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FOR OFFICIAL USE ONLY Report No: ICR00005406 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-57710, IDA-60200, IDA-D1070, IDA-D1780, IDA-D3490, AND IDA-D4580) ON TWO CREDITS AND FOUR GRANTS IN THE AMOUNT OF SDR 0\.8 MILLION, SDR 1\.2 MILLION, SDR 0\.8 MILLION, SDR 2\.5 MILLION, SDR 7 MILLION AND SDR 4 MILLION (US$1\.0 MILLION, US$1\.65 MILLION, US$1\.0 MILLION, US$3\.35 MILLION, US$10\.0 MILLION AND US$5\.5 MILLION EQUIVALENT) TO THE KINGDOM OF TONGA FOR A FIRST INCLUSIVE GROWTH DEVELOPMENT POLICY OPERATION, SECOND INCLUSIVE GROWTH DEVELOPMENT POLICY OPERATION, AND A THIRD INCLUSIVE GROWTH DEVELOPMENT POLICY OPERATION SEPTEMBER 14, 2021 Macroeconomics, Trade And Investment Global Practice East Asia And Pacific Region The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report CURRENCY EQUIVALENTS (Exchange Rate Effective August 31, 2021) Currency Unit = Tongan Pa’anga (TOP) TOP$2\.25 = US$1 US$1\.42329 = SDR 1 FISCAL YEAR July 1 - June 30 Regional Vice President: Victoria Kwakwa Country Director: Stephen N\. Ndegwa Regional Director: Hassan Zaman Practice Manager: Lars Christian Moller Task Team Leader: Andrew Blackman ICR Main Contributor: Stephen Pollard The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank MTDS Medium-Term Debt Management Strategy CoA Chart of Accounts NCD Non-Communicable Disease DFAT Department of Foreign Affairs and Trade PAT Ports Authority Tonga DPO Development Policy Operation PDO Program Development Objective EU European Union PEFA Public Expenditure and Financial Accountability FDI Foreign Direct Investment PFTAC Pacific Financial Technical Assistance Centre FY Fiscal Year PIC Pacific Island Country GDP Gross Domestic Product PIC8 SCD Systematic Country Diagnostic for 8 small PICs GoT Government of Tonga PSC Public Service Commission ICT Information and Communication Technology PSDI Pacific Private Sector Development Initiative IDA International Development Association RPF Regional Partnership Framework FMIS Financial Management Information System SDR Standard Drawing Right ILO International Labour Organization SME Small and Medium Enterprises IMF International Monetary Fund SOE State-Owned Enterprises JPRM Joint-Policy Reform Matrix TA Technical Assistance MOF Ministry of Finance TC Tropical Cyclone Ministry of Meteorology, Energy, Information, ToC Theory of Change MEIDECC Disaster Management, Environment, Climate TOP Tongan Pa’anga Change and Communications TSDF Tonga Strategic Development Framework 2015-2025 MFAT Ministry of Foreign Affairs and Trade WBG World Bank Group MPE Ministry of Public Enterprises WHO World Health Organization The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report TABLE OF CONTENTS DATA SHEET \. 1 I\. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES\. 5 II\. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES \. 10 III\. OTHER OUTCOMES AND IMPACTS \. 27 IV\. BANK PERFORMANCE \. 28 V\. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES \. 30 VI\. LESSONS AND NEXT PHASE \. 30 ANNEX 1\. RESULTS FRAMEWORK \. 33 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES\. 40 ANNEX 3\. BORROWER, CO-FINANCIERS, AND OTHER DEVELOPMENT PARTNERS’/STAKEHOLDERS’ COMMENTS \. 43 ANNEX 4\. SECTORS AND THEMES\. 44 ANNEX 5\. THEORY OF CHANGE \. 48 ANNEX 6\. MAP OF THE KINGDOM OF TONGA \. 50 ANNEX 7\. SUPPORTING DOCUMENTS \. 51  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report DATA SHEET BASIC INFORMATION Program Series Project ID Short Name Full Name Tonga First Inclusive Growth Development Policy P155133 Tonga First Inclusive Growth DPO Operation Tonga Second Inclusive Growth Development Policy P159262 Tonga Second Inclusive Growth DPO Operation Tonga Third Inclusive Growth Development Policy P159263 Tonga Third Inclusive Growth DPO Operation Series Details (USD) Project ID Approved Amount Disbursed Amount P155133 2,000,000\.00 2,251,502\.20 P159262 15,000,000\.00 14,775,064\.03 P159263 5,500,000\.00 5,565,640\.03 Total 22,500,000\.00 22,592,206\.26 KEY_D PF_OPTI ONS_ TBL P155133 P159262 P159263 Policy-Based Guarantees No No No IDA- IDA- D1780,IDA- Ln/Cr/TF 57710,IDA- IDA-D4580 60200,IDA- D1070 D3490 Concept Review 30-Nov-2015 11-Jul-2016 04-Dec-2018 Decision Review 28-Jan-2016 02-Feb-2017 13-Mar-2019 Approval 16-Mar-2016 27-Apr-2017 16-May-2019 Effectiveness 11-May-2016 15-Jun-2017 18-Jun-2019 Page 1 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Original Closing 30-Jun-2017 31-Dec-2018 30-Sep-2020 Actual Closing 30-Jun-2017 31-Dec-2018 30-Sep-2020 Crisis or Post-Conflict No No No Regular Deferred Drawdown Option No No No Catastrophe Deferred Drawdown Option No No No Sub-National Lending No No No Special Development Policy Lending No No No Organizations Series Project Borrower Implementing Agency P159263 Ministry of Finance Ministry of Finance P159262 Ministry of Finance and National Planning P155133 Ministry of Finance and National Planning Program Development Objective (PDO) Program Development Objective (PDO) (From last operation in the series) i) Support fiscal resilience by means of strengthened revenue mobilization and strategic fiscal and debt policies; ii) support improved government accountability by improving compliance with public procurement regulations, improving budgetary classifications, and improving the adequacy of responses to external audit; and iii) support a more dynamic and inclusive economy by adopting investor-friendly foreign investment legislation, improving oversight and private participation in public enterprises, introducing regulation to private sector labor markets, and strengthening regulatory frameworks in selected sectors\. PROGRAM FINANCING DATA (USD) World Bank Administered Financing Approved Amount Actual Disbursed P155133 1,000,000 1,125,751 IDA-57710 Page 2 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report 1,000,000 1,125,751 IDA-D1070 P159262 1,650,000 1,654,104 IDA-D1780 3,350,000 3,446,050 IDA-60200 10,000,000 9,674,910 IDA-D3490 P159263 5,500,000 5,565,640 IDA-D4580 Total 22,500,000 22,592,206 RATINGS SUMMARY Program Performance Overall Outcome Relevance of Prior Actions Achievement of Objectives (Efficacy) Moderately Unsatisfactory Moderately Satisfactory Moderately Unsatisfactory Bank Performance Moderately Satisfactory ACCOUNTABILITY AND DECISION MAKING At ICR: Regional Vice President Country Director Director Victoria Kwakwa Stephen N\. Ndegwa Hassan Zaman Practice Manager Task Team Leader(s) Lars Christian Moller Andrew Blackman At Approval: Page 3 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report P155133 Regional Vice President Country Director Director Axel van Trotsenburg Franz R\. Drees-Gross Satu Kristiina Jyrintytar Kahkonen Practice Manager Task Team Leader(s) Mathew A\. Verghis David Stephen Knight P159262 Regional Vice President Country Director Director Victoria Kwakwa Michel Kerf John Panzer Practice Manager Task Team Leader(s) Ndiame Diop Kim Alan Edwards, David Stephen Knight P159263 Regional Vice President Country Director Director Victoria Kwakwa Michel Kerf Lalita M\. Moorty Practice Manager Task Team Leader(s) Ndiame Diop Kim Alan Edwards, Andrew Blackman Page 4 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report I\. PROGRAM CONTEXT AND DEVELOPMENT OBJECTIVES A\. Context at Appraisal Context 1\. This programmatic series of three development policy operations (DPO) supported the reform agenda of the Government of Tonga (GoT) in: (i) deepening fiscal resilience; (ii) improving government accountability; and (iii) developing a more dynamic and inclusive economy\. These three areas are central to the nation’s medium-term development plan—the Tonga Strategic Development Framework 2015-2025 (TSDF)—and to the Bank’s Regional Partnership Framework (RPF) for nine small Pacific Island Countries (PICs), including Tonga\. The DPOs were part of coordinated budget support with the Governments of Australia and New Zealand, the Asian Development Bank (ADB), and the European Union (EU)\. The series was complemented by additional financing to DPO2, to help the GoT cover an unanticipated financing gap that arose due to the impact of Tropical Cyclone (TC) Gita in February 2018\. 2\. Tonga underwent major democratic changes in the years prior to the ‘Inclusive Growth’ DPO series\. Constitutional reforms in April 2010 resulted in most seats in the legislative assembly being democratically elected\. Democratic elections were subsequently held in 2010, 2014 and 2017—the last occurring between DPO2 and DPO3 in this programmatic series\. In addition, Prime Minister ʻAkilisi Pōhiva died in September 2019, resulting in the formation of a new government during implementation of the DPO3 reform program\. 3\. As with many other small PICs, Tonga’s economic growth potential is limited by innate high-cost structures\. The nation’s small size, dispersed population, extreme remoteness, and dependence on imports combine to raise the cost of economic activity and the cost of providing public services\. In 2016, Tonga had 14 active State-Owned Enterprises (SOEs) involved in a range of commercial activities including utilities, transport, banking, and communications, some greatly underperforming\. A broad-based SOE reform program commenced in 2006\. 4\. The economy’s growth potential is further curtailed by exposure to economic shocks and natural disasters\. Output contracted by over 5 percent in FY09 as the global economic crisis led to a domestic credit crunch\. In 2014, TC Ian caused extensive damage to houses, infrastructure, and agriculture\. Tonga’s vulnerability to natural disasters was again highlighted in February 2018 when TC Gita caused damages and losses of US$164 million (38 percent of Tonga's FY17 Gross Domestic Product (GDP)) and created a public financing need of US$113 million (26 percent of GDP) for cyclone recovery\. 5\. Economic growth had been weak and volatile\. For the twenty years prior to the First Inclusive Growth DPO in 2016, per capita real GDP had grown by 0\.7 percent on average, compared to 1\.7 percent globally\. Deep recessions in FY06-FY07 and FY09 were offset by growth spurts in FY08, FY11 and FY16—FY17\. Growth was driven by public construction following political disturbances in 2006, and reconstruction and strong remittance inflows following the impacts of TC Ian in January 2014\. Over the five years prior to DPO1, agriculture and fisheries had outperformed other sectors, registering average annual compound growth of 5\.2 percent compared to growth in the secondary and tertiary sectors of -0\.1 and 1\.7 percent, respectively\. Total tourist arrivals increased by 2\.8 percent over the same period\. Remittances continued to be a critical income source with an expansion of overseas worker programs\. TC Ian reconstruction and construction work for the South Pacific Games were expected to be the main drivers of growth over the projection period\. The IMF’s Article IV reports published in 2016, 2017 and early 2018 noted a favorable economic outlook\. However, these projections were revised downwards due to the impact of TC Gita\. 6\. The current account deficit was driven by construction cycles and was largely financed by development grants and foreign direct investment (FDI)\. Prior to DPO1, the current account deficit after grants was reported to have averaged 1\.6 percent of GDP over FY11 to FY15\. Nevertheless, development assistance helped GoT to build up foreign Page 5 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report reserves, which increased from 5\.6 months of imports in FY11 to 6\.3 months of imports in FY15\. FDI inflows remained low at around 3 percent of GDP in FY15\. The current account deficit was forecast to widen to 7 percent of GDP during FY16 due to an increase in construction-related imports for the South Pacific Games (SPG)\. During preparation of DPO2, the deficit was projected to average around 10 percent of GDP in FY18 and FY19, as SPG construction continued\. However, due to TC Gita and a subsequent increase in imports and a decline in tourism and agricultural exports, during preparation of DPO3 the deficit was projected to peak at 12\.8 percent of GDP in FY19\. 7\. Inflation had also fluctuated\. Inflation declined from a peak of 7\.1 percent in FY11 to 0\.2 percent in FY15 and was expected to remain moderate over the medium term\. Private sector credit fell over the period FY09 to FY13\. However, domestic private sector credit subsequently recovered, expanding by almost 13\.5 percent in FY17 following reforms to central bank operations, the banking sector, and the non-bank financial sector\. The IMF Article IV reports in 2016, 2017 and 2018 assessed the level of the exchange rate as broadly in line with fundamentals\. 8\. The fiscal balance had significantly improved due to prudent fiscal management\. Sustained GoT efforts to improve revenue mobilization and enhance spending controls resulted in an improvement in fiscal outturns from an overall deficit (after grants) of 5\.2 percent of GDP in FY11 to fiscal surpluses averaging 3\.3 percent of GDP in FY16 and FY17\.1 Development expenditure, which included donor-financed capital projects, had fallen from FY11 as large debt- financed public buildings and roads projects were completed\. Managing current expenditure pressures had been a challenge as current expenditure increased by 2\.9 percentage points of GDP from FY14 to FY15\. This was due to increased public sector wage bill costs, increased goods and services expenditure and a one-off monetization of pension commitments\. In this context, the DPO series targeted several reforms to enhance fiscal resilience, including to improve wage bill management, review tax exemptions and investment incentives, increase excise rates on fuel and unhealthy foods, introduce a Medium-Term Debt Management Strategy (MTDS), and SOE reform\. 9\. Tonga had generally kept public debt in check\. Public and publicly guaranteed debt to GDP had gradually declined from 54\.4 percent in FY12 to 47\.5 percent in FY14\. The 2015 Debt Sustainability Analysis indicated that Tonga remained at moderate risk of debt distress\. However, Tonga’s external and overall debt distress rating moved from moderate to high risk in December 2017\. This resulted from a change in classification to better account for the average annual impact of natural disasters in the IMF/World Bank Debt Sustainability Analysis\. Key macroeconomic indicators at the time of the preparation of the first DPO are presented in Table 1 and key fiscal indicators in Table 2\. 10\. Extreme poverty was negligible, but hardship was a concern at the time of the first DPO\. Bank estimates revealed that the prevalence of extreme poverty was very low in Tonga, at 1\.1 percent nationwide\. However, “hardship” (a lack of cash for basic goods) affected around a quarter of the population\. The incidence of poverty and hardship were particularly high in rural and remote areas relative to urban areas\. The estimated Gini coefficient of 41\.7 was in line with other countries in the East Asia Pacific region, controlling for income\. 11\. Social and human development indicators were amongst the strongest in the Pacific, but challenges remained including gender disparities that adversely affected development outcomes for women\. Primary and secondary school enrollments were high at 96 percent and 83 percent, respectively\. However, the quality of education presented a challenge\. While population health standards had previously improved, the growing incidence of non-communicable diseases (NCDs) was a serious concern\. Women were under-represented at senior levels of the labor force and there were no female Members of Parliament\. Forty percent of ever-partnered women aged 15-49 had experienced gender- based violence\. Women also had a higher NCD burden, were 20 percent more likely to be obese than men, and were almost 10 percent more likely to die prematurely\. Prior to the DPO series the legal framework did not include fundamental labor rights, including key rights for women\. 1 These reflect outturns, explaining the difference with Table 1\. Page 6 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report 12\. The TSDF and the GoT’s budget priorities guided the formulation of the DPO series reform program\. The reform program was closely linked to the Joint Policy Reform Matrix (JPRM)—a matrix of priority reform actions agreed by the GoT and five development partners—WB, ADB, Australia (through its Department of Foreign Affairs and Trade, DFAT), New Zealand (through its Ministry of Foreign Affairs and Trade, MFAT), and the EU—against which the partners provided budget support\. The Bank leads the engagement with GoT on behalf of the five development partners\. In previous years, the JPRM had included policy reforms in domestic revenue mobilization, public financial management and the enabling environment for private sector development\. The TSDF has seven high-level National Outcomes\. Inclusivity and sustainability are emphasized in each of the seven outcomes\. Table 1: Key Macroeconomic Indicators during preparation of DPO1 *Due to methodological changes to the series, historical data is not available\. Source: DPO1 Program Document\. Page 7 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Table 2: Key Fiscal Indicators during preparation of DPO1 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 In percent of GDP, unless otherwise indicated Overall Balance -7\.4 -2\.8 -1\.3 2\.7 0\.2 -4\.9 -2\.7 Primary Balance -4\.6 -1\.9 -0\.4 3\.6 1\.0 -4\.0 -1\.9 Total Revenues and Grants 26\.3 27\.4 25\.3 28\.6 29\.0 30\.7 27\.8 Domestic revenues 19\.2 18\.0 19\.5 20\.0 21\.9 22\.6 22\.8 of which Sales and Conumption Taxes 10\.6 11\.0 11\.2 11\.8 12\.5 13\.1 13\.3 of which Taxes on Income and Profits 4\.9 3\.2 3\.6 3\.2 3\.6 0\.0 0\.0 of which Non-tax Revenue 2\.1 2\.2 2\.5 2\.7 3\.2 3\.2 3\.2 Grants 6\.8 9\.4 5\.6 8\.6 7\.1 8\.1 5\.0 Total Expenditures 33\.7 30\.2 26\.5 25\.9 28\.8 35\.6 30\.5 Current Expenditure 22\.7 23\.5 24\.9 23\.6 26\.5 31\.9 28\.1 Wages and Compensation 11\.8 10\.4 10\.8 11\.5 12\.3 13\.4 12\.9 Goods and Services 6\.6 8\.3 9\.8 6\.7 7\.5 10\.9 8\.3 Interest Payments 2\.7 0\.8 0\.9 0\.9 0\.8 0\.9 0\.8 Current Transfers 2\.2 3\.0 2\.0 3\.3 4\.2 4\.4 4\.6 Development expenditures 9\.6 5\.6 1\.6 2\.3 2\.3 3\.7 2\.4 General Government Financing 7\.4 2\.8 1\.3 -2\.7 -0\.2 4\.9 2\.7 External (net) 8\.4 5\.1 0\.2 -0\.8 0\.6 1\.9 0\.7 Domestic (net) -1\.1 -2\.4 1\.0 -1\.9 -0\.7 3\.0 2\.0 Source: DPO1 Program Document\. Original Program Development Objective(s) (PDO) and Original Policy Areas/Pillars Supported by the Program 13\. The PDO originally consisted of three pillars linked to the GoT’s priority reform areas: • Pillar 1: Support fiscal resilience by means of strengthened revenue mobilization and strategic fiscal and debt policies\. • Pillar 2: Pursue inclusiveness and government accountability by improving compliance with public procurement regulations, improving budgetary classifications, improving the adequacy of responses to external audit, and introducing new regulatory frameworks into selected sectors\. • Pillar 3: Support a more dynamic and inclusive economy by adopting investor-friendly foreign investment legislation, extending coverage of the credit bureau, and improving oversight and private participation in public enterprises\. B\. Significant Changes During Implementation Revised Program Development Objectives (PDOs) 14\. The PDO pillars were amended under DPO3\. The concept of inclusiveness was removed from Pillar 2 to avoid overlap with Pillar 3\. The title of Pillar 2 was therefore changed to “support improved government accountability”\. The clearer demarcation of Pillars 2 and 3 led to a clearer fit of Prior Actions\. The introduction of new regulatory frameworks in selected sectors was therefore moved to Pillar 3\. Extending coverage of the credit bureau was removed from the Page 8 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report reform program following a change in Fijian law that caused the provider to cease operating the Tongan credit bureau, previously hosted in Fiji\. Introducing regulation to private sector labor markets was explicitly added to the title of Pillar 3\. There were no other changes to the PDO\. Page 9 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report II\. ASSESSMENT OF KEY PROGRAM DESIGN AND OUTCOMES Prior Actions for Indicative Triggers from DPO1 Indicative Triggers from DPO1 and DPO2 Results Indicators DPO1 and Prior Actions for DPO2 and Prior Actions for DPO3 (original and revised) Pillar I: Supporting fiscal resilience Prior Action 1: Indicative Trigger: Indicative Trigger (from DPO1): Result Indicator 1 (original): The Recipient has Implement recommendations of Implement recommendations of a review of Excise duty revenue as a proportion of GDP increased the rate of a review of consumption tax corporate tax legislation to reduce exemptions Baseline (average FY11-FY14): 4\.2 percent fuel excise tax by TOP legislation to reduce exemptions Target (FY18): increase of 0\.5 percentage points of 0\.06 per liter (an Indicative Trigger (from DPO2): GDP increase in the rate of Prior Action 1: Revise the Revenue Administration Services Act 12%) and other excise The Recipient has increased the to set more realistic penalties and introduce Result Indicator 1 (revised under DPO3): Domestic tax and import duty rate of fuel excise tax by TOP 0\.09 more avenues for revenue recovery revenue as a proportion of GDP\. rates to improve per liter (an increase in the rate Baseline (average FY14-FY16): 21\.8 percent revenue mobilization of 16%) and other excise tax and Prior Action 1: Target (average FY18-FY20): >25 percent and strengthen import duty rates in order to The Recipient’s Cabinet has approved for incentives to consume improve revenue mobilization submission to Parliament a revised Revenue Result: Average of 24\.2 percent for FY18-FY20\. healthy foods, as and strengthen incentives to Services Administration Bill that introduces Source: Ministry of Finance evidenced through the consume healthy foods, as additional avenues for revenue recovery and Excise Amendment and evidenced through the Excise sets updated and graduated penalties Baseline and target reflected an implied increase of the Customs Amendment and the Customs 3\.2 percentage points\. Baseline was revised down Amendment Amendment Prior Action 2: to 21\.5 percent (as recorded by MoF in 2021), The Recipient’s Cabinet has approved for implying a target of 24\.7 percent\. Result was submission to Parliament a new Customs Bill negatively affected by the economic impacts of that aligns with international standards COVID-19 and TC Harold in late FY20, resulting in an (including the Revised Kyoto Convention and increase of 2\.7 percentage points relative to the World Customs Organization recommended baseline\. practices) and simplifies customs administration Partially achieved\. Page 10 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Prior Action 2: Indicative Trigger: Result Indicator 2: External borrowing that is above The Cabinet has The Recipient’s Cabinet has 35 percent concessionality as a proportion of all approved a new approved a transparent, target- external borrowing Medium-Term Debt based fiscal anchor system and Baseline (FY13-FY15): 100 percent Strategy which has monitoring framework Target (FY16-FY20): 100 percent been made public Prior Action 2: Result: 100 percent (FY16-FY20) The Recipient’s Cabinet has Source: Ministry of Finance, Kingdom of Tonga approved a transparent, target‐ Medium-Term Debt Strategy, FY2021 – FY2025\. based fiscal anchor system and monitoring framework that Achieved\. supports medium‐ term fiscal sustainability and a more efficient Result Indicator 3: Ensure that annual budget mix of public spending estimates are consistent with medium term fiscal anchors, and that any divergences are adequately explained\. Baseline (FY13-FY17): No analysis of consistency between annual Budget estimates and medium- term fiscal anchors in Budget documents\. Target: (FY18-FY20): Analysis included in Budget documents Result: Analysis included in Budget documents for FY18 (Table 2, page 6), FY19 (unnumbered table, page 25) and FY20 (Table 1, page 8)\. Annual budget estimates were consistent with medium-term fiscal anchors\. Achieved\. Prior Action 3: Indicative Trigger: Indicative Trigger (from DPO1): Result Indicator 4 (original): Public wage bill as a (a) The Recipient’s Cabinet approval of a new public Cabinet approval of a new public service proportion of domestic revenue Remuneration service remuneration structure to performance management framework which Baseline (FY14): 57 percent Authority has ensure adequate pay and is provides for credible performance assessments Target (FY19): 53 percent or lower completed a consistent with fiscal target to and performance-based pay progression Page 11 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report remuneration review reduce share of wage bill in total Result Indicator 4 (amended under DPO3): of the public service to government spending over time Indicative Trigger (from DPO2): Public wage bill as a proportion of domestic ensure equitable, Cabinet has approved draft legislation to revenue\. competitive, and Prior Action 3: institutionalize a transparent reward and pay‐ Baseline (average of FY14-FY16): 62 percent fiscally sustainable The Recipient’s Cabinet has setting mechanism to support improved control Target (average of FY18-FY20): 53 percent or lower remuneration and approved and begun to of the wage bill and effective performance and submitted its implement a new public service motivation of public servants Result: Average of 50\.1 percent (average FY18- recommendations to remuneration structure and FY20)\. Cabinet; and (b) the performance management Prior Action 3: Source: Ministry of Finance, FY19 and FY21 Budget Recipient’s Cabinet has system to ensure effective public The Recipient has: (i) realigned the Statements\. reviewed the said service delivery, adequate pay, performance management system year; (ii) recommendations\. and consistency with fiscal provided target performance-rating Achieved\. sustainability distributions to public institutions; and (iii) clarified the eligibility of public sector Result Indicator 5: Annual moderated performance employees to receive performance rewards process completed, and ratings used in the and the application of procedures to manage determination of public sector wages\. poor performance, based on a review of its Baseline (FY14): No new public service remuneration structure Target (FY18-FY20): Yes and performance management system Result: Annual moderated performance process completed, and ratings used in the determination of public sector wages (FY18-FY20)\. Source: Ministry of Finance, Budget Statements from FY18 (pg\. (i), 24 and 36), FY19 (pg\. 47) and FY20 (pg\. 53)\. Achieved\. Page 12 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Prior Actions for Indicative Triggers from Indicative Triggers from Results Indicators DPO1 DPO1 and Prior Actions for DPO1 and DPO2 (original and revised) DPO2 and Prior Actions for DPO3 Pillar II: Government accountability Prior Action 4: Prior Action 4: Result Indicator 6: Proportion of contracts above the small purchases The Recipient’s Cabinet The Recipient has threshold that are subject to open competition 2 has approved a revised implemented a new Baseline (FY14): 35 percent of contracts subject to open competition set of Procurement procurement tracking Target (FY20): At least 50 percent of contracts subject to open Regulations, and database and adopted competition prepared standard compliance and performance bidding documents and indicators and associated Result: 28 percent (FY20)\. procurement manuals in targets for monitoring system Source: MOF Procurement Division KPIs on MoF website support of the performance, to be publicly Regulations disseminated Not Achieved Indicative Trigger: Indicative Trigger (DPO1): Result Indicator 7: New economic segment is utilized in the budget Implementation of revised Activate and add key FMIS systems\. Chart of Accounts to improve modules, such as budget Baseline (FY17): Old economic segment used in budget reporting reporting for line ministries preparation, sales and receipts, Target (FY20): New economic segment is reflected in budget reporting cash management Result: A revised economic segment was completed and reflected in Indicative Trigger (DPO2): the budget reporting (FY20)\. Approval of a Chart of Source: Technical Review of the Government of Tonga’s Current Accounts revision to accurately Financial Management Information System, Reporting Systems and reflect standard economic Payroll by Brendan Toner, of vSolutions Limited (January 2021)\. classifications in the Government budget system Achieved\. Prior Action 4: The Recipient has removed 2 Aligned with the definition of PEFA Dimension PI-19(i) based on M2 scoring methodology as set out in 2011 Public Financial Management Performance Measurement Framework\. Page 13 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report the non-economic items from the economic segment of the Chart of Accounts, which will improve the accuracy and integrity of budget reporting Prior Action 5: Result Indicator 8 (original): Proportion of outstanding audit A new biannual report of recommendations 12 months after submission of the audit report to audit recommendations the Legislative Assembly and actions for all Baseline (FY15): 85 percent (115 of 136) ministries and agencies Target (FY19): 50 percent has been prepared, and a new Audit Oversight Result Indicator 8 (amended under DPO3): Proportion of public Committee of Cabinet accounts audit recommendations noted as ‘outstanding’ in the established and tasked following year’s audit report\. with ensuring timely and Baseline (FY17): 60 percent (6 of 10 audit matters raised in FY16 with thorough follow-up of respect to the public accounts were still outstanding as of the FY17 audit recommendations Audit)\. Target (FY19 and FY20): 40 percent (no more than 40 percent of audit matters raised in FY18 with respect to the public accounts are still outstanding as of the FY19 Audit, and no more than 40 percent of audit matters raised in FY19 with respect to the public accounts are still outstanding as of the FY20 Audit) Result: FY19: 22 issues raised in previous year’s audit still outstanding and 8 resolved\. FY20: Awaiting verification\. Source: FY19 Financial & Compliance Audit Report (pg\. 13-18)\. Incomplete/Not Achieved\. FY20 report not yet available\. Results until FY19 suggest indicator may not have been achieved in FY20\. Page 14 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Prior Actions for Indicative Triggers Indicative Triggers (from DPO1 and DPO2) and Results Indicators DPO1 (from DPO1) and Prior Actions for DPO3 (original (DPO1) and revised) Prior Actions for DPO2 Pillar III: Supporting a more dynamic and inclusive economy Prior Action 6: Indicative Trigger: Indicative Trigger (DPO1): Result Indicator 9 (original): Monitoring reports The Recipient’s Cabinet approval for Cabinet approval of a competition policy for regulated sectors published on a regular basis Legislative Assembly submission to Parliament of Baseline (2015): No baseline report has approved a new legislation to establish a Indicative Trigger (DPO2): Target (2018): Reporting issued by regulators that Communications multi-sector regulator and The Recipient’s Cabinet has approved the National covers all sectors under their oversight Commission Act that finalization of institutional Energy Bill for submission to Parliament will establish an structure Result Indicator 9 (amended under DPO3): independent regulator Regulators for the communication and energy Prior Action 5 Trigger Dropped\. sectors are established and operational\. Cabinet approved for public Sufficient progress had not been made\. Baseline (2015): Neither exists consultation a National Target (FY20): Both are established and Energy Bill that includes operational provisions for multi-sector regulation for all energy sub- Result (FY20): The communications sector sectors (electricity, gas, regulator exists but is not independent of the petroleum) Ministry of Meteorology, Energy, Information, Disaster Management, Environment, Climate Change and Communications (MEIDECC)\. The energy sector regulator does not exist\. Not achieved\. Indicative Trigger (DPO1 and DPO2): Result Indicator 10 (original): Number of basic Employment Relations Bill that, among others, labor rights enshrined in domestic legislation reduces gender disparities approved by Cabinet for Baseline (2015): None of eight in place submission to Parliament Target (2018): At least six of eight in place Prior Action 5: Result Indicator 10 (amended under DPO3): The Recipient’s Cabinet has approved for Number of basic labor rights (including equal Page 15 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report submission to Parliament the Employment remuneration for equal work, gender non- Relations Bill, which will ensure fundamental labor discrimination and right to maternity leave) rights are enshrined in domestic law enshrined in domestic legislation\. 3 Baseline (2015): None of seven in place Target (FY20): Equal remuneration for equal work, gender non-discrimination and right to maternity leave enshrined in domestic legislation\. Three of the remaining four basic labor rights also enshrined in domestic legislation\. Result (FY20): Basic labor rights not yet enshrined in domestic legislation\. Act has been passed by Parliament but is awaiting King’s assent to become effective\. Once enacted, the results indicator will be achieved\. Not achieved\. Indicative Trigger: Indicative Trigger (DPO1): Result Indicator 11: Foreign investment legislation A Contract Bill has been approved by Cabinet that Vetted applications from foreign investors approved by Cabinet for codifies common law on contracts Baseline (FY15): 21 applications submission to Parliament and Target (FY20): 30 applications or greater Cabinet approval of work Indicative Trigger (DPO2): permit rules Cabinet approval of revised foreign investment Result (FY20): 27 in FY20\. (although 49 in FY17, 32 regulations, including reserved and restricted lists, in FY18 and 31 in FY19)\. Not achieved in FY20 due Prior Action 6: and work permit rules to economic impact of COVID-19 but achieved The Recipient’s Cabinet has each year from FY17 to FY19\. approved the Foreign Prior Action 6: Investment Bill for submission The Recipient’s Cabinet has approved revised Partially achieved\. to the Recipient’s parliament, foreign investment regulations, which provide which includes provisions to clearer and more transparent requirements for facilitate foreign investment foreign investment applications 3Where the basic rights consist of: As measured in the annual WBG Ease of Doing Business index\. The 7 basic labor rights measured are: i) paid annual leave; ii) notice period for redundancy; iii) severance pay for redundancy; iv) equal remuneration for equal work; v) gender non-discrimination; vi) right to maternity leave; vii) paid sick leave\. Page 16 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report in the Recipient’s territory Indicative Trigger: Indicative Trigger (DPO1): Result Indicator (dropped) Issuance of central bank Extension of credit bureau coverage to non- bank Number of credit checks for new loan requests directive to mandate credit credit providers, such as utilities for; i) sole male applicants; ii) female applicants or bureau reporting to reduce joint applications costs of due diligence and Indicative Trigger (DPO2): Baseline (FY15): i) 636; ii) 588 support access to finance for The Recipient’s Central Bank has issued a directive to Target (FY19): i) 800 or more; ii) 750 or more SMEs and individuals\. mandate credit bureau reporting to reduce costs of due diligence and support access to finance for SMEs NA\. During DPO2 preparation the and individuals Trigger was delayed until DPO3 as the proposed reform Trigger Dropped was no longer feasible, for A change in Fijian laws caused the provider to cease reasons beyond Tonga’s operation of the Tonga credit bureau which was control (change to Fijian law)\. hosted in Fiji\. Prior Action 7: Indicative Trigger: Indicative Trigger (DPO1): Result Indicator 12: Number of public enterprises The Recipient’s Cabinet has approved the Cabinet has approved the reform of an additional that have been reformed Cabinet has approved reform of two PEs in two PEs reformed in accordance with the PE Reform Baseline (FY2015): None the appointment of accordance with the PE Plan, where ‘reformed’ may consist of privatization, Target (FY18): At least four shared boards of Reform Plan, where liquidation, substantial restructuring, outsourcing or directors of public ‘reformed’ may consist of another form of public-private partnership Result Indicator 12 (amended under DPO2): enterprises in the privatization, liquidation, Number of public enterprises that have been information, substantial restructuring, Indicative Trigger (DPO2): reformed since 2015\. communications, and outsourcing or another form Cabinet has approved the reform of an additional PE Baseline (FY15): None technology sector, and of public-private partnership reformed in accordance with the PE Reform Plan, Target (FY20): At least two the utilities sector to where ‘reformed’ may consist of privatization, streamline the number Prior Action 7: liquidation, substantial restructuring, outsourcing or Result (FY20): Tonga Cable Ltd reform completed\. of Directors and The Recipient’s Cabinet has another form of public-private partnership The Ports Authority Tonga reform was delayed achieve greater directed the Ministry of Public due to a contract review and the change of efficiency Enterprises to proceed with a Prior Action 7: government following the death of PM Pōhiva, sale of shares in Tonga Cable The Recipient’s Cabinet has approved a but is on track to be completed by January 2022\. Ltd\. recommendation that the Ports Authority Tonga adopts a landlord model for Nuku'alofa port Partially Achieved Page 17 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report A\. Relevance of Prior Actions Rating: Moderately Satisfactory 15\. All PAs had a strong and direct link to the achievement of the PDO\. However, in some instances, the PAs (and complementary technical assistance) were not sufficient to overcome domestic capacity constraints (for example, the procurement, audit and energy sector regulator)\. In addition, some risks may have been underestimated, which impacted the achievement of the targeted results (for example, the national energy bill, and the credit bureau reform)\. Pillar 1 Supporting Fiscal Resilience 16\. Tax policy and revenue administration reforms were relevant to the PDO to support fiscal resilience as they contributed to domestic revenue mobilization, increased government cash buffers and a reduced deficit\. Specific duty increases were needed to counter previous losses in trade taxes and to address the consumption of products that contribute to NCDs\. The increase in fuel excise taxes was designed to support an increase in revenues without increasing net prices to consumers (due to low global oil prices)\. The increase in tax on tobacco, alcohol, and specific unhealthy foods was designed to incentivize healthy consumption choices and reduce the long-term fiscal burden of NCDs on the public health system\. To encourage healthy choices and reduce the negative impact on household budgets, compensating reductions in the import duties of various fruit, vegetables and fish were implemented\. Under DPO3, Cabinet approved a revised Revenue Services Administration Bill for submission to Parliament\. This aimed to introduce additional avenues for revenue recovery and set updated and graduated penalties\. An additional Prior Action was included under DPO3 where Cabinet also approved for submission to Parliament a new Customs Bill that aligned with international standards and that simplified customs administration\. This action was added because of the reform progress made and to ensure consistency with Chapter 4 of the Pacific Agreement on Closer Economic Relations (PACER) Plus economic cooperation agreement, thereby facilitating trade\. 17\. Using taxation to raise the domestic price of tobacco, alcohol and sugary drinks that lead to NCDs can be an important factor in reducing the consumption of those products\. Increased taxation did lead to increased prices and reduced consumption\. 4 Receipts for excise tax and business import duties also increased over the period\. Health taxes can increase revenues and lead to better health outcomes\. 5 However, GoT recognizes that fiscal policy measures alone will not be sufficient to change behavior and address the NCDs crisis\. Indeed, tax measures are one of GoT’s multi-pronged approach to address the crisis\. Other initiatives include: (i) targeted interventions that support healthier pregnancy and the first two years of life; (ii) community outreach programs to support social and behavior change and healthier lifestyles; (iii) an extensive and sustained NCDs awareness and nutrition campaign; (iv) strengthening of school curriculum regarding nutrition, healthy lifestyle and NCDs; and (v) policy initiatives to support access to affordable healthier food options\. 6 Nevertheless, further efforts are needed to reduce the incidence of NCDs, including by addressing GoT support to local manufacturers of alcohol and sugar-sweetened beverages in the form of: 4 World Bank\. 2019\. Using Taxation to Address Noncommunicable Diseases: Lessons from Tonga\. Washington D\.C\. 5 Lane et al\. (2021)\. Using Health Taxes to Support Revenue: An Action Agenda for the IMF and World Bank\. Center for Global Development: Washington, DC; WHO guidance on healthy sugar intake and the cost-effectiveness of taxes on sugar-sweetened beverages and list of selected economic and medical studies therein; World Bank\. (2020)\. Taxes on Sugar-Sweetened Beverages: Summary of International Evidence and Experiences\. World Bank, Washington, DC\. Shekar, M\. & Popkin, B\. (2020)\. Obesity: Health and Economic Consequences of an Impending Global Challenge\. Human Development Perspectives series\. Washington, DC: World Bank\. 6 GoT\. Undated\. Ministry of Health\. Hala Fononga: National strategy for prevention and control of non-communicable diseases 2015- 2020\. Nuku’alofa\. World Bank\. 2019\. Using Taxation to Address Noncommunicable Diseases: Lessons from Tonga\. Washington D\.C\. Page 18 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report (i) tariff-free importation of machinery and equipment; and (ii) lower tax rates relative to imported products\.7 18\. Indicative triggers to reduce exemptions by implementing recommendations of a review of consumption tax legislation and corporate tax legislation were replaced\. Given pressing revenue and health needs, in DPO2 GoT decided to continue reforms supported in DPO1 and not prioritize the proposed trigger supporting a review of consumption tax legislation\. The trigger was nevertheless supported in the medium- term\. 8 Furthermore, GoT considered that the reform to the Revenue Administration Services Act was a more pressing reform area, requesting that this be prioritized in DPO3 in place of the previously envisaged indicative trigger to reduce corporate tax exemptions\. 19\. Reforms related to strategic debt and fiscal policies were relevant to the PDO as they addressed the need for more careful fiscal analysis and management\. The country has confronted regular, large domestic and external shocks that make careful fiscal management crucial\. Large external loans taken out in 2008 and 2010, combined with the country’s limited fiscal capacity to service debt, led to Tonga being rated at a high risk of debt distress in the 2017 IMF/WB Debt Sustainability Analysis\. This emphasized the need to strengthen the legislative, institutional and policy frameworks that govern, and provide discipline to, the design of fiscal policy, government borrowing decisions, and debt management\. The DPO1 Prior Action to put in place an MTDS was complemented under DPO2 by implementation of a transparent, target‐based fiscal anchor system and monitoring framework\. More strategic fiscal and debt management helped GoT to both assess and avoid any new external borrowing\. 20\. The medium-term fiscal anchor and monitoring framework was focused on key debt, revenue, and wage bill affordability targets to address potential shocks in pursuit of greater economic stability\. The fiscal anchors have been adhered to and continue to be reported against in the annual budget statement\. GoT refers to these anchors in their budget preparations as guiding principles\. When performance or projections deviate from the anchors, the path to return to the anchors is described in the budget statement\. Overall, the action has been very effective in guiding medium-term fiscal management and sustainability\. 21\. The implementation of a new public service performance management and remuneration system was relevant to the PDO as it directly addressed a growing and unaffordable public sector wage bill\. The public sector wage bill was high at around 60 percent of domestic revenue at the commencement of DPO1 and the system of remuneration was poorly structured\. 9 The Prior Action progressed from a study of public service remuneration under DPO1 to Cabinet approval and the implementation of a new public service remuneration structure and performance management system under DPO2 and DPO3\. This contentious reform program was subject to sensitive consultations and was sensibly carried out over several years\. The indicative trigger was changed from one that focused on legislative reform to improvements to the system implemented by the Public Service Commission (PSC)\. This was due to confirmation that legislative reform was not required for the new performance management system to be implemented by PSC under the existing Public Services Act\. Pillar 2 Government Accountability 22\. Actions to strengthen procurement were relevant to the PDO as they directly addressed 7 World Trade Organization\. 2014\. Tonga Trade Policy Review\. Report by the Secretariat\. Geneva\. Page 51, paragraph 4\.36\. 8 The review was completed in 2019 with IMF technical assistance\. 9 Earlier fiscal pressures led to public sector pay cuts which contributed to riots in Nuku’alofa in 2007\. Ongoing pressure for ad-hoc large increases in public sector wages highlighted the need for systemic reform to the remuneration framework and performance management system\. Large reform and change management processes led to successful reform, supported by sequential actions under the DPO series which delivered effective controls on wage bill and a shift to a culture of rewarding performance\. Page 19 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report accountability for government finances; however, they were not sufficient to overcome capacity constraints\. This Prior Action was a continuation of earlier reforms that were needed to address a lack of usable records, compliance, and capacity\. Prior Actions built on the earlier reforms with the approval of a revised set of procurement regulations and preparation of standard bidding documents and procurement manuals under DPO1\. This continued under DPO2 via: (i) implementation of a new procurement tracking database; and (ii) adoption of compliance and performance indicators and targets for publicly disseminated monitoring\. While the Prior Actions were relevant, they were insufficient to achieve the results indicator\. This was because line ministries continued to experience a lack of capacity to fully implement the regulations\. Complementary measures to build capacity were less effective than expected due to high turnover of procurement personnel in line ministries\. Further capacity development will be needed\. The lack of capacity was a major factor in not achieving the results indicator\. 23\. Prior Actions to improve monitoring, management and reporting on public finances were relevant to the development objective of strengthening government accountability\. Strengthening the accuracy of public finance records, records management and reporting has long been required\. The reform program was partially focused on further improving GoT financial management information system (FMIS)\. However, the indicative trigger to add key FMIS modules was dropped\. This was due to a change in government and change in reform priorities\. GoT is now considering investing in a new system\. The FMIS additions were to be implemented together with a compatible revision of the Chart of Accounts (CoA) to improve budgeting and financial reporting, including for line ministries\. The latter reform was postponed from DPO2 to DPO3 as further technical assistance (TA) from the IMF’s Pacific Financial Technical Assistance Centre (PFTAC) identified the need for further analytical work\. 24\. Strengthening audit functions was relevant to the development objective as it addressed historical weaknesses in government accountability but overestimated GoT implementation capacity\. Previous Public Expenditure and Financial Accountability (PEFA) and other assessments identified several weaknesses in external audit\. The accounting for public finances and their audit had been constrained by a lack of qualified public sector accountants leading to inaccuracies and delays\. A new biannual report of audit recommendations and actions was prepared, and a new Audit Oversight Committee of Cabinet established under DPO1\. However, the committee has not met since 2017\. The Finance Minister leads a GoT Internal Audit Committee that meets regularly\. This committee considers the external audit recommendations made by the Auditor General’s Office, and seeks to direct ministries, departments and agencies to address them\. The Office of the Auditor General has recently been strengthened\. The Prior Actions were appropriate but insufficient to achieve the results indicator, given the difficulties that line ministries have experienced in improving their management of public finances and their associated lack of capacity\. Further capacity development in public finance accounting will be needed\. 25\. There were strong analytical underpinnings for the prioritization and selection of all Prior Actions under Pillars 1 and 2\. The GoT’s PEFA self-assessment, Public Financial Reform Roadmap and 2015 Remuneration Review, several IMF Article IV reports, and the DFAT Assessment of National Systems all provided support to the relevance of Prior Actions under Pillars 1 and 2\. Other assessments have been provided by other donors and development partners including the ADB and the IMF\. However, according to these same reports, the coordination and sequencing of the reforms could be strengthened\. Pillar 3 Supporting a More Dynamic and Inclusive Economy 26\. The Prior Action to establish independent regulators for the communications and utilities sectors was relevant to the objective of supporting a more dynamic and inclusive economy\. Establishing Page 20 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report independent regulators would stimulate competition and opportunities for consumer gain, and private sector growth\. Market regulation is needed to counter the lack of economies of scale and high-cost structures, and the potential for over pricing and monopolization\. Under DPO1, the legislative assembly approved a new Communications Act to establish an independent regulator\. It was then intended that the regulatory framework would expand to the regulation of some utility sectors\. Under DPO2, Cabinet approved a National Energy Bill for public consultation that included provisions for multi-sector regulation for all energy sub-sectors (electricity, gas, petroleum)\. The approval of a National Energy Bill replaced an earlier trigger for Cabinet to approve a competition policy as the new trigger was more directly related to the reforms underway\. Reform progress was delayed by national elections, the impact of TC Gita, staff turnover and delays in the provision of development partner-financed TA\. 27\. Passage of the Employment Relations Bill was relevant to the development objective of securing an inclusive labor market, especially for labor in the private sector and for women\. Prior to the DPO series, Tonga had no formal regulatory environment for labor in the private sector—through legislation had been under preparation for many years\. The reform provides the legislative backing for fundamental rights, principles, and entitlements at work, especially for women\. In 2016, Cabinet approved the country’s membership in the International Labour Organization (ILO), providing added impetus to complete the reform\. The Employment Relations Act was subjected to extensive consultation and was passed by Parliament on September 8, 2020\. However, it is yet to receive the King’s assent—the final legislative step prior to enactment\. Once enacted, the law would help all Tongans to fully participate in the economy\. 10 28\. Prior Actions to improve the environment for FDI were relevant to the development objective through the promotion of private sector led growth and job creation\. FDI was low prior to the DPO series due to an unattractive environment for investment\. In DPO2, Cabinet approved the Foreign Investment Bill for submission to Parliament to facilitate foreign investment\. Under DPO3, Cabinet approved revised foreign investment regulations to provide clearer and more transparent requirements for foreign investment applications\. An indicative trigger regarding a Contract Bill was replaced by approval of the foreign investment regulations, as this provided greater continuity to the reform program\. It was also explicitly linked to the results indicator\. The proposed incorporation of new work permit rules was not addressed due to the time required to discuss and process the Foreign Investment Bill\. The Prior Action was appropriate to achieve the results indicator—as evidenced by the sustained increased in approved foreign investor applications relative to the baseline\. Nevertheless, the results indicator was not fully achieved, as the international travel restrictions and severe economic downturn due to COVID-19 and TC Harold in late FY20 curbed foreign investor applications\. 11 29\. The Prior Action to provide reliable credit information and lower the cost of credit by establishing a credit bureau was relevant to the PDO as it would facilitate small business activity and extend credit to women\. The establishment of a credit bureau is a key step in providing comprehensive, reliable credit information and thereby radically lowering the cost of extending credit to new customers\. Under DPO2 the central bank was to issue a directive to mandate credit reporting under the credit bureau that was already operated out of Fiji\. This would reduce costs of due diligence and support access to finance for small and medium enterprises (SMEs) and individuals\. However, a change in Fijian law caused the provider to cease 10 World Bank\. 2020\. Integrating a Gender Equality Lens: Drawing Lessons from Three Good-Practice Development Policy Operations\. MTI Insight Series\. World Bank, Washington, DC\. 11 There remain other constraints to attracting FDI, including securing land and labor (as noted in the IMF Article IV 2020) and difficulties of registering property, protecting minority interests, and resolving insolvency (as noted in the World Bank Doing Business 2020 Tonga Profile)\. Page 21 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report operating the Tonga credit bureau\. The central bank then preferred a domestic based credit bureau while the Bank sought to support another regional solution\. The Prior Action was postponed while an alternative solution was assessed\. 30\. Public enterprise reforms in pursuit of more competitive, efficient, and cost-effective delivery of goods and services, lessening fiscal risk and creating opportunities for private sector growth were relevant to the PDO\. GoT was intent on continuing its successful reforms of the public enterprise sector\. 12 Strong government ownership has led to the divestment of public enterprises where this has been assessed as viable and in the public interest\. The reform program has also resulted in improved governance and different forms of private sector operation where GoT has preferred that ownership remain in public hands\. Under DPO1, Cabinet approved the appointment of shared boards of directors of public enterprises in the information and communication technology (ICT) and utilities sectors\. The reform was designed to improve the management and governance of the sectors, while recognizing the limited number of suitable board candidates in the country\. This was followed by a Cabinet directive to proceed with a sale of shares in Tonga Cable Ltd\. in DPO2 to increase private sector participation in the company\. In DPO3, Cabinet approved a recommendation that the Ports Authority Tonga (PAT) adopt a landlord model for Nuku'alofa port\. The reform would allow PAT to focus on its core functions of port management and regulation, while allowing for greater private sector participation in the provision of stevedoring and related services at the port\. 31\. The selection, prioritization, and relevance of Pillar 3 Prior Actions is supported by the government’s private sector development strategy\. 13 However, this strategy could be strengthened by inclusion of priority issues noted by recent IMF and World Bank assessments\. The strategy could also be strengthened in future by a more strategic focus and the fuller participation of the private sector in designing and therefore committing to that strategy\. 14 32\. The results chain or Theory of Change (ToC) of the Prior Actions was not presented in the DPOs\. ToCs for all Prior Actions have therefore been drafted and included in Annex 5\. All ToCs demonstrate how the three DPOs contributed to the achievement of outputs and results, and thereby the outcomes and the development objectives of enhancing fiscal resilience, improving government accountability, and creating a more dynamic and inclusive economy\. 33\. The DPOs were aligned with the objectives of the WB’s 2016 Systematic Country Diagnostic (SCD) and the RPF covering FY17-FY21\. The DPOs were aligned with the SCD priority actions of fostering access to economic opportunities and public services and to selectively address weaknesses in economic governance and the business environment\. The DPOs contributed to the first RPF theme of exploiting economic opportunities through public enterprise reform and by making it easier to invest in Tonga\. They contributed to the second theme of enhancing access to employment opportunities and the fourth, strengthening the enablers of growth and opportunities, by introducing a legal framework that protects fundamental labor rights, and by strengthening fiscal policy to build fiscal buffers and improve the resilience of the government to shocks\. DPO actions are also closely linked to the IDA18 special theme “Governance and Institutions”, including in the areas of supporting domestic revenue mobilization and enhancing the performance of SOEs\. 34\. The supplemental financing to DPO2 allowed GoT to finance crucial immediate recovery priorities in 12 See: ADB\. 2016\. Finding Balance Benchmarking the Performance of State-Owned Enterprises in Island Countries\. Manila\. 13 GoT\. 2019\. Kingdom of Tonga Private Sector Development Strategy (PSDS) and Action Plan 2018-2022\. Nuku’alofa\. 14 The drafting of the private sector strategy was assisted by ADB’s Pacific Private Sector Development Initiative (PSDI) and the need for a stronger strategic focus in PSDI’s work was expressed as a general concern in: Independent Evaluation Department ADB\. 2018\. Performance Evaluation Report Pacific Private Sector Development Initiative\. Manila\. Page 22 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report the aftermath of TC Gita\. These included support for the immediate relief effort, agriculture sector recovery, and housing and public infrastructure repair and rebuilding, among others\. Without the supplemental financing, fiscal resilience—the first development objective of the DPO program—could have been significantly weakened, with the GoT forced to run down cash balances and/or increase debt to potentially unsustainable levels to meet its recovery needs\. A\. Achievement of Objectives (Efficacy) Rating: Moderately Unsatisfactory 35\. The DPO series supported the achievement of critical development outcomes related to fiscal and debt management, the NCDs crisis, civil service management, SOE performance and labor rights\. Prior to the DPO series, GoT had commenced a high-quality fiscal consolidation that saw the fiscal accounts turn from a deficit of over 6 percent of GDP in FY11 to a small surplus in FY16\. The DPO series supported the GoT to reinforce this fiscal consolidation and protect the nation’s hard-won fiscal sustainability in the face of multiple shocks (TC Gita, TC Harold, COVID-19, the 2017 election and the death of PM Pōhiva)\. Indeed, the reform program supported GoT to register five consecutive fiscal surpluses during FY16-FY20 and avoid new non- concessional external borrowing\. Revenue reforms supported an increase in revenue buoyancy, while also helping to change consumption behavior and address the NCDs crisis\. The introduction of fiscal anchors and the nation’s first MTDS strengthened fiscal sustainability\. The civil service reform agenda was critical to address wage bill pressures and support a change in civil service culture towards rewarding performance\. SOE reform has improved fiscal sustainability by helping to improve SOE profitability and reduce subsidies\. Finally, the Employment Relations Act is a landmark reform that—once approved by the King—will introduce fundamental labor rights and protections for the first time in Tonga\. 36\. Of the 12 Results Indicators associated with the series, five were achieved, three partially achieved, and three were not achieved\. The results indicator regarding audit recommendations cannot be fully assessed, as the FY20 Financial & Compliance Audit Report is not yet available\. The report was due to be submitted to Parliament by end-June 2021 but was still not available when this ICR was finalized in September 2021\. The results up to FY19 suggest that the results indicator is unlikely to have been achieved\. Achievement of the results indicators related to revenue collection, FDI and the Employment Relations Act were negatively affected by the economic impacts of TC Gita in FY18 and the dual shocks of TC Harold and COVID-19 in FY20\. 15 In the absence of the dual shocks, all three results indicators were on track to be achieved\. Despite these adverse impacts, substantial improvements in revenue mobilization and FDI were realized\. The result associated with the Employment Relations Act will be fully achieved following approval by the King\. Pillar 1 Supporting Fiscal Resilience 37\. The Prior Action target to raise domestic revenue and improve revenue administration was partially achieved\. The result indicator was on track to be achieved but the outcome was negatively impacted by the economic impacts of TC Gita, TC Harold and COVID-19\. These shocks resulted in lower economic activity which reduced revenue collection\. GoT also responded to the shocks by providing temporary tax relief, contributing to lower revenues\. The increases in the rates of fuel excise tax and other excise tax and import duties were entered into Gazette in July 2016\. Cabinet also approved: (i) a revised Revenue Services Administration Bill for submission to Parliament that would introduce additional avenues for revenue recovery and set updated and graduated penalties, and (ii) a new Customs Bill that aligned with 15In 2020, Tonga suffered dual external shocks of the COVID-19 pandemic and TC Harold (a category 5 cyclone), causing significant negative effects on the tourism-dependent economy and government finances\. Page 23 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report international standards and simplified customs administration\. 16 Domestic revenues rose from an average of 21\.5 percent of GDP over FY14-FY16 (revised down from 21\.8 percent) to 24\.2 percent over FY18-FY20\. This was below the target of an average of 25 percent of GDP over FY18-FY20\. Nevertheless, the result was an impressive outcome in the context of the multiple external shocks during FY18-FY20\. 38\. The results indicator was relevant and measurable but may have been too ambitious\. The target might have been slightly too ambitious given possible elasticities of demand and the frequency of external shocks\. The preferred source of indicators (government statistics, IMF Article IV or other) could also have been stated\. The DPO1 result indicator only focused on excise tax\. However, as the Revenue Administration Services Act and the Customs bill were related to domestic revenue collection more broadly, the result indicator was changed\. 39\. The result indicator targets regarding external borrowing and the fiscal anchor system were achieved\. Cabinet approved the new Medium-Term Debt Strategy on December 18, 2015 and a transparent, target-based fiscal anchor system and monitoring framework on February 3, 2017\. There were two targets\. The first result indicator was set at maintaining the concessionality of external borrowing\. The indicator was relevant, measurable, and reasonable, although the source was not declared in the DPO program documents\. GoT did not take on any new external debt (concessional or otherwise) over the stipulated period\. The second result indicator was that analysis of consistency between annual budget estimates and medium-term fiscal anchors was included in budget documents from FY18 to FY20\. This was achieved\. The result indicator was relevant, readily measurable, and the target was reasonable, with the source identified\. 40\. The targets to reduce the public wage bill as a proportion of domestic revenue and to employ an annual moderated performance process were achieved\. The Remuneration Authority completed its first remuneration review of the public service on June 12, 2014\. Cabinet approved the recommendations on December 4, 2015\. GoT began to implement a new public service remuneration structure and performance management system through Cabinet decisions on April 27, 2016 and July 8, 2016\. A second remuneration review was submitted on July 25, 2016\. The annual moderated performance process was completed, and the ratings used in the determination of public sector wages\. 17 The public wage bill as a proportion of domestic revenue was reduced from a baseline average of 62 percent over the period FY14 to FY16 to below the target of an average of 53 percent over the period FY18 to FY20\. 41\. The politically sensitive introduction of a new public service remuneration framework and performance management system, leading to a reduction of the wage bill, is a notable success story\. Key lessons include the time required and the importance of GoT ownership of the reform program\. The result indicator was revised from an earlier FY14 baseline of 57 percent and FY19 target of 53 percent or lower\. This was done to strengthen the line of sight between the reform agenda and sustained improvement in wage bill management\. The result indicator was relevant and measurable, and the target was based on historical precedence\. Pillar 2 Government Accountability 42\. The target for the result indicator regarding improved procurement was not achieved\. Cabinet approved a revised set of procurement regulations on May 1, 2015\. Standard bidding documents and 16 The Revenue Services Administration Bill has been passed by Parliament but not yet approved by the King\. This has held up implementation of the reform, negatively impacting on the achievement of the results indicator\. The Customs Act has been enacted\. 17 This is referenced in PSC Circular Savingrams dated July 12, 2018 and December 4, 2018\. Page 24 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report procurement manuals were also prepared to support the regulations\. GoT also implemented a new procurement tracking database and adopted compliance and performance indicators and associated targets for monitoring system performance\. These were publicly disseminated\. However, the proportion of contracts above the small purchases threshold that were subject to open competition did not increase to the FY20 target of over 50 percent\. The Central Procurement Unit of MOF received TA to help establish a series of key performance indicators\. The Result Indicator was therefore measurable and relevant to the Prior Action\. The target may have underestimated capacity constraints, particularly in line ministries\. 43\. The Prior Action to apply a new economic segment in the budget system was achieved\. To improve the accuracy and integrity of budget reporting, GoT removed the non-economic items from the economic segment of the CoA\. The reform was achieved despite numerous setbacks, supported by multiple rounds of TA\. 18 The indicator was relevant and measurable\. As the DFAT Assessment of National Systems states, some reforms require sustained efforts over many years\. The CoA and FMIS reform program was identified as one such area\. 19 44\. The target for the proportion of public accounts audit recommendations to be noted as ‘outstanding’ in the following year’s audit report could not be fully assessed, although is unlikely to have been achieved\. A new biannual report of audit recommendations and actions for all ministries and agencies was prepared, and a new Audit Oversight Committee of Cabinet was approved by Cabinet on August 28, 2015\. This Committee was tasked with ensuring timely and thorough follow-up of audit recommendations\. The proportion of public accounts’ audit recommendations noted as outstanding in the following year’s audit report were targeted to be reduced from an FY17 baseline of 60 percent to a target of no more than 40 percent in FY19 and FY20\. Over seventy percent of audit recommendations were still outstanding in FY19\. The FY20 report was scheduled to be presented to Parliament by end-June 2021\. However, the report has been delayed\. The indicator was relevant and measured by the Office of the Auditor General\. However, the target may have been too ambitious given the continued shortage of public sector accountants\. 20 Pillar 3 Supporting a more dynamic and inclusive economy 45\. The outcome of establishing independent regulators for the communication and energy sectors has not been achieved\. In 2015, Parliament approved a new Communications Commission Act to establish an independent regulator under DPO1 but funds for its implementation have not been allocated in the budget\. On February 17, 2017 Cabinet approved an Energy Bill be disseminated for public consultation\. However, the bill remains to be submitted to Parliament\. The results indicator was changed from the regular publication of monitoring reports for the regulated sectors to the more precise established and operational regulators for the communication and energy sectors\. The revised indicator was relevant and measurable, but the target was revealed as unreasonable given the time needed to gain full political acceptance\. 46\. The outcome of enshrining key labor rights in legislation has not yet been achieved, although the results target will be fully achieved once the law is gazetted following the King’s approval\. GoT has done everything in its power to achieve the result\. Tonga acceded to the International Labour Organisation by a Cabinet Decision on September 18, 2015\. The Employment Relations Bill was approved by Cabinet on April 5, 2019 and passed by Parliament on September 8, 2020\. The Act has not become law because the King has not yet given royal assent\. This is due to concerns that enactment of the bill (and the extra rights for workers 18 Brendon Toner, vSolutions\. 2021\. Technical Review of the Government of Tonga’s Current Financial Management Information System, Reporting Systems and Payroll\. Mark Silins\. 2018\. PFTAC Quarterly Report November\. 2018\. 19 Government of Australia DFAT\. 2019\. Assessment of National Systems Tonga March 2019 Update\. Canberra 20 See 5-19: GoT Ministry of Finance 2014\. Public Finance Management Reform Roadmap for Tonga 2014/15 to 2018/19\. Nuku’alofa\. Page 25 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report that it confers) would be too onerous for employers at this time, given the severe negative economic shock due to TC Harold and COVID-19\. This is despite several comprehensive rounds of public consultations, numerous revisions to the bill, and extensive information sessions between members of parliament and the ministry\. The indicator was changed from the number of labor rights enshrined in legislation to specify three key rights that would be included (equal remuneration for equal work, gender non-discrimination, and maternity leave)\. The indicator was relevant and measurable, but the timing of the target may have been overambitious given that this was a highly sensitive reform\. 47\. Allowing for the impact of COVID-19 in 2020, the outcome of realizing an increase in foreign investors’ vetted applications was achieved\. Cabinet approved revised foreign investment regulations, which provided clearer and more transparent requirements for foreign investment applications under a new foreign investment legislation on March 10, 2017\. Extensive consultations were undertaken, and all inputs helped lead to increases in foreign investors’ applications of 49 in FY17, 32 in FY18, 31 in FY19, and 27 in FY20\. The target was 30 applications or more in FY20\. Applications were negatively impacted by the border closures and economic downturn due to COVID-19\. The indicator was relevant and measurable, and the target was achievable\. 48\. The objective to reform at least two public enterprises by FY20 was partially achieved\. Cabinet approved the appointment of shared boards of directors of public enterprises in the ICT sector and utilities on September 25, 2015\. The PAT reported on the implementation of shared directors in the transport sector in May 2016\. 21 Cabinet next directed the Ministry of Public Enterprises (MPE) to proceed with a sale of shares in Tonga Cable Ltd\. on February 3, 2017\. 22 Digicel completed the share purchase agreement on July 26, 2017\.23 This was followed by Cabinet approving a recommendation that PAT adopt a landlord model for Nuku'alofa port on November 9, 2018\. This reform was delayed to allow for appropriate contractual arrangements and safeguards to be put in place to mitigate a possible stevedoring monopoly\. 24 It was delayed further due to the change of government following the death of PM Pōhiva, while the new Cabinet reviewed the reform\. Nevertheless, GoT remains committed to finalizing the reform\. The selected private sector provider is scheduled to commence operations in January 2022\. Tonga Water Board, Tonga Forests and Tonga Broadcasting Commission were also reformed during implementation of the DPO series— although not as part of the DPO reform program\. The results indicator was adjusted from at least four SOEs reformed to at least two as the prior indicator was overly ambitious\. The indicator was relevant and measurable, and the target was feasible\. B\. Overall Outcome Rating and Justification Rating: Moderately Unsatisfactory 49\. In view of the relevance of the design of the program and the efficacy of the achievement of results, the overall development outcome is rated moderately unsatisfactory\. Some very significant reforms have been achieved\. Open and frank dialogue on macroeconomic issues has helped Tonga to achieve and maintain 21 Article available here\. 22 Link available here\. 23 Link available here\. 24 MPE acknowledged this risk and included a clause in the concession agreement that would allow PAT to access the docks and use the machinery in the event of industrial action\. MPE stated that they have learned from previous reforms that introduced greater private participation into a sector and understand the need to manage the employment impacts\. 28 PAT staff are expected to be affected by the reform\. MPE planned to include a condition that required a transition period during which time the PAT staff will transfer to the company to minimize employment impacts\. Page 26 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report prudent fiscal and debt policy and management, navigate severe external shocks (TC Gita), and strengthen key institutions for inclusive development\. The benefits of these reforms are likely to take some additional time to be fully realized\. Other, more sensitive reforms such as the Employment Relations Act will take more time to be fully implemented\. Nevertheless, their development impacts will be substantial once they are full enacted\. Nevertheless, only five of the 12 results indicators were fully achieved, with achievement of several results hampered by external shocks, including TC Gita, TC Harold and the COVID-19 pandemic\. III\. OTHER OUTCOMES AND IMPACTS A\. Poverty, Gender and Social Impacts 50\. Most of the policy actions supported under the program will have an indirect positive impact on poor households and vulnerable groups\. Enhanced public revenue generation, control over public debt, strengthened medium-term budgeting, better management of public service remuneration, strengthened procurement and audit, a more attractive environment for foreign investment legislation and improved public enterprise management will benefit all Tongans, especially the poor and vulnerable\. All these reforms provide fiscal space (either by increasing revenues or improving the efficiency of spending) to support enhanced delivery of public goods and services\. The well-being of the poor is disproportionately dependent on government services, so they stand to benefit most from improved public service delivery\. 51\. More specifically, the increased taxes on tobacco, alcohol and instant noodles will have a net positive impact on the poor and on women over the long-term\. Poor households in Tonga are more likely than wealthier households to reduce the consumption of products that can lead to NCDs in response to significant tax-price increases\. That is, provided, healthier foods are accessible, and social preferences are also addressed\. 25 Women are also likely to benefit more as smoking appears to be increasing among young women and any reduction in the use of alcohol could lessen domestic abuse\. 52\. When enacted, the Employment Relations Act will be of direct benefit to women and will more generally benefit all employees\. By enshrining basic labor rights in law, the legislation should improve work conditions for all employees, particularly for vulnerable groups and women\. However, new minimum requirements, such as paid leave, may increase labor costs to employers and deter some job creation\. 53\. The PAT restructuring and signing of a concession contract may lead to job losses, to the extent that the concessionaire can deliver the services more efficiently than PAT\. However, PAT management are exploring options to redeploy affected employees within PAT, or to offer redundancy payments, to any staff that are not employed by the concessionaire\. B\. Environmental, Forests, and Natural Resource Aspects 54\. The policy reforms supported by this operation have not, and are not likely to have, any negative effects on Tonga’s environment and natural resources\. C\. Institutional Change/Strengthening 55\. The series of reforms to strengthen public service remuneration and performance management yielded a very positive impact on the public sector\. Other public finance management reforms to raise revenue, strengthen debt management, formulate a fiscal strategy, and strengthen budget accuracy, 25 World Bank\. 2019\. Using Taxation to Address Noncommunicable Diseases: Lessons from Tonga\. Washington D\.C\. Page 27 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report procurement, audit, and public enterprise management also led to positive institutional change\. 56\. The foreign investment legislation and SOE reforms continued the long-term attention to improve the enabling environment for private sector development\. The appointment of independent regulators and enactment of the Employment Relations Act will also bring about important institutional development when they are implemented\. D\. Other Unintended Outcomes and Impacts 57\. There were no other unintended outcomes and impacts\. IV\. BANK PERFORMANCE Rating: Moderately Satisfactory A\. Preparation 58\. The program of reforms supported by the DPO series relied on analytical work conducted by the World Bank, GoT, and other development partners, donors, and regional programs\. The Bank’s work on taxation and NCDs advanced the understanding of the demand for consumer goods that can lead to NCDs\. Specific analytical reports for Tonga (the 2012 Financing Options for the Health Sector and 2014 NCDs Roadmap) also provided recommendations on a broad package of reforms\. The Bank provided analytical support to GoT in building an evidence base for the new fiscal strategy and to define the appropriate levels of the fiscal anchors\. Bank TA supported the development and implementation of the remuneration framework and performance management system\. Regulatory assessments carried out as part of the Bank’s Pacific Regional Connectivity Program identified constraints in the communications sector legal framework and actions that could be taken to address them\. The Bank’s Tonga Energy Road Map program identified shortcomings in non-electricity regulation and supported the preparation of the National Energy Bill\. 59\. The Bank took account of lessons learned from other earlier operations\. This led to the targeted focus on critical areas of reform and continued, flexible engagement\. The published findings of relevant operations of other development partners and donors provide lessons that could also have been considered\. 26 60\. The program documents took adequate account of most of the perceived risks, and mitigation measures were mostly adequate\. Anticipated risks were limited institutional capacity, macroeconomic shocks, political and governance risks, vested interests, and negative social impacts\. Limited institutional capacity and political sensitivities delayed some of the reforms that will be further pursued in future programs (such as reforms to reduce consumption and corporate tax exemptions)\. 61\. The Employment Relations Bill and the energy sector reforms were politically sensitive\. Ex-ante study of the political economy of reform could help guide participatory reform, and other reform design including timing\. 27 26 Bruce Knapman and Cedric Saldanha\. 1999\. Reforms in the Pacific: An Assessment of the Asian Development Bank’s Assistance for Reform Programs in the Pacific\. Manila: ADB; ADB\. 2001\. Special Evaluation Study on Program Lending\. Manila; ADB\. 2009\. ADB Support for Public Sector Reforms in the Pacific: Enhance Results through Ownership, Capacity, and Continuity\. Manila; and Independent Evaluation Department\. 2017\. Corporate Evaluation Results-Based Lending at the Asian Development Bank: An Early Assessment\. Manila: ADB\. 27 As the ICR of the previous DPOs determined, the political context and Government Ownership were major factors affecting implementation\. Strong political support for reforms kept GoT actively engaged in moving reforms forward (despite low capacity and starting from the point of first-generation reforms)\. However, there were also challenges posed by those who stood to lose from Page 28 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report 62\. A more comprehensive and participatory private sector development strategy could help to identify binding constraints and prioritize issues and options for future interventions\. A private sector development strategy and prioritized action plan that is jointly prepared by the private sector and government could provide a more suitable roadmap for future reform\. It could also encourage a more frequent, frank, and structured exchange of views between businesses and regulators\. 63\. A DFAT evaluation concluded that the JPRM could benefit from a study of its impact\. This was supported by the government at the time\. The overall program could also benefit from a broader discussion of the theory of change for economic policy reform in Tonga\. As the lead JPRM development partner the Bank would be best placed to lead this discussion\. B\. Implementation 64\. The Bank proactively identified and effectively responded to most of the risks to the achievement of relevant development outcomes during implementation\. The Bank responded positively and in a timely manner to the impact of TC Gita, including through supplemental financing to DPO2\. Negative social risks did not materialize\. In some cases, the risks of limited organizational and institutional capacities and the time taken to gain full political acceptance were underestimated\. As reported by the ICR of the previous DPO series, lack of capacity was a major factor affecting implementation\. 28 A lack of capacity in public finance accountability and management requires greater attention\. More sensitive reforms, such as the Employment Relations Act, will require more time to be completed\. Once approved, however, ensuring that the law translates into improved working conditions for all employees will require the implementation of complementary enabling regulations\. Such complementary measures should be considered under future DPO and TA engagements\. 65\. The Bank closely monitored progress on all results indicators over the course of the program\. Some results indicators were adjusted to take account of progress\. A course correction was necessary in the case of the proposed credit bureau\. The DFAT evaluation recommended that a JPRM monitoring tool be developed to track the implementation of previous reforms and measure reform quality\. While this may not be required by development partners that track progress for their own accountability requirements a summary JPRM- based monitoring framework that tracked inputs, outputs, outcomes, and impact could assist the governance of reform within country\. Such an exercise would have to be cognizant of the GoT’s limited capacity\. 66\. The Bank led the coordination with GoT on the reform program and TA requirements under the JPRM\. Bank TA supported reforms related to the fiscal anchors, debt management, tax exemptions and investment incentives, procurement (in coordination with DFAT), and tax measures to address the NCDs crisis (in coordination with DFAT)\. The Bank, in coordination with ADB, DFAT and MFAT, provided guidance on the reform program to strengthen public service remuneration and performance management systems\. The Bank led the TA engagement on the energy sector until 2016, when donor support transferred to the EU\. The Bank also maintained close contact with PFTAC and the ADB in support of the FMIS and CoA TA\. The Bank made a total of 19 missions to Tonga over the period February 2015 to September 2020\. 67\. There was good coordination in program implementation with other development partners and donors through the JPRM process\. The GoT has maintained its commitment to reform over the past decade\. reforms and related vested interests, particularly as it pertains to the reforms linked to procurement and SOE privatization\. The Bank had insufficient understanding of the political dynamics and how it would impact the implementation of reforms including who would be adversely affected\. Failure to monitor and actively manage these risks also slowed implementation of reforms\. 28 World Bank\. 2017\. Implementation Completion and Results Report: The Kingdom of Tonga, for the Economic Reform Support Development Policy Operation I & II\. Washington D\.C Page 29 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report The JPRM development partners also provided a range of TA to assist implementation\. DFAT supplied TA in public finance management and procurement\. ADB funded TA in support of public enterprise reform and strengthening the FMIS\. DFAT and ADB both funded TA related to the public service performance management and remuneration reform program\. The EU provided TA for regulation in the energy sector, though this was much delayed\. Employment relations legislation was supported by the ILO, while the Bank and DFAT also provided technical reviews of drafts of the bill\. The DPOs also received valuable technical support from the regional organizations, the Pacific Association of Supreme Audit Institutions in audit, PFTAC in public finance management and PSDI in private sector development\. Regular Aide-Memoires produced following each JPRM mission now incorporate a summary annex of reform priorities, TA needs, and which partner will provide the assistance\. 68\. Other development partner coordination was also strong\. Development coordination was also conducted through regular high-level consultation meetings in Nuku’alofa, and other regular inter- development partner meetings coordinated by the Bank\. The Bank and the IMF also maintain a close working relationship in Tonga, with the Bank participating in Article IV missions, facilitating the discussions on structural reforms\. V\. RISK TO SUSTAINABILITY OF DEVELOPMENT OUTCOMES 69\. The sustainability of development outcomes will remain challenged by limited implementation capacities\. The DPOs have helped strengthen fiscal resilience, inclusiveness and government accountability and a more dynamic and inclusive economy\. However, staff turnover of some development partners and recipient staff compounds the challenges of capacity development\. Moreover, despite targeted TA provided by development partners, domestic capacities may continue to be overestimated\. 70\. As acknowledged in the program documents, the sustainability of development outcomes will continue to be threatened by macroeconomic risks\. These risks include global or regional economic downturns impacting sources of remittances and external demand, development assistance from donors, and imported commodity prices\. Fiscal and debt management has however been prudent—with key reforms supported by the DPO series\. Continued GoT commitment and engagement with development partners is expected to sustain reform momentum\. The Bank is expected to continue to work with IMF staff to monitor macroeconomic risks and provide policy advice to government as needed\. 71\. Natural hazards can also alter GoT fiscal priorities and divert its limited capacity, thereby putting at risk the sustainability of DPO achievements\. When disasters strike, the authorities are forced to redirect their limited public service capacity to the immediate relief effort, crowding out the focus on longer-term reform priorities\. GoT is adjusting fiscal policy to mitigate these risks to the extent possible\. 72\. Changing political priorities have contributed to slower-than-expected reform progress and variable implementation follow through\. This risk is likely to remain present, given the large role of the public sector in the economy and small, interconnected population\. This risk has been mitigated to some degree by continuous dialogue between the Bank and GoT\. While some sensitive reforms may just take more time, it may also be prudent to examine the political ramifications of selected reforms more closely\. VI\. LESSONS AND NEXT PHASE A\. Lessons Learned 73\. The ‘Inclusive Growth’ series demonstrated that DPOs in Tonga can achieve good results with Page 30 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report government ownership\. The close partnership between the MoF and the Bank facilitated the provision of policy advice that has helped GoT to maintain a solid macroeconomic framework, despite numerous exogenous shocks and periodic political pressures\. 74\. A three-year program can involve significantly greater implementation challenges than a two-year program\. A two-year program is the standard duration in the Pacific, and the duration of two previous programmatic series in Tonga\. The ‘Inclusive Growth’ series spanned several years 29, different governments, ministerial and civil service staff turnover, and a major natural disaster\. Combined, these challenges curtailed progress in some specific reform areas\. A return to the two-year program is recommended\. 75\. Flexibility in the DPO program is crucial in an environment of low capacity and frequent shocks\. Limited public sector capacity means that reform progress can be directly affected by the performance or departure of a few officials\. Contrastingly, continuity of a strong team can result in faster-than-expected reform progress\. External shocks can divert the government’s limited capacity to the relief effort, requiring additional time to complete the reform program\. This series highlighted the importance of flexibility to adjust the reform program (including the flexibility to adjust indicative triggers) to ensure it remained relevant to revised policy priorities and informed by the latest evidence and conditions\. 76\. Another key lesson is the need to carefully assess institutional capacities in support of targeted policy reforms and to regularly analyze and confirm political support for the reform program\. Frequent changes in key counterparts and ministers highlight the importance of working with a broad set of stakeholders in developing and implementing the DPO reform program\. This has been institutionalized by the Budget Support Management Committee 30 requiring all JPRM ministries to assign at least one working- level staff (i\.e\., below Chief Executive Officer) to support coordination and continuity\. JPRM missions were also adjusted to include regular meetings with the Cabinet and/or the Finance Minister, to maintain political support for the reform program\. Ongoing assessments of institutional capacity and political economy— including via the Bank liaison officer, project teams and dedicated TA—can complement these developments\. 77\. The success of the wage bill management reform agenda in a politically sensitive area reinforces these lessons\. The success of this reform agenda highlights the importance of strong client ownership and the value of sustained development partner support through diagnosis, reform design and implementation\. The reforms were grounded in analysis undertaken by GoT (with development partner assistance) in response to a pertinent political issue\. The analysis started with smaller public agencies to gain legitimacy, before extending to ministries under PSC jurisdiction\. The reform process started with a review of remuneration to ensure that the authorities had accurate and comprehensive information\. This was followed by extensive consultation and awareness building on the reasons and benefits of a shift to performance- based pay, along with extensive training to support implementation, and regular consultations and adjustments to improve implementation\. This process helped to address political pushback and get the buy- in of stakeholders\. The success also shows how the DPO instrument can support the achievement of significant development outcomes by supporting incremental reforms in some years, which help create the space for transformative reforms in other years\. This is particularly important in low-capacity environments, where significant reforms often require subsequent implementation support\. 78\. Through the JPRM, the Bank has maintained a strong partnership with other development partners in support of the Bank’s operations\. The JPRM is a robust and effective mechanism for coordinating 29 The reform priorities were first discussed with authorities in FY15, while the DPO3 was approved by the WB Board in FY19\. 30 The JPRM coordination mechanism between GoT and the development partners\. Page 31 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report development partner financing and technical support\. Development partner comparative advantages can be harnessed by identifying a lead partner to support different reform areas, amplifying the impact of the Bank’s operations\. This collaboration and coordination among development partners and with GoT is crucial to sustain key results from the DPOs and should be continued\. 79\. This series also confirmed lessons learned from the previous DPO engagement\. Past operations have highlighted that adequate investment in policy dialogue is vital but resource intensive\. Close coordination and engagement with other development partners in the identification of policy priorities is critical in sectors where the Bank has lesser knowledge and engagement\. Another lesson is the importance of persistence\. Although progress in some areas has been slower than originally anticipated, long-term engagement has helped keep the focus on reforms and overcome vested interests\. Finally, coordinated management of fiscal needs and budget support can provide vital support to mitigate the impact of external shocks\. B\. Next Phase 80\. The Bank is currently implementing a subsequent programmatic DPO series (the ‘Resilience’ series)\. DPO1 (P171071) was approved by the Board on May 12, 2020\. DPO2 (a hybrid operation with a Catastrophe- Deferred Drawdown Option, P172742) is scheduled to go to the Board in November 2021\. This series has applied some of the key lessons learned from the ‘Inclusive Growth’ series\. First, by reverting to a two-year program\. Second, COVID-19 related border restrictions have forced all missions to be virtual\. This has further highlighted the importance of close coordination between the development partners (including those with on-the-ground presence) to ensure effective follow-up on reform priorities and TA\. Virtual missions have also highlighted the importance of strong relationships with key counterparts and continuity of the Bank’s task team leader\. These aspects have helped to maintain strong reform progress and robust dialogue on key macroeconomic opportunities and challenges, along with close development partner coordination\. \. Page 32 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report ANNEX 1\. RESULTS FRAMEWORK A\. RESULTS INDICATORS Pillar: Pillar I: Supporting fiscal resilience Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Domestic revenue as a Text Average FY14-FY16: 21\.8 Average FY18-FY20: >25 Average of 24\.2 percent for FY18- proportion of GDP percent percent FY20 30-Jun-2016 30-Jun-2020 30-Jun-2020 Comments (achievements against targets): Baseline revised down from 21\.8 percent to 21\.5 percent (as recorded by MoF in 2021)\. The original target implied a 3\.2 percentage point increase from the baseline\. Actual result was an increase of 2\.7 percentage points\. Partially achieved\. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion External borrowing that is above Text FY13-FY15: 100 percent FY16-FY20: 100 percent 100 percent (FY16-FY20) 35 percent concessionality as a proportion of all external 30-Jun-2015 30-Jun-2020 30-Jun-2021 borrowing Comments (achievements against targets): Page 33 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Achieved\. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Ensure that annual budget Text FY13-FY17: No analysis of FY18-FY20: Analysis Analysis included in Budget estimates are consistent with consistency between included in Budget documents for FY18 (Table 2, page medium term fiscal anchors, and annual Budget estimates documents 6), FY19 (unnumbered table, page that any divergences are and medium-term fiscal 25) and FY20 (Table 1, page 8)\. adequately explained\. anchors in Budget Annual budget estimates were documents consistent with medium-term fiscal anchors\. 30-Jun-2017 30-Jun-2020 01-Jul-2021 Comments (achievements against targets): Achieved\. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Public wage bill as a proportion of Text FY14-FY16: 62 percent Average of FY18-FY20: 53 Average of 50\.1 percent (average domestic revenue percent or lower FY18-FY20)\. 30-Jun-2016 30-Jun-2020 30-Jun-2020 Comments (achievements against targets): Achieved\. Page 34 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Annual moderated performance Text FY14: No FY18 to FY20: Yes Annual moderated performance process completed, and ratings process completed, and ratings used in the determination of used in the determination of public public sector wages sector wages (FY18-FY20)\. 30-Jun-2014 30-Jun-2020 30-Jun-2020 Comments (achievements against targets): Achieved\. Pillar: Pillar II: Government accountability Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Proportion of contracts above the Text FY14: 35 percent of FY20: At least 50 percent of 28 percent (FY20) small purchases threshold that contracts subject to open contracts subject to open are subject to open competition competition competition 30-Jun-2014 30-Jun-2020 30-Jun-2020 Comments (achievements against targets): Not achieved\. Page 35 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion New economic segment is Text Old economic segment New economic segment is A revised economic segment was utilized in the budget systems used in budget reporting reflected in budget completed and reflected in the reporting budget reporting (FY20) 30-Jun-2017 30-Jun-2020 30-Jun-2021 Comments (achievements against targets): Achieved\. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Proportion of public accounts Text 60 percent (6 of 10 audit FY19 and FY20: 40 percent FY19: 22 issues raised in previous audit recommendations noted as matters raised in FY16 (no more than 40 percent year’s audit still outstanding and 8 ‘outstanding’ in the following with respect to the public of audit matters raised in resolved\. FY20: Report not year’s audit report accounts were still FY18 with respect to the available\. outstanding as of the public accounts are still FY17 Audit)\. outstanding as of the FY19 Audit, and no more than 40 percent of audit matters raised in FY19 with respect to the public accounts are still outstanding as of the FY20 Audit) 30-Jun-2017 30-Jun-2020 30-Jun-2021 Comments (achievements against targets): Page 36 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Incomplete/Not Achieved\. FY20 report not yet available\. Results until FY19 suggest indicator may not have been achieved in FY20\. Pillar: Pillar III: Supporting a more dynamic and inclusive economy Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Regulators for the Text 2015: Neither exists End FY20: Both are The communications sector communication and energy established and operational regulator exists but is not sectors are established and independent of MEIDECC\. The operational energy sector regulator does not exist 30-Jun-2015 30-Jun-2020 30-Jun-2021 Comments (achievements against targets): Not achieved\. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of basic labor rights Text 2015: None of seven in End FY20: Equal FY20: Basic labor rights not yet (including equal remuneration for place remuneration for equal enshrined in domestic legislation\. equal work, gender non- work, gender non- Act has been passed by Parliament discrimination and right to discrimination and right to but is awaiting King’s assent to maternity leave) enshrined in maternity leave enshrined become effective\. Once enacted, domestic legislation in domestic legislation\. the results indicator will be Three of the remaining four achieved\. basic labor rights also Page 37 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report enshrined in domestic legislation\. 30-Jun-2015 30-Jun-2018 30-Jun-2021 Comments (achievements against targets): Not achieved\. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Vetted applications from foreign Text 21 applications 30 applications or greater FY20: 27 in FY20 (although 49 in investors FY17, 32 in FY18 and 31 in FY19)\. Not achieved in FY20 due to economic impact of COVID-19 but achieved each year from FY17 to FY19\. 30-Jun-2015 30-Jun-2020 30-Jun-2021 Comments (achievements against targets): Partially achieved\. Indicator Name Unit of Measure Baseline Target Actual Achieved at Completion Number of public enterprises that Text None At least two Tonga Cable Ltd reform completed\. have been reformed Ports Authority Tonga reform is ongoing\. Page 38 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report 30-Jun-2015 30-Jun-2019 30-Jun-2021 Comments (achievements against targets): Partially achieved\. Page 39 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION PROCESSES A\. TASK TEAM MEMBERS P159263 Andrew Blackman (Task Team Leader), Kim Alan Edwards (Task Team Leader), Cristiano Costa e Silva Nunes (Procurement Specialist), Robert J\. Gilfoyle (Financial Management Specialist), Robert Johann Utz (Team Member), Michelle Lee McDonall (Team Member), Reinaluz Ona (Team Member), Georgie McArthur (Team Member), Donna Andrews (Team Member), Natalia Latu (Team Member); Tony Shen (Team Member)\. P159262 David Stephen Knight (Task Team Leader), Kim Alan Edwards (Task Team Leader), Cristiano Costa e Silva Nunes (Procurement Specialist), Stephen Paul Hartung (Financial Management Specialist), Robert Johann Utz (Team Member), Samantha Evans (Team Member), Virginia Ann Horscroft (Team Member), Yumeka Hirano (Team Member), Marjorie Mpundu (Team Member), Loren Atkins (Team Member), Donna Andrews (Team Member), Saia Faletau (Team Member); Tony Chen (Team Member)\. P155133 Kim Alan Edwards (Task Team Leader), Cristiano Costa e Silva Nunes (Procurement Specialist), Stephen Paul Hartung (Financial Management Specialist), Samantha Evans (Team Member), David Stephen Knight (Team Member), Jesse Jon Gerome Doyle (Team Member), Donna Louise Andrews (Team Member), Carlos Romero Orton (Team Member); Virginia Horscroft (Team Member); Loren Atkins (Team Member); Robert Gilfoyle (Team Member); Saia Faletau (Team Member); Tatafu Moeaki (Team Member); Quincy Austriaco (Team Member)\. _______________________________________________________________________________________________ P167330 Kim Edwards (Task Team Leader), Andrew Blackman (Task Team Leader), Cristiano Costa e Silva Nunes (Procurement Specialist), Robert J\. Gilfoyle (Financial Management Specialist), Michelle Lee (Team Member), Loren Atkins (Team Member), Imogen Halstead (Team Member), Saia Faletau (Team Member), Tatafu Moeaki (Team Member), Tony Shen (Team Member)\. B\. STAFF TIME AND COST P159263 Page 40 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Staff Time and Cost Stage of Project Cycle No\. of staff weeks US$ (including travel and consultant costs) Preparation 18\.600 87,955\.32 FY17 22\.377 103,385\.14 FY18 28\.313 110,385\.42 FY19 0 1\.94 FY20 Total 69\.29 301,727\.82 Supervision/ICR Total 0\.00 0\.00 P159262 Staff Time and Cost Stage of Project Cycle No\. of staff weeks US$ (including travel and consultant costs) Preparation 34\.992 209,008\.04 FY17 22\.377 103,385\.54 FY18 28\.313 110,385\.42 FY19 0 1\.94 FY20 Total 85\.68 422,780\.94 Supervision/ICR Total 0\.00 0\.00 Page 41 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report P155133 Staff Time and Cost Stage of Project Cycle No\. of staff weeks US$ (including travel and consultant costs) Preparation 0 11,405\.00 FY15 24\.700 100,099\.82 FY16 34\.992 209,008\.04 FY17 22\.377 103,385\.54 FY18 28\.313 110,385\.42 FY19 0 1\.94 FY20 Total 110\.38 534,285\.76 Supervision/ICR 0 62\.31 FY16 Total 0\.00 62\.31 Page 42 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report ANNEX 3\. BORROWER, CO-FINANCIERS, AND OTHER DEVELOPMENT PARTNERS’/STAKEHOLDERS’ COMMENTS The GoT had no comment on the ICR and thanked the Bank for its continued leadership of the JPRM\. The ADB provided the following written comments on the ICR: Overall, I don’t have substantive comments and agree with the lessons learned\. The main one for ADB/WB, which we have already adopted, are the challenges of a 3-year program as opposed to a 2-year program\. Our own review also highlights shifting priorities of government (due to politics or disasters) as a major risk\. I think the evolution of the JPRM to be a coordinating forum for partner technical assistance over the current cycle is perhaps something that could foreshadowed in this review also\. In section IV, I note the mention of a participatory private sector strategy – I would welcome this as a good step forward\. This should include the energy, PAT, and other SOE reforms as part of setting a clear direction from government, in addition to the regular regulatory environment/foreign investment considerations\. This may alleviate some of the political sensitivities and interest groups surrounding the recent reform efforts\. Page 43 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report ANNEX 4\. SECTORS AND THEMES \. SECTORS AND THEMES P159263 Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR TBL Public Administration 43 0\.00 0\.00 Central Government (Central Agencies) 43 0 0 SECTOR TBL Industry, Trade and Services 57 0\.00 0\.00 Trade 29 0 0 Other Industry, Trade and Services 28 0 0 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Economic Policy 14 Trade 14 Trade Logistics 14 Private Sector Development 29 Business Enabling Environment 29 Investment and Business Climate 29 Jobs 29 Public Sector Management 57 Public Finance Management 57 Public Expenditure Management 14 Domestic Revenue Administration 43 Human Development and Gender 14 Gender 14 Page 44 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Labor Market Policy and Programs 14 Labor Market Institutions 14 P159262 Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR TBL Public Administration 72 0\.00 0\.00 Central Government (Central Agencies) 58 0 0 Other Public Administration 14 0 0 SECTOR TBL Energy and Extractives 14 0\.00 0\.00 Other Energy and Extractives 14 0 0 SECTOR TBL Industry, Trade and Services 14 0\.00 0\.00 Other Industry, Trade and Services 14 0 0 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Economic Policy 29 Fiscal Policy 29 Fiscal sustainability 29 Private Sector Development 14 Business Enabling Environment 14 Investment and Business Climate 14 Public Private Partnerships 14 Public Sector Management 43 Public Finance Management 43 Public Expenditure Management 29 Domestic Revenue Administration 14 Page 45 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Public Administration 14 Administrative and Civil Service Reform 14 Human Development and Gender 14 Gender 14 P155133 Sectors Mitigation Co- Adaptation Co- Major Sector/Sector (%) benefits (%) benefits (%) SECTOR TBL Public Administration 100 0\.00 0\.00 Central Government (Central Agencies) 71 0 0 Other Public Administration 29 0 0 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Economic Policy 15 Fiscal Policy 15 Fiscal sustainability 7 Tax policy 8 Private Sector Development 14 Business Enabling Environment 14 Regulation and Competition Policy 14 Public Sector Management 73 Public Finance Management 37 Public Expenditure Management 22 Domestic Revenue Administration 8 Debt Management 7 Public Administration 36 Transparency, Accountability and Good Governance 22 Page 46 of 52  The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report State-owned Enterprise Reform and Privatization 14 \. Page 47 of 52 The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report ANNEX 5\. THEORY OF CHANGE PILLAR 1: SUPPORTING FISCAL RESILIENCE DEVELOPMENT Enhance fiscal OBJECTIVE resilience Strengthen revenue Greater fiscal OUTCOMES mobilization sustainability OUTPUTS & RESULTS Increase tax collection and Improve Improve Strengthen medium disincentivize consumption revenue and management and term fiscal planning of fuel and unhealthy customs controls of public and monitoring foods & beverages administration sector wage bill INPUTS & ACTIONS Revised New public Reforms to Increase Medium Transparent, Revenue Revised Remuner service strengthen excise tax -Term target‐based Services customs ation remuneration and and import Debt fiscal anchor Administration legislation review structure and streamline duty rates Strategy system legislation PMS PMS PILLAR 2: GOVERNMENT ACCOUNTABILITY DEVELOPMENT Improve government OBJECTIVE accountability OUTCOMES Better value for money and increased transparency in public spending OUTPUTS & RESULTS Improve capacity to effectively improve the accuracy Improve external scrutiny and implement, record and monitor and integrity of budget timeliness of actions to address procurement reporting audit recommendations INPUTS & ACTIONS New Audit Revised Revised procurement Oversight procurement Chart of tracking Committee regulations Accounts database and reporting Page 48 of 52 The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report PILLAR 3: SUPPORTING A MORE DYNAMIC AND INCLUSIVE ECONOMY DEVELOPMENT Create a more dynamic OBJECTIVE and inclusive economy Increased private sector participation OUTCOMES More efficient and inclusive in the economy and improved SOE factor markets performance OUTPUTS & RESULTS Clearer, more Improve SOE Improve ICT and Improved labor transparent, and governance and energy sector conditions and streamlined foreign operational regulation protections investment regime efficiency INPUTS & ACTIONS Shared Ports New Tonga National Foreign Foreign SOE Authority Communications Employment Cable Ltd Energy Investment investment boards of Tonga Commission Act Relations Bill share Bill Bill regulations directors adopts and regulator sale landlord model Page 49 of 52 The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report ANNEX 6\. MAP OF THE KINGDOM OF TONGA Page 50 of 52 The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report ANNEX 7\. SUPPORTING DOCUMENTS • ADB\. 2001\. Special Evaluation Study on Program Lending\. Manila • ADB\. 2009\. ADB Support for Public Sector Reforms in the Pacific: Enhance Results through Ownership, Capacity, and Continuity\. Manila; and Independent Evaluation Department\. 2017\. Corporate Evaluation Results-Based Lending at the Asian Development Bank: An Early Assessment\. Manila • ADB\. 2016\. Finding Balance Benchmarking the Performance of State-Owned Enterprises in Island Countries\. Manila • ADB\. 2017\. Performance Evaluation Report Strengthening Public Financial Management Program (Tonga) (Grant 0359)\. Manila • ADB\. 2020\. Completion Report\. Tonga: Building Macroeconomic Resilience Program\. Manila • Bredon Toner\. Technical Review of the Government of Tonga’s Current Financial Management Information System, Reporting Systems and Payroll\. vSolutions Limited\. • Bruce Knapman and Cedric Saldanha\. 1999\. Reforms in the Pacific: An Assessment of the Asian Development Bank’s Assistance for Reform Programs in the Pacific\. Manila: ADB • Cardno\. 2018\. Independent Evaluation of DFAT’s Economic and Public-Sector Reform Program (EPSG III) of the Kingdom of Tonga 2015/16 – 2017/18\. Final Report Submitted to DFAT April 2018\. Canberra\. • Independent Evaluation Department ADB\. 2018\. Performance Evaluation Report Pacific Private Sector Development Initiative\. Manila • Government of Australia Department of Foreign Affairs and Trade\. 2019\. Assessment of National Systems Tonga March 2019 Update\. Canberra • Government of Tonga\. Undated\. Ministry of Health\. Hala Fononga: National strategy for prevention and control of non-communicable diseases 2015-2020\. Nuku’alofa • Government of Tonga, Ministry of Finance and National Planning\. 2010\. Public Expenditure and Financial Accountability (PEFA) Public Financial Management Performance Report\. Nuku’alofa • Government of Tonga Ministry of Finance 2014\. Public Finance Management Reform Roadmap for Tonga 2015/15 to 2018/19\. Nuku’alofa • Government of Tonga, Ministry of Finance and National Planning\. 2015\. Tonga Strategic Development Framework, 2015–2025\. Nuku’alofa • Government of Tonga, Ministry of Finance and National Planning\. 2017\. Budget Statement 2017- 2018\. Nuku’alofa • Government of Tonga, Ministry of Finance and National Planning\. 2018\. Budget Statement 2018- 2019\. Nuku’alofa • Government of Tonga, Ministry of Finance\. 2019\. Budget Statement 2019-2020\. Nuku’alofa • Government of Tonga\. 2019\. Kingdom of Tonga Private Sector Development Strategy (PSDS) and Action Plan 2018-2022\. Nuku’alofa • Government of Tonga, Ministry of Finance\. 2021\. Medium-Term Debt Strategy Fiscal Years 2021- 2025\. Nuku’alofa • IMF\. 2020\. Technical Assistance Report Tonga Public Expenditure and Financial Accountability Assessment: Agile Report\. Washington D\.C\. • IMF\. 2020\. Concluding Statement for IMF 2020 Article IV Consultation Mission\. Washington D\.C\. • IMF\. 2020\. Tonga: Staff Concluding Statement IMF 2020 Article IV Consultation Mission\. Page 51 of 52 The World Bank Tonga Inclusive Growth DPO Series Implementation Completion and Results Report Washington D\.C\. • Special Health Service\. 2019\. Tonga Health Systems Support Program Phase 2 (THSSP2) Mid-term evaluation report\. Canberra • Tonga Office of the Auditor General\. 2020\. Financial and Compliance Audits 2018-2019\. Nuku’alofa • Dr Viliami Konifelenisi Fifita, Dr Alba Lanau Sánchez, Dr Héctor Nájera Catalán, Dr David Gordon\. Government of Tonga Statistics Department\. 2018\. Assessing progress towards the eradication of poverty in the Kingdom of Tonga\. Nuku’alofa • World Bank\. 2016\. Systematic Country Diagnostic for the Eight Small Pacific Island Countries: Priorities for Ending Poverty and Boosting Shared Prosperity\. Washington D\.C\. • World Bank\. 2016\. International Development Association Program Document for a Proposed Development Policy Grant in the Amount of SDR 0\.8 Million (Equivalent to US$ 1\.0 Million) and a Proposed Development Policy Credit in the Amount of SDR 0\.8 Million (Equivalent to Us$ 1\.0 Million) to the Kingdom of Tonga for The First Inclusive Growth Development Policy Operation\. Washington D\.C\. • World Bank\. 2017\. Implementation Completion and Results Report on a Grant in the Amount of SDR 1\.7 million (US$ 2\.5 million equivalent) and a Credit in the Amount of (US$ 2\.5 million equivalent) and a Grant in the Amount of SDR 1\.7 million (US$ 2\.5 million equivalent) and a Credit in the Amount of (US$ 2\.5 million equivalent) to the Kingdom of Tonga for the Economic Reform Support Development Policy Operation I & II\. Washington D\.C\. • World Bank\. 2017\. International Development Association Program Document for a Proposed Development Policy Grant in the Amount of SDR 1\.2 Million (Equivalent to US$ 1\.65 Million) and a Proposed Development Policy Credit in the Amount of SDR 2\.5 Million (Equivalent to Us$ 3\.35 Million) to the Kingdom of Tonga for The Second Inclusive Growth Development Policy Operation\. Washington D\.C\. • World Bank\. 2018\. International Development Association Supplemental Financing Document for a Proposed Grant in the Amount of SDR 7\.0 Million (Equivalent to US$ 10 Million) from the IDA Crisis Response Window Resources to the Kingdom of Tonga for The Second Inclusive Growth Development Policy Operation\. Washington D\.C\. • World Bank\. 2019\. International Development Association Program Document for a Proposed Development Policy Grant in the Amount of SDR 4\.0 Million (Equivalent to US$ 5\.5 Million) to the Kingdom of Tonga for The Third Inclusive Growth Development Policy Operation\. Washington D\.C\. • World Bank\. 2019\. Using Taxation to Address Noncommunicable Diseases: Lessons from Tonga\. Washington D\.C\. • World Bank\. 2020\. Doing Business 2020 Economy Profile Tonga\. Washington D\.C\. • World Bank\. 2020\. “Integrating a Gender Equality Lens: Drawing Lessons from Three Good- Practice Development Policy Operations\.” MTI Insight Series\. World Bank, Washington, DC\. License: Creative Commons Attribution CC BY 3\.0 IGO • World Trade Organization\. 2014\. Tonga Trade Policy Review\. Report by the Secretariat\. Geneva Page 52 of 52

REVIEW

P078613

 Document of The World Bank Report No: ICR00001045 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H0860 TF-55391 TF-56653 TF-57251) ON A CREDIT IN THE AMOUNT OF SDR 16\.8 MILLION (US$ 25\.12 MILLION EQUIVALENT) MDTF GRANT IN THE AMOUNT OF US$25\.3 MILLION TO THE GOVERNMENT OF SIERRA LEONE FOR AN INSTITUTIONAL REFORM & CAPACITY BUILDING PROJECT October 28, 2011 Public Sector Reform and Capacity Building Unit Country Department West Africa 1 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective October 2011) Currency Unit = Leone Leone 4,400 = US$1 US$ 1\.495 = SDR 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS APC All People’s Congress CAS Country Assessment Strategy CLoGPAS Comprehensive Local Government Performance Assessment System CoA Chart of Accounts CSO Civil Society Organization DecSec Decentralization Secretariat DFID Department for International Development DO District Office DLC Development Learning Center DP Development Partner EC European Commission ESW Economic and Sector Work FM Financial Management GRS Governance Reform Secretariat HDI Human Development Index (UN) HPP Health and Population Project HRM Human Resource Management ICR Implementation Completion Results IDA International Development Association IEC Information, Education and Communication IFMIS Integrated Financial Management Information System IMCLGD Inter-Ministerial Committee on Local Government and Decentralization IMF International Monetary Fund IPAM Institute of Public Administration and Management IRCBP Institutional Reform and Capacity Building Project ISM Implementation Support Mission LC Local Council LGA Local Government Act LGDG Local Government Development Grant LGDGP Local Government Development Grant Program LGFC Local Government Finance Committee LGFD Local Government Finance Department LGSC Local Government Service Commission LTA Local Technical Assistant M&E Monitoring and Evaluation MAFS Ministry of Agriculture and Food Security MC Minimum Condition MDAs Ministries, Departments, and Agencies MDG Millennium Development Goal MDTF Multi-Donor Trust Fund MEST Ministry of Education, Science and Technology MEYS Ministry of Education, Youth and Sports MLGRD Ministry of Local Government, and Rural Development MLGCD Ministry of Local Government and Community Development MoF Ministry of Finance MoFED Ministry of Finance and Economic Development MTEF Medium-Term Expenditure Framework NaCSA National Commission for Social Action NGO Nongovernmental Organization NPS National Public Services (survey) PAD Project Appraisal Document PCU Project Coordination Unit PDO Project Development Objective PETS Public Expenditure Tracking Study PFM Public Financial Management PFMRU Public Financial Management Reform Unit PIU Project Implementation Unit PPF Project Preparation Facility PRSP Poverty Reduction Strategy Paper PSMSP Public Sector Management Support Project RRA Rapid Results Approach RRI Rapid Result Initiative SLRA Sierra Leone Road Authority SLPP Sierra Leone People’s Party TSC Technical Steering Committee UNDP United Nations Development Program UNAMSIL United Nations Mission in Sierra Leone WC Ward Committee Vice President: Obiageli Ezekesili Acting Country Director: Sergiy V\. Kulyk Country Manager Vijay Pillai Sector Manager: Anand Rajaram Project Team Leader: Roberto Panzardi ICR Team Leader: Roberto Panzardi  SIERRA LEONE Institutional Reform & Capacity Building Project CONTENTS 1\. Project Context, Development Objectives and Design \. 15 2\. Key Factors Affecting Implementation and Outcomes \. 21 3\. Assessment of Outcomes \. 27 4\. Assessment of Risk to Development Outcome \. 32 5\. Assessment of Bank and Borrower Performance\. 33 6\. Lessons Learned\. 36 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 38 Annex 1\. Project Costs and Financing \. 39 Annex 2\. Outputs by Component \. 51 Annex 3\. Economic and Financial Analysis \. 52 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 53 Annex 5\. Beneficiary Survey Results \. 55 Annex 6\. Stakeholder Workshop Report and Results \. 59 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 60 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 65 Annex 9\. List of Supporting Documents \. 69 MAP  SIERRA LEONE INSTITUTIONAL REFORM & CAPACITY BUILDING PROJECT BASIC DATA SHEET A\. Basic Information INSTITUTIONAL Country: Sierra Leone Project Name: REFORM & CAPACITY BUILDING IDA-H0860,TF-55391,TF- Project ID: P078613 L/C/TF Number(s): 56653,TF-57251 ICR Date: 10/26/2011 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: TAL Borrower: SIERRA LEONE Original Total USD 25\.12M Disbursed Amount: USD 25\.06M Commitment: Revised Amount: USD 25\.08M Environmental Category: B Implementing Agencies: IRCBP Coordinating Unit Cofinanciers and Other External Partners: European Commission UK DfID B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: Effectiveness: 07/06/2004 Appraisal: 02/03/2004 Restructuring(s): 02/28/2008 Approval: 05/11/2004 Mid-term Review: 06/04/2006 12/04/2006 Closing: 06/30/2008 03/31/2009 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Substantial Bank Performance: Satisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Quality of Supervision: Satisfactory Implementing Satisfactory 5  Agency/Agencies: Overall Bank Overall Borrower Satisfactory Moderately Satisfactory Performance: Performance: C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of No Satisfactory time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 35 35 Sub-national government administration 65 65 Theme Code (as % of total Bank financing) Conflict prevention and post-conflict reconstruction 13 13 Decentralization 24 24 Municipal governance and institution building 25 25 Participation and civic engagement 13 13 Public expenditure, financial management and 25 25 procurement E\. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Callisto E\. Madavo Country Director: Serviy V\. Kulyk Mats Karlsson Sector Manager: Anand Rajaram Guenter Heidenhof Project Team Leader: Roberto O\. Panzardi Yongmei Zhou ICR Team Leader: Roberto Panzardi ICR Primary Author: Roberto Panzardi 6 F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Support the post-conflict Government of Sierra Leone (GoSL) to establish a functioning local government system and improve inclusiveness, transparency, and accountability of public resource management at all levels of government\. The Results Framework presented in this Data Sheet is the one introduced during the MDTF restructuring of 2010\. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or Target documents) Values Years Number of elected local councils which are able to make development plans that Indicator 1 : respond to local priorities through a participatory process\. All 19 LCs have 19 by end of Value 0\. No elected councils continued to prepare project quantitative or yet\. Elections were held 3-yr rolling dev\. plans 06/30/2008\. 5 Qualitative) in May 2004\. linked to national by6/30/2005 PSRP and MDG goals\. Date achieved 02/15/2004 12/01/2010 06/30/2011 Comments (incl\. % 100% achievement) Indicator 2 : Number of Local Councils meeting all minimum conditions on CLoGPAS 16 of 19 LCs 11 of 19 LCs meet or Value 0\. No elected councils display meet all partially met all quantitative or yet\. Elections were held minimum minimum conditions Qualitative) in May 2004\. conditions on on CLoGPAS\. GLoGPAS Date achieved 12/01/2010 12/01/2010 06/30/2011 Comments (incl\. % 69 %\. This indicator was introduced during MDTF restructuring in 2010\. achievement) Number of Local Councils meeting the threshold for the performance measures Indicator 3 : bonus (or Performance Incentive Grants) of CLoGPAS 16 of 19 LCs 10 of 19 LC meet the Value 0\. No elected councils display meet the threshold for the quantitative or yet\. Elections were held threshold for the performance measure Qualitative) in May 2004\. performance bonus measures bonus Date achieved 12/01/2010 12/01/2010 06/30/2011 Comments 63 %\. This indicator was introduced during MDTF restructuring in 2010\. 7 (incl\. % achievement) Indicator 4 : Percent of general population seeing improvements in health and education services Satisfaction with primary school increased from 87 % (2005) to 91 % (2008) Value No baseline data quantitative or established Satisfaction with Qualitative) health clinics improved from 81 % (2005) to 91 % (2008) Date achieved 12/01/2010 06/30/2011 100 %\. These are perception-based data, meaning that differences in satisfaction Comments (both across space and over time) may be driven as much by different expectations (incl\. % as by different levels of services\. However, other more objective-based measures of achievement) health and education services confirm this positive trend\. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Percent of primary schools having at least one core textbook per child 70 % of households Value are satisfied with (quantitative 36 65 quality of school or Qualitative) buildings and materials Date achieved 01/01/2005 06/30/2011 06/14/2011 Comments % cannot be measured\. The original target could not be found as the baseline (incl\. % school survey was not repeated after 2005\. achievement) Indicator 2 : Percent of clinics having essential drugs Percent of clinics Value with all essential (quantitative 32 50 drugs improved from or Qualitative) 24 % in 2005 to 34 % in 2008 Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments The baseline is different because different source has been used\. Data available (incl\. % come from the Reproductive Child and Health Program (IRCBP 2010)\. achievement) Indicator 3 : Decentralization policy is formulated and submitted to Cabinet\. Value Decentralization No Policy elaborated Met\. (quantitative policy approved 8 or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments (incl\. % 100%\. The policy has been adopted by Cabinet as a national document\. achievement) The LGA 2004 is amended in line with Decentralization Policy and sections of the Indicator 4 : Education Act, Hospitals Board Act, SALWACO Act and Local Tax Act that are in conflict with the LGA 04 are repealed\. Value Contradictions in LGA and other (quantitative Partially Met\. legislation Acts amended\. or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments 75%\. Amendments to the LGA04 and the Hospital Board have been completed and (incl\. % drafting note prepared for the Minister to organize adoption fora & facilitate the achievement) reaching of a Cabinet conclusion\. Indicator 5 : A Gender Strategy and Policy developed in support of decentralization\. Gender Value Draft Gender Policy/Strategy (quantitative Met\. Policy/Strategy submitted to or Qualitative) Cabinet Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments 100%\. Strategy was developed and plans and provisions made for popularizing the (incl\. % strategy and build capacities in its implementation in 2011\. achievement) Number of outstanding functions fully devolved according to revised Statutory Indicator 6 : Instrument Value (quantitative 42 82 46 or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments (incl\. % 56%\. Only about half of the functions were devolved\. achievement) Indicator 7 : Number of LCs with fit-for-purpose constructed/renovated office buildings Value (quantitative 3 19 9 or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments (incl\. % 47 % Only about half of LC buildings competed and handed over achievement) Number of Local Councils meeting own revenue generation targets (Le 2000 per Indicator 8 : capita per year for rural councils and Le 3000 per capita per year for urban councils)\. Value (quantitative 4 12 14 or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 9 Comments 116%\. According to the LGFD 2010 assessment, the target was exceeded by two (incl\. % more LCs\. achievement) Number of LCs complete projects included in LGDG work plan with satisfactory Indicator 9 : financial and contract management\. Value (quantitative 14 19 19 or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments (incl\. % 100% achievement) Indicator 10 : Number of Local Councils with elected and trained Ward Committees Value (quantitative 2 19 19 or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments (incl\. % 100% achievement) Indicator 11 : IEC Strategy for Decentralization is in place\. Value None\. Separate strategies The strategy is (quantitative done for MIALG&RD Met\. operational\. or Qualitative) and IRCBP Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments (incl\. % 100%\. A national IEC for decentralization strategy is in place\. achievement) Assessment from available sources (e\.g GoBifo) of the extent to which Indicator 12 : decentralization has rekindled social cohesion and empowers marginalized groups in the local decision-making process Public confidence in Decentralization Value decentralization 60% local councilors has 80% (quantitative Local Government Act increased from 33 % Local Government or Qualitative) 42% in 2007 to 49 % in Act 60% 2008\. Date achieved 04/01/2009 06/30/2011 06/14/2011 % Not Applicable\. The IPA, a research organization, stated that the results of the Comments Gobifo survey cannot be used to assess this indicator\. An indirect proxy of social (incl\. % cohesion can be found in the level of citizen’s trust in local authorities\. Moreover, achievement) qualitative data also confirm that previously marginalized group (women, ethnic minorities) are increasingly participating to decision-making process at local level Number of LCs with regular (including random) audits of financial management, Indicator 13 : procurement, and contract management\. Value (quantitative 0 19 19 or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 10 Comments (incl\. % 100% achievement) Develop guidelines for integrated Sector and Local Councils planning and Indicator 14 : monitoring and evaluation\. Guidelines for Value integration of (quantitative None District M&E into Met\. or Qualitative) Local Council M&E developed Date achieved 06/30/2005 01/31/2011 06/14/2011 Comments 100%\. Guidelines for integration of District M&E into Local Councils M&E (incl\. % developed\. achievement) Respective organograms reflect new disposition as identified in Management & Indicator 15 : Functional reviews\. Value Agreed approach (quantitative None Partially Met\. effected or Qualitative) Date achieved 04/01/2009 01/31/2011 06/14/2011 Comments (incl\. % 75%\. Organogram approved but has not been implemented yet\. achievement) Indicator 16 : Appropriate staff recruitment/deployment of civil servants effected\. Value Agreed approach (quantitative None Not Met effected or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments While the organogram has been developed, the elaboration of staff/systems (incl\. % development is yet to be implemented\. achievement) Indicator 17 : Staff/systems development program elaborated Value Agreed approach (quantitative None Not Met effected or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments (incl\. % achievement) DecSec/LGFD coaching and mentoring of identified Ministry staff conducted in Indicator 18 : accordance with schedule\. Value Agreed approach (quantitative None Not met effected or Qualitative) Date achieved 04/01/2009 06/30/2011 06/14/2011 Comments The mentoring and coaching was carried out but not within schedule and the areas (incl\. % of training were not focused on key topics agreed\. achievement) 11 G\. Ratings of Project Performance in ISRs Date ISR Actual Disbursements1 No\. DO IP Archived (USD millions) 1 12/29/2004 Satisfactory Satisfactory 2\.43 2 03/29/2005 Satisfactory Satisfactory 3\.17 3 09/12/2005 Satisfactory Satisfactory 7\.21 4 06/30/2006 Satisfactory Satisfactory 13\.54 5 04/11/2007 Satisfactory Satisfactory 19\.19 6 10/05/2007 Satisfactory Satisfactory 21\.86 7 12/21/2007 Satisfactory Satisfactory 21\.86 8 06/30/2008 Satisfactory Satisfactory 23\.02 9 12/24/2008 Satisfactory Satisfactory 23\.76 10 03/27/2009 Satisfactory Satisfactory 23\.55 11 07/29/2010 Satisfactory Satisfactory 25\.06 12 03/10/2011 Satisfactory Satisfactory 25\.06 13 08/29/2011 Satisfactory Satisfactory 25\.06 H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Key Approved Restructuring Date(s) Changes Made PDO Change DO IP in USD millions The proposed changes were expected to deepen the Project’s development impact by increasing the support for building capacity and systems, and through improved implementation modalities\. They involve (i) termination of the Project component involving establishment and making 02/28/2008 N S S 21\.86 operational a Development Learning Center (DLC), (ii) utilization of the resulting savings of $2\.9m to the three performing components of the Project, (iii) addition of several new activities, (iv) increasing the precision of two outcome indicators, (v) amendment of the eligibility of local costs for IDA funding from 1 Amount is IDA only since this was generated by the system\. Full funding (IDA & MDTF) is shown in Annex 1\. 12  ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Key Approved Restructuring Date(s) Changes Made PDO Change DO IP in USD millions 90% to 100 %, including financing of applicable taxes for both foreign and local costs, and deletion of completed disbursement conditions, (vi) extension of the Project Closing Date from June 30, 2008 to March 31, 2009 and (vii) expansion of the membership of the technical steering committee\. Key changes made were: (a) introduction of selected performance indicators that should have been introduced when the MDTF Grant was made available for the Project\. Although the IDA Grant Agreement has already closed, after consultations with QK, Legal and LOA it was agreed that the performance indicators in the closed IDA Grant Agreement could still be amended in order to capture the correct results expected from the Project in light of the additional resources that had been added to the Project; (b) modification of the Project results 12/01/2010 N S S 20\.09 framework to highlight five particular new clusters in the Decentralization and Capacity Building Component support for the GoSL decentralization program that hitherto received less concentrated attention; and (c) extension of the closing date of the MDTF Grant Agreement from January 31, 2011 to June 30, 2011 to allow the Recipient to carry out activities under the Decentralization & Capacity Building Component and Project Coordination Component of the Project, as these were defined in the original PAD\. 13 I\. Disbursement Profile 14 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. After independence in 1961, Sierra Leone socio-political context has been shaped by an increasing reliance on patronage and state violence as the main strategy to maintain and exercise political power\. This strategy reached its peak under the regime of Siaka Stevens\. Under his rule, elected local councils were abolished in 1972 and governmental power was centralized in the hands of the elites in Freetown\. Under the auspices of patrimonial politics, corruption became rampant; politicians’ general lack of accountability contributed to a rapid decline in the economic performance and the subsequent collapse of public services from 1970s to 1980s (Kpundeh 1995; Reno 1995)\. This magnified popular discontent, marginalizing wide sector of the population and eventually bringing the country into a decade-long civil war in which an estimated 70,000 people died, thousands were maimed, and half of the population was displaced\. 2\. By the end of the civil war in 2002, Sierra Leone had many pressing needs for recovery and reconstructions\. The war prompted an exodus of professionals and businessmen, doubled Freetown’s population, wrecked most of the infrastructure, business and much of the housing stock, and caused a cumulative decline of 48% in GDP per capita\. What little infrastructure existed collapsed during the war, and the country ranked at the bottom of the UN Human Development Index\. The combined pressures to mitigate the root causes of the conflict and deliver rapid “peace dividendâ€? through the country implied that state capacity would have to be built in parallel at the central and local level, or even prioritized at the latter\. Consequently, an agenda for decentralization reforms – originally launched in 1996 – was reactivated and featured prominently in the Framework for Peace, Recovery and Development in 2002 and set the stage for the policy dialogue between the GoSL and the development community\. 3\. In the view of both GoSL and Development Partners, decentralization was then seen as contributing significantly to defusing societal tensions and the alienation of the rural population, while at the same time restoring public service provision and steadily expanding it\. Accordingly, the revival of sub-national - democratically elected - political institutions (after 32 years of centralized rule) was identified by the SLPP-led government as the primary strategy to build popular legitimacy, sustain political stability, and reverse the massive urban/central bias which characterized Sierra Leonean postcolonial politics and led the country into war\. This strategy was also combined with a sustained attempt to re-legitimize the institutions of the Paramount Chiefs, the ‘traditional’ authorities whose popularity and legitimacy had been greatly weakened during the period of the civil war\. (Srivastava and Larizza 2011; Hanlon 2004)\. 4\. The process of decentralization formally began in 2004, with the passage of the primary legislation, the 2004 Local Government Act\. (LGA)\. The LGA established 19 Councils (13 rural and 6 urban), reshaped the administrative, functional and fiscal inter-governmental relationships between the central government and the sub-national authorities and identified a four year period of transition (to end in 2008) during which governmental functions would be devolved in phases (specified in the Statutory Instrument attendant to the LGA)\. After that initial phase, the devolution process was to be completed, including thorough revisions to the legal, institutional, and administrative structures and systems in place2\. 2 A more in-depth description of the legal framework established through the 2004 LGA in terms of political, fiscal and administrative decentralization can be found in Glynn, Larizza and Vinuela (2011a)\. 15 5\. The government also recognized the importance of effective public financial management (PFM) systems to ensure efficient and effective use of scarce public resources\. As substantial resource transfers to local governments were planned under the new decentralized system, the establishment of a legal and regulatory framework, robust systems for decentralized budget, execution, accounting and the availability of adequate human resources capacity were urgently needed\. The immediate challenge was therefore to design and implement a decentralization program to translate what was a national strategic priority into the reality of a development project\. 6\. Consistent with the World Bank Transitional Support Strategy (2002-2004) for Sierra Leone, the Bank’s Institutional Reform and Capacity Building Project (IRCBP) was designed and approved in 2004 as a major instrument to support the landmark institutional reform envisaged in the LGA, focusing on decentralization, PFM, and capacity building for local governments\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 7\. The original PDO of the (IRCBP) is to support the post-conflict Government of Sierra Leone (GoSL) to establish a functioning local government system and improve inclusiveness, transparency, and accountability of public resource management at all levels of government\.3 The original PDO indicators of the IDA Grant were the following4: ï‚ At least 19 elected local councils are able to make development plans that respond to local priorities through a participatory process\. ï‚ At least 19 elected local councils are able to make budget consistent with Section 67 of Local Government Act 2004\. ï‚ Number of elected local councils which were able to meet the transparency and the financial management accountability requirement as per Local Government Act 2004 (Section 107, 81, 105)\. ï‚ At least 14 out of 19 elected local councils are able to complete the projects submitted in previous year's work plan\. ï‚ At least 14 out of 19 elected councils are able to deliver all services devolved to them at the levels of the year before devolution\. ï‚ At least 14 out of 19 elected LCs receive a tied grant for each devolved service, at least that amount necessary to continue the operation and maintenance of that service at the standard prior to devolution\. ï‚ At least 90% of donor funding is captured in the fiscal reports using government budget classifications by program and object of expenditures\. 3 This PDO is slightly different from the project objective in the Development Grant Agreement, which states that the objective of the project is to assist the Recipient to establish a functioning local government system and improve inclusiveness, transparency, and accountability of overall public financial management at all levels of government\. The re-wording from “public resource managementâ€? to “public financial managementâ€? was done merely to specify more clearly the more intent of the PDO\. 4 These indicators were later revised when the MDTF was restructured in 2010\. 16  ï‚ At least 90% of Vote Controllers, within 10 days after end of month, submits to the FS actual revenue and expenditure for the preceding month and estimated revenue and expenditure for the month\. ï‚ At least 90% of reporting entities have unqualified audit reports by the Auditor General\. ï‚ In-year reports are published regularly for tracking poverty expenditure by function\. ï‚ Public Procurement Law enacted, embracing the principle of transparency, accountability & efficiency\. ï‚ At least 90% of the funds provided for procurement is effectively utilized\. 1\.2 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 7\. The PDO was not revised\. However, the following PDO indicators were refined at the time of the restructuring in 2008 to make them more precise so as to facilitate monitoring, and to comply with the GoSL’s legal framework\. These changes did not constitute any change in the original project scope: a) “14 of the 19 elected local councils are able to deliver all services devolved to them at the levels of the year before devolutionâ€? was modified as: “14 out of the 19 elected councils are able to maintain the coverage and quality of five key devolved services – primary education, primary health, agriculture extension, water and sanitation, and maintenance of feeder roads – at the levels of the year before devolution\.â€? b) “95% of Vote Controllers submit regular in-year and annual budget execution reports to MoF and the relevant minister on timeâ€? was modified to read: “95% of Vote Controllers, within 10 days after end of month, submit to the Financial Secretary and the relevant minister actual revenue and expenditure for the preceding month and estimated revenue and expenditure for the monthâ€?\. This was more precise and reflected the requirement of the new Government Budget and Accountability Act (2005) which was passed after the project approval in 2004\. 8\. When the IDA Grant closed in March 2009, activities under the original Component 1 (Decentralization and Capacity Building) and Component 4 (Project Coordination) continued to be implemented until June 30, 2011 with MDTF funding\. In view of what had already been accomplished at the time of IDA Grant closure and to reflect new priorities of the GoSL and Development Partners (DPs) going forward, a new Results Framework (RF) was formalized in December 2010 through the MDTF restructuring that scaled-up the project\. The original PDO indicator on the “Number of elected local councils that meet the transparency and the financial management accountability requirement as per Local Government Act 2004 (Section 107, 81, 105)â€? was re-casted to “All 19 elected local councils continue to meet the transparency and the financial management accountability requirement as per Local Government Act 2004 (Section 107, 81, 105)â€?\. Secondly, three new PDO indicators were introduced: a) “ Number of Local Councils meeting all minimum conditions on CLoGPASâ€?; 17  b) “Number of Local Councils meeting the threshold for the performance measures bonus (or Performance Incentive Grants) of CLoGPASâ€?; and c) “Percent of general population seeing improvements in health and education servicesâ€?\. 9\. Finally, a revised set of intermediate indicators was formulated in order to more effectively monitor the expected outcomes of the additional activities required to advance decentralization that were not included in the original project design addressing legal, policy, chiefdom governance, outreach and training capacity issues\. 1\.4 Main Beneficiaries 10\. Given the nature of the project which focused on developing institutions and systems in the government (both at national and sub-national level), the PAD does not specifically identify the primary target group\. However, the PDO and the key performance indicators indicate the target beneficiaries broadly included all 19 elected local councils, the Ministry of Finance, the Ministry of Local Government and Community Development (MoLGCD) 5 , other ministries, departments, agencies (MDAs) benefiting from the financial management reforms including procurement reforms and ultimately the local communities whose living conditions are expected to improve as result of the restored local state structure e\.g bridges and better provision of and access to basic public services such as health, education, etc\. \. 1\.5 Original Components (as approved) 11\. At the time of approval in 2004, the project components were as follows: 12\. Component 1 - Decentralization and Capacity Building (US$14\.3m) was designed to finance the design and implementation of the government Decentralization Program\. Specific activities were: (i) establishing and strengthening the policy advisory and strategic management role of the Decentralization Secretariat (DecSec), MoLGCD and the Local Government Finance Department (LGFD), MoF, so to equip them to lead the implementation of the Decentralization Program; (ii) providing some modest start-up investment in office infrastructure, communications equipment, and vehicles to local councils; (iii) supporting the DecSec to manage an ambitious capacity building program to support decentralization; (iv) financing the Local Government Development Grant (LGDG) system with the objective of helping local councils quickly establish credibility and capacity in development planning and execution; and (v) financing a range of monitoring and evaluation (M&E) activities, including monitoring for due diligence purpose, monitoring and evaluating for the purpose of improving the effectiveness of capacity building, monitoring and evaluation for the purpose of ensuring the sustainability of the fiscal decentralization strategy, evaluation of the impact of fiscal decentralization on infrastructure development and service delivery, and evaluation of the social impact of decentralization\. 13\. Component 2 - Public Financial Management (PFM) Reform (US$6\.2m) was designed to support the implementation of a PFM reform program\. This would be achieved by: (i) establishing the core policy advisory and implementation capacity for the PFM reform program; (ii) designing and deploying a new Integrated Financial Management Information System 5 The Ministry of Local Government was reorganized and renamed the Ministry of Internal Affairs, Local Government and Rural Development in September 2007\. In December 2010, another reshuffle in the Cabinet split the Internal Affairs function and reorganized and renamed the Ministry of Local Government and Rural Development (MoLGRD)\. 18 (IFMIS) to meet the control and information requirements of the decentralized system of financial management; (iii) financing the development and implementation of an interim local government financial management system and intensive training for local government financial management staff; (iv) strengthening the MTEF process through technical assistance on how to improve the Cabinet policy process, strengthen the linkages between policy objectives and budget proposals, and use the Medium-Term Expenditure Framework (MTEF) process as a key driver to motivate vote controllers towards efficiency in management, and to reward budget entities for performance; (v) financing the implementation of a new legislative and regulatory framework for procurement; and (vi) carrying out re-assessment of the standard PFM indicators annually so as to evaluate the impact of the PFM reform initiatives\. 14\. Component 3 - Development Learning Center (DLC) (US$2\.9m) aimed at establishing an excellent information, communications, and training center to meet the demand for capacity building which cannot be satisfied through traditional means and existing institutions\. The key support activities included: (i) establishing the DLC as an independent legal entity; (ii) constructing the DLC facility, installing the required equipment, and recruiting staff, so as to make the DLC operational; (iii) assisting the DLC become financially viable in three years; and (iv) carrying out monitoring and evaluation to provide for consistent tracking of DLC activities, drawing lessons, and improving on DLC operations\. 15\. Component 4 - IRCBP Coordination (US$1\.lm) was designed to ensure effective coordination of the other components and strict compliance with the World Bank Financial Management Guidelines and the Procurement Guidelines\. Specifically, this component financed: (i) an IRCBP Coordinator responsible for the overall coordination of the project; (ii) a Chartered Accountant as the Principal Finance Officer; (iii) a Procurement Specialist; (iv) a M & E Specialist responsible for setting up and maintaining an M&E system for the IRCBP; and (v) technical assistance, training, and operational expenditures to strengthen the coordination and monitoring function of the unit\. 1\.6 Revised Components 16\. One of the revisions undertaken in the project was the cancellation of the DLC component during the 2008 project restructuring\. The cancellation was carried out because of the inability of the government to formalize an enabling legislation (a condition of the IDA Grant) within 12 months of Grant effectiveness date, for the establishment of the DLC as a financially autonomous entity with appropriate physical facilities and key staff and resources\. The cancellation was deemed justified based on Global Development Learning Network (GDLN) experience in Africa at that time that raised questions of financial sustainability\. The cancellation was also based on the findings of the performance examination commissioned by AFTKIL that indicated that “only one of the eight centers – the Senegal facility – appeared to have been able to generate enough revenue through user fees to cover its annual operating costsâ€?\. The original GDLN center business model as described in World Bank project documents that assumed that each new GDLN entity would be autonomous or semi-autonomous and would achieve financial self-sustainability in about four years was considered no longer valid in light of the cross-national experience\. Furthermore, without super-savvy business managers who can match capacity development demand of the public and private sectors with global supply, the DLC could possibly become a white elephant project that could drain GoSL budget\. 17\. Since the DLC component was seen as a means to an end and not an end in itself in the PDO, the cancellation had no direct effect in the achievement of the PDO for as long as other alternatives were explored to build up domestic training capacity and learning network\. One of 19 the alternatives identified was the Institute of Public Administration and Management at the University of Sierra Leone which had been transformed under new leadership into an efficient, high quality professional training organization\. The other alternative was more intensive development and implementation of relevant training courses from local providers\. The latter was already being supported by the MDTF\. 18\. The other revisions pertain to the addition of the following sub-components to Component 1: (a) Gender; (b) Information Management Support to the MoLGRD; (c) Chiefdom Governance; (d) Training Service Providers; and (e) Mainstreaming\. These changes also did not affect the achievement of the PDO or the outcome targets\. 19\. The savings from the DLC component were reallocated to the other project components\. The reallocation allowed the IRCBP to: (i) increase capacity building and training activities for decentralization; (ii) extend activities under the PFM component to enable a smoother transition to the new PFM project planned at the time6, including roll out of the IFMIS beyond the MoFED and the Police Department to other MDAs; and (iv) support consultation, information, education and communication activities which were judged important to support dialogue among key stakeholders and community participation in the decentralization process\. (See Table 1)\. Table 1: Reallocation of Funds of the DLC Component (US$) Use of IDA Reallocation Unallocated Revised Allocation of DLC Funds Allocation 1\. Decentralization and 14,293,000 473,724 14,766,724 Capacity Building 2\. Public Financial 6,182,300 1,306,946 637,490 8,126,736 Management Reform 3\. Development Learning 2,941,010 (2,892,716) 48,294 Center 4\. IRCBP Coordination 1,066,200 1,112,046 2,178,246 Unallocated 637,490 (637,490) Total 25,120,000 25,120,000 1\.7 Other significant changes 20\. In 2006 additional funding for Components 1 and 4 was provided by United Kingdom’s Department for International Development (DFID) (₤7,950,000) and the European Commission (EC) (€9,100,000), through a GoSL-executed and Bank-administered Multi-Donor Trust Fund (MDTF)\. At the time the total value of the commitments from DFID and EC was estimated at US$25 million7\. Although it was classified as a “co-financing MDTFâ€?, it was designed to be implemented beyond the implementation period of the IDA grant which closed on March 31, 2009 and for the MDTF resources to be available until January 31, 2011, original closing date of 6 The Integrated Public Financial Management Reform Project (IPFMRP) was approved by the Board on June 4, 2009\. 7 A Bank-executed component provides implementation support to the Bank including a senior public sector specialist position at the Freetown Office who oversees the implementation on a daily base\. 20 the MDTF agreement that was later extended to June 30, 2011\. The additional financing to support this scaling up of the IRCBP Project was provided by an MDTF Grant with an estimated value of $27\.2 million\. The MDTF Agreement was also restructured December 2010 for the following reasons: ï‚ the amendment of the IRCBP Grant Agreement to include selected performance indicators to be used for project implementation; ï‚ the extension of the closing date of the MDTF from January 31, 2011 to June 30, 2011, to carry out complementary activities under the Decentralization and Capacity Building Component and Project Coordination Component in order to deepen, reinforce and consolidate the gains to date, ï‚ the amendment of the MDTF Program’s result framework to identify support for additional activities required to advance decentralization that were not included in the original project design addressing legal, policy, chiefdom governance, outreach and training capacity issues; and, ï‚ the amendment of the DFID and EC Administrative Agreements to extend closing and disbursement dates and to reflect the additional resources to be administrated by the Bank\. 21\. The extra funding resulted in increased resources for existing activities as well as the provision of funds for additional activities (scaling up) that would promote further achievement of the PDO\. Furthermore, the establishment of the MDTF enhanced donor coordination among development partners and made the implementation arrangement with the GoSL more effective\. Finally, the additional funding allowed to increase the project’s team by hiring a senior Public Sector Specialist, based in Freetown up until October 2010\. This adviser enhanced the quality of support and supervision provided to the three implementing agencies and strengthened the quality of coordination between development partners\. Table 2 below indicates availability of resources under the IDA grant and the MDTF for various components\. Table 2: Availability of IDA and MDTF resources FY05 FY06 FY07 FY08 FY09 FY10 FY11 1\. Decentralization and IDA Capacity Building MDTF 2\. Public Financial IDA Management Reform MDTF 3\. Development Learning IDA Center* MDTF 4\. IRCBP Coordination IDA MDTF *cancelled in February 2008 21 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 22\. The post-conflict context had an important influence on the preparation and design of the project\. In view of the severe capacity constraints in the country, the task team faced the well known trade-off between the objective of quickly delivering tangible results and longer term objective of building sustainable institutional capacity\. In view of the political nature of decentralization, there was increased pressure to get the systems up and running as quickly as possible\. 23\. In order to support the establishment of sustainable local government systems the project used an institutional approach at the national level which was a unique approach to addressing the severe capacity shortage in government\. Specifically, in addition to the IRCBP PCU (which was 8 a standard PCU/PMU), the project helped to establish three ‘implementing agencies’ financed entirely by the project and staffed by competitively recruited local technical assistants (LTAs) who received salaries significantly higher than the equivalent civil servants\. Although the long- term sustainability of this approach remains an issue of concern (more on this below), available evidence suggests that the presence of competitively-recruited contract staff acted as a solid catalyst of the reform process and accounts for the positive results achieved by the Local Councils over time (Glynn, Larizza and Vinuela 2011)\. That is a huge upside\. However, while both LGFD and PFMRU were physically and functionally integrated within the MoFED, the Dec- Sec was only formally included in the MoLGRD, remaining de-facto largely autonomous and independent from it\. Partially as a consequence of the continuous tensions between both personnel and mandates of the two institutions, the working relationship between Dec-Sec contract staff and permanent civil servants in the MLGRD remained poor\. Finally, the issue of what would happen at the end of the project was not addressed until rather late in the game with the result that some of the Dec-Sec functions had not yet been mainstreamed in government at the time that the project (MDTF) closed in June 2011\. 24\. Another important contextual factor is the timing of the first country-wide local council elections\. In order to ensure support to the newly elected local councils (LCs), the project was scheduled to be delivered before the local council elections scheduled on May 22, 2004\. This meant that there were less than nine months from the project concept review meeting in August 2003 to the board delivery in May 11, 2004 to prepare a technically complicated and politically sensitive project\. This may have restricted the Bank’s ability to conduct a more comprehensive analysis of several complex issues surrounding decentralization in Sierra Leone, including (i) the chiefdom reform policy and; (ii) the timing for the devolution of human resources\. 25\. Micro-level factors also played an important role in shaping the preparation process and design such as rivalry and bureaucratic competition between the MoF and the MoLGCD, prompting the Bank to attempt to mitigate the risk that interagency politics interrupts the project implementation\. Recognizing the leadership role of both the MoF and the MoLGCD in the national decentralization program, the Bank brokered a power-sharing deal between the two ministries, under which the MoLGCD formally housed the Decentralization Secretariat that provided overall coordination of the decentralization policy, legal, and regulatory matters and capacity building activity while the MoF took over the three units, including the LGFD that manages all the fiscal decentralization issues, the PFMRU responsible for the PFMR component, 8 These were the Decentralization Secretariat (Dec SEC) of the MoLGRD and the Local Government Finance Department (LGFD) and Public Financial Management Reform Unit (PFMRU) of the MoFED\. 22 and the PCU\. It was also agreed that the directors of the DecSec, the LGFD, and the PFMRU report to respective parent ministries and directors do not have a hierarchical relation with the Project Coordinator who reports to the Technical Steering Committee (TSC) consisting of the Financial Secretary (Chair), Establishment Secretary, Permanent Secretary of the MoLGCD, and other stakeholders\. While this could mitigate the potential negative impact of interagency politics and rivalry, it somehow made the task of overall project coordination and management more challenging\. 26\. Finally, and most importantly, the Decentralization program was at the top of GoSL’s reform agenda, being perceived as a good opportunity to meet popular expectations, enhance legitimacy of the post-conflict government, and strengthen the political support for the ruling party\. Largely driven by these political and economic interests, the commitment of the national government was strong, with pressing demands for support to the internationally community\. As a leading member of the international Consultative Group, the Bank was expected to lead these efforts to assist the GoSL in developing the national decentralization program\. As a result, the IRCBP was seen as one of the high priority projects in the Bank’s country portfolio and this status certainly helped the Task Team mobilize necessary resources and support from Bank senior management during preparation and supervision\. For example, at the decision meeting in January 2004, the project funding was increased from US$20 million to US$25 million and a commitment was made to increase the supervision budget\. 2\.2 Implementation 27\. Implementation progress has varied significantly across the components and subcomponents\. While the 2006 QSA review noted that overall project performance was good during the early stages of implementation, the presidential and parliamentary elections in 2007 and the subsequent change of the ruling party had the adverse effect of slowing down implementation dramatically from early 2007 until late 2007\. Because of that, the IRCBP was unable to take prompt action on the series of recommendations identified in the 2006 Mid-Term Review (MTR)\. 28\. Despite the carefully designed implementation arrangement, interagency politics and competition were problematic as highlighted by the DLC component\. Originally, the DLC component was to be managed by the Establishment Secretary’s Office and later established as an independent legal entity\. After project launch it became clear that the Ministry of Education was in strong disagreement with the Bank and the MoF took over the overall direction of the DLC component and insisted that it should have supervisory responsibility over this component\. Despite high level discussion at Cabinet, with the President chairing, no compromise was found\. 29\. In time, tensions developed between the IRCBP contract staff and regular civil servants\. This may have been due to the variation in salary scale between IRCBP contract staff (qualified professionals) and the civil servants\. In the MoF, this appeared to be somewhat mitigated by the fact that senior staff - Financial Secretary, Budget Director, Director of EPRU, Accountant- General – were themselves LTAs financed from donor resources\. However, in the MoLGCD, the relationship between the top civil servants and the DecSec were strained and the DecSec was isolated from the ministry, undermining the project’s original intention to enhance policy and implementation capacity within the MoLGCD through the training and integration of DecSec contract staff designated to be change agents\. The difficult relationship hampered the efficacy of the DecSec\. 23 30\. The coordination challenges associated with the hybrid project management and implementation arrangements which included the PCU, the three project financed government departments, two key ministries (MoF and MoLCD) and other MDAs, increased\. An area of concern raised by IRCBP contract staff was lack of clarity on human resource management – recruitment, selection, motivation, discipline, and termination of employment\. Furthermore, complicated implementation arrangements with parent ministries, poor internal communication, and interpersonal disputes frustrated and demoralized a number of IRCBP staff\. The government addressed these concerns with the introduction of the pay policy reform\. The government also conducted on June 14, 2011 a consultative meeting chaired by the Director General of HRMO for senior staff of MLGRD, HRMO, Ministries of Education, Health, Marine & Fisheries, Lands, Labor, Information & Communications, Agriculture and Works\. The objectives of the meeting were to: (i) highlight challenges and bottlenecks in the process of devolution of staff; and, (ii) agree on the action points on alignment with the decentralization\. The meeting reached agreement on the transitional arrangements under the National Decentralization Policy whereby all locally operating staff will be employed directly by Local Councils by 2016\. The following actions were also taken by government: (a) Joint validation by HRMO and MLGRD of names of sectoral Ministry staff posted to local council areas; (b) Preparation of model “letters of deploymentâ€? and selection scheme; (c) Convening of a meeting to agree on models; and (d) Engagement of MDAs on any perceived problems relating to parent legislation (e\.g Education Act)\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 31\. To track progress towards the PDO and intermediate results as well as enhance learning from the project implementation, a detailed results framework was developed and three streams of M&E activities were envisaged, including: (1) monitoring for due diligence purpose; (2) monitoring and evaluating whether the development objectives are being achieved through various surveys; and (3) evaluating whether the policy and implementation framework developed under the project will be sustainable\. An M&E plan was designed by each component and various M&E activities, including data collection and analysis, were spread across the components and all the four implementation agencies\. The PCU was responsible for implementing an overall M&E plan for the entire project\. The results framework in the PAD lists a total of 9 PDO indicators and 16 intermediate results indicators (see Table 3 in Annex 2)\. The monitoring responsibility for management of the M&E framework is embedded within Sub-component 1\.5 (Monitoring and Evaluation) under Component 1 (Decentralization and Capacity Building)\. In 2008, two outcome indicators were refined to facilitate monitoring, and to comply with the GoSL's legal framework (see Section 1\.2)\. The refinement was not intended to scale down the indicators and it did not constitute any change in the original Project scope\. It was understood by all concerned that the framework in the appraisal document provided a useful listing of project elements and the results that were expected to be achieved\. During the 2010 restructuring of the MDTF agreement, an amendment of the M&E framework was undertaken to identify the support for additional activities that were required to advance decentralization that were not included in the original project design that addressed legal, policy, chiefdom governance, outreach and training capacity issues\. 32\. The Bank and the implementation agencies monitored the indicators with regularity\. The start was delayed due to delays in recruiting project monitoring officer\. After the initial delay, project monitoring appeared to have functioned relatively well as indicated by the ISRs\. In particular, as part of the effort to monitor and build capacity at local councils the Comprehensive Local Government Performance Assessment Systems (CLoGPAS) was designed and implemented in 2006 to serve as a sustainable local council management accountability mechanism, covering both compliance accountability and performance accountability\. After 24 2006, two additional rounds were undertaken by the Decentralization Secretariat’s M&E unit in 2008 and 2011, respectively\. Moreover, the results of the CloGPAS were also used to implement a Performance Incentive Grant System, managed by the Local government Finance Department (LGFD)\. The IRCBP’s evaluation unit also launched a series of evaluation studies and country- representative national surveys to systematically document and tracks the impact of the project activities and, more broadly, the quality of local governance and decentralized service delivery in Sierra Leone such as National Public Services (NPS) surveys in 2006, 2007 an 20089\. Designed and carried out in partnership with the Abdul Jameel Poverty Action Lab (J-PAL), the NPS covers more than 6000 households nation-wide\. (See Annex 5 for summary of key findings from CloGPASS and NPS surveys)\. 33\. The evidence is mixed in terms of whether M&E activities effectively informed the IRCBP operation or findings from M&E were used to improve the project performance\. On the one hand, one of the project’s M&E tools (the CloGPAS exercise) has been institutionalized as one of the core benchmarking mechanism to establish allocation of resources to LCs under the Local Government Development Grant (LGDG), aiming to support LCs’ development projects On the other hand, although M&E was designed to be a key part of the IRCBP implementation, capacity building and learning, the use of the project M&E framework did not fully move beyond its traditional position as a compliance tool\. In the last two years of project implementation, however, the task team pursued more strongly in advising and assisting the government to more effectively using the M&E framework as a management tool in assessing performance and taking corrective actions that may be needed to achieve results according to agreed plans\. 34\. The rich source of administrative/survey data and reports generated by the IRCBP evaluation unit have also had mixed impact\. On the one hand, the reports have been shared with government departments, local councils, donors, and some civil society groups\. A good relationship was developed with the Ministry of Health with joint surveys developed which fed back into the workings of the ministry and the World Bank health project\. Some donors have used data from the household NPS survey to design new projects and inform sectoral interventions\. One the other hand, however, the data have been underused compared to their potential\. The lack of the advanced technical skills required to analyze micro survey data – within the ICRBP team as well across government’s agencies - might have been a factor limiting the integration of data and reports into the broader policy decision-making process of the government\. 2\.4 Safeguard and Fiduciary Compliance 35\. Financial Management\. The project’s financial management risk was rated substantial at appraisal\. Performance of financial management was rated less than satisfactory on numerous occasions during implementation primarily because of the operational bottleneck of the GoSL’s insufficient counterpart funding and persistent delays in processing the withdrawal applications by the MoF\. Initially, it was estimated that the GoSL would contribute $3\.07 million for local expenditure and taxes\. Yet, due to national budget constraints, only $736, 972 was deposited to the project account\. The insufficient counterpart funding became a source of delays in activities related to local council infrastructure\. In view of this constraint, the Bank restructured the project in January 2008 by amending the financing percentage of the IDA grant to 100% for all 9 The fourth round of the survey was expected to be completed by project closure (30 June 2011), but due to delays in the data collection process is now expected to be completed by spring 2012\. 25 expenditure categories\. It should be noted, however, that local counterpart financing issue was an issue that affected not only IRCBP but the entire portfolio of the Bank in Sierra Leone\. 36\. Procurement\. Given the high procurement risk environment in the country, the Bank team closely monitored project procurement activities and every supervision mission carried out a procurement post review\. The performance of procurement within the PCU remained satisfactory without facing any major issue for the entire period of project implementation\. While the MTR in December 2006 noted administration of procurement at LC level as moderately satisfactory, this was mostly attributed to the inability of LCs to follow all the procedures due to weak capacity\. This issue was addressed by the project through more intensive supervision and post review\. It should be noted, however, that overall procurement management across local councils significantly improved in the last three years (2008-2010) especially since the establishment of the National Public Procurement Authority (NPPA)\. The NPPA’s key roles are the following: (a) regulate and harmonize public procurement processes in the public service; (b) decentralize public procurement to procurement entities; and (c) promote economic development, including capacity building in the field of public procurement by ensuring value for money in public expenditures and the participation of qualified providers across the country\.10 37\. Disbursement\. The amount approved under the IDA Grant was SDR16\.8 million (see Annex 1) of which almost the entire amount was disbursed\. SDR 21,959\.86 (approximately US$ 35,000\.28) was cancelled due to the cancellation of some parts of the local government grants caused by inadequate attention and oversight by the PCU\. The total amount provided by DFID and EU was US$27\.8 million of which about US$ 26\.1 (94%) was disbursed\. 38\. Environmental Assessment\. The environment category of the project at appraisal was B because the project’s local grants were designed to finance infrastructure development activities which may have some environmental aspects\. The environment safeguard compliance had been rated satisfactory until a review study in July 2008 that showed that the Bank approved environmental and social management framework were not being used and no environmental monitoring were conducted at the local level\. Among the actions taken to address this issue was the recruitment of local and international consultant who developed the ESMF manual\. In addition, relevant personnel of the Local Councils and relevant service providers were trained on the procedures described in the manual\. It should be noted that the rating given prior to December 2008 ISR of “satisfactoryâ€? was based on the assumption of no safeguards issues\. This rating was downgraded to “Moderately Satisfactoryâ€? until the time of the MDTF closure in June 2011 after the introduction of the ESMF manual\. 2\.5 Post-completion Operation/Next Phase 39\. The main challenge of the post-completion operation is how to build on the achievements of the IRCBP to expand the scope of decentralization and public financial management reforms and scale up interventions for institutional development and capacity building in alliance with the GoSL’s broad development objectives and priorities\. 10 This is based on the findings of the Technical and Procurement Audit Reports (2009 and 2010) as well as the PEFA 2010 report\. 26 40\. The following streams of interventions continued: a) The Multi-Donor Trust Fund (MDTF) to channel contributions from DFID and the EC in 2006 to expand the scope and finance additional activities and to continue to operate the Decentralization and Capacity Building component of the IRCBP from the end of the IDA funding in March 2009 until June 2011\. The key focus of the support was to address some key issues going forward, including integration of the DecSec into the MoLGRD, capacity development within the MoLGRD, devolution of human resource management to local councils, and strategic communications and outreach to the public\. b) The IPFMRP project (US$20\.9 million) to continue to support GoSL in sustainably improving the credibility, control and transparency of fiscal and budget management\. The ongoing IPFMRP is jointly financed by IDA, DFID, and the EC with support from the African Development Bank and GoSL counterpart funds\. The IPFMRP was approved by the Board on June 4, 2009 and become effective on December 15, 2009\. c) The Decentralized Service Delivery Program (DSDP) for US$20\.0 million to improve the quality and access to decentralized service delivery of social services in health, education, water, and solid waste\. The DSDP was designed to strengthen institutional and organizational capacity at the central and local levels to enable local councils to carry out their core devolved mandates and functions, and enhance the quality and impact of the performance on actual service outcomes\. 41\. Last but not least, a pre-identification of a Public Sector Pay and Performance Project is underway\. The project is envisioned to assist the government in implementing the Pay and Performance Reform/Improvement program laid out in the government’s Pay Reform Strategy of 2011-15\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 42\. The determination of the project’s objectives and its design were firmly rooted in the situational context of Sierra Leone in the aftermath of a decade of severe civil strife, community dislocation and physical devastation\. Even prior to the official conclusion of the war in early 2002, the Government’s draft Interim Poverty Reduction Strategy Paper (PRSP) (Sept\.2001) had identified decentralization as a priority in governance to secure the peace and to rekindle development across the national territory, while economic recovery was inter alia to be underpinned by greatly strengthened public financial management\. These priorities were reflected in the Bank’s Transitional Support Strategy (March 2002) in which the preparation of the IRCBP was linked\. The project, therefore, had high relevance since its inception\. This relevance has remained undiminished during implementation as the change in political administration left unaltered the commitment to the decentralization by devolution reform and the deepening of the process is highlighted both in PRSP 2005-2007 (as a “key strategyâ€? under Pillar 1) and PRSP 2008-2012 with an emphasis on effective service delivery for sustainable human development\. 43\. The challenges associated with the condition related to the passing of the legislation for the establishment of the DLC was probably not fully appreciated at the design stage\. As explained earlier and in retrospect, the eventual cancellation of the DLC component was assessed as having no impact on the achievement of the PDO\. 27 44\. The trade-offs associated with the chosen implementation arrangements are discussed in section 2\.1 and lessons are drawn in section 6\. 3\.2 Achievement of Project Development Objectives Rating: Satisfactory 45\. The PDO was to support the post-conflict Government of Sierra Leone (GoSL) to establish a functioning local government system and improve inclusiveness, transparency and accountability of public resource management at all levels of government\. In terms of the PDO indicators, almost all the targets were achieved (see Annex 2)\. In 2010, additional funds were received from the MDTF to scale up the activities under Component 1\. Therefore, three new PDO indicators were introduced to monitor and measure achievements of the scaled up activities that were not included in the original project design with respect to legal policy, chiefdom governance, outreach and training capacity issues\. Empirical evidence collected through (i) Aides memoire, (ii) the ESW “Decentralization, Democracy, and Developmentâ€? undertaken under the project, (iii) a growing body of analytical work carried out by the Bank and independent researchers using the rich set of data generated by the projects and, ultimately, (iv) perceptions of various stakeholders interviewed for the ICR consistently and strongly attests to the positive impacts of the project activities and the overall success of decentralization reform in Sierra Leone\. 46\. While ambitious in its expectations, the IRCBP project had no guaranteed prospects of success\. On the one hand, several governmental agencies resisted the decentralization process and tried to delay the devolution of functions to LCs\. On the other hand, the fragility of post- conflict institutional architecture created additional challenges: first, as indicated above, in 2004 the presence of the state outside Freetown peninsula simply collapsed and had to be rebuilt from scratch\. Second, human capital both at national and local level was a massive impediment for any large-scale interventions aiming to restore local governance\. Third, the institutional and collective memory of the Local government system in the country was buried under more than 30 years of hyper-centralized rule\. 47\. Despite these countervailing forces, however, the new disposition for local government has taken on a momentum and maturity cementing its institutional presence in the architecture of the state\. The process of decentralization has become institutionally embedded, as reflected in the two rounds of democratic local elections and the growing legitimacy in the eyes of the population of the elected structures and avenues for the expression of development priorities\. This success is also reflected in the reduction of bureaucratic inefficiencies achieved through a fully functioning intergovernmental fiscal transfer system established on an equitable and transparent basis which is universally accepted\. Para 48 and 49 below provide summary evidence of PDO achievement\. [Annex 2 contains a detailed assessment of the project’s achievements by component and outcome indicators, and provides additional evidence to support and justify the project rating]\. 48\. Established functioning Local Government System\. Institutional and organizational structures of sub-national government have been fully reestablished in the country\. Local councils are fully staffed with core skills in the areas of development planning, internal audit, monitoring and evaluation and procurement\. According to the CLoGPAS assessment, the number of LCs that met (or partially met) the ‘minimum conditions’ in critical functional areas has significantly improved between 2006 and 2011\. [See Figure 5\.1 in Annex 5]\. Local Councils 28 hold regular meetings and produce minutes, participatory development planning has taken root, accounts are completed on time, and regularly audited and financial information is disclosed\. The latest PEFA report provides additional evidence consistent with these trends, showing that in 2010 local councils received the highest scores on key dimensions of budget execution and accounting practices scoring higher on these dimensions than the national government (Srivastava and Larizza 2011)\. The re-establishment of the functioning systems also brought about notable improvements in service delivery particularly in the health and education sector\. Among other things, surveys conducted for the period covering 2005 to 2008 showed that: (a) public satisfaction with health services improved from 81\.0% to 90\.6%; (b) more rural citizens were within reach of a primary school than they were in 2005; and (c) the percentage of households with access to school within 30 minutes’ walking distance increased from 68\.3% to 74\.3%\. 49\. Improved Inclusiveness, Transparency and Accountability of Public Resources\. The Local Government Development Grant (LGDG) funded the development budget of all local councils\. Budgets were released with minimum conditions in terms of implementing the plans according to agreed standards on transparency and accountability\. LCs implemented capacity building activities for local staff in the areas of participatory planning, budgeting, financial management, and project management\. This helped ensure that local governments were staffed with skilled individuals who are able to manage resources in accordance with new regulations\. Significant advance were made in laying sound foundations of PFM\. All 19 local councils use simplified (PETRA) system that interfaces with central government chart of accounts managed through IFMIS\. Other notable actions on transparency have been implemented such as the posting on notice boards at LC offices relevant financial information on a monthly basis\. Another is the establishment of the National Public Procurement Authority (NPPA) (National Public Procurement Act of 2004) in charge of the regulation and harmonization of public procurement processes in the public service\. One of its key functions is to monitor compliance with accountability provisions of the new procurement law that requires tenders and contract awards to be published on notice boards in conspicuous places at the Council Offices and various wards in the localities\. The new law also promotes the use of radio stations to air notices of tenders and contract awards\. These practices have been successfully implemented across the country\. Last but not least, procurement complaints mechanism had been put in place through the Independent Review Panel (IPRP)\. 50\. By the aforementioned outcomes, the PDO has been substantially achieved\. There is a good pattern of successful achievement across the broad operational span of the objective\. 51\. Achievement of the targets was facilitated by the PCU who were staffed with highly skilled LTCs\. As already discussed, this was a unique approach which had helped facilitate implementation of project activities\. This action was taken to address the severe capacity (and motivation) shortage in government\. Most likely, decentralization would not have taken off and got established if this approach was not taken\. On the downside: (i) there were tensions between these agencies and "real" government counterparts; (ii) the issue of what would happen at the end of the project was not addressed until rather late in the game with the result that some of the functions (mainly those of the DecSec) are not yet mainstreamed in government\. The issue with integration of DecSec, however, is actively being addressed by GoSL within the framework of the new pay reform strategy\. 3\.3 Efficiency 52\. At appraisal, a cost-benefit and financial analysis was not carried out because of difficulties in identifying and quantifying the direct and indirect financial, economic, and social 29 benefits, and attributing specific outcomes to interventions\. The signed amount for the IDA Grant in July 2004 was SDR 16,800,000 which was equivalent to roughly US$26\.8 was relatively efficiently utilized until closure of the IDA Grant in March 2009\. With respect to the MDTF Grant of US$25\.3 million, approximately 94% was also effectively disbursed\. At all times during project implementation, funds were used with the view to ensuring cost efficiency and best value for money\. This was evidenced by the fact that all financial transactions were fully verified before disbursements were made for the acquisition of goods, implementation of local civil works\. Selections of consultants were carried out competitively and in accordance with agreed procedures (World Bank guidelines and Procurement Law of GoSL) that also promoted intensively the principles of best value for money\. The introduction of the local automated financial systems linked to IFMIS and adoption of competitive procurement procedures became important key tools for helping the LCs to adopt the least cost approach in the administration of their budget\. 53\. At project end, an amount equivalent to about US $35,000 was cancelled\. The dovetailing of MDTF funds with those of IDA also resulted in increased absorption rates (LGDG, Council infrastructure provision) across project activities\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory 54\. Several senior administrators interviewed for the ICR stated the success of the IRCBP in providing financial/technical resources and strong implementation intent behind the government decision to pursue a policy of decentralization and improving PFM as core responses to the country’s strategic priorities in the post-conflict environment\. In the process of actualizing this intent, the project has generated credence for the original policy initiative as well as helped to confer legitimacy for the newly established structure of sub-national government through the increasingly visible and effective operations of the Councils and improvements in PFM\. 55\. Within this context of progress in the governance domain, the identified individual shortcomings and under achievements in specific aspects of the project’s results do not justify a corrective counterbalance to the satisfactory rating\. In fact – again reflecting interviewee commentary – much of the project’s success can be seen to have been at least partially pre- ordained by the careful and participatory approach at the design stage and the valuing of the IRCBP as a key facilitating intervention in the nation’s general developmental effort\. The spin- off of the project therefore has been noted as establishing approaches that will have lasting importance including in center/local fiscal relations, capacity building modalities and inter Ministry coordination\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 56\. As noted in Section 3\.1 above, the project in its inception was responsive to the Government’s strategic approach to poverty reduction\. Although the original PDO did not focus on social development, the additional PDOs added in 2008 put an explicit emphasis on improved service delivery, with special focus on the health and education sector\. In this regard, evidence from the NPS surveys suggests that access to and quality of health services has improved dramatically since 2005\. Clinic infrastructures, availability of drugs and numbers of staff have all improved with the result that public satisfaction with health service improved from 81\.0% to 30 90\.6%\. With regard to the education sector, more rural citizens were within reach of a primary school than they were in 2005\. The percentage of households with access to a school within 30 minutes walking distance increased from 68\.3% in 2005 to 75\.3% in 2008\. This is recognized by the IRCBP Evaluation Unit’s consolidated analysis from primary health care studies (2005, 2006, and 2008) and the National Public Services surveys (2005, 2007)\. However, it is also observed “that at the very least decentralization has been compatible with consistent improvements in 11 public service delivery\.â€? Moreover, communities far from Freetown but close to a district capital saw the biggest improvements in services, even holding constant the remoteness of these communities\. A reduction in “distance from powerâ€? – a direct byproduct of decentralization – thus appeared to have had a positive impact on service delivery\. These improvements are remarkable if one considers the short time since the launch of decentralization and the fact that local government performance continues to be constrained by several factors, including the incomplete devolution of functions and line staff, the relatively small size and tied nature of the transfers, and the unresolved tensions between local councils and the traditional authorities\. 57\. Concerning the gender dimension, DecSec gave expression to a declared focus on this by establishing a specialist post (staffed in acting capacity as of the time of this ICR) with a mandate to devise a policy and strategy\. Progress was slow but cooperation with other relevant agencies was good\. In general, the ESW publication identified gender and generational gaps in civic participation\. Encouragingly though, female councilor numbers rose from 12\.7% to 18\.9% between the last two elections (in 2004 and 2008)\. (b) Institutional Change/Strengthening 58\. As discussed above, the effective integration of the DecSec into the MoLGRD remained a work in progress\. The plan for integration called for six steps starting with the review and approval of Ministry functions going forward and included a skills audit, recruitment and identification of capacity building needs\. None of the substantive actions included in the plan had been achieved yet but the following key actions were taken by government recently: (a) drafting of the HR policy document for local staff (submitted after national validation session, now awaiting cabinet approval); (b) convening of an interactive forum with HRMO; and (c) facilitation of recruitment of 4 additional ‘core’ staff – Economist, Valuator, Gender Officer and IEC Officer - for LGAs (selection made, recruitment not yet completed due to recurrent financing discussions with MoFED)\. 59\. The Ministry presented an organizational chart which essentially divides the existing Directorate of Local Government into two: a Directorate for Local Government and Directorate for Decentralization\. Just prior to the closing of the MDTF Grant, the Bank strongly communicated the official approval for the proposed structure and the need for action to adequately implement the mainstreaming with the view to filling of the established posts within the Ministry in line with the competencies identified\. 60\. The integration of the DecSec into the MLGRD is the more difficult for two reasons: (i) the vision of the MLGRD continues to be of a DecSec financed by donors; and (ii) there are reduced resources providing financial support for the transition\. In view of the central role of the DecSec in spearheading the decentralization agenda, this poses the biggest threat to sustainability\. 11 Foster, Elizabeth and Rachel Glennester\. Impact of Decentralization on Public Services: Evidence to Date\. In Yongmei Zhou (2009)\. Decentralization, Democracy, and Development: Recent Experience from Sierra Leone\. 31 61\. On the other hand, at the local level, the very establishment of functioning LCs where none existed for three decades represents an institutional milestone\. Interviewees who had served in former appointed ‘committees of management’ typified the change to LCs as entities as a switch to “legitimacyâ€? (for councilors and managers) in the communities’ eyes\. As previously observed, however, important questions of HRM and accountability through the structures for service delivery remain to be addressed satisfactorily\. Notably, issues of personnel devolution are yet to be properly streamlined\. These include, re-defining the framework for the assignment of devolved staff to LCs which should include the preparation of letters of deployment and clarifying issues of accountability and reporting\. (c) Other Unintended Outcomes and Impacts (positive or negative) 62\. The reallocation of funds to PFM purposes following the restructuring allowed additionally production of training/coaching efforts, technological support to systems and buy in of the PFM system\. 63\. The vibrancy and volatility in local politics engendered by decentralization measures might not have been fully foreseen\. Since 2004 a new generation of leaders has emerged in the country whose interests are naturally aligned with the survival of decentralization\. The two rounds of sub national elections—held in 2004 and 2008, respectively—reported an increasing level of competitiveness and managed to create a new class of local politicians\. In addition, the ‘schooling’ of potential leaders through local structures appeared to have resulted into a positive by-product\. 64\. The process of decentralization has also promoted greater participation among all citizens, including women (as captured by NPS – Annex 5), and increased power sharing across ethnic groups\. Indeed, traditionally marginalized groups such as women and ethnic minorities have been the largest beneficiaries of the new space for political participation\. While in 2004 women occupied 12\.7 percent of council seats in council elections, in 2008 this increased to 18 percent, a higher rate of representation relative to the 12 percent share of women’s seats in the national parliament\. Finally, decentralization has also allowed greater participation and power sharing among representatives from minority groups and smaller ethnic groups\. In so doing, more groups have a stake in the system, promoting prospects of political stability\. This is a remarkable achievement for a country that has emerged from a decade-long civil war\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 65\. As noted in section 2\.3 above, the IRCBP evaluation unit has undertaken several rounds of surveys to monitor the impact of the project activities on a wide range of beneficiaries\. More precisely, the 2006, 2008 and 2011 CloGPAS have captured the performance of Local Councils, the ‘2008 Decentralization Stakeholder Survey’ captured the perceptions of Local Councilors, and the NPSs captured the improvement in service delivery as perceived by the Local Communities\. Annex 5 summarizes the key findings from each of these surveys\. 4\. Assessment of Risk to Development Outcome Rating: Significant 66\. Six years after the decentralization initiative was launched, it has arguably taken firm root, leading several observers to suggest that it would be very hard to reverse the process and re- concentrate power at the center\. Recent developments, however, suggest that pressures might be 32 building to weaken decentralization, casting some doubt on the central government’s intentions to unequivocally move the agenda forward\. The recent reintroduction of the district officers in 2010 and the downgrading of the political status of the local councils provide some evidence of a new ‘containment’ strategy designed to protect the interests of the national elites and undermine the emerging political power at the sub national level (Srivastava and Larizza 2011)\. 67\. The local councils remain highly dependent on grants from the national government\. Although the volume of these grants has increased over time and a larger proportion of budgeted amounts are now being transferred, the lack of financial autonomy leaves the local councils vulnerable to the whims of the national government\. Moreover, the lack of control over frontline staff weakens the ability of the local councils to influence the quality of services\. Both of these risks are exacerbated by the ongoing tensions between the Local councils and the chieftaincy arising from a lack of clarity about their respective domains\. All together, these risks represent a significant threat to the prospects for sustaining and further strengthening decentralization reforms in Sierra Leone\. 68\. Finally, it is still not clear how the functions of the DecSec will be integrated into the MoLGRD\. Without the mainstreaming of these functions, there is a significant risk that skilled contract staff will not be attracted and retained in the civil service weakening institutional capacity and undermining sustainability of the decentralization reforms\. A similar risk exists at local level where the local councils had difficulty in recruiting/retaining capable staff for key positions\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 69\. The Bank performed well under extremely tight schedule and strong pressure to meet project objectives\. The entire preparation until appraisal was done with full involvement and participation of government officials\. The design was consistent with the recommendations of Quality Enhancement Review team for the project and the Transitional Support Strategy (TSS) focused on institutional reform and capacity building at both national and local levels\. The task team was composed of individuals with the right skill mix during preparation\. The preparation was well coordinated with other development partners namely DfID, the EC, and UNDP\. Even though the task team identified weak implementation capacity, more effort should have been taken to address the government’s core capacity to manage the M&E framework\. (b) Quality of Supervision Rating: Satisfactory 70\. Based on the recommendation of the Quality of Enhancement Review team, supervision was frequent (every four months) during the first 18 months of the project, allowing the task team to provide on-site support to the project team\. The task team provided prompt and relevant responses to requests from the IRCBP team\. The average period of response to requests for no- objections and review of terms of references was five working days\. High quality mission reports 33 were prepared at the end of each mission\. A comprehensive Mid-Term review was conducted during which implementation issues highlighted and remedial actions were agreed upon\. 71\. The Bank effectively and successfully partnered with the donors for getting behind a critical reform agenda with the best possible instrument of coordination with the establishment of a Multi-Donor Trust Fund (MDTF) under the management of the Bank\. The funds under the MDTF extended and deepened project activities in decentralization\. 72\. After the establishment of the MDTF, the TTL was heavily lobbied by the EU and DFID to improve both the quality of dialogue between the Bank and its contributing partners, as well as the day to day strategic guidance and advice to the program\. The EU and DFID were concerned that they were not receiving sufficient information and in-situ dialogue on the way in which the IRCBP was progressing, nor did they have an immediately available contact point for the Bank in-country to engage with on technical issues and considerations\. Both the EU and DFID were frustrated that it appeared that the only contact and serious engagement that they could have with the Bank (and the GoSL implementing agencies) was when the Implementation Support Missions (ISM’s) took place\. To address Donor’s concerns, discussions between the Bank and the donors began in December 2008 and agreement was reached that EU and DFID would earmark funds for the recruitment of an ETC based in the WB Freetown office who would be answerable to the TTL but would also work and discuss IRCBP technical issues with partners and GoSL counterparts\. 73\. The ETC was formally appointed in September 2008 after initiating a rapid process of recruitment that was recognized by the contributing partners as an extremely successful exercise\. For the EU and DFID in particular, the immediate availability and easy access to the ETC provided significant re-assurance on the way in which their contributions were being utilized, allowing for increased technical engagement on the program and a greater degree of understanding of the decentralization processes and the impact that it would have on their respective country assistance programs\. The ETC also provided excellent support to the Dec – Sec and Ministry activities and very quickly became a valued and embedded member of the team\. 74\. Donor co-ordination, as a result of the recruitment of the ETC, has, therefore, helped further improve the effectiveness of the implementation of the program that lead to positive achievement of targeted results and outcomes of IRCBP\. Both contributing partners were able to retain an element of continuity in their understanding of their support to the program (despite their own staff turnovers) as a result of the strong coordination efforts and the full time presence of the ETC\. The ETC also played an integral role by giving inputs on the scope of activities and program for the successor intervention – Decentralized Service Delivery program (DSDP I and 2)\. 75\. Internal Bank handovers between TTL's and other Bank newcomers to the IRCBP were also quickly and comprehensively facilitated by the ETC\. The transition process was well managed with adequate involvement of the subsequent TTLs in the MTR of the project and timely preparation of detailed hand over notes\. There was continuity in the Bank’s team and its approach was pro-active, demonstrating flexibility in addressing issues\. The task team’s focus of realizing the developmental impact of the project ensured that project implementation was geared towards the appropriate activities, that the objectives of the project were met and also ensured that disbursements of project funds never lagged\. The task team was forthright in proposing the cancellation of the DLC component during the MTR\. The fiduciary team provided the appropriate support to the task team\. A Quality of Supervision Assessment (QSA7) conducted by QAG in September 2006 rated the quality of supervision as highly satisfactory\. 34 76\. The Bank, however, could have done better in addressing issues related to environment safeguards, and anticipated better the challenges associated with the integration of the IRCBP contract staff into parent ministries, and the workings and management of the IRCBP team\. The Bank also faced challenges in mobilizing the release of donor funds for decentralization in a timely manner during the latter part of the project due to changeover of the EU TTL\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 77\. Given the satisfactory rating for quality at entry and the satisfactory rating for supervision, ICR guidance requires overall Bank performance to conform with the outcome rating, which is satisfactory\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 78\. Government's commitment was mixed\. Even though Government was committed to decentralization and the devolution of power which was evidenced through various Cabinet documents and pronouncements of government officials, certain sector ministries (e\.g\. Education,) initially opposed the devolution of their functions and it took a lot of effort (on the part of DecSec and MLGRD) to get this resolved The initial project preparation was spearheaded by the Governance Reform Secretariat (GRS) as the overarching agency of governance reform in the country\. GRS was able to rally various officials to participate in meetings to get the project prepared\. Subsequently, various stakeholders at national and district levels were consulted during the preparation of the project\. The then Minister of Finance and the Financial Secretary also demonstrated commitment to PFM reforms\. 79\. As agreed in the project documents, the Government constituted the TSC to provide guidance to the project management team\. Initially, the TSC did not function as expected\. However, there has been marked improvement in the functioning of the TSC\. This was evidenced by: (a) the expansion of the TSC to incorporate critical players in the decentralization process such the Local Council Association, the HRMO, PSRU, and Civil Society; and (b) the TSC met frequently and provided the required oversight and technical support to the project implementation units\. The Government was unable to provide all the counterpart funds negotiated and agreed upon with the Bank especially before the project was restructured\. The long delays in the approval of withdrawal applications at MoFED at times posed significant challenges with regards to cash liquidity at the project level\. Some project activities had to be put on hold until the withdrawal applications were approved and the project accounts replenished\. As noted earlier, however, the issue of counterpart funds was fully resolved when the IDA Grant financing percentage was increased to 100% during the IDA restructuring in 2008\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 80\. Project management under PCU was mostly satisfactory throughout the implementation period\. Work plans were prepared annually as a guide in the implementation of the project\. Periodic procurement plans were also prepared and revised quarterly to reflect changes in the work plans\. As agreed upon in the Development Grant Agreement, project management reports 35 were prepared annually and quarterly that indicated progress and outstanding issues\. Procurement management was good as all the procurements that were undertaken followed the procurement procedures outlined in the project documents\. With regards to FM, adequate financial records were maintained and annual external audits were commissioned on time and the reports delivered to the Bank within the stipulated six months after the preceding financial year\. 81\. LGFD, DecSec and PFMRU provided the appropriate capacity building, coaching and mentoring to the LCs to understand their new roles and responsibilities in a decentralized environment\. PFMRU also worked with the relevant officials at MoFED, Accountant General’s Department and other sector ministries to implement the reforms related to public financial management\. 82\. Both PFMRU and LGFD had good working relationships with MoFED and are regarded as integral units/departments of the ministry\. However, the working relationship between DecSec and MLGRD was not consistent\. DecSec initially started working well with MLGRD but later this relationship deteriorated due to interpersonal differences, salary variations and (until 2010) physical location of DecSec outside the Ministry\. 83\. The Local Councils were rated satisfactory based on their ability to provide the plan and execute local projects in a timely manner\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately satisfactory 84\. Given the moderately satisfactory rating for the Government's performance and the satisfactory rating for the performance of the implementing agencies, ICR guidance requires overall Borrower performance to conform with the outcome rating, which was moderately satisfactory\. 6\. Lessons Learned 85\. The GoSL and DP’s choice to define the ‘road map’ of decentralization by rapidly enacting critical legislation– before the formulation of a National Decentralization Policy - proved to be a successful strategy\. The rapid enactment of legislation regulating the functions and mandates of LCs prevented delays at the implementation stage by (i) de-facto blocking interference by resistance groups in the critical start-up period and (ii) minimizing the space for conflicting interpretations (such as the issue of the relationship between LCs and Chiefdoms) that could stagnate the process\. Once the 2004 LGA was in place, local elections took place, staff were appointed to the LCs, grants started to flow and, in short, the show was on the road and on an, arguably, irreversible, path\. In turn, the late elaboration of the NDP (approved by Cabinet in December 2010) made it possible to benefit from the experience of the early period and quickly identify specific requirements for additional legislative harmonization and change 86\. The choice to establish an explicit deadline (2008) for the devolution process was also critical to support the reform agenda\. In the view of the legislative framework, the devolution of functions did not need to await the development of adequate capacity within the institution of LC\. Accordingly, managerial staffing at the new local Councils was pragmatically organized by the assignment of central civil servants to Chief Administrator (CA), deputy CA and Treasurer posts\. In this regard, the deadline for the function devolution was instrumental in keeping the 36 momentum of the decentralization process and mobilizing demands for sustained capacity- building efforts at local level\. 87\. The sequencing of decentralization reforms - featuring the establishment of democratically elected authorities first, and subsequently the progressive devolution of fiscal and administrative functions) was critical to institutional success because the progressive empowerment of locally elected political leadership – via increased resources and administrative decision-making power – progressively enhanced accountability relationship with the citizens, generating demand for services and thereby shaping the incentives for local politicians to deliver and improve the quality of local services\. This in turn enhanced citizens’ perception of LCs as trustworthy and legitimate authorities\. 88\. The design of a relatively simple and transparent intergovernmental fiscal system (first generation grants) set the stage for predictable and (in general) timely vertical transfers to the Local Councils\. This enabled the effective functioning of LCs and ultimately gave rise to the new structures and systems for sub-national government evident today with an established level of governmental subsidiary\. 89\. The modality of donor support to decentralization and, in particular, the use of LTA- funded positions acted as a strong driver of the reform process\. As discussed above, the creation of project financed line agencies was a unique approach within the country environment in which the project operated\. The Dec-Sec was only formally included in the MLGRD, but remained de- facto largely autonomous and independent from it\. Although the long-term sustainability of this model remains an issue of concern, evidence suggests that the project might not have achieved the same results in the absence of these agencies\. This requires further reflection on the benefits and potential trade-offs associated with this model, and the extent to which it could be replicated in other post-conflict and fragile countries undergoing decentralization reforms\. The monitoring of IRCBP activities has benefited from a rich set of survey data collected by the IRCBP evaluation unit in collaboration with research organizations (J-PAL / IPA) and Statistics Sierra Leone (SLL)\. These surveys provided a unique panel data series which had allowed to systematically track progress of decentralization and impact of IRCBP activities, and had also been used by Bank staff and researchers to inform new project designs across variety of sectors\. These positive externalities confirm the benefits of building multiple partnerships while also suggesting the importance of maintaining the surveys going forward, by including them in the national statistical plan of Statistics Sierra Leone\. By doing so, the data and knowledge generated by the IRCBP are likely to become (better) integrated into the policy decision making process of government\. At the same time, the under-usage of such data during the life of the project suggests that in the future a stronger emphasis should be made in developing the required statistical and technical skills across the project’s implementing agencies, to facilitate a more effective institutional learning within the IRCBP team as well as across government agencies\. 90\. Decentralization is one of the most contested and politically difficult reforms to implement in any national policy\. The experience of IRCBP suggests that the trajectory of reform process is heavily influenced by the degree to which the often-conflicting incentives of different actors play out\. It also suggests that the outcomes of reforms can substantially alter the political equilibrium in the country, re-shaping political economy dynamics and re-defining the position of political and economic actors vis-à-vis the reform process\. As indicated above, the risk of a ‘containment’ strategy put in place by the central government might well be a by-product of the successful re-establishment of sub-national government\. In light of this, the critical lesson for the Bank and the donor community refers to the urgent need of continuing the support and engagement with LCs, after the project closes\. Such support is crucial to the mitigate the risks for 37 long-term sustainability of IRCBP achievements and help local authorities in their ongoing efforts to meet citizens’ demands and perform their devolved functions, 91\. Trend towards the bi-lateralization of multilateral aid calls for rethinking and adjustment of the Bank role\. Financial support to decentralization from EU and DfID came on stream in 2006 and continued for components 1 and 4 of the IRCBP until June 2011\. Thus strict co- financing in actuality was confined to the mid years of operation although the active involvement of partners predates this\. The relationship between the Bank, donors and the GoSL has been handled adroitly in these circumstances\. In particular, a strong focus on a shared project perspective and coordination was required when IDA funds were terminating, as the development partners considered the non-continuation to be an unsatisfactory state of affairs and tended to become more proprietorial about their own funding inputs as a result\. There are important lessons for future co-financing arrangements\. In particular, the Bank administered MDTF project without IDA funding changed the dynamics among development partners in terms of the development partners perception that the Bank was the sole TTL\. The general view, however, was that the Bank was an agent and the development partners are the patrons which is not consistent with the nature of the collaboration that the Bank and donors are equal partners\. As such, the role of the Bank on multilateral aid calls for rethinking and adjustment\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (See Annex 7) (b) Co-financiers (See Annex 8) (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) NA 38  Annex 1 - Project Costs and Financing (This table will be refined further after receipt of more information from GoSL) (a) Project Cost by Component (in USD Million equivalent) IDA MDTF/Others Latest Appraisal Latest Appraisal Latest Estimate Estimate Estimate Estimate Estimate Components Total (USD (USD (USD (USD 12 (IDA + millions) millions) millions) millions) MDTF) DECENTRALIZATION AND 17\.17 14\.61 24\.26 22\.06 36\.67 CAPACITY BUILDING PUBLIC FINANCIAL 6\.26 8\.13 - - 8\.13 MANAGEMENT REFORM DEVELOPMENT LEARNING 3\.03 0\.05 - - 0\.05 CENTER IRCBP COORDINATION 1\.11 2\.18 1\.01 2\.46 4\.64 UNALLOCATED 0\.62 - - - - Total Project Costs 28\.19 24\.97 25\.27 24\.52 49\.49 Total Financing Required 28\.19 24\.97 25\.27 24\.52 49\.49 (b) Financing Actual/Latest Appraisal Estimate Percentage of Source of Funds Estimate (USD millions) Appraisal (USD millions) Borrower 13 3\.07 0\.74 24% IDA GRANT 28\.19 24\.97 89% TF051640 0\.77 0\.55 71% TF055391 0\.92 0\.88 96% MDTF – TF056653 25\.27 24\.52 97% TF057291 0\.88 0\.88 100% Total 59\.10 52\.54 89% (c) Expenditure Categories IDA MDTF/Others Latest Appraisal Latest Latest Estimate Original Total Estimate Estimate Estimate Components Estimate (USD (IDA+MDTF) (USD (USD (USD millions)* millions) millions) millions) Works 0\.87 5\.05 5\.16 6\.03 Goods 7\.10 1\.77 1\.53 8\.63 Consultant Services & Training 9\.99 10\.87 9\.27 19\.26 Development Grants 5\.39 6\.06 6\.62 12\.01 Operating Costs 1\.63 1\.52 2\.01 3\.64 Total 24\.97 25\.27 24\.52 49\.49 12 USD Equivalent is higher at appraisal because the SDR exchange rate prevailing at that time was used\. 13 Government contribution was revised from 90% to 0% during the 2008 restructuring 39  Annex 2 - Outputs by Component 1\. As indicated in section 3\.2, an examination of the achievement of project results (intermediate outcome indicators) provides enhanced explanatory value in support of the project rating\. Component 1: Decentralization and Capacity Building 2\. The initial number of sub-components under Component 1 was increased from 5 to 10 with additional funds and later reduced to 5 towards project end\. Rating: Satisfactory 1\.1 Strengthen policy and implementation capacity for decentralization\. 3\. The operative legislation – the 2004 LGA and the accompanying Statutory Instrument detailing the devolution timetable – were in place when project implementation began\. This provided immediate momentum for the reform agenda in moving to establish the machinery for local government following the Council elections in mid-2004\. The intention was to subsequently reformulate the policy foundation for decentralization in the light of the early administrative experience and, additionally, to carry out a process of harmonization of existing laws with the LGA\. The National Decentralization Policy has been developed, approved by Cabinet and launched by the President; drafting instructions for the revision of LGA-04 has been developed and submitted to the Minister, MLGRD, and a draft Chiefdom Governance Policy prepared\. The devolution timetable still applies and is pursued with individual MDAs despite some deadline slippage\. As earlier noted, the Intergovernmental Fiscal Transfer System has been established on firm and uncontested principles of operation\. 1\.2 Start-up investment in local government administrative infrastructure is effective and timely 4\. Each LC has been empowered to employ eight, non-sectoral, ‘core staff’ competitively selected under the auspices of the Local Government Services Commission, with procedures of the Guidelines for Human Resource Management (HRM) applying to their employment\. All devolved staff operating at LCs, however, remains attached to their respective MDAs as deployed civil servants\. The employment and accountability relationship between the Councils and these staff is consequently not established on any legal basis\. Despite much discussion around this issue, no clear declaration has been made by Government on a definitive HRM regime to be applied across staff categories\. 1\.3 Capacity for management and implementation of decentralized governance is incrementally strengthened\. 5\. All LCs possess own-generated development plans on the basis of which annual budgets are produced within a MTEF\. Financial management and procurement capacity has been progressively upgraded although qualifications on audit are still registered in a majority of cases\. Devolution of specific service delivery functions continues although with some particular delays or blockages notably with the roads and water sectors\. The generation of own source revenues remains stunted, a situation that is not helped by the continuing lack of certainty as to the relative distribution of revenue powers with the Chiefdoms\. Budget Oversight Committees exist under 40 law and LC budgets and the results of public expenditure tracking survey (PETS) are popularized\. The accountability nexus is still seen as lacking, however, as with citizen engagement generally\. 1\.4 Build Local Councils capacity to design and implement infrastructure development projects satisfactorily\. 6\. The early introduction of the Rapid Results Approach across Councils and the introduction of related ‘quick wins’ promoted the legitimacy of the newly elected LCs in the eyes of their communities\. In this regard, an LGDG was designed both as a financing mechanism and as an incentive mechanism to encourage local councils to adopt practices of transparency and accountability and to acquire skills of participatory planning, budgeting, financial management, and project management\. The LGDG provided the incentive by stipulating the minimum conditions for local councils to access the LGDG\. The minimum conditions have been derived from the Local Government Act 2004 and the the LC’s capacity to meet these conditions has been assessed by the IRCBP Evaluation Unit through the CloGPASS exercise\. The introduction of the LGDG facility, its implementation manual and the annual assessment of eligibility provided the opportunity for visible projects and disciplined allocations (a total of 240 projects totaling over 20 billion Leones)\. The degree to which there is full and active community participation in the prioritization of projects remains a question however, reflecting a general picture of still limited inclusion of the populace in LC affairs\. The constraints faced at the LC level on civil works were addressed with the recruitment of engineers for all 19 LCs\. 1\.5 Capacity to carry out effective M&E of the decentralization activities supported by the IRCBP and those of the broader GoSL decentralization programme strengthened\. 7\. Decentralization dialogue forums were held on two occasions and evaluation survey results have been widely disseminated including within the ESW publication “Decentralization, Democracy and Developmentâ€?\. Three rounds of the CLoGPAS (2006, 2008 and 2011) exercise were completed and results analysed with regard to capacity building requirements\. However, successive project aide memoires singled out project monitoring as a still underdeveloped aspect of IRCBP activity and, further, questioned the sustainability of the Evaluation Unit’s work and the mainstreaming of M&E combined into the Ministry for Local Government and official national structures generally\. In terms of regular Audit meanwhile, a backlog for LC accounts continues though a concerted effort is to be made to clear this\. Component 2: Public Financial Management Reform Rating: Satisfactory 2\.1 Improved legislative and regulatory framework for PFM 8\. The Government Budgeting and Accountability Act was enacted in 2005 and the Financial Management Regulations – covering also LCs – were gazetted in 2008\. Regulations specifically for the local government level have been in draft form for some time\. This was due to the fact the Regulations for Local Councils was put on hold because of the impending revisions to the Local Government Act 2004\. It was deemed (at the time) that it was not necessary to finalize the draft Regulations when the principal law (LGA 2004) was under consideration for review\. Thus, the development of the Regulations in the IPFMRP was included and this will be formalized in 2012\. After this, the FM manuals will be finalized for the LCs which alongside with the Regulations\. 41 2\.2 Implement a new IFMIS in MoF and one line Ministry 9\. Roll out of the system to ten Ministries had been accomplished\. All of the financial specialists interviewed for the ICR spoke of the significant benefits arising from the wide installation of the system and spoke of it as the hallmark feature of the reform\. 2\.3 Implement interim local government financial management system 10\. All LCs are now using a simplified (Petra) FM system which interfaces readily with the central government chart of accounts\. Extensive FM training and coaching was conducted throughout the project life both for accounts and non-accounts executive staff in an effective and exemplary collaboration between PFMRU and LGFD\. Monthly financial accounts are now routinely produced by LCs\. 2\.4 MTEF process strengthened 11\. This did occur but specialist interviewees have suggested that it might have been done with more rigors to embed the framework more securely as a planning and monitoring tool\. In particular feedback from ministries, departments, and agencies (MDAs) to the Accountant General’s Department remains weak and implementation of the tracking of poverty reduction expenditure is not as thorough as initially designed\. 2\.5 Procurement Reform 12\. The legislation and regulations are in place and the National Public Procurement Authority convened the first National Forum in 2008\. Procurement audits have yet to be regularized\. In their absence, adherence of MDA to procurement plans can be fully verified\. There is a generally expressed view by specialists that the LC Procurement Officers hired as ‘core staff’ and specifically trained, exhibit higher expertise than their MDA counterparts\. 2\.6 Monitoring and Evaluation 13\. PFM Standard Assessment Indicators were updated on an annual basis as planned\. The PFM Oversight Committee meetings were convened regularly\. The final PEFA report was accepted by GoSL at the end of 2007 and the analysis contained in the report were used in the design of the IPFMRP\. Component 3: Development Learning Centre Rating: Cancelled 14\. The end-2006 MTR provides the full summary analysis underlying the recommendation that the Component be cancelled and funds reallocated to further support PFM\. The cancellation was carried out because of the inability of the government to formalize an enabling legislation (a condition of the IDA Grant) within 12 months of Grant effectiveness date, for the establishment of the DLC as a financially autonomous entity with appropriate physical facilities and key staff and resources\. The cancellation was deemed justified based on Global Development Learning Network (GDLN) experience in Africa at that time that raised questions of financial sustainability\. The cancellation was also based on the findings of the performance examination commissioned by AFTKIL that indicated that “only one of the eight centers – the Senegal facility – appeared to have been able to generate enough revenue through user fees to cover its annual 42 operating costsâ€?\. The original GDLN center business model as described in World Bank project documents that assumed that each new GDLN entity would be autonomous or semi-autonomous and would achieve financial self-sustainability in about four years was considered no longer valid in light of the experience\. Furthermore, without super-savvy business managers who can match capacity development demand of the public and private sectors with global supply, the DLC could possibly become a white elephant project that could drain GoSL budget\. 15\. Since the DLC component was seen as a means to an end and not an end in itself in the PDO, the cancellation had no direct effect in the achievement of the PDO for as long as other alternatives were explored to build up domestic training capacity and learning network\. One of the alternatives identified was the Institute of Public Administration and Management at the University of Sierra Leone which had been transformed under new leadership into an efficient, high quality professional training organization\. The other alternative was more intensive development and implementation of relevant training courses from local providers\. The latter was already being supported by the MDTF\. Component 4: Project Coordination Rating: Satisfactory 4\.1 Effective coordination of the 3 components of the IRCBP has been incrementally established and IRCBP implementation complies with the World Bank Financial Management and procurement guidelines\. 16\. At all stages of project review and supervision FM and procurement arrangements were adjudged adequate (with the exception of continuing delays in the processing of withdrawal applications)\. The same was generally the case with project management\. As it was conceived and designed, the PCU Coordinator had no supervisory role over the Directors (other than with regard to grant administration) for elements of the project\. This was also reflected in the fact of salary parity\. As it was, the gelling of personalities allowed this arrangement to work but some members of the PCU felt a more defined managerial chain of command would have further benefitted project execution\. 17\. Achievement of the targets was facilitated by the PCU who were staffed with highly skilled LTAs\. As already discussed, this was a unique approach which had helped facilitate implementation of project activities\. This action was taken to address the severe capacity (and motivation) shortage in government\. Most likely, decentralization would not have taken off and got established if this approach was not taken\. However, there were some concerns raised by the PCU that the Technical Steering Committee did not assume its full directional and advisory role for the project\. It was also observed that there was increased distancing of project functions from Ministry of Local Government regular activity (which was not the case with the MoF)\. Senior Ministry personnel characterized their position as being marginalized and put in a back seat with internal capacity building needs being ignored\. Others consider that the Ministry never sufficiently engaged with the project (perhaps being overwhelmed by its challenges) and ignored the longer term sustainability issues despite frequent entreaties\. The problem with integration of DecSec, however, is being addressed and actions are being taken by GoSL to resolve these issues in accordance with the new pay reform strategy\. 18\. The final results and outcomes of the project are summarized in the Table 2\.1\. It should be noted that the intermediate indicators used for Component 1 (Decentralization and Capacity Building) were made more comprehensive to more effectively monitor implementation progress 43 of the scaled up project activities funded from the additional funds provided by the donors (DFID and EU) that co-financed the project\. 44  Table 2\.1: Results Framework (IDA and MDTF) IDA MDTF PDO Outcome Indicators Actual Value at Completion PDO Outcome Indicators Actual Value at Completion Year 2009 Year 2011 Support the post-conflict Government of Sierra Leone (GoSL) to establish a functioning local government system and improve inclusiveness, transparency, and accountability of public resource management at all levels of government\. 1\. All 19 elected local councils are All 19 LCs have continued to Met 1\. All 19 elected local councils All 19 LCs have continued Met able to make development plans prepare 3-year rolling continue to meet the to prepare 3-yr rolling dev\. that respond to local priorities development plans linked to transparency and the plans linked to national through a participatory process national PSRP and MDG financial management PSRP and MDG goals\. and are able to prepare a budget goals\. accountability requirement consistent with Section 67 of as per Local Government Local Government Act 2004\. Act 2004 (Section 107, 81, 105) (RECAST) 2\. 14 out of 19 elected local 16 of 19 LCs display monthly Met 2\. Number of Local Councils 11 of 19 LCs meet or Partially councils meet the transparency financial accounts, and all 19 meeting all minimum partially met all minimum met\. and the financial management display minutes of LC conditions on CLoGPAS conditions on CLoGPAS accountability requirement as per meetings, and 15 display dev\. (NEW) Local Government Act 2004 plans\. 13 LCs prepared 2008 (Section 107, 81, 105)\. accounts\. 3\. 14 out o f 19 elected councils are Survey (Dec 2007) shows Met 3\. Number of Local Councils 10 of 19 LC meet the Partially able to deliver all services improvement in basic meeting the threshold for the threshold for the met devolved to them at the levels of education, primary health, performance measures bonus performance measure bonus the year before devolution\. water and transport services (or Performance Incentive since 2005 in all LCs\. Some Grants) of CLoGPAS evidence that access to (NEW) agricultural extension declined\. 4\. 90% donor funding is captured in With the introduction of the Met 4\. Percent of general population Satisfaction with primary Met the fiscal reports using IFMIS, the Accountant seeing improvements in school increased from 87 % government budget General’s Department (within health and education services (2005) to 91 % (2008) classifications by program and the Ministry of Finance and (NEW) object of expenditures\. Economic Development - Satisfaction with health MoFED) has direct access to clinics improved from 81 % 45  all financial information (2005) to 91 % (2008) processed through the consolidated revenue fund (CRF) and this information is regularly available to MoFED thus there wasn’t the need for Vote Controllers to be sending such reports to the Financial Secretary 5\. 95% of Vote Controllers, within With the introduction of the Met 10 days after end of month, IFMIS, the Accountant submit to the Financial Secretary General’s Department (within and relevant minister actual the Ministry of Finance and revenue and expenditure for the Economic Development - preceding month and estimated MoFED) has direct access to revenue and expenditure for the all financial information month\. processed through the consolidated revenue fund (CRF) and this information is regularly available to MoFED thus there wasn’t the need for Vote Controllers to be sending such reports to the Financial Secretary\. 6\. 90% of reporting entities have “This indicator was not Not unqualified audit reports by the monitoredâ€? Monitored Auditor General\. 7\. In-year reports are published Quarterly data on functional Met regularly for tracking poverty expenditures is gazetted\. 2008 expenditure by function\. PETS was conducted and a draft report produced\. 8\. Public Procurement Law enacted, The Public Procurement Law Met embracing the principle of embracing principles was transparency, accountability & passed in 2004, and efficiency\. regulations gazetted in Sept\. 06\. National Forum on Procurement (legislatively required) held in October 08\. 46 9\. 90% of the funds provided for 91\.3% achieved\. Met procurement are effectively utilized\. IDA MDTF Intermediate Indicators Actual Value at Completion Intermediate Indicators Actual Value at Completion Year 2009 Year 2011 Component One: Decentralization and Capacity Building 1\. Number of elected local All 19 LCs have continued to Met 1\. Percent of primary schools 70 % of households are Partially councils which are able to make prepare 3-year rolling having at least one core satisfied with quality of met development plans that respond development plans linked to textbook per child (NEW) school buildings and to local priorities through a national PSRP and MDG materials participatory process\. goals\. 2\. Number of elected local For FY2009, the budget Met 2\. Percent of clinics having Fraction of clinics with all Met councils which are able to make circular was issued in June essential drugs (NEW) essential drugs improved budget consistent with Section 2008 and in December 2008 from 24% in 2005 to 34% 67 of Local Government Act all 19 Councils prepared their in 2008 2004 2009 budgets\. The budgets are in compliance with the LGA Act 3\. Number of elected local All 19 LCs were able to Met 3\. Decentralization policy is Met\. The policy has been Met councils which were able to complete projects included in formulated and submitted to adopted by Cabinet as a complete the projects submitted their WPs\. Projects Cabinet\. (NEW) national document\. in previous year's work plan\. briefs/profiles discussed and approved by Council were submitted to LGFD/DECSEC 4\. Number of elected councils Survey (Dec 2007) shows Met 4\. The LGA 2004 is amended Amendments to the LGA04 Partially which were able to deliver all improvement in basic in line with Decentralization and the Hospital Board have met due to services devolved to them at the education, primary health, Policy and sections of the been completed and drafting contradicti levels of the year before water and transport services Education Act, Hospitals note prepared for the ons in devolution\. since 20 05 in all LCs\. Some Board Act, SALWACO Act Minister to organize legislation evidence that access to and Local Tax Act that are adoption fora & facilitate agricultural extension in conflict with the LGA 04 the reaching of a Cabinet declined\. are repealed\. (RECAST) conclusion\. 5\. Number of elected LCs receive All 19 LCs received allocated Met 5\. A Gender Strategy and Strategy was developed and Met a tied grant for each devolved tied grants for Q1 & Q2 Q3 Policy developed in support plans and provisions made service, at least that amount of 2008\. Q4 transfers were of decentralization\. (NEW) for popularizing the strategy 47 necessary to continue the not made due to overall and build capacities in its operation and maintenance of budget shortfall at the implementation in 2011\. that service at the standard prior national level to devolution\. 6\. 82 outstanding functions Only about half (46) of the Partially fully devolved according to functions were devolved\. met revised Statutory Instrument\. (RECAST) 7\. 19 LCs with fit-for-purpose Only 9 LC buildings Partially constructed/renovated office competed and handed over met buildings\. (RECAST) 8\. 12 Local Councils meeting According to the LGFD Met own revenue generation 2010 assessment, the target targets (Le 2000 per capita was exceeded by two more per year for rural councils LCs\. and Le 3000 per capita per year for urban councils)\. (RECAST) 9\. 19 LCs complete projects Target of 19 achieved\. Met included in LGDG work plan with satisfactory financial and contract management\. (RECAST) 10\. 19 Local Councils with Target of 19 achieved\. Met elected and trained Ward Committees\. (NEW) 11\. IEC Strategy for A national IEC for Met Decentralization is in place\. decentralization strategy is (NEW) in place\. 12\. Assessment from available Public confidence in local Partially sources (e\.g GoBifo) of the councilors has increased met extent to which from 33% in 2007 to 49% decentralization has in 2008\. Qualitative data rekindled social cohesion also confirms that and empowers marginalized previously marginalized groups in the local decision- group (women, ethnic making process\. (RECAST) minorities) are increasingly participating to decision- 48  making process at local level 13\. 19 LCs with regular Target of 19 met\. Met (including random) audits of financial management, procurement, and contract management\. (RECAST) 14\. Develop guidelines for Guidelines for integration of Met integrated Sector and Local District M&E into Local Councils planning and Councils M&E developed\. monitoring and evaluation\. (NEW) 15\. Respective organograms Organogram approved but Partially reflect new disposition as the Public Sector Reform Met identified in Management & Unit but has not been Functional reviews\. (NEW) implemented yet\. 16\. Appropriate staff While the organogram has Not met recruitment/deployment of been developed, the civil servants effected\. elaboration of staff/systems (NEW) development is yet to be implemented\. 17\. Staff/systems development No staff/systems Not met program elaborated\. (NEW) development program 18\. DecSec/LGFD coaching and Full action was not taken Not met mentoring of identified Ministry staff conducted in accordance with schedule\. (NEW) Component Two: Public Financial Management Reform 1\. Percentage of donor funding Target of 95% was achieved Met captured in the fiscal reports with the introduction of using government budget IFMIS\. classifications by program and object of expenditures\. 2\. % of Vote Controllers, within IFMIS now generates reports Met 10 days after end of month, on expenditures on regular submit to the FS actual revenue basis for each MDA and expenditure for the 49  preceding month and estimated revenue and expend for the month 3\. In-year reports are published Quarterly data on functional Met regularly for tracking poverty expenditures is gazetted\. 2008 expenditure by function\. PETS was conducted and a draft report produced\. 4\. Percentage of recorded All Bank accounts in IFMIS Met transactions reconciled to bank reconciled by the 10th of each accounts within one month\. month\. 5\. Public Procurement Law The Public Procurement Law Met embracing the principles of embracing principles was transparency, accountability passed in 2004, and and efficiency\. regulations gazetted in Sept\. 06\. National Forum on Procurement (legislatively required) held in October 08\. 6\. Percentage of reporting entities Procurement plans are being Met preparing procurement plans as prepared by MDAs as part of part of the budget preparation the budget preparation process process and MDAs submit these to NPPA and MoFED prior to the start of the financial year and is normally a pre-condition for the disbursement of funds\. 7\. Percentage of the funds 91\.3% against a target of 90% Met provided for procurement effectively utilized\. Component Three: DLC component 1\. The DLC is fully operational The DLC component was N/A and has become financially cancelled\. As a result, this viable indicator is no longer applicable\. Component Four: IRCBP Coordination 1\. Annual project reports to World Quarterly project reports are Met Bank are of satisfactory quality prepared and are of and provided in a timely reasonable quality\. They 50  manner\. document progress and highlight challenges\. Reporting against PDO indicators improved\. 2\. Audit reports of IRCBP are Audit reports were Met unqualified unqualified\. 51  Annex 3 - Economic and Financial Analysis Not Applicable 52  Annex 4 - Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Lead Public Sector Management Public sector Harry C\. Garnett AFTPR Specialist reform James F\. Hicks Consultant AFTU1 Local government Public financial Smile Kwawukume Senior Public Sector Specialist AFTPR management Distance learning Marc Jean Yves Lixi Operations Officer AFTRL center Barjor E\. Mehta Senior Urban Spec\. AFTU1 Local government Public sector Francesca Recanatini Senior Public Sector Specialist PRMPS reform Human Jacob Jusu Saffa Human Development Specialist AFTH2 Development Gert Johannes Alwyn Van Public financial Lead Financial Management Spec AFTFM Der Linde management Yongmei Zhou Senior Economist SASDU Task Team Leader Supervision/ICR Ferdinand Tsri Apronti Procurement Specialist AFTPC Procurement Public financial Anthony Bennett Consultant AFTFM management Lead Financial Management Public financial Parminder P\. S\. Brar AFTFM Specialist management Robert Wallace DeGraft- Financial Financial Management Specialist AFTFM Hanson Management Organizational Christiane Frischmuth Consultant HRSLO management Brendan J\. Glynn Senior Public Sector Specialist AFTPR Local government Anna Victoria Gyllerup Operations Officer AFTRL M&E Project Camilla Holmemo Consultant EASSO management Manush A\. Hristov Senior Counsel LEGAF Legal affairs Public financial Smile Kwawukume Senior Public Sector Specialist AFTPR management Distance learning Marc Jean Yves Lixi Operations Officer AFTRL center Ryann Manning Consultant LEGJR Access to justice Leonardo Mazzei Communications Officer EXTCD Communications Mbuba Mbungu Senior Procurement Specialist AFTPC Procurement Paolo Mefalopulos Senior Communications Officer EXTCD Communications Daniel J\. Murphy Social Development Specialist AFCC1 Social development Senior Financial Management Public financial John Nyaga AFTFM Specialist management 53  Senior Financial Management Public financial Jonathan Nyamukapa AFTFM Specialist management Martin Onyach-Olaa Senior Urban Specialist AFTU1 Local government Financial Oluwole Pratt Financial Management Analyst AFTFM management Human resource Gary J\. Reid Lead Public Sector Management ECSPE management Laura L\. Rose Sr Economist (Health) AFTH2 Health Mohamed Sidie Sheriff Communications Officer AFREX Communications Nicola J\. Smithers Consultant OPCFM Task Team Leader Vivek Srivastava Sr Public Sector Spec\. AFTPR Task Team Leader Gert Johannes Alwyn Van Public financial Lead Financial Management Spec AFTFM Der Linde management Distance learning Mwangi Wachira Consultant AFTRL center Financial Frederick Yankey Sr Financial Management Specia AFTFM management Distance learning Qinghua Zhao Senior Information Officer DECRG center Reynaldo Castro Consultant AFTPR Implementation (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY03 14 71\.62 FY04 61 300\.47 Total: 75 372\.09 Supervision/ICR FY05 44 140\.58 FY06 68 293\.22 FY07 102 370\.04 FY08 54 207\.84 FY09 39 149\.27 FY10 19 80\.02 FY11 4 48\.69 Total: 330 1,289\.66 54  Annex 5 - Beneficiary Survey Results14 This annex summarizes some of the key finding from IRCBP’s survey instruments designed to systematically track and monitor the progress of decentralization reforms and the impact of the activities supported by the project at the district and household level since 2004\. In particular, the note summarizes the progress of capacity-building efforts at LCs level and the extent to which LC perform their ‘core’ mandated functions (section 5\.1)\. It then reviews the progress made to date in the delivery of basic services, with a special focus on the education and health sector (section 5\.2)\. 5\.1 Capacity-building at Local Councils: key findings from the CloGPASS reports The Comprehensive Local Government Performance Assessment System (CLoGPAS) was designed in June 2006 to serve as a sustainable local council management accountability (compliance accountability and performance accountability) mechanism for the Local Councils, devolving MDAs, Civil Society, the development partners, and other key stakeholders in the on- going decentralization process of Sierra Leone\. The framework has two dimensions: the minimum conditions (MCs) and performance measures (PMs)\. The MCs which deals with both aspects of local council management accountability, examine functional capacities of the Local Councils in terms of their preparedness to take over devolved functions and deliver services at the acceptable standards and assess/review the compliance of Local Councils with existing laws and regulations that guide the decentralization process\. The MCs have seven (7) thematic areas1 with sub-indicators that define a specific thematic area\. The thematic areas of the MCs are as follows: (1) Financial Management (2) Functional Capacity in Development Planning (3) Project Management, Monitoring and Evaluation (4) Functional Capacity in Budgeting and Accounting (5) Functional Capacity in Procurement (6) Transparency and Accountability and (7) Functional Capacity of the Local Council\. The PMs which are more concerned about performance accountability assess Councils operational proficiency in terms of effectively using existing and established structures/institutions to improve decentralized service delivery, support good governance, transparency, accountability and inclusiveness\. Like the MCs, the PMs have seven broad thematic areas: (1) Management, Organization and Institutional Structures ,(2) Transparency, Openness, Participation & Accountability , (3) Planning System & Project Implementation Including M&E ,(4) Human Resource Management (5) Financial Management, Budgeting and Auditing , (6) Fiscal Capacity and Local Revenue Generation , and (7) Procurement and Contract Management\. Figure2: Monitoring progress in Capacity-Building at the level of Local councils, 2006-2011 There have been three rounds of CLoGPAS in 2006, 2008 and 2011, respectively\. Results have been used to implement a Performance Incentive Grant System by the Local Government Finance Department, as well as to identify capacity gaps in local councils and, more generally, to inform and guide the decision-making process for key stakeholders in the Decentralization Program\. Figure 5\.1 below shows the number of councils that met (or partially met) each of the seven minimum conditions captured by the CloGPASS\. As indicated, there have been significant 14 This Annex draws upon several reports prepared by the IRCBP Evaluation Unit “and The Abdul Latif Jameel Poverty Action Lab (JPAL) at MIT, between 2005 and 2011\. 55 improvements in all ‘core’ functions of LCs, with remarkable achievements in areas such as ‘budget and accounting’ and ‘functional capacity’, where all 19 LCs fully met the minimum conditions\. Since 2008, a slight deterioration has been recorded for project implementation and development planning\. This is consistent with the ISR findings\. Figure 5\.1 – Number of Councils that Meeting Minimum Conditions 20 18 16 14 12 10 8 6 4 2006 2 0 2008 2011 Source: CloGPASS 2006, 2008 and 2011\. Data for Procurement not yet available in 2011\. 5\.2 Access to and Quality of Basic Services at the local level There have been three rounds of the National Public Services (NPS) survey in 2005, 2007 and 2008, respectively\. Quality of services at health clinics has been also surveyed three times in 2005, 2006 and 2008\. In 2005, a baseline report on the Quality of Primary Education was also carried out\. Overall, the most important single finding is that the availability of basic services improved dramatically between 2005 and 2008\. As indicated by table 5\.1 below, however, the improvement is not, however, consistent or across the board, with some sectors making more progress than others\. More precisely, availability of services improved sharply with more schools and more clinics since 2005\. The number of rural households within 30 minutes of a primary school rose from 68 to 74%\. An even larger improvement was seen in the number of rural households within 1 hour of a clinic which rose from 48 to 61%\. The single largest improvement was households with access to water up from 61 to about 81 percent (an increase of about 30%\. The one area where there has been a sharp decline in services is agricultural extension where the percentage of households who have spoken to an agricultural extension worker in the last year has declined consistently and dramatically (from 23 to 9 percent)\. \. 56  Table 5\.1 - Availability of Services Diff b/w 2005 and 2005 2007 2008 2008 Significance Education Access to school within 30 minutes walking 68\.3 73\.9 74\.3 6 ** Access to school within 60 minutes walking 87 87\.5 88\.4 1\.4 Satisfaction with primary schools 87\.7 94\.4 90\.3 2\.6 * Health Access to health clinic within 30 minutes 29 34\.2 48\.6 19\.6 ** Access to health clinic within 60 minutes 48 53\.7 61\.2 13\.2 ** Satisfaction with health clinic 81 90\.9 90\.6 9\.6 ** Registration of Births and Deaths Births registered (%) 44\.1 43\.4 48\.2 4\.1 Deaths registered (%) 23\.1 23\.7 24\.7 1\.6 Agriculture Spoken to an extension worker in the past year 23 17\.8 9 -14 ** Storage, access to enough space (farming hhs only) 8\.4 11\.8 14\.3 5\.9 ** Drying floor space, access to enough space 12\.2 19\.8 18\.3 6\.1 ** Transport/Roads Driveable road within 30 minutes walking 67\.1 73\.2 77\.5 10\.4 ** Nearest drivable road passable all year 60 68\.1 71\.1 11\.1 ** Transport at least once a day, on nearest drivable road 56\.8 60 55\.1 -1\.7 Markets Market area within 60 minutes 31\.9 45\.8 50\.9 19 ** Water Water source within 15 minutes 61 73\.4 80\.9 20\.1 ** Source: National Public Services Survey 2005 2008 (IRCBP) Note: ** Estimate of difference is statistically significant at 95% confidence level\. In the education sector, fees remain a major barrier to use, effectively limiting availability\. Primary school is meant to be free, but 65% of households pay fees for primary school, up from 57 55% in 2007\. Of those not sending all their children to school, fees are one of the main barriers according to households\. In the health sector a similar situation exists\. Fees are charged for vaccines for children and for medical care to under 5 years, despite the fact that both are meant to be free\. Indeed there is no difference in fees paid by the under fives and over fives\. The trend is negative, 65% of households who had a child vaccinated reported having to pay (includes charges for vaccination card), which is up from 46% in 2007\. Only 40% of households in 2007 said “someone without moneyâ€? could get free care\. Moving to the quality of health care provision, survey data suggest that there has been a sharp improvement in health quality since 2005, with some slight deterioration and erosion of progress made from 2006 to 2008 (Table 5\.2)\. Table 5\.2 - Quality of health services over time: 2005-2008 58 Annex 6 - Stakeholder Workshop Report and Results Not Applicable 59  Annex 7 - Summary of Borrower's ICR and/or Comments on Draft ICR Table 1 illustrates the achievement of the project objectives and outputs are compared with the indicators established at the project appraisal\. Table 1: Achievement towards the Project Development Objective at ICR June 30, 2008 Targets for PDO Indicators Findings 1\. 19 elected local councils Satisfactory\. All 19 local councils have three-year rolling which are able to make development plans\. Councils have established ward development plans that respond committees, technical planning committees (TPCs), and to local priorities through a have annual work plans\. The development plans were also participatory process and make linked to the national PSRP and the MDG goals\. All 19 LCs budgets consistent with Section prepared the FY07 budgets that comply with the content 67 of Local Government Act requirements of Section 67\. The only deviation has been 2004\. that the budgets were not completed 3 months in advance of the budget year as required, though they were all prepared by end December 2006\. This is largely due to the local council budget circular not being issued by MoF until August; the Budget Bureau intends to bring forward the release for 2008 budget\. 2\. 14 out of 19 local councils are Satisfactory\. able to meet the transparency and S\. 107: 14 out of 19 Local councils are displaying monthly the financial management financial accounts, and 15 are displaying development plans accountability requirement as per on the LC and ward notice boards\. Local Government Act 2004 S\. 81: Financial statements have been prepared for 2005 but (Section 107, 81, 105)\. none have as yet been audited\. 2004 accounts for all LCs have been audited but in no cases was the management letter received submitted to the council\. S\. 105: All 19 councils have prepared asset inventories\. 15 have submitted them to the MLGCD, and 18 have updated them in 2006\. 3\. 14 out of 19 elected councils Satisfactory are able to deliver all services Household data collected in 2005 and 2007 allows us to devolved to them at the levels of calculate indicators of Local Council performance in health the year before devolution\. and agriculture functions that devolved during that period: access to primary health care, satisfaction with primary health care, registration of births, registration of deaths and contact with agricultural extension agents\. For each of the indicators, at least 14 councils were able to maintain or improve the level of services\. Many councils had mixed results, however, with services declining in one area while remaining constant or increasing in others\. As a result, only seven Local Councils were able to maintain or improve the services on all of the five indicators used\. 60 4\. 90% donor funding is captured Moderately satisfactory\. All programmatic assistance is in the fiscal reports using integrated into the IFMIS and fiscal reports\. However the government budget MoF has only partial information on donor funding classifications by program and received by GoSL and does not know the total\. In addition, object of expenditures\. while a significant number of projects are captured in the development budget, only IRCBP is currently recorded in IFMIS and included in financial reports\. 5\. 95% of Vote Controllers Unsatisfactory\. There is no evidence that the Vote submit regular in-year and annual Controllers are submitting budget execution reports to budget execution reports to MoF either MoF or their ministers\. and the relevant minister on time\. The intention of monitoring this indicator was to encourage accountability of vote controllers towards their ministers and MoF\. This will be particularly important after they gain substantial budget autonomy under the ongoing PFM reform\. The new Government Budget and Accountability Act (2005) also specifically requires the Vote Controllers to submit to the Financial Secretary, within 10 days after end of month, actual revenue and expenditure for the preceding month and estimated revenue and expenditure for the month\. In addition to financial accountability, this requirement is intended to help MoF to manage cash flow\. This indicator was modified as recommended by the MTR to "95% of Vote Controllers, within 10 days after end of month, submit to the Financial Secretary and the relevant minister actual revenue and expenditure for the preceding month and estimated revenue and expenditure for the monthâ€? to be consistent with the requirement of the new Government Budget and Accountability Act (2005)\. The councils have not adopted this practice\. 6\. In-year reports are published Satisfactory\. The first quarterly statement for the period regularly for tracking poverty ending June 30, 2006 was gazetted on September 14, 2006 expenditure by function\. and the statement for the quarter to September 30, 2006 was gazetted on December 21, 2006\. Comparison with budget is provided against economic classification\. Functional expenditures are included but without comparison to budget\. 7\. Public Procurement Law Achieved\. The Public Procurement Law was passed in embracing the principles of 2004, and the regulations gazetted in September 2006, transparency, accountability and embracing the principles of transparency, accountability efficiency\. and efficiency\. 8\. 90% funds provided for Not determined\. procurement are effectively Under the Procurement Reform process, MDAs are utilized\. required, for the first time in 2005, to produce procurement plans as part of the budget preparation process\. At the national level 9 out of about 80 procuring entities, namely the Ministries of Defense, Education Science & Technology, Health, Agriculture, Mineral Resources, Works Housing & Technical Maintenance, Transport & Communication, Sierra Leone Roads Authority and Sierra 61  Leone Police Authority, prepared procurement plans during the FY06 budget preparation\. The procurement audit that should have been undertaken by NPPS with support from the IRCBP did not take place, making it impossible to determine performance of this indicator\. 3\.0 CHALLENGES AND OUTSTANDING ISSUES  Unpredictable and inadequate resource transfers from the central government\.  Very low local revenue mobilization effort  Resistance of some MDAs to decentralization  Communication gaps between MLGCD & DecSec  Difficulty to manage the IMC  Lack of management culture for sustainability of infrastructure provided for LCs  Lack of support to WDCs apart from training  Poor Donor Coordination on Decentralization 4\.0 SUSTAINABILITY The sustainability of IRCBP successes involves a few dimensions: ï‚ The sustainability of the local government management systems and basic capacity to mobilize local resources and manage local infrastructure and service delivery\. ï‚ The sustainability of the inter-government transfer system\. ï‚ The sustainability of the management capacity to continue the decentralization process and the PFM reform process\. As both the new inter-governmental relations and the local government management systems have been emerging, they require constant monitoring, evaluating, and fine tuning to become sustainable\. The IRCBP implementation arrangement was been designed under the principle that if new structures are created to lead the reforms, they are created not as parallel structures of government but rather as part of the government structures\. Therefore, the integration of the project funded units into the respective ministries must be given immediate attention\. There is a risk that the contract staff hired under the project will not be retained once project funding ends\. Given that the government staff is poorly motivated and with inadequate qualifications, the current trend of adequately trained national staff leaving the public service to join international NGOs and donor funded programs/projects will continue\. The focus on the transfer of skills by contract staff working in the decentralization secretariat to permanent ministry staff was given more attention towards the end of the IDA funding\. Government should follow up on this to retain the gains made so far\. A gradual reduction in the reliance on contract staff during the next phase of the IRCBP (with parallel funding of the Decentralization and Project Coordination components of the through the Multi-Donor Trust Fund, which allows for activities to continue until the beginning of 2011); and in the proposed public financial management reforms should be encouraged, while increasing the capacity of permanent staff\. 62 5\.0 BANK AND BORROWER PERFORMANCE 5\.1 Bank 5\.1\.1 Lending: The Bank's performance at lending is satisfactory, given that the GOSL participated fully in the preparation of the project and the Bank fully honored its obligation at lending\. 5\.1\.2 Supervision: The Bank's performance was satisfactory\. The Bank provided adequate implementation support through missions to the country\. Initially this was done every quarter of the year\. After a year, the implementation support missions (ISMs) were reduced to once every six months\. All aides memoires related to the ISMs were prepared on time and cleared by borrower before they were officially issued\. The task team leader that started the project stayed for three years\. This was good because it provided the project with consistency in management from the Bank end\. The mid-term midterm review of the project was conducted on time; and in a participatory manner, involving the borrower\. A formal report on the review was prepared and discussed with the borrower\. 5\.1\.3 Overall Bank performance: The overall Bank performance is satisfactory 5\.2 Borrower 5\.2\.1 Preparation: The performance of the Government of Sierra Leone is rated satisfactory as it participated actively and effectively in the preparation of the Project from 2003 till its appraisal in 2004\. During the period of preparation, Government officials showed their commitment to the project by cooperating with Bank officials involved in the design of the project\. 5\.2\.2 Government implementation performance: Government performance is rated unsatisfactory, due to untimely and non-release of counterpart funds; delays in the processing of withdrawal applications, the inactivity of the TSC; and the poor oversight of the IMC\. The entire project period was characterized by persistent failure to release counterpart funds\. In instances where the counterpart funds were released, payments were delayed, and only a fraction of what is requested in provided\. For the 2004-2008 period, US$3,070,000 was allocated to the project by GoSL\. As at June 2007 before the Grant Amendment that led to the cancellation of Government Counterpart funding, Le981,909,500 (equivalent to US$350,574) had been disbursed to the project\. 5\.2\.3 Implementing Agency: 63 The implementing agency (PCU) is rated satisfactory\. This is based on project management expertise\. Work plans were prepared on an annual basis to guide the implementation of the project and these were submitted to the Task Team Leader after approval by the Project Steering Committee\. Project management reporting was well executed even though annual reports were not prepared on time\. Quarterly reports were prepared on time; and these indicated progress made against planned objectives and issues planned for the next reporting period\. In the area of project financial management, the PCU kept good financial records and commissioned annual audit reports within the specified period\. The procurement process was well managed, as goods and services were procured based on procurement procedures outlined in the project covenants\. 5\.2\.4 Overall Borrower performance: The overall performance of GoSL on the project is rated unsatisfactory due to the inability to provide counterpart funding, the infrequency of the TSC and IMC meetings\. Lessons Learned Lessons to be learnt from this project are: 1\. The project management design should be simple\. There was a lot of difficulty with the reporting requirements, as each unit initially thought it could leave the Project Coordination Unit out in its reporting arrangement, dealing directly with only the supervisory ministry; 2\. The cost table developed at appraisal grossly underestimated the operational costs of project implementation; and for goods and services; 3\. The need for a review and revision of project design midstream to take into consideration external circumstances and more so if the country circumstances have changed; 4\. The importance of the supervisory role of the ministries should be emphasized in the project design, with an attendant funding provided in the cost table\. 64  Annex 8 - Comments of Co-financiers A\. EUROPEAN COMMISSION (EU) A\.1 Background 1\. The EU has for long supported the Government of Sierra Leone in its decentralization efforts\. Under the 9th EDF Country Strategy Paper (CSP - 2003-2007), the overall objective of focal sector 2 was to contribute to restore civil authority throughout the country and to establish a participatory, transparent and accountable system of governance\. To this end, support to the decentralization policy was identified as one of the main intervention requirements to achieve these objectives\. Also the 10th EDF CSP (joint EU-DFID), in line with the PRSPII, foresees continued support to decentralization efforts as a key intervention under the focal sector of governance and institutional support\. 2\. With the signature of Financing Agreement (FED/2004/017-038) in November 2005, the EU contributed a total of EUR 10 Million to the decentralization capacity building program (9 ACP SL 018), via a World Bank managed trust fund for the Institutional Reform Capacity Building Project (IRCBP)\. In November 2010, the EU agreed to a non-cost extension of the project, extending the final project date to 30 June 2011\. A\.2 Project Deliverables 3\. In this Financing Agreement, the EU and the Government of Sierra Leone jointly agreed on the following objectives, purposes and envisaged results: 4\. The overall objective of this EU support was to provide efficient, transparent and accountable delivery of services to the poor through the establishment of local governance\. The project purpose was to facilitate the devolution of functions and enable the local councils to carry out their mandate in accordance with the Local Government Act (LGA - 2004) and other applicable regulatory frameworks\. 5\. The following results were foreseen: a) Major inconsistencies between existing laws and the LGA are resolved including clarification of roles and responsibilities between local councils and chiefdom authorities\. The principle of decentralized governance is entrenched in the Constitution\. b) Policy-making and implementation, monitoring capacity, information management and communication is strengthened for Decentralization c) Local Councils (LC) are provided with the adequate infrastructure and equipment means to carry out their mandate d) Councilors and LC professional staff have acquired the competencies for the LC to assume the delivery of core local responsibilities\. e) National and Regional Training Service Providers progressively able to formulate and implement training to LC 65  f) LC have at their disposal discretionary development transfers enabling them to acquire and "practice by doing" their planning, budgeting, and management skills g) Progress and impact of the decentralization process are monitored and evaluated\. h) The trust fund is managed in accordance with applicable procedures and guidelines\. A\.3 Preliminary Comments 6\. Given these envisaged results and the project outcome reported in Table 2 of this ICR (ICR00001045), the overall project performance can be described as satisfactory or partially achieved\. Please note that at this stage, the EU has not launched an independent evaluation or audit and comments and observations are therefore to be seen as preliminary\. 7\. The re-establishment of local councils including a finance system for local government is in itself a major achievement in a country that -for decades- has seen deterioration in local service delivery and massive decline of state presence and legitimacy in the regions\. With this increase of power and authority outside Freetown, the overall political landscape has changed\. 8\. There are also indications that the public increasingly recognizes the role of local councils in service delivery and is experiencing improvements in such, although comprehensive data is not readily available (i\.e\. INPS survey expected at end of 2011, IPA survey not usable)\. 9\. Questions remain over the central government's commitment to decentralization as concerns were frequently raised over the lack of support and leadership from the responsible central line Ministry (Ministry of Local Government and Rural Development – MLGRD) in supporting the institutional framework of local government\. A recent example of this is the case of the mainstreaming of the decentralization secretariat into the MLGRD, which has not taken place\. 10\. While considerable progress was made on tackling some of the inconsistencies in the legal and institutional framework (e\.g\. decentralization policy adopted, procurement act/regulations adopted), there remain gaps and inconsistencies among LGA, decentralization policy and other acts/regulations\. The project shows shortcomings in delivering such amendments (e\.g\. Education Act, Hospitals Board Act, Local Tax Act) at project closure\. Furthermore, the relationship between local councils, Chiefs and newly re-introduced District Officers remains contentious and unclear and government has made no concerted effort to resolve this\. 11\. In terms of budget planning, execution and reporting, drafting of inclusive development plans and delivery of the devolved services, progress made is significant, particularly against the fact that LC were non-existent at project start\. However, it is a major shortcoming that so far only 46 out of 82 functions were successfully devolved\. Moreover, not all LC meet the transparency and financial management accountability requirements and the EU reserves some doubt as to the proper and sound financial execution of some of the local development projects\. 12\. Infrastructure work for LC remains an area of concern\. Worryingly, only 9 out of the 19 targeted LC were handed over fit-for-purpose constructed/renovated office buildings\. The unresolved issue of the completed, but unoccupied city council building in Bo further contributes to the concerns over LC buildings\. 66 13\. Regarding the overall implementation and project management, the EU would like to underline that –while the IRCBP delivery units have delivered much over the entire project span- the levels of effectiveness and efficiency as well as overall quality, accuracy and readiness of work and information have deteriorated noticeably in the final year of operation\. Furthermore, the EU's visibility vis-à-vis beneficiaries, stakeholders and partners and its day-to-day involvement have not been on a satisfactory level\. A\.4 Recommendations 14\. It is noteworthy that -building on the work already done under the IRCBP-, the EU has also entered into a Financing Agreement with the Government of Sierra Leone committing a further EUR 5 Mio into the Decentralized Service Delivery Project (FED/2010/022-211)\. Funds will again be mobilized through a World Bank managed trust fund\. 15\. Against the above-mentioned preliminary observations, the EU would like to make the following recommendations for its future involvement in World Bank managed decentralization projects\. ï‚ EU to maintain closer involvement in project management and in implementation support missions ï‚ Ensure extensive EU visibility, in accordance with the partners' contractual obligations ï‚ Follow more closely and proactively manage political debate around decentralization 16\. It is further recommended that – based on the detrimental effects of the pullout of the external Senior Public Sector Consultant –full-time Freetown-based project management support is recruited by the World Bank\. B\. DEPARTMENT FOR INTERNATIONAL DEVELOPMENT (DFID) 1\. The Institutional Reform and Capacity Building Program (IRCBP) has been a longstanding project in Sierra Leone beginning with World Bank funding in 2004, and later being joined by the EU and DFID\. The overall aim of the project was to re-establish local government across the country to improve both basic services delivery, and to help rebalance the political economy of the post-war state\. 2\. According to DFID’s evaluation of IRCBP, the following impacts are most noticeable: a) The re-establishment of local councils and a new local government finance system in a post-conflict and fragile state is a major achievement\. b) There remain gaps and inconsistencies in the overall local governance framework\. The relationship between local councils, Chiefs and newly re-introduced District Officers remains contentious and unclear and government has made no concerted effort to resolve this\. c) Councils are associated with, and are likely to be partly responsible for, improvements in service delivery\. d) Local government has changed the political landscape at a local level, increasing the power and authority of governing institutions outside Freetown and potentially changing voting behavior at a local level\. 67  e) A large question mark remains over the government’s commitment to decentralization and their desire to see local councils grow and flourish, with corresponding lack of support and leadership from the Ministry of Local Government and Rural Development in supporting and developing the institutional framework of local government\. f) It is likely that in the near future councils will experience two countervailing forces regarding their importance at a local level – they are likely to have their power and resources challenged relative to other local governing actors that are more closely under the control of central government; but will also receive significant new funds through DSDP that might go some way to bolstering their profile at a local level\. g) IRCBP delivery structures have delivered much, but the effectiveness and efficiency of World Bank implementation units deteriorated in the final year of operation\. 3\. According to the PCR scoring template, comparing logframe indicators to actual achievement this project is rated as a ‘3’, meaning that its objectives have been partially achieved\. However, this may understate the significant impact this project has had on the country\. As noted, functioning local government has been re-established in Sierra Leone after a 30 year absence and while there have been – and will remain – uncertainties over the future of local government the scale of project’s achievement should be properly recognized\. 4\. DFID agreed a no-cost extension to the project in November 2010, in return for particular action on three DFID priorities coming out of the 2010 Annual Review\. A summary of these actions suggest that little progress has not been made against two of the three, although this is largely due to inaction by the Ministry of Local Government and Rural Development\. 5\. This report makes some recommendations for DFID’s involvement in future World Bank decentralization-related projects, for example the Decentralized Service Delivery Program (DSDP) Phase II, which is currently being discussed: a) Maintain a closer watch on the political commitment to the decentralization agenda, and ‘which way the wind is blowing’ in policy debates\. b) Be more aware of the ‘day-to-day’ management activity of projects being done by the World Bank and/or their delivery units\. Where performance is beginning to slip, it could take an earlier and more proactive role in raising this issue with World Bank managers\. c) More actively manage the logframe associated with the project to ensure that it remains valid and current to the priorities of the program\. 68  Annex 9 - List of Supporting Documents Project Documents Project Appraisal Document April 14, 2004 Development Grant Agreement May 18, 2004 Project Concept Note October 31, 2003 Concept Review Meeting Minutes August 25, 2003 Decision Meeting Minutes January 24, 2004 Minutes of Negotiations April 2, 2004 Aide Memoire – Identification Mission February 2003 Aide Memoire – Preparation Mission May-June 2003 Aide Memoire – Pre-Identification Mission for the DLC September 2003 Component Aide Memoire – Appraisal Mission February 2004 Aide Memoire – Implementation Support April 2005 Aide Memoire – Implementation Support June-July 2005 Aide Memoire – Implementation Support November-December 2005/January-February 2006 Aide Memoire – Implementation Support/Mid-term Review December 2006 Aide Memoire – Implementation Support November-December 2007 Aide Memoire – Implementation Support June 2008 Aide Memoire – Implementation Support February-March 2009 Aide Memoire – Implementation Support June 2010 Aide Memoire – Implementation Support December 2010 Aide Memoire – Implementation Support June 2011 Implementation Status Reports May-June 2004, December 2004, March 2005 September 2005, June 2006, April 2007 October 2007, December 2007, June 2008 December 2008, March 2009 July 2010 December 2010 June 2011 Decentralization, Democracy, and Development March 2009 QAG Assessment Report: QSA7 September 2006 Decentralization: What have we learned? (IRCBP Evaluation May 2009 Unit) The future of the Evaluation Unit at IRCBP (IRCPB June 2010 Evaluatin Unit) Basic Serviced and Decentralization in Sierra Leone: Trends August 2009 and Lessons (IRCBP Evaluation Unit & The Abdul Latif Jameel Poverty Action Lab (JPAL) at MIT CLoGPAS annual reports (IRCBP Evaluation Unit) 2006, 2008 and 2011 Primary Health Care in Sierra Leone, annual reports (IRCBP 2006, 2007 and 2009 Evaluation Unit) 69 Nationa Public Services Survey, annual reports (IRCBP 2005, 2007 and 2008) Evaluation Unit) Baseline Report on the Quality of Primary Education in 2006 Sierra Leone (IRCBP Evaluation Unit) Decentralization Stakeholders survey 2008 World Bank analytical work Transitional Support Strategy for Sierra\. Leone March 2002 Country Assistant Strategy for Sierra Leone FY06-09 May 2005 Sierra Leone FY06-09 CAS Completion Report August 2003 Sierra Leone - Strategic Options for Public Sector Reform Decentralization in Client Countries: An Evaluation of World 2008 Bank Support, 1990-2007\. 2008 Sacks and Larizza (2011) Srivastava and Larizza (2011a) Srivastava and Larizza (2011b) Glynn, Larizza and Vinuela (2011 Government of Sierra Leone’s documents Sierra Leone Interim Poverty Reduction Strategy Paper June 2001 Sierra Leone Poverty Reduction Strategy Paper: A National February 2005 Programme for Food Security, Job Creation and Good Governance (2005 – 2007) Local Government Act 2004 National Decentralization Policy 2010 A Review of the Local Government Development Grants (LGDG) Program, June 2011 70  IBRD 33478 SIERRA LEONE SELECTED CITIES AND TOWNS MAIN ROADS DISTRICT CAPITALS RAILROADS NATIONAL CAPITAL DISTRICT BOUNDARIES RIVERS INTERNATIONAL BOUNDARIES 13°W 12°W 11°W GUINEA To Ouré-Kaba 10°N 10°N To To Faranah Kindia Falaba s\. Yana Yana Mon go a Mt ar ies W Kabala arc a ra Bendugu t Sc W KOINADUGU GUINEA Grea Kamakwie i S el Fadugu To Bagbe Kamaron Forecariah Madina Junction BOMBALI Bintimani ts\. KAMBIA (1948 m) M Kurubonla cies Pendembu a Kambia m car Lo le S Batkanu Alikalia Bumbuna Litt 9°N 9°N Mange Gbinti Makeni Binkolo Kayima ana Pamp Port Port Loko Tefeya Tefeya Lunsar Magburaka KONO Matotoka Lungi PORT LOKO Yengema Yengema ills l Pepel R oke Sefadu T O N K O L I L I Masingbi ri H FREETOWN Masiaka Njaiama- Sewafe Go Gandorhun Koindu Yonibana Yonibana Yele Yele Songo oa WESTERN M To Mongeri Kolahun Waterloo Waterloo Buedu AREA F\.R\. F\.R\. Kailahun Panguma Rotifunk Moyamba Dambara KAILAHUN Banana Islands Yawri BO KENEMA Pendembu Bay M O YA M B A YA Mano Lago 8°N Bo 8°N Daru g Sembehun Jon Shenge Blama Kenema wa Se Kribundu LIB E R I A a Sherbro Mo Joru Momaligi Sumbuya Turtle Sherbro Matru Islands Island Bonthe Potoru B O N TKH E ittam Pujehun PUJEHUN Zimmi o ATLANTIC OCEAN Lake Mabesi M an Lake Fairo Mape SIERRA 7°N LEONE Sulima To Monrovia 0 20 40 60 Kilometers 0 20 40 50 Miles This map was produced by the Map Design Unit of The World Bank\. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries\. 12°W 11°W NOVEMBER 2004

REVIEW

P119432

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Report Number: ICRR0022504 1\. Project Data Project ID Project Name P119432 LS - Smallholder Agriculture Dev Project Country Practice Area(Lead) Lesotho Agriculture and Food L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) COFN-C1250,COFN-C1260,IDA- 31-Mar-2018 16,069,938\.88 50170,IDA-61440 Bank Approval Date Closing Date (Actual) 10-Nov-2011 28-Feb-2020 IBRD/IDA (USD) Grants (USD) Original Commitment 10,000,000\.00 0\.00 Revised Commitment 17,270,019\.49 0\.00 Actual 16,071,364\.85 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Katharina Ferl Vibecke Dixon Christopher David Nelson IEGSD (Unit 4) 2\. Project Objectives and Components DEVOBJ_TBL a\. Objectives According to the Project Appraisal Document (PAD) (p\.vi) and the Financing Agreement of November 16, 2011 (p\. 5) the objective of the project was “to increase marketed output among project beneficiaries in Lesotho‘s smallholder agriculture sector”\. According to the Financing Agreement of October 11, 2017 (p\. 5 ) the objective of the project was changed to “increase in marketed output among project beneficiaries in Lesotho’s smallholder agriculture sector and, to Page 1 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) improve the recipient’s capacity to respond promptly and effectively to an eligible crisis or emergency” when the project received Additional Financing (AF)\. b\. Were the project objectives/key associated outcome targets revised during implementation? Yes Did the Board approve the revised objectives/key associated outcome targets? Yes Date of Board Approval 11-Oct-2017 c\. Will a split evaluation be undertaken? Yes d\. Components The project included four components: Component 1: Increasing Agricultural Market Opportunities (appraisal estimate US$4\.07 million, actual US$11\.66 million): This component was to include two sub-components: Sub-Component 1\.1: Promotion of Innovative Agri-Business Initiatives: This sub-component was to finance, through a Competitive Grants 2 Program (CGP), the introduction, testing and demonstration of new business initiatives and technological innovations by small and medium agriculture-related and rural businesses, registered associations and cooperatives\. Grants were to be awarded based on proposals received from applicants and chosen through a competitive selection process\. Subcomponent 1\.2: Market Linkage Development: This sub-component was to finance the development and improvement of links between agricultural producers and markets, reduction of market transaction costs, and alignment of production decisions with business and market opportunities\. This were to be achieved by setting up market linkage mechanisms and providing for improved information flow and responsiveness between all actors in the market chain\. The sub-component was to target commodity-based farmer associations, district and local apex associations, registered farmer cooperatives, informal farmer organizations or producer interest groups, market intermediaries, agri-businesses, input suppliers and other market participants\. Supported activities were to include: a) an upgraded public market information system, to be managed by the Department of Marketing of the Ministry of Trade and Industry, Cooperatives and Marketing (MTICM), which were to seek to improve information quality and services by providing training, supporting sub-sector and commodity studies, and introducing IT-supported data and information exchange b) agricultural trade fairs at district level; c) round-table meetings of farmers/farmer groups and traders/processors; and d) a mentoring service providing direct field support to producer groups and associations helping them to understand and adopt technologies in accordance with market requirements\. Page 2 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Component 2: Increasing Market-Oriented Smallholder Production (appraisal estimate US$14\.61 million, actual US$5\.54 million): This component was to finance two sub-components: Sub-component 2\.1: Preparation and implementation of Agricultural Investment Plans (AIPs): This sub- component was to finance the preparation and implementation of AIPs\. The AIPs were to identify promising agricultural activities, establish investment priorities, and indicate training that will be needed to ensure that the activities can be taken up successfully\. The AIPs will target three main groups of beneficiaries: (a) existing producer groups that want to improve the production and productivity of their crops, improve their market integration, increase their membership or join forces with other groups; (b) broader community- based groups that manage resources or facilities which are important for market-oriented production; and (c) poorer farmers who have an interest in joining a group or committed farmers with a common interest wishing to form new groups\. Sub-component 2\.2: Technology packages for smallholders: This sub-component was to finance the provision of contracts to locally-based Non-Governmental Organizations (NGOs) and private operators to support the introduction, adaptation and dissemination of new and improved technologies, coupled with training and support\. Topics were to be drawn from common themes emerging during the preparation of the AIPs and requiring innovative solutions not necessarily obvious to the local communities to be prioritized at annual technology forums attended by district and national staff and experts\. Examples of technologies likely to be supported through the project were to include: conservation agriculture, water harvesting, improved homestead gardening, mushroom production, micro-scale irrigation systems, use of open- pollinated varieties, livestock feeding and improvement, and small-scale processing technologies\. Component 3: Project Management (appraisal estimate US$4\.18 million, actual US$4\.34 million): This component was to finance the project’s management\. A Project Management Unit (PMU) was to be established in the Ministry of Agriculture and Food Security (MAF)\. Also, an effective project management and administrative system were to be set up to ensure coordination between the project, other initiatives and national institutions working in the sector\. During the restructuring in 2016 the following component was added: Component 4: Contingent Emergency Response Component (CERC) (appraisal estimate US$ zero, actual US$1\.36 million): The component with zero-dollar allocation was added in 2016 as a response to the El Nino drought and was to allow for rapid reallocation of project proceeds in the event of a natural or man-made disaster or crisis that has caused or is likely to imminently cause a major adverse economic and/or social impact\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: The project was estimated to cost US$34\.46 million\. Actual cost was US$30\.81 million\. Financing: The project was financed by a US$10\.0 million credit by the Bank of which US$8\.75 million was disbursed\. The project also received Additional Financing of US$10\.0 million of which US$7,32 million was disbursed\. The project also received financing in the amount of US$10\.0 million by the International Fund for Agriculture Development of which US$8\.06 million was disbursed\. Page 3 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Borrower Contribution: The Borrower was to contribute US$3\.48 million which materialized\. Also, local farmer organizations were to contribute US$980,00\. The actual contribution was US$3\.2 million\. Dates: The project was restructured twice: ï‚ On July 26, 2016 the project was restructured (level 1) to: i) change the development objectives to include the Contingent Emergency Response Component (CERC) to finance emergency expenditures in response to the El Nino related drought\. The new PDO included “\.and, in the event of an eligible crisis or emergency, to provide immediate and effective response to said eligible crisis”; ii) revise the Results Framework accordingly; iii) reallocate financing between disbursement categories; iv) change institutional arrangements; and iv) modify procurement\. ï‚ In October 2017, the project was restructured (level 1) to: i) receive AF in the amount of US$10\.0 million to scale up the project interventions from four to seven districts; ii) revise the PDO to reflect the newly introduced language of the CERC objective to “To increase marketed output among project beneficiaries in Lesotho’s smallholder agricultural sector and, to improve the recipient’s capacity to respond promptly and effectively to an eligible crisis or emergency”; and iii) revise target values of PDO indicators to reflect the AF scope; and iv) the project’s closing date was extended from March 31, 2018 to February 28, 2020\. ï‚ On October 18, 2019 the project was restructured (level 2) to: i) modify an error in the share of IDA financing for disbursement category 3 for eligible emergency expenditures (which was increased from 50 percent to 100 percent); and ii) revise the PDO indicator on direct beneficiaries accordingly (upwards) 3\. Relevance of Objectives Rationale According to the PAD (p\. 1) between 1980 and 2009 Lesotho’s economy moved away from depending on subsistence agriculture and remittances from mine workers based outside the country and experienced considerable diversification with a more balanced mix of industry, services and exports\. During this time real Gross Domestic Product (GDP) increased by 3\.3 percent per capita annually\. However, despite these positive developments, poverty rates remained high, particularly in rural areas\. 76 percent of Lesotho’s population lived in rural areas earning significantly lower incomes and facing higher poverty than the country’s urban population\. In 2008, unemployment rate stood at 22\.7 percent\. Also, at the time of appraisal in 2011, the Gini coefficient was estimated at 0\.66 indicating inequality in the distribution of wealth\. More than three quarters of the rural population was involved in agricultural activities\. However, the agricultural sector experienced several challenges such as under-investments and poor farming practices, unsustainable land management leading to declining soil fertility and severe soil erosion, as well as extreme weather conditions such as frost, hailstorms, extreme heat, and frequent droughts\. Low performance of the agricultural sector resulted in poor nutrition outcomes\. For example, in 2007 the average national stunting rate was at 41\.7 percent\. To address these issues the government developed the National Vision 2020 which aimed to: i) combat wide-spread stock theft; ii) diversify into cash crops; iii) revise land tenure system; and iv) advance irrigation Page 4 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) methods and effective extension service\. Also, the government developed the National Strategic Development Plan (NSDP) (2011/12-2016/17) which aimed to: i) improve access to finance; ii) promote the production of high value crops and livestock products; iii) improve quality livestock breeding, seed production capacity and access to farm machinery; iv) promote investment in agro-industry and development of agri-business to increase value addition and market integration\. The original and revised objectives of the project supported these government strategies\. Also, the objectives were in line with the Bank’s most recent Country Partnership Framework (CPF) (FY16-20), particularly two priorities under focus area 2: i) improving the business environment and diversifying economy, and ii) improving agricultural productivity of smallholders and micro, small, and medium enterprises (MSME) in agriculture\. While the original and revised PDOs remained relevant throughout project implementation a shortcoming was the lack of clarity in the PDO formulation around what outcomes would be achieved through increasing marketed output among project beneficiaries in Lesotho‘s smallholder agriculture sector\. As a result, the relevance of objective rating is Substantial\. Rating Relevance TBL Rating Substantial 4\. Achievement of Objectives (Efficacy) EFFICACY_TBL OBJECTIVE 1 Objective To increase marketed output among project beneficiaries in Lesotho‘s smallholder agriculture sector: Rationale This validation conducts a split rating since the PDO and targets where modified when the project received AF\. Theory of Change: The project’s theory of change envisioned that project activities such as promoting agribusiness initiatives, developing market linkages, preparing and implementing Annual Investment Plans (AIPs), and providing technology packages for smallholders were to result in outputs such as Competitive Grant Program (CGP) proposals being financed, CGP sub-projects being trained, AIPs proposals being financed, and training being provided for CGP/AIP\. These outputs were to result in outcomes including CGP sub-projects being commercially viable, farmers and traders using public market information, farmers having improved access to markets and farmers adopting improved technologies and practices\. Finally, these intermediate outcomes were to result in the objective of increased marketed output\. According to the ICR (p\. 6) the project made the following assumptions (which were within the project’s control): a\. Smallholder farmers are interested in working together through producer and market groups; b\. Qualified service providers and contractors are available in the market; Page 5 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) c\. Marketing grant implementation modality, which provided a great degree of independence to beneficiaries and service providers in implementation of the grants and required sound skills and knowledge in financial, procurement, contract and business management, selection and supervision of equipment and works, is adequate; d\. Piggery and poultry sub-projects, which required stronger cash flows and depended on availability of affordable feed (the latter dependent on weather/climate shocks), would not require different co- financing conditions\. Key assumptions that were beyond the project’s control: a\. Severe climatic shocks do not occur during the project life; b\. Complementary International Fund for Agricultural Development (IFAD) financing assistance support would be delivered in a timely manner for scaling up project impacts\. There was also the underlying assumption that training in new technologies would automatically result in the uptake of new technologies\. Outputs: ï‚ 878 matching grant sub-projects, of which 776 sub-projects remained operational at closing, were financed\. This output did not have a target\. ï‚ Out of all sub-projects, 435 sub-projects were supported in terms of production of horticulture and seedlings\. Support included greenhouse (0\.25 hectares per sub-project), shade nets (0\.40 hectares per sub-project), development of or improved irrigation systems (mainly boreholes), adoption of drip or sprinkler irrigation system, extension of advisory services, and participation in international training programs\. At project closing, 408 out of these 435 sub-projects were operational\. This output did not have a target\. ï‚ 193 of CGP projects completed were commercially viable, surpassing the original target of 24 CGP projects\. ï‚ 79,006 client days of training were provided under the CGP component, surpassing the original target of 11,200 days\. 47,628 client days of training were provided to female clients, achieving the original target of 47,628 training days\. According to the Bank team (March 29, 2021) the training focused on: i) productivity-enhancing and natural resource management (NRM) technologies (i\.e\.; seeds/breeds, irrigation technologies, pest/disease management, production and post-production infrastructure and value addition, water, land and farm management practices); and ii) market-oriented, or “Farming as Business” approach (commercial training to better consider demand, costs and benefits, marketing strategies among others in decision making)\. ï‚ The number of targeted beneficiaries who have adopted improved production technologies/farming practices in targeted areas increased from 234 beneficiaries in 2011 to 3,271 beneficiaries in 2020, not achieving the original target of 7,500 beneficiaries\. ï‚ 49 percent of the targeted beneficiaries were female, almost achieving the target of 50 percent\. ï‚ The percentage of farmers and traders in project districts who used public market information increased from 10 percent in 2011 to 36 percent in 2020, not achieving the original target of 50 percent\. ï‚ 2,318 new business contracts between farmer groups and the private sector were established as a result of the project’s market facilitation activities surpassing the original target of 100 business contracts\. Page 6 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) ï‚ 42 percent of targeted beneficiaries recorded better access to markets, not achieving the target of 50 percent\. ï‚ The percentage of beneficiaries satisfied with improved performance of agricultural service providers increased from 15 percent in 2011 to 93 percent in 2020, surpassing the original target of 50 percent\. ï‚ 35,360 client days of training under the Agriculture Investment Plan were provided, not achieving the original target of 160,000 days, and surpassing the revised target of 30,000 days\. 15,970 client days of training were provided to women, not achieving the original target of 80,000 days and achieving the revised target of 15,000 days\. Outcomes: ï‚ The percentage of household commercialization (measured through value of produce sold as percentage of total value of produce generated) in project areas increased from 15 percent in 2011 to 76 percent in 2020, surpassing the target of 40 percent\. According to the ICR (p\. 15) the project farmers produced 95 percent higher value of marketed output than the control groups resulting from higher production of cash crops and higher prices obtained per unit of marketed output and higher marketed shares of output\. ï‚ Yields of major cash crops (potatoes, carrots, cabbage, and tomatoes) in the targeted area increased from zero in 2017 to 21\.30 percent in 2020, surpassing the target of a 15 percent change\. It is unclear what this baseline value is measuring or referring to\. The ICR provided baselines for each crop but not for all major crops together\. According to the ICR (p\. 12) the project substantially exceeded the targets for two crops (tomatoes and cabbages)\. Two crops (potatoes and carrots) could not be assessed since those crops did not grow under protected farming (in greenhouses)\. Beans and green vegetables also achieved 8 to 13 percent higher yields\. Furthermore, a 2019 Bank study “Linking Smallholders to Markets” project beneficiaries found a 40 percent higher productivity for green bell peppers for project participants compared to farmers growing peppers in open field and using traditional practices\. ï‚ Smallholder livestock production experienced a net increase from zero in 2017 to 7\.52 percent in 2020, not achieving the target of a 10 percent change\. According to the ICR (p\. 14) piggery and poultry sub-projects were the reason for not achieving the target since they were particularly vulnerable to frequent droughts resulting in animal feed shortages and price increases, which negatively impacted their productivity\. The project was able to build capacity among farmers and supported the adoption of improved production technologies/farming practices\. There is limited evidence that the project successfully increased marketed output among project beneficiaries as demonstrated by farmers achieving an increase in yields of two of four major crops (since the increases in yields were only measured for two major crops)\. The project was not able to increase the percentage of farmers and traders in project districts who used public market information and fell short of providing beneficiaries with better access to markets\. Also, there were several issues in M&E implementation (see section 9b for more details) resulting in inadequate tracking towards achievement of the PDO\. Based on the above, the achievement of the original objective is rated Modest\. Rating Page 7 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Modest OBJECTIVE 1 REVISION 1 Revised Objective Increase in marketed output among project beneficiaries in Lesotho’s smallholder agriculture sector: Revised Rationale Theory of Change: The project’s theory of change envisioned that project activities such as providing emergency and recovery support to affected and strengthening response capacity was to result in outputs such as emergency support and recovery packages and training being provided as well as emergency staff being trained and disease outbreak control tools being provided\. These outputs were to result in the outcome of beneficiaries benefitting from emergency and recovery support, if and when needed\. The revised PDO made the same assumptions as the original PDO\. Outputs: ï‚ Between 2016 and 2018, 2,075 food insecure and vulnerable households were provided with emergency special protection and integrated sustainable production support including kits of improved seeds, fertilizer, grazing vetch, shade-nets and plastic to protect vegetables against extreme cold and heat, surpassing the target of 2,000 households\. This output did not have a target\. ï‚ 8,882 vulnerable households received support in restoring livelihoods through rehabilitation of irrigation systems, water storages, provision of livelihood kits, training on Climate Smart Agriculture (CSA), Sustainable Land Management (SLM), and nutrition sensitive technologies and practices\. Of all the beneficiaries of the (CERC), 10,917 households received nutrition sensitive production support\. This output did not have a target\. ï‚ 193 of CGP projects completed were commercially viable, achieving the revised target of 193 CGP projects\. ï‚ 79,006 client days of training were provided under the CGP component, surpassing the revised target of 60,000 days\. ï‚ 47,628 client days of training were provided to female clients, achieving the revised target of 30,000 training days ï‚ The number of targeted beneficiaries who have adopted improved production technologies/farming practices in targeted areas increased from 234 beneficiaries in 2011 to 3,271 beneficiaries in 2020, not achieving the revised target of 3,000 beneficiaries\. ï‚ The percentage of farmers and traders in project districts who used public market information increased from 10 percent in 2011 to 36 percent in 2020, not achieving the revised target of 80 percent\. ï‚ 2,318 new business contracts between farmer groups and the private sector were established as a result of the project’s market facilitation activities surpassing the revised target of 2,000 business contracts\. ï‚ The percentage of beneficiaries satisfied with improved performance of agricultural service providers increased from 15 percent in 2011 to 93 percent in 2020, surpassing the revised target of 70 percent\. Page 8 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) ï‚ 35,360 client days of training under the Agriculture Investment Plan were provided surpassing the revised target of 30,000 days\. 15,970 client days of training were provided to women achieving the revised target of 15,000 days\. Outcomes: ï‚ 23,140 beneficiaries benefited from the Contingent Emergency Response Component, which was activated due to the El Nino drought in 2015/16, surpassing the target of 5,000 beneficiaries\. ï‚ An assessment by the Food and Agriculture Organization (FAO), the implementing partner of the CERC, found that beneficiaries experienced doubled crop production, diversification towards nutritious crops and 63 percent increase in maize productivity for 83 percent of beneficiaries and improved food security for 91 percent of households\. Although the evidence to back these claims up is not presented in the ICR; it is plausible that the achievements at output level might have lead to increased crop production, diversification and improved food security\. There is also evidence that the recipient’s capacity to respond promptly and effectively to an eligible crisis or emergency was improved as demonstrated by the large number of beneficiaries which benefited from the project’s intervention during the 2015/16 El Nino drought\. Even though, the project experienced issues in regard to tracking progress towards the achievement of the PDO, with the additional evidence provided through FAO and through the El Niño response, the achievement of this objective is rated Substantial with some shortcomings\. Revised Rating Substantial OBJECTIVE 2 Objective NA Rationale NA Rating Not Rated/Not Applicable OBJECTIVE 2 REVISION 1 Revised Objective To improve the recipient’s capacity to respond promptly and effectively to an eligible crisis or emergency: Revised Rationale Page 9 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Theory of Change: The project's theory of change envisioned that outputs such as capacity building in areas such as CSA, SLM, etc\., the adoption of promoted technologies, improvement of control of livestock diseases outbreak, and improvement of emergency decision making were to result in the outcome of the recipient being able to respond promptly and effectively to an eligible crisis or emergency\. Outputs: ï‚ 296 extension officers of MAFS and MFRSC were trained in areas such as CSA, SLM, post-harvest management, food preservation techniques, rangeland management, fodder production, conservation agriculture and diagnosis and treatment of zoonotic diseases\. ï‚ To further facilitate replication and adoption of promoted technologies, the FAO developed communication and training materials which were adapted to local conditions for extension officers\. 25,000 handouts on conservation agriculture and 90,000 handouts on home gardening and nutrition were distributed to the farming communities and primary schools\. ï‚ Livestock extension services were provided with veterinary kits and sterilizers to improve control of livestock disease outbreak\. This allowed for the vaccination or treatment of livestock assets of 15,214 households\. ï‚ Emergency decision making was improved through a) assessment, documentation and dissemination of impacts of CERC interventions and lessons learned; b) development of Sustainable Livelihoods Framework and Lesotho Livelihoods profiling exercise to support improved understanding of community dynamics and informed identification of targeted transfers and services for vulnerable households; c) thematic studies including on seed security and vulnerability; d) development of web- based Crop Information Portal under the MASF to strengthen its capacity to generate statistics for five stable crops and for timely agricultural reporting and information dissemination\. Outcome: 23,140 beneficiaries benefited from the Contingent Emergency Response Component which provided emergency response financing, which was activated due to the El Nino drought in 2015/16, surpassing the target of 5,000 beneficiaries\. Revised Rating Substantial OVERALL EFF TBL OBJ_TBL OVERALL EFFICACY Rationale Achievement of the original objective “to increase in marketed output among project beneficiaries in Lesotho’s smallholder agriculture sector was Modest while the achievement of the two revised objectives were Substantial\. Based on that, the project’s overall efficacy rating is Substantial with some shortcomings\. Page 10 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Overall Efficacy Rating Substantial 5\. Efficiency Economic Efficiency: The PAD did not include a traditional economic analysis and stated (p\. 19) that due to the demand-driven nature of the project design, project-supported investments could not be identified with certainty prior to implementation\. As a result, it was not possible to undertake a detailed ex-ante cost-benefit analysis based on a portfolio of projected sub-project investments\. Instead, an economic and financial analysis was conducted using a series of representative farm models to assess the likely attractiveness of the overall project investment and to evaluate the incentives faced by beneficiary households\. The key parameters used in the economic and financial analysis included participation rate, mix of cropping and livestock production activities, production increases, and productivity gains\. According to the PAD (p\. 19) the economic analysis estimated that if the project were to reach 5,000 to 7,000 beneficiary households within the project implementation period, and if each of these beneficiary households were to realize a minimum projected set of incremental benefits, the aggregate economic benefits generated by the project was to produce an overall internal rate of return (IRR) in excess of 12 percent\. The financial analysis showed that changes in cropping patterns and productivity gains expected to result from project-supported activities were likely to generate attractive financial returns to participating households ranging from 13\.3 percent to 49\.0 percent\. The PAD stated that the economic and financial analyses used conservative values for many key parameters indicating that the actual returns might be higher\. The ICR (p\. 17) modified the PAD’s analysis by including measuring returns through CGP and AIP sub-project models, using actual benefits and costs, and revising benefit and cost assumptions\. The ICR used a ten-year time period for sub-projects and applied a discount rate of five percent and a financial discount rate of eight percent\. For intensive vegetable production the FRR was 36\.7 percent and the ERR was 44\.2 percent\. For intensive pig production the FRR was 16\.1 percent and the ERR was 21\.7 percent\. For broiler and egg production the FRR was 4\.4 percent and the ERR was minus 4\.6 percent\. For wool and mohair production the FRR was 80\.8 percent and the ERR was 97 percent and for diary production the FRR was 5\.5 percent and the ERR was 10\.1 percent\. The overall project ERR was 18\.4 percent, indicating that the project was a worthwhile investment\. Also, the ICR (p\. 18) stated that the project’s ERR is competitive with other agriculture commercialization interventions in the South Asia and East Asia Pacific region\. Operational Efficiency: The project experienced implementation delays, especially during the initial phase of implementation, due to capacity issues, demand driven nature of matching grant interventions, and lack of interest in AIP interventions and community contributions to community resource management activities\. Due to an increased share of beneficiary contributions (from AIP with 20 percent beneficiary contribution to CGP with 40 percent beneficiary contribution), exchange rate savings in the amount of approximately US$0\.70 Page 11 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) million, and reimbursement of ineligible expenditures (US$270,271) the project did not disburse US$3\.25 million of the IDA financing and US$2\.66 million of IFAD financing\. Taking everything together, the project’s overall efficiency rating is Substantial\. Efficiency Rating Substantial a\. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) 0 Appraisal 0  Not Applicable 0 ICR Estimate 0  Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome Relevance of the original and revised objective was Substantial given the alignment with the Bank’s most recent Country Partnership Framework (CPF) (FY16-20)\. The efficacy of achievements of the original objective was Modest\. The efficacy of achievement of the revised first objective was Substantial with some shortcomings, and efficacy of achievement of the second revised objective was Substantial\. Efficiency was Substantial\. Hence, the outcome of the original objective is Moderately Unsatisfactory and the outcome of the revised objective is Moderately Satisfactory\. The outcome ratings for the original and revised projects are thus: Original project Revised project Relevance Substantial Efficacy Modest Substantial with shortcomings Efficiency Substantial Outcome rating Moderately Unsatisfactory Moderately Satisfactory According to IEG/OPCS harmonized guidelines, when a project’s objectives are revised, the final outcome rating is an average of outcomes before and after the revision of objectives weighted by Bank disbursements under each set of objectives\. In this project 14\.76% of disbursements occurred under the original objective and 85\.24% under the revised objective\. Page 12 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) • Based on the original objective with an outcome of Moderately Unsatisfactory (score of 3) and a disbursement weight of 0\.147 the weighted outcome score is 0\.44\. • Based on the revised objective with an outcome of Moderately Satisfactory (score of 4) and a disbursement weight of 0\.85 the weighted outcome score is 3\.4\. • The combined weighted average outcome score is 3\.84 which corresponds to a Moderately Satisfactory outcome rating\. a\. Outcome Rating Moderately Satisfactory 7\. Risk to Development Outcome The project’s risks to development outcome can be classified into the following categories: Government commitment/follow on projects: According to the ICR (p\. 27) the government continues to be committed to the project’s PDO and continues to work with IFAD to receive support for sup-projects, which only became operational at project closing\. Also, the government and the Bank continue to collaborate on a new project the “Lesotho Smallholder Agriculture Development Project 2”, a five-year project that became effective in August 2019 and aims to scale-up the adoption of good agricultural practices\. Support from donor organizations is critical to ensure continuous financing in this area and sustaining project outcomes\. Capacity building: The project was able to build institutional capacity among the implementing agencies, technical agencies, farmers and agribusinesses\. According to the ICR (p\. 27) the project enabled farmers to move away from producing for their own household towards commercialization and market-oriented production\. The capacity built will support the sustainability of project outcomes\. Climatic events: The project was able to provide farmers with better coping mechanisms and build capacity in government agencies to support farmers\. However, Lesotho continues to be subject to extreme climatic events such as the droughts in 2015/16 and 2018/19, which might negatively impact the outcomes of this project\. Covid-19 pandemic: According to the ICR (p\. 27) the Lesotho Vulnerability Assessment Committee projected that the covid-19 pandemic is likely to increase the number of food insecure households by 179,857 by September 2020\. Also, travel restrictions on food supply chains, decrease in consumer spending and purchasing power will negatively impact Lesotho’s agriculture and food systems for the beneficiaries\. 8\. Assessment of Bank Performance a\. Quality-at-Entry Page 13 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) According to the PAD (p\. 13) the project’s design was built on lessons learned from previous projects in Lesotho such as the Bank’s Agricultural Policy and Capacity Building Project (APCBP) project\. The main lessons from that project were the need to avoid an overly complex project design and the desirability of having simple and clear implementation mechanisms\. The Bank identified relevant risks and rated the risk of weak implementation capacity as High\. The following risks were identified as Substantial: i) size of local market and competition from South Africa; ii) weak capacities and unclear responsibilities of implementation partners, as well as tight governmental budget situation with unclear development for the future MAFS budget; iii) joint IFAD/Bank operation, though expected to provide synergies, might also lead to increased bureaucracy for the implementing partners; and iv) complex project design\. The project tried to mitigate these risks by providing training and building capacity in participating government support services as well as embedding the PMU within MAFS to strengthen the skills of senior government officers\. The project tried to mitigate the risk of competition from South Africa by several measures such as the project initially focusing on commodities that have a comparative advantage in the local market, supporting and training of farmers and farmer groups to gear production to market demands and establishing a competitive grants program to help create market opportunities for local production\. Furthermore, design elements were to be aligned to serve both IFAD and Bank requirements as much as possible\. However, while the mitigation measures for most risks were adequate, they were not sufficient in terms of capacity and according to the ICR (p\. 22) the project experienced a slow start to implementation due to low technical, fiduciary and M&E capacity at the district level\. Also, the PMU did not have the necessary capacity to address issues related to social and environmental safeguards and financial management resulting in safeguard compliance being rated Moderately Unsatisfactory several times throughout implementation and the project encountering cases of misappropriation of grant funds and cancellation of project proceeds and project beneficiaries and SPs (see section 10b for more details)\. The Bank team did not identify the risk of extreme weather events such as droughts, which Lesotho experienced between 2015-16 and 2018-19\. According to the ICR (p\. 23) water scarcity affected crop and livestock production and reduced productivity and animal feed shortages\. As a result, the price of animal feed increased, not allowing for some sub-projects to be operationalized\. Also, the Bank team did not identify the risk of insufficient demand for grants resulting in implementation delays\. Finally, despite a large proportion of female farmers, the project did not take gender aspects into account\. The project’s Results Framework had several shortcomings such as the majority of indicators lacking a baseline, targets being overly ambitious, and lack of guidance on impact assessment approaches to measure project outcomes etc\. (see section 9a for more details)\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision The Bank conducted 12 supervision missions throughout project implementation\. The ICR (p\. 26) stated that the Bank and IFAD supported the implementation of the project adequately and had the adequate mix of expertise\. The project team provided the government with advice and identified actions to address implementation issues\. For example, the recommendation by the project team to Page 14 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) reallocate resources from underperforming AIPs to the CGPs resulted in an increase of sustainable sub- projects\. According to the ICR (p\. 26) implementation progress was reported candidly and the project team revised grants resources that required commitments of beneficiaries to adequately operate, maintain and manage investments\. The Bank team made adaptations to the project’s Results Framework during the Mid-Term Review (MTR)\. However, these changes to the Results Framework were not sufficient to allow for an adequate monitoring of implementation progress\. The ICR (p\. 25) stated that the Bank was proactive in addressing safeguard compliance issues and proposed an action plan for the implementation of corrective actions (see section 10a for more details)\. However, the ICR (p\. 26) also stated that safeguard compliance issues and financial management issues under the CGP were only identified during the second half of project implementation, which might indicate that Bank supervision was not sufficiently close\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. M&E Design, Implementation, & Utilization a\. M&E Design The original and revised objective of the project were not sufficiently specific\. The original and revised objectives did not clearly state what outcomes were to be achieved through increasing marketed output among project beneficiaries in Lesotho‘s smallholder agriculture sector\. Therefore, the theory of change and how key activities and outputs were to result in the intended outcomes was not clear\. According to the ICR (p\. 12) the project’s Results Framework had several shortcomings: i) while all indicators included a target, the majority of indicators lacked a baseline; ii) targets were overly ambitious; iii) the baselines yields were established in 2018 and were based on ongoing general trends and changes since project appraisal in 2012; iv) representative of one year only while changing climate and weather events in Lesotho would require the use of at least three-year averages; v) baseline yields were drawn from national statistics which also included commercial farmers with access to irrigation water, technology and knowledge and did not focus on project beneficiaries; and vi) lack of guidance on impact assessment approaches to measure project outcomes\. Furthermore, using an indicator on productivity with fixed proxy crops was not adequate for measuring the project’s achievement in diversification towards market driven crops\. Page 15 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) According to the PAD (p\. 17) the PMU M&E Officer were to have primary responsibility for monitoring progress and outcomes based on indicators defined in the project Results Framework\. b\. M&E Implementation According to the ICR (p\. 22) the project faced several issues regarding M&E implementation due to weak M&E capacity at the district level\. As a result, M&E of sub-projects was limited\. Furthermore, lack of regular monitoring resulted in a limited ability to assess the PDO achievement during implementation\. The ICR (p\. 24) stated that it was recommended for the M&E officer to spend more time in the field to collect data and receive feedback from sub-project clients\. However, data was mainly qualitative, and the project had to rely on the Mid-Term- Review (MTR) and end line survey to assess three out of four PDOs\. The ICR (p\. 24) stated that after the MTR data collection, analysis, dissemination and M&E reporting improved\. According to the Bank team (March 29, 2021) following the MTR recommendations, the project started capturing spillover effects of the project on indirect beneficiaries (e\.g\. adoption of technologies following demonstration days organized by CGPs)\. The project also strengthened its M&E capacity through more staff and capacity building/training for M&E specialists\. It conducted CGP and AIP assessment studies, strengthened monitoring processes, planned/implemented the project completion survey\. Improved monitoring capacity helped understand the reasons for low interests amongst beneficiaries to work in groups indicating lack of beneficiary inclusion\. Furthermore, the project included an MTR survey and an impact assessment survey, which was conducted by an external party in a timely way\. According to the ICR (p\. 24) the impact assessments’ design was adequate and used the difference in difference technique to appropriately measure project\. Also, the project prepared qualitative and quantitative impact assessment reports and supported the preparation of thematic studies and surveys\. According to the Bank team (March 29, 2021) at the national/central level, the M&E capacity is planned to be maintained under the follow-on project\. However, the M&E capacity developed at the field level (district offices) may be affected by a current higher-than-optimal staff turn-over\. c\. M&E Utilization According to the Bank team (March 29, 2021) despite the shortcomings mentioned above, the project’s M&E data was used to inform decision making\. For example, M&E data helped to identify several issues including: i) identify the reluctance of farmers in working in groups, their interest in and potential for scaling up technology promotion and documented the significant impact of technology adoption alone on productivity enhancement; ii) identify quality and capacity issues of contractors hired by groups to implement irrigation sub-projects so that corrective measures could be taken; and iii) determine size (amount) and conditions for matching grants for both crop and livestock subprojects by providing an important lesson: livestock subprojects needed higher working capital and carried higher risk of losses during droughts\. Furthermore, the M&E system also provided key data to help adjust design, as well as resolve operational and fiduciary issues, including the need for i) registration of irrigation systems, ii) restoration of damaged infrastructure, iii) provision of additional targeted training, and iv) relocation of funds\. As a Page 16 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) result of the M&E data the government, Bank and IFAD teams were able to make timely and well- informed decisions and provide adequate and timely implementation support\. While M&E is rated Modest, the additional surveys and the impact assessment that were done provided sufficient evidence for the Substantial efficacy rating of the revised objectives\. M&E Quality Rating Modest 10\. Other Issues a\. Safeguards The project was classified as category B and triggered the Bank’s safeguard policies OP/BP 4\.01 (Environmental Assessment), OP/BP 4\.09 (Pest Management), OP/BP 4\.11 (Physical Cultural Resources), OP/BP 4\.12 (Involuntary Resettlement), and OP/BP 4\.12 (International Waterways)\. According to the ICR (p\. 25) the project prepared an Environmental and Social Management Framework (ESMF), Pest Management Plan (PMP), and Resettlement Policy Framework (RPF)\. Also, the Borrower conducted riparian notifications due to small-scale irrigation activities in the Orange-Senqu River basin through the Orange-Senqu River Commission to South Africa, Namibia, and Botswana\. By the time the project was submitted to the Board, no responses of any of the notified riparians were received\. The ICR (p\. 25) stated that the project’s safeguard rating was Moderately Satisfactory until May 2018\. As a result of the project’s poor compliance to environmental and social management procedures the rating was then downgraded to Moderately Unsatisfactory\. Every sub-project financed by the project had to go through an environmental and social screening process\. However, some sub-projects did not undergo this screening process because the farmers were not aware, and some screening processes had to be conducted retrospectively\. Also, safeguard implementation was inadequate during the early phase of project implementation since prospective project sites were not screened and challenges and mitigation measures were therefore not identified\. Furthermore, some AIP activities negatively impacted land and water access\. Finally, the project did not document the verification process and ensure full informed consent of vulnerable groups\. While the government was willing to address these issues, the PMU lacked a dedicated social and environmental specialist to follow through and ensure the project’s safeguard compliance\. According to the ICR (p\. 25) the Bank team addressed these issues by developing an action plan which included the recruitment of a dedicated safeguard specialist\. The rating of safeguard compliance improved through: i) proper screening of sub-projects; ii) provision of training for grant recipients on Environmental and Social Safeguards; and iii) preparation and implementation of sub-project specific Environmental and Social Management Plans\. As a result of these actions, the project’s safeguard rating was upgraded to Satisfactory in November 2019\. However, the ICR (p\. 25) stated that the project did not have a grievance mechanism to register grievances and beneficiary feedback\. b\. Fiduciary Compliance Page 17 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Financial Management: According to the ICR (p\. 25) the project’s financial management performance was rated Satisfactory until January 2019\. Also, the Bank team stated (March 29, 2021) that the project complied with the Bank’s financial covenants\. However, due to a qualified audit report for the year ending on March 31, 2018, the project’s financial management performance was downgraded to Moderately Satisfactory\. Even though the audit report for the following year was unqualified the rating remained at Moderately Satisfactory due to issues related to ineligible expenditures\. The PMU addressed this issue by hiring a consultant to assess the reason for these expenditures and provide recommendations to the government resulting in the government refunding LSL2,911,350\. However, the ICR stated that the project continued to have an outstanding advance which had gone beyond the application deadline and still needed to be addressed when the project closed\. Procurement: According to the ICR (p\. 26) the project complied with the Bank’s procurement and consultant guidelines\. The project team and the procurement specialist filed all documentation related to each procurement procedure adequately using the Bank’s Systematic Tracking of Exchanges in Procurement (STEP)\. The project did not encounter any serious procurement issues and the project’s procurement rating was Satisfactory throughout project implementation\. c\. Unintended impacts (Positive or Negative) NA d\. Other The project did not pay sufficient attention to gender\. The indicators included in the Results Framework such as number of businesses/number of technologies adopted could have been disaggregated in terms of gender especially since approximately 70 percent of famers are female\. The Results Framework only included the required Bank indicator “percentage of female beneficiaries”\. However, the ICR did not state how the data was obtained and what the project did to address typical issues related to the majority of farmers being female\. For example, it is not clear how the project ensured that the income earned through the agricultural activities by female farmers would not be controlled by their husbands\. The project missed an important opportunity to address such gender issues\. 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Outcome Moderately Satisfactory Satisfactory Moderately Bank Performance Moderately Satisfactory Satisfactory Page 18 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Quality of M&E Modest Modest Quality of ICR --- Substantial 12\. Lessons The ICR (p\.28-29) included the following lessons learned, which were adapted by IEG: ï‚ When a project aims to promote commercial agriculture, a mix of activities including investments and institutional support is critical\. This project was able to change the mindset of smallholder agricultural producers but the ICR did not provide any evidence to back up those claims\. ï‚ Assessing critical conditions during project preparation is important for ensuring the achievement of intended outcomes\. In this project, the importance of farmers having incentives to work together in groups was not sufficiently identified during project preparation\. As a result, AIP sub-projects were unsustainable and performed poorly\. ï‚ The provision of financial capital needs to be combined with building resilience of agribusinesses to climate shocks\. While this project did not address harsh weather and climatic events in its project design, it was sufficiently flexible to introduce climate-smart agriculture practices and activities during project implementation resulting in long-term climate resilience by project beneficiaries\. 13\. Assessment Recommended? No 14\. Comments on Quality of ICR The ICR provided an adequate overview of project preparation and implementation\. Also, the ICR included an appropriate Economic analysis\. The ICR is sufficiently candid, internally consistent and outcome driven\. Also, the ICR included useful lessons learned that can provide a learning experience for future projects in this area\. However, the ICR did not sufficiently focus on gender\. The quality of the ICR rating is Substantial\. a\. Quality of ICR Rating Substantial Page 19 of 20 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review LS - Smallholder Agriculture Dev Project (P119432) Page 20 of 20

REVIEW

P095229

IEG Report Number: ICRR14872 ICR Review Independent Evaluation Group 1\. Project Data: Date Posted: 10/27/2015 Country: Angola Project ID: P095229 Appraisal Actual Project Name: Angola Emergency Project Costs (US$M): 133\.0 170\.6 Multi-sector Recovery - Phase 2 L/C Number: Loan/Credit (US$M): 102\.0 78\.0 Sector Board: Transport Cofinancing (US$M): Cofinanciers: Board Approval Date : 05/22/2007 Closing Date: 06/30/2011 05/31/2013 Sector(s): General water; sanitation and flood protection sector (30%); Rural and Inter-Urban Roads and Highways (30%); Transmission and Distribution of Electricity (25%); General public administration sector (15%) Theme(s): Rural services and infrastructure (25%); Conflict prevention and post-conflict reconstruction (25%); City-wide Infrastructure and Service Delivery (24%); Decentralization (13%); Education for all (13%) Prepared by: Reviewed by: ICR Review Group: Coordinator: Victoria Alexeeva Peter Nigel Freeman Christopher David IEGPS1 Nelson 2\. Project Objectives and Components: a\. Objectives: This was the second phase of the Emergency Multi-sector Recovery Program, which aimed to help build the foundation for long-term reconstruction, economic rehabilitation, and re-establishment of state administration throughout its territory\. The specific objectives for phase 2 of the project were "to: (a) facilitate agricultural marketing in specific areas with high agricultural potential that have been affected by the conflict; (b) reconstruct and rehabilitate critical infrastructure; and (c) strengthen capacity of participating ministries and agencies for improved governance and transparency and of local governments for future decentralization" (Technical Annex, p\.7-8)\. The Financing Agreement (p\.5) states the objectives of the project as follows "to assist the Recipient in its post-war recovery efforts to build foundations for long-term reconstruction, economic rehabilitation, and the re-establishment of state administration throughout its territory"\. Following IEG procedures, this Review will base its evaluation on the statement of objectives in the legal document\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: Component 1: Rural development and delivery of social services (appraised US$13 million; actual US$42\.2 million) was to finance the rehabilitation of about 600 km of rural roads, i\.e\., 300 km of rural roads in the Bié province and 300 km of rural roads in the Malanje province\. A new activity was added on reconstruction of the Agricultural Development Stations (Estação de Desenvolvimento Agrícola), which remained to be completed after the program's first phase\. Component 2: Rehabilitation and Reconstruction of Critical Infrastructure (appraised US$106 million; actual US$123\.8 million) comprised four subcomponents: (i) roads (appraised US$28 million; actual US$26\.5 million) included rehabilitation of about 150 kilometers of high traffic roads and bridges linking the cities of Lucala and Negage; (ii) electricity (appraised US$36 million; actual US$51\.6 million) included reconstruction of medium and low-voltage power distribution systems in the provincial capitals of Luena, Malanje, N’Dalantando, Kuito, and Uige, and about seventy (70) kilometers of power lines network in Luanda; (iii) water supply (appraised US$25 million; actual US$33\.9 million) was to support water services in N’Dalatando and in rural areas of Moxico; and (iv) urban infrastructure and services (appraised US$17 million; actual US$11\.8 million) was to finance a rapid assessment of the drainage and sewerage collection systems in Luanda and emergency repairs to prevent overflows of sewage, and studies, equipment, and civil works to control erosion in Moxico\. Component 3\. Sector Development Strategies and Strengthening of Human and Institutional Capacity (appraisal US$8 million; actual US$2\.5 million) aimed to: (a) establish a model for financing the subnational administrations’ development budget; (b) create a mechanism and practical tools for regular auditing, monitoring and financial reporting requirements; (c) build capacity at local level to plan, budget, implement, and monitor small-scale rural infrastructure; (d) pilot mechanisms for investment programming, budgeting, implementation, assets’ management, and accounting\. The activities were to focus on four municipalities, Kilamba Kiaxi (Luanda province), Kamacupa (BiC), Calandula (Malange), and Sanza Pombo (Uige)\. Component 4\. Management, Monitoring and Evaluation of Project Implementation (appraisal US$7 million; actual US$2\.1 million) was to finance technical assistance, consultant services, operating costs, logistical support, and equipment to complement project management and monitoring and evaluation\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project cost: The actual project cost was US$170\.6 million, which increased from the appraised amount of US$133 million due to cost increase and additional contribution from the Government\. Financing: IDA's credit of US$102 million was disbursed at US$78 million by project closure\. The unallocated amount of US$24 million was cancelled, as a number of project activities were carried out with Government own funds\. There was no other co-financing\. Technical Annex indicated that EU, UNDP/UNCDF, and French Cooperation committed to finance one percent (TA's Appendixes, p\.4)\. The ICR does not provide information on co-financing\. Borrower contribution : The Government contributed US$92\.6 million, which is threefold of their original commitment of US$30 million, as it carried out a number of the planned activities through its own budget\. Dates: The project closing date was extended once by 23 months from the original closing date of June 30, 2011 to May 31, 2013 due to slow implementation, as a result of delays in procurement, issuance of entry visas to the country, and difficulty in access to the project sites for security reasons\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: High\. Angola's prolonged civil conflict had devastated Angola's infrastructure and displaced roughly one-third of the country's population (about 4 million)\. While the country was growing due to oil revenues, it had one of the world’s highest levels of income inequality\. The challenge for Angola was to re-establish the administration to address poor governance and restore basic infrastructure services in the country\. The project development objectives were consistent with the the Government's post-war Priority Phase Multi-sector Rehabilitation and Reconstruction Program (PPMRRP), which was extended from the period of 2003-2005 to 2011-2012\. This two- phased Emergency Multi-Sector Recovery Program supported by the Bank provided the framework for the Government's Program (Phase 2 of the program is the project under review)\. The objectives remain relevant to the Government's Poverty Reduction Plan (Estrategia de Combate a Pobreza) 2010-2015 and the National Development Plan 2013-2017, which focus on poverty reduction, eradication of hunger, and accelerated infrastructure development\. The project objectives remain relevant to the Bank's Country Partnership Strategy for Angola FY2014-2016, which aims to help diversify the economy, enhance quality of service delivery, and build human/institutional capacity\. b\. Relevance of Design: Modest\. As explained in the project's Technical Annex (TA) p\.8, although presented as a program, this is a single project split into two phases due to IDA resources constraints\. In 2005, the Bank could finance only part of its intended contribution to the overall emergency program under IDA 13, therefore it was decided to split the operation into two phases, with the second phase to be financed under IDA 14\. The second phase was to build on the activities of the first phase (P083333) and focus on upgrading infrastructure, supporting rehabilitation or construction of feeder roads, trunk roads (including bridges), electricity services, rural water supply, water supply in a provincial capital, and urban infrastructure\. The second phase did not include health and education services supported under the first phase\. Measures to strengthen central and local governments were included under both projects\. The statement of the development objective was clear\. The components in the project supported the re-establishment of livelihoods for the resident population in the conflict affected provinces, through improving road access and restoring water and electricity services\. The results framework was built around the phase -2 specific objectives (TA's Annex 1)\. The project was also to support decentralization and local government development through piloting of a fiscal transfer mechanism from the central government to the targeted four provinces\. This was however not an emergency activity and premature for the limited operational and administrative capacity\. The overall design of the emergency project was complex for a post-conflict context characterized by serious implementation and coordination capacity weaknesses\. 4\. Achievement of Objectives (Efficacy): (a) To assist the Recipient in its post -war recovery efforts to build foundations for long-term reconstruction and economic rehabilitation \. Substantial\. Outputs Rural roads and Agriculture  503 km of rural roads were rehabilitated against the target of 600 km, of which 373 km were in the Malanje province (financed through government own funds), and 130 km of rural roads were in the Bié province (83% complete at closure)\.  150 km of primary road between Lucala and Negage was rehabilitated as targeted, through government own funds\.  12 agriculture buildings were rehabilitated to function as Agriculture Development Offices to promote smallholder agriculture, provide innovative participatory agriculture methods and distribute inputs\. The furnishing and equipment for these buildings were to be provided by IDA though the Market Oriented Smallholder Agriculture Project (P093699) and the GoA\. Electricity  Medium and low-voltage electricity distribution systems were rehabilitated in Malanje, N'Dalatando and Luanda and are operating as targeted (the works were financed through government own funds within the framework of the project)\. Rehabilitation works were 67% complete in the targeted peri-urban areas of the three cities of Kuito, Luena and Uige at project closure\. Water Supply  In Malanje, all the targets were exceeded: 3,200 house connections were provided (target 2,500), 77\.6 km of pipes and 45 standpipes (target 40) were completed\.  In N'Dalatando, all the targets were met and exceeded: 2,100 water house connections were provided (target 1,600); 42 km of pipes and 93 standpipes were completed as targeted, including construction of an intake station and water treatment facility\.  In Kuito, 2,000 water connections, 60 km of urban network and 60 standpipes were completed, including a reservoir (no targets)\. Urban infrastructure and services  Tender documents were prepared for feasibility studies and detailed designs for community participation in prevention and maintenance measures to reduce erosion in areas prone to natural disasters in Luena city\.  A feasibility study and civil works were carried out to improve Luanda’s drainage and sewage collection system, fi nanced through Government budget\.  A study of erosion control in Moxico was not completed, as planned, including related civil works\. Outcomes  500,000 people are reported to have benefitted from improved water services through household connections  and rehabilitated standpipes in three provinces of Malanje, N’Dalatando and Kuito\.  Travel time along the Chicala-Mutuvo road segment reduced by half from three hours (based on interviews with local users); and the traffic increased significantly, including trucks, from nearly non-existent levels in the post-conflict environment to almost 1,000 vehicles per day on the 42 km section rehabilitated under the project between Kuito and Chilonda in Bié province ( based on traffic count provided by the road construction contractor in 2013)\.  For lack of data and limited capacity and resources, no study was carried out at project closure to assess the project's impact\. The ICR provides an overview of empirical evidence on actual benefits of investments in rural roads that include increasing economic opportunities for the poor, productivity of businesses, and lowering transportation costs (ICR's Annex 4)\. Improved water services help decrease the incidence of cholera and other water borne diseases\. The electricity works that were still on-going at project closure in the three peri-urban areas were expected to reach about 10,000 beneficiaries, including schools and medical centers, as well as replace individual generators, thus reducing cost of buying fuel ( Annex 7- Borrower's report, p\.55)\. Overall, the project targets on outputs were largely achieved, albeit the works were largely financed and completed by the Government\. The on-going electricity and road works are likely to be completed\. It is reasonable to conclude that improvements in infrastructure delivered within the framework of the project substantially contributed to the country's long-term reconstruction and economic rehabilitation\. (b) To assist the Recipient in its post -war recovery efforts to build foundations for the re -establishment of state administration throughout its territory \. Modest\. Outputs  Sector strategies were drafted for water and electricity, i\.e\., Water for All, and Electricity for All\. These sector-specific initiatives aimed for major expansion in access to public goods and services by 2017\. The preparation of transport strategy was cancelled for lack of interest from the relevant Ministry\.  Training was carried out on water treatment, distribution, management and sanitation practices for local authorities and community leaders, and infrastructure planning for the Ministry of Planning (the ICR does not report the number of people)\.  Harmonization of methodologies for planning, budgeting, and public management was completed in five provinces (Uíge, Bengo, Kwanza Norte, Malanje and Bié) and 163 municipalities\. This was done through the support of the United Nations Development Programme (UNDP) but financed under the project (ICR p\.17)\.  The envisaged grants program to finance goods, works, and services for local governments did not take place under the project\. Outcomes There were two outcome indicators to measure achievements for the institutional support provided under the project: (i) improved system of procurement and financial management in the ministries and agencies involved in the project; and (ii) implementation of fiscal transfer mechanisms for decentralization in some provinces\.  As for the first outcome indicator, the ICR p\.iv reports that the implementing agencies' procurement capacity has improved; this however is not supported by the project experience, which suffered from significant procurement delays, poor quality and incomplete procurement documentation, and preparation of tender packages (ICR, p\.13)\. The ICR does not discuss either if the capacity of the ministries and agencies improved to implement projects transparently (intermediate indicator 5) \. The approval of the procurement legislation by the Government in 2010, mentioned by the ICR p\.iv, cannot be attributed to the project\.  As for the second outcome target of implementation of fiscal transfer mechanisms for decentralization in selected provinces, the ICR reports that there are fiscal transfer mechanisms within the provinces but these cannot be attributed to the project, and the indicator was not monitored\. The sector strategies supported by the project provided the basis for new investments in water and energy infrastructure\. In particular, the Ministry of Energy and Water had an action plan to invest US$5\.9 billion to expand and upgrade water pumps and purification systems to supply 120 municipalities by 2017\. 5\. Efficiency: No economic or financial analyses were done at appraisal as this was not required for emergency projects\. The ICR p\.18 explains that an ex-post analysis was not possible due to data constraints\. For example, in transport sector, no traffic counts were carried out in the country, and travel times, fleet size and composition remained uncertain\. The ICR discusses the overall benefits attained from improving access to basic infrastructure services based on empirical evidence from similar interventions, in particular rural roads and water supply, and concludes that the provision of basic services in most affected areas would have further declined from the already serious post-conflict situation, making the population worse off than it is “with the project” (Annex 4)\. The project implementation period was extended by about two years, and there were still activities incomplete at closure\. While appraised in 2005, it was approved in 2007 and became effective in 2008; as a result of these substantial delays, the Government undertook a significant part of the activities through its own funds\. About US$23 million of IDA funds were not utilized and cancelled at project closure\. The project pace of implementation was slow for low procurement capacity, weak coordination, and difficulties in receiving entry visas\. There was also increase in unit costs, for example, the actual unit cost for rural road rehabilitation amounted to US$ 100,000 per km compared to US$ 21,700 per km estimated at appraisal\. The ICR p\. 44 further elaborates that either the costs were largely underestimated at appraisal or there were inefficiencies in the use of project resources; no analysis was undertaken to understand the increase in road works unit costs\. The actual unit costs for water component were lower than appraised (ICR, p\.44)\. Efficiency is assessed as modest\. a\. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The project’s objectives were highly relevant to the Bank’s and the Government’s priorities for Angola\. Relevance of design is rated modest\. Overall, the project substantially contributed to Angola's post-war recovery efforts to build foundations for long-term reconstruction and economic rehabilitation, however its support for the re-establishment of state administration throughout the country was only modest\. Efficiency is assessed as modest\. a\. Outcome Rating: Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating:  Financial risk\. After project closure, the remaining electricity and road works were being implemented by the Government through its own funds; and according to the ICR p\.14, GoA is financing maintenance of the project-supported infrastructure\.  Institutional risk \. The Government adopted the water and electricity strategies and remains committed to continue the expansion of access to infrastructure\. However, the institutional capacity, in particular public procurement system performance, remain weak to ensure good progress and achievement of the sector- defined goals\. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry: The project was prepared pursuant to OP/BP 8\.0 Rapid Response to Crises and Emergencies\. The project was appraised in November 2005, however due to delays in Bank’ evaluation of GoA’s non-concessional borrowing, it was approved in May 2007\. The effectiveness was further delayed to 2008, and the Government decided to implement priority activities of the project using its own resources\. The emergency project design was complex for a post-conflict environment with low institutional and procurement capacity\. The project team could not access project sites for security concerns, and relied on local authorities to understand the condition of infrastructure in the selected communities\. The assessment of risks did not identify two important factors that eventually impacted the project implementation to a significant extent\. These were the difficulty in accessing project sites in conflict- affected areas was not identified as a risk at preparation, and the difficulty in obtaining entry visas for international staff at the PMIU, resulting in a disorganized procurement process\. M&E design had weaknesses, as a number of indicators were not clearly defined\. Also, the project costs were significantly underestimated at appraisal\. Quality-at-Entry Rating: Moderately Unsatisfactory b\. Quality of supervision: Supervision missions were irregular, due to persistent challenges in obtaining entry visas for Angola despite the United Nations Laissez-Passer\. The ICR p\.21 reports that the implementation status reports were prepared in a timely fashion after each mission\. The few supervision aide-memoires filed in the Bank’s document repository identified the key problems and agreed on action plans to address them\. For example, establishing a steering committee, restructuring the project, and extending the closing date\. This decisions were based on partial assessment, as a formal midterm review of project -phase 2 did not take place because of visa failed applications of an international consultant\. The project team leader changed several times\. In 2010, such change however seemed to help speed up the procurement processes and project disbursements (ICR, p\.13-14)\. The project team however could not ensure the completion of the activities\. Also, while there were new activities added in lieu of the ones financed by the Government, about US$24 million were still cancelled at project closure\. According to the Borrower p\.60, there were extensive delays in receiving ‘no objection’ from the Bank on procurement processes\. Quality of Supervision Rating : Moderately Unsatisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The Government of Angola was committed to the project and responded to project delays through implementation of the activities agreed within the project framework through its own resources, which were boosted by growing oil revenues\. A substantial portion of civil works were completed by the Government\. The ICR p\.22 notes that the GoA was unable to facilitate the provision of timely entry visas for consultants, contractors and Bank staff, thus affecting the project progress and implementation of the activities\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance: The implementing agency was the Project Management and Implementation Unit (PMIU) established under the guidance of the Vice-Minister of Planning\. The ICR notes p\. 22 that PMIU played a key role in identifying priority activities financed by the project\. There were however a number of factors under the control of the PMIU that contributed to implementation delays, in particular (a) coordination of the activities between the line ministries and local agencies involved in the project; (b) fragmented approach to the submission of procurement requests, which created confusion and delayed approvals; and (c) inadequate arrangements for the collection of project- related data needed for the agreed monitoring and evaluation procedures\. While the ICR finds p\.11 that this improved by the end of project, it still did not ensure the completion of project activities by project closure\. Also, there were several changes in project coordinators\. The ICR should have discussed the performance of the sector ministries involved in the project\. Implementing Agency Performance Rating : Moderately Unsatisfactory Overall Borrower Performance Rating : Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The results framework had seven key outcome indicators that were linked with the specific objectives of the phase-2 project (Technical Annex- Annex 1)\. The indicators focused on measuring whether improvements in physical infrastructure were implemented\. The institutional capacity indicators were to measure (i) the improvement in procurement and financial management system- through Bank assessment, and (ii) the implementation of fiscal transfer mechanisms for decentralization\. There were no baseline data for most of the indicators\. b\. M&E Implementation: Due to insufficient institutional capacity of the project implementing agencies and limited access to project sites in six provinces (Bié, Kwanza North, Luanda, Malanje, Moxico and Uíge), the PMIU was unable to collect the appropriate data required for adequate monitoring\. The PMIU provided quarterly reports on the financial management of the project and documented the completion of activities funded by the project\. Quarterly reports did not include detailed progress data towards completion of indicators (e\.g\., the number of households affected by improvement of water infrastructure)\. The PMIU provided more detailed data to evaluate the performance at the end of the project\. c\. M&E Utilization: As inferred from the ICR's discussion of M&E, as a result of the limited data collection during implementation, M&E was utilized only for the evaluation of the project performance\. M&E Quality Rating: Negligible 11\. Other Issues a\. Safeguards: As part of the program, phase 2 was a Category 'B' project that triggered three safeguards policies – OP4\.01 Environmental Assessment, OP 4\.09 Pest Management, and OP 4\.12 Involuntary Resettlement\. As an emergency operation, processed under OP 8\.50, safeguards documents did not need to be approved and disclosed prior to appraisal\. The ICR p\.13 reports that environmental and social safeguards were rated satisfactory in the implementation status reports throughout the implementation of the project\. Environmental Assessment : The Environment and Social Management Framework (ESMF) for the program was disclosed in the country and at the World Bank InfoShop on March 4, 2008, two months after the phase- 2 project effectiveness date\. An environmental consulting firm was engaged to manage and oversee the execution of the project, as agreed at preparation, as local capacity for environmental and social management was weak\. As reported by the ICR p\.13, "the PMIU and the consultants worked closely with the ministries and agencies concerned to ensure that contractors complied with Bank safeguard policies and using the methodologies and procedures for implementation of the project specified in the project"\. In other sections of the report, however, the ICR points to several weaknesses in the PMIU implementation (i\.e\., weak coordination with the ministries), difficulties in accessing project sites and obtaining visas for consultants; these issues are not discussed in this section and how these were overcome for supervision of the compliance with the safeguards policies\. Pest Management: This safeguard policy was not applicable to Phase 2\. Involuntary Resettlement : The ICR does not provide details whether there were any instances of involuntary resettlement\. b\. Fiduciary Compliance: Procurement: As explained by the ICR p\.13, low procurement capacity in the line ministries and local authorities resulted in the submission of poor quality, incomplete, and disorganized procurement documentation to the PMIU, which in turn, submitted incomplete packages to the Bank, leading to substantial procurement delays\. The disbursement substantially improved over the period April 2011 to May 2012 when a new Program Coordinator was appointed by the government and a new project team leader by the Bank\. Despite these improvements, the preparation of tender packages remained a challenge throughout the project implementation\. Overall, the Bank procurement rules were followed without exception (ICR, p\.13)\. Financial management\. The ICR p\.13 reports that throughout the implementation of the phase- 2 project, external audits were provided in a timely fashion and all were unqualified\. Quarterly reports by the PMIU provided details on the financial aspects of each activities funded by the project\. According to the ICR p\.13, the necessary actions were taken to address identified weaknesses\. c\. Unintended Impacts (positive or negative): d\. Other: 12\. Ratings: ICR IEG Review Reason for Disagreement/Comments Outcome: Moderately Moderately Satisfactory Satisfactory Risk to Development Moderate Significant Institutional and procurement capacity Outcome: remains weak\. Bank Performance: Moderately Moderately Unsatisfactory Unsatisfactory Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR: Satisfactory NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: Two lessons are selected from the ICR, with some adaptation of the language:  Emergency operations should have a simple design to facilitate prompt implementation and completion\. In a post-conflict environment, emergency operations help address urgent and pressing needs, while often in an environment of widespread and systemic weaknesses in public agencies\.  Progress monitoring and mid- course project review are important tools to detect issues in project implementation and take corrective actions on time\. Under this project, as there were several changes in the project team leadership and program coordinator, lack of the adequate M&E implementation and the mid--term review exacerbated the project implementation\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is concise and informative\. The report clearly describes issues and factors that impacted project implementation\. The efficacy section is generally output-oriented, however the ICR team took an effort to supplement the report with research providing additional evidence of benefits from infrastructure improvements, i\.e\., rural roads (Annex 4)\. The lessons were rather broad\. The ICR should have provided an assessment of the procurement and financial management systems of the project- supported agencies, in particular if this was part of the project outcome indicator\. The ICR often mentions the implementing agencies, however in section 9b only indicates the PMIU\. The reports should have provided more details on compliance with safeguards, as the project involves a substantial amount of infrastructure works; also, it should have mentioned whether there were any instances of involuntary resettlement\. One minor remark: footnote 23 does not provide correct reference to page # in the Technical Annex\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P113134

 ICRR 14332 Report Number : ICRR14332 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 05/08/2014 Country : Madagascar Project ID : P113134 Appraisal Actual Project Name : Madagascar - US$M ): Project Costs (US$M): 40\.4 41\.93 Emergency Food Security And Reconstruction Project L/C Number : C4537 Loan /Credit (US$M): Loan/ US$M ): 40\.0 41\.6 Sector Board : Social Protection US$M): Cofinancing (US$M ): Cofinanciers : Board Approval Date : 03/09/2003 Closing Date : 12/31/2011 06/30/2013 Sector (s): Other social services (31%); Primary education (23%); General water sanitation and flood protection sector (17%); Public administration- Other social services (17%); Roads and highways (12%) Theme (s): Natural disaster management (43% - S); Global food crisis response (30% - P); Rural services and infrastructure (27% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Moritz Piatti Judyth L\. Twigg Lourdes N\. Pagaran IEGPS2 2\. Project Objectives and Components: a\. Objectives: According to the Project Paper (p\. 4) and the Financing Agreement (p\. 6), the development objectives were : “(i) to increase access to short -term employment in targeted food-insecure areas; and (ii) restore access to social and economic services following the natural disasters in targeted communities \.â€? b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: The Project included four components : for -work) 1) Social safety net (cash -for- ( appraisal US$ 12\. work ) (appraisal 14 \.24 million )\. This component set 12 \.30 million, actual US$ 14\. out to increase access to short -term employment in targeted food-insecure areas and communities affected by natural disasters as identified by the National Bureau for Risk and Catastrophe Management (Bureau National de Gestion des Risques et des Catastrophes , BNGRC)\. Labor-intensive sub-projects were to be identified by local authorities in collaboration with communities, focusing on soil erosion control, feeder roads, irrigation, and cleaning of drainage canals\. The labor component was to account for at least 75 percent of sub-project costs\. Individual cash-for-work participants were to be selected through Community Targeting Committees \. In order to optimize the safety net support, labor-intensive public works were to be programmed to coincide with the agricultural ‘lean season," or pre-harvest time when rice prices peak and food is scarcer, or alternatively, in the period immediately following a natural disaster to stabilize consumption \. 2) Community -driven basic infrastructure in the poorest communities (appraisal US$ 8\.40 million, actual US$ 6\.10 million )\. This component was to finance small -scale infrastructure investments targeted to the poorest communities and prioritized through local participatory planning processes \. These community-based infrastructure sub-projects aimed to increase access to social and economic services among participating communities \. 12 \.80 million, actual US$ 14\. 3) Community -driven basic infrastructure in response to natural disasters (US$ 12\. 14 \.03 million )\. This component was to restore access to social and economic services in the aftermath of natural disasters, and in particular cyclones\. The component targeted communities in areas identified by the National Bureau for Risk and Catastrophe Management\. Special attention was to be given to restoring social services, including schools, health centers, and nutrition sites \. 4) Project management, monitoring and evaluation, and auditing (US$ 6\.90 million, actual US$ 7\.57 million )\. This component was to finance project operating costs, including training to project staff, communities, and other implementing partners\. It was also to support effective monitoring and evaluation, including development of the Intervention Fund for Development (Fonds d’Intervention pour le Développement, FID) website, financial and technical audits, and impact evaluations \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost : 104% of the total appraisal amount was disbursed \. Total project cost exceeded appraisal amounts largely due to increased expenditures of the cash -for-work program, that suffered from inflationary pressures and above-expected daily wage expenditures \. More resources were spent on the cash -for-work program and natural disaster response than on the community -driven infrastructure component due to the staggered implementation of the various components\. Financing : The project was financed by an International Development Association (IDA) credit in the amount of US$ 41\.64 million\. Borrower Contribution : Borrower contribution at appraisal was US$ 0\.44 million\. Actual borrower contribution was US$ 0\.33 million, which is 83% of the appraised amount\. Borrower contributions were exclusively through community co-financing of the community-driven infrastructure component \. A shift away from this toward the first and third component explain lower than expected borrower contribution \. Dates : While the planned closing date was 12/31/2011, the actual closing date was 06/30/2013\. The delay was due to a political crisis on 03/17/2009, which suspended all Bank activities in line with OP 7\.30\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: High \. Relevance of Objectives is rated High\. In 2008, Madagascar was confronted by the combined impacts of the food price crisis, the oil price shock, and a devastating cyclone season, threatening hard -won development gains\. Given the economic shocks and natural disasters, the objectives of increasing access to short -term employment in targeted food-insecure areas and restoring access to social and economic services following the natural disasters in targeted communities were highly relevant to country conditions \. In the context of the prolonged political crisis in 2009, the objectives became even more relevant to the country’s development needs\. The project was fully consistent with the country ’s Country Assistance Strategy (CAS 2007, pp\. 37-48), which supports the implementation of the Madagascar Action Plan, including improving nutrition and food security, improving support for very poor and vulnerable segments of the population, and restoring basic social and economic infrastructure in the aftermath of natural disasters such as cyclones \. Additionally, the project remains highly relevant, as the Interim Strategy Note for the period of 2012 -2013 stresses improving access to and quality of services, as well as better preparedness to deal with natural disasters \. b\. Relevance of Design: Relevance of Design is rated Modest \. The project's results chain is moderately plausible \. Providing cash for labor is likely to increase short -term employment, and rehabilitating infrastructure is likely to increase access to social and economic services \. However, the component of financing small -scale infrastructure in the poorest communities does not stipulate whether these are also communities that are directly affected by natural disasters \. Furthermore, the objectives would have benefited from being more outcome oriented \. Increasing access through restoring and constructing infrastructure does not necessitate increased service uptake or utilization \. Similarly, increased access to short -term employment does not necessitate stabilized food security \. The ICR notes that the key indicators sought to capture the emergency goals of the project (ICR, p\.15)\. 4\. Achievement of Objectives (Efficacy): Increase access to short -term employment in targeted food -insecure areas is rated Substantial \. Outputs: 9\.94 million person-days of cash-for-work manual labor were completed in targeted food -insecure areas, significantly exceeding the original target value of 7\.8 million\. 61% of program beneficiaries were female, significantly exceeding the target of 50%\. Outcomes: There were 400,580 beneficiaries of the cash-for-work program, significantly exceeding the target of 160,000\. Ex-post targeting analysis found that 92 percent of beneficiaries were poor, compared with a general poverty rate of 76 percent in the communities evaluated (ICR, p\.18) 69 percent of beneficiaries were satisfied or very satisfied with the quality of implementation of the cash -for–work program (ICR, p\. 19)\. A beneficiary assessment reported that households used three -quarters of the cash payments to purchase food, helping to stabilize food security (ICR, p\.19) An impact evaluation found that beneficiary households exhibited a significantly higher level of household expenditures than comparison households \. Over three-quarters of respondents reported that the additional revenue went towards their daily needs\. A net gain of about one-half day of rice consumption per week was observed among beneficiary groups versus the control groups (ICR, p\. 19)\. An additional 6 percent of beneficiaries stated that additional revenue went to health and education expenditures \. In terms of health outcomes, the presence of a sickness over the course of the last two weeks was reduced by a net three percentage points for beneficiary over control groups (ICR, p\. 19)\. Restore access to social and economic services following the natural disasters in targeted communities is rated Substantial \. Note: Though the community-based infrastructure component does not explicitly state that it targets communities affected by natural disasters, it did contribute to this objective through rehabilitating infrastructure and thereby increasing access to social and economic services \. Outputs: 2,123 sub-projects were completed under the social safety net program, significantly exceeding the target of 1,600\. 6,226 kilometers of rural roads were rehabilitated under the social safety net program, significantly exceeding the target of 1,600\. 157 community based sub-projects were implemented under the community -driven basic infrastructure component, exceeding the target of 152\. There were 816,591 beneficiaries under these sub -projects, far exceeding the target of 76,000\. 2,190 of hectares of irrigated land were rehabilitated under the community -driven infrastructure component, falling significantly short of the target of 3,100\. 204 kilometers of rural roads were rehabilitated under the community -driven infrastructure component, falling short of the target of 250\. 331 social and economic basic infrastructures damaged by natural disasters were rehabilitated or reconstructed, significantly exceeding the target value of 210\. 291 schools damaged by natural disasters were reconstructed or rehabilitated, significantly exceeding the target of 123\. 918 classrooms damaged by natural disasters were built and /or rehabilitated, significantly exceeding the target of 307\. Ten health centers damaged by natural disasters were rehabilitated or reconstructed, falling short of the target of 30\. 95 kilometers of rural roads damaged by natural disasters were rehabilitated, significantly exceeding the target of 27\. Intermediate Outcomes: The project intended to speed up response time following a natural disaster, and sought to complete 75 percent of reconstruction sub-projects within 6 months of being prioritized by local authorities \. Execution in this regard improved over the life of the project\. Only 22 percent of sub-projects were completed within 6 months following cyclone Bingiza in early 2011\. In response, a series of measures (including revisions to procurement procedures ) was adopted, and 100 percent timely completion was achieved during the final cyclone season, although this is partly explained by the relatively small number of facilities (16) that were reconstructed in that season (ICR, p\. 20)\. Outcomes A beneficiary assessment reports that 81 percent of beneficiaries were satisfied or very satisfied with the sub-projects, 98 percent affirmed that the project was a community priority, and 94 percent were satisfied with the participatory diagnostic of community needs \. Over half of households felt that these sub -projects had increased revenues and productivity, and 91 percent felt their living conditions had improved (ICR, p\. 19)\. A beneficiary assessment found that all of the schools reconstructed had a full complement of infrastructure and school furniture\. 63 percent of beneficiaries of health centers felt the furniture and equipment was very good or good, and 99 percent were satisfied with the infrastructure \. Respondents indicated that access to and utilization of schools and health centers had improved (ICR, p\. 20)\. An impact evaluation of community-based sub-projects found that, in the road sector, project investments resulted in a 28 percent reduction in travel time versus control groups \. Investments in market infrastructure improved occupancy rates slightly, with a net 2\.5 percentage point increase to an average of 75\.6 percent occupancy\. In terms of the water sub-projects, the impact evaluation found that the time women and girls spent fetching water was reduced and people overall saw increased access, though functionality of some systems was an issue \. A composite indicator of economic well-being of community infrastructure investments showed improvements for intervention households versus comparators (ICR, p\. 19)\. 5\. Efficiency: Over 75 percent of the safety net sub -project costs were transfers in wages to workers, which is a high level of labor intensity by international safety net comparisons \. Transfers went almost exclusively to food - insecure households and a beneficiary assessment evidenced that three quarters of these funds were used to purchase food, pointing to substantial cost effectiveness of these transfers \. The ICR refers to Ralaivelo 2011 for an ERR calculation of various sub -projects implemented by the FID, and estimates range from 27 to 87 percent\. Though a methodology is not provided, the ICR notes that significant increases in traffic were observed on the roads rehabilitated, leading to an increase in transport of agricultural products to market\. For market infrastructure, it is noted that economic returns derive from providing opportunities for expansion of economic benefits as markets grow \. Benefits from irrigation sub-projects are based on the increases in production allowed by counter -season growing\. No economic analysis was undertaken for social infrastructure such as schools\. In terms of unit cost analysis (cost efficiency), comparison between FID and other school construction programs showed that FID averages between 7 and 26 percent unit cost savings given similar delegated contract management than comparator programs, with an additional savings when community - based contracting procedures are used by FID\. (ICR p\.32) The response time to natural disasters was initially low, at 22% completed within 6 months of a cyclone\. After revisions in procurement procedures, however, response time was increased to 100% within 6 months of a cyclone by project closure\. Operational costs of the project implementation agency were 15%, achieving project operational efficiency targets \. After initial delays due to a prolonged political crisis in 2009, implementation was conducted in a timely manner, especially considering difficult political circumstances \. Efficiency is rated Substantial \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The project's objectives were highly relevant to country circumstances and Bank /government strategy, and relevance of design is rated modest\. Evidence that the project achieved increased access to short -term employment and restored access to social and economic services following natural disasters is substantial \. Efficiency is rated substantial given timely implementation, improved response time to natural disasters, and transfers reaching their intended recipients\. These ratings are indicative of only minor shortcomings in the project's preparation and implementation, resulting in an outcome rating of Satisfactory \. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: At the project level, sustainability risks have been reduced by up -front creation of local maintenance funds, community training in maintenance, and focus on reconstruction of existing infrastructure \. At the institutional level, the implementing agency has been instrumental in developing the basis for a social protection response in Madagascar, which can be scaled up when additional internal and external resources become available\. The implementing agency will continue supporting the follow -on Emergency Infrastructure Preservation and Vulnerability Reduction Project, which will preserve key infrastructure and selectively continue those activities started under the project in social protection, agriculture and transport \. This funds on-going efforts in the cash-for-work program and the response to natural disasters \. The community - driven basic infrastructure would be taken up through the Local Development Fund program \. In addition, a new Emergency Food Security and Social Protection Project is currently under preparation which would continue FID ’s social protection role and activities \. The ICR (p\.17) also mentions that the African Development Bank has shown interest to provide funds to the FID to finance small-scale infrastructure in disaster prone areas \. However, the overall fiscal climate of the country and the ability of the sectoral ministries to adequately maintain services given shrinking budgets pose a systemic ongoing risk \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: The Bank responded rapidly to an emergency situation \. Preparation activities built on the Bank's international expertise in social protection, country experience in this area, and a long operational relationship with the project's implementing agency\. Specific design changes based on previous experience include a reduction in the labor intensity of cash-for-work program from 80 to 75 percent, as 80% was deemed too stringent; limitations on the types of eligible investments; and an incorporation of cyclone - proof norms and standards based on the Government’s 2008 post-cyclone damage assessment report \. The technical, financial, social, environmental, and economic appraisal was satisfactory \. Risks were adequately assessed and mitigation measures identified \. Its focus on achievable objectives and tailoring to the emergency context of the operation was noted \. The results readiness of the monitoring and evaluation framework was rated above average in a portfolio review of all Bank social protection operations through the FY 2005 - 2009 period\. (ICR p\.13) at -Entry Rating : Quality -at- Satisfactory b\. Quality of supervision: Formal supervision missions were carried out annually, and Implementation Status Reports were filed twice per year\. Daily contact was maintained between the Bank team and the implementing unit, with close monitoring of project implementation throughout\. Bank supervision had a strong client -oriented focus, and the ICR reports positive feedback on the level of engagement, timeliness of response, and addressing of implementation issues as they arose\. The Bank provided important technical assistance in developing and adjusting targeting mechanisms\. Periodic ex-post procurement and financial management reviews helped inform supervision of fiduciary aspects\. However, aides - memoires lacked sufficient detail such as findings and field reports from safeguard and infrastructure reviews, or discussions of the findings of technical audits and evaluations \. These would have provided a fuller scope of supervision activities \. A regulatory supervision mission replaced the formal midterm review, as the task team felt there were no substantive issues that needed to be addressed \. (ICR p\.24) Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The project launched days before the onset of a political crisis, resulting in a change of government and Madagascar being brought under OP 7\.30 (Dealings with De Facto Governments )\. This affected the overall implementation environment in Madagascar, with a suspension in disbursements across the portfolio \. However, despite the challenges, the new government was considered consistently supportive of the project \. The ICR cites numerous examples of successful collaborations with the government, including collaboration with the Ministry of Environment and Forests for community reforestation efforts, and the Ministry of Public Health to facilitate improved service delivery \. Although the government created a challenging operational environment, there was not a significant adverse effect on the actual implementation of the project in achieving its development outcomes, and there are many examples of government agencies working in collaboration with the implementing agency toward project outcomes (ICR, p\. 22)\. As counterpart financing came exclusively from communities (and not the government), the change in government did not affect these contributions \. Government Performance Rating Satisfactory b\. Implementing Agency Performance: The project's implementing agency was the Intervention Fund for Development (Fonds d’Intervention pour le Développement, FID)\. Despite the political and economic difficulties facing Madagascar throughout the implementation period, the FID performed well \. The ICR reports it to be one of the few institutions in Madagascar with the capacity to respond to shocks and cultivate functional working relationships with many other agencies; this capacity was central to overall project implementation (ICR, p\. 25)\. FID has been creative and open in building these relationships across agencies \. The FID carried out implementation in a diligent and foresighted fashion \. Financial management and procurement functions were always rated as satisfactory \. Ex-post reviews found that overall documentation on contracting and financial transactions was adequately done, and standard financial reports to the Bank were delivered on time and with satisfactory quality (ICR, p\. 25)\. An institutional assessment was carried out with recommendations implemented, including the creation of an additional internal control position, incorporation of measurable performance indicators for each position and restructuring of the salary scale, and development of a personnel training plan \. Recommendations from a technical audit resulted in changes to latrine design \. Recommendations from the cash-for-work program were incorporated into changes in the targeting mechanism and other operational procedures \. The ICR does not state when the assessments and resulting adjustments were carried out \. Implementing Agency Performance Rating : Satisfactory Overall Borrower Performance Rating : Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: Overall, the project design included clear and pragmatic M&E arrangements \. The relevant key performance indicators, namely the number of beneficiaries and rehabilitation and reconstruction of infrastructure, were measurable and appropriate given the emergency context, and are likely to capture progress of the project components toward the stated objective \. The M&E design was built on FID’s prior experience, and FID’s management information system was considered functional and appropriate for monitoring during appraisal \. Several evaluations were planned, including a technical audit, an impact assessment based on the baselines established during the previous Community Development Project, and a beneficiary assessment \. b\. M&E Implementation: Key performance indicators were obtained during project closure, and there was a sufficient evaluative base to judge progress toward development outcomes \. During implementation, the management information system was able to report on outputs and activities on a timely basis\. However, fiduciary and management elements were not adequately integrated in the management information system, leading to fragmentation and lack of homogeneity in information \. The follow up project seeks to address this issue through the installation of new software \. Beneficiary registries for cash -for-work programs were kept in lists of implementing NGOs, inhibiting stewardship and oversight by the FID\. The follow-up operation intends to rectify this \. Some adjustments to the planned evaluation schedule were made \. A baseline for an impact evaluation of previous FID-implemented projects had been carried out in 2006 with the follow-up planned for 2009, which could not be carried out due to the political circumstances in the country \. Instead, an impact evaluation of the community -driven infrastructure component and an ex -post and final beneficiary assessment of the other two components were conducted\. In addition, a technical audit and an economic evaluation of the community -driven infrastructure sub-projects were completed\. c\. M&E Utilization: The project used M&E data to be more responsive to emerging needs, and the implementing agency integrated recommendations into operating procedures \. For example, the design of latrines and size of windows in schools were adjusted based on the findings of the technical audit \. Similarly, targeting criteria for the cash -for-work program were initially standard across rural and urban areas, but findings from the impact evaluation prompted FID to differentiate between the two\. M&E Quality Rating : Substantial 11\. Other Issues a\. Safeguards: The project was environmental category B and triggered the safeguard policy environmental assessment (OP/BP 4\.01)\. The FID’s environmental manual was revised during preparation to incorporate recommendations from an ex-post environmental impact assessment of projects carried out in September 2007 for a previous operation\. At project appraisal, FID was considered to have sufficient resources and capacity to manage safeguards, with environmental specialists located in the general directorate and in each inter -regional directorate\. Safeguards compliance was rated satisfactory throughout implementation, and no significant environmental impacts were found \. (ICR p\.16) The technical audit found several positive environmental impacts of FID sub -projects, such as a reduction in flood risks and improved sanitary conditions due to cleaning and improvements to canals \. The reforestation of mangroves helped reduce erosion and restore ecological balance \. FID altered its school reconstruction designs specifically to reduce the use of local wood to ease deforestation pressures \. b\. Fiduciary Compliance: Overall procurement risk at appraisal was rated low \. A procurement capacity assessment report noted that FID had sufficient procurement staff with prior experience working with both the World Bank and the government \. Procurement was rated as satisfactory throughout project implementation (ICR, p\.16)\. Ex-post procurement reviews, including visits to FID regional offices, identified minor shortcomings, mainly in consistent documentation \. Financial management was rated as satisfactory throughout project implementation \. Financial supervision reports and audits were submitted in a timely fashion and found to be acceptable \. An evaluation of the financial management system was carried out in March 2010, and FID responded to minor issues that were flagged (ICR p\.16)\. The FID is reported to have adopted a strong anti -corruption stance in the face of the weak governance context of the country during the implementation period \. FID engaged with an anti-corruption agency to train FID intermediaries in anti-corruption practices and raise awareness of the legal consequences of not fulfilling contractual requirements \. Contractual issues, such as problems with payment systems among local associations managing cash -for-work activities, resulted in immediate cancellation of contracts and pursuit of legal actions through appropriate national channels\. c\. Unintended Impacts (positive or negative): None reported\. d\. Other: 12\. Ratings : 12\. ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Moderately Moderately Satisfactory Satisfactory Borrower Performance : Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: The following lessons are drawn from the ICR (pp\. 25 - 27): Flexibility in implementation of a project in a volatile political environment can be critical \. As part of humanitarian response permitted under OP7\.30, the project was able to disburse a cash -for-work component prior to other components and thereby help cushion immediate adverse effects on vulnerable populations \. Increased autonomy of the implementing agency, restrictive controls to personnel changes, and an objective use of targeting criteria can help protect against political interference \. In the fragile political environment in which this project was implemented, these measures proved valuable while a collaborative relationship with the main authorities was maintained\. Finding synergies across ongoing efforts in disaster management can strengthen a program \. During implementation of this project, for example, the Ministry of Health used the opportunity of vulnerable workers assembled on cash-for-work project sites to provide health services directly to them and deliver targeted awareness campaigns\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR places the project thoroughly into context and provides a concise, clear assessment of the project's achievements\. The ICR complies with established guidelines \. It is careful in analyzing the results framework, offers valuable information on the reasons that specific indicators were chosen, and provides additional relevant evidence on the achievement of the objectives that goes beyond the immediate project development indicators \. However, the ICR would have benefited from additional information on other partners that were engaged in the emergency relief efforts, greater analysis of why targets for some of the indicators were surpassed so dramatically, while others were not met, and more detail on the methodology that was used for deriving the IRR for some of the sub-projects of the FID\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P007711

Document of The World Bank Report No: 30242 IMPLEMENTATION COMPLETION REPORT (SCL-42760 TF-26538) ON A LOAN IN THE AMOUNT OF US$47 MILLION TO NACIONAL FINANCIERA S\.N\.C\. WITH THE GUARANTEE OF THE UNITED MEXICAN STATES FOR A RURAL DEVELOPMENT IN MARGINAL AREAS PROJECT December 9, 2004 Environmentally and Socially Sustainable Development Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2003) Currency Unit = Mexican Peso 1 Mexican Peso = US$ 0\.0956 US$ 1 = 10\.455 Mexican Peso FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS APL Adoptable Program Loan CNA National Water Commission CAS Country Assistance Strategy CPPR Country Program and Portfolio Review CRDS Regional Sustainable Development Council CSF Community Saving Funds FAO Food and Agriculture Organization of the United Nations FIRCO Fideicomiso de Riesgo Compartido (Trust Fund for Shared Risk) ICR Implementation Completion Report IICA Instituto Nacional de Capacitacion del Sector Agropecuario, A\.C (National Institute for the Agricultural Sector Training) INIFAP Instituto Nacional de Investigaciones Forestales y Agropecuarias (National Institute for Forestry, Agriculture, and Livestock Research) IPM Integrated Pest Management NAFIN Nacional Finaciera (National Development Bank) NAFTA North American Free Trade Agreement NGO Non-Governmental Organazation NPV Net Present Value PAD Project Appraisal Document PANNA Pesticide Action Netwrk PEAT Basic Technical Assistance Program PRI Institutional Revolutionary Party RDMAP Rural Development in Marginal Areas Project SAGAR Secretary of Agriculture, Livestock, and Rural Development (now SAGARPA) SAGARPA Secretary of Agriculture, Livestock, Rural Development, Fisheries and Food SHCP Secretary of Finance and Public Credit SILs Specific Investment Loan SINDER Sistema Nacional de Extension Rural (National System of Rural Extension) Vice President: David de Ferranti Country Director Isabel Guerrero Sector Manager/Director John Redwood Task Team Leader/Task Manager: James Smyle  MEXICO Rural Development in Marginal Areas Project CONTENTS Page No\. 1\. Project Data 1 2\. Principal Performance Ratings 1 3\. Assessment of Development Objective and Design, and of Quality at Entry 2 4\. Achievement of Objective and Outputs 4 5\. Major Factors Affecting Implementation and Outcome 9 6\. Sustainability 13 7\. Bank and Borrower Performance 13 8\. Lessons Learned 17 9\. Partner Comments 19 10\. Additional Information Annex 1\. Key Performance Indicators/Log Frame Matrix 21 Annex 2\. Project Costs and Financing 25 Annex 3\. Economic Costs and Benefits 27 Annex 4\. Bank Inputs 31 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 34 Annex 6\. Ratings of Bank and Borrower Performance 35 Annex 7\. List of Supporting Documents 36 Annex 8\. Borrower Executive Summary ICR 38  Project ID: P007711 Project Name: Rural Development in Marginal Areas Project Team Leader: James W\. Smyle TL Unit: LCSER ICR Type: Core ICR Report Date: December 9, 2004 1\. Project Data Name: Rural Development in Marginal Areas Project L/C/TF Number: SCL-42760; TF-26538 Country/Department: MEXICO Region: Latin America and the Caribbean Region Sector/subsector: General agriculture, fishing and forestry sector (64%); Other social services (15%); Agricultural extension and research (15%); General public administration sector (6%) Theme: Nutrition and food security (P); Rural services and infrastructure (P); Decentralization (S); Rural policies and institutions (S); Civic engagement, participation and community driven development (S) KEY DATES Original Revised/Actual PCD: 04/05/1997 Effective: 03/15/1998 10/14/1998 Appraisal: 06/24/1997 MTR: 05/21/2001 Approval: 01/27/1998 Closing: 06/30/2003 06/30/2003 Borrower/Implementing Agency: Nacional Financiera, S\.N\.C\. (NAFIN)/Secretariat of Agriculture, Livestock and Rural Development Other Partners: State Authorities STAFF Current At Appraisal Vice President: David de Ferranti Javed Shahid Burki Country Director: Isabel M\. Guerrero Olivier Lafourcade Sector Manager/Director: John Redwood Maritta Koch-Weser Team Leader at ICR: James W\. Smyle Adolfo Brizzi ICR Primary Author: Jorge Caballero; Elsie Garfield and James Smyle with inputs from Jorge Franco; Christian Pieri and Zhong Tong 2\. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: M Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S  Project at Risk at Any Time: No The Project had a Quality at Supervision rating of "Satisfactory"\. 3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: The Rural Development in Marginal Areas Program, of which this project is the first phase (APL I) seeks to improve the well-being and the income of smallholders in about 24 targeted marginal areas , which are (*) among the poorest of the country, through sustainable increases in productivity and better food security\. The program seeks to improve the productive capacity of participating farmers through a community-based approach by (i) facilitating the introduction of sustainable agricultural production systems and diversification through improved access to financial resources and agricultural services; (ii) fostering community socio-economic development, organization, and participation; (iii) enhancing the provision of effective technical support services and training to farmers and producers organizations; and (iv) promoting an effective decentralized decision-making system fostering institutional coordination\. The program would cover a total population of about 10 million people, of which about 2 million would benefit directly from program support\. The program was planned to progressively expand coverage over an eight-to-ten year period to eventually cover the 24 target regions\. APL I was to cover a first group of six marginal areas, comprising the regions of Mixe, Cuicateca, Mazateca (in the state of Oaxaca), and the Huasteca region (a contiguous area expanding over parts of the three states of Veracruz, San Luis Potosi and Hidalgo)\. The 6 regions comprise an area of some 23,000 km2 with a total population of about 1\.3 million inhabitants\. An estimated 70 percent of the population was eligible to participate in the project\. About 40,000 families, constituting poor small farming households, were to directly benefit from project support\. The project objective reflects the program goal and aims at improving smallholders' productivity and food security in a first group of six marginal areas\. The project would promote the participation of indigenous people, as they represent about 67 percent of this target population, and women, as they play a key role in both agricultural and in family nutrition\. (*) "Marginal areas" were defined both geographically (using a combination of GOM indices of marginality and poverty from CONAPO and INEGI) and physically (using a combination of agro-ecological and production system variables from SAGAR)\. Beneficiary eligibility was primarily defined on the basis of verifiable criteria of available assets (land, livestock), level of production for self-consumption, access to services, and producer groups\. 3\.2 Revised Objective: Program objectives remained unchanged during the period of implementation\. 3\.3 Original Components: The project components and activities were designed in a way that was consistent and appropriate for reaching the objective of improving the well-being and the income of smallholders in targeted marginal areas, through focalized activities that assured area and beneficiary targeting\. The project financed four components that included the following: Total Project Costs: $63 million of which $47 million from the World Bank\. 3\.3\.1\. Productive Investments (US$40 million, 63% of total project cost): Under this component, the - 2 -  project financed demand-driven investment subprojects for agricultural production, natural resources management, value-added processing, and minor productive infrastructure\. The investments were to be financed through a matching grants system with up-front contribution by participants of at least 30 percent of the subproject cost\. A cost-recovery mechanism was to be promoted at the community level to foster sustainability of project activities\. Eligible expenditures in the subprojects included farming equipment and tools; inputs for cultivation or livestock; construction materials, small works and installations; processing machinery; small irrigation and drainage works and equipment; plantations and nurseries; technical assistance and specialized training and; storage facilities for inputs and products\. The principal types of subprojects to be covered were: (i) improvements in traditional basic grain farming systems and home garden production; (ii) diversification and improvement of farming and production systems with commercial objectives; (iii) natural resources management and agroforestry; (iv) small enterprise development subproject; and (v) revolving funds\. 3\.3\.2\. Community Development (US$6 million, 9% of total project cost): This component financed activities community-driven investments for which cost recovery was not expected\. Activities included: (i) preparation of community-based natural resources management, plans and small works associated with them; (ii) small projects related to community activities of indirect benefits; and (iii) training and workshops to facilitate beneficiaries participation in the project (interchanges with other communities, participatory approaches, management of revolving funds, natural resources management, etc\.)\. 3\.3\.3\. Technical Support (US$13 million, 22% of total project cost): This component covered the provision of extension services, technical assistance, workshops, and training for farmers, producers' organizations, women's groups, and small entrepreneurs\. The support was primarily to address needs for the preparation and implementation of subprojects, the establishment of demonstration plots, and the start-up of specialized activities\. While basic extension services were to be provided under the national extension system, technical assistance required for the identification, preparation and implementation of investment subprojects was to be contracted by the communities and beneficiary groups through NGOs or the private sector and partly financed by producers\. 3\.3\.4\. Institutional Strengthening & Project Administration (US$4 million, 6% of total project cost): This component was to support project management and administration, and included (i) the establishment and operating expenditures of the Regional Sustainable Development Councils (CRDSs) and their technical support units; (ii) capacity building and training for the CRDSs and (iii) expenses associated with institutional strengthening at the central level, project management, monitoring and evaluation, and auditing\. 3\.4 Revised Components: Project components remained unchanged\. 3\.5 Quality at Entry: Quality at entry of APL I was rated as satisfactory\. In addition to being consistent with the CAS, the project's objectives and activities reflected a number of innovative concepts: explicit links between social demands and institutional response (through regional councils); participatory, community-driven approaches; integration of social and environmental safeguard concerns; co-financing among different levels of government; capitalization of financial assistance; and the possibility of replication to many areas in the country\. Overall, at Federal, State and sub-regional levels, stakeholders acknowledged the innovative and appropriate vision on which the project was built\. From the perspective of the Bank's safeguard policies, the design was appropriate at entry\. Government - 3 -  and institutional policy and the necessary degree of commitment by technical staff were in place\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The project outcome is rated satisfactory\. This may be a somewhat unorthodox conclusion for a project within a program of APLs that was closed early with a large undisbursed balance, but, as discussed in more detail below, the project had tremendous success in convincing Government to scale up, without external financial assistance, a poverty-targeted program for sustainable rural development\. In this regard, the project exceeded, both in scope and timing, all expectations with respect to its development impact\. For example: l Government completely mainstreamed the RDMAP through SAGARPA's Under-Secretariat for Rural Development\. As of 2003, 75% of the Under-Secretariat's investment program budget was being allocated utilizing the concepts and approaches developed under APLs I and II\. l The ICR's: (a) estimation that the economic rate of return over 13%, (b) the financial analysis showing a financial rate of return estimated to be over 50%, and (c) the conclusion that investments made under the project resulted in improved production and income\. l The project contributed directly to achieving Government of Mexico and the CAS priorities on improving food security and well being among rural households of the extreme poor (who are primarily indigenous); priorities that are still valid\. While the APL itself did not progress as far as was originally planned, Government's early mainstreaming of the RDMAP and rapid expansion of the project concept into a broader Marginal Areas program under the current "Alliance With You" rural development program clearly constitutes a successful outcome for the project\. Based on the survey data and information collected through interviews with field staff and participating farmers, it can be stated that among the producers assisted over longer periods of time (more than one year), the project achieved the objective of improving production and income\. According to the FAO's 2001 annual evaluation of SAGARPA's rural development programs, which specifically includes the RDMAP, 68% and 17% of beneficiaries increased productivity and income by 30%, respectively\. As regards impacts on household food security, the available information on production increases indicates that improvements were achieved in household food security\. In Veracruz, for example, child nutrition status in nine project communities was assessed and measurable improvement in child health and nutrition were found as a result of the introduction of grain amaranths in the diet\. With respect to the environment, agrochemical use and health hazards were increasingly reduced over the life of the project, with the greatest reductions occurring as a result of an important change in the 2002 program guidelines that recurrent costs such as agricultural inputs (including pesticides and fertilizers) would no longer be financed\. Other positive impacts included the increased investment requested by producers for soil and water conservation and management, for alternative soil nutrient management technologies (e\.g\., composting), in crops adapted to conditions in marginal areas which required fewer inputs (e\.g\., aloe vera), and in diversification activities which reduced reliance on extensive use of the natural resource base (e\.g\., handicrafts, small animal raising, fish culture, small-scale value-added processing, etc\.)\. 4\.2 Outputs by components: - 4 -  4\.2\.1 Productive Investments The FAO/SAGARPA evaluation (2001) showed overall farmers' satisfaction with the recommended technologies and 87% of the farmers interviewed reported that they continued to use the recommended technologies\. Each State has a list of successful subprojects and all these projects have in common some degree of technical and economic integration within a broader framework of rural family and market opportunity development\. It was recognized that the promotion of changes in technology, especially among indigenous peoples, cannot be achieved in isolation from the understanding of the complex functioning of their traditional production systems and the interaction of these systems with the family-economy, labor allocation strategies, community organization, current links with public services and unfavorable marketing systems controlled by middlemen\. Two interesting trends were observed with respect to subprojects: (i) a progressive move from investments in subsistence agriculture to investments in income generating activities, e\.g\., in the State of Oaxaca between 1997 and 2001 the annual percentage of investment in traditional crop production declined steadily from 43% to 8%; and (ii) a growing demand for investments in soil and water conservation, which went from zero in 1997 to a high of 10% in the states of Oaxaca, Veracruz and Hidalgo\. According to SAGARPA's reports, the project generally met or exceeded its targets in terms of number of subprojects financed annually\. However, only about 50% of the estimated 40,000 end-of-project beneficiaries were reached despite a total investment that was 76% of the appraisal estimate\. This is an indication that average per-beneficiary costs were significantly higher than expected\. The desired productivity increases were obtained, but as of program closing, the income improvements sought had not yet fully materialized\. Only an estimated 17% -- 25% of the goal -- of project producers experienced income increases of more than 30%\. Among other this was due to a heavy reliance by farmers on planting of subsistence crops; the length of establishment period for market-oriented, perennial crops; and difficulty in accessing competitive markets (i\.e\., marketing tended to be through middlemen, operating with predatory practices)\. With a longer implementation period, this would have improved given the trend observed during the project of a shift from subsistence production to more market and income generating investments in crop and livestock production\. While there is no information available on the actual percentage of funds that were recovered -- the project target was 80% recovery -- there was a notable and important development of community saving funds (CSF) created out of producers' savings\. The project made a crucial contribution in initiating the CSF movement and developing the appropriate technical assistance package and capacity for the creation of CSFs\. One indication of this is the report by the Instituto Nacional para el Desarrollo de Capacidades del Sector Rural (Inca Rural) that by July 2002 there were about 110 CSFs with more than 4,700 members in the states assisted by the project\. The total estimated savings among these CSFs was 2\.7 million pesos or about 600 pesos per capita\. The project was also successful in increasing demand for investments in practices conducive to conservation and sustainable management of land and water resources, including conservation tillage, living edges and agroforestry activities\. Producers from Oaxaca, Veracruz and Hidalgo steadily increased their demand for such investments to where it ultimately represented about 10% of the total financing for productive investments\. The increases were particularly significant in Oaxaca, going from 2% of investment in year one to 21% in the final year\. According to the 2001 SAGARPA/FAO Evaluation, 38\.9% of beneficiaries believed that the program had undertaken positive actions with respect to natural resources\. - 5 -  Some shortcomings were noted\. While technologies were generally sound in principle, many were not yet adapted to the biophysical and sociocultural environments in which the project operated\. For example, when initially more complex IPM technologies were promoted (e\.g\., crop scouting), results were marginal\. However, by shifting to "soft", environmentally friendly technologies that relied on skills within most farmers' grasp (e\.g\., introducing different crop varieties as part of an integrated pest management approach) better results were achieved\. Over time, gains were made in moving for the early-on view that subprojects were primarily vehicles for providing subsidies to traditional farming practices toward the understanding that they were investments in developing future, sustainable farming practices\. Achieving a move toward the integration of subprojects at the farm, community, micro-watershed, and market levels was difficult and slow\. During the course of implementation, many of these weaknesses were recognized and a series of improvements were made incrementally, over time\. Among the critical steps taken to address these shortcomings were those related to improving technical support and retention rates of field technicians to allow for improving performance through both training and experiential learning\. This is discussed in more detail in the sections immediately below\. 4\.2\.2 Community Development According to project reports, participatory rural assessments and plans for community-based natural resources management were carried out in 100% of participating communities and about 75% of investment targets were met in community development subprojects\. These are very important levels of accomplishment\. The full impact of this accomplishment, however, was not achieved\. The project was introducing new instruments for achieving participatory development (e\.g\., rural assessments, diagnostics, prioritization of issues and opportunities) and as such they were often treated as formalities to be applied and rarely updated\. In the beginning, the groups of community participants were often "artificial" in the sense that they came together solely for the purpose of accessing project resources\. During the course of implementation, there were advances in resolving these problems, especially once reforms were introduced in the project's technical support structure that created regional technical units that could offer closer technical and organizational support\. 4\.2\.3 Technical Support Overall, farmers from the assisted areas were highly supportive of the technical assistance received, particularly when it came through technicians that spoke the local language\. According to the FAO/SAGARPA evaluation (2001), 93\.4% of farmers interviewed said that they benefited from skilled field technicians\. Only 5\.2% of interviewed farmers paid for technical assistance services whereas 24% were willing to pay for it in the near future\. During the project, there was a clear and constant demand on the part of communities and municipal governments to have access to technical knowledge and assistance not directly related to any particular investment subproject\. Community demand for non-subproject related technical assistance was high\. Areas of particular demand for assistance included marketing and organizational and administrative assistance\. Early attempts to respond to this demand revealed that provision of technical assistance generated expenditure levels that were unsustainable under the Alianza's regulations\. This limitation was resolved in the 2002 guidelines with the mainstreaming of the RDMAP\. In recognition of the demand for technical assistance, the guidelines were reformed to allow stand-alone technical assistance investments, training, organizational support, marketing, etc\. The financing ceilings established under the 2002 federal guidelines were generous\. While the desired levels of assistance (one extensionist per four communities) were generally achieved, there were problems with and complaints about the high turnover of field technicians, the lack of continuity in the services provided, inadequate support for implementation and monitoring of results, and the unsatisfactory quality of many subprojects submitted for project funding\. In general, the extension agents - 6 -  were young professionals, lacking incentives to remain in the field and often overwhelmed by the administrative demands and requests to produce plans and bankable projects\. On these issues, progress was achieved as a result of the ongoing dialogue on refining project guidelines to create opportunities for improving the provision of services, for developing and integrating within the project strategic lines of assistance (e\.g\., environmental management, IPM, marketing and commercialization), and of removing adverse incentives\. Improvements were seen in the 2002 federal guidelines for the Alianza Para El Campo program when restrictions on investments in technical assistance, training, and extension were removed\. The changes introduced allowed for adequate financing to carry out critical activities as they had been originally intended, such as: participatory diagnostics with community groups, technical assistance, training and organizational support, and impact monitoring\. For the latter, also for the first time, the 2002 guidelines included financing for a quality control and supervision mechanism (through contracts with Universities)\. Another very important change as of 2002 was a prohibition in the program of using public funds for purchasing agricultural inputs (including pesticides and fertilizers)\. This latter created two desirable incentives\. For the technical service providers, it became unavoidable to look to the use of improved agronomic and cultural practices for maintenance of soil fertility and for pest management\. For farmers, the use of agrochemicals would no longer be subsidized by the federal program, requiring they rationalize their practices and complement them with more natural management systems\. As part of the overall dialogue with Government, towards the end of the program SAGARPA expressed interest in working with the World Bank in areas of decentralized, participatory rural development and environmental management of agricultural productions systems; the latter in order to develop payment of environmental services schemes to benefit rural households\. 4\.2\.4 Institutional Strengthening & Project Administration The project was successful in creating the regional councils in most regions and in strengthening grassroots organizations (especially in Veracruz)\. Technical units were created and were successful in maintaining the project as operational\. During the field visits, it was found that the communities appreciated the regional councils as useful organizational structures for discussing their needs and finding solutions to common productive problems\. The new Sustainable Rural Development Law of December 2001 institutionalized the regional council philosophy and principals, but at the same time it introduced a new structure within which the project's regional councils did not fit well either in territorial or in operational terms\. The new law created and gave to Municipal Development Councils the role of prioritizing development investments and to the District Councils the role of a forum for interchange between municipalities and sectors in order to allow for coordination and development of strategic, regional priorities\. As such, the project's regional councils became "obsolete" within the organizational structure for development planning introduced by the new law\. It was noted that in states that were initially distrustful of the project's Regional Councils, at the end these same state authorities expressed their disappointment for the loss of the existing councils as the move was made to municipal-level planning and priotization\. Apparently, in an important number of cases -- following long periods of often-tense dialogue -- the council actors had learned to work in a constructive way\. A side effect, mentioned by some state authorities, was that the mechanism of the councils may have contributed to the reduction in other forms of pressuring Government (e\.g\., invading government offices, blocking roads and demonstrations)\. At the time of project closing, much yet remained to be done to implement the new planning and organizational structures and to consolidate within these a participatory institutional framework\. An important step, taken by the Subsecretariat of Rural Development at the time of project closing, to strengthen these was to finance municipal-level promoters in the marginal areas' municipalities to support and work with the Municipal Development Councils and local communities on - 7 -  participatory planning\. A shortcoming noted in the project's institutional strengthening efforts was its limited contribution to strengthening the strategic/operational relations between SAGARPA and the states; a critical element in the decentralization framework\. Throughout the implementation, bottlenecks between the federal and state level programs existed\. Among these are included: limited systematic communications and dialogue between the two levels of government; and limited consultations between the federal and state levels on adaptations and refinements of program's norms and guidelines\. Given that a number of the problems that contributed to the eventual cancellation of a significant percentage of the loan were ones whose solution required accommodation on the part of the states in areas of financial management and procurement, it is possible that more systematic communications and dialogue may have contributed to a solution\. 4\.3 Net Present Value/Economic rate of return: The economic rate of return is 13\.3% for the overall project which shows that the project had a positive impact on most of the targeted beneficiaries and made a relatively positive overall economic contribution\. In order to carry out the economic analysis, adjustments were made in the price of labor, maize, beans and milk\. The actual rate of exchange of the Mexican peso was used as it is considered to be determined in the open market and other domestic prices are believed to be in line with border economic values\. The subsidies paid through Procampo (*)and the RDMAP itself were excluded from calculations in order to reflect the real social cost of the project\. (*) Begun in 1994, PROCAMPO is a government subsidy program whose objective is to provide direct income support to rural producers\. The program was initiated in response to the liberalization of the Mexican economy to soften the blow to the income of rural producers when government price guarantees for agricultural products were removed\. 4\.4 Financial rate of return: The financial analysis to assess the actual results obtained by beneficiaries of productive investments of APL I was carried out on the basis of twelve farm models (including 4 for milpa production, 3 for home garden/small livestock production, 2 for commercial crops, 1 for cattle production, and 2 for micro agro-industries), valid all across the project areas\. Selected farm models show relatively high positive financial results (see Annex 3); a result that could be expected given the level of subsidy provided to the various on-farm investments\. The exceptions are the models of milpa improvements with soil conservation and milpa with fruit trees, probably because of the high initial investment requirements\. Initial investment costs in the "milpa with fruit trees" model were reduced by 50% through promotion of locally produced grafted fruit tree seedlings and through research showing that equivalent results could be obtained with a 30% reduction in the recommended fruit trees populations\. The switching values show that all models are relatively stable, with the exception of the "milpa with soil conservation" model\. This latter is not surprising considering that terracing (the soil conservation technology in the model) tends to be an inappropriate technology for use with low value crops\. As the project was moving toward the promotion of more appropriate hillside production practices (e\.g\., vegetative barriers, minimum till), in the future the "milpa with soil conservation" model likely would have improved\. The overall financial rate of return was estimated at 50\.9%\. 4\.5 Institutional development impact: - 8 -  The institutional development impact was satisfactory given the extraordinary success of the project had in helping Government rapidly scale up its marginal areas rural development program, although, as noted in Section 4\.2\.4, some aspects of the institutional strengthening component itself could have been more effective\. As mentioned previously, the RDMAP became the basis for SAGARPA's Sub-Secretary of Rural Development's restructuring of its programs\. The major changes came toward the end of 2002 when the Alianza para el Campo programs were restructured in accordance with an integrated rural perspective and based on the new institutional framework defined by the Sustainable Rural Development Law\. All existing, individual programs were conceptually and operationally grouped into three basic thematic areas similar to the RDMAP structure: (i) physical capital development (i\.e\., capital investments); (ii) human capital strengthening (i\.e, training, technical assistance and consultancies to identify, prepare, execute and consolidate investment subprojects); and (iii) social capital building through strengthening organizations, organizational linkages and local participation and decision-making processes\. The RDMAP targeting criteria were adopted for the new program, resulting in about 70% of the Sub-secretary of Rural Development's resources being directed to marginal areas\. According to the 2002 Operational Manual, the new assistance strategy prioritizes capitalization of family production units, food security, sustainable use of natural resources, adding value through post-harvest transformation processes, capacity building in rural activities and higher levels of participation especially through farmers' organizations\. As a learning experience, the RDMAP provided Government and the states with an important opportunity to confront the challenges of developing the instruments and organization required for decentralized, participatory and demand-driven approaches to productive agricultural investment\. While there remains a substantial amount of work required to refine the instruments and approaches initiated under the RDMAP, the evolutionary trends are visible as past learning has been incorporated into revised approaches to be implemented through the new, RDMAP-based program\. One particular area of note is in the ongoing adjustments being made to the approach for provision of technical assistance in marginal areas\. A very positive set of changes introduced at the time of project closing included: (i) more realistic financing ceilings for technical assistance; (ii) making stand-alone technical assistance subprojects eligible for financing; (iii) differentiated payment scales to reduce turnover of field technicians and to create incentives for technicians to visit and work in more remote/marginal areas; (iii) addition of a quality control/outcome certification mechanism in the technical assistance program; and (iv) placement of program promoters in the Municipalities to work directly with the Municipal Development Councils\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: A number of problems affecting public interventions in the rural sector are either beyond the control of Government or are very slow to change as they result from a heavily ingrained institutional/political culture that was reinforced during past decades of "top-down" oriented programs\. There are also persistent structural problems limiting the capacity of small farmers to access assets, to participate in better functioning factor and goods markets (e\.g\., land, financial services, labor, and technology, marketing facilities) and to add value in the post harvest chain\. These constrain their development and the potential for programs such as RDMAP to contribute to the growth process\. This situation constitutes a major policy challenge as NAFTA agreements will put the sector in open competition with Canada and the United States as of 2008\. Factors beyond the control of Government and the implementing agency that affected the project's ability to fully achieve the desired impacts on the direct beneficiaries included: fall in the price of grains in the international market; appreciation of the Mexican peso from 1996 to 2001; public sector reform resulting in the abrupt withdrawal of the public sector from direct provision of technical assistance, and rural - 9 -  financing among others; opening of the Mexican market to imports of grains faster than originally agreed in NAFTA; and institutional cultures in an uneven process of adaptation toward supporting decentralized, participatory and demand driven development approaches\. 5\.2 Factors generally subject to government control: Several implementation problems can be attributed to public management norms and culture and to Government policy\. First, the federal budgetary cycle made it difficult to systematically operate a decentralized, demand-driven project from year-to-year\. This, in turn, made it more difficult to achieve objectives of local capacity building and sustainability\. Typically, financing of community-level activities was initiated during the 4th quarter of any fiscal year\. This was the time required to complete the cycle of Congressional approval of budget, approval and publication of the rules for the functioning of the federal programs during that fiscal year, finalizing of agreements with the states on the transfer of the federal program funds under the new year's rules, transfer of funds to the state and contracting of the technical assistance providers to work with communities and groups on their proposals, selection and approval of proposals\. At the farmer-level, this resulted in late disbursement and a divorce between project support and the seasonal farming cycles\. Multi-year subprojects could not be approved as financing was on an annual basis only\. Second, the project's adaptive approach, which encouraged discussions, reflections and knowledge dissemination, initially confronted a traditional institutional environment that had evolved to operate more centrally-controlled activities\. This, coupled with the aforementioned budgetary arrangements, limited the opportunities for the project to develop and integrate its needed "bottom-up" elements\. Also, top decision-makers did not receive the quality and timely information that was becoming available at the local level unless they actively sought it out by making regular visits to the project communities\. Finally, the Government of Mexico's fiscal policy of non-additionality (*) applied to external financial resources limited the project's potential\. In terms of the RDMAP, a project to progressively build upon learning and experience in order to replicate and scale-up proven approaches, the lack of additionality made all decisions within SAGARPA on resource allocation a zero sum game\. Any incremental investment in institutional strengthening, coordination, monitoring and evaluation, systematization of experiences and dissemination of good practices, and consensus building could only be done at the expense of "productive investment" and through increases in what were considered to be "administrative costs"\. As such, flexibility, experimentation, innovation and adaptation potential were significantly reduced\. In addition, difficulties were created for financial management\. The RDMAP had severe problems in translating expenditure of national funds into disbursements from the Bank\. The executing agencies (SAGARPA and the State governments) had no incentive to bear the incremental transaction costs associated with the Bank's financial management, procurement and disbursement requirements as they would have access to the same amount of resources from the national budget with or without the Bank financing\. This was the primary cause of slow disbursements that resulted in the cancellation of more than 50% of the APL I loan funds\. (*) The World Bank finances a percentage of the federal budget\. Thus, from the agency perspective, World Bank financing does not imply additional resources\. Among others, this means that no additional resources are provided to the agency to cover the transaction costs associated with a Bank-financed project\. This aspect of working in Mexico has long been recognized as a problem that can affect the implementation of investment projects, especially when the project is financing small, scattered activities and/or attempting to break new ground\. Although some projects have coped better than others (see section on Lessons Learned) and the Ministry of Finance requested that the subject of non-additionality be dropped from the ICR (see section on Borrower comments), the non-additionality problem has been, and continues to be, a chronic problem for much of the Mexico portfolio\. - 10 -  5\.3 Factors generally subject to implementing agency control: While overall the RDMAP's contribution was very positive, during the course of implementation a number of critical issues arose\. The commitment by Government to a rapid expansion of the Marginal Areas concept and approach and its integration into the Alianza para el Campo framework resulted in an unforeseen circumstance\. Whereas the RDMAP was to be the pilot ­ a structured learning environment for systematically refining, scaling-up and expansion ­ it was quickly faced with a choice of operating either as an enclave in the Government's much larger program or to be mainstreamed into the larger program\. Given the non-additionality of Bank-financing, the decision to mainstream was a correct one\. However, the integration of the RDMAP into the Alianza now meant that it represented a line of financing within the Alianza that was relatively small (*), but whose execution relative to the rest of the Program required a disproportionate amount of time and resources at the national and state-levels and additional transactions for the recipients\. The increases in administrative complexity resulting from expansion of the program was anticipated\. From late 1999 onward,discussions centered on strengthening the structure and functions at the central and state levels (e\.g\., increasing central level monitoring and follow capabilities and state level operational capabilities), implementing an effective communications strategy on the project's operational rules and characteristics, increasing administrative and technical staff and not prematurely decentralizing some functions\. Specific proposals to deal with administrative issues were generated in the Second National Forum of the RDMAP held in October 2000\. Ultimately, most of the proposed strengthening actions were not implemented as: (i) the changes proposed would have required incremental financing and (ii) from an operational perspective, the RDMAP was already demanding more staff time and operational/recurrent expenditure than the other, non-Bank financed portions of the Alianza programs\. Other issues worthy of mention include: i\. Greater efforts were needed in: a) dissemination and communication to support a process of "horizontal dissemination" between and to get periodic feedback from project actors (federal, state, local, community), and b) to monitor socioeconomic and environmental impacts from baseline situations\. ii\. A more systematic approach to capacity-building programs for community participatory planning during early implementation\. Such a capacity program was eventually organized by SAGARPA and implemented by a specialized NGO (INMEDER) for a limited number of technician and farmers leaders in 2002; iii\. A sustained focus on promoting the formation and/or strengthening of community organizations; sustainable ggriculture farmers' organizations; and development of field technician and producers' technical capacity for on-site adaptation of improved technologies; iv\. A more systematic approach to ensuring appropriate orientation and impact of subprojects through: l Participatory rural assessment including diagnosis and prioritization of issues and opportunities; l Timeliness of disbursements relative to production cycles and field activities; l Reducing administrative tasks required of the field technician so that majority of their time is dedicated to field, not desk, work; l Increasing field technicians responsibilities during the subproject implementation and in the monitoring of results; l Recruitment process of field technicians that ensure an appropriate mix of experienced and - 11 -  inexperienced technicians and of technicians with multidisciplinary backgrounds (especially, social science/community organization, marginal areas production systems, rural development, natural resources, and marketing/commercialization backgrounds); l Development of long-term basic education and training programs for field technician to teach them to move beyond the delivery of only technical messages and to develop capacity of field technicians as "change agents" and "catalyzers"; and l An incentive system to reduce field technician turnover and enhance motivation to work under difficult conditions through more than just salary increases and covering of travel expenses, but also by enhancing potential for professional development\. (*) By the end of 2001, under APL I and APL II, the Bank was financing activities in only 15 regions whereas the government's overall program for Marginal Areas was being implemented in 42 regions\. In addition, Government was financing the implementation of the RDMAP in municipalities within regions where the RDMAP was operating but that where not eligible for Bank-financing, i\.e\., municipalities which met the criteria for RDMAP financing but which had not been included in the APL\. By 2002, Bank financing represented less than 10% of the total program financing\. 5\.4 Costs and financing: The total project cost was US$63\.0 million at appraisal, including Bank financing of US$47\.0 million of Federal and States' budgets and US$16 million of beneficiary contributions\. Actual expenditures amounted to US$48\.9 million, of which Bank financing was US$21\.48 million, GOM US$21\.52 million and beneficiaries US$5\.90 million\. The differences between the appraisal estimates and the final total were primarily attributable to a series of factors discussed below\. The actual expenditures were approximated 78% of the initial budget\. Bank financing was only 46% of the original estimate\. The by-component expenditure, as a percent of original estimates was: Productive Investments - 76%; Community Development ­ 67%; Technical Support ­ 88%; and Institutional Strengthening and Project Management ­ 75%\. The shortfall in overall disbursement is primarily explained by: (i) project start-up was slow; (ii) the mainstreaming of the programs' budget into the Alianza para el Campo, where the states subsequently reset budget priorities, resulting in budget reductions to the Bank-financed RDMAP; and (iii) the lengthy process required to transfer federal program funds to the states\. The Bank loan disbursement data does not accurately portray the real pace of implementation by Government; rather it indicates the problems that were affecting the Bank-financed portion of the program\. For example, in 2000, APL I and APL II had a combined budget allocation of over 260 million pesos (approximately US$ 27\.7 million)\. The entire amount was disbursed by SAGARPA to the participating states, which reported a 100% execution of those funds\. Subsequently, SAGARPA's RDMAP administrative staff estimated that Bank-reimbursable expenditure constituted about 86% of this total (about 224 million pesos)\. The Bank ultimately was able to reimburse only some 55% of that amount\. The process required to do so took 18 months due, among others, to the difficulty that federal-level staff had in obtaining adequate documentation from state officials\. The underlying causes of this situation were primarily: i\. Lack of incentives for: a) the States to collect, maintain or deliver to SAGARPA's RDMAP administrative staff the documentation required for requesting Bank reimbursal, and b) SAGARPA to finance the additional transaction costs associated with the Bank loan\. The additional costs of compliance with Bank procedures had to be absorbed by the States' and SAGARPA's budgets, - 12 -  which given the non-additionality of the Bank loan, were the same with or without the loan funds\. Another contributing factor was that the unspent balance of the budget allocated under RDMAP could be spent on other activities that were subject to more flexible and discretional regulations\. Thus, the RDMAP competed at a disadvantage with other programs of Alianza para el Campo\. ii\. The rapid expansion of the RDMAP by Government, utilizing their own funds, placing tremendous strain on the implementation capacity of SAGARPA's RDMAP staff\. The same staff were administering and managing SAGARPA's Rural Development Sub-secretariat's expanded program as well as numerous other rural development programs\. Despite great diligence and effort on their part, there was neither the time or the resources to resolve the Bank-specific problem\. Attempts were made to increase Bank loan disbursements without result\. Among these were efforts by NAFIN and SAGARPA to jointly analyze the disbursement process in order to simplify and reduce the time required\. Agreements were reached with the Bank to utilize simplified documentation for purposes of disbursement and audits\. SAGARPA also attempted to move fund management and administration to FIRCO (Investment Fund for Shared Risk or Fideicomiso de Riesgo Compartido), an agency of SAGARPA that was effectively managing other Bank-financed programs\. By October 2001 the Bank warned about the possibility of making a partial cancellation of the loan\. By November 2002, only some 30% of the eligible expenditure for 2001 had been disbursed and prospects were not promising for resolving the obstacles to disbursements in 2002\. SHCP, in conjunction with NAFIN, informed the Bank in November 2002 of their decision to cancel US$23 million from APL I rather than seek an extension of the project's June 2003 closing date\. At that time less than 40% of the APL I loan had been disbursed\. Several promising alternatives were discussed to increase disbursements; however SHCP's position was that significant efforts had already been made with no improvement in disbursements, and rather than continue to pay commitment fees, Government would cancel all but what might reasonably be expected to be disbursed before project closing\. In December 2002 all but US$ 6\.0 million were canceled from APL I\. In October 2003, the US$ 2\.5 million yet outstanding to be disbursed was cancelled\. In total, some US$25\.5 million was canceled from the loan\. 6\. Sustainability 6\.1 Rationale for sustainability rating: Overall, sustainability is considered likely\. As discussed above, the project exceeded all expectations with respect to scaling up, both in scope and timing, and eliminating the need for external resources\. Government has mainstreamed the RDMAP\. The bulk of SAGARPA's rural development investment program budget with the states is being allocated utilizing concepts and approaches developed under APL I and APL II\. The new Sustainable Rural Development Law, which greatly strengthens the role of local communities and municipal governments in prioritization of investment resources, provides a suitable framework for sustaining the project's vision of community demand-driven investments\. In addition, the financial and economic rates of return of the project indicate that the potential for sustainability exists\. The project also made important progress with regard to developing the tools and capacity to encourage and facilitate the development of community saving funds (CSF), created out of producers' savings\. Over time, these funds could become important sources of financing for productive investments\. Other factors that been previously mentioned but which are important elements that favor sustainability and demonstrate Government's commitment include: (i) having responded to community demand for technical assistance by both increasing the financing ceilings (investment) in technical assistance and by having made stand-alone technical assistance subprojects eligible for financing; (ii) the introduction of differentiated payment scales to reduce turnover of field technicians and to create incentives for technicians to visit and work in more remote/marginal areas; (iii) the addition of a quality control/outcome certification mechanism - 13 -  in the technical assistance program; and (iv) placement of program promoters in the Municipalities to work directly with the Municipal Development Councils\. 6\.2 Transition arrangement to regular operations: The principal transition arrangements to regular operations are through the new Alianza Contigo (Alliance With You) program framework\. The new program structure consists of three inter-locking subprograms: "PAPIR" or "Rural Investment Projects" for financing investments in physical capital; "PRODESCA" or "Rural Capacity Building Program" for training, technical assistance and studies and; "PROFEMOR" or "Program for Strengthening of Businesses and Rural Organizations" for strengthening organizations, organizational linkages and local participation and decision-making processes\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: The World Bank's performance in the lending process, including APL I and APL II, can be rated as satisfactory\. The project design was consistent with the government priorities at that time and the proposed 10-year program provided Government with a long-term development strategy in the rural areas\. Because, among others, of Government's strong ownership of the RDMAP and the vision it represented, the APL was an appropriate instrument for assisting Government to achieve the goal of reducing rural poverty and fostering sustainable agricultural production among small farmers living in marginal areas\. Risks were adequately assessed and the principal risks identified for the appraisal (availability of technical assistance, functioning of regional councils, etc\.) over time revealed themselves as actual implementation problems for which mitigating measures were foreseen\. 7\.2 Supervision: The Bank's supervision performance was rated as satisfactory\. Project supervision by the Bank was considered to be regular, constructive, and supportive of project implementation\. The Bank team worked closely with the government and the counterpart's implementation unit to monitor progress, advise and assist to resolve problems\. The Bank team established a collaborative relationship with the borrower and supervision missions were usually well regarded both as technical assistance and as a mechanism for messages from local stakeholders and field and state operating staff to be discussed with the federal authorities\. It was demonstrated that supervision missions could, after successive discussions, help to introduce important operational changes\. For example, the discussions reflected in Aide Memoirs around the desirability of making direct disbursements to stakeholders for the purchase of goods and works bore fruit and this method was successfully introduced in Veracruz and Oaxaca\. Such changes as this were the result of joint visits with federal staff to the field, hearing views from local stakeholders that were different from those held at the central level, and the sometimes rapid, sometimes gradual process of fomenting changes based on mutual discussion, observation and knowledge generated through the joint field visits\. State-level actors also saw Bank supervision missions as playing a strategic role in bridging knowledge and suggestions from the bottom to the top administrators\. 7\.3 Overall Bank performance: Overall, Bank performance was satisfactory\. At the Federal, State and sub-regional levels, stakeholders acknowledged the innovative and appropriate vision on which the program has been built\. During the implementation period, it was demonstrated that the RDMAP approach is viable as it is accepted by farmers and communities and can provide good results in terms of sustainable increases in income through diversification and the improvement of productive capacity\. The Borrower and project stakeholders - 14 -  appreciated the Bank's support, advice and supervision during preparation and implementation\. In fact, it could be argued that that Bank performance might merit a highly satisfactory rating, if both the Government and the Bank had been able to successfully overcome the issues stemming from the non-additionality\. However, all sides recognized that the ability of a single project to do so was extremely limited, so ICR rating for Bank performance remains at satisfactory\. Borrower 7\.4 Preparation: The Government's performance in preparing the Project was satisfactory\. The Government of Mexico was fully supportive of the project in both policy and financial terms\. SAGARPA was involved throughout the preparation and provided the needed orientation, technical counterpart and supervision to the project preparation teams\. The program that was developed was relevant\. Local governments and communities strongly supported the project's focus and aims of assisting a large number of communities of rural poor (151,000 communities)\. 7\.5 Government implementation performance: Throughout the implementation of the project the Government's macro-policy framework and priorities were highly supportive of the RDMAP\. There was significant commitment from Government to the types of rural development interventions that the RDMAP represented\. This was manifest in the increased budgetary allocations made to the program and its rapid expansion to new (non-Bank financed) areas and new states\. In terms of the normative and institutional context in which the project implementing agency worked, following the change of administrations at the end of 2000 the context changed greatly\. The change of federal administration from that of the PRI (after over seventy years in office) to a non-PRI federal administration meant a significant change in the relationship between the federal and states' administrations\. For the first time in Mexico's modern history, different political administrations existed at the federal and state levels\. An accelerated decentralization took place in which roles were redefined along a basic differentiation between roles of the federation (policy and norms) and the states (operations)\. Among the results were: i\. The federal bureaucracy's leverage with the states was weakened, which contributed greatly to the inability of SAGARPA to require states to comply with procedures for documenting expenditures in order to obtain Bank reimbursals\. Indeed, the states, as sovereign entities under the Constitution, could not be forced\. Previously, under the PRI structure this had not such an issue due to the "discipline" inherent within the context of a one-party public administration\. ii\. In respect of the inability of SAGARPA to require states to comply with procedures for documenting expenditures, either as a consequence or as a contributing factor, there was a weakening of commitment on the part of SAGARPA management to assume the incremental expenditures associated with the implementation of the RDMAP\. iii\. Communications between federation and states were weakened\. Subsequently, federal level planning and normative design not uncommonly resulted in important changes with limited prior discussion with the states and the states made adjustments to meet their priorities and purposes and the federation was not informed by the states of their adjustments, subsequent operations or results\. It can only be expected that this situation will improve over time as as the federal and state governments learn to work together within the new federal model evolving from mulit-party politics and the ongoing devolution of decision-making to the states and municipalities within the federal programs\. - 15 -  The change in administrations also brought the inevitable change in sectoral authorities and in upper-level public agency staff\. Unsurprisingly, these new actors had little experience in running the public bureaucracy and their learning process was further complicated by the situation described above and by the number and scope of changes that the new sectoral authorities were introducing in Government's rural development programs and in the administrative structures to operate them\. Inevitably this also contributed to slow downs in the project's implementation and, while the RDMAP staff worked hard to learn and get the project on-track, the sum total of the changes (expansion of RDMAP model, mainstreaming of RDMAP, weak communications between federal and state-levels, loss of leverage with states' bureaucracies, reduced commitment of counterpart to assume transaction costs and lack of incentives or additional funds to cover these) created the untenable situation that led to early cancellation of the RDMAP\. Some obstacles were also encountered in the form of bureaucratic rigidities that made it difficult to shift resources within the program as dictated by experience and learning\. Part of this came from pressures associated with overall reform efforts directed at reducing personnel and recurrent/operational expenses at the field-level\. For example, the rapid expansion of the program was not accompanied by an increase in administrative, supervision and monitoring and evaluation capabilities as additional staff could neither be hired nor brought in and outsourcing, which was the primary alternative, could not substitute effectively for internal administrative and operational staff\. Also, strict guidelines greatly limited the capacity of the implementing agency to better allocate program resources when the opportunity arose or to fund necessary innovations like a social communications strategy, technical assistance to the states', development of an appropriate monitoring system and, as already mentioned, the necessary staff to follow up program operations\. As a result, agency staff was stretched thin, over-committed and lacked a complete set of instruments for program management, supervision and evaluation\. 7\.6 Implementing Agency: The implementing agency was SAGARPA's Undersecretary of Rural Development\. Overall performance was satisfactory\. The federal administration of 1995-2000 participated in planning both phases of the APL and was committed to its design and implementation mechanisms\. The resulting project was a vehicle for learning -- from the development of the rules and responsibilities of the Regional Rural Development Committees to the specific ways to contract technical assistance personnel in the field\. The different approaches taken by each participating state in administrative procedures and even to the "philosophy" of the project provided diverse models to learn from\. Some state initiatives, like in the state of Veracruz, decided to contract `community promoters' and to directly disburse program funds to the producer's groups\. In a number of cases, such as those mentioned here, these adjustments proved to be good practices and were subsequently adopted by other states\. Annual nationwide program workshops, which brought together producers, field technical staff, state administrators and federal staff proved to be a good way to share experiences and to disseminate learning within the project\. The project evolved during the 1998 to 2000 period, but it did so slowly\. Changing operational rules was difficult\. It was possible to introduce adjustments only once a year and, due to a "top­down" bureaucratic culture, incorporating experiences and lessons learned from operations and the constructive internal discussions was not a simple matter\. The new federal administration entered in December 2000 and inherited a program whose norms and budget structure were already set and that allowed for no changes in the 2001 exercise\. Thus the "Rural Development in Marginal Areas Project" ran in 2001 much in the same manner as in the previous year\. The new sectoral authorities for SAGARPA's rural development (RD) programs early on initiated a - 16 -  process to try and consolidate the numerous existing RD programs into a simpler, better-focused framework\. After evaluating the some 18 existing programs in the Alianza Para El Campo, it was decided to take the Rural Development in Marginal Areas Project (RDMAP) as the model for the whole of the rural development programs of the new administration\. In particular, the new authorities liked the RDMAP's linkages between technical assistance, social organization and physical investments as well as the participatory approach to decision-making\. They moved forward in 2002, taking important steps to consolidate the existing RD programs into three (see Section 6\.2) and to further decentralize administrative and operational responsibilities to the states and agenda-setting and prioritization responsibilities to the municipal-level\. These goal for decentralization were compatible with the changes introduced (under the new Sustainable Rural Development Law)\. Great gains were made through the ambitious efforts to expand and replicate the RDMAP on the national level\. The impacts from this, particularly in sharpening the poverty and equity focus of RD programs is extremely positive\. Yet, the challenge of implementing these profound changes while overhauling the federal rural development programs was also great\. There was an underestimation of the central capacity to guide and facilitate the desired changes at the state and municipal levels\. No substantial strengthening of central capabilities or provision of technical assistance to effect the administrative changes were provided nor were internal institutional or external communications campaigns put into effect to orient local, state or federal actors on the new programs(*)\. The absence of clear indicators for change or impacts from ongoing restructuring hampered the systematic follow up and refinements to the changes being implemented\. (*) One quite positive response in 2003 was to place Rural Development Promoters (Coordinators) in over 800 poor municipalities, using federal funds, to work in close association with the Municipalities and communities\. 7\.7 Overall Borrower performance: Overall the Borrower's performance is rated as satisfactory\. This overall rating should be seen as combining an unsatisfactory performance in terms of resolving the non-additionality/low disbursement issue and a highly satisfactory peformance in terms of the project having greatly influenced government policy and approaches\. This has resulted in a rapid scaling up and in the mobilization of significant, additional public resources to implement nation-wide a successful program for rural development among the extreme poor in rural areas\. The Borrower showed and continues to show a tremendous commitment to the RDMAP model, its refinement and its implementation\. The Borrower has utilized the RDMAP as a pilot to develop ideas, learn, and to adapt the learning and apply it broadly as intended by the APL approach\. 8\. Lessons Learned Project Management and Administration "Adaptable Program Loans" may not be sufficiently adaptable when a project is successful in convincing policymakers that it merits replication and expansion\. When the pace of change is such that the originally conceived program grows much faster than envisioned, the APL framework may actually inhibit adaptation versus the use of a series of SILs\. Where there is no-additionality and project implementation implies significantly increased transaction costs from the perspective of the key implementation actors, a reasonable incentive framework must be explicitly included in project design to overcome the otherwise high risk that those costs will not be accepted or borne and project implementation will suffer\. - 17 -  The non-additionality of Bank-lending greatly complicates the introduction of new approaches and structures for development\. The absence of incremental financing for such mundane expenditures as contracting of additional personnel at federal and state-levels to assist with the incremental administrative transactions associated with a Bank-financed projects greatly hampers implementation efficiency and is demoralizing to project staff\. Projects that finance small, demand-driven community subprojects through decentralized implementation structures must greatly simplify financial management processes especially those related to the validation of disbursements and expenditures\. Attention should be given to constructing output/outcome-related approaches and to having capacity building for best practice approaches for management and administration of inputs incorporated into project and community subproject design\. Innovative projects and APLs require early, in-depth evaluation before new phases, expansions or major implementation changes\. These evaluations should look at, among others, technical aspects such as appropriateness of technology, impacts of packages recommended, degree of actual participation of target groups, success in development of project management instruments and structures to monitor inputs and outcomes and to detect and resolve implementation problems\. A strong management information system and an efficient administrative structure are needed, as in any project\. Further attention to monitoring, technical review, systematizing of experiences and dissemination of good practices could have significantly increased the quality of the results and the sustainability potential of the program\. Mainstreaming and scaling-up of projects is extremely desirable from many perspectives\. However, from a project management perspective there are risks that must be dealt with in an intentional fashion\. If non-additionality is also a factor, the risks can be much greater\. Scaling-up too quickly rapidly increases the administrative complexity and can dilute the administrative and technical capacities directed toward project implementation as well as limit the potential impact and ability to innovate and learn\. Project Implementation Non-additionality also impacts investments in "best-practice" elements of project design\. In the case of a pilot project, where significant additional training, technical assistance and a more sophisticated than normal monitoring and evaluation system is required, from an agency viewpoint these require significant expenditure that must be "cut" from other (usually operational and investment) budgets\. To overcome this, it seems desirable to heavily front-load these elements in a project in order to establish a "tradition" of such expenditures while there is time and leverage to possibly achieve the needed investment-levels\. In programs where non-additionality in lending is found, more realistic assessments of institutional capacity and the implementing agencies organizational structures and culture must be undertaken and with a slightly different focus than for projects where funds are incremental\. Where loans are not incremental, the assessment must lead to more precise and pragmatic implementation hypotheses that reflect that the options for capacity building and strengthening investments may be substantially reduced as compared to a project where there is additionality\. Without additionality, there will be a much greater reliance over the implementation period on existing capacity and existing processes\. This in turn should lead to more modest expectations of how rapidly change and increased capacity can be attained\. Given the space and the flexibility, the states can innovate and develop appropriate solutions to address implementation issues and create more favorable environments for implementation, tailored to their - 18 -  particular environment\. This type of innovation can be capitalized upon to improve overall program functioning, particularly when cross-dissemination is encouraged between states\. The example of Veracruz's innovative approaches in developing solutions to address issues of quick turnover and thus lack of continuity of field technicians by creating a favorable incentive situation is one example\. Direct disbursement of resources to farmers' groups for their own administration dramatically decreases the time required to initiate local projects, is an efficient way to reduce transaction costs, increases quality control over input and equipment purchase, ensure the types of inputs purchased actually meet the producers' needs, and improves outcomes, project ownership and relations between the project and the project clients\. Key elements to the long term sustainability of programs like the RDMAP include: (i) strengthening and support for inter-institutional coordination at all levels as a continuous need; (ii) operational integration of the current three lines of rural development assistance (PAPIR, PRODESCA, PROFEMOR) into a seamless rural development program for the marginal areas and SAGARPA's priority groups (women, youth, indigenous, and the elderly); (iii) strengthening of the quality control mechanism to ensure adequate supervision and evaluation of the provision of technical services to communities and groups; and (iv) strengthening of a programmatic approach to the promotion, expansion, and maintenance of the group and community savings and credit schemes in order to improve access to credit for the rural poor and build a culture of savings and investment\. Field technicians must follow-up, monitor, and assess the impacts of the sub-projects, by doing so, they will advance much more quickly up the "learning curve"\. The regional councils were useful instruments for improving transparency and accountability with respect to development investments\. In the later transition to Departmental and Municipal Development Councils these could have remained a bit longer in place to transfer their experience and facilitate the change to the new structures\. Training and Technical Assistance The program demonstrated that technical assistance is a very important factor in triggering and fostering rural development in marginal areas and that upstream, preparatory work in participatory social diagnostics and participatory planning are essential tools for reaching poor groups and tailoring actions to what is appropriate to their situation\. Programs seeking to change approaches and behaviors require more and earlier training activities to acquire practical "know-how" in addition to "lectures" on the new concepts\. Examples of what worked well in training included: i) the tutoring systems implemented in Oaxaca, Veracruz, and later in Chiapas through a regional or state-level coordinator and ii) specialized capacity building programs for cross-cutting themes (e\.g\., on community saving and credit accounts and on "Participatory Community Planning") are both more efficient and well-appreciated by the field technicians, resulting in improved performance of the technical assistance, as in Oaxaca and Chiapas\. As learned by the end of the Program, organization for provision of technical services must increasingly focus on i) the strengthening of municipal promoters/technicians, ii) developing and implementing more aggressive plans for capacity building of practitioners, including farmer-to-farmer extension, field visit, and hands-on training and acquisition of "know-how" through specialized units or contractors\. - 19 -  Tutoring of field technicians, particularly in marginal areas, is critical\. Such tutoring should contemplate the need for specialized assistance from academic or scientific organizations\. To make this work, however, challenges resulting from institutional distrust, competing institutional norms require appropriate incentives to overcome\. 9\. Partner Comments (a) Borrower/implementing agency: SHCP Comments We would prefer that the theme of "no-additionality" be removed from the document\. Throughout the document this theme is reiterated as an important reason as to why the two loans were cancelled due to their not being incremental to the executing agency's budgetary ceiling\. The decision to cancel was taken by SHCP because of the very significant lags in disbursements despite numerous attempts to increase them\. It was clear that in the medium term there were not going to be improvements\. If SAGARPA did not assign budget to cover the "incremental administrative costs" mentioned in Section 5\.2 (among others), this was not due to "non-additionality"\. Rather, it was due to a lack of appropriate provisions for budget on the part of the agency, which is a quite different matter\. Also, the legal and budgetary framework applied to these two loans exists for all World Bank loan projects (in Mexico) and does not affect the execution of these others\. Further, this rule existed from the time of the preparation of the loan project and was known to all parties prior to the negotiations\. In virtue of the points mentioned, it is the request of SHCP that this theme be removed from the implementation completion report SAGARPA Comments 3\.5 Quality at Entry It is important to note that the implementation arrangements had incompatibilities with respect to the actual function/procedures of the involved public institutions in the following areas: l In practice, many of the functions and responsibilities of the executing agency (SAGARPA) were actually functions and responsibilities that were devolved to the state governments\. l The roles of the individual actors and levels in the process of definition of budgets (especially the roles of SHCP, SAGARPA and the state governments)\. l The institutional implications of the operations of the Marginal Areas project versus the operations of the Alianza Para El Campo program through which it was executed, especially as regards the additional processing demands (transaction costs) of the project in the absence of incremental funds in the budget to cover these costs\. l The period of the project versus the periods of planning and responsibility of a government administration\. 4\.2 Outputs by components\. The initial financing of the project of recurrent costs in the farmer's production system, especially inputs like agrochemicals, created dependencies and made it difficult for farmers to see the real costs of production\. Therefore guidelines were changed (ed\. note, change was made in the 2002 program guidelines) to orient assistance towards capitalizing farmer's production systems\. This change in no way - 20 -  impeded the programs' potential to improve agricultural practices and introduce technological changes, however farmers would have to pay with their own funds for inputs\. The role of the "Regional Councils for Sustainable Development" in the project was never adequately documented\. There are diverse opinions about the actual utility of the Councils\. In the State of Veracruz, for example, the Councils were never formed\. In Puebla, the Councils were primarily for purposes of form rather than substance\. In the Huasteca, the Councils were somewhat closed, excluding other project stakeholders and often operating with logic of distributing available assistance among groups linked to the Council\. 7\.6 Implementing Agency: In 2002, the change in the Alianza Para El Campo program guidelines was the expression of the change in policies brought by the new administration\. In this sense, that the policy changes would result in adjustments to the Alianza program should have been foreseen and expected by all participants\. (b) Cofinanciers: (c) Other partners (NGOs/private sector): 10\. Additional Information - 21 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Increase of productivity by about 40% to Productivity increase at least 40%, income Based on FAO/SAGRPA evaluation in 2001, 50%, and increase of income by about 30% increase at least 30%\. The latest data are not available\. [1] to 40% for participating producers\. Community plans for natural resources 100% 100% [3] & [5] management, small infrastructure and capacity building approved and implemented in participating communities\. Producers who adopt the new technology 50%\. 50% for milpa, and over 70% for fruit, coffee experienced an increase of yield of the milpa and livestock\. by 40%, fruit, coffee and livestock by 30% at end of the project\. Percentage of the projects are still operating 70% No data two year after the financing of the investment\. Percentage of the producers supported by 70% 17% [1] the project improve their income by at least 30% at EOP Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate Subprojects financed annually during project Oaxaca 225 2000 budget executed in 2001 [3]: life\. S\.L\.P\. (1st Phase) 150 Oaxaca 269 Hidalgo 125 S\.L\.P 275 Veracruz (1st Phase) 100 Hidalgo 94 Veracruz 497 Small holders benefiting from the project by Oaxaca 14500 2001 [3]: EOP\. Veracruz (1st Phase) 8400 Oaxaca 8799 [9] S\.L\.P\. (1st Phase) 9100 S\.L\.P\. 1531 Hidalgo 8000 Hidalgo 6960 Veracruz 2194 [10] Percentage of projects subject to funds 80% Percentages of subprojects with a cost recuperation implement a cost recovery recovery element, as of December 2001 [3]: system\. Oaxaca Cuicateca 10% Oaxaca Mazateca 83% Oaxaca Mixe 42% Huasteca Hidalgo 80% Huasteca Veracruz 6% Huasteca S\.L\.P\. 15 [2] Percentage of subprojects for milpa 50% In general, most of milpa improvement improvements in watershed areas that adopt subprojects included some component of soil methods of soil conservation and water conservation, such as contour planting and management\. stone line\. However, in practice only a few producers fully applied the recommendations contained in the subprojects\. Establishment of one extensionist in every 4 1 extension agent in every 4 communities Communities per extension agent, on communities assisted\. assisted\. average: Oaxaca 4\.5 Huasteca Hidalgo 3 Huasteca Veracruz 5 Huasteca S\.L\.P\. 4\.5 [3] [6] Percentage of producers who receive 50% 70% technical assistance on agricultural technology who adopt proposed changes\. Percentage of the subproject beneficiaries 60% 50% (?) who received technical assistance who consider technical assistance to be - 22 -  satisfactory A Regional Council for Sustainable 1 in each region\. Regional councils were established in every Development operating in every region region, with the exception of Veracruz, as this (project units), with participation of was a prerequisite for receiving assistance\. institutions, producers' organizations, community representatives, and NGOs\. Percentage of approved subprojects disburse At least 90% (% within 60 days) funds within 45 days of project submission\. Oaxaca Cuicateca 20 Oaxaca Mazateca 10 Oaxaca Mize 5 Huasteca Hidalgo 85 Huasteca Veracruz 0 Huasteca S\.L\.P\. 8 [3] 1End of project [1] According to FAO/SAGARPA evaluation 2001, 67\.9% and 17% of beneficiaries increase productivity and income respectively\. As regards productivity increase, quantitative data was only obtained from key informants in the field\. On average low increase in traditional food crops yields (50% maize, 60% beans)\. When new cropping systems were introduced, including conservation tillage, legume cover crops and fruit trees contours, productivity more than doubled in maize and beans\. In addition, there has been introduction of new high value added crops (fruits, etc\.), that most certainly have involved increase in producers' income\. As regards income, the trend towards shifting investments from subsistence production to cash income generation crops and livestock production may suggest that farmers were increasing income\. This is an observation further supported by the fact that the community saving funds grew significantly over the years\. [2] There is no information available on the actual % of funds which were recovered\. There has been an important development of community saving funds (CSF), which were created out of producers savings, to whose creation the project made a crucial contribution by initiating the CSF movement and providing the appropriate technical assistance\. Indicatively it was reported by SAGARPA/Inca Rural that by July 2002 there were the following number of CSF in the states assisted in the project\. State Number of CSF Number of Amount of savings members (Mexican pesos) Chiapas 218 4858 786951 Guerrero 9 399 206425 Hidalgo 20 466 275860 Michoacán 23 480 103248 Oaxaca 53 2267 1839327 San Luis Potosí 14 1246 437445 Veracruz 21 759 120710 - 23 -  [3] Reported by SAGARPA\. [4] According to data contained in Evaluation of Alianza para el Campo 2001, SAGARPA/FAO\. The survey covered the states of Chiapas, Guerrero, Hidalgo, Michoacan and Puebla\. [5] Participatory rural assessments and plans of community-based natural resources management were mostly carried out to comply with the Norms and Operative Manual and were rarely taken into consideration or updated during the following process of subproject development\. [6] According to SAGARPA, in 2001 there were 248 extensionists with different specialties involved in the project\. [7] Organic cropping, such as compost application, was introduced and well accepted in home garden (traspatio), but as it highly labor intensive it was hardly applied in open field cultivation\. Experiences of biological control did not work properly because lack of monitoring and lack of on site validation\. [8] There was an increased demand for investments in practices conducive to conservation and sustainable management of land and water resources, including conservation tillage, living edges and agroforestry activities\.Producers from Oaxaca, Veracruz and Hidalgo had steadily increased the demand for such investments to represent about 10% of the total amount of productive investments\. This increase is particularly significant in Oaxaca: 1st year, 2\.2% ( corresponding to a total amount of about US$22,000); 2nd year, 7\.6%; 3rd year, 10\.9; 4th year, 15\.0%; 5th year, 20\.8% (corresponding to a total amount of about US$ 312,000)\. In Chiapas, technical assistance reports that many farmers were asking for investments in soil and water management, such as terracing, and simple gravity irrigation system\. Such investments were usually not implemented for several reasons, including a) higher cost leaving less investment opportunities to communities, b) lack of coordination or good will from public institutions "officially' in charge of such investments (e\.g\. SEMARNAP, CNA)\. According to SAGARPA/FAO Evaluation, 38\.9% of beneficiaries believe that the program has undertaken positive actions towards natural resources\. [9] The State Technical Unit reports that from 1997 to 2001 a cumulative total of 52,324 Family Productive Units (FPU) received support from the program, including Productive Investments for 44,683 FPUs, Community Investments involving 1,796 FPUs, and TA for 5,890 FPUs\. [10] State SAGARPA Delegation reports that for the period 1998-2001, 12,359 FPUs received support\. [11] The financial and economic analysis of some micro-enterprises sub-projects, such as aquaculture production in Oaxaca and Chiapas, show that significant amount of labor force was hired monthly\. - 24 -  Similarly, community restaurant as developed in the Huasteca regions has also created job opportunities\. [12] Farmers targeted by the project were generally highly supportive of the technical assistance received\. Most of the communities had hardly received any attention in the past, and they were naturally appreciative of this new attention, particularly coming from field technician speaking their own idiom\. The SAGARPA/FAO evaluation makes a clear distinction between the percentage of beneficiaries who were satisfied with the support provided by the Program, and the percentage of producers who have changed their farming practices or improved their technical knowledge\. For instance, the evaluation in Guerrero (2001) shows that 93\.5% of interviewed farmers estimate that the support and services provided by the Program were of good quality, but this support came late for 63\.6% of them, and more concerning , 88\.3% acknowledged that they have not learn anything new regarding farming practices\. - 25 -  Annex 2\. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million Productive Investment 40\.00 30\.50 76 Community Development 6\.00 4\.00 67 Technical Support 13\.00 11\.41 88 Institutional Strengthening and Project Management 4\.00 3\.00 75 Total Baseline Cost 63\.00 48\.91 Total Project Costs 63\.00 48\.91 Total Financing Required 63\.00 48\.91 Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N\.B\.F\. Total Cost Other 1\. Works 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 2\. Goods 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 3\. Services 0\.00 0\.00 15\.00 0\.00 15\.00 Consultants Service (0\.00) (0\.00) (11\.00) (0\.00) (11\.00) 4\. Subprojects 0\.00 0\.00 46\.00 0\.00 46\.00 (0\.00) (0\.00) (34\.50) (0\.00) (34\.50) 5\. Operating Costs 0\.00 0\.00 2\.00 0\.00 2\.00 (0\.00) (0\.00) (1\.50) (0\.00) (1\.50) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 0\.00 0\.00 63\.00 0\.00 63\.00 (0\.00) (0\.00) (47\.00) (0\.00) (47\.00) Matching grants\. Community procurement and direct contracting for works, goods and services for subprojects of less than US$30,000\. Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N\.B\.F\. Total Cost Other 1\. Works 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 2\. Goods 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 3\. Services 0\.00 0\.00 11\.41 0\.00 11\.41 Consultants Service (0\.00) (0\.00) (4\.47) (0\.00) (4\.47) 4\. Subprojects 0\.00 0\.00 34\.50 0\.00 34\.50 - 26 -  (0\.00) (0\.00) (16\.36) (0\.00) (16\.36) 5\. Operating Costs 0\.00 0\.00 3\.00 0\.00 3\.00 (0\.00) (0\.00) (0\.65) (0\.00) (0\.65) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 0\.00 0\.00 48\.91 0\.00 48\.91 (0\.00) (0\.00) (21\.48) (0\.00) (21\.48) Matching grants\. Community procurement and dirct contracting for works, goods and services for subprojects of less than US$30,000\. 1/Figures in parenthesis are the amounts to be financed by the Bank Loan\. All costs include contingencies\. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units\. Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate Bank Govt\. CoF\. Bank Govt\. CoF\. Bank Govt\. CoF\. Productive Investment 30\.00 14\.23 10\.57 5\.70 47\.4 Community Development 4\.50 2\.13 1\.77 0\.10 47\.3 Technical Support 9\.50 4\.48 6\.83 0\.10 47\.2 Institutional Strengthening 3\.00 0\.65 2\.35 21\.7 and Project Management Total 47\.00 47\.00 15\.75 21\.48 21\.52 5\.90 45\.7 45\.8 37\.5 Note: 1\. The Bank loan financed both the Federal and State contributions, which at appraisal were estimated to be: Federal Govt\. - US$31\.50 million (50% total project cost) and States - US$15\.75 million (25% of total project cost)\. Because there is no additionality to Bank loans in Mexico, the Appraisal Estimate only shows the Bank financing, i\.e\., to present Govt\. financing in the above table would simply be to repeat the figures in the "Bank" column in the "Govt\." column\. Also, the PAD does not provide a clear breakdown of Federal, State and Beneficiary financing by component therefore no attempt was made to do so here\. In the "Actual/Latest Estimate" the reported "Govt\." expenditures represent the eligible expenditures for which SAGARPA was unable to obtain Bank reimbusal\. 2\. "Govt" includes Federal and State financing\. "CoF" includes beneficiary financing\. 3\. SAGARPA has cost breakdowns for Bank financing by disbursement category and not by component\. Therefore, "Actual/Latest Estimate" figures for Bank financing at the component-level is taken from the disbursement data, whose categories correspond to the components with the exception of Components 1 and 2, which are included in the disbursement category "Subprojects"\. The division of these latter was based on best estimates from the information available\. - 27 -  Annex 3\. Economic Costs and Benefits The economic and financial analysis has been carried out for evaluating the output of the porject\. About the farm models The ex-post evaluation was developed according to the following methodology\. First, a selection of the main activities supported by the Productive Investments component of the project was done on the basis of their occurrence and major contribution to the disbursement in the 8 States covered by the WB loan\. Five selected activities - "Milpa" improvement; "Traspatio"; Commercial Crops; Livestock Production; Micro-enterprises ­ represent about 80% of the total disbursement effectively realized during APL I\. Second, for each main activity, specific subprojects were selected from several proposals made by the beneficiary communities at local level\. The selection made for the analysis is responded to a threefold criteria: i) frequency of subprojects supported in each area, ii) availability of data, particularly on costs, prices and change in productivity, and iii) potential for application of the subprojects to the different marginal areas\. Third, cost and returns were calculated on the basis of 2001 prices, since this was the last year of full project implementation\. The analysis overlook the differences encountered in the different States concerning the same type of activity\. Likewise, it didn't seem necessary to make a distinction between the 2 phases as the "weight" of the selected activities, in terms of actual disbursement ­reflecting the demand- have been very similar\. Twelve models of productive systems were developed: Activity 1: Milpa and Corn Production 1\. Improved "milpa" (traditional milpa with agrochemical inputs and increase in plant population; seeding along contour); 2\. "milpa" with soil conservation (improved milpa with earth works, including terracing); 3\. Corn in association with commercial crop (hot pepper associated with 10 lines of corn); 4\. "milpa" with fruit trees in contours (peach trees planted every 10-12m, associated with improved milpa); Activity 2: Home garden ("Traspatio") 5\. "traspatio" with chicken and eggs production (improved alimentation of birds, and production of chicken and eggs); 6\. "traspatio" with sheep production (breeding improvement and lambs marketing) ; 7\. "traspatio" with pig production (breeding improvement and piglets marketing); Activity 3: Commercial crops 8\. Improved management of Citrus orchard (regeneration of under managed orchards); Activity 4:Livestock production 9\. Livestock production (breeding improvement and calves and milk marketing); Activity 5: Micro-enterprises 10\. Women handicrafts workshop (production of traditional clothes and handicrafts including, purses, backpack, hats); 11\. Fish production (building of tanks to raise trouts, tilapias, using canalized run-off waters); 12\. Corn mill (for production of corn floor and corn "masa")\. The models have been applied across all regions\. It was taken a conservative assessment of productivity increase to match the range of yields and productivity identified by several sources including regional experts Sources of information include Report from the State Technical Unit from Oaxaca, Annual - 28 -  evaluations from Veracruz, Hidalgo, Puebla, Chiapas, San Luis Potosi, Michoacan, Guerrero, subprojects documents provided by Chiapas, Hidalgo, Puebla, Veracruz, Oaxaca, and resource persons from SAGARPA, State Delegation, FIRCO, and from the World Bank\. A corrective evaluation of labor was applied when the region offers possibility of better remuneration e\.g\. in coffee production region the labor cost was raised at 50 Mexican pesos/day compare to the average 30-35 Mexican pesos/day applied in most marginal areas\. It was assumed that price of coffee increased after the third year from 6\.3 to 10 pesos as a result of international price recovery\. Financial analysis A financial analysis was carried out to assess the actual results obtained by beneficiaries of productive investments of the project\. All twelve farm models (including 4 for milpa production, 3 for "traspatio" production, 2 for commercial crops, 1 for cattle production, and 3 for micro agro-industires) were considered valid all across the project areas, though in different proportions of the benefiting farmers\. Full investment costs were included as well as the amount of subsidy provided by the project which entered into the models as grants\. Assumptions regarding yield increases were made on the basis of data obtained from surveys undertaken by the SAGARPA/FAO 2001 evaluation of the Alianza programs and from data collected in the field from key informants\. Other data inputs were obtained locally during the visit to several project areas\. Financial Results Switching Value MODEL NPV FIRR (%) -Benefit % +Costs % 1\. Improved Milpa $137,623 79\.1 -71\.1 246\.0 2\. Milpa with Soil Conservation ($751) 4\.9 -0\.8 0\.8 3\. maiz with Hot Pepper $876 20\.5 -17\.0 20\.5 4\. Milpa with Fruit Trees ($16,171) -25\.3 -154\.2 60\.7 5\. Chicken and Eggs, Traspatio $21,252 31\.7 -34\.0 51\.6 6\. Sheeps, Traspatio $20,008 21\.1 -24\.6 32\.6 7\. Pigs, Traspatio $19,325 56\.3 -36\.9 58\.5 8\. Citrus $2,119 22 -17\.8 21\.6 9\. Livestock Production $20,165 32\.3 -53\.7 111\.2 10 Women Handicrafts $939 16\.3 -11\.8 13\.4 11\. Fish Production $6,268 34\.3 -21\.5 27\.3 12\. Corn Mill $11,004 34\.4 -27\.0 38\.2 Total Project $186,543,718 50\.9 -243 256 All selected farm models show relatively high positive financial results as can be seen in the table above, which could be expected given the level of subsidy provided to the various on-farm investments\. The exceptions are the models of milpa improvements with soil conservation and milpa with fruit trees, probably because of the high initial investment requirements\. The switching values (that indicate the required change as a proportion of the base value of returns and costs for the NPV to equal zero) show that all models are relatively stable, that is not very much sensible to changes in costs and returns, with the exception of the one of milpa with soil conservation\. - 29 -  The overall financial rate of return was estimated at 50\.9%\. For the aggregate financial and economic evaluation, the mentioned 13 farm models were incorporated according to the relative importance of the various productive investments financed and the number of farms, and the general costs of the project were added\. Investments required by producer are shown in the table below, including the amount of subsidy granted on average in each farm model\. Investments and Returns by Producers AM Incentive Average Increased TYPE of MODEL Toal Investment Amount Percentage returns 1\. Improved Milpa $25,000 $20,000 80 $15,337 2\. Milpa with Soil Conservation $2,660 $713 27 $2,204 3\. maiz with Hot Pepper $1,078 $650 60 $2,205 4\. Milpa with Fruit Trees $20,834 $6,000 29 $2,025 5\. Chicken and Eggs, Traspatio $1,600 $1,224 77 $19,830 6\. Sheeps, Traspatio $30,750 $9,500 31 $16,059 7\. Pigs, Traspatio $16,468 $7,500 46 $10,900 8\. Citrus $70 $2,625 70 $7,000 9\. Livestock Production $16,337 $5,000 31 $14,034 10 Women Handicrafts $335 $150 60 $6,690 11\. Fish Production $12,264 $6,500 53 $8,450 12\. Corn Mill $2,200 $1,867 78 $11,930 Economic analysis For the economic analysis it was considered adjustments in the price of labor because of the assumed limited employment opportunities for the targeted group of workers\. Thus, shadow price for labor were estimated at 80% of the market price\. As regards maize, beans and milk, the shadow prices reflect the still existing market distortions, remaining after the policy reforms undertaken in Mexico in past years and the current opening of the economy\. The corrections introduced are 90% for maize and beans and 80% for milk\. The rate of exchange of the Mexican peso is considered to be determined in the open market and other domestic prices are considered in line with border economic values\. The subsidies paid through Procampo and the RDMAP itself were excluded from calculations in order to reflect the real social cost of the project\. The economic internal rate of return is 13\.3% for the overall project\. All together these calculations show that the project had a positive impact on most of the targeted beneficiaries and made a relatively positive overall economic contribution in spite of the subsidy component\. Fiscal Impact The loan/project supported a larger SAGARPA program and operated within the existing budget allocation of SAGARPA and the state governments, and it did not generate additional budgetary financial requirements for the Federal Government\. State governments derived the bulk of their budgetary resources from federal transfers as they cannot retain tax revenues\. Incremental tax revenues as a result of project - 30 -  activities were negligible as sales of goods and services in the agricultural sector are exempt from the Value Added Tax (IVA) and income tax revenues from incremental profitability of on-farm production were also negligible given the level of income of the benefited population\. - 31 -  Annex 4\. Bank Inputs (a) Missions: Stage of Project Cycle No\. of Persons and Specialty Performance Rating (e\.g\. 2 Economists, 1 FMS, etc\.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation Identification 14 Economist (2), Agroecologist (1), Mission: 07/1995 Natural Resources Spec\. (2), Anthropologist (1), Indigenous Spec\. (1), Rural Sociologist (1) , Monitoring And Evaluation Spec\. (1), Agronomist (2), Institutions Spec\. (1), Policy Analyst (1), Rural Development Spec\. (1) Appraisal/Negotiation Appraisal 14 Economist(2),Agroecologist Mission: 06/1997 (1), Natural Resources Spec\. (2), Anthropologist (1), Negotiations: Indigenous Spec\. (1), Rural 12/97 Sociologist (1) , Monitoring And Evaluation Spec\. (1), Agronomist (2), Institutions Spec\. (1), Policy Analyst (1), Rural Development Spec\. (1) Supervision 10/1997 6 Ag\. Economist (1); Nat\. Res\. S S Manag\. Spec\. (1); Rural Finance (1); Micro-Enterprise (1); Anthropologist (1); Monitor & Evaluat (1) 04/1999 6 Sector Leader (1); Economist (1); S S Natural Resource Spec\. (1); Commodity Specialist (1); Rural Finance Speciali (1); Social Development Spe (1) 11/1999 5 Sector Leader (1); Ag Economist S S (1); Ngos And Social (1); Proj\.Mangm\.Specialist (1); Communic\.Specialist (1) 06/2000 4 Task Manager (1); Sector Leader S S (1); Agriculturalist (1); Socil Scientist (1) 11/2000 4 Task Manager/Agric\. Ec (1); S S Sector Leader/Agric Ec (1); Agriculturalist (1); Social Scientist (1) 05/2001 8 Sector Leader/Ag\.Econ\. (1); S S Agriculturalist (1); Natural - 32 -  Resources Mgmt (1); Social Communications (1); Social Scientist (1); Procurement (1); Financial Management (1); Policy/Institutions (1) 06/2001 5 Task Team Leader/Sr\. Nat\.Res\. S S Spec\. (1); Social Specialist (1); Sr Procurement Special (1); Financial Management (1); Agroecologist (1) 10/2001 4 Task Team Leader/Sr\. Nat\.Res\. S S Spec\. (1); Social Specialist (1); Agroecologist (1); Natural Resources Mgmt (1) 04/2002 5 Task Team Leader/Sr\. Nat\.Res\. S S Spec\. (1); Social Specialist (1); Agroecologist (1); Financial Management (1); Sr\. Procurement Spec\. (1) 11/2002 6 Task Team Leader/Sr\. Nat\.Res\. S S Spec\.(1) ; Sector Manager (1); Agroecologist (1); Social Spec\. (1); Financial Mgmt\. (1); Sr\. Procurement Spec\. (1) 04/2003 4 Task Team Leader/Sr\. Nat\.Res\. S S Spec\.(1) ; Agroecologist (1); Social Spec\. (1) ; Financial Mgmt\. (1) 06/2003 3 Task Team Leader/Sr\. Nat\.Res\. S S Spec\.(1) ; Social Spec\. (1); Sr\. Financial Mgmt\. Spec (1) ICR 12/2003 4 Team Leader/Sr\. Ag\. Econ (1); Agroecologist (1); Social Spec\. (1); Financial Mgmt\. (1); Ag\. Economist (1) Note: No data available on details of identification, preparation, appraisal and negotiations missions\. Information presented from PAD Annex 7\. (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation Not Available $506,903 Appraisal/Negotiation Not Available --* Supervision 94 $396,940 ICR 3** $14,819** Total * - No details available on SW and costs for identification, preparation, appraisal and negotiations missions; cost is for all LEN phase\. - 33 -  ** - Actuals for ICR for APL I do not reflect actual cost\. APLI and APL II charged to APL II task code (avg\. per ICR 15 SW, $61,922) - 34 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 35 -  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6\.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 36 -  Annex 7\. List of Supporting Documents Banco Mundial\. Guidelines for preparing implementation completion reports\. ICR\. Ayudas de memoria del PDRAM\. Abril de 1999 Ayudas de memoria del PDRAM\.Noviembre de 1999 Ayudas de memoria del PDRAM\.Junio de 2000 Ayudas de memoria del PDRAM\.Octubre de 2000 Ayudas de memoria del PDRAM\.Mayo-Junio de 2001 Ayudas de memoria del PDRAM\.Octubre de 2001 Ayudas de memoria del PDRAM\.Abril-Mayo de 2002 Ayudas de memoria del PDRAM\.Noviembre de 2002 Ayudas de memoria del PDRAM\.Junio de 2003 James Smyle\. 2003\. Ayuda de memoria de junio de 2003 con comentarios al "Informe Final de Resultados Alcanzados de Sagarpa\. Smyle\. 6 páginas\. Enviada el 15 de julio de 2003 a C\. Tunon\. James Smyle\. Propuesta de calendario y tareas para el ICR en hoja excel\. Garfield\. Documentos varios relacionados con la colaboración especial de Francisco Medina\. Enviados por Garfield el 9 de octubre\. Garfield\. Agenda para cierre con Sagarpa\. 7 de noviembre\. 4 páginas\. Christian Pieri\. Annex 1\. Key Performance Indicators/Log Frame Matrix\. Pieri, Caballero, 7 pages\. Nov\. 7th, 2003\. Christian Pieri\. 2003\. SUMMARY OF THE FINANCIAL/ECONOMIC EVALUATION\. Pieri, Medina, Caballero\. 2 pages\. Nov\. 7\. 2003\. Christian Pieri\. 2003\. About the Farm Models\. Pieri\. 2 pages\. Nov\. 7, 2003\. Christian Pieri\. 2000\. RURAL DEVELOPMENT IN MARGINAL AREAS\. APL Phase I: 1997-2000; APL Phase II: Dec\. 1999-2002\. Technical Aspects: Adequacy of Technologies, Technical Assistance role and activities, and their impacts\. Executive Summary\. Pieri\. 6 pages\. Nov\. 6th\. Jorge Caballero Cerruti Jorge Caballero Cerruti \. Propuesta de cuadros (en blanco) para pedir información a Sagarpa\. 22 de septiembre\. Jorge Caballero Cerruti\. BTO del 16 de noviembre\. 4 páginas\. Dirigido a Selim Mohor\. Jorge Caballero Cerruti\. Preguntas de Maddalena DiGiorgio a Francisco Médina, enviadas por Caballero el 27 de octubre\. Jorge Caballero Cerruti\. ICR\. Aportaciones de Caballero del 31 de octubre\. En inglés\. 6 páginas sobre: 3\. Assessment of Development Objective and Design, and of Quality at Entry; 4\. Achievement of Objective and Outputs; 5\. Major Factors Affecting Implementation and Outcome\. Jorge Caballero Cerruti\. 2003\. Comentarios generales sobre el proyecto\. Caballero, 6 pages\. Sent by - 37 -  Garfield on Nov\. 7th\. 2003\. Jorge Caballero Cerruti\. Annex 2\. Project Costs and Financing\. Caballero, 4 pages\. Jorge Franco\. Programa de Desarrollo Rural en Áreas Marginadas\. ICR\. Aspectos sociales\. Jorge Franco, 21 páginas\. Enviado el 19 de octubre\. Jorge Franco\. Aportaciones al formato ICR\. Español e inglés\. Jorge Franco\. Enviado el 19 de octubre\. Jorge Franco\. 2003\. Aportaciones de Jorge Franco en el formato de ICR Guidelines (en inglés)\. Sent on November 3th, 2003\. Jorge Franco\. Evaluación de la Alianza para el Campo 2002\. Insumos para el ICR\. Jorge Franco, 10 pags\. José María Caballero\. Nota de política sobre desarrollo rural (Chiapas)\. 23 pags\. Enviada por Garfield el 17 de octubre\. Consultores del BM (José Valencia)\. 2002\. Alternativas de organicidad de los Consejos Regionales de Desarrollo Sustentable, en el marco del nuevo sistema de planeación y participación social de la Ley de Desarrollo Rural Sustentable que propone Consejos Distritales y Municipales\. José Valencia, Mayo de 2002\. Leyes\. 2001\. Ley de Desarrollo Rural Sustentable\. Diario Oficial 7 de diciembre de 2001\. Leyes\. 2002\. Reglas de Operación de la Alianza para el Campo 2002\. D\.O\. 15 de marzo de 2002 Sagarpa\. 2003\. Informe final de los resultados alcanzados en el marco del préstamo 4276 del Banco Mundial\. 30 de junio de 2003\. 38 pags\. Sagarpa\. 2000\. REPORTE DE EJECUCIÓN\. Préstamo 4276 ­ ME\. RESUMEN EJECUTIVO\. PERIODO: 1 de enero del 2000 ­ 30 de junio del 2000\. 9 pags\. - 38 -  Additional Annex 8\. Borrower Executive Summary PROGRAMA DE DESARROLLO PRODUCTIVO SOSTENIBLE EN ZONAS RURALES MARGINADAS\. INFORME FINAL DE LOS RESULTADOS ALCANZADOS EN EL MARCO DE LOS PRÉSTAMOS 4276-ME Y 7004-ME DEL BANCO MUNDIAL "PROGRAMA DE DESARROLLO PRODUCTIVO SOSTENIBLE EN ZONAS RURALES MARGINADAS" (RESUMEN EJECUTIVO) 1\. Evaluación del proyecto\. a) Objetivos El planteamiento de objetivos a lograr correspondió con la realidad del sector rural marginado, su cumplimiento fue relativamente satisfactorio, dado que su desarrollo fue heterogéneo; en algunos estados se tuvo relativo interés, en tanto que en otros hubo más voluntad y más interés de alcanzar los objetivos, así como más recursos a disposición del programa y más control\. b) Diseño La conceptualización del diseño del programa fue acertada en su mayor parte porque consideró los elementos fundamentales al concebir dentro de su estructura una filosofía, enfoque, metodología, estrategias, mecanismos de implementación, normas e indicadores bastante congruentes con los objetivos del mismo proyecto y con la lógica de producción y costumbres de la familia rural de alta y muy alta marginación\. Sin embargo, le falto un sistema eficiente de administración de las acciones del programa para asegurar los resultados en la parte operativa, un esquema operativo y de control, así como un sistema de información y mecanismos eficientes de gestión\. Asimismo no hubo un plan estratégico de servicios técnicos para los proyectos, no se considero la parte de capacidad de ejecución real a nivel institucional\. c) Implementación No obstante que se llevaron a cabo importantes acciones de implementación para dejar instalado debidamente el programa en las regiones de los estados como: 1) Presentar el programa a los gobiernos estatales e instituciones federales que operan en las regiones, aclarando las características y particularidades del mismo, acordando los municipios de las regiones, 2) Se constituyeron los comités estatales del programa respectivos incluyendo funcionarios federales y estatales, 3) Se seleccionó y preparó personal técnico de diferentes instituciones en el diagnóstico socioeconómico regional participativo mediante talleres con apoyo de la FAO y Banco Mundial, 4) Se elaboraron estudios; socioeconómico, Técnico y Financiero regional, de impacto ambiental y de las Organizaciones en cada región e incluso en Oaxaca se realizaron estudios específicos como el de sistemas de producción, mujeres, caminos saca cosecha, etc\., con apoyo de fondos japoneses del Banco Mundial, 5) Se previó la necesidad de conformar los Consejos Regionales de Desarrollo Sustentable y las Unidades Técnicas de los Consejos, impulsando su formación, 6) Se llevaron a cabo talleres para revisar y modificar los diagnósticos socioeconómicos de cada - 39 -  región por diferentes instituciones y organizaciones de productores, 7) La normatividad del programa y su manual de operación se explico en cada estado con crédito externo\. d) Experiencia de la operación Las experiencias de la operación del programa son heterogéneas con buenos o regularmente satisfactorios resultados, a partir del compromiso de los ejecutores y, de la participación de los productores en los consejos regionales de desarrollo rural sustentable y en los procesos de planificación comunitaria\. Los servicios técnicos de campo contribuyeron a impulsar la participación de los productores en la toma de decisiones de la planeación, operación y seguimiento de su propio desarrollo y de la sociedad rural, logrando la organización de unidades de producción familiar a través de diagnósticos, planes y proyectos de desarrollo integral comunitario participativo, generando el desarrollo de capacidades locales, tanto en capital humano como social, para exigir que los procesos se realicen de una manera transparente, equitativa y democrática\. e) Principales lecciones aprendidas que pudiesen ser relevantes en el futuro § Que se requieren sistemas de comunicación, información, seguimiento y evaluación para asegurar resultados\. § Que se debe hacer un análisis de capacidad institucional en todos los niveles que intervienen en cualquier programa\. § Que el reconocimiento de la lógica de producción de la familia rural marginada para su subsistencia, propicia apoyos integrales para su desarrollo social y económico\. § Que el fomento al ahorro y la recuperación de los apoyos por parte de las familias rurales beneficiadas, es posible y que además es fundamental para la sostenibilidad financiera de los cambios tecnológicos\. § Que el desarrollar mayor número de herramientas de trabajo como metodologías, manuales, modelos, paquetes de capacitación, controles, formatos, procesos, talleres, videos, entre otros, permita sistematizar las acciones del desarrollo del programa\. 2\. Evaluación del desempeño del prestatario (SHCP, SAGARPA y NAFIN)\. a) Diseño La SAGARPA contribuyó significativamente en el diseño técnico del programa con la asesoría técnica y revisión de FAO y Banco Mundial, discutiendo primero en forma conjunta la conceptualización del mismo y posteriormente SAGARPA desarrolló la normatividad y manual de operación; así como diversas actividades de promoción, capacitación, inducción metodológica, operación, evaluación y seguimiento\. En relación a comprobación de gastos y desembolsos, la SAGARPA instaló en octubre de 1998 la Unidad de Comprobación de Gastos, la que contó con personal a nivel central y estatal quien directamente se encargaba de la comprobación de gastos y desembolso, bajo la supervisión de la SAGARPA y la revisión de NAFIN\. b) Operación (implementación y evolución) - 40 -  La intervención de la SAGARPA en la implementación del programa en los estados fue satisfactoria al plantear la propuesta a los estados con amplia aceptación, sin embargo, en su evolución fue regularmente satisfactoria ya que no se previeron las estructuras organizacionales suficientes para acompañar con eficiencia el desarrollo del programa, faltando además un sistema de control y diseño de herramientas, que aseguraran resultados, por lo cual se dejo suelto el programa sin conocer con precisión el rumbo de éste en cada estado\. El acompañamiento y asesoría técnica de Nacional Financiera en comprobación de gastos, desembolso y auditorias, realizando además visitas de supervisión y de asesoría en la materia a los estados que tenían crédito externo\. Un problema importante en la operación del Programa se refiere a la lentitud observada en el desembolso y en recuperar la información relativa a la ejecución del crédito externo\. En eso influyó de manera fundamental que quienes gastaban los recursos del programa eran los estados, y éstos no tuvieron estímulos positivos al cumplir o negativos por no cumplir, además el detallado diseño de la administración del crédito externo les implicó significativos costos de transacción adicionales\. c) Principales lecciones aprendidas Que deben simplificarse los procesos de comprobación de gastos y desembolsos, así como las contrataciones de consultores para ser más oportunos en la información financiera y en los productos que se esperan obtener, tanto por NAFIN como por Banco Mundial o en su defecto considerar estímulos a los ejecutores para cumplir adecuadamente la administración del crédito externo\. La Autorización de la segunda fase fue un poco apresurada, no permitió recuperar enseñanzas de la primera fase Las operaciones de comprobación de gastos y desembolsos deben iniciar al parejo de la operación para evitar desfasamientos en los desembolsos\. 3\. Evaluación del desempeño del Banco (y otros que haya estado involucrado durante la implantación y supervisión del proyecto)\. a) Diseño La participación del Banco Mundial en el diseño del programa siempre estuvo presente, desde las propuestas iniciales de un enfoque regional, productivo, integral, sostenible y participativo, así como, la asesoría metodológica para su instrumentación sobre todo en los estados piloto\. b) Supervisión La supervisión del Banco Mundial mediante misiones permitió un contacto cotidiano con las operaciones de campo que facilitó el apoyo en la instrumentación tanto en la parte documental, como en la parte técnico ­ operativa\. Traduciéndose en documentos ayuda memoria que sistematizaron las observaciones y propuestas de solución, muchas de ellas retomadas con las adecuaciones consecuentes en términos operativos y administrativos\. c) Efectividad de las relaciones entre el prestatario y el Banco - 41 -  La relación del Banco con SAGARPA y NAFIN fue fluida, sin embargo, la capacidad de respuesta fue insuficiente para concretarse medidas encaminadas a mejorar el desembolso, tales como ampliación de regiones y estados susceptibles de descontar, así como otras medidas simplificadoras\. d) Principales lecciones aprendidas Asegurar que las metas de desembolso se cubran con el presupuesto otorgado al programa\. Los proceso de comprobación de gastos y requerimientos de información deben ser simples en ejecuciones federalizadas, de tal modo que no impliquen altos costos de transacción a los estados, en caso de diseños detallados deben considerarse estímulos los estados para garantizar el cumplimiento de compromisos Cuidar que la capacidad institucional o estructuras organizativas del ejecutor: nivel central, estados y regiones, sea la adecuada 4\. Arreglos para la sustentabilidad del proyecto en el futuro\. a) Arreglos Etapa Pre-operativa: Sistematizar las estrategias, planes, programas y acciones a través de diseño de manuales, modelos, procedimientos y videos, entre otros, que permitan asegurar la correcta inducción de quienes se van a incorporar a la operación del programa y que estas herramientas sean congruentes con los sistemas de comunicación, información y seguimiento\. Etapa Operativa: Contar con sistema de remuneraciones diferenciales significativas de acuerdo a la distancia y dificultades de acceso de las comunidades asignadas, de tal modo que los técnicos puedan vivir en su área de trabajo\. Incluyendo un esquema de incorporación al trabajo técnico de los productores líderes\. Facilitar esquemas de evaluación durante la operación, pero también flexibilidad para hacer las adecuaciones legales necesarias desprendidas de la operación\. b) Principales lecciones aprendidas incorporando en los arreglos Ordenar las estructuras y disposiciones de arriba hacia abajo para que pueda haber participación de abajo hacia arriba\. Los indicadores de evaluación del programa deben medir los resultados, los procesos y los recursos utilizados para identificar donde se localizan los errores y aciertos, y realizar las acciones correctivas necesarias o reproducir las experiencias exitosas, según sea el caso\. c) Algunos posibles indicadores a ser utilizados para monitorear la operación futura y el impacto de desarrollo Indicadores de Impacto: Rendimiento actual de la producción obtenida con proyecto, en relación a la producción obtenida - 42 -  sin proyecto, Incremento en ingreso familiar obtenido con proyecto, en relación al ingreso mensual o anual obtenido sin proyectos, Canasta básica de consumo familiar con y sin proyecto, Etc\. Indicadores de Desempeño: Tiempo transcurrido en la Gestión de Recursos, desde la asignación presupuestal al programa hasta la liberación de los recursos a los beneficiarios una vez realizado los cambios necesarios para una eficiente gestión, en relación al tiempo transcurrido en la liberación de recursos a los beneficiarios sin realizar los cambios señalados, Número de hectáreas atendidas con algún tipo de mejora o conservación de recursos naturales, en relación al número total de hectáreas atendidas por el programa, Número de beneficiarios que se apropiaron de nuevas tecnologías, en relación al número total de beneficiarios del programa, Etc\. - 43 -  - 44 -

REVIEW

P126424

REVIEW

P055989

 ICRR 10371 Report Number : ICRR10371 ICR Review Operations Evaluation Department 1\. Project Data : OEDID : OEDID: C3094 Project ID : P055989 Project Name : Economic Reform Support Operation Country : Ghana Sector : Economic Management L/C Number : Partners involved : Prepared by : Michael R\. Lav Reviewed by : John Johnson Group Manager : Ruben Lamdany Date Posted : 06/28/1999 2\. Project Objectives, Financing, Costs and Components : Objectives : To bring the adjustment program back on track by implementing the VAT, increasing electricity tariffs, and reducing the fiscal deficit \. In addition, the project sought to (a) improve fiscal management by implementing a medium-term expenditure framework, (b) speed public enterprise privatization by defining which enterprises would be privatized, (c) enact the Energy Commission and the Public Utilities Regulatory Commission Act to assist in public enterprise reform\. (d) support the Cabinet Process by reforming its structure and supporting analytical capacity, and (e) assist in the reform of government agencies, Costs and financing : $50 million\. 3\. Achievement of Relevant Objectives : The project was successful in achieving the implementation of the VAT, increasing electricity tariffs, and reducing the fiscal deficit\. A Tax Identification Numbering System for all taxpayers was implemented to improve treatment of taxpayers\. The medium-term expenditure plan was also firmed up \. Public enterprise reform was furthered by implementing the Energy Commission and the Public Utilities Regulatory Commission Acts \. 4\. Significant Achievements : The most significant achievement was to restore the momentum for adjustment, primarily fiscal adjustment by measures noted above\. 5\. Significant Shortcomings : A smaller number of enterprises than envisaged were proposed for privatization by the government \. The appointments to improve the analytical capacity of the cabinet were not made as envisaged \. This and other aspects of the project's Institutional Development program fell short of objectives \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Negligible Negligible Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : The Bank should move quickly to support government reform initiatives, especially in restarting adjustment programs, provided it is convinced of real ownership \. However, Institutional Development needs to be carefully formulated and related measures should not be generally inclusion as components of adjustment lending \. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : The ICR clearly presents relevant information \. It is somewhat brief in terms of macroeconomic and fiscal analysis (for example, how will the lagging privatization program affect fiscal matters ), but is very clear on the role of the project in moving the reform program forward \.

REVIEW

P101508

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR 137111-BR IMPLEMENTATION COMPLETION AND RESULTS REPORT ON LOANS IBRD 77730 and 82000 IN THE TOTAL AMOUNT OF US$139\.5 MILLION TO THE STATE OF RIO DE JANEIRO WITH THE GUARANTEE OF THE FEDERATIVE REPUBLIC OF BRAZIL FOR THE RIO DE JANEIRO SUSTAINABLE RURAL DEVELOPMENT PROJECT MAY 30, 2019 Agriculture Global Practice Latin America and Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Exchange Rate Effective November 30, 2018 Currency Unit = Brazilian Real (BRL) BRL 1 = US$0\.258 US$1 = BRL 3\.86 FISCAL YEAR July 1 - June 30 ABBREVIATIONS AND ACRONYMS AF Additional Financing BCR Borrower Completion Report COGEM Micro-catchment Development Committee (Comite Gestor das Microbracias) CPF Country Partnership Framework CPS Country Partnership Strategy DRM Department of Mineral Resources (Departamento de Recursos Minerais) EMATER-Rio State Rural Extension Agency (Empresa de Assistencia Tecnica e Extensao Rural do Estado do Rio de Janeiro) EMBRAPA Brazilian Agriculture Research Enterprise (Empresa Brasileira de Pesquisa Agropecuaria) ESS Economic Sustainability System FAERJ Federation of Agriculture, Livestock and Fisheries of the State of Rio de Janeiro (Federacion da Agricultura, Pecuaria e Pesca do Estado do Rio de Janeiro FAO Food and Agricultural Organization FAPERJ State Research Support Foundation (Fundação de Amparo à Pesquisa do Estado do Rio de Janeiro FM Financial Management GAP Good Agricultural Practice GDP Gross Domestic Product GEF Global Environment Facility GHG Greenhouse Gas ICR Implementation Completion and Results Report IFR Interim Financial Report IRR Internal Rate of Return ISP Institutional Sustainability Plan ISR Implementation Status and Results Report LA Loan Agreement M&E Monitoring and Evaluation MDC Micro-catchment Development Committee (Comitē Gestor da Microbracia) MDP Micro-catchment Development Plan (Plano Executivo da Microbracia) MIS Management Information System NGO Nongovernmental Organization NNWF North and Northwestern Fluminense Region NPV Net Present Value PAD Project Appraisal Document PDO Project Development Objective PEM Micro-basin Executive Management Plan PESAGRO State Agriculture Research Enterprise (Empresa de Pesquisa Agropecuaria do Estado do Rio de Janeiro) PID Individual Development Plan PIU Project Implementation Unit (Secretaria Executiva do Projeto) PMU Project Management Unit Rio GEF Sustainable Integrated Ecosystem Management in Production Landscapes of the NNWF GEF Project - Rio de Janeiro SAFF System for Physical and Financial Monitoring (Sistema de Acompanamento Fisico Financiero) SEAPEC State Secretariat of Agriculture and Fisheries SEAPPA State Secretariat of Agriculture, Livestock, Fisheries and Supply (Secretaria de Estado de Agricultura, Pecuaria, Pesca e Abastecimento) SIAFE-Rio Integrated System for Budget, Financial and Accounts Management ( Sistema Integrado de Gestão Orçamentária, Financiera e Contábil do Rio de Janeiro) SoRJ State of Rio de Janeiro UENF North Fluminense State University (Universidade Estadual do Norte Fluminense) Regional Vice President: Axel van Trotsenburg Country Director: Paloma Anos Casero Senior Global Practice Director: Jurgen Voegele Practice Manager: Preeti S\. Ahuja Task Team Leader(s): Maurizio Guadagni ICR Main Contributor: Tomas Rosada Villamar  TABLE OF CONTENTS DATA SHEET \. I I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES\. 1 A\. CONTEXT AT APPRAISAL \.1 B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION \.4 II\. OUTCOME \. 8 A\. RELEVANCE OF PDOs \.8 B\. ACHIEVEMENT OF PDOs (EFFICACY) \.8 C\. EFFICIENCY \. 14 D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 16 E\. OTHER OUTCOMES AND IMPACTS \. 17 III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 21 A\. KEY FACTORS DURING PREPARATION \. 21 B\. KEY FACTORS DURING IMPLEMENTATION \. 22 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 24 A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 24 B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 26 C\. BANK PERFORMANCE \. 28 D\. RISK TO DEVELOPMENT OUTCOME \. 31 V\. LESSONS AND RECOMMENDATIONS \. 32 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 34 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 51 ANNEX 3\. PROJECT COST BY COMPONENT \. 53 ANNEX 4\. EFFICIENCY ANALYSIS \. 54 ANNEX 5\. IMPACT EVALUATION: METHODOLOGY \. 59 ANNEX 6\. IMPACT EVALUATION: MAIN RESULTS \. 62 ANNEX 7\. SPLIT ASSESMENT: PERFORMANCE OF PDO INDICATORS \. 73 ANNEX 8\. LIST OF PUBLICATIONS FINANCED UNDER PARTICIPATORY RESEARCH 2010–2018 \. 77 ANNEX 9\. BORROWER COMMENTS \. 83 ANNEX 10\. SUPPORTING DOCUMENTS \. 84  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P101508 Rio de Janeiro Sustainable Rural Development Project Country Financing Instrument Brazil Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency State Secretariat of Agriculture, Livestock, Fisheries, and State of Rio de Janeiro Supply (SEAPPA) Project Development Objective (PDO) Original PDO The PDO is to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower's territory, thus contributing to the higher-order objective of increasing small-scale farming productivity andcompetitiveness in those areas\. Revised PDO The objective of the Project is to increase the adoption of integrated and sustainable farming systems approaches in specificareasof the Borrower's territory and help re-establish an agricultural productive environment in areas of the Serrana Regionaffected bythe January 2011 natural disaster, thus contributing to the higher-order objective of increasing small-scale farmingproductivity and competitiveness in those areas\. i  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 39,500,000 38,735,596 38,735,596 IBRD-77730 100,000,000 60,000,000 50,518,222 IBRD-82000 Total 139,500,000 98,735,596 89,253,818 Non-World Bank Financing 0 0 0 Borrower/Recipient 39,519,000 0 0 Total 39,519,000 0 0 Total Project Cost 179,019,000 98,735,596 89,253,818 KEY DATES FIN_TABLE_DAT Approval Effectiveness MTR Review Original Closing Actual Closing 10-Sep-2009 08-Mar-2010 11-Apr-2015 30-Nov-2015 30-Nov-2018 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 27-Oct-2011 9\.58 Change in Project Development Objectives Change in Results Framework Change in Components and Cost Change in Financing Plan Other Change(s) 01-Oct-2012 18\.83 Additional Financing 22-May-2013 20\.83 Change in Components and Cost Reallocation between Disbursement Categories Change in Institutional Arrangements 29-Jun-2015 42\.31 Change in Components and Cost Reallocation between Disbursement Categories Change in Institutional Arrangements 01-Sep-2017 56\.16 Change in Implementing Agency Change in Results Framework Change in Components and Cost Cancellation of Financing Reallocation between Disbursement Categories ii  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) KEY RATINGS Outcome Bank Performance M&E Quality Moderately Satisfactory Moderately Satisfactory Substantial RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 29-Dec-2009 Satisfactory Satisfactory \.33 02 28-May-2010 Satisfactory Satisfactory \.28 03 30-Jun-2010 Satisfactory Satisfactory 3\.09 04 02-Mar-2011 Moderately Satisfactory Moderately Satisfactory 3\.09 05 14-Dec-2011 Moderately Satisfactory Moderately Satisfactory 12\.51 06 30-Jun-2012 Satisfactory Satisfactory 17\.97 07 16-Jan-2013 Moderately Satisfactory Moderately Satisfactory 21\.11 08 16-Sep-2013 Moderately Satisfactory Moderately Satisfactory 23\.83 09 03-Apr-2014 Moderately Satisfactory Moderately Satisfactory 27\.10 10 08-Nov-2014 Moderately Satisfactory Moderately Satisfactory 36\.04 Moderately 11 18-Jun-2015 Moderately Unsatisfactory 41\.58 Unsatisfactory Moderately 12 31-Dec-2015 Moderately Unsatisfactory 46\.40 Unsatisfactory Moderately 13 26-Jun-2016 Moderately Unsatisfactory 53\.41 Unsatisfactory Moderately 14 21-Dec-2016 Moderately Unsatisfactory 53\.41 Unsatisfactory 15 03-Jun-2017 Unsatisfactory Unsatisfactory 53\.41 Moderately 16 27-Dec-2017 Moderately Unsatisfactory 66\.46 Unsatisfactory Moderately 17 25-Jun-2018 Moderately Unsatisfactory 74\.98 Unsatisfactory 18 23-Dec-2018 Moderately Satisfactory Moderately Satisfactory 89\.43 iii  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) SECTORS AND THEMES Sectors Major Sector/Sector (%) Agriculture, Fishing and Forestry 100 Agricultural Extension, Research, and Other Support 2 Activities Public Administration - Agriculture, Fishing & Forestry 21 Other Agriculture, Fishing and Forestry 77 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Social Development and Protection 50 Social Inclusion 50 Participation and Civic Engagement 50 Urban and Rural Development 17 Rural Development 17 Land Administration and Management 17 Environment and Natural Resource Management 34 Renewable Natural Resources Asset Management 34 Biodiversity 17 Landscape Management 17 ADM STAFF Role At Approval At ICR Regional Vice President: Pamela Cox Axel van Trotsenburg Country Director: Makhtar Diop Paloma Anos Casero Senior Global Practice Director: Ethel Sennhauser Juergen Voegele Practice Manager: Mark R\. Lundell Preeti S\. Ahuja Task Team Leader(s): Alvaro Juan Soler Bavosi Maurizio Guadagni ICR Contributing Author: Tomas Ricardo Rosada Villamar iv The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) v The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. CONTEXT AT APPRAISAL Context 1\. At the time of project preparation and appraisal (August 2009), Brazil had undergone a period of significant poverty and inequality reduction\. Moderate poverty fell from 32\.9 percent in 2002 to 21\.6 percent in 2008, while the Gini index also fell from 0\.59 in 2002 to 0\.55 in 2008 (Country Partnership Strategy [CPS] 08–11)\. While remaining relatively resilient during the 2008 financial crisis and recovering swiftly in 2009, economic growth slowed from the precrisis levels of 4–5 percent to 2 percent after 2009\. Growth in the years after 2003 was largely based on favorable external conditions, credit-fueled consumption, and an expanding labor force\. Fast employment creation was the driver of poverty reduction, while an expansion of targeted social programs helped reduce extreme poverty\. 2\. Agriculture in the State of Rio de Janeiro (SoRJ) is more important than would normally be expected in an urbanized state\. At appraisal, around 25 percent of the state’s gross domestic product (GDP) was derived from agriculture and agro-industrial activities, generating approximately 40 percent of rural employment\. More than 60 percent of total state land was dedicated to agricultural activities, most of it in three administrative regions holding more than one-half of the state’s rural population: the North and Northwestern Fluminense region (NNWF), and Serrana regions (PAD 2009)\. 3\. Despite its importance, the agriculture sector faced fundamental challenges\. These included low productivity, limited market links in the face of high demand for agricultural products (Metropolitan area of Rio de Janeiro and smaller urban centers), degradation of the natural resource base, rural poverty, and low capacity of agricultural producers to respond to market demands\. These factors were associated with fragile organization of farmers, their widespread use of inefficient and unsustainable agricultural practices, poor infrastructure, the incipient nature of regional industrialization, markets and processes of agro-industrialization, and limited scope of public policies in rural areas\. 4\. The World Bank was already active in rural areas of southern and southeastern Brazil, supporting capacity building at the local level for participatory rural development and environmental management practices\. In the years before the approval of the Rio de Janeiro Sustainable Rural Development Project (“Rio Rural”), the need became evident to focus on interventions within a market-oriented approach on agricultural development, calling for new projects to build on the existing productive and social base to enable a more sustainable development impact\. The project built on the approaches and institutional structures established under the Integrated Management of Agroecosystems Project in Hydrographic Micro-catchments of the NNWF Project (“Rio Rural GEF”) to provide support needed to address the main challenges of the rural sector in the SoRJ\. 5\. Alignment with the Government’s strategy\. The project responded directly to the Government’s higher-level objective of increasing productivity and competitiveness in the small-scale farming sector while improving natural resources management\. The state demonstrated commitment and support for local-level capacity building for participatory rural development and environmental management—all central pillars of rural operations in Brazil\. 1 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 6\. The project drew directly on the Rio de Janeiro Sustainable Integrated Ecosystem Management in Production Landscapes of the NNWF GEF Project (“Rio GEF”), which became effective in 2006 and closed in 2011, and on the accumulated knowledge of other World Bank-supported operations in the northeastern and southeastern regions of the country\. The design of the project reflected the lessons of those experiences\. 7\. Rationale for Bank support\. The project was anchored in the World Bank’s CPS 08–11 Report No\. 42677\. By strengthening farming systems, the project was expected to contribute primarily to the third pillar of the CPS: a more competitive Brazilian economy\. Main activities were related to better linking small farmers to markets, promoting education for innovation and growth, and improving governance by strengthening the public management of the rural sector\. Theory of Change (Results Chain) 8\. The project was approved before presentation of a Theory of Change in the Project Appraisal Document (PAD) became mandatory, and consequently, the PAD did not contain a diagrammatic representation\. With the objective of clarifying the World Bank team’s thinking during the period of PAD preparation leading to approval, Figure 1 presents a reconstruction of the prevailing Theory of Change as interpreted by this Implementation Completion and Results Report (ICR) and reconstructed based on the implicit results chain described in the PAD\. Figure 1\. Theory of Change 2 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Project Development Objectives (PDOs) 9\. According to the Loan Agreement (LA), the PDO of the project was “to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory, thus contributing to the higher-order objective of increasing small-scale farming productivity and competitiveness in those areas\.” Key Expected Outcomes and Outcome Indicators 10\. Key expected outcomes\. These were (a) to strengthen the longer-term impact on sustained agricultural productivity at a larger scale, (b) to improve the efficiency of rural production processes, (c) to enhance market links, and (d) to improve the ability of public institutions to adapt to the evolving demands of the rural sector\.1 11\. Outcome indicators were the following: ï‚ At least 50 percent of small farmers in targeted areas transitioned towards more productive farming systems2 ï‚ Improved product quality in at least 50 percent of beneficiaries receiving investment support as measured by: (i) Number of beneficiary farmers adopting Good Agricultural Practices (GAP) (ii) Number of small farmers or enterprises certified3 (iii) Number of agro-processing and artisanal enterprises adding value ï‚ Improved market access by at least 10 percent of beneficiaries receiving investment support as measured by their inclusion in (or with improved links to) at least one value chain ï‚ At least 50 percent of the targeted small farmer agricultural lands under improved production systems ï‚ Length (km) of tertiary roads restored and maintained 12\. Targeted beneficiaries\. The project targeted an estimated 37,000 small-farming families (some 150,000 people in total) in the SoRJ\. This corresponds to roughly 30 percent of the total rural population in the state\. The target population primarily resided in the north (9 municipalities), northwest (13 municipalities), and Serrana (14 municipalities) administrative regions, covering approximately 23,000 1 See PAD (2009), paragraph 21, page 6\. 2 “Improved production systems” were defined as those that resulted in sustainably better agroforestry, crop, or livestock quality and yields\. For example, an improved food crop production system could be associated with the introduction of Conservation Agriculture (through adoption of crop rotations, minimal soil disturbance—zero or minimum tillage—and permanent soil cover) and GAPs\. 3 The project would support technical and financial assistance to farmers or enterprises to be certified in (a) organic agriculture; and (b) production of certified forestry products\. Certification of organic products of farmers or their enterprises adopting organic farming would be provided by the Association of Organic Farmers of Rio de Janeiro\. 3 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) square kilometers (53 percent of the total area of the state)\. Participating institutions would also benefit from capacity building, enabling them to more effectively meet rural sector demands\. Components 13\. Component 1: Supporting Rural Production and Competitiveness (estimated total cost US$66\.1 million of which IBRD US$32\.6 million and Borrower US$15\.4 million)\. This component provided assistance to rural beneficiaries to implement changes in rural production processes through (a) preinvestment activities to strengthen organization and capacity for agricultural productivity; and (b) investments to implement demand-driven activities (subprojects) through the provision of grants aimed at improving sustainable and productive farming systems (productive subprojects), compliance with environmental regulations and adoption of agroecological and environmentally sound practices (environmental subprojects), and erosion control and rehabilitation and maintenance of rural roads (rural roads subprojects)\. 14\. Component 2: Strengthening Institutional Frameworks (estimated total cost US$5\.2 million of which IBRD US$2\.9 million and Borrower US$2\.2 million)\. This component aimed at improving the Borrower’s institutional frameworks supporting market-driven agricultural development by (a) strengthening rural institutions and coordination mechanisms through capacity building for the Borrower’s agencies, providing better services and coordination with other public and private sector stakeholders through implementing specific activities (institutional subprojects) identified in an institutional sustainability plan (ISP), and contributing to the implementation of a national policy in support of territorial development; (b) improving public and private financial support mechanisms through the enhancement of links between the supply and the demand of financial resources for sustainable rural development activities; and (c) undertaking participatory research to establish a new and effective operational system (the Sustainable Services Research Network System) to conduct agriculture-related research and induce innovation\. 15\. Component 3: Project Coordination and Information Management (estimated total cost US$7\.6 million of which IBRD US$3\.8 million and Borrower US$3\.8 million)\. This component supported the Borrower’s overall project management and coordination functions, including monitoring and evaluation (M&E), as well as dissemination of key sustainable rural development information by financing (a) project coordination through the strengthening of the organizational and operational structure of the Project Implementation Unit (Secretaria Executiva do Projeto, PIU); and (b) information management through the development and implementation of a management information system (MIS) that ensured widespread access and adequate information flows to impact stakeholder decision making in support of sustainable rural development as well as through the promotion of the use of digital and other information technology tools among project stakeholders and beneficiaries\. B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION 16\. The project was implemented over a period marked by a series of external events—a major flood that caused 850 deaths, a drought affecting the Serrana region, strikes by the staff of the implementing agency, a fiscal crisis with high inflation, currency devaluation, and judicial power seizures of the Designated Account —which affected implementation and forced the Borrower and the World Bank to adjust project design and implementation arrangements\. The following table summarizes the project’s timeline and changes\. 4 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Table 1\. Main Features of Project Restructurings Table 1\. Main features of project restructurings Project restructurings Timeline 2009 (August) 2011 (September) 2012 (October) 2017 (September) 2018 (November) Level 1 Restructuring Level 2 Restructuring Original loan Additional Financing of Partial cancellation of Event Natural disaster Project closing (USD39\.5 million) USD100 million USD40 million Change in PDO to include the PDO No changes to PDO No changes to PDO No changes to PDO emergency area (Serrana region) 3 PDO indicators (2 original PDO indicators were PDO indicators 5 PDO indicators 3 PDO indicators 3 PDO indicators 3 PDO indicators downgraded to intermediate indicators) Reduction of original targets and inclusion of new targets at Project targets intermediate level related to the Increase in project targets Reduction of project targets No further change in targets natural disaster in the Serrana region Revised PDOs and Outcome Targets 17\. Revision of the PDO\. Due to the natural disaster that affected Rio de Janeiro’s Serrana region in January 2011, the project was restructured in that year, and the PDO was revised to allow financing of emergency relief activities\. The PDO was revised by the addition of a clause as follows: “to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower's territory and help re-establish an agricultural productive environment in areas of the Serrana Region affected by the January 2011 natural disaster, thus contributing to the higher-order objective of increasing small-scale farming productivity and competitiveness in those areas\.” The restructurings carried out in 2012 and 2017 (partial cancellation) did not modify this PDO\. 18\. Beneficiaries and project area\. The 2011 restructuring diverted resources to new activities so the targets for some of the original indicators were reduced\. The project area remained unchanged (59 municipalities), but the number of micro-catchments targeted was reduced from 270 to 200, the number of direct beneficiaries targeted was reduced from 24,400 to 19,300, and the number of indirect beneficiaries targeted was reduced from 37,000 to 28,000\. The 2012 restructuring (Additional Financing [AF]) significantly increased the project’s scale by adding 13 new municipalities, 166 micro-catchments, 27,700 direct beneficiaries, and 50,000 indirect beneficiaries\. As part of the 2017 restructuring (partial cancellation), the number of direct beneficiaries was again reduced, this time to 35,000, while the number of municipalities and micro-catchments was not modified\. Revised PDO Indicators 19\. Emergency restructuring of 2011\. The Results Framework was modified to include (a) changes to the PDO and introduction of new intermediate-level indicators to monitor the implementation and results of emergency activities and (b) reduction in the number of beneficiaries and other target values related to the original PDO-level and intermediate-level results indicators, because of the redirecting of project resources to the emergency activities\. The only PDO indicator that was not modified was “Extent of tertiary roads restored and maintained” (target: 1,300 kms)\. Two new intermediate results were introduced under Component 1: (a) number of emergency investment proposals financed (target: 2,300 emergency investment proposals) and (b) all resources related to emergency operations disbursed one year after the natural disaster (target: US$18\.77 million)\. 5 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 20\. Restructuring of 2012 (AF)\. The targets for three PDO outcome indicators were increased to reflect the goal of scaling up project activities, that is, the number of small farmers transitioned toward more productive and sustainable farming, number of small farmers included in at least one value chain, and hectares of agricultural lands under improved production systems\. One PDO indicator was modified to reflect the type of improved farming systems promoted by the project: “Number of small farmers (at least 50% in targeted areas) transitioned towards more productive and sustainable farming systems\.” Two PDO indicators were reclassified as intermediate results indicators4 under Component 1: (a) improved product quality and (b) extent of tertiary roads restored and maintained\. Revised Components 21\. Restructuring of 2012 (AF)\. Changes were made to several components: ï‚ Component 1: (a) longer-term rehabilitation activities in areas of the Serrana region; (b) identification, preparation, and implementation of new investments (productive and environmental ‘Structuring Subprojects’) by small producers\. New activities would be implemented on a larger scale (across several micro-catchments and/or municipalities)\. ï‚ Component 2: (a) new partnerships to enhance cohesion of public policies and institutions under Subcomponent 2\.1 (Strengthening Rural Institutions and Coordination Mechanisms); (b) Subcomponent 2\.2 (Improving Public and Private Financial Support Mechanisms), an evaluation of the economic sustainability system (ESS), subject to a positive evaluation, additional seed capital for the proposed mechanism; and (c) under Subcomponent 2\.3 (Undertaking Participatory Research), additional value-chain studies and participatory research in support of investments under Component 1\. ï‚ Component 3: (a) incremental management and coordination functions (Subcomponent 3\.1); and (b) additional information and outreach activities (Subcomponent 3\.2)\. Other Changes 22\. Other changes introduced during the project implementation period included the following: ï‚ 2011 restructuring: (a) an extension of the end-disbursement date for the operational costs that enabled the loan proceeds for operational costs to be used beyond March 1, 2012\. ï‚ 2012 (AF) restructuring: (a) AF of US$100 million, (b) increased project area and targets, and (c) two-year extension of closing date\. 4No clear justification was given in the AF PAD for this change (reduction) in the number of PDO indicators other than (sic) “Project outcome indicators at PDO level and specific targets have also been updated to reflect the expansion of the original activities and the revised implementation schedule\.” The justification of the Project Management Unit (PMU) for this change was provided by email on May 9, 2019 (sic) “This indicator was excluded from the results framework because it was integrated with the measurement of beneficiaries included in productive value chains, since the improvement of product quality had been one of the axes worked in value chain subprojects\. Maintaining this indicator would have been redundant\.” 6 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ï‚ 2015 restructuring: (a) allow the financing of operational costs for a longer period to help address the fiscal crisis\. ï‚ 2017 restructuring: (a) cancellation of US$40 million of the AF Loan from Categories 1 and 2; (b) reallocation among disbursement categories; (c) simplification of project design, by eliminating institutional and structuring subprojects5 (Component 2\.1), not requiring the creation of consortia of municipalities for road maintenance; (d) change in the Results Framework: reductions in targets of two PDO indicators and the introduction of a new intermediate-level indicator (rural roads rehabilitated, target: 6,000 km)\. Rationale for Changes and Their Implication on the Original Theory of Change 23\. The rationale for the various restructurings was as follows: ï‚ 2011 emergency restructuring\. Beginning shortly after effectiveness, natural disasters (heavy rains and floods) forced significant adjustments in project implementation arrangements\. The World Bank was asked to support the implementing agency by redirecting resources to affected rural areas and providing an immediate response to restore physical access through rural road rehabilitation, restoration of damaged houses, and the restoration of productive assets\. All those activities were within the scope of the project\. Language relating to geographical targeting and the prioritization of productive activities was added to the PDO to allow the financing of emergency activities in the Serrana region\. ï‚ 2012 restructuring (AF)\. This was mainly in response to (a) the need to adopt a more integrated and comprehensive approach to disaster risk management after the natural disaster of 2011 and (b) a scaling-up strategy for the project in anticipation of an expected major inflow of investments in the coming decade in the SoRJ, including World Cup in 2014 and the Olympic Games in 2016, and the consequent increased demand for agricultural products\. The request for AF was fully consistent with the World Bank Group’s CPS 2012– 2015 (Report No\. 63731-BR), in particular in its first and fourth strategic objectives: to increase the volume and productivity of public and private investments and to further improve sustainable natural resource management and enhance climatic resilience while contributing to local economic development and helping to meet rising global food demand\. The AF also supported the state’s integrated territorial development policies and strengthened its disaster risk management capacity, complementing the support provided as part of the World Bank’s Rio de Janeiro program under the AF for the Strengthening Public Sector Management and Territorial Development TAL (P126735)\. It involved a slight 5 During project execution, the bureaucratic process and the incipient organization of the small producers to take on greater investment to implement these public calls for access to the “structuring subprojects”, as well as the complexity of the procedures for access to resources by those farmers, made this type of support impossible\. With the restructuring of 2017, “structuring subprojects” were replaced by two additional subproject modalities: group and value chain subprojects: (a) group subprojects: under this modality, Rio Rural supported organized groups of smaller producers (3 to 10 producers) in overcoming bottlenecks on their farms, filling the gap of individual subprojects (productive and environmental) allowing mainly machines and equipment to be acquired and used in a group; (b) value chain subprojects: investments were focused on activities that add value to production, through improvement of product quality, stimulation of processing, processing, agroindustry, packaging, seal, and certification\. They comprised actions essentially for groups of one or more micro-basins to increase efficiency and overcome bottlenecks in the main agricultural production chains, with emphasis on activities "beyond the farmgate\." 7 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) adjustment of the PDO and an upward revision of targets consistent with the additional loan funds\. ï‚ 2017 restructuring (partial cancellation)\. This restructuring was justified by the limited borrowing capacity of the state, which was significantly affected by an acute fiscal crisis, disrupting project implementation for almost one year\. As with the other World Bank projects in the state, on several occasions, the judicial power ordered seizures of the funds in the Designated Account\. Moreover, the fiscal crisis reduced public investments for rural roads rehabilitation and maintenance\. The restructuring involved a cancellation of loan funds and a downward revision of targets consistent with the reduced funding\. II\. OUTCOME A\. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 24\. The relevance of the PDO to the CPS and Country Partnership Framework (CPF) is High\. The PDO was highly relevant at the time of appraisal and remained consistently relevant throughout implementation with the World Bank’s CPSs and CPF\. The relevance of the PDO was ensured at the time of appraisal through its alignment with the CPS of 2008–2011 - Report No\. 42677-BR (CPS 08-11)\. At closing, the primary themes of the PDO remained in the mainstream of the new World Bank/Brazil CPF 2018–2023 Report No\. 113259-BR\. The project responded to two challenges reflected in this CPF\. First, it set out to stimulate investments and innovation, thereby increasing productivity, improving the business environment, facilitating access to capital and encouraging competition\. Second, it promoted smart management of natural resources and better ways to mitigate natural risks and pollution through the sound management of water resources and environment, as well as property rights and land\. Moreover, the project addressed the CPF focus areas of inclusion and sustainable development by promoting socioeconomic development of smallholder rural farmers\. The project remained fully relevant, even when taking into consideration its various restructurings, none of which substantially altered the overall development objective\. B\. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 25\. The project was innovative for the SoRJ, proposing a new approach building on productive potential and access to existing, profitable markets in the state\. The project supported fruits, vegetables, and milk value chains, which are suited to small farmers and take advantage of urban demand from the metropolitan area of Rio de Janeiro and other smaller urban centers in the interior of the state\. The project strengthened organizations of family farmers, helping them become more commercially competitive and promoting adoption of improved production systems to ensure long-term sustainability\. The implicit ‘Theory of Change’ was sound and based on rational operational and technical assumptions\. 8 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 26\. Due to external factors, the implementation period was divided into four phases, with distinct performance characteristics: (a) Initial implementation phase, between approval and the 2011 emergency\. Progress achieved during this phase was modest because of legal, operational, and procurement challenges and by uneven readiness to implement\. (b) Emergency implementation phase, between 2011 and the 2012 restructuring\. This second phase was defined by the 2011 emergency and the World Bank’s speedy and effective response to an external event (including a new type of “Emergency Subproject”)\. These emergency activities were completed successfully in about one year, leading to impressive results\. Rural poverty was reduced again after 2013, returning to the trend of the larger region of southern Brazil\. The project—together with other emergency responses— contributed to this important result\. Yet this may have led to an optimistic view of the project’s potential\. In addition, given the Rio Olympic Games, the participation of the state as an official location for the 2014 Soccer World Cup, and the overall optimistic expectations for the growth of BRICS (Brazil, Russia, India, China, and South Africa), there was consensus about the need to be prepared for significant economic growth in the coming years, leading to calls from state authorities to expand project coverage and increase the outcome targets\. (c) Intermediate implementation phase, between the 2012 AF and the 2017 restructuring\. During this period, it gradually became evident that the US$100 million of AF had been approved in response to an overly optimistic view of the prospects for potential achievements and the possibilities of scaling up the scope and coverage of the operation\. This realization coincided with dramatic political and economic (fiscal) crises in Brazil, which shifted public priorities and further constrained the project’s pace of execution and rate of disbursement\. The SoRJ was disproportionately affected by low oil prices, given its high reliance on oil royalties, and in June 2016, the local authorities declared a state of “fiscal emergency\.” The difficulties encountered during this period demonstrated that the expansion of the project’s targets had been overly optimistic, and it was necessary to cancel US$40 million of loan resources\. (d) Final phase of consolidation, between 2017 restructuring and the closing date\. The final restructuring enabled the project to consolidate basic results (with reduced scope and partial cancellation of loan funds), supported by marked improvement in project execution and disbursements, leading to achievement of most end targets\. 27\. The following paragraphs disaggregate the PDO by theme and present evidence of the project’s achievements using the PDO outcome indicators and supporting information\. The evidence includes a strong Borrower Completion Report (BCR)6 based on, among others, extensive interviews with project institutions, beneficiaries, and other stakeholders, as well as data obtained from a representative sample of beneficiaries\. The findings of an Impact Evaluation study are discussed as well, 7 along with data from 6 Avaliação Geral do Projeto de Desenvolvimento Rural Sustentável em Microbacias Hidrográficas do Estado do Rio de Janeiro\. OPE Socias, Fevereiro 2019\. 7 Governo do Estado do Rio de Janeiro, Secretaria de Estado de Agricultura e Pecuária - SEAPPA (2018)\. “Impacto do programa Río Rural no Estado do Rio de Janeiro: Sumário Executivo”\. For details on the Impact Evaluation see section IV A on Quality of Monitoring and Evaluation\. 9 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) the project archives\. The targets for each objective are compared with the achievements and results at project closing, but in view of the different restructurings and distinct implementation phases, a “split assessment” was undertaken for rating the overall outcome (see Section II D)\. 28\. PDO outcome - Theme 1: “Increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower's territory\.” ï‚ Outcome indicator No\.1: Area of agricultural lands under improved production systems (hectares) - Final Target: 160,000 ha\. The actual outcome was 223,152 ha of agricultural land under improved production systems, measured through the area of benefited properties\. This outcome corresponds to 139 percent achievement of the target\. ï‚ Outcome indicator No\. 2: Number of small farmers included (or with improved links) in at least one value chain\. Final target 2,600 farmers\. A total of 3,359 small farmers were included in (or with improved links to) at least one productive chain as a direct result of the project, corresponding to 129 percent achievement of the target\. This result was calculated based on the number of beneficiaries of subprojects focused on productive chains\. In addition, the technical report which evaluated the five productive chains supported (coffee, milk, organic, peach palm, and strawberry) concluded that, through the project's strategies and activities, these chains benefited small farmers by reducing their operating costs, increasing their productivity and income, improving pricing policy, and promoting important environmental gains, such as erosion control, reduction of pesticide use, and optimization of water use (AVALSUST 2018b)\. ï‚ Outcome indicator No\. 3: Number of small farmers transitioned towards more productive farming systems\. Final target 35,000 farmers\. A total of 37,172 small farmers and family farmers (including at least 50 percent in the target areas) adopted more productive and sustainable systems, corresponding to 106 percent of the target\. This was estimated through the number of Individual Development Plans (PIDs) multiplied by two because the PIDs showed that, on average, two members of the farming family actively managed the productive and business/administrative aspects of the property\. ï‚ Breakdown of Outcome indicator No\. 3: Number of female small farmers transitioned towards more productive farming systems\. Final target 6,000\. At project end, 5,280 family farmers adopting more productive and sustainable systems were women, corresponding to 88 percent of the target\.8 Additional Results ï‚ Intermediate results indicator: Km of rural roads rehabilitated and in maintenance (6,000 km)\. The reports of the Production Roads Program indicate that 7,127 km of rural roads were rehabilitated and/or maintained, corresponding to 119 percent of the target\. According to the report on the sustainability of roads and bridges served by the project, Rio Rural contributed to their good functionality through improvement of drainage systems, 8 This indicator was measured directly from types of subprojects targeted to women\. Note the difference from Outcome indicator 3, where an indirect measurement is made by assuming the number of small farmers by multiplying the number of PIDs by 2\. 10 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) erosion control and adequate lining of canals/channels\. However, it should be noted that drainage and erosion control structures also require maintenance (AVALSUST 2018c)\. ï‚ Intermediate results indicator: Targeted clients satisfied with project services (75 percent)\. Through the Practices Evaluation Survey (PSATISF 2018b) carried out with 61 beneficiaries in the Northwest region and 42 in the Serrana, a 91\.8 percent satisfaction index was obtained in the first region and 100 percent in the second region, resulting in an average index of 95\.15 percent of beneficiaries highly satisfied with the practices developed by the project\. Also, field trips during supervision missions always confirmed the high level of beneficiary satisfaction\. Regarding satisfaction with the Micro-catchment Development Committee (Comite Gestor das Microbracias, COGEMs), from meetings held with 85 COGEMs from the Serrana region, a 78\.14 percent satisfaction index was estimated\. Considering all the mentioned indicators, the overall Satisfaction index is 79\.2 percent (PSATISF 2018b), exceeding the target\. ï‚ Intermediate results indicator: Number of participatory research projects carried out in support of sustainable rural development (50 projects)\. According to the results of the participatory research reports, 75 participatory research projects supporting sustainable rural development were carried out, representing 150 percent of the target\. From 2010 to 2018, State Agriculture Research Enterprise (Empresa de Pesquisa Agropecuaria do Estado do Rio de Janeiro, PESAGRO-Rio) operated in 30 municipalities and 35 hydrographic micro- basins, involving a public of 52 direct beneficiaries (experimental farmers), 3,939 indirect beneficiaries, and 28 researchers\. Some BRL 4,718,660 was spent on participatory research with direct IBRD resources and BRL 788,707 with counterpart funds\. (RFNPP 2018)\. ï‚ Key benefits generated by the participatory research projects were documented for dairy and coffee value chains, as well as for organic agriculture\. In the case of dairy, research contributed to improvements in afforestation of grasslands, diversification of grasses, multiplication of sugarcane forage, use of grazing rock dust, control of mastitis in herds, and training in sanitary conditions of production\. In the case of coffee, research contributed to improving the quality and type of Arabica coffee produced in the northeast of Rio de Janeiro\. Organic seed production was stimulated (20 species of vegetables, 24 of corn and beans, and 11 of green manures), efficiency of essential oils for the treatment of seeds was tested, and studies of organic agriculture and the observed behavior of rice cultivars in floodplains were conducted (RFNPP 2018)\. ï‚ Other relevant results\. Other results attributable to the project in relation to the development of agricultural value chains include (a) coffee chain: average increase of 20 percent in sales price due to increases in product quality, mechanization and reduction of production costs, mainly in the region northwest of Fluminense; (b) milk chain: increases in productivity (20 percent) and sale price due to investments in productive assets (cooling tanks), reduction of the rural exodus of producers, and improvements in the genetic quality of the herd; (c) palm hearts (palmito) chain: expansion of planted area and introduction of technologies that increase productivity and reduce crop losses, in addition to environmentally regulating the production properties; (d) production of strawberries: investment in suspended semi-hydroponic systems, with little or no use of pesticides; (e) based on participatory research projects developed with Rio Rural resources, the production 11 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) chain of olericultura was dynamized and it benefited from reduction of pesticides and the adoption of protected cultivation and circular vegetable garden systems (AVALSUST 2018b; RFNPP 2018)\. ï‚ An ESS was established—as planned—to enable public and private resources to be raised\. A total of 158 investment proposals were financed through the ESS for the benefit of family farmers, representing 263 percent of the target\. Also, through the ESS, US$25,375,344 was leveraged (original target was US$ 1,000,000) (MRESULT 2018)\. ï‚ Other results indicate that 370 hydrographic micro-basins were reached (366 original target), 370 COGEMs were established, aggregating 3,870 stakeholders, and 38,221 environmental and productive investment proposals (subprojects) were financed (6 percent above the target) (MRESULT 2018)\. ï‚ The independent impact evaluation9 concludes, among others, that the project positively affected profit per hectare due to the use of more productive practices, as well as improvements in the marketing of products\. Because profits were positively affected, producers were able to pay higher salaries to hired workers\. Given the recent nature of many of the investments that were surveyed—and based on the impact evaluation results for similar projects—longer-term potential appears positive\. The report also concludes that if producers are well informed about the practices and their benefits, supported by adequate technical assistance and with the right incentives, they will adopt them, making possible an improvement in the environment and long-run sustainability (see further details/results in annex 6)\. 29\. PDO outcome - Theme 2: “Help re-establish an agricultural productive environment in areas of the Serrana region affected by the January 2011 natural disaster\.” The relevance of this change to the PDO is confirmed by the increased rural poverty as a consequence of this natural disaster\. No specific PDO indicators were included in the Results Framework; however, the corresponding intermediate outcomes were consistently monitored by the M&E system and reported in the Results Framework as intermediate results\. The main achievements included the following: ï‚ US$18\.77 million of emergency financing was allocated to support special (emergency) subprojects in the Serrana region\. A total of 2,277 emergency subprojects were financed (99 percent of the target) reaching a coverage of 1,908 farmers affected by the natural disaster (95 percent of the target)\. In addition, 890 km of roads (111 percent of the target) and 46 small bridges (115 percent of the target) were rebuilt, and 34 communities were served with soil conservation patrols assisting 4,858 beneficiaries\. ï‚ Emergency-related activities also contributed to strengthening community organizations, participatory identification of support projects from local planning, and training of technicians and beneficiaries\. Producer associations were supported with the acquisition of 9“Avaliação de Impacto do Programa Rio Rural sobre a Rentabilidade das Propriedades Rurais “; Oportunidades, pesquisa e estudos sociais - OPE Sociais\. November 20, 2018\. See annexes 5 on Methodology and 6 on Main Results from the Impact Evaluation\. 12 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ‘mini-patrols’10 responsible for the management of small machines and equipment made available to small producers to rehabilitate roads and other public infrastructure\. Technical assistance was reinforced, operators of such equipment trained, and associations qualified in the management of community enterprises (RATIVEMERG 2013a, 2013b)\. ï‚ PESAGRO-Rio strengthened the Participatory Research Units in the Serrana region where restoration of degraded areas was taking place, emphasizing agroecological transition, organic production, and the adoption of new technologies by experimental farmers\. 30\. According to the results evaluation of the emergency activities, 89 percent of the beneficiaries stated that as a direct results of project support, they were able to recover from the damage caused by the catastrophe within six months\. Most technicians and beneficiaries interviewed recognized positively the role of the emergency committees in local social organization\. Justification of Overall Efficacy Rating 31\. Overall efficacy is rated Substantial\. Factors considered in determining the rating were the following: ï‚ All three outcomes contained in the revised PDO were achieved, with quantitative outcomes embodied in the PDO indicators surpassing their end targets\. A clear and strong causal connection supports the Theory of Change\. ï‚ Number of direct beneficiaries far exceeded the revised target, with the exception of the number of women farmers transitioned toward more productive farming systems (88 percent achievement of the end target)\. ï‚ Out of 24 intermediate outcome indicators, 21 met or exceeded the end targets, and all were achieved at a rate of 95 percent or better\. ï‚ Disbursement of the loan proceeds was less than optimal, reaching US$89\.3 million or about 90 percent of aggregate loan proceeds, net of cancellation, due mainly to the procurement challenges described as well as fluctuations in the exchange rate\. ï‚ The sustainability outlook is positive for both the business investments and environmental elements, based on the fact that (a) participatory selection and implementation of subprojects increased ownership and therefore sustainability, (b) improved access to markets has generated a permanent revenue stream for beneficiaries, and (c) implementation was done largely by regular staff from the state government\. The sustainability outlook for public policies is less clear because the consequences of the current fiscal situation are unpredictable\. 10The ‘mini patrols’ consisted of a set of machines and implements for the preparation and conservation of the soils\. They were destined to some producing associations in micro-basins of the Serrana region, affected by the catastrophe of 2011\. In general, they were composed of a tractor with plow and in some cases, micro-tractors\. The associations that received these patrols had to sign a commitment to use them according to the rules of the Rio Rural project and had to undergo training in environmental management and safeguards\. 13 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 32\. Split assessment of rating\. Consistent with the ICR Guidelines, a split assessment was carried out to determine the outcome rating\. Details are presented in Section II D\. Splitting the assessment made no material difference to the outcome rating, when compared with the final rating based on the final outcomes at closing\. C\. EFFICIENCY Assessment of Efficiency and Rating 33\. The project disbursed US$146\.36 million (75 percent of funds approved), out of US$202\.45 million available including the AF\. Several external factors contributed to the lower-than-expected disbursement, including a devaluation of the Brazilian real and a fiscal crisis experienced by the SoRJ\. On the one hand, the strong currency devaluation decreased unit costs in local currency and increased significantly the amount of local currency available to the project\.11 On the other hand, inflation also increased during implementation, raising many costs\. As a result of these two sets of forces that affected the purchasing power of the loan proceeds, it is difficult to calculate in real terms exactly what was disbursed\. What is noteworthy, however, is that the project exceeded its PDO indicator targets (except for women) and either exceeded or met most intermediate outcome targets, with lower-than-anticipated total costs\. 34\. Economic efficiency\. To evaluate the economic and financial results of the project, 155 PIDs were randomly selected as a stratified random sample from the five regions of the SoRJ (representing about 1 percent of total PIDs implemented)\. In terms of value chains, the sample included 54 PIDs for horticulture (leafy vegetables, tomato, cauliflower, peppers, cassava, potatoes, sweet corn); 51 PIDs for milk production; 31 PIDS for fruticulture (citrus, passion fruit, strawberry, kale, banana, pineapple); 11 PIDs for coffee production; 6 PIDs for raising small animals; and 2 PIDs for forestry (palmito)\. In terms of territorial coverage, the sample included 35 PIDs from the Northern region; 30 PIDs from the Northwest region; 37 PIDs from the Central region; 29 PIDs from the Serrana region; and 24 PIDs from the Southern region\. More details are presented in annex 4\. These 155 PIDs benefited 236 households (about 1\.4 percent of total households) representing 714 people\. 35\. Investments made by the PIDs included brush cutters, spring protection, vehicles (mini-tractors and wagons), plantations (coffee, passion fruit, palmito, forage cane and strawberry), improved pastures and rotational pasture systems, irrigation systems, organic fertilization, drying infrastructure and coffee pulping machines, milking machines and milk cooling tanks, sheds, spraying machines, animals (cows and chickens), riparian forests, agroforestry systems, greenhouses, and soil preparation\. The results generated by the various investments were mainly increased production, lower production costs, and increased incomes\. 36\. Net present value (NPV) and internal rate of return (IRR)\. For the 155 PIDs evaluated (with 236 families and 2,120 ha), the economic NPV and the IRR of the investments made, or the incremental situation were US$3\.0 million and 54 percent\. Total investments at economic prices were US$603,800, of which, US$314,700 was funded by the project (or 52 percent) and US$289,000 was funded by participants and other sources (or 48 percent)\. The average values per participating family are US$2,600 of investments, US$2,500 as incremental net revenue per year, and 27 person-days as incremental annual 11PAD 2009 reports an exchange rate of BRL 2\.15 per US$1\.0; PAD 2012 reports an exchange rate of BRL 1\.82 per US$1\.0; at project closing (November 30, 2018), the exchange rate was BRL 3\.86 per US$1\.0\. 14 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) use of labor\. The average annual incremental net income per hectare is US$275, which is significantly more conservative than the estimated mean value for profit per hectare of US$800 in the Impact Evaluation\.12 For the Serrana region, subject to special attention due to the emergency, the returns were very close to the overall average returns\. 37\. Indicative estimates of economic viability were also generated for investments made by the project in rural road improvements and participatory research\. In terms of the impact of rural roads, results are the following: (a) 92 percent reduction of days of non-trafficability, (b) reduction of production losses (20 percent in the case of milk and 36 percent in the case of vegetables), (c) reduction of 50 percent of travel time due to increase in traffic speed, (d) reduction of 40 percent to 60 percent of the average cost of vehicle maintenance, and (e) 20 percent to 50 percent reduction in average fuel consumption\. The IRR of the improvement of two roads evaluated (around 7–9 km improved) varies between 20 percent and 280 percent\. As for participatory research, results show (a) 50 percent increase in milk production and reduction of rock dust as a result of the introduction of the silvo-pastoral system with rotational grazing, (b) 30 percent increase in forage cane production as a result of the addition of rock dust to organic fertilization, (c) 30–50 percent increase in milk production as a result of the control of mastitis and good sanitary practices, and (d) increase of 10–40 percent in the productivity of horticulture and increase of 40 percent of the income as a result of the use of alternative inputs to pesticides\. Regarding greenhouse gas (GHG) emission monitoring, results show how the most important actions to reduce GHG emissions are those related to actions against deforestation/forest regeneration as protection of recharge areas and areas of springs\. One of the recommendations emerging from the analysis is to keep a focus on these activities when planning new projects\.13 38\. To estimate the aggregate economic return of the Rio Rural project, the economic flows of the sample of 155 PIDs were extrapolated based on the ratio between the project investments for all the PIDs and the project investments on the PIDs of the sample\. Other project costs not directly related to the PIDs were incorporated into the analysis of the NPV and aggregate IRR\. Incremental PID investments irrespective of financial source generated an economic NPV of US$317 million and an economic IRR of 54 percent\. Incremental investments in the PIDs in addition to other project costs generated an economic NPV of US$299 million and an economic IRR of 45 percent\. When carbon balance co-benefits were added, the economic NPV and IRR were US$346 million and 49 percent, respectively\. Finally, considering that the average project investment per PID is higher than the average investment of sampled PIDs, such investment costs were adjusted, and the NPV and the economic IRR with other project costs and carbon co-benefits were US$301 million and 36 percent\. These results are similar to the indicators of the economic analysis carried out for the project at appraisal\. The analysis offers unbiased economic indicators at the aggregate level, but the small sample size of PIDs only allows indicative conclusions\. The large variability of results in terms of economic NPV and IRR do not allow comparisons by region and by value chain\. 12 As explained by the Food and Agricultural Organization (FAO) economist who prepared the EFA: “The average annual incremental income per hectare is USD 275, which is more conservative than the estimated mean value of profit per hectare of US$800 in the Impact Evaluation\. Even though the sample does not allow for comparisons among regions or value chains, we can say that in the Serrana region, subject to special attention due to the emergency, the returns were very close to the overall average returns\. Further, it is emphasized that: ‘In many instances, it is too early for the most recent subprojects to have produced an impact’\.” 13 Bassi, Lauro\. 2018\. “Primeira avaliação: resultados de cadeias produtivas avaliadas apoiadas pelo Programa Rio Rural/BIRD e resultados do monitoramento da biodiversidade e armazenamento de carbono \.” 15 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 39\. Sensitivity analysis\. The returns generated by the project investments are sensitive to production and/or price changes because a reduction of 11 percent in sales or revenues would reduce the economic IRR to 12 percent\. The returns are moderately sensitive to rising input costs as a 20 percent increase in costs would generate a marginally acceptable return\. In contrast, the returns are very resilient in terms of labor costs and changes in investment costs as these would have to increase by 60 percent and 120 percent before the returns would fall to a marginally acceptable level\. 40\. Efficiency rating\. Efficiency is rated Substantial, based on overall financial and economic results, including the rural investment subprojects (PIDs), the largest investment, but also other auxiliary investments such as rural roads, participatory research, and impacts in GHG emissions\. It is worth noting that assessment of the efficiency of the project proved to be a challenging exercise due to the complex context in which the project operated,14 the concentration of investments toward the last years of the project, the small sample size to estimate the aggregate economic return of rural investment subprojects (PIDs), and the fact that in many instances it is too early for the most recent subprojects to have produced an impact\. Still, results are significant and could be considered a lower-bound for the overall project\. D\. JUSTIFICATION OF OVERALL OUTCOME RATING 41\. The overall outcome rating is Moderately Satisfactory based on the following: ï‚ High relevance of the PDO based on its sustained alignment with World Bank strategy documents for Brazil ï‚ Substantial rating for efficacy, based on the achievement or surpassing of almost all key targets and important collateral/complementary achievements ï‚ Substantial rating for efficiency, based on positive economic and financial outcomes 42\. Split assessment of overall outcome\. According to “Bank Guidance: Implementation Completion and Results Report (ICR) for Investment Project Financing (IPF) Operations” and given the nature of the various restructurings, a double split assessment was done to assess the overall outcome rating\. Table 2 presents the results of the double split assessment, which recognized three separate assessment periods delineated by two restructurings: (a) the September 2011 restructuring due to the emergency in the Serrana region, which involved a change in PDO (Split 1), and (b) the September 2017 restructuring which included a partial cancellation of funds (US$40 million) and a significant reduction in project targets (Split 2)\. 43\. Achievement of the PDO indicators was assessed by comparing current values as of the date of each restructuring against target values according to each Results Framework\.15 For Split 1, the targets for most PDO indicators had been achieved (except for indicators that did not have a target for year 1 of the project), and hence the ratings are Substantial and High\. For Split 2, the PDO indicators showed a lower level of achievement, and hence the ratings are Modest and Substantial\. At project closing, all PDO indicators had achieved or exceeded the targets set out in the Results Framework, so the rating is Substantial\. The weight of each period was based on noncumulative disbursements reported by the 14 See Section I\.B Significant changes during implementation\. 15 Annex 7 provides a detailed measurement of PDO indicators for split assessment\. 16 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) project\. This yields a final outcome rating of 4, equivalent to Moderately Satisfactory, which is consistent with the final Implementation Status and Results Report (ISR) rating at closing\. Table 2\. Split Assessment of Outcomes Table 2\. Split assesment of outcomes Split 1 Split 2 Project closing Restructuring of Restructuring of 2011 2017 2018 RELEVANCE OF PDO HIGH EFFICACY PDO Number of small farmers (at least 50% in targeted areas) transitioned towards more productive and Substantial Modest Substantial sustainable farming systems\. Improved product quality measured by: Number of farmers adopting Good Agricultural Substantial N/A N/A Practices (GAP) Number of small farmers or enterprises certified Substantial N/A N/A Number of agro-processing and artisanal enterprises adding value High N/A N/A Improved market access by at least 10% of beneficiaries receiving investment support as Substantial Substantial Substantial measured by their inclusion in (or with improved links to) at least one value chain At least 50% of the targeted small farmer Substantial Modest Substantial agricultural lands under improved production Extent of tertiary roads restored and mantained High N/A N/A EFFICIENCY SUBSTANTIAL Outcome ratings Moderately Moderately Satisfactory Satisfactory Satisfactory Numerical value of outcome ratings 5 4 4 Disbursement $ 9,575,735\.53 $ 56,156,124\.77 $ 89,155,068\.25 Share of disbursement 10% 47% 43% Weighted value of the outcome rating 0\.48 1\.86 1\.70 Moderately Satisfactory Final outcome rating 4 E\. OTHER OUTCOMES AND IMPACTS Gender 44\. The project’s focus on family farming was reflected in an investment strategy designed to produce important impacts on women as key actors in family farming\. Specific attention was given to vulnerable groups including women, reflected in the number of women that participated in training activities and in the number of investment proposals from women financed by the project\. In the Results Framework, a PDO-level indicator "number of small farmers (at least 50% of selected areas) transferred to more productive and sustainable systems" was disaggregated by gender reporting 88 percent achievement rate at project closing\. Gender targets were also at intermediate level such as “number of women trained in key project concepts” reporting 175 percent achievement rate at project closing\. 45\. Participation by women in the awareness-raising phase of the project, as well as in community decision-making spaces such as the COGEMS, was reported as significant during project execution\. The role of State Rural Extension Agency (Empresa de Assistencia Tecnica e Extensao Rural do Estado do Rio de Janeiro, EMATER-Rio) technicians was key in promoting women's participation in these meetings and in productive processes, evidenced by the increase in the number of women who received financial resources and technical support\. 17 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 46\. Dedicated subprojects such as the “Kit Galinha Caipira” (local chicken breed), handicrafts, and some specific value chains helped increase female participation in rural communities while increasing their earnings\. The role of women in value chains such as peach palm16 and organic palm trees stood out as fundamental in value-adding and in the marketing of their agriculture produce, including access to institutional markets (public purchases)\. In this way, the project had a clear impact on promoting female autonomy in the SoRJ\. Institutional Strengthening 47\. Grassroot institutional development\. The micro-basin approach was based on the idea of strengthening grassroots institutions (COGEMs) as instruments of community organization and channeling of local demands to higher decision-making bodies and allocation of public resources\. At closing, the project had supported 370 COGEMs in 366 micro-basins and more than 19,000 producers had accessed resources dedicated to subprojects\. 48\. Institutional alliances\. The project built a significant number of partnerships with state institutions for risk management and environmental adequacy, as well as integration with credit programs\. Cooperation agreements were established with partners that have similar actions to Rio Rural, such as North Fluminense State University (Universidade Estadual do Norte Fluminense, UENF), Brazilian Agriculture Research Enterprise (Empresa Brasileira de Pesquisa Agropecuaria, EMBRAPA)-Soils, EMATER- Rio, PESAGRO-Rio, Department of Mineral Resources (Departamento de Recursos Minerais), EMBRAPA- Agrobiology, Baixo Paraíba Basin Committee, National Ministry of Agrarian Development (Ministerio do Desenvolvimiento Agrario)/National Program to Strengthen Smallholder Agriculture (Programa Nacional de Fortalecimento da Agricultura Familiar), Banco do Brasil, nongovernmental organizations (NGOs), Brazilian Micro and Small Business Support Service (Serviço Brasileiro de Apoio à Micro e Pequenas Empresas), FAERJ (Federation of Agriculture, SoRJ), State Research Support Foundation ( Fundação de Amparo à Pesquisa do Estado do Rio de Janeiro, FAPERJ), State Secretariat for Planning and Management (Secretaria de Estado de Planejamento e Gestão do Estado do Rio de Janeiro), and the German universities of Cologne, Jena, and Leipzig\. 49\. Participatory research\. Through a Participatory Research Nucleus, the project developed seven action plans: (a) Implementation and Maintenance of Participatory Research Units; (b) Implementation and Maintenance of Long-term Agriculture Experiments; (c) Network for Research, Innovation, Technology, Services, and Sustainable Development in Hydrographic Hydrological Systems; (d) Production of Agroecological Inputs; (e) Adequacy of Rural Dairy Farms to Good Practices; (f) Agroecology, Organic and Sustainable Agriculture (Studies); and (g) Institutional Strengthening\. 50\. The achievements of this subcomponent were to continue the seven Participative Research Units implemented by Rio Rural GEF and to implement new units; to promote validation events for research lines; to prepare, correct, and publish technical manuals; to participate in the regional meetings of PESAGRO-Rio; and to publish studies, including some 14 papers in 2017 alone\. 51\. According to the Final Report of the Participatory Research Nucleus, from 2010 to 2018, 33 percent of the financing of research projects developed by PESAGRO-Rio came from Rio Rural, while 66 percent 16Bactris gasipaes is a species of palm native to the tropical forests of South and Central America\. It is often cultivated by smallholders for hearts of palm and fruits\. 18 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) came from other sources, such as FAPERJ (Foundation for Research Support of the SoRJ), State Fund for Environmental Conservation and Urban Development, (Fundo Estadual de Conservação Ambiental e Desemvolvimento Urbano), National Council for Scientific and Technological Development, Financier of Studies and Projects, Ministry of Agriculture, Livestock and Food Supply, State Secretariat of Agriculture, Livestock, Fisheries and Supply (Secretaria de Estado de Agricultura, Pecuaria, Pesca e Abastecimento, SEAPPA), and Parliamentary Amendment\. 52\. Institutional strengthening and technical assistance\. EMATER-Rio incorporated the methodology based on hydrographic basins as part of its efforts\. Its technicians incorporated this approach when working with rural communities during the various phases of the project (sensitization, training, and monitoring)\. The COGEMs met regarding implementation and maintenance and often expanded the purpose of strengthening the participation of producers in the micro-basin\. Mobilizing Private Sector Financing 53\. ESS\. A proposal for an ESS was designed with Global Environment Facility (GEF) resources and operationalized with resources from the Rio Rural project\. The objective was to create a financing mechanism for family farmers\. The ESS focused on raising funds from the following sources: (a) public policies in general; (b) payment for environmental services in carbon, water, and biodiversity; (c) agricultural credits; and (d) private partnerships in the areas of sustainable business and socioenvironmental responsibility\. The ESS was implemented in a decentralized manner, leveraging co- investment resources and integrating partnerships with public and private institutions\. At project end, 158 investment proposals were presented (263 percent of target), of which 86 were approved, leveraging US$25,375,344 in co-investments from various sources (US$1\.2 million municipal governments, US$17\.4 million state governments, US$3\.0 million Federal Government, and US$3\.6 million other private sources)\. The number of proposals directed to public financial institutions (federal, state, municipal governments) was the largest, corresponding to 74 percent of the total proposals made\.17 Poverty Reduction and Shared Prosperity 54\. The project had no explicit poverty reduction objective\. However, the target population (small farmers) and the aim of improving productive farming systems and reduce the vulnerability of the territories where the target population lives, indirectly relates to a potential poverty impact\. 55\. As part of the evaluation strategy, the PMU contracted several analyses to document the effects of the project on the target population\. One was a diagnosis to understand the determinants and the recent evolution of poverty in the SoRJ, which would allow contextualizing effects attributable to the project\. The main finding of this study was that the bulk of observed rural poverty reduction in Rio de Janeiro between 2001 and 2015 did not derive from the productivity or profitability of agricultural activities\. Rather, it was the joint effect of public transfers plus income growth of rural dwellers coming from nonagricultural activities\. 56\. Another study determined that the project enabled the recovery of the productive capacity of soils, contributed to the preservation of water springs and protection of biodiversity, combining community self-management and the promotion of smallholder proactivity\. In other words, “the project combines 17 Rio Rural\. 2016\. “Estratégia de cofinanciamento programa Rio Rural\.” Project Report\. 19 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) the adoption of productive systems that are sustainable and the management of natural resources, demonstrating that it is possible to generate income and, at the same time, to meet the demands of the market and environmental legislation” (DPOBREZA 2018, 29)\. 57\. The Impact Evaluation,18 in its chapter referring to impacts on living conditions and poverty levels, identifies modest impacts in terms of time allocation and household mobility observed through greater migration of the elderly (possibly for health care reasons) and reductions in youth and adult migration suggesting that rural areas could be perceived as more attractive due to expectations of higher income\. At the same time, the report also acknowledges that many indicators associated with living conditions do not yet show clear impact because the expected effects require a longer period to mature and be observable\. Balance of GHG emissions 58\. A GHG appraisal of the main set of activities implemented under the project was carried out using the Ex Ante Carbon-balance Tool (EX-ACT), which quantifies the net carbon balance (in tCO 2e) resulting from GHGs emitted or sequestered during project implementation, compared to the scenario before project implementation\.19 The main hypothesis is that project-supported activities mitigated or reduced GHG emissions when compared with the situation ex ante\. 59\. The analysis focused on selected practices and actions covered by a GHG analysis performed in 2009 (before the project, presented in a study by Branca and Medeiros of 2010) and included an update of the analysis carried out in 2017\. Other actions, such as the “Improvements in feeding practices of dairy herds” were not included in the analysis due to the lack of data\. The actions considered were (a) Protection of springs and streams and support for the establishment of legal reserves, (b) Expansion of agroforestry systems, (c) Improved management of annual crops, (d) Improvements in pasture management, (e) Support to family agroindustry, and (f) Technical support\. The results in terms of balances of GHG as tCO2 equivalent per year showed modest impacts\. Other Unintended Outcomes and Impacts 60\. Social capital\. By promoting solidarity among rural producers, the project strengthened the role of cooperative mechanisms, such as cooperatives and associations, in integrating producers into the market, thereby, facilitating their access to inputs and improving their ability to sell their products (especially in local markets)\. The project achieved other unintended effects and impacts, such as promoting inclusion of women and youth in rural activities, as well as strengthening links with the National School Food Program (Programa Nacional de Alimentação Escolar)\. 61\. Results from the impact evaluation related to social capital20 show that producers participated more actively, and community participation was more collaborative on productive than on social aspects\. The project appears to have increased participation in activities which delivered more economic benefits and reduced their participation in activities bringing social benefits\. In other words, social capital was 18 “Avaliação de Impacto do Programa Rio Rural sobre as condições de vida e a pobreza; ” Oportunidades, pesquisa e estudos sociais - OPE Sociais\. November 20, 2018\. See annexes 5 on Methodology and 6 on Main Results from the Impact Evaluation\. 19 Saraiva Schott and Bernstad 2018\. 20 “Avaliação de Impacto do Programa Rio Rural sobre o capital social; ” Oportunidades, pesquisa e estudos sociais - OPE Sociais\. November 20, 2018\. See annexes 5 on Methodology and 6 on Main Results from the Impact Evaluation\. 20 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) important and systematically fostered, well before the investment stage\. It was an essential component of the adoption process, on the premise that value chains do not function without organization, cooperation, and collaboration\. The assumption was that if producers were organized, trained, and well informed about sustainable farm practices and provided with appropriate incentives, they would adopt practices which improved their profitability and long-term sustainability\. III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A\. KEY FACTORS DURING PREPARATION 62\. Realism and ambition of objectives\. The PDO refers to concepts such as “integrated, sustainable, farming systems” that are complex in nature\. To reduce possible confusion, the term “farming system,” which was fundamental for the overall structure of components and subcomponents and selection of activities, was clearly defined as “a population of individual farms that have broadly similar resource bases, enterprise patterns, household livelihoods, and constraints, and for which similar development strategies and interventions would be appropriate, including the key role played by the community, the environment, and support services, to achieve their common objective” (PAD 2009)\. This definition posed a challenge in calibrating and assessing during implementation the overall level of ambition of the project\. Given the different shocks encountered by the project, the team was forced to adjust objectives and targets to maintain their realism\. 63\. Simple and flexible design\. The overall design of the project with two technical components (supporting rural production and competitiveness and strengthening institutional frameworks) and one project management component (project coordination and information management) allowed enough flexibility so that even with restructuring, the basic structure of the project was not altered\. In addition, the structure of its components also facilitated the operationalization of (a) the micro-basin methodological approach; (b) the possibility of integrating knowledge produced by institutions related to the agriculture sector (participatory research); and (c) the Participatory and Negotiated Territorial Development approach as a way to build and strengthen the community organizations and their social fabric\. These elements constituted a triad that enabled the achievement of results\. 64\. Readiness for implementation\. Because the project was prepared taking into account the experience of the Rio GEF project, the readiness for implementation was guaranteed to a certain extent\. The main challenges that were encountered had more to do with the lack of fiscal resources to operate than with the lack of capacity within the implementation unit and among the institutional and strategic partners on the ground\. 65\. Results Framework and impact evaluation\. As designed, the M&E strategy called for a rigorous impact evaluation\.21 During implementation, indicators in the Results Framework were adjusted to better capture response actions to the different shocks the project experienced, for example, emergency subprojects for the Serrana region in 2011, recovery of rural roads, and water investments\. 21 See section IV A on Quality of Monitoring and Evaluation\. 21 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) B\. KEY FACTORS DURING IMPLEMENTATION 66\. Natural disaster (flooding) and emergency response\. In January 2011, exceptionally heavy rains occurred in the Serrana region of the SoRJ, the state’s most important production pole for horticulture, floriculture, and aviculture\. Extensive flooding and mudslides in 11 municipalities resulted in over 850 deaths, left close to 20,000 people homeless, caused extensive damage to rural infrastructure (roads, bridges, rural buildings, and homesteads), damaged or destroyed crops and livestock and other productive assets, and led to disease outbreaks\. In rural areas, most of the affected households were operators of small family-run farms, with little access to credit or agricultural insurance\. As a consequence of this natural disaster, rural poverty in the state increased, reversing a declining trend\. Rapidly restoring the productive capacity of these households became a government priority, to avoid further loss of income\. The implementing agency SEAPEC State Secretariat of Agriculture and Fisheries estimated that 17,000 families depending on agriculture for livelihoods were affected, with approximately 3,400 families experiencing direct losses of assets and income\. The total economic cost of the disaster in rural areas was estimated by SEAPEC at BRL 269 million (about US$163 million)\. 67\. In the wake of the disaster, the state government requested the World Bank’s assistance to provide emergency support to affected farmers in rural areas to help them resume agricultural production\. The types of assistance included the restoration of physical access through rural road rehabilitation, repair or reconstruction of damaged dwellings, and restoration of productive assets\. These activities fell within the scope of the project, which had just started implementation in the Serrana region\. The project was restructured; the PDO was modified to include the (sic) “Serrana Region affected by the January 2011 natural disaster,” and US$18\.77 million of the original loan (IBRD) was reallocated into a new category of emergency response subprojects\. At the same time, the number of beneficiaries and other target values related to the original results indicators were adjusted downward to compensate for the redirecting of project resources to the emergency activities\. Emergency actions under the project began immediately after the catastrophe of January 2011, with resource releases occurring from May 2011 until the end of 2012\. 68\. Drought and emergency response\. In late 2014 and early 2015, the SoRJ was heavily affected by a drought that hit the Southeast region of the country\. This drought triggered another restructuring\. The borrower requested the inclusion of water management subprojects (for example, storage and distribution of rainwater and groundwater for human consumption, drilling of tube wells, and installation of supply and distribution networks) and a drought management committee, within the scope of the project\. Through EMATER-Rio technicians and producers, agriculture practices were identified that were suited to the needs of each affected holding\. In addition to these activities supported by the project, producers who were trained by the Rio Rural GEF project helped in disseminating mitigation practices to other affected producers\. 69\. Fiscal crisis\. The economic crisis affecting the state posed a substantial challenge for project implementation\. The state’s fiscal situation deteriorated rapidly in 2015 when the Brazilian economy entered into recession after the price of petroleum fell sharply and the resulting drastic reduction of Petrobras investments and operations in the state affected the services industry\. The recession precipitated a rapid rise in unemployment in 2015 and 2016, further depressing domestic demand, while the large fiscal deficits translated into rapidly rising public debt\. General government gross debt rose from 56\.3 percent of GDP at the end of 2014 to 69\.5 percent by end of 2016\. In 2016, the state government started paying salaries in installments\. The crisis revealed the inadequacy of the state’s fiscal policy and 22 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) made clear that the efforts to diversify the economy and increase tax revenue had not been successful\. As with other World Bank projects in the state, in August 2016, the judiciary seized undisbursed loan proceeds in the Designated Account, disrupting project activities\. This crisis delayed project implementation for almost one year\. 70\. Strike of EMATER-Rio\. During 2012 and 2013, EMATER-Rio employees went on strike, demanding improvements in salaries and working conditions\. The main strategy adopted to put pressure on the state government was to boycott implementation of the Rio Rural project, interrupting project activities in the hydrographic micro-basins, including the sending of documents to the PMU\. The strike lasted approximately one year and affected all regions of the state, causing significant delays for the project\. There was disruption in the preparation of Micro-basin Executive Management Plans (PEMs), PIDs, supervision reports, and rendering of accounts\. Following interventions by SEAPPA, the Executive Secretariat of the Rio Rural project, and the EMATER-Rio board of directors—and in the face of strong pressure from project beneficiaries—the strike ended and activities resumed\. In the short run, the strike had a negative impact on the implementing agency and the project, but over the longer run, it had the effect of improving personnel management practices within public agencies including the implementation agency, increasing the relevance of merit criteria in the selection and promotion process\. This had a longer-term positive impact on the capacity of the implementing agency\. 71\. Procurement\. At decentralized levels, procurement activities were carried out without major difficulties by subproject beneficiaries using simplified procurement procedures approved for extremely small-value procurements (less than US$5,000)\. At the central (state) level, in contrast, procurement activities were greatly affected by the weak capacity of the PIU, which was reflected in implementation delays and high-risk ratings during most of the project’s life\. The main challenges included the following: ï‚ In the initial years, the procurement of road maintenance machinery had to be repeated thrice because of poor specifications and the PIU’s alleged discrimination against foreign suppliers\. ï‚ Despite the World Bank’s repeated recommendations, the PIU often applied inappropriate selection criteria for the hiring of individual consultants, which forced the World Bank to impose a temporary freeze on new hiring, except for key PIU positions\. ï‚ An indication of possible governance issues in the procurement of gravel for road maintenance constrained the PIU’s strategy for road rehabilitation\. ï‚ During the fiscal crisis, the seizure of loan proceeds by judicial decisions at the federal level halted project implementation for a sustained period during which no major procurement was carried out\. ï‚ In 2018, two large national procurement tenders (National Competitive Bidding) for road rehabilitation were questioned by the state’s Court of Accounts (Tribunal de Contas) and because the PIU was unable to provide responses satisfactory to the Court on time, those tenders were eventually removed from the project\. Other large procurements, for example, for the reconstruction of bridges and the installation of sanitation kits, were also dropped due to the PIU’s inability to prepare the tenders on time\. 23 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 72\. During the second half of 2018, the Procurement Plan was updated to include only smaller and simpler activities, removing the more complex activities that posed greater challenges to the PIU’s capacity\. Thereafter, the procurement function improved noticeably, allowing the rating to be upgraded to Moderately Satisfactory\. IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 73\. The scope of the M&E framework was broad, designed to systematically track and measure project implementation, accommodate midcourse corrections if needed, and demonstrate results for the productive, socioeconomic, and environmental elements of the project\. Most project-related information would be collected at three points in time: (a) at the beginning of the project (baselines constructed using existing information previously collected by the Rio GEF and complemented by additional baseline surveys in the project’s first year and other available data); (b) at the time of the Midterm Review (Midterm Impact Evaluation); and (c) at closing (Impact Evaluation and a BCR)\. The Theory of Change, while not presented in diagram form in the PAD, was clear as explained through the project’s objectives, key activities, and strategies\. The PDO specified the target population as the small-scale farming sector and clarified that increased productivity and competitiveness in this sector were higher-level objectives, that is, likely to be achieved beyond the life of the project\. The technical and operational strategy supporting the PDO was conceptually logical\. 74\. The PDO indicators, while highly relevant, showed some weaknesses with respect to their complexity and vagueness in some cases\. In addition, several required core indicators were omitted (number of beneficiaries, gender participation)\. The MIS was conceptually ambitious and based on participatory principles designed to ensure widely accessible streams of information intended to empower stakeholders to identify priority interventions needed in the sector, create continuous feedback to support project implementation, and create web-based, customized computer applications to be used by internal and external audiences\. The decentralized system would build on existing information systems and databases from the Rio GEF project to monitor the project’s physical and financial progress\. Baseline surveys and evaluation studies would be outsourced/shared, with some coordination activities and field surveys to be conducted by state and federal institutions (with recurrent costs covered)\. 22 M&E Implementation 75\. The project agencies collected, analyzed, and disseminated key datasets; coordinated planned studies; and complied with fiduciary reporting requirements\. During implementation, development of the originally planned MIS was abandoned due to restrictions on hiring of consultants\. Part of the activities that were under the original MIS were developed by the project’s communication and monitoring teams, with participatory tools and the project's web portal\. In addition to the regular MIS, the methodology for the planned Impact Evaluations was discussed and developed in the early years of implementation\. Because the project developed an Impact Evaluation and also due to the different shocks faced early on 22Under this model, EMATER would conduct household-level socioeconomic surveys, EMBRAPA would generate soil and production system surveys, FEEMA (state environmental agency) would manage the surface water surveys, and the UENF would handle the biodiversity survey\. 24 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) during implementation, a baseline was not done for the regular MIS, but only for the Impact Evaluation\. A methodologically robust final Impact Evaluation was carried out using treatment and control groups and randomized sampling, which enabled identification of benefits attributable to the project\. The Impact Evaluation was carried out in the Central and Southern regions of the state covering 120 micro-basins in 35 municipalities\. It focused on three fundamental dimensions (impact domains): (a) profitability of rural properties; (b) social capital; and (c) and living conditions\. A summary of the methodology and identification strategy is presented in annex 5\. A summary of the main results by impact domain can be found in annex 6\. The full Impact Evaluation reports are available in the project file and are cited in the bibliography presented in annex 10\. 76\. The BCR was loosely structured around the World Bank’s ICR template and was of good quality, informative, and directly useful to the ICR\. Numerous studies (including baselines for research efforts beyond the project), evaluations, monitoring and activity reports were prepared over the course of the project, associated with specific types of productive and environmental practices, with the rural road and bridge investments, and with activities in progress\. Project restructurings entailed several adjustments to indicators and targets in response to changing circumstances and realities on the ground including climatic and financial emergencies\. They were designed to reflect different, improved, or more appropriate measures of project achievement and changed circumstances\. The 2011 restructuring modified the PDO to introduce the concept of the emergency objectives and introduced new monitoring indicators to measure the achievements\. M&E Utilization 77\. Project monitoring data and periodic progress reports were valued inputs to management decision making as well as key research and reporting deliverables\. These include the ISR, the BCR, the project economic and financial analysis, the final Impact Evaluation, supervision missions and Aide Memoires, institutional training programs, and project results dissemination activities\. M&E data and analyses were disseminated through bulletins to rural communities, results/knowledge-sharing events for project technicians and managers, and through the project website\.23 Reports were generated on environmental education and prevention of environmental shocks, as well as public campaigns such as “Rio 2016: Clean Water for the River and Atlantic Forest Connection\.” Project data released on the Internet by the project’s institutional partners generated numerous studies, books and research articles, theses, and dissertations\. Justification of Overall Rating of Quality of M&E 78\. Overall M&E is rated Substantial\. The M&E system, as designed and implemented, permitted assessment of the project’s achievements\. Moderate shortcomings in design of the Results Framework are balanced against a strong evaluation and reporting performance during implementation and proactive dissemination and utilization of M&E products\. Further, the World Bank flexibly and pragmatically adjusted the PDO and Results Framework in response to changing circumstances, to improve the quality and/or utility of project indicators and targets, and to ensure that the Results Framework adequately reflected project activities, objectives, and realities on the ground\. 23 http://www\.microbacias\.rj\.gov\.br\. 25 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental Safeguards Compliance 79\. Environmental Safeguards Compliance was rated Satisfactory throughout the project’s life\. Environmental risks were considered Low for most of the project life, except for a period of about 1\.5 years (from late 2016 to early 2018) when the environmental performance risk was rated Moderately Unsatisfactory due to a delay in the implementation of mitigation measures to control erosion in bridges supported under the project\. The delay was mainly associated with the state’s fiscal situation which subsequently, delayed procurement of erosion control works\. Except for this issue associated with the bridges, all other environmental interventions (especially farmers’ transition to agroecological farming systems) were judged Satisfactory\. 80\. The project was classified Category B, which required an Environmental Management Framework\. The project triggered five environmental safeguard policies: Environmental Assessment (OP/BP 4\.01), Natural Habitats (OP/BP 4\.04), Pest Management OP/BP 4\.09), Physical Cultural Resources (OP 4\.11/BP), and Forests (OP/BP 4\.36)\. Performance was as follows: ï‚ Environmental impacts were for the most part positive, including enhanced soil nutrition and reduced erosion through improved cropland and grazing management; rehabilitation of degraded Atlantic forest areas, especially in riparian zones and around springs; sustained use/conservation of natural resources, leading to improved biodiversity; reduced use of pesticides in croplands; erosion control in rural road rehabilitation areas; and water conservation benefits and climate co-benefits\. ï‚ Strong technical capacity of the project unit, project partnerships with environmental and agricultural research agencies and environmental NGOs, and strong support to community self-management of natural resources strengthened the environmental evaluation of all investments and definition of appropriate instruments\. High overall compliance— collectively and individually—shows that farmers bought into environmental conservation measures and mitigation measures\. ï‚ Integrated pest management techniques were disseminated, focused on biological controls, and types of parasites and tools for behavioral control of pests and insects\. ï‚ No measures were needed to preserve physical cultural resources because no project activity placed cultural assets at risk\. Further, the project’s strong natural resources management and conservation focus took natural habitats into account in all activities\. 81\. Climate change co-benefits\. The project generated climate change adaptation and mitigation co- benefits in agricultural areas\. Specifically, it enhanced climate change adaptation by (a) reducing exposure of communities and systems by conducting proper micro-catchment planning; this led to improved land- and water-use planning and management at the farm level, in turn promoting the adoption of improved cropland and grazing management, conservation agriculture, reforestation of riparian areas, and natural regeneration of vegetation around springs and (b) reducing sensitivity by enhancing soil nutrition and on- farm water management\. Some climate change mitigation co-benefits were generated through the reduction and removal of GHG emissions through improved cropland and grazing management and 26 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) restoration of Atlantic forest especially in riparian areas and springs, as well as increasing feed-use efficiency and reducing forest degradation in grazing areas\. Social Safeguards Compliance 82\. Involuntary Resettlement (OP 4\.12) was triggered on a precautionary basis\. The project did not lead to any involuntary resettlement\. When needed for community development activities, small plots were acquired through voluntary donation from project beneficiaries, following legal procedures that were thoroughly documented\. Throughout its implementation, compliance of project activities with social safeguards was regularly supervised on a biannual basis\. The project performance rating remained Satisfactory throughout the project’s life\. Overall compliance with social safeguards is judged Satisfactory and social risk is Low\. Fiduciary Compliance 83\. Financial management (FM) performance was rated Moderately Unsatisfactory until the second semester of 2018, when the rating was upgraded to Moderately Satisfactory due to improved performance\. The Moderately Unsatisfactory rating was mainly due to (a) late submission of interim financial reports (IFRs); and (b) project financial data being registered in two separate systems that required constant reconciliations\. These included SIAFEM (SoRJ FM system) and its replacement Integrated System for Budget, Financial, and Accounts Management (Sistema Integrado de Gestão Orçamentária, Financiera e Contábil do Rio de Janeiro, SIAFE-Rio) (the state government’s public FM system, where expenditures are budgeted, committed, and accounted for and through which all payments are made) and System for Physical and Financial Monitoring (Sistema de Acompanamento Fisico Financiero, SAFF) (the project FM and monitoring system used for the preparation of IFRs)\. Discrepancies often appeared between the SIAFEM data and the IFRs\. There was also a delay in the launch of SIAFI-Rio— the budgeting and accounting state system that replaced SIAFEM—which had an impact on the generation of the IFRs\. 84\. The project’s FM function was adversely affected by repeated seizures of loan proceeds\. Because the SAFF was not adequately monitoring subproject implementation, funds in the Designated Account were seized in August 2016 in compliance with a judicial order\. This had an impact on project execution by leading to a halt in any further advances to the Designated Account, while the Federal Government reaffirmed its commitment to continue with the project and committed to reimburse the sequestered amount\. This event created a critical disruption to the project\. Moreover, funds continued to be seized from the Designated Account, which at the end of 2018 totaled BRL 6,455,606\.09 (including interest earned of BRL 3,069,967\.24)\. 85\. The FM risk rating varied between Moderate to High\. The FM risk was changed to High at the end of the project, due to (a) the high risk of undocumented advances at the end of the project, with the World Bank/PIU exploring options to submit substitute expenditures, to cover both the amounts seized by the judicial authorities from the Designated Account (due to the state’s fiscal situation) as well subprojects unable/unlikely to document the resources transferred to them, before the expiry of the grace period; (b) high volume of subproject execution at the end of the project; and (c) the project’s final combined 2018 and 2019 audit report, which will be received only in September 30, 2019\. 27 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 86\. Except for the 2014 audit report, all other audit reports were submitted late\. Apart from the 2012 and 2014 audit reports (which expressed a modified audit opinion, that is, qualified), all other audit reports expressed an unmodified opinion\. 87\. All IFRs received during the life of the project were considered acceptable (after revisions), but many were received late\. As of April 8, 2019, the undocumented balance in the Designated Account according to Client Connection was BRL 59,782,829\.26\. Under the original arrangement, any undocumented balance remaining at the end of the grace period (April 31, 2019) would have to be refunded to the World Bank\. 88\. To date, no ineligible expenditures have been identified\. The grace period was extended, and it will end on May 31, 2019\. The final audit is expected after the end of the grace period\. Procurement Compliance 89\. The World Bank’s procurement oversight was continuous, comprehensive, and benefited from having a single experienced Procurement Specialist for the project duration\. The PIU’s chronic inability to overcome procurement weaknesses made the procurement function especially challenging, as did major delays in procurement review and approvals by the State Court of Accounts (Tribunal de Contas), which negatively affected the efforts to maintain timely procurement processing and the scope and quantity of procurement packages\. Planned road works and bridges were especially hard-hit\. The World Bank responded through repeated procurement training, frequent adjustments to procurement strategy and planning, more frequent procurement supervision, and contracting a consultant familiar with World Bank procurement rules to support the PIU\. Section III discusses procurement as a key factor affecting project implementation\. In contrast to the experience in the central PIU, at decentralized levels, beneficiaries performed well in conducting direct procurement of goods and services through the agreed community participation in procurement modality (stipulated in the PAD), characterized by simplified procurement procedures and the small value of procurement contracts (<US$5,000)\. 90\. The 2011 (Level I) Restructuring introduced a new category of ‘Emergency Subprojects’ to restore the productive environment of flood-affected small farmers\. While these used existing community procurement procedures, procurement risk remained High due to the project’s decentralized nature and the higher ceilings on financial support per beneficiary allowed under this instrument\. Risks were reduced, however, by training beneficiaries and local technicians in the World Bank procurement processes, increasing field supervision of emergency activities using the EMATER field network, and reassigning project procurement personnel\. Procurement quality improved slowly under the AF as the PIU adjusted to the increased volume of procurement under the larger project, supported by agreed and closely monitored action plans to improve procurement capacity, development of a procurement monitoring module in the MIS, and the use of checklists to maintain momentum\. Based on the above history, procurement ratings were mostly in the unsatisfactory range throughout until restored to Moderately Satisfactory in the final year\. C\. BANK PERFORMANCE Quality at Entry 91\. Key elements relevant for assessing the project’s quality at entry are as follows: 28 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ï‚ The World Bank supported the client in preparing the first large-scale World Bank- supported market-focused rural intervention in the SoRJ, scaling up and complementing the previous Rio GEF and other GEF donor-funded rural and environmental operations, whose primary focus was environmental protection and natural resources management\. The project was designed to take the unique opportunity offered to execute a strongly market- oriented agricultural operation to simultaneously support farmers’ competitiveness and protection of global biodiversity resources\. Lessons emerging from those state operations, as well as similar projects elsewhere in Brazil and Latin America, were also considered\. ï‚ The project built on accumulated experience\. Its design and operational methodology benefited from two decades of World Bank-supported multiphased community-driven and micro-catchment-based small farmer programs in both the northeastern and southeastern regions of Brazil and took certain features from the “productive alliance” model which was expanding under World Bank-supported rural operations in Latin America at the time\. ï‚ The project’s implementation approach was sound and logical , based on socioeconomic and environmental studies and identified relevant productivity and environmental issues, their consequences, and the challenges faced in overcoming them\. The project adopted a hybrid approach stressing small farmer organization (loosely interpreted in the PAD, but formalized under the AF), competitiveness, market access, and agricultural sustainability— financed through a matching grant mechanism with beneficiary contribution—while retaining the micro-catchment as organizing unit and geophysical location\. However, the resulting project was quite complex for a state with limited experience with such market- oriented methodologies and approaches, in addition to limited institutional capacity (as became evident during implementation)\. ï‚ Fiduciary aspects (procurement, FM, and safeguards) were adequately assessed\. FM and procurement capacity assessments were conducted for SEAPPA, EMATER, and PESAGRO, the main implementing agencies, and appropriate risk ratings were applied; action plans and training were designed to boost those agencies\. Safeguards were addressed adequately, and the required assessments and plans were prepared; the project was expected to have positive environmental and social impacts\. However, persistent procurement issues and disagreements during a major part of the implementation period (distracting attention from other core development issues) seem to indicate that a more careful assessment would have been appropriate ex ante to smooth implementation\. ï‚ The M&E system/arrangements were clearly described albeit ambitious in scope\. The PDO specified the targeted beneficiaries, but it was framed very broadly\. The Results Framework at appraisal covered the gamut of project activities and goals; however, the PDO indicators did not capture entirely the essence of the PDO, and some indicators were multifactored, vaguely defined, and likely to be difficult to measure (mainly because of lack of clarity on the methodologies to collect and process data)\. As noted, there were no indicators for women, youth, or other vulnerable groups\. These were weaknesses in project design which affected quality at entry\. ï‚ The PAD states that the project explicitly targeted women and youth, but this was not reflected in the RF indicators or specific aspects of project design\. The regions selected for 29 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) project focus were adequate as they presented the lowest socioeconomic indicators in the state\. During extensive consultations supporting preparation, communities expressed acute concerns about deepening poverty and outmigration, along with their receptivity to sustainable and productive technologies and practices\. More attention could have been given to the selection of farmers’ organizations and identification of instruments to support their strengthening to be able to successfully benefit from the project\. 92\. The project risk assessment was realistic, but it did not cover all potential risks\. Institutional weaknesses should have been more explicitly recognized during preparation/appraisal, together with additional mitigation measures\. Some critical events that disrupted project implementation and affected disbursement were not anticipated\. Quality of Supervision 93\. Key elements relevant for assessing project supervision are as follows: ï‚ The World Bank’s focus was generally proactive and supportive, but the difficult operating context led the supervision team to focus on unblocking processes in the short run while focusing less on long-run developmental impacts\. The urgency in providing adequate solutions to extreme weather events as well as to the fallout from financial crisis and repeated sequestration of funds by federal agencies, were important factors in this uneven focus\. ï‚ The size of and justification for the AF can be questioned\. The injection of US$100 million of additional World Bank financing, with the goal of engaging the state in a longer-term intervention to deepen and expand coordinated agricultural and environmental management to intensify the project’s development effectiveness, seemed reasonable at a time when the state was enjoying an apparently permanent growing trend\. In retrospect, however, the decision to introduce an AF of almost three times the original loan may have been questionable, as it later became apparent that it was too large for the SoRJ to absorb\. A more conservative approach with a smaller AF would have been less risky\. ï‚ Supervision of fiduciary and safeguards aspects was managed well by experienced World Bank specialists\. Special note is made of the quality of the support provided by the World Bank in the area of procurement, given the acute capacity constraints, governance issues and bureaucratic obstacles, stemming from the state’s fiscal emergency and the larger national political and economic crises during the second half of the project period\. ï‚ The World Bank management expressed appreciation for the project team’s skill in managing repeated challenges over the project engagement period, which included a complete cessation of project activities in 2016 due to fiscally driven tensions associated with the retention of funds in the Designated Account\. ï‚ Supervision missions mobilized a wealth of technical support—although coordination was, at times, challenging—to maintain a balanced focus between achieving developmental outcomes while assuring adequate implementation progress\. Even though a balanced team of specialists sourced regionally participated in supervision (from World Bank 30 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Headquarters, the County Management Unit and from other international agencies such as FAO), they were not always present at the same time to discuss critical issues with the client and to find commonly agreed solutions\. Mission findings were reported in a candid and informative manner, which incorporated action plans with systematic follow-up\. Again, because of the difficult issues on several fronts requiring urgent solutions, the World Bank supervision was obliged to focus on problem-solving to facilitate overall project implementation and disbursement\. ï‚ Recurring crises prevented the World Bank team from focusing consistently on M&E, but this did not constrain the production of high-quality, methodologically sound studies or undermine the project’s ability to collect, organize, utilize, and disseminate key data\. Further, an impressive body of research papers and complementary analyses were financed and disseminated (see annex 8)\. 94\. The World Bank worked with the SEAPEC project team and other executing agencies to ensure orderly project closure and sound transition arrangements for the regular operation of supported activities\. This included determining responsibility and arrangements for the completion of some incomplete investments, ensuring the timely delivery of the Impact Evaluation and BCR, and insisting that the Borrower maintain a basic core team to support the World Bank’s ICR\. Justification of Overall Rating of Bank Performance 95\. The World Bank’s overall performance is rated Moderately Satisfactory, due to modest shortcomings in Quality at Entry and Quality of Supervision (as described earlier)\. These shortcomings are mainly associated with the complexity of project design given the challenging institutional context for project implementation, limitations in M&E and the RF, and questions associated with the size of and rationale for the AF\. These shortcomings were at least partially overcome owing to the close supervision support provided by the World Bank team and the team’s effectiveness in working with the borrower to address successfully the large number of challenges that arose during implementation\. D\. RISK TO DEVELOPMENT OUTCOME 96\. The main risk to development outcome is the fiscal situation of the SoRJ, which could potentially affect the effectiveness of institutions involved in activities key to ensuring sustainability (through the operational capacity of their staff)\. On the other hand, the decentralized approach adopted by the project (that is, transfer of powers from SEAPPA’s center to its regional and subregional offices, especially with key on-the-ground implementers, including EMATER-Rio and PESAGRO) provided increased local capacity building and outreach\. This was reinforced by project resources specifically invested for strengthening the capacity of key implementing agencies at the local and regional levels\. The sustainability of the institutional approach, despite the fiscal constraints, is considered likely\. 97\. The project also developed extensive partnership models through NGOs, farmer/producer organizations and cooperatives, leading to an enhanced understanding of the benefits of strengthening associative behavior and demonstrating how smallholder producers could develop and maintain market links\. The initial reluctance on the part of many beneficiaries to adopt new approaches and practices (which stemmed from a combination of cultural factors, risk-averse strategies, and bad experiences with more traditional models of rural extension in the past) was overcome by the extensive utilization of a 31 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) highly participatory approach for the delivery of technical assistance, which emphasizes strengthening local organizations, learning exchanges, and beneficiary empowerment\. The continuous use of the COGEM model contributed significantly to increasing beneficiary participation and transparent decision making\. 98\. Market risk associated with prices, production quality, and timing of delivery for honoring contracts could potentially hamper the profitability of many of the productive investments made under the project\. Although the project cannot control market risk, it has contributed to equipping small farmers with a deeper awareness of market demands and more integrated production systems, and they are better able to react and adapt to changing market conditions and to monitoring and addressing risks after the project\. 99\. The project has also contributed to a deeper understanding of the risks associated with external weather events and climate change, as well as provided the chance to increase state- and local-level capacities to respond to these types of shocks in the future\. V\. LESSONS AND RECOMMENDATIONS 100\. Demand-driven approaches for mobilizing investment support normally take time and require intensive capacity building\. The experience with the evolution needed for the identification and implementation of subprojects confirmed that participatory approaches require a period of assimilation both by technical assistance institutions as well as producers (from two to three years)\. Beneficiaries need time and training to mature and develop ideas into actual investment proposals\. More mature and better organized beneficiary groups are typically more responsive to market opportunities and show higher capacity for mobilizing the level of resources needed to prepare investment proposals\. A realistic assessment of their initial capacity is essential for planning appropriate capacity-building and technical assistance activities and to avoid overly optimistic implementation plans, as well as to ensure achievement of impacts at the beneficiary level\. 101\. Definition of hydrographic micro-basins as the working unit can be extremely useful\. This concept, building on the previous experience with the GEF operation and experiences in other states of Brazil, allowed field technicians and organized producers an overall understanding of the situation and the concentration of efforts to set up an adequate PEM\. This helped consolidate the results of the diagnosis, with the recommendations coming from the technical strategy and the priorities defined by the farmers’ organizations\. It also helped put into perspective the complementarity between the PIDs and the different types of subprojects (productive, environmental, and value chain)\. Finally, it made possible the implementation of the COGEMs, which was another element contributing to further participation and empowerment of beneficiaries\. 102\. Focusing on business development and responding efficiently to market demand, typically requires a flexible, diversified marketing approach\. Public purchasing programs are important, mainly in the first stages to build confidence, but not to be considered as the final solution ignoring other private commercial prospects (even though they could be more stringent and demanding)\. Also, beneficiaries learned that proximity to market is not the only aspect to be considered for achieving effective access to markets; other factors are more important to gain and maintain access, such as capacity for frequent and timely delivery of quality products, as well as capacity to adjust to shifting market demands or changes in market structure\. Adequate managerial and marketing capacity are key factors to increase effective, sustainable access to markets\. 32 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 103\. Decentralization of project implementation to the municipal level can increase flexibility\. Shifting decision making closer to demand and markets increases possibilities for building local capacity, and it is a catalyst to more effective rural public policy instruments, contributing to long-term sustainability of the intervention\. In addition, the approach based on COGEMs was instrumental in strengthening of capacity building and empowerment of the beneficiaries leading to a better selection and implementation of subprojects and helping beneficiaries take a more entrepreneurial approach\. 104\. Flexible project design can allow the World Bank to respond quickly and effectively to unforeseen extreme events such as flooding, drought, and fiscal crisis and to provide emergency responses tailored to needs on the ground\. Project design should allow for some degree of flexibility to allow efficient responses in cases of emergency\. At the same time, it is imperative to allow time for a careful assessment of the underlying assumptions and the rationale for the response (such as size of additional financing/partial cancellation, expansion of areas, institutional changes, and complexity of new components or activities)\. 33  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Objective/Outcome: Adoption of farming systems approaches, re-establishing agriculture production in Serrana region Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of small farmers Number 0\.00 35000\.00 37172\.00 transitioned towards more productive farming systems 01-Oct-2010 30-Nov-2018 06-Dec-2018 Number of female small Number 0\.00 6000\.00 5280\.00 farmers transitioned towards more productive 01-Oct-2010 30-Nov-2018 06-Dec-2018 farming systems Comments (achievements against targets): Comments: Exceeded 106%\. At appraisal, the indicator aimed that at least 50% of small farmers in targeted areas transitioned towards more productive farming systems (those that result in sustainably better agro-forestry, crop or livestock quality and yields), with an estimated overall number of small farmers in project focal areas and a target of 37,000\. During the 2011 restructuring, the estimated overall number of small-farmers in project focal areas was decreased to 28,000\. At closing, the target was 35,000 and the project reached 37,172 small farmers that transitioned to more productive farming systems\. Under this indicator, a sub-indicator was created: number of female small farmers transitioned towards more productive farming systems\. - This sub-indicator was not considered with the 2009 PAD and even thought at closing the target of 6,000 female small farmers transitioning to more productive farming systems was not reached, the project had 88% of success for 34  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) this sub-indicator\. With the inclusion of gender indicators, the project highlighted the importance of women in agricultural productive systems as well as key actors of development and income generators\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion No\. of small farmers included Number 10\.00 2600\.00 3359\.00 in (or with improved links to) at least one value-chain 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): Comments: Exceeded 129%\. The original PDO outcome indicator at appraisal was Improved market access by at least 10% of beneficiaries receiving investment support as measured by their inclusion in (or with improved links to) at least one value chain, revised with the 2011 restructuring and reworded as number of small farmers included in (or with improved links to) at least one value chain\. Since 2009, the original target was 2,600 and at closing, the result was 3,359\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Area of agricultural lands Number 0\.00 160000\.00 223152\.00 under improved production systems (Hectares) 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): 35  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Comments: Exceeded 139%\. Since appraisal, the target was set at 160,000\. At closing the result showed an amount of 223,152 hectares\. Data are extracted from the SAFF (Sistema de Acompanhamento Físico e Financeiro), the number of PIDs and the average area of the benefited properties\. A\.2 Intermediate Results Indicators Component: Component 1: Supporting Rural Production and Competitiveness Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads rehablitated Kilometers 0\.00 6000\.00 7127\.00 01-Oct-2010 30-Nov-2018 06-Dec-2018 Roads rehabilitated - rural Kilometers 0\.00 6000\.00 7127\.00 Roads rehabilitated - non- Kilometers 0\.00 0\.00 0\.00 rural Comments (achievements against targets): Exceeded 119%\. At appraisal, the intermediate results indicator was not considered or included\. With the 2017 restructuring, the indicator was incorporated with a target of 6,000 and a final result of 7,127\. However, it should be noted that at appraisal, a PDO outcome indicator was created as Length (km) of tertiary roads restored and maintained with a target of 1,300 km\. With the 2012 restructuring, the indicator 36  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) was moved as intermediate results indicator under component 1, and later dropped\. According with the 2014 ISR 10, archived November 08th, 2014, the indicator reached 3,389 km of tertiary roads restored and maintained\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of stakeholders Number 1000\.00 4000\.00 3870\.00 participating in development committees across all levels 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): Substantial achievement: 96\.75%\. At appraisal, this intermediate results indicators was drafted as number of stakeholders participating in development committees across local, municipal and regional levels with a target of 4000\. During the 2017 restructuring, the indicator was revised and reworded as number of stakeholders participating in development committees across all levels\. At closing, the results reached were 3,870\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of beneficiaries Number 0\.00 50000\.00 59651\.00 trained in key project concept 01-Oct-2010 30-Nov-2018 06-Dec-2018 Number of women Number 0\.00 7800\.00 13671\.00 beneficiary trained in key project concept 01-Oct-2010 30-Nov-2018 06-Dec-2018 37  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Comments (achievements against targets): Exceeded 119%\. At appraisal, the target was projected for 42,000 beneficiaries\. In 2011 the indicator was revised to include 2,000 affected by the natural disaster\. As well, a new sub-indicator was added: Number of women beneficiary trained in key project concept with a target of 7,800 women beneficiaries trained\. The inclusion of this indicator shows the importance of the inclusion of gender in this project as key stakeholders of development and income generation in agricultural activities\. At closing, 59,651 beneficiaries were trained in key project concept\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion A strategy and action plan Number 0\.00 1\.00 1\.00 (ISP) formulated to strengthen rural institutions 01-Oct-2010 30-Nov-2018 06-Dec-2018 in the State of Rio de Janeiro Comments (achievements against targets): Achieved 100%\. The strategy was formulated since the 2009 PAD and no more updates were necessary\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion No\. of small farmer Number 0\.00 60\.00 158\.00 investment proposals financed with the 01-Oct-2010 30-Nov-2018 06-Dec-2018 participation of the ESS Amount (US$) leveraged for Amount(USD) 0\.00 1000000\.00 25375344\.00 38  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) small farmer investment 15-Jun-2018 subprojects Comments (achievements against targets): Exceeded 263%\. The original target was stated as 60 and the final result showed that 158 small farmer investment proposals were financed with the participation of the ESS Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Targeted clients satisfied Percentage 0\.00 75\.00 79\.20 with project services 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): Exceeded 106%\. This is not an original intermediate results indicator\. It was incorporated with the 2017 restructuring with a target of 75 and a final result of 79\.2\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of investment Number 0\.00 36200\.00 38221\.00 proposals (subprojects) financed 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): 39  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Exceeded 160%\. The strategy was formulated since the 2009 PAD and minor wording updates were performed\. The target was also maintained from the beginning of the project by 36,200\. At closing, the result showed that 38,221 investment proposals (subprojects) were financed\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion All resources related to Amount(USD) 0\.00 14000000\.00 14000000\.00 emergency operations disbursed one year after 01-Feb-2011 30-Nov-2018 06-Dec-2018 disaster (US$) Comments (achievements against targets): Achieved 100%\. Not an original intermediate results indicator\. This indicator was incorporated with the 2011 restructuring due to the 2011 natural disaster\. The target was 14,000,000 and the result showed that 14,000,000 were reached\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of emergency Number 0\.00 2277\.00 2277\.00 investment proposals financed 01-Feb-2011 06-Dec-2018 06-Dec-2018 Comments (achievements against targets): 40  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Substantial achievement: 99%\. Not an original intermediate results indicator\. Was introduced as new indicator with the 2011 restructuring due to the natural disaster that occurred that year\. The target proposed was 2,300 with a final result of 2,277 emergency investment proposals financed\. Component: Component 2: Strengthening Institutional Frameworks Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion An economic sustainability Number 0\.00 1\.00 1\.00 system established 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): Achieved 100%\. Not an original intermediate results indicator\. It was considered in the 2011 restructuring paper with the ESS design in year 2 and the ESS established in year 3\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of cooperation Number 0\.00 4\.00 10\.00 arrangements established to implement joint activities 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): 41  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Exceeded 250%\. The strategy was formulated since the 2009 PAD, minor wording adjustments were made and no more updates were necessary\. The original target was and at closing, the result showed 10 cooperation arrangements established to implement joint activities\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of participatory Number 21\.00 50\.00 75\.00 research projects carried out in support of sustainable 01-Oct-2010 30-Nov-2018 06-Dec-2018 rural development Comments (achievements against targets): Exceeded 150%\. The intermediate results indicator was formulated since the 2009 PAD and no more updates were necessary\. The original target was 50 and the final result showed that 75 participatory research projects were carried out under the RNS\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of Microcatchment Number 50\.00 366\.00 370\.00 Development Plans (MDP) formulated and negotiated 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): Exceeded 101%\. At appraisal, the original intermediate results indicator was stated as Number of MDPs, MuDPs, and RDPs formulated (or updated) and negotiated with stakeholders across all levels (Under component 1)\. With the 2012 restructuring moved under component 2\. 42  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) With the 2017 restructuring, the wording in the indicator was revised and updated to number of MDP formulated and negotiated\. The original target was 366 and at closing the result showed that 370 MDPs were formulated and negotiated\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of new MDC Number 0\.00 366\.00 370\.00 established or strengthened 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): Exceeded 101%\. At appraisal, the original intermediate results indicator was drafted as number of new MDCs and RDCs established and existing MDCs, MUDCs and RDCs strengthened (Under component 1) with a target of 200 new MCDs and 50 existing MCDs\. With the 2011 restructuring, the new target for MCD was adjusted to 152 and for existing MCDs 48\. The 2012 restructuring revised the indicator as follows: number of MDCs, MuDCs and RDCs established and strengthened, adjusting the target of MDCs to 366\. At closing, results showed that 370 new MDCs were established or strengthened\. Component: Component 3: Project Coordination and Information Management Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion MIS established and Text GEF MIS MIS effectively MIS effectively operating operating operating 01-Oct-2010 30-Nov-2018 06-Dec-2018 43  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Comments (achievements against targets): Achieved 100%\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion M&E system established and Text GEF M&E system M&E system properly M&E system properly effectively collecting and established operating operating analyzing relevant information 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): Achieved 100%\. During YR1, M&E system established\. YR2 to closing, M&E was effectively operating\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion PIU structure functionning Text Decree to restructure PIU operating PIU operating across all levels existing GEF PIU 01-Oct-2010 30-Nov-2018 06-Dec-2018 Comments (achievements against targets): Achieved 100%\. 44 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 45 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) B\. KEY OUTPUTS BY COMPONENT Objective/Outcome: Increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower-s territory and help re-establish an agricultural productive environment in areas of the Serrana Region affected by the January 2011 natural disaster\. Outcome Indicators Number of small farmers (at least 50% in targeted areas) transitioned towards more productive farming systems\. Target: 35,000 / Result: 37,172 (106%) Number of female small farmers transitioned towards more productive farming systems Target: 6,000 / Result: 5,280 (88%) Number of small farmers included in (or with improved links to) at least one value-chain Target: 2,600 / Result: 3,359 (129%) Area of agricultural lands under improved production systems (Hectares) Target: 160,000 / Result: 223,152 (139%) Intermediate Results Indicators Component 1: Supporting Rural Production and Competitiveness – Capacities built and investments implemented across individual, community, municipal and regional levels to improve production systems and rural livelihoods, and restoration of the productive environment in areas of the Serrana region affected by the natural disaster 1\. Roads rehabilitated\. Target: 6,000 / Result: 7,127 (119%) - Roads rehabilitated – rural\. - Roads rehabilitated – non rural 2\. Number of stakeholders participating in development committees across all levels\. Target: 4,000 / Result: 3,870 (96\.75%) 3\. Number of beneficiaries trained in key project concept\. Target: 50,000 / Result: 59,651 (119%) - Number of women beneficiary trained in key project concept\. Target: 7,800 / Result: 13,670 (175%) 4\. A strategy and action plan (ISP) formulated to strengthen rural institutions in the State of Rio de Janeiro\. Target: 1 / Result: 1 (100%) 5\. Number of small farmer investment proposals financed with the participation of the ESS\. Target: 60 / Result 158 (263%) - Amount (US$) leveraged for small farmer investment subprojects\. Target 1,000,000 / Result: 46 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 25,375,344 (2538%) 6\. Targeted clients satisfied with project services\. Target: 75\.0 / Result: 79\.2 (106%) 7\. Number of investment proposals (subprojects) financed\. Target: 36,200 / Result: 38,221 (105\.58%) 8\. All resources related to emergency operations disbursed one year after disaster\. Target: 14,000,000 / Result: 14,000,000 (100%) 9\. Number of emergency investment proposals financed\. Target: 2,300 / Result: 2,277 (99%) Component 2: Strengthening Institutional Frameworks – More effective institutional arrangements and capacities at state and decentralized levels to support sustained agricultural development and disaster risk management throughout the SoRJ 1\. An ESS established\. Target: 1 / Result: 1 (100%) 2\. Number of cooperation arrangements established to implement joint activities\. Target: 4 / Result: 10 (250%) 3\. Number of participatory research projects carried out in support of sustainable rural development\. Target: 50 / Result: 75 (150%) 4\. Number of microcatchments development plans (MDP) formulated and negotiated\. Target: 366 / Result: 370 (101%) 5\. Number of new MDC established or strengthened\. Target: 366 / Result: 370 (101%) Component 3: Project Coordination and Information Management – Project management functioning and able to effectively implement and monitor project activities across all territorial levels, as to disseminate and share SRD knowledge and information to influence decision-making processes of key stakeholders 1\. MIS established and operating\. Target: MIS effectively operating / Result: MIS effectively operating (100%) 2\. M&E system established and effectively collecting and analyzing relevant information\. Target: M&E system fully established and operating / Result: M&E system fully established and operating (100%) 3\. PIU structure functioning across all levels\. Target: PIU operating efficiently / Result: PIU operating efficiently (100%) 47 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Key Outputs by Component Component 1: Supporting Rural Production and Competitiveness – Capacities built and (Linked to the achievement of the investments implemented across individual, community, municipal and regional levels to Objective/Outcome)24 improve production systems and rural livelihoods, and restoration of the productive environment in areas of the Serrana region affected by the natural disaster 1\. Number of subprojects financed (No target/result: 38,221) 2\. Number of farmers help due to the 2011 Natural Disaster Emergency (No target/1,908) 3\. Number of youth farmers participating in project activities (no target/result: 383) 4\. Number of producers that access to subprojects resources in 366 micro catchments (19,315/no target) 5\. Number of beneficiaries/persons involved with environmental training (no target/6,772) 6\. Number of PIDs elaborated (no target/18,586) 7\. Number of rural communities benefited with roads rehabilitated (no target/result 34) 8\. Number of beneficiaries with roads rehabilitated (no target/result 4,858) Component 2: Strengthening Institutional Frameworks – More effective institutional arrangements and capacities at state and decentralized levels to support sustained agricultural development and disaster risk management throughout the SoRJ 1\. Number of cooperation agreements established (10 [100%]) 2\. Number of publications and work documents (no target/results 14) 3\. Number of technical manuals and guidelines elaborated (no target/result 40) 4\. Number of PEM/DRP published in the portal (no target/result 217) Component 3: Project Coordination and Information Management – Project management functioning and able to effectively implement and monitor project activities across all 24 Primary source: December 23, 2018 ISR (ISR34415) 48 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) territorial levels, as to disseminate and share SRD knowledge and information to influence decision-making processes of key stakeholders 1\. Preparation of a budget for the implementation team (100%) 2\. Design and implementation of an accurate M&E program (target yes/result yes 100%) 49 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 50  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A\. TASK TEAM MEMBERS Name Role Preparation Supervision/ICR Maurizio Guadagni Task Team Leader(s) Luciano Wuerzius Procurement Specialist(s) Miguel-Santiago da Silva Oliveira Financial Management Specialist Alberto Coelho Gomes Costa Social Safeguards Specialist Katia Lucia Medeiros Environmental Safeguards Specialist Julia Conter Ribeiro Team Member Patricia Rodrigues de Melo Team Member Michele Martins Team Member Mario I\. Mendez Team Member Sofia Keller Neiva Team Member B\. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No\. of staff weeks US$ (including travel and consultant costs) Preparation FY07 2\.420 15,168\.47 FY08 8\.304 37,508\.92 FY09 27\.430 145,968\.14 FY10 1\.490 6,792\.42 Total 39\.64 205,437\.95 Supervision/ICR FY10 10\.542 57,251\.48 51  The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) FY11 17\.457 110,400\.87 FY12 8\.175 65,703\.89 FY13 9\.950 69,255\.52 FY14 11\.763 100,808\.12 FY15 11\.013 82,567\.94 FY16 20\.022 135,876\.17 FY17 14\.485 108,453\.19 FY18 10\.222 103,361\.34 FY19 14\.608 112,999\.49 Total 128\.24 946,678\.01 52 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 3\. PROJECT COST BY COMPONENT Planned Closing Initial AF AF Percent Closing Initial Initial Appraisal Planned Closing of Component/Subcomponents Amount and AF and AF Amount Amount Amount Approved (US$) Amount Amount (US$) (US$) (US$) (%) (US$) (US$) 1\. Support to Small Farmer 66\.13 89\.63 108\.10 46\.29 174\.23 135\.92 78 Production and Competitiveness 1\.1\. Pre-Investment 18\.66 4\.96 14\.50 1\.19 33\.16 6\.15 19 1\.2 Investments 47\.46 84\.67 93\.60 45\.10 141\.06 129\.77 92 1\.2\.1 Investment on Subprojects 47\.46 84\.67 78\.10 40\.65 125\.56 125\.32 100 1\.2\.2 Investments on Rural Roads 0\.00 0\.00 15\.50 4\.45 15\.50 4\.45 29 2\. Institutional Frameworks 5\.17 1\.58 4\.84 0\.85 10\.03 2\.43 24 2\.1 Strengthening Rural Institutions 2\.76 0\.26 1\.57 0\.30 4\.33 0\.56 13 and Coordination 2\.2\. Improving Public and Private 0\.86 0\.00 0\.14 0\.00 1\.01 0\.00 0 Financial Support Mechanisms 2\.3 Undertaking Participatory 1\.55 1\.32 3\.13 0\.55 4\.69 1\.87 40 Research 3\. Project Coordination and 7\.60 6\.24 10\.50 1\.68 18\.10 7\.92 44 Information Management 3\.1 Project Coordination 5\.20 5\.01 6\.13 0\.81 11\.33 5\.82 51 3\.2\. Information Management 2\.40 1\.23 4\.38 0\.87 6\.78 2\.10 31 Front-end Fee 0\.10 0\.08 0\.00 0\.00 0\.10 0\.08 80 Project Total Costs 79\.01 97\.53 123\.44 48\.82 202\.45 146\.36 72 53 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 4\. EFFICIENCY ANALYSIS 1\. During the initial ex ante evaluation, a financial and economic analysis was performed based on 31 farm models involving 21 main crops or livestock activities\. For the AF, the financial and economic analysis was revised based on 33 farm models with 25 crops or livestock activities\. For the final evaluation, 155 PIDs were selected as a stratified random sample to evaluate the financial and economic results of the five state regions: North, Northwest, Mountain, Central, and South\. The sample was proportionally obtained from lists by regions and production systems in the main value chains\. The sample of 155 PIDs benefited 236 families with 714 people\. In terms of value chains, there were 54 PIDs of horticulture (leafy vegetables, tomato, cauliflower, peppers, cassava, potatoes, sweet corn); 51 PIDs of milk production; 31 of fruticulture (citrus, passion fruit, strawberry, persimmon, banana, pineapple); 11 PIDs of coffee production; 6 PIDs for raising small animals; and 2 PIDs on forestry\. In terms of territorial coverage, there were 35 PIDs in the northern region, 30 PIDs of the northwest region, 37 PIDs of the center region, 29 of the mountain region, and 24 from the southern region\. The details of the analysis are presented in Excel spreadsheets available in the project files\. In general terms, the investments made by the various PIDs included brush cutters; spring protections; vehicles, mini tractors, and wagons; plantations (coffee, passion fruit, palmito, forage cane, and strawberry); improved pastures and rotational pasture systems; irrigation systems; organic fertilization; drying infrastructure and coffee pulping machines; milking machines and milk cooling tanks; sheds; spraying machines; animals (cows and chickens); riparian forests; agroforestry systems; greenhouses; and soil preparation\. The results generated by the PIDs were mainly higher production and income, generally associated with higher production costs\. Labor costs have increased or remained at the same level\. Sales were generally carried out through existing market channels (associations, cooperatives, local markets and industries, wholesale markets and middlemen)\. The selected PIDs were evaluated through individual workshops conducted by EMATER extension agents trained in the FAO’s RuralInvest methodology\. Due to the relatively small selection universe of the PID, the financial and economic results obtained from this analysis provide unbiased estimates of viability at the aggregate level but do not allow for reliable comparisons by region, crop, or value chain\. 2\. During the ex-ante evaluation and the evaluation for the AF, the analytical parameters essentially included an annual discount rate of 12 percent and an evaluation period of 20 years\. This final evaluation uses the same parameters\. The BRL/U\.S\. dollar exchange rate considered ranged from 1\.75 in 2010 to 3\.74 in 2018\. For the financial analysis, the family workforce involved in the PIDs was not included because it does not represent a currency expense\. For the economic analysis, family labor was included and valued at market price\. It is assumed that the economic price of labor is equal to the financial or market price because the medium to long-term unemployment rate tends to be close to the voluntary unemployment rate (according to the IBGE – Brazilian Institute of Geography and Statistics)\. Economic project costs were estimated by deducting the average 20 percent ICMS - Imposto Sobre Operações Relativas à Circulação de Mercadorias e Serviços de Transporte Interestadual de Intermunicipal e de Comunicações (value added tax) from financial project costs\. The fiscal impact was not assessed as most beneficiary families would be exempt from ICMS (value added tax) under the terms of the current legislation\. Economic Analysis 3\. Annex 3 shows the costs of the project\. In aggregate terms, the Rio Rural project channeled US$146 million, of which US$66 million was from the IBRD loan and US$35 million from the counterpart of the federal and state governments\. In addition, the participating families and their organizations contributed about US$45 million as co-financing\. Of the US$146 million of total costs, 97 percent relate to the cycle of 54 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) planning, implementation, and M&E of PIDs\. These costs involved pre-investments, productive investments, micro-basin management planning and institutional strengthening, participatory research, project management, M&E, and communication\. Rio Rural also channeled US$4\.4 million to improve rural roads\. Indicative estimates of economic viability were generated for rural road improvements and the impact of participatory research\. Finally, additional benefits were estimated by the favorable carbon balance generated by the project\. 4\. Table 4\.1 presents the aggregate economic results\. For the 155 PIDs evaluated (with 236 families and 2,120 ha), the economic NPV and the IRR of the investments made or the incremental situation were US$3\.2 million and 43 percent\. Total investments were US$707,300, of which US$377,600 was funded by the project (or 53 percent) and US$329,700 was funded by participants and other sources (or 47 percent)\. The average values per participating family are US$3,000 of investments, US$2,800 as incremental net revenue per year, and 28 person-days as incremental annual use of labor\. The average annual incremental net income per hectare is US$275, which is more conservative than the estimated mean value of profit per hectare of US$800 in the Impact Evaluation\.25 Even though the sample does not allow for comparisons among regions or value chains, we can say that in the Serrana region, subject to special attention due to the emergency, the returns were very close to the overall average returns\. 5\. To estimate the aggregate economic return of the Rio Rural project, the economic flows of the sample of 155 PIDs were extrapolated based on the ratio between the project investments for all PIDs, and the project investments on the PIDs of the sample\. Other project costs not directly related to the PIDs were incorporated into the analysis of the NPV and aggregate IRR\. Based on table 4\.2, incremental PID investments independently of the financial source generated an economic NPV of US$317 million and an economic IRR of 54 percent\. Incremental investments on PIDs and other project costs generated an economic NPV of US$299 million and an economic IRR of 45 percent\. When carbon co-benefits were added, the economic NPV and IRR were US$346 million and 49 percent, respectively\. Finally, considering that the average project investment per PID is higher than the average investment of sampled PIDs, such investment costs were adjusted, and the NPV and the economic IRR with other project costs and carbon co-benefits were US$301 million and 36 percent\. This last scenario is considered the base-case scenario\. These results are similar to the indicators of the economic analysis carried out for the project at appraisal\. The analysis offers unbiased economic indicators at the aggregate level, but the small sample size of PIDs only allows indicative conclusions\. The large variability of results in terms of economic NPV and IRR do not allow comparisons by region and by value chain\. 6\. The Rio Rural project is sensitive to production and/or price changes because a reduction of sales or revenues of 11 percent would reduce the economic IRR to 12 percent\. The project is moderately sensitive to rising input costs, as a 20 percent increase in costs would generate a marginally acceptable return\. In contrast, the project is quite resilient in terms of labor costs and changes in investment costs, as they will have to increase by 60 percent and 110 percent, respectively to generate a marginally acceptable return\. 7\. In terms of impact of the roads evaluated, there is (a) 92 percent reduction of days of non- trafficability, (b) reduction of production losses (20 percent in the case of milk and 36 percent in the case of vegetables), (c) reduction of 50 percent of travel time due to increase in traffic speed, (d) reduction of 25Compendio da Avaliação de Impacto\. Impacto dos indicadores Econômicos dos produtores em microbacias: Estado do Rio de Janeiro, 2018\. Lucro médio por hectare das unidades produtivas no ano anterior\. Impacto\. 55 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 40–60 percent of the average cost of vehicle maintenance, and (e) 20–50 percent reduction in average fuel consumption\. The IRR of the improvement of two roads evaluated (around 7–9 km improved) varies between 20 percent and 280 percent\. In terms of impact of participatory research evaluated by the project, there is (a) 50 percent increase in milk production and reduction of rock dust as a result of the introduction of the silvopastoral system with rotational grazing, (b) a 30 percent increase in forage cane production as a result of the addition of rock dust to organic fertilization, (c) 30–50 percent increase in milk production as a result of the control of mastitis incidence and good sanitary practices, (d) increase of 10–40 percent in the productivity of horticulture, and (e) increase of 40 percent of the income as a result of the use of alternative inputs to pesticides\. Financial Analysis 8\. Table 4\.2 presents the aggregate financial results\. For the 155 PIDs evaluated (with 236 families and 2,120 ha), the financial NPV and IRR of the investments made or the incremental situation were US$4\.2 million and 58 percent, respectively\. The average value per participating household was US$3,400 as incremental net revenue per year\. The average annual incremental net income per hectare is US$380, which is also more conservative than the estimated mean value for profit per hectare of US$800 in the abovementioned Impact Evaluation\. 9\. To estimate the project's aggregate financial return, the financial flows of the PIDs in the sample were extrapolated on the same basis as stated earlier\. Based on table 4\.3, incremental PID investments independently of the financial source generated a financial NPV of US$441 million and an IRR of 58 percent\. Incremental investments on PIDs and other project costs generated a financial NPV of US$418 million and an IRR of 49 percent\. When carbon balance co-benefits were added, the financial NPV and IRR were US$467 million and 52 percent, respectively\. Finally, considering that the average project investment per PID is higher than the average investment of sampled PIDs, such investment costs were adjusted, and the financial NPV and IRR with other costs and co-benefits by carbon balance were US$411 million and 38 percent, respectively\. This last scenario is considered the base-case scenario\. Sensitivity Analysis 10\. To assess the sensitivity of PID economic and financial indicators considering investments and other costs, switching values (percentage that reduces the overall economic IRR to 12 percent) were estimated for gross annual revenues, annual costs of inputs, and annual costs of labor\. As shown in table 4\.3, the project is sensitive to production and/or price reduction because a 11 percent reduction of revenues would reduce the overall economic IRR to 12 percent\. The project is moderately sensitive to rising input costs as a 20 percent increase in cost would generate a marginally acceptable return\. In contrast, the project is quite resilient in terms of labor costs and changes on investment costs as they will have to increase by 60 percent and 110 percent, respectively, to generate a marginally acceptable return\. 56 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Table 4\.1\. Economic Assessment Results (US$) Key Paramaters Number Number of PIDs on the Sample 155 Number of PIDs financed by the Program 16,215 Assessment level Participants Productive Base (Ha) Investments Annual Net Income Incremental NPV IRR Families Persons Without PID With PID Without PID With PID Increment Without PID With PID Increment @ 12% % PIDs Total from Sample of PIDs 236 714 2,119 2,119 991,578 1,595,351 603,773 406,771 988,099 581,327 3,037,860 54% Mean per PID 2 5 14 14 6,397 10,293 3,895 2,624 6,375 3,750 19,599 54% Mean per Family 1 3 9 9 4,202 6,760 2,558 1,724 4,187 2,463 12,872 54% Mean per Hectare - - 1 1 468 753 285 192 466 274 1,434 54% Extrapolation to Program Total 16,215 74,694 221,676 221,676 103,731,857 166,894,256 63,162,399 42,553,537 103,367,863 60,814,327 317,799,364 54% PIDs + other Program costs Total from Sample of PIDs 236 714 2,119 2,119 991,578 1,762,893 771,315 406,771 988,099 581,327 2,855,695 45% Mean per PID 2 5 14 14 6,397 11,374 4,976 2,624 6,375 3,750 18,424 45% Mean per Family 1 3 9 9 4,202 7,470 3,268 1,724 4,187 2,463 12,100 45% Extrapolation to Program Total 16,215 74,694 221,676 221,676 103,731,857 184,421,374 80,689,517 42,553,537 103,367,863 60,814,327 298,742,581 45% PIDs + other costs + Carbon co-benefits Total from Sample of PIDs 236 714 2,119 2,119 991,578 1,762,893 771,315 406,771 1,064,383 657,612 3,303,105 49% Mean per PID 2 5 14 14 6,397 11,374 4,976 2,624 6,867 4,243 21,310 49% Mean per Family 1 3 9 9 4,202 7,470 3,268 1,724 4,510 2,786 13,996 49% Extrapolation to Program Total 16,215 74,694 221,676 221,676 103,731,857 184,421,374 80,689,517 42,553,537 111,348,192 68,794,655 345,547,414 49% Investment adjusted to Total Costs Total from Sample of PIDs 236 714 2,119 2,119 991,578 2,157,432 1,165,854 406,771 1,064,383 657,612 2,874,133 36% Mean per PID 2 5 14 14 6,397 13,919 7,522 2,624 6,867 4,243 18,543 36% Mean per Family 1 3 9 9 4,202 9,142 4,940 1,724 4,510 2,786 12,179 36% Extrapolation to Program Total 16,215 74,694 221,676 221,676 103,731,857 225,695,202 121,963,345 42,553,537 111,348,192 68,794,655 300,671,447 36% 57 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Table 4\.2\. Financial Assessment Results (US$) Key Paramaters Number Number of PIDs on the Sample 155 Number of PIDs financed by the Program 16,215 Assessment level Participants Productive Base (Ha) Investments Annual Net Income Incremental NPV IRR Families Persons Without PID With PID Without PID With PID Increment Without PID With PID Increment @ 12% % PIDs Total from Sample of PIDs 236 714 2,119 2,119 1,189,894 1,914,421 724,527 934,685 1,738,117 803,431 4,212,701 58% Mean perPID 2 5 14 14 7,677 12,351 4,674 6,030 11,214 5,183 27,179 58% Mean per Family 1 3 9 9 5,042 8,112 3,070 3,961 7,365 3,404 17,850 58% Mean per Hectare - - 1 1 562 903 342 441 820 379 1,988 58% Extrapolation to Program Total 16,215 74,694 221,676 221,676 124,478,228 200,273,107 75,794,879 97,780,141 181,829,427 84,049,285 440,702,911 58% PIDs + pther Program costs Total from Sample of PIDs 236 714 2,119 2,119 1,189,894 2,115,472 925,578 934,685 1,738,117 803,431 3,994,104 49% Mean perPID 2 5 14 14 7,677 13,648 5,971 6,030 11,214 5,183 25,768 49% Mean per Family 1 3 9 9 5,042 8,964 3,922 3,961 7,365 3,404 16,924 49% Extrapolation to Program Total 16,215 74,694 221,676 221,676 124,478,228 221,305,649 96,827,420 97,780,141 181,829,427 84,049,285 417,834,772 49% PIDs + other costs + Carbon co-benefits Total from Sample of PIDs 236 714 2,119 2,119 1,189,894 2,115,472 925,578 934,685 1,814,401 879,716 4,441,513 52% Mean perPID 2 5 14 14 7,677 13,648 5,971 6,030 11,706 5,676 28,655 52% Mean per Family 1 3 9 9 5,042 8,964 3,922 3,961 7,688 3,728 18,820 52% Extrapolation to Program Total 16,215 74,694 221,676 221,676 124,478,228 221,305,649 96,827,420 97,780,141 189,809,755 92,029,614 464,639,604 52% Investment adjusted to Total Costs Total from Sample of PIDs 236 714 2,119 2,119 1,189,894 2,588,918 1,399,024 934,685 1,814,401 879,716 3,926,748 38% Mean perPID 2 5 14 14 7,677 16,703 9,026 6,030 11,706 5,676 25,334 38% Mean per Family 1 3 9 9 5,042 10,970 5,928 3,961 7,688 3,728 16,639 38% Extrapolation to Program Total 16,215 74,694 221,676 221,676 124,478,228 270,834,201 146,355,972 97,780,141 189,809,755 92,029,614 410,788,490 38% Table 4\.3\. Sensitivity Analysis on Financial and Economic Returns Economic Financial Scenario Project IRR (%) Project IRR (%) Base-case scenario 36 38 89% of PID revenues 12 21 120% of PID input costs 12 22 160% of PID labor costs 12 38 210% of PID investment costs 12 14 58 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 5\. IMPACT EVALUATION: METHODOLOGY Impact Evaluation Universe 1\. The Impact Evaluation was limited only to two regions of the state—the Central and South regions\. These two regions were not ideal choices because the agrarian sector is stronger in the Northwest region and the Serrana region\. However, when the Impact Evaluation started, the project was already well established in the Northwest region of the state, making it very difficult to obtain control groups\. The Serrana region, due to the January 2011 natural disaster, was considered a priority, with all the micro- basins receiving emergency assistance, and hence it was not possible to obtain comparison groups there either because the original project dynamic was altered by the emergency\. On the other hand, the project had not started in the Central and South regions, and therefore was the best available option from the experimental design point of view\. Figure 5\.1\. State of Rio de Janeiro – municipalities from the South and Central regions participating in Rio Rural Project 2\. As shown in table 5\.1, the SoRJ has 92 municipalities, 78 of which participated in the project\. About 22 of 32 municipalities in the Central region, and 13 of 25 in the South region, were selected for the Impact Evaluation\. In terms of micro-basins, about one-third (120) of all micro-basins covered by the project (373) took part in the Impact Evaluation\.26 26It is important to note that in terms of the total resources of the project, micro-basins considered for the Impact Evaluation correspond to approximately 20 percent of resources available\. In addition, the impact of the project can be very heterogeneous because the agricultural activities are very different between the regions of the state\. This makes it much more difficult to extrapolate the impact of these two regions to the rest of the state\. Quite possibly, the impact of the project is substantially greater in the two regions where resources are concentrated the most, that is, Northwest and Serrana regions\. 59 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Table 5\.1\. Rio Rural Project - Total Number of Municipalities and Micro-Basins Region Number of Covered by the Project Covered by the Impact Evaluation Municipalities Municipalities Micro-Basins Municipalities Micro-Basins Northern 9 9 66 — — Northeast 13 13 95 — — Central 32 25 73 22 70 Serrana 13 13 80 — — Southern 25 18 59 13 50 Total 92 78 373 35 120 Source: Emater/Rio\. Methodology 3\. The impact of the project was evaluated by contrasting economic indicators constructed from information obtained from producers located in micro-basins benefiting from the project versus the corresponding set of indicators obtained from nonparticipating micro-basins\. 4\. As the micro-basins were not chosen at random, in principle, the economic indicators of these micro-basins should differ even in the absence of the project, taking into account that the observed differences cannot be fully attributed to the project's action\. However, because the selection process for micro-basins was only carried out on the basis of a single synthetic indicator as defined in the Operations Manual, the impact can, in this case, be obtained from the contrast between the economic indicators of the benefited and not benefited micro-basins, being controlled by the value using the methodology known as discontinuous regression\. 5\. A description of how this discontinuous regression methodology was used to estimate the magnitude of the impact of the project on economic progress in the communities served and their corresponding statistical accuracy is presented here\. 6\. In principle, the differences between the treatment and comparison micro-basins of the same municipality can be decomposed into two components\. On the one hand, these differences arise from the fact that one benefited from the project and the other did not\. On the other hand, micro-basins may also differ because of other factors that influence these economic indicators, after which they received different scores\. Thus, based on this information, the impact of the project is estimated as the difference between the economic indicators of the treatment and control micro-basins, based on an adjustment to take into account other contrasts resulting from the difference of scores between the treatment and control that may also explain the diversity of these economic indicators\. 7\. More precisely, if 𝑹𝒌,𝒕 is an economic indicator for a treatment micro-basin of municipality k, and 𝑹𝒌,𝒄 is the same indicator for a control micro-basin of municipality k, then it can be stated, 𝑅 , = 𝑅 , + 𝛿 + 𝜆 𝑃 , − 𝑃 , , where 𝜹𝒌 denotes the impact of the project in municipality k, í µí±í µí²Œ,𝒕 e í µí±í µí²Œ,𝒄 the micro-basins of treatment and control in municipality k, and 𝝀𝒌 denotes the relationship between the result and the score\. Using as an approximation the hypothesis that for all k, 𝝀𝒌 = 𝝀∗ , and that 𝜹𝒌 = 𝜹𝟎 + 60 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) í µí¼\. í µí±í µí²Œ,𝒕 , this means that the magnitude of the impact of the project varies linearly with the score received\. In this case, alternatively we can state that 𝛿 = 𝛿 + 𝛽\. 𝑃 , = 𝛿̅ + 𝛽\. 𝑃 , − 𝑃 , where 𝜹 is the average impact of the project and 1 𝑃 = 𝑃 , \. 𝑚 8\. Therefore, 𝑅 , − 𝑅 , = 𝛿̅ + 𝛽\. 𝑃 , − 𝑃 + 𝜆∗ 𝑃 , − 𝑃 , \. 9\. Then, the average impact of the project 𝜹 is given by 1 𝛿̅ = 𝛿 = Δ𝑅 − 𝜆∗ \. ΔP, 𝑚 where m denotes the number of municipalities included in the evaluation of the project\. 1 Δ𝑅 = Δ𝑅 , 𝑚 1 ΔP = ΔP , 𝑚 1 1 𝜆̅ 𝛿̅ = 𝛿 = Δ𝑅 − Δ𝑃 , 𝑚 𝑚 𝑚 Δ𝑅 = 𝑅 , − 𝑅 , , Δ𝑃 = 𝑃 , − 𝑃 , \. 10\. Therefore, as already mentioned, the impact is estimated as the mean of the differences in economic indicators between treatment and control, 𝚫𝑹, adjusted by the consequences of the differences of scoring, 𝝀∗ \. 𝚫𝐏 or equivalent to the regression intercept\. 61 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 6\. IMPACT EVALUATION: MAIN RESULTS I\. INDEPENDENT IMPACT EVALUATION OF RIO RURAL 1\. Background\. The Rio Rural project aimed to promote sustainable rural development in hydrographic micro-catchments (or micro-basins) through the provision of training, technical assistance, and financial incentives to small family farmers in key areas of the SoRJ\. 2\. The unit selected for the implementation of the Rio Rural project was the hydrographic basin\. Understanding the territory as a system of multiple ‘layers’ socially constructed, it is verified that the development discussions occurred across different territorial levels (micro-basins, municipalities, regions, hydrographic basins), with the hydrographic micro-basin being the minimum territorial unit capable of integrating social variables with economic and environmental conditions\. This approach facilitates the articulation and implementation of interventions necessary for local development, allowing for a systemic and integrated vision, as well as greater horizontality in the management of development policies rather than vertical and sectoral approaches\. 3\. It was understood from the interpretation of the PA) that three interlaced channels were used to achieve the objectives of the project\. First, income generation was sought through increases in land productivity and greater appreciation of local production, which was supposed to be achieved on the basis of both increased marketing support and improvements in local infrastructure\. Second, the project sought to recover the productive capacity of soils, the protection of water resources, and the conservation of biodiversity\. Finally, in support of the first two channels, the dynamization of the organizational capacity and the self-management of the rural communities was sought through the support for strengthening active social networks—in short, to promote the empowerment of family farmers and the formation of community networks\. 4\. Project areas\. The project was implemented in five regions of the state, comprising a total of 78 municipalities27 and 373 micro-basins\. The beneficiaries of the project were/are small family farmers, fishermen, women, youth, and other rural producers organized into formal and informal groups (associations, cooperatives, and so on)\. When it was originally conceived, the project was supposed to provide direct benefit to approximately 37,000 rural people\. More specifically, the focal area of the project would cover the North, Northwest, and Serrana regions, which concentrated 224 (83 percent) of the 270 micro-basins to be worked and where 61 percent of the municipalities involved were located\. Replication would occur in 46 micro-basins (17 percent of the total) inserted in 23 municipalities distributed in four other regions\. The total number of people in the micro-basins covered by the project was about 148,000\. 5\. With the AF, the goal of the project was to benefit 78,000 rural families, 47,000 of whom would benefit directly in 72 of the 92 municipalities of the state, including individual, collective, and territorial groupings\. This contingent of families that would benefit from the project was equivalent to 93 percent of family farmers, small farmers, rural women, and young people and 70 percent of the total farmers in the SoRJ, according to data from the Census of Agriculture and Livestock (IBGE – Brazilian Institute of Geography and Statistics, 2006)\. If other activities of the project are considered, the number of beneficiaries added by the AF would be approximately 50,000 rural families (as shown in table 6\.1)\. 27 Corresponding to about 85 percent of the total number of municipalities in the state\. 62 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Table 6\.1\. Project Beneficiaries Area/Beneficiaries Original Project Restructured Project AF TOTAL Municipalities 59 59 13 72 Micro-basins 270 200 166 366 Beneficiary population 37,000 28,000 50,000 78,000 Direct beneficiaries 24,400 19,300 27,700 47,000 6\. Coverage of the impact assessment\. The impact assessment of the project was limited to only two regions of the state: Central and South\. In fact, these two regions are not the best choices for an evaluation of the project’s impact because the agricultural sector is much stronger in the Northwest and Serrana region of the state\. However, when this evaluation began, the project was already well established in the Northwest region, which made it difficult to obtain comparison groups\. Because of the January 2011 disaster, the Serrana region was considered a priority, with all the micro-basins receiving emergency assistance, and thus, in this case, it would not be possible to obtain comparison groups\. On the other hand, in the Central and South regions, the project had not yet started and therefore was the ideal situation for an experimental impact assessment\. The SoRJ has 92 municipalities, of which 78 were served by the project (85 percent)\. In the impact assessment, which covered only two regions (Central and South), there are 35 municipalities (38 percent of the state) and about 120 micro-basins (32 percent of the 373 in the state)\.28 7\. Reporting\. The purpose of this report contracted by the Rio PIU was to assess the magnitude of the impact of the Rio Rural project on some key aspects and to verify the validity of its Theory of Change\. The results of the impact evaluation were presented in three stand-alone reports addressing the three key areas: (a) levels of income and profitability of rural properties benefiting from the project, (b) living conditions of the targeted family units and levels of poverty, and (c) formation of social capital\. A\. Impact Evaluation: Economic Impacts on Family Farms under the Project 29 8\. The instrument used for the assessment of economic impacts considered numerous questions aimed at measuring the various economic aspects of rural family farms\. To measure the impact of the project on several economic aspects of the productive units benefited, a questionnaire was constructed with 93 questions grouped in 12 dimensions\.30 To estimate the impact of the project on the economic situation of the beneficiary’s productive units, 333 basic indicators were constructed and measured based on the individual interviews to the units in the sample\. In addition to these indicators, other indicators were constructed based on the costs and the returns recorded from different productive activities, summarizing the total income and total costs of the units\. The total number of units interviewed was 2,089, corresponding to 1,199 of the Central region and 890 of the South region\. As mentioned previously, the impact of the project was evaluated by contrasting economic indicators constructed from information obtained from producers in micro-basins that benefited with those from non-benefited micro-basins\. 9\. The main results are presented in the following tables in a concise form for each of the dimensions of the economic questionnaire, highlighting the most relevant indicators on which a statistically significant 28 See annex 5 for a summary of the Impact Evaluation methodology\. 29 Based on the report “Avaliação de Impacto do Programa Rio Rural sobre a Rentabilidade das Propriedades Rurais” prepared by Oportunidades, pesquisa e estudos sociais - OPE Sociais\. November 20, 2018\. 30 Land, hydric and energetic resources, environment, agricultural practices, technical assistance, productive services, production, investments, capital, expenditures, and financing\. 63 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) impact of the project was detected\. This helps interpret to what extent the magnitude of the impacts found mean that the actions taken had in fact, led to the producers achieving higher levels of productivity and, consequently, greater profitability of their activities\. It also contributes to understanding the extent to which the results found corroborate the Theory of Change that underlies the design of the project\. 10\. Results reported\. The impact evaluation report on levels of income and profitability of rural properties benefiting from the project concludes that the positive impact of the project on the levels of profit per hectare was due to the use of more productive practices, as well as to improvements in the marketing of the products, allowing the producer to pay a higher salary to hired workers\. In summary, the producer is making bigger profits and is sharing some of that profit to the extent that s/he is paying better wages to employees\. These results clearly corroborate the Theory of Change that supports the design of the project, which is that if producers are well informed about the practices and their benefits and if they have adequate technical assistance and the right incentives, they will adopt them\. In addition, these rural producers came to realize that the adoption of these practices also made it possible to promote an improvement in the environment and, therefore, increase farming/agricultural sustainability in the long run\. Table 6\.2\. Statistically Significant Positive Impacts of Rio Rural on the Economic Indicators Area of Analysis Indicator Land Use Percentage of productive units (family farms) having a reserved area or with native vegetation Agricultural Practices Percentage of productive units (family farms) that used subsoiling Percentage of productive units (family farms) that implemented pasture rotation Percentage of productive units (family farms) that implemented precision irrigation Technical Assistance Average volume of milk cooling tanks owned by productive units Production Total net margin per ha obtained by productive units Net margin per ha of obtained by productive units from agricultural production Percentage of productive units implementing intensive livestock productive systems Percentage of total volume of milk produced that is pasteurized for marketing Expenditures Average monthly salary perceived by temporary laborers in the productive unit Financing Percentage of productive units receiving less than the amount of financing requested Table 6\.3\. Statistically Significant Negative Impacts of Rio Rural on Other Indicators Area of Analysis Indicator Land Tenure Percentage of productive units where the land is under rent or other forms of partnership Land Use Average size of productive units Environment Percentage of productive units that bury their trash and residues Percentage of productive units that burn their trash Percentage of productive units that use their trash for composting Percentage of productive units that did not properly treat their waste Agricultural Practices Percentage of productive units (family farms) that used subsoiling Percentage of productive units (family farms) that implemented crop rotation Percentage of productive units (family farms) that burn their crop residues Percentage of productive units (family farms) that burn their crop residues as an alternative measure to control plagues Productive Services Average use of tractors and agricultural vehicles used in the productive units during the year 64 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Area of Analysis Indicator Production Total annual amount of fertilizer used in agricultural production (including seeds and seedlings production) in the year Average land used for crops, seeds, and seedlings production in the productive unit in the year Percentage of the production of milk cattle (including buffalos) in the productive units for which the main marketing channel for last year was not successful Percentage of total volume of milk produced that is pasteurized for marketing Financing Percentage of productive units receiving financing last year Percentage of productive units not receiving financing last year for bureaucratic reasons B\. Impact Evaluation: Impacts on Living Conditions and Poverty under the Project 31 11\. With the objective of measuring the living conditions of the families benefited by the project, a questionnaire was constructed with 80 questions grouped into 10 dimensions,32 organized in two parts\. The first part of the questionnaire, composed of three blocks, was answered by the reference person at the residence, comprising information about the location of the residence, the construction materials of the residence, and about migration and whether any members planned or went to live in the city\. The second part of the questionnaire was addressed to all members of the residence and was composed of seven blocks, comprising information about identification of each person and relationship with the owner, household composition and demography, migration, education, access to information from outside the household, work history, and incomes\. 12\. With the objective of estimating the impact of the project on the indicators of living conditions in the beneficiary productive units, 246 basic indicators were constructed\. Besides these indicators, some indicators of per capita income were also constructed using information from both the family questionnaire and the economic questionnaire\. A total of 2,089 interviews were carried out, 1,199 in the Central region and 890 in the South region\. 13\. As before, the impact of the project was assessed by contrasting the performance of indicators constructed from information obtained from producers in micro-basins benefiting from the project versus the indicators obtained from micro-basins not benefiting from the project\. 14\. Results reported\. It is noteworthy that in the case of many indicators, a significant impact was found but in the opposite direction than would be expected, while in others, no impact was found\. However, it is also noteworthy that many of these indicators related to living conditions are indicators that take time to come into effect and their change will only be perceived in the long run\. For the most sensitive indicators, it was possible to capture some impact of the project\. 15\. A summary of the results obtained for each of the dimensions investigated, where significant positive or negative impacts were found, is presented in tables 6\.5 and 6\.6\. Even if 246 indicators were used, only 19 indicators were found to have significant impacts\. 31 Based on the report “Avaliação de Impacto do Programa Rio Rural sobre as condições de vida e a pobreza ” prepared by Oportunidades, pesquisa e estudos sociais - OPE Sociais\. November 20, 2018\. 32 Three dimensions on household information (location, dwelling, migration); seven dimensions for household members (demography, migration, education, access to information, work, income derived from work, identification)\. 65 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) 16\. There was some evidence of the impact of the project in terms of time allocation and mobility\. More specifically, the results seem to indicate a greater migration of the elderly, possibly suggesting a greater level of wealth in families\. On the other hand, there is also some evidence of an impact of the project toward reducing youth and adult migration, possibly suggesting that rural areas become more attractive by offering more opportunities to economically active youth and adult population\. Table 6\.5\. Statistically Significant Positive Impacts of Rio Rural on Living Conditions Dimension Indicator Residence Percentage of residences where the roof is built with tiles Percentage of residences where there is no bathroom Migration Percentage of residences where the head of the household migrated to a city in the last 3 years with an age of 65 years or more Percentage of residences where the head of the household migrated to a city in the last 3 years because of health issues Percentage of residences where the head of the household migrated to a city in the last 3 years because of other family of personal issues or demands Household Percentage of residences where all children live with their fathers composition and demographics Percentage of residences where all children live with their fathers and their mothers Percentage of residences where all children live with either their fathers or their mothers Education Percentage of residences where at least one adult has completed primary education Table 6\.6\. Statistically Significant Negative Impacts of Rio Rural on Living Conditions Dimension Indicator Residence Percentage of residences where the roof is built with concrete Migration Percentage of residences where the head of the household does not consider migrating to a city Percentage of residences where the head of the household has migrated to a city in the last 3 years Percentage of residences where a head of the household’s child has migrated to a city in the last 3 years Percentage of residences where a family member has migrated to a city in the last 3 years and was less than 17 years old Percentage of residences where a family member has migrated to a city in the last 3 years and was between 30 and 64 years old Percentage of residences where a family member has migrated to a city in the last 3 years in the center of the district or municipality Percentage of residences where there is absence of an adult born in the municipality or district and plans to move to a city Labor force Percentage of residences where at least one adult, more than 16 years old, has worked during the last 12 months Women jobs Percentage of women, between 16 and 64 years old, who worked during the last 12 months 66 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) C\. Impact Evaluation: Impacts on Social Capital under the Project 33 17\. One of the objectives of the Rio Rural project was to promote beneficiaries’ empowerment and the formation of active community networks\. The term social capital is used in this study as a characteristic that a community has or could have that facilitates collective action by its members; a community capable of more easily implementing collective actions has greater social capital\. 18\. To measure the social capital of the communities benefited by the project, a questionnaire was constructed with 49 questions grouped in 14 dimensions\.34 For measuring the impact of the project on social capital, 241 basic indicators were constructed to better characterize in which dimensions the impact is most evident\. The total number of interviews was 2,089 (1,199 in the Central region and 890 in the South region)\. 19\. Results reported\. According to the project design, the Rio Rural project was expected to have a greater impact on certain dimensions of social capital such as productive cooperation and less on others such as degree of trust or solidarity\. Tables 6\.7 and 6\.8 present a summary of the indicators on which positive and negative significant impacts were found, respectively\. From a total of 241 indicators, 31 were found with statistically significant positive impacts and 17 with statistically significant negative impacts\. 20\. The project seemed to increase participation in activities that bring more ‘economic’ benefits and reduce participation in activities that bring ‘social’ benefits, a result that is consistent with the overall design of the project\. For producers to adopt a more productive and sustainable production system in their properties, they must first associate and then participate in a participatory planning process culminating in the PID\. All this process was geared toward developing the social capital of communities comprising more participatory family farmers\. Table 6\.7\. Statistically Significant Positive Impacts of Rio Rural on Social Capital Dimensions Indicators Community Participation in some local group, association of organization Participation Participation in some local group, association of organization with political interests aimed to revendicating public services Active participation in some local group, association of organization with political interests aimed to revendicating public services Benefits Support available in urgent situations Access to agricultural inputs or technologies Access to irrigation Access to infrastructure Access to other productive inputs Connectivity Presence of groups that work inside the area of the micro-catchment without integration with other groups Presence of groups that work inside the area of the micro-catchment and integrated with other groups with different objectives 33 Based on the report “Avaliação de Impacto do Programa Rio Rural sobre o capital social ” prepared by Oportunidades, pesquisa e estudos sociais - OPE Sociais\. November 20, 2018\. 34 Type of community participation, level of participation, democracy, connectivity, networks, trust, solidarity, cooperation, information and communication, sociability, social inclusion, conflict, leadership, benefits\. 67 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Dimensions Indicators Presence of groups that work inside and outside the area of the micro-catchment without integration with other groups Presence of groups that work inside and outside the area of the micro-catchment with integration with other groups Networks Able to receive financing support from someone outside the household in case of need Able to receive help from neighbors from 1 or 2 days to take care of the production unit Not able to trust receiving help from neighbors from 1 or 2 days to take care of the production unit Solidarity Believe that members of the community help each other at least in a few cases Believe that members of the community help each other only in exceptional cases Percentage of people that feel members of the community never help each other Willing to cooperate with a community project benefiting the community, even though it does not benefit them directly Cooperation Work with members of the community in tasks aimed producing common benefits No member of the household has ever worked with other community members in tasks benefiting the community Community member that does not participate in community activities is certainly criticized Community member that does not participate in community activities is probably criticized Facing a community problem, nobody in the community would help Communication Make or receive at least 2 phone communications per day Community leaders are one of the three key sources of information regarding public actions\. Community leaders are one of the three key sources of information regarding the markets\. Social Inclusion Access to health services Empowerment Percentage of people that consider they do not contribute to making the community a better place to live Community had a meeting several times for preparing or delivering a request or document to government or to local leaders in relation to something benefiting the whole community\. Community had a meeting at least once for preparing or delivering a request or document to government or to local leaders in relation to something benefiting the whole community\. Some requests have been successful\. Table 6\.8\. Statistically Significant Negative Impacts of Rio Rural on Social Capital Dimensions Indicators Community Participation in some local group, association of organization for religious, artistic, or Participation sportive interest Number of times that some member of the household has participated in two of the main local groups, associations of organizations in the last 12 months Average value (cash or goods) the household contributed with any group, association, or organization in the last 12 months Democracy Percentage of groups where people become members on their own initiative Benefits Groups providing leisure or fun activities to members Groups providing spiritual, social status, or self-esteem benefits to their members Groups providing leisure or fun activities, as well as spiritual, social status, or self-steam benefits to their members Connectivity Groups that work outside the micro-catchment, with or without integration with other groups 68 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Dimensions Indicators Groups that work outside the micro-catchment, with effective integration with other groups Networks Average number of close friends Cooperation Community member that does not participate in community activities will certainly not be criticized or is unlikely to be criticized\. Community member that does not participate in community activities will not be criticized\. Communication Rarely make or receive a phone call Empowerment Number of people declaring the community had only one meeting in the last 12 months for preparing or delivering a request or document to government or to local leaders in relation to something benefiting the whole community Most of those requests were not successful\. Number of people who met a politician, phone him/her, or delivered a letter within the last 12 months II\. ASSESSMENT OF ENVIRONMENTAL SUSTAINABILITY OF RURAL ROADS AND BRIDGES35 21\. Rural roads investments, which are usually relatively small in physical scale when included in an agricultural development project, frequently generate some substantial positive impacts but also may generate direct and indirect adverse environmental impacts\. Direct environmental impacts are generally due to construction- and rehabilitation-related activities, while indirect impacts are generally due to the use of roads\. In this context, three aspects that lead to environmental impacts, especially related to erosive processes, are highlighted in the evaluation of investments in rural roads and bridges in the Rio Rural project: improper cross-section design, inadequate or absence of proper drainage, and lack of environmental protection measures (especially against erosion)\. 22\. This independent assessment review presented the results of the evaluation of tertiary rural roads and bridges built under the Rio Rural project\. Roads sections located in 10 municipalities of the priority regions of Rio Rural (Serrana, Northwest, and North) were evaluated, as well as 23 bridges in 3 municipalities of the Serrana region (Nova Friburgo, Teresópolis, and Sumidouro)\. 23\. The tertiary rural road improvements under Rio Rural and the set of associated environmental measures aimed at improving the relationship between the road and the landscape and at increasing long- term sustainability from a social and environmental point of view\. The environmental control measures were primarily aimed at controlling the erosive process and correcting possible effects of engineering interventions, such as the case of slope conformation for small rectification and smoothing of curves and drainage works, such as the reform or implantation of manholes and improvement of gutters and other minor structures\. 24\. In the case of roads, the evaluation was conducted using three complementary key indicators\. In the case of bridges, one key indicator was adopted\. Each key indicator included different parameters that 35Bassi, Lauro\. 2018\. “Avaliação da sustentabilidade ambiental de estradas rurais terciárias e pontes\.” Programa Rio Rural\. Governo do Estado do Rio de Janeiro\. 69 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) allowed quantitative evaluation criteria and qualitative through direct perception\. The key indicators were the following: ï‚ Roads: (a) Efficiency in erosion control, (b) efficiency of drainage system, and (c) efficiency in reducing impacts on the road environment ï‚ Bridges: Erosion control measures in bridges 25\. The field assessment of the inventory of roads and bridges in the 10 selected municipalities covered (a) 38 stretches of roads that covered an extension of 305\.7 km and benefited around 13,755 people and (b) 23 bridges, involving 33 micro-basins, benefiting around 7,650 people\. 26\. Summary results for roads\. The road platforms were evaluated in an integrated manner together with gutters, culverts, and slopes, which can cause problems, especially erosion, when wrongly sized, poorly shaped, or left unprotected\. After assessing each key element affecting the sustainability of the road segment inspected, the overall results obtained show that 65 percent of roads evaluated had high sustainability, 33 percent average sustainability, and 2 percent low sustainability\. The following positive aspects were observed, which were responsible for the high environmental sustainability in 65 percent of the road segments evaluated: (a) Drainage system: (i) Culverts that generally meet the requirements for expected volumes of rainwater to be drained and (ii) correctly sized gutters, in most of the evaluated sections, with good functionality\. (b) Erosion control: (i) Road platforms with good conformation allowing the lateral drainage of the rainwater toward the gutters without causing erosion and (ii) slopes generally adequately shaped and protected\. (c) Materials used: It was observed that, in general, the primer coating had been suitably selected and exhibited good aggregation, giving stability to the pallet, and the materials used had good resistance against erosion\. 27\. On the other hand, sustainability issues were identified in at least 35 percent of the evaluated segments, mainly related to (a) platform erosion, because of inadequate conformation, low-quality coating material and low erosion resistance, or inadequately designed gutters; (b) erosion at drainage exits, caused by the inadequate conduction of the water coming from the gutters; and (c) need for adequate maintenance\. 28\. Summary results for bridges\. All the evaluated bridges were located in the Serrana region and are part of the emergency project for the recovery of the road infrastructure after the catastrophe of 2011\. The main results obtained from the field inspection showed high sustainability in 92 percent of the evaluated bridges in terms of erosion control measures (degree of protection of the bed slopes)\. 70 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) III\. ASSESSMENT OF PARTICIPATORY RESEARCH ACTIVITIES UNDER THE PROJECT 36 Introduction 29\. This report refers to the actions developed by PESAGRO's Participative Research Nucleus from 2010 to 2018 under the Rio Rural project\. These actions were implemented following six action plans: ï‚ Plan 1: Participatory Research Units\. Aiming at adapting technologies to the socioeconomic conditions of producers in the selected micro-basins in line with the lines of action encouraged by the Rio Rural project\. ï‚ Plan 2: Long-term Experiments\. Presenting solutions for technological bottlenecks of the main productive value chains in the state\. ï‚ Plan 2\.1 Research Network\. Facilitating the integration of research, teaching, and extension actions for sustainable rural development; raising and resolving demands of interest groups; sharing ideas, methods, and financial resources and stimulating synergies between institutions, avoiding overlapping of actions, with the farmer and his/her family as a priority beneficiary, as well as technicians and consumers\. ï‚ Plan 3: Production of agroecological inputs\. Providing access to farmers, experimentation, and use of alternative inputs and enabling the implementation or transition from conventional models to agroecologically more sustainable ones\. ï‚ Plan 4: Adequacy of Rural establishments of Dairy Cattle to Good Practices \. Making it possible for farmers to implement milk production systems with good practices that are adequate to the legislation and preserving the environment\. ï‚ Plan 5: Agroecology, Organic, and Sustainable Agriculture\. Carrying out studies to solve bottlenecks and diagnostics for the implementation of public policies of agroecology and organic agriculture in the SoRJ\. ï‚ Plan 6: Institutional Strengthening\. Improving institutional infrastructure and public sector processes to serve the external public and meet its institutional mission\. 30\. Scope of the participatory research activities\. The actions of these activities reached 28 municipalities and 37 micro-basins, 52 farmers experimenters/promoters participating, and 3,939 farmers within these micro-basins\. The number of participatory research activities can be broken down as follows: Table 6\.9\. Participatory Research Activities by Type (2010 to 2018) Action Plans Implemented Number 1\. Units of participatory research 24 2\. Long-term experiments 26 36RFNPP 2018 - State of Rio de Janeiro\. 2018\. Relatorio Final do Nucleo de Psquisa Participativa no Programa Rio Rural \. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel\. Rio de Janeiro\. Pages 36\. 71 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Action Plans Implemented Number 3\. Adoption of technology by family farms related to good 21 dairy practices 4\. Studies and research on organic agriculture 4 TOTAL 75 Table 6\.10\. Other Outputs of the Project Concept Number Number or researchers from PESAGRO participating 41 Number of PESAGRO’s state centers participating 6 Number of technical manuals produced 20 Number of technical publications produced 72 Main Results 31\. The main conceptual results obtained (based on anecdotal evidence) were the following: ï‚ With the introduction of rotational silvo-pastoral systems, there was an increase in the diversity of grasses in the properties, with good soil cover and nutritional value, and after the system was implemented the farmers increased the number of divisions on their own initiative\. ï‚ In the establishment and expansion of the systems, the farmers of the Northwest showed preference for grasses with seed propagation (Mombasa, Brachiaria brizanta, Brachiaria massai), mainly because of better drought resistance\. ï‚ Mombasa grass (Panicum maximum) presented the best response to milk production (according to the reports of the partner farmers and the data obtained in the verification) together with improvement in soil fertility and no negative influence on the amount of green matter\. ï‚ Average milk production increased from 40 L a day to 80 L a day per property\. Considering the average price of milk at BRL 1\.20 per L, the producers that previously had a dairy activity revenue of BRL 48\.00 per day experienced a 100 percent increase\. 72 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 7\. SPLIT ASSESMENT: PERFORMANCE OF PDO INDICATORS September 2011 Restructuring October 2012 Restructuring (AF) September 2017 Restructuring (partial November 2018 Project Closing (emergency) cancellation) Target YR1 (RF) Target YR3 (RF) Target YR8 (RF) End Target (RF) End Target (RF) End Target (RF) PDO Indicators PDO Indicators PDO Indicators PDO Indicators PDO Indicators Target (EF) Observed Observed Observed Observed (original) (2011) (2012) (2017) (2018) % % % % 1 19,500 Number 0 0 13,300 Met Number 0 9,170 47,000 0\.00 Number 22,841 45,850 35,000 65\.26 Continue 37,172 35,000 106\.21 small of small of small of small as per farmers farmers farmers farmers 2012 transitio (at least (at least (at least restructu ned 50% in 50% in 50% in ring toward targeted targeted targeted more areas) areas) areas) producti transition transition transition ve ed toward ed ed toward farming more toward more systems productiv more productiv e farming productiv e and systems e and sustainabl sustainab e farming le systems farming systems 2 Improve Improved Moved to n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. d product intermed product quality iate quality measured outcome measure by: s d by: 2a 9,500 Number 0 0 6,600 Met Dropped n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. farmers of farmers adoptin adopting g GAPs GAP 2b 130 Number 5 5 30 100 Moved to n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. small of small intermed 73 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) September 2011 Restructuring October 2012 Restructuring (AF) September 2017 Restructuring (partial November 2018 Project Closing (emergency) cancellation) Target YR1 (RF) Target YR3 (RF) Target YR8 (RF) End Target (RF) End Target (RF) End Target (RF) PDO Indicators PDO Indicators PDO Indicators PDO Indicators PDO Indicators Target (EF) Observed Observed Observed Observed (original) (2011) (2012) (2017) (2018) % % % % farmers farmers or iate or enterprise outcome enterpri s certified s ses certified 2c 280 Number 11 5 80 220 Moved to n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. agro- of agro- intermed processi processin iate ng and g and outcome artisanal artisanal s enterpri enterprise ses s adding adding value value 3 2,050 Number 10 10 1,000 100 Number 10 1,450 2,600 0\.69 Number 2,430 2,500 2,600 93\.46 Continue 3,359 2,600 129\.19 small of small of small of small as per farmers farmers farmers farmers 2012 included included included included restructu in (or in (or with in (or in (or with ring with improved with improved improve links to) at improved links to) at d links least one links to) least one to) at value at least value least chain one chain one value value chain chain 4 266,000 Area of 0 0 180,000 Met Area of 0 27,500 185,00 0\.00 Area of 105,278 165,000 160,000 65\.80 Continue 223,152 160,000 139\.47 hectares agricultur agricultur 0 agricultur as per of al lands al lands al lands 2012 agricultu under under under 74 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) September 2011 Restructuring October 2012 Restructuring (AF) September 2017 Restructuring (partial November 2018 Project Closing (emergency) cancellation) Target YR1 (RF) Target YR3 (RF) Target YR8 (RF) End Target (RF) End Target (RF) End Target (RF) PDO Indicators PDO Indicators PDO Indicators PDO Indicators PDO Indicators Target (EF) Observed Observed Observed Observed (original) (2011) (2012) (2017) (2018) % % % % ral lands improved improved improved restructu under productio producti productio ring improve n systems on n systems d systems producti on systems 5 1,300 Extent of 65 0 1,300 Excee Moved to n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. kms of tertiary ded intermed tertiary roads iate roads restored outcome restored and s and maintaine maintai d ned 75 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) October 2012 Restructuring (AF) September 2017 Restructuring (partial cancellation) November 2018 Project Closing Target End End PDO Indicators Observed PDO Indicators Target PDO Indicators Target YR3 Target % Observed Target % Observed % (2012) (2017) YR8 (RF) (2018) (EF) (RF) (RF) (RF) PDO Indicators into Intermediate Indicators PDO Indicators into Intermediate Indicators PDO Indicators into Intermediate Indicators Extent of tertiary 65 400 2,500 16\.25 Rural roads 4,745 n\.a\. 6,000 79\.08 Rural roads 7,127 6,000 118\.78 roads restored rehabilitated rehabilitated and maintained Improved Dropped n\.a\. n\.a\. n\.a\. n\.a\. Dropped n\.a\. n\.a\. n\.a\. product quality in at least 50% of beneficiaries receiving investment support (i) Dropped n\.a\. n\.a\. n\.a\. n\.a\. Dropped n\.a\. n\.a\. n\.a\. n\.a\. Dropped n\.a\. n\.a\. n\.a\. (ii) Number of 5 100 1,000 5\.00 Dropped n\.a\. n\.a\. n\.a\. n\.a\. Dropped n\.a\. n\.a\. n\.a\. small farmers or enterprises certified (iii) Number of 11 30 120 36\.67 Dropped n\.a\. n\.a\. n\.a\. n\.a\. Dropped n\.a\. n\.a\. n\.a\. agro-processing and artisanal enterprises adding value 76 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 8\. LIST OF PUBLICATIONS FINANCED UNDER PARTICIPATORY RESEARCH 2010–2018 SANTOS, M\. W\. dos; CARVALHO, L\. S\.; AYUKAWA , M\. L\.; OLIVEIRA, L\. A\. A\. de; BARCELOS, B\. J\. C\. de S\. Criação de galinha caipira em sistema semi-intensivo\. Niterói: PESAGRO-RIO: RIO RURAL, [2011]\. 5 f\. Resumo expandido\. ANDRADE, W, E, de B\.; AYUKAWA, M\. L\.; OLIVEIRA, L\. A\. A\. de; FERREIRA, J\. M\.;VALENTINI, L\.; BARCELOS, B\. J\. C\. de S\. Banana e caqui - sistemas sustentáveis\. Niterói: PESAGRO-RIO: RIO RURAL, [2008]\. 5 f\. Resumo expandido\. ANDRADE, W, E, de B\.; AYUKAWA , M\. L\.; OLIVEIRA, L\. A\. A\. de; FERREIRA, J\. M\.; VALENTINI, L\.; BARCELOS, B\. J\. C\. de S\. Adubação verde em subsistema de produção de mandioca\. Niterói: PESAGRO-RIO: RIO RURAL, [2010]\. 8 f\. Resumo expandido\. FERREIRA, J\. M\.; IDE, C\. D\. ; FREITAS, I\. M\. de; OLIVEIRA, L\. A\. A\. de; BARCELOS, B\. J\. C\. de S\. Barragem subterrânea\. Niterói: PESAGRO-RIO: RIO RURAL, [2009]\. 7 f\. Resumo expandido\. FERREIRA, J\. M\.; SILVA, L\. G\. J\. S\.; VALENTINI, L\.; ANDRADE, W\. E\. de B\. A\.; OLIVEIRA, L\. A\. A\. de; BARCELOS, B\. J\. C\. de S\.; Adubação Orgânica em Olerícolas\. Niterói: PESAGRO-RIO: RIO RURAL, 2011\. 5 f\. Resumo expandido\. ANDRADE, W\. E\. de B\.; FERREIRA, J\. M\.; POSSES, J\. H\. P\.; OLIVEIRA, L\. A\. A\. de; BARCELOS, B\. J\. C\. de S\. Alternância de áreas de produção de aipim utilizando o sistema de fileiras duplas com culturas intercalares\. Niterói: PESAGRO-RIO: RIO RURAL, 2011\. 5 f\. Resumo expandido\. 9 f\. Resumo expandido\. VALENTINI, L\.; FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; BARCELOS, B\. J\. C\. de S\. Banco de sementes de milho e adubo verde\. Niterói: PESAGRO-RIO: RIO RURAL, 2011\. 7 f\. Resumo expandido\. ANDRADE, W\. E\. de B\.; MURAKAMI, K\. R\. N\.; FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; BARCELOS, B\. J\. C\. de S\. Controle alternativo de pragas e doenças do cafezal\. Niterói: PESAGRO-RIO: RIO RURAL, 2011\. 13 f\. Resumo expandido\. MORENO, J\. M\.; CASTAGNA, A\. A\.; MOREIRA NETO, G\. P\.; SEIXAS FILHO, J\.T\. de; SOUZA, S\. O\. de; RODRIGUES, E\.; BRETAS, A\.; DILLY, R\. L\. Sequestro de carbono em dois sistemas de pastoreio rotativo \. Niterói: PESAGRO-RIO: RIO RURAL, 2011\. 4 f\. Resumo expandido\. MOREIRA NETO, G\. P\.; CASTAGNA, A\. A\.; MORENO, J\. M\.; SEIXAS FILHO, J\. T\. de; SOUZA, S\. O\. de S\.; RODRIGUES, E\.; BRETAS, A\.; DILLY, R\. L\. Comparação de produtividade das pastagens sob dois sistemas de pastoreio rotativo\. Niterói: PESAGRO-RIO: RIO RURAL, 2011\. 3 f\. Resumo expandido\. CASTAGNA, A\. A\.; SOUZA, S\. O\. de; SEIXAS FILHO, J\. T\. de; RODRIGUES, E\.; BARCELOS, B\. J\. C\. de S\.; FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; Pastoreio racional rotacionado na microbacia médio ribeirão bonito - Miracema-RJ (resultados parciais)\. Niterói: PESAGRO-RIO: RIO RURAL, 2012\. 6 f\. Resumo expandido\. FERREIRA, J\. M\.; SILVA, L\. G\. J\. S\., VALENTINI, L\.; ANDRADE, W\. E\. de B\.; RIBEIRO, L\. J\.; BARCELOS, B\. J\. C\. de S\.; OLIVEIRA, L\. A\. A\. de\. Tomate: sistemas sustentáveis\. Niterói: PESAGRO-RIO: RIO RURAL, 2012\. 5 f\. 77 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Resumo expandido\. FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; ANDRADE, W\. E\. de B\.; VALENTINI, L\.; BARCELOS, B\. J\. C\. de S\. Utilização de defensivo alternativo na cultura do pimentão\. Niterói: PESAGRO-RIO: RIO RURAL, 2012\. 4 f\. Resumo expandido\. BARROS, J\. C\. da S\. M\.; FERREIRA, J\. M\.; VALENTINI, L\.; IDE, C\. D\.; MURAKAMI, K\. R\. N\. Efeito da aplicação de urina da vaca no desenvolvimento inicial de plantas de lima ácida tahiti \. Niterói: PESAGRO-RIO: RIO RURAL, 2012\. 4 f\. Resumo expandido\. FERREIRA, J\. M\.; SANTOS SILVA, L\. G\. J\.; VALENTINI, L\.; ANDRADE, W\. E\. de B\.; OLIVEIRA, L\. A\. A\. de; BARCELOS, B\. J\. C\. de S\. Tomate: sistemas sustentáveis\. Niterói: PESAGRO-RIO: RIO RURAL, 2012\. 4 f\. Resumo expandido\. SOUZA, S\. O\. de; CAMARGO FILHO, S\. T\.; FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; SANTOS, J\. G\. C\. dos\. Pastoreio rotacionado em sistema silvipastoril (microbacia morro alto - Quissamã-RJ)\. Niterói: PESAGRO- RIO: RIO RURAL, 2012\. 6 f\. Resumo expandido\. FONSECA, M\. F\. de A\. C\.; MATTOS, C\.; VERSARI, D\.; ROCHA da SILVA, G\. R\.; MONTEIRO, G\. L\.; PERUZZI, M\.; SANTOS, N\. L\. V\. dos; GRAZIOLI, R\. B\.; MENDONÇA, C\.; MACHADO, A\. P\.; OLIVEIRA, L\. A\. A\. de; LOPES, A\. Comercialização de alimentos saudáveis da agricultura familiar para o mercado institucional (PAA) fase I: sensibilização, elaboração do projeto de venda, contrato com a CONAB e introdução à agroecologia \. Niterói: PESAGRO-RIO: RIO RURAL, 2012\. 14 f\. Resumo expandido\. FONSECA, M\. F\. de A\. C\.; AYUKAWA , M\. L\.; VERSARI, D\.; SANTOS, N\. L\. V\. dos; GRAZIOLI, R\. B\.; ROCHA da SILVA, G\. R\.; MACHADO, A\. P\.; MENDONÇA, C\.; OLIVEIRA, L\. A\. A\. de; LOPES, A\. Comercialização de alimentos saudáveis da agricultura familiar para o mercado institucional (PAA) Fase II: acompanhamento da unidade de pesquisa participativa\. Niterói: PESAGRO-RIO: RIO RURAL, 2012\. 15 f\. Resumo expandido\. CORRÊA, A\. L\.; FERNANDES, M\. do C\. de A\.; AGUIAR, L\. A\.; LIMA, E\. de S\. Desempenho de variedades de milho quanto à produção de grãos, sementes e palha para artesanato, em propriedades de assentamento rural (microbacia São Francisco - Valença-RJ)\. Niterói: PESAGRO-RIO: RIO RURAL, 2013\. 5 f\. Resumo expandido\. GUIMARÃES, T\.; FONSECA, M\. F\. de A\. C\.; MAGALHÃES, J\. V\.; OLIVEIRA, L\. A\. A\. de\. Oferta de produtos da agricultura orgânica no circuito carioca de feiras orgânicas no ano de 2011 \. Niterói: PESAGRO-RIO: RIO RURAL, 2013\. 17 f\. Resumo expandido\. FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; DIAS, D\. V\. da S\.; RIBEIRO, L\. J\.; ANDRADE, L\.; SANTOS SILVA, L\. G\. J\.; VALENTINI, L\. Comercialização na transição agroecológica: a experiência na microbacia de Santa Maria do Cambiocó São José de Ubá-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 4 f\. Resumo expandido\. FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; DIAS, D\. V\. da S\.; ANDRADE, L\.; SANTOS SILVA, L\. G\. J\.; VALENTINI, L\. Efeito da adubação orgânica com vermicomposto em alface cultivada em horta circular agroecológica \. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 4 f\. Resumo expandido\. CHAVES, T\. de A\.; ANDRADE, A\. G\. de\. Recuperação de áreas rurais degradadas por erosão com técnicas 78 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) de baixo custo\. Niterói: PESAGRO-RIO: RIO RURAL, 2013\. 14 f\. Resumo expandido\. SOUZA, S\. O\. de; CASTAGNA, A\. A\.; FERREIRA, J\. M\.; VALENTINI, L\.; OLIVEIRA, L\. A\. A\. de; SANTOS, J\. G\. C\. dos\. Produção de leite em sistema de manejo agroecológico de pastagem (microbacia médio Ribeirão Bonito - Miracema-RJ)\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 6 f\. Resumo expandido\. SOUZA, S\. O\. de; CASTAGNA, A\. A\.; VALENTINI, L\.; OLIVEIRA, L\. A\. A\. de; SANTOS, J\. G\. C\. dos\. Produção de leite em sistema de manejo agroecológico de pastagem (microbacia valão do papagaio - Itaocara-RJ) \. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 6 f\. Resumo expandido\. SOUZA, S\. O\. de; CAMARGO FILHO, S\. T\.; FERREIRA, J\. M\.; VALENTINI, L\.; OLIVEIRA, L\. A\. A\. de; SANTOS, J\. G\. C\. dos\. Matéria seca de gramíneas e produção de leite em pastoreio rotacionado silvipastoril (microbacia morro alto - Quissamã-RJ)\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 7 f\. Resumo expandido\. VALENTINI, L\.; FERREIRA, J\. M\.; ANDRADE, W\. E\. de B\.; OLIVEIRA, L\. A\. A\. de; DIAS, D\. V\. da S\.; FIGUEIREDO, F\. A\. M\. M\. de A\. Sistema agroflorestal e utilização de defensivos alternativos: a pesquisa participativa na microbacia valão grande II, Cambuci-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 6 f\. Resumo expandido\. OLIVEIRA, L\. A\. A\. de; DIAS, D\. V\. da S\.; FERNANDES, M\. do C\. de A\.; GUIMARÃES, T\. da S\.; TORRÃO, R\. B\. de A\. Produção de defensivos alternativos em duas microbacias no município de Teresópolis, região serrana do Estado do Rio de Janeiro\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 6 f\. Resumo expandido\. BARROS, J\. C\. da S\. M\. de; VALENTINI, L\.; FERREIRA, J\. M\.; ANDRADE, W\. E\. de B\.; OLIVEIRA, L\. A\. A\. de\. Produção de lima ácida tahiti no período de entressafra, na microbacia valão do papagaio, município de Itaocara-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 7 f\. Resumo expandido\. FERREIRA, J\. M\.; ANDRADE, W\. E\. de B\.; OLIVEIRA, L\. A\. A\. de; FERNANDES, M\. do C\. de A\.; FERNANDES, F\. Efeito da aplicação foliar de agrobio em alface e beterraba cultivadas em horta circular agroecológica em duas microbacias de São João da Barra-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 5 f\. Resumo expandido\. OLIVEIRA, L\. A\. A\. de; FERREIRA, J\. M\.; DIAS, D\. V\. da S\.; FERNANDES, F\.; RIBEIRO, L\. J\. Avaliação preliminar da introdução de novos sistemas de cultivo com hortaliças em microbacias hidrográficas no 5º distrito de São João da Barra-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 8 f\. Resumo expandido\. OLIVEIRA, A\. B\. de; CRUZ, R\. B\. da; MIGUEL da SILVA, G\. Estudos prospectivos com a heveicultura em sistemas agroflorestal e agrossilvopastoril integrados à propriedade familiar no município de Magé-RJ \. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 12 f\. Resumo expandido\. ANDRADE, W\. E\. de B\.; PINTO, J\. F\.; FERREIRA, J\. M\.; Shimoya, A\.; OLIVEIRA, L\. A\. A\. de\. Produção acumulada (10 anos) do cafeeiro arábica em condições de adensamento no noroeste fluminense experimento de longa duração\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 4 f\. Resumo expandido\. ANDRADE, W\. E\. de B\.; FERREIREA, J\. M\.; OLIVEIRA, L\. A\. A\. de\.; PINTO, J\. F\.; VIRGENS, A\. P\. C\. das\. Qualidade de cafés arábica (bebida e tipo) de pequenos produtores de microbacias hidrográficas de Porciúncula e Varre-Sai, noroeste fluminense primeiros resultados \. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 5 f\. Resumo expandido\. 79 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) SOUZA, S\. O\. de; VALENTINI, L\.; FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; SANTOS, J\. G\. C\. dos\. Diagnóstico participativo das propriedades leiteiras visando à implantação das unidades de Pesquisa participativa de pastoreio rotacionado silvipastoris em microbacias hidrográficas da região noroeste fluminense \. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 7 f\. Resumo expandido\. SOUZA, S\. O\. de; KIMURA, L\. M\. S\.; SOARES, R\. M\.; VALENTINI, L\. V\.; FERREIRA, J\. M\.; OLIVEIRA, L\. A\. A\. de; Shimoya, A\. Diagnóstico de sanidade animal e de algumas características de produção das propriedades leiteiras contempladas com unidades de pesquisa participativa de pastoreio rotacionado silvipastoris nas microbacias da região noroeste fluminense\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 7 f\. Resumo expandido\. DIAS, D\. V\. da S\.; FONSECA, M\. F\. de A\. C\.; SIQUEIRA, M\. F\. B\.; VALENTINI, L\.; Shimoya, A\.; OLIVEIRA, L\. A\. de; FERREIRA, J\. M\. Efeitos da utilização de bokashi e microorganismos eficientes no cultivo de cebola (Allium cepa) em sistema orgânico de produção, na região serrana do estado do Rio de Janeiro \. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 4 f\. Resumo expandido\. SAITER, O\.; FERNANDES, M\. do C\. de A\.; OLIVEIRA, L\. A\. A\. de; OLIVEIRA, E\. A\. G de\. Enriquecimento nutricional de substrato para a produção de mudas de quiabo e brócolis na microbacia de vieira - Teresópolis-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 4 f\. Resumo expandido\. SAITER, O\.; FERNANDES, M\. do C\. de A\.; OLIVEIRA, L\. A\. A\. de; OLIVEIRA, E\. A\. G de\. Uso de biofertilizante agrobio e óleo de nim no controle de pulgão em produção de mudas de brássicas (couve-flor, couve manteiga e brócolis) na microbacia de vieira - Teresópolis-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 4 f\. Resumo expandido\. SAITER, O\.; FERNANDES, M\. do C\. de A\.; OLIVEIRA, L\. A\. A\. de; OLIVEIRA, E\. A\. G de\. Uso do biofertilizante agrobio, calda bordalesa e emulsão sulfocálcica visando ao controle de míldio (bremia lactucae) em produção de mudas de alface na microbacia de vieira - Teresópolis-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2014\. 4 f\. Resumo expandido\. SAITER, O\.; FERNANDES, M\. do C\. de A\.; OLIVEIRA, L\. A\. A\. de; OLIVEIRA, E\. A\. G de; GALLO, J\. N\. N\. Efeito do biofertilizante agrobio e adubo orgânico fermentado tipo bokashi na cultura de beterraba microbacia de vieira - Teresópolis-RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2015\. 7 f\. Resumo expandido\. FERREIRA, J\. M\.; ANDRADE, W\. E\. de B\.; VALENTINI, L\.; OLIVEIRA, L\. A\. A\. de; FERNANDES, Fernanda\. Avaliação de cultivares de tomate em cultivo protegido microbacia campo de areia - São João da Barra - RJ\. Niterói: PESAGRO-RIO: RIO RURAL, 2015\. 5 f\. Resumo expandido\. FERREIRA, J\. M\.; ANDRADE, W\. E\. de B\.; OLIVEIRA, L\. A\. A\. de; VALENTINI, L\. Efeito da aplicação foliar de agrobio em tomate cultivado a campo microbacia rio doce - São João da Barra - RJ \. Niterói: PESAGRO- RIO: RIO RURAL, 2015\. 5 f\. Resumo expandido\. NETO, S\. A\.; VALENTINI, L\.; OLIVEIRA, L\. A\. A\. de\. Comportamento de cultivares e linhagens de arroz irrigado Campos dos Goytacazes\. Niterói: PESAGRO-RIO, 2018\. (PESAGRO-RIO\. Informação Tecnológica On Line, 134)\. ANDRADE, W\. E\. de B\.; VIRGENS, A\. P\. C\. das; SOUZA, F\. G\. de; FERREIRA, J\. M\. Qualidade de café de 80 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) produtores convencionais de porciúncula 1 Noroeste Fluminense - Amostragem 2013, 2014 E 2015\. Niterói: PESAGRO-RIO, 2018\. (PESAGRO-RIO\. Informação Tecnológica On Line, 134)\. VIANA, A\. R\.; FERREIRA, J\. M\.; VELENTINI, L\.; OLIVEIRA, L\. A\. A\. de\. Efeito da adubação orgânica na produção da cana forrageira no município de Itaperuna-RJ\. Niterói: PESAGRO-RIO, 2018\. (PESAGRO-RIO\. Informação Tecnológica On Line, 137)\. VIANA, A\. R\.; FERREIRA, J\. M\.; VELENTINI, L\.; OLIVEIRA, L\. A\. A\. de\. Efeito da adubação orgânica na produção da cana forrageira no município de Italva-RJ\. Niterói: PESAGRO-RIO, 2018\. (PESAGRO-RIO\. Informação Tecnológica On Line, 136)\. ANDRADE, W\. E\. de B\.; FERREIRA, J\. M\.; SILVA, J\. A\. da C\. e; MACHADO, G\. da C\. L\.; RANGEL JÚNIOR, E\.; SIAS, S\. P\.; OLIVEIRA, L\. A\. A\. de\. Utilização da parte aérea da mandioca como alternativa de silagem na pequena propriedade 1 Itaocara - Noroeste Fluminense\. Niterói: PESAGRO-RIO, 2018\. (PESAGRO-RIO\. Informação Tecnológica On Line, 135)\. VIEIRA, A\.; LATINE, M\.; CELESTINO, R\. C\. A\.; OLIVEIRA, L\. A\. A\. de; RÊGO FILHO, L\. de M\.; GRAÇA, J\. Avaliação de variedades cítricas introduzidas no município de Bom Jardim - RJ\. Niterói: PESAGRO-RIO, 2017\. (PESAGRO-RIO\. Informação Tecnológica On Line, 99)\. VIEIRA, A\.; PAULA, C\. de; CELESTINO, R\. C\. A\.; OLIVEIRA, L\. A\. A\. de; RÊGO FILHO, L\. de M\.; GRAÇA, J\. Estudo de coleção de plantas cítricas para o município de São José do Vale do Rio Preto - RJ\. Niterói: PESAGRO- RIO, 2017\. (PESAGRO-RIO\. Informação Tecnológica On Line, 100)\. VIEIRA, A\.; CHAGAS, J\. B\. de R\.; CELESTINO, R\. C\. A\.; OLIVEIRA, L\. A\. A\. de; RÊGO FILHO, L\. de M\.; GRAÇA, J\. Introdução e avaliação de cultivares de laranjeiras no município de Teresópolis-RJ\. Niterói: PESAGRO- RIO, 2017\. (PESAGRO-RIO\. Informação Tecnológica On Line, 101)\. VIEIRA, A\.; CHAGAS, J\. B\. de R\.; CELESTINO, R\. C\. A\.; OLIVEIRA, L\. A\. A\. de; RÊGO FILHO, L\. de M\.; GRAÇA, J\. Introdução e avaliação de novas cultivares de tangerineiras e híbridos no município de Teresópolis- RJ\. Niterói: PESAGRO-RIO, 2017\. (PESAGRO-RIO\. Informação Tecnológica On Line, 108)\. VIEIRA, A\.; FERREIRA, R\. B\. C\.; CELESTINO, R\. C\. A\.; OLIVEIRA, L\. A\. A\. de; RÊGO FILHO, L\. de M\. Introdução e estudo de pessegueiros na região Serrana Fluminense município de Sumidouro - RJ\. Niterói: PESAGRO- RIO, 2017\. (PESAGRO-RIO\. Informação Tecnológica On Line, 109)\. SAITER, O\.; LOPES, H\. M\.; OLIVEIRA, L\. A\. A\. de; FERNANDES, M\. do C\. de A\.; FONSECA, M\. F\. de A\. C\. Diagnóstico do sistema de produção e do uso de sementes orgânicas no município de Teresópolis - RJ\. Niterói: PESAGRO-RIO, 2017\. (PESAGRO-RIO\. Informação Tecnológica On Line, 115)\. OLIVEIRA, A\. B\. de; OLIVEIRA, L\. A\. A\. de; CRUZ, R\. B\. da; SILVA, G\. M\. da; MARQUES, F\. G\. Formação de sistemas agroflorestais com espécies nativas da mata atlântica e espécies exóticas não invasoras, para recomposição de reserva legal em propriedades de agricultores familiares do estado do rio de janeiro Resultados preliminares\. Niterói: PESAGRO-RIO, 2017\. (PESAGRO-RIO\. Informação Tecnológica On Line, 118)\. SAITER, O\.; AGUIAR, L\. A\.; FERNANDES, M\. do C\. de A\.; OLIVEIRA, L\. A\. A\. de\. Desempenho de variedades de bananeiras resistentes ou tolerantes aos agentes do Mal-do-Panamá e da Sigatoka Negra Microbacia 81 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Vale do Sahy - Mangaratiba - RJ\. Niterói: PESAGRO-RIO, 2016\. (PESAGRO-RIO\. Informação Tecnológica On Line, 82)\. BARROS, J\. C\. da S\. M\. de; VALENTINI, L\.; FERREIRA, J\. M\.; LARA, H\. S\. Produção de lima ácida Tahiti no período de entressafra\. Niterói: PESAGRO-RIO, 2016\. (PESAGRO-RIO\. Informação Tecnológica On Line, 88)\. ANDRADE, W\. E\. de B\.; FERREIRA, J\. M\.; PINTO, J\. F\.; ENGELHARDT, M\. A\.; OLIVEIRA, L\. A\. A\. de\.; VALENTINI, L\. Boas práticas agrícolas na produção do café: adensamento do cafeeiro arábica\. Niterói: PESAGRO-RIO, 2016\. (PESAGRO-RIO\. Informação Tecnológica On Line, 95)\. VALENTINI, L\.; FERREIRA, J\. M\.; ANDRADE, W\. E\. de B\.; OLIVEIRA, L\. A\. A\. de; SHIMOYA, A\. Avaliação de pó de rocha como fertilizante alternativo em pastagem na Região Noroeste\. Niterói: PESAGRO-RIO, 2016\. (PESAGRO-RIO\. Informação Tecnológica On Line, 96)\. 82 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 9\. BORROWER COMMENTS 83 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) ANNEX 10\. SUPPORTING DOCUMENTS Bibliography references AVALSUST 2018b - State of Rio de Janeiro\. 2018\. Availacao da Sustentabilidade de Practicas Produtivas e Ambientales e de Estradas Rurais Terciarias Apoiadas pelo Projeto Rio Rural BIRD - Primera Avaliacao: Resultados de cadeias produtivas avaliadas apoiadas pelo Programa Rio Rural BIRD e resultados de monitoramento da biodiversidade e armazenamiento de carbon (Produto 4)\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel, Rio de Janeiro\. AVALSUST 2018c - State of Rio de Janeiro\. 2018\. Availacao da Sustentabilidade de Practicas Produtivas e Ambientales e de Estradas Rurais Terciarias Apoiadas pelo Projeto Rio Rural BIRD - Primera Avaliacao: Resultados de cadeias produtivas avaliadas apoiadas pelo Programa Rio Rural BIRD e resultados de monitoramento da biodiversidade e armazenamiento de carbon (Produto 6)\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel, Rio de Janeiro\. Bassi, Lauro\. 2018\. “Avaliação da sustentabilidade ambiental de estradas rurais terciárias e pontes \.” Programa Rio Rural\. Governo do Estado do Rio de Janeiro, Rio de Janeiro, Brazil\. CPF 18–23 - World Bank\. 2018\. Country Partnership Framework 2018-2023\. Report No\. 113259-BR\. Washington, DC: World Bank\. http://documents\.worldbank\.org/curated/en/148141498229092629/pdf/20170619-Brazil-CPF-draft- for-Board-with-CLR-Acknowledgement-Box-06202017\.pdf\. CPS 08–11 - World Bank\. 2008\. Country Partnership Strategy Brazil 2008-2011\. Report No\. 42677-BR\. Washington, DC: World Bank\. http://siteresources\.worldbank\.org/BRAZILINPOREXTN/Resources/3817166- 1220388091471/CPS2008\.pdf?resourceurlname=CPS2008\.pdf\. CPS 12–15 - World Bank\. 2012\. Country Partnership Strategy Brazil 2012-2015\. Report No\. 63731-BR\. Washington, DC: World Bank\. http://documents\.worldbank\.org/curated/en/801861468016829855/pdf/637310CAS0P1230Official0Us e0Only090\.pdf\. DPOBREZA 2018 - State of Rio de Janeiro\. 2018\. Diagnostico da Pobreza Rural no Estado do Rio de Janeiro\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel, Rio de Janeiro\. ISR 2018 - World Bank\. 2018\. Implementation Status and Results Report - Rio de Janeiro Sustainable Rural Development Project (P101508)\. Seq\.18\. Washington, DC: World Bank\. LA 2009 - World Bank\. 2009\. Loan Agreement between State of Rio de Janeiro and International Bank for Reconstruction and Development\. Loan Number 7773-BR\. Washington, DC: World Bank\. LA 2013 - World Bank\. 2013\. Loan Agreement (Additional Financing for the Rio de Janeiro Sustainable Development Project) between International Bank for Reconstruction and Development and State of Rio de Janeiro\. Loan Number 8200-BR\. Washington, DC: World Bank\. 84 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) MRESULT 2018 - State of Rio de Janeiro\. 2018\. Marco de resultados: Indicadores Rio Rural Outubro 2018 (planilha)\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel, Rio de Janeiro\. MTR 2015 - World Bank\. 2015\. Estado Do Rio de Janeiro Projeto de Desenvolvimiento Rural Sustentavel en Microbracias Hidrograficas do Estado do Rio de Janerio - Missao de Revisao de Meio Termo - Ayuda Memoria\. PAD 2009 - World Bank\. 2009\. Project Appraisal Document\. Report N46397-BR\. Washington, DC: World Bank\. PP 2012 - World Bank\. 2012\. Proposed Paper on a Proposed Additional Loan in the Amount of US$100 million to the State of Rio de Janeiro, Brazil with the Guarantee of the Federative Republic of Brazil for the Additional Financing for the Rio the Janeiro Sustainable Rural Development Project \. Report N67055-BR\. Washington, DC: World Bank\. PSATISF 2018b - State of Rio de Janeiro\. 2018\. Nivel de satisfacao dos entrevistados com as praticas avaliadas - Projecto Rio Rural BIRD\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel, Rio de Janeiro\. RATIVEMERG 2013a - State of Rio de Janeiro\. 2013\. Relatorio de Atividades do Programa Rio Rural BIRD Emergencial - abr-2013\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel, Rio de Janeiro\. RATIVEMERG 2013b - State of Rio de Janeiro\. 2013\. Relatorio de Atividades do Programa Rio Rural BIRD Emergencial - out-2013\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel, Rio de Janeiro\. Rio Rural\. 2016\. Estratégia de cofinanciamento programa Rio Rural\. Project report\. RFNPP 2018 - State of Rio de Janeiro\. 2018\. Relatorio Final do Nucleo de Psquisa Participativa no Programa Rio Rural\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel, Rio de Janeiro\. RP 2011 - World Bank\. 2011\. Restructuring Paper on a Proposed Project Restructuring of Rio de Janeiro Sustainable Rural Development Project Loan September 10, 2010 to the State of Rio de Janeiro \. Report N62969-BR\. Washington, DC: World Bank\. RP 2013 - World Bank\. 2013\. Restructuring Paper on a Proposed Project Restructuring of Rio de Janeiro Sustainable Rural Development Project Loan 7773-BR September 10, 2009 to the State of Rio de Janeiro \. Report NRES10451\. Washington, DC: World Bank\. RP 2015 - World Bank\. 2015\. Restructuring Paper on a Proposed Project Restructuring of Rio de Janeiro Rural Development Project Loan 8200-BR November 6, 2012 to the State of Rio de Janeiro \. Report NRES10451\. Washington, DC: World Bank\. RP 2017 - World Bank\. 2017\. Restructuring Paper on a Proposed Project Restructuring of Rio de Janeiro State of Rio de Janeiro\. (2016)\. 85 The World Bank Rio de Janeiro Sustainable Rural Development Project (P101508) Estratégia de cofinanciamento do Programa Rio Rural - ago-2016\. Secretaria de Agricultura, Pecuaria, Pesca e Abastecimiento; Superintendencia de Desenvolvimento Sustentavel\. Rio de Janeiro\. Sustainable Rural Development Project Approved on September 10, 2009 to State of Rio de Janeiro \. Report N-RES29133\. Washington, DC: World Bank\. Saraiva Schott, Fábio, and Anna K\. E\. Bernstad\. 2018\. Update of the GHG Balance Sheet Estimates of the Practices Promoted by the Rio Rural Program Using the FAO ExAct Tool\. Consultancy report\. Rome, Italy: FAO\. 86

REVIEW

P109804

 ICRR 13945 Report Number : ICRR13945 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 05/15/2013 Country : Indonesia Project ID : P109804 Appraisal Actual Project Name : Access To Finance US$M ): Project Costs (US$M): 4\.48 5\.98 And Capacity Building Of Earthquake-affected Mses In Yogyakarta And Central Java L/C Number : Loan /Credit (US$M): Loan/ US$M ): 4\.48 5\.98 Sector Board : US$M): Cofinancing (US$M ): Cofinanciers : Board Approval Date : 07/10/2008 Closing Date : 05/31/2010 06/30/2011 Sector (s): Micro- and SME finance (100%) Theme (s): Micro; Small and Medium Enterprise support (67% - P); Trade facilitation and market access (33% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Sushma Narain Rene I\. Vandendries Ismail Arslan IEGPS2 2\. Project Objectives and Components: a\. Objectives: According to the Project Appraisal Document (PAD pg 3) the overall objective of the project was to “contribute to the Government of Indonesia’s (GoI's) initiatives to support the recovery of Micro and Small Enterprises (MSEs) in Yogyakarta and Central Java and enable them to reach at least their pre -earthquake capacity through enhanced access to finance and targeted technical assistance \.â€? The Grant Agreement (Schedule 1, Pg\. 7) defines the objective of the Project as : “to contribute to the efforts of the Republic of Indonesia to support the recovery of MSEs in the Affected Areas and to enable them to at least regain their pre -earthquake operating capacity\.â€? The two statements are nearly identical except that the PAD states that the objective was to reach pre-earthquake capacity while the Grant Agreement defines the objectives as achieving pre -earthquake operating capacity\. The PAD definition is closer to the project design which measures the achievement of objectives in terms of pre-earthquake operating capacity, sales and profit \. The PAD definition is thus used for this review\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: I\. Assessment for Identification of Interventions /Targeting of Beneficiaries (Appraisal: US$0\.4 million, Actual: US$0\.6 million):: to conduct livelihood, market and environmental surveys to fine -tune the implementation strategy for assistance to MSEs \.  II\. II \. Asset Replacement (US$0\.9 million both appraisal and actual): : to assist enterprises that had suffered damage to equipment, production facilities or to rebuild supporting infrastructure to resume operations \. The assets were procured by the International Organization for Migration (IOM) and delivered to the communities for hand-over to the MSEs\. III Access to Finance (Appraisal: US$ l \.0 million, Actual:US$0\.1 million ): to provide credit to MSEs including III\. community enterprises, associations and cooperatives through the APEX, Permodalan Nasional Madani (PNM) which will on lend to selected participating Micro Finance Institutions (MFIs)\. This component was dropped as the negotiation for the Memorandum of Understanding (MOU) between PNM and IOM was not concluded satisfactorily\. After the project restructuring and amendment to the grant agreement in May, 12, 2010, the remaining funds of this component were re -allocated to Component IV–Assistance to Market Access and Component V–Technical Assistance & Capacity Building to finance an expansion of activities in these two components\. In addition a micro-finance training was added to the capacity building component to enable the assisted MSEs to access finance \. The project team clarified that the actual expense of US$ 100,000 represents the consultant fees spent during the negotiations between IOM and PNM as well as the fee incurred throughout the project cycle to connect IOM beneficiaries with the parallel German Agency for International Cooperation (GIZ) project\. iv Assistance for Market Access (Appraisal: US$0\.3 million, Actual:US$0\.9 million ): to provide technical iv\. assistance (TA) to MSEs to help them recover former buyers and customers or to identify new ones through the Indonesian Chamber of Commerce and Industry (KADIN) which will in turn work through its various business associations and broad networks in government and the private sector \. v\. Capacity Building Technical Assistance (Appraisal: US$0\.7 million, Actual: US$ 2\.1 million) to provide TA and training for skills development and capacity building to the MSEs and Producer Groups \. TA will also be provided for the formation of these groups where the need for such group formation is supported by the assessments\. Following the reallocation of funds from Component III to this Component, a training program was also added to build capacity of the MSEs to assess their financing needs, select an appropriate financial service provider and prepare credit applications to MFIs \. vi\. Project Management and Monitoring and Evaluation (Appraisal: US$1\.1 million, actual: US$ 1\.3 million): to finance all costs associated with management, implementation, and supervision of the project incurred by IOM \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: At appraisal the total cost of the project was estimated at US$ 4\.48 million\. The funds were provided as a Java Recovery Fund (JRF) grant- a multi donor recovery and reconstruction fund set up in 2006, after a massive earthquake struck the populous south - central Java coast, coordinated by the World Bank \. A mid-term review was held on October, 23, 2009 and the project was restructured on May 12, 2010\. Following the restructuring the project closing date was extended from May 31, 2010 to June 30, 2011 and an additional financing of US$ 1\.5 million was endorsed and approved by JRF Steering Committee on May 12, 2010\. The project team clarified that Bank approval was obtained on 6 October 2010\. The additional financing and project extension was to implement an exit strategy and to allow extended assistance to beneficiaries that remain vulnerable combined with targeted capacity-building activities for the local governments and other local institutions \. At completion the total project cost was US$ 5\.98 million\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: The relevance of the project objectives is rated as substantial and consistent with the reconstruction and rehabilitation efforts of the Government of Indonesia as outlined in its National Action Plan (NAP)\. NAP’s priorities included: (a) recovery of industry and service sectors with a focus on small-scale industry, agriculture and tourism; (b) recovery of the financial service delivery to improve access to finance for Small and Medium Enterprises (SMEs); (c) recovery of market access for earthquake-affected SMEs\. These objectives were firmly aligned with the JRF and this project funded by the JRF\. JRF was convened by the Bank at the request of GOI and helped bring together several key development partners to set up a US$84 million fund, US$20 million of which were earmarked for livelihood recovery\. The project objectives remain consistent with current objectives  of private sector development, increasing access to finance for SMEs and poor households as well as the disaster risk management goals as outlined in the IBRD and IFC Country Partnership Strategy (CPS) for FY2009-2012\. b\. Relevance of Design: The relevance of design is rated substantial \. The results framework and the causal chain -input, outputs and outcomes- were clear and convincing\. The project design had some good features \. The project components and activities addressed the main constraints in recovering the capacity of MSEs affected by the earthquake i \. e\. access to finance, need for assets replacement, improved access to markets and skills development \. In this the project design drew on lessons learned from the implementation of previous recovery activities in the region such as i) the importance of community and government ownership and their involvement at all stages of preparation and implementation; (ii) transparent targeting of beneficiaries; and (iii) provision of a comprehensive package of technical as well as financial assistance to MSEs \. The on-lending conditions under the access to finance component were well designed \. It involved the use of an apex institution (PNM); predetermined criteria to select and monitor financial intermediaries; transfer of funds to PNM on a non-reimbursable basis; on-lending of the proceeds to selected intermediaries at an interest rate of not more than 7 percent annually, with a repayment period of not more than 5 years (justified by the emergency character of the operation); and the assumption of the credit risk by the financial intermediaries \. The project’s exit strategy i\.e\. the proposed endowment fund to support MSEs had the potential to sustain the project outcome beyond project closing\. However, the access to finance component was dropped as IOM and PNM failed to conclude the MOU\. According to the MTR this was due to PNM ’s “lack of willingness and commitmentâ€? to the project\. The project team however clarified that PNM was not willing due to the cost /benefit considerations\. 4\. Achievement of Objectives (Efficacy): The project’s objective was to contribute to the Government of Indonesia ’s initiatives to support the recovery of MSEs in Yogyakarta and Central Java and enable them to reach at least their pre -earthquake capacity\. The project had a number of important outputs and outcomes \. The main source of data for measuring PDO achievement is the beneficiary satisfaction survey, which covered a small sample of 10 percent of the assisted enterprises \. An additional source is a comparative analysis of the baseline data collected from 3,000 beneficiaries at inception vis-à-vis a 15 percent beneficiary sample of the target population at project closing \. Although the assessment of PDO achievement is based on two small samples, project efficacy is rated as substantial as a number of micro and small enterprises were helped to recover the level of operating capacity and profits that they had had prior to the earthquake through asset replacement, market access, capacity building and restoration and building of local infrastructure \. The project team also clarified that for both the data sources the samples were randomly selected, however the sectors for which the samples were sele cted were pre-determined and that the results are, therefore, indicative\. Outputs a) Assessment for Identification of Interventions /Targeting Beneficiaries : 25 villages were assessed as targeted, 4456 selected MSEs were registered in the project database exceeding the target of 4,300; of these 42 percent were women MSEs- described as a woman led MSE in the borrower ’s ICR- against the target of 30 percent\. b) Asset Replacement : The in –kind support to replace affected assets and infrastructure essential for restarting economic activities was provided to 3,032 MSEs exceeding the target of 3,000\. Under this component, assistance was also provided to establish 18 new cooperative production facilities in the crop production and livelihood sectors, irrigation system, 52 communal cattle and goat pens, 9 bio gas plants and 3 product show rooms, 50 meters of drainage canal were upgraded and 237 meters of community roads were rehabilitated \. c) Access to Finance : As discussed in Sec 2 C, this component was dropped as the MOU between IOM and PNM could not be finalized and funds budgeted for this component were reallocated to other components \. However, given that access to finance was identified as a major constraint; the beneficiaries were assisted in accessing finance by way of referral to the JRF livelihood project implemented by GIZ in partnership with PNM \. MSEs were also trained (as mentioned in 4e below) to enable them to access funds from other MFIs \. Access: 628 MSEs participated directly in fairs and exhibitions compared to the target d) Assistance for Market Access: of 450, and 2,230 MSEs participated with product contributions in these fairs\. The ICR does not provide information regarding the number of MSEs that were assisted in improving access to markets or recovering old buyers and customers or the type of activities that were undertaken to accomplish this \. e) Capacity building technical assistance : TA was provided to 4342 MSEs against the target of 4000\. In addition disaster management and recovery training for the local governments was added upon restructuring and 43 workshops/forums were also conducted for government capacity building against the target of 40\. The capacity building component also included training for MSEs to enable them to access finance from other MFIs \. The project team clarified that in all 1240 people were trained to improve financial literacy and to access finance \. All participants of the A2F program were referred to MFIs as a standard activity \. 468 MSEs (i\.e\. 38 percent of the targeted training participants, or 10\.5 percent of all 4,456 MSEs obtained a loan from a credit source in the period following completion of the training \. In line with the advice given by GIZ, IOM beneficiary groups were connected with five banks : BMT Syariah Sukowati; BPR Nusamba Temon; BPR Pembangunan Daerah Gunung Kidul; BPR Profidana; BPR Wuniartha\. And 43 beneficiaries accessed loans from the GIZ funded bank BPR Pembangunan Daerah Gunung Kidul\. Outcomes The PDO target outcome indicator was that 4,300 assisted MSEs reached their pre -earthquake operating capacity, sales and profits \. This target was substantially achieved \. The source cited in the ICR for assessing the accomplishment of this target outcome is the IOM Beneficiary Satisfaction Survey which was conducted in the final quarter of 2011\. The survey, covered only 459 MSEs or slightly over 10 percent of the beneficiaries \. Of these, 87\.7 percent reported having achieved the pre -earthquake or better levels of capacity and 77 percent of them had exceeded pre-earthquake levels\. Extrapolating this finding to the 4,456 assisted enterprises, the number of SMEs that would have achieved pre -earthquake operating capacity would be 3,908, equivalent to 90\.9 percent of the target\. There is no report on increase in sales in the sampled enterprises \. The project team added that the information on sales was collected to calculate the profits and as the office is dismantled the raw sales data is not available\. In addition, as the table below shows, at project closing the IOM ’s internal pre and post intervention comparative impact evaluation for 15 percent of the 3000 beneficiaries for which data was collected at the inception, found an average of 76\.2 percent net increase in MSE profits among the sampled enterprises; a 20\.7 percent increase in household incomes; and improvements in savings and enterprise skills \. The average per month MSE profit increased from USD 17\.6 (baseline data from the beneficiaries ’ assessment survey) to USD 31\.0 (post intervention)\. Pre-Intervention Post- Intervention % increase Profits (Baseline) USD 17\.6 per USD 31\.0 per month 76\.2% MSE month USD 144 20\.7% Household income USD 119 As mentioned above, this is based on information collected from a small sample comprising of 15 percent of the beneficiaries\. The project team, however, clarified that the sample was randomly selected though the sectors were predetermined\. Intermediate Outcome Indicators : beneficiaries\. The intermediate outcome target was that 4,300 MSE’ Percentage of women beneficiaries\. MSE’s are registered in women’s MSE’ the project database and 30 percent of these are women’ MSE’s\. By project completion, 41\.8 percent of the 459 MSEs in the Beneficiary Survey were women led MSEs\. Extrapolating to the 4,456 assisted enterprises, would indicate that the target was exceeded \. access\. The intermediate outcome target was that 4,000 MSE’ Improvement in market access\. MSE ’s improved access to Markets \. By project completion 97 percent of the 459 MSEs of the Beneficiary Survey indicated that they had improved market access\. Extrapolating to the 4,456 assisted enterprises, would indicate that 3,876 of the assisted MSEs had improved access to markets, close to the target outcome\. Additional information from the  project beneficiary database collected at the start of the project and compared with 15 percent of the sample beneficiaries shows that while no beneficiaries accessed markets beyond the village or sub-district levels, at project closing, 22\.3 percent of the MSEs stated that they had penetrated district-level markets, 26\.4 percent provincial-level markets and 11\.4 percent national-level markets\. Improvement in financial management and managerial skills \. The intermediate outcome target was that 4,300 MSEs had financial records which previously had none \. By project completion 4, 206 or 98 percent of the MSEs had financial records\. Another intermediate outcome target was that 4,300 MSEs will have business plans which previously had none\. By project completion 4,049 or 94 percent of the MSEs had business plans \. finance: There was no intermediate outcome target to track this after the restructuring of Increasing access to finance: the project and cancellation of the access to finance component However, as part of the capacity building component MSEs were provided microfinance training to enable them to access credit from MFIs including from the other JRF project implemented by GIZ\. According to the ICR, by project closing, 10\.5 percent or 468 MSEs , had accessed credit (Data reported by the training implementer Rekap Data Peminjam Paska Pelatihan ‘Access to Finance’, Bina Swadaya Konsultan on July 2011)\. The borrower’s ICR further adds that of these, 364 beneficiaries had obtained credit through revolving fund schemes, while 104 MSEs obtained bank credits\. Only 43 beneficiaries could access credits from a GIZ-funded MFI- the parallel JRF project in the region\. Thus following the dropping of the access to finance component, the project was not successful in assisting the majority of the MSE’s to access funds\. The borrower’s ICR identified the following factors that curtailed a greater success in this regard: (a) certain beneficiary sectors did not require financial assistance from formal channels, instead preferring loans from funds rotated within the group; (b) required travel time between the location of the MSE and the BPR posed a financial and logistical constraint; (c) beneficiaries that required financing were sometimes not bankable, meaning that they lacked track record or loan repayment ability to be viewed as attractive clients; and (d) MFIs did not want to weaken their portfolio by taking on non -bankable clients \. 5\. Efficiency: The PAD and ICR do not provide any Economic Rate of Return (ERR) and Financial Rate of Return (FRR) for the project, and there is no information in the ICR to compare this project to similar projects in other countries \. Based on the lack of evidence the efficiency is rated as modest \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The project had some important results in terms of output for the earthquake affected MSEs \. It increased participation of micro and small MSE in fairs and expos, created production groups, restored and created small/local infrastructure, replaced assets, build financial and business management capacity of MSEs and disaster management capacity of local governments \. Overall a large number of micro small enterprises were helped to recover the operating capacity and profits they had prior to the earthquake through asset replacement, market access, capacity building and restoration and building of local infrastructure \. This was achieved despite the dropping of the important access to finance component and low success in increasing access to finance through training\. Overall the rating of moderately satisfactory takes into account the relevance of objectives and design both rated as substantial, as well as efficacy rated as substantial, and efficiency of the project in achieving the objectives rated as modest \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The endowment fund to be created from the repaid loans was an important plank to finance the MSEs for the next 10 years and hence for the sustainability of the development outcome \. This could not be executed as the access to finance component was dropped \. The project’s alternative strategies to increase access to finance were not very successful \. The project however received funds to draw up an exit strategy to sustain the gains and the outcome of the project \. Although the exit strategy has important features including local governments ’ involvement and draws up detailed action plans, the capacity of the strategy to help sustain the development outcomes could not be fully assessed at project closing \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: The project objective was relevant to country priorities and Bank strategy \. The Bank clearly identified the constraints and challenges facing the MSEs and incorporated them in the project design \. The results framework and outcome indicators as designed were clear and convincing \. Intermediate outcome indicators were largely measurable\. Monitoring and evaluation (M&E) arrangements provided a dedicated M&E resource and budget\. However, the project design did not identify the entity risk with respect to the apex bank and thus provided no mitigating measures \. This proved to be significant, as the failure to execute the MOU resulted in the access to finance component being dropped from the project and the alternative strategies were not very successful in increasing access to finance through other sources \. The project team indicated that the access to finance was one of the five components and accounted for only 15 percent of the project cost\. at -Entry Rating : Quality -at- Moderately Satisfactory b\. Quality of supervision: Supervision missions were carried out twice a year \. The Bank team had a high degree of continuity \. The Bank was responsive to GOI’s requests throughout project implementation, and demonstrated flexibility \. As discussed in section 4, following the MTR recommendations, the team dropped the access to finance component as the MOU with PNM was not concluded and redistributed the funds to market access and capacity building components \. And following the GOI’s request added capacity building of the local government for disaster mitigation and recovery \. The project team facilitated access to credit to eligible MSEs, as recommended by the MTR, through the parallel JRF Livelihood Recovery Project implemented by the GIZ\. However, as discussed in section 4 this strategy was not very successful \. Overall though the project team responded to the changing environment and emerging needs through its flexible approach to ensure significant impact for a large number of micro and small enterprises, over forty percent of which were women led\. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The Borrower, IOM and the Bank closely cooperated during project preparation stage, assessments as well as during the implementation phase given the local and community based nature of the project \. Government also actively participated in the project closing workshops and capacity building for disaster management  and training as part of the exit strategy \. Overall, government performance is rated satisfactory as the government support was critical for the implementation of the project in the difficult recovery and reconstruction context\. Government Performance Rating Satisfactory b\. Implementing Agency Performance: IOM had a challenging task, given the severe destruction caused by the massive earthquake which damaged infrastructure and business assets \. In this environment it was able to generate a number of outputs such as building local infrastructure, replacing affected assets, building capacity of MSEs, civil societies, local government and create production groups \. Its relevant experience of livelihood recovery in the affected area facilitated this\. IOM was also able to build on its partnerships with the local governments and agencies \. IOM and PNM were not able to sign the service agreement and the alternative strategies to increase access to finance were not very successful including through the parallel JRF project \. Further 15 percent of the respondents of the Beneficiary Satisfaction Survey were ‘dissatisfied’ with the replaced assets purchased and distributed by IOM due to ‘assets not meeting quality standards or required specifications of the MSE \.’ This is inconsistent with the process of beneficiary identification and need assessments carried out as part of the project and monitoring done through the project database with a dedicated M&E resource and with adequate budgetary allocation for the same \. However, given the large number of outputs that were generated, the high utilization level of individual and communal productive assets created under the project, the targeting of beneficiaries from remote areas, and the assistance provided for recovery to the large number of micro and small enterprises, the implementing agencies performance is rated as satisfactory \. Implementing Agency Performance Rating : Satisfactory Overall Borrower Performance Rating : Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The project had an M&E budget allocation as well as dedicated resources : an M&E Manager and Officer to monitor the project\. The project implementation progress was to be tracked using the beneficiary database \. The causal chain- input, output and outcome- was clear and convincing\. The intermediate outcome indicators were measurable\. The baseline values were to be added following the beneficiaries ’ assessments and registration in the project database under component I \. The Beneficiary Satisfaction Survey upon completion of the project was to track the impact\. The M&E framework was updated following the restructuring but tracked largely outputs \. However, no output or intermediate indictors were added to capture the outcome for microfinance training of MSEs to access credit from MFIs b\. M&E Implementation: IOM was required to provide the Bank with quarterly reports on implementation progress as well as a completion report following the project closure \. IOM was also required to hold monthly meetings with GIZ (following the MTR recommendations and the need for coordination to facilitate access to finance for the beneficiaries ) and report the minutes of the meetings to the Bank and to JRF \. The ICR does not provide any information on these meetings or on the reporting requirements \. The project team however clarified that such meetings took place on a regular basis and that IOM regularly submitted these reports \. The beneficiary satisfaction survey at project closure was the main data source and used a small sample size of 10 percent of the beneficiaries \. IOM’s existing database was expanded to include the profiles of beneficiaries to track progress and for project management \. IOM’s internal impact evaluation tracked project impact using 15 percent of the 3,000 beneficiaries registered in the database \. The ICR does not indicate whether the samples were randomly selected\. However as indicated in sec 4, the project team clarified that for both the data sources the samples were randomly selected but the sectors for which the samples were selected were pre -determined  and that the results are, therefore, indicative \. c\. M&E Utilization: The project database was created to monitor implementation and correct course based on the findings \. Sufficient information is not available in the ICR to assess the utilization of the M&E indicators to monitor project progress\. However, the borrower’s ICR indicates that the project impact was tracked using the database \. M&E Quality Rating : Substantial 11\. Other Issues a\. Safeguards: Safeguards: The project had a category B rating and was not expected to lead to any significant adverse social and environmental impact\. Environmental safeguards were suitably maintained through a negative checklist\. The social impact was expected to be positive, as the project assisted MSEs affected by the earthquake to revitalize their businesses and to re-integrate affected low income communities back into sustainable economic life\. No social and environmental issues were encountered during project implementation b\. Fiduciary Compliance: Financial Management reports were submitted on time and no major issues were noted\. The financial management system provided timely and accurate information required to manage and monitor the implementation of the project\. The project audit reports were also submitted on time with clean audit opinion \. c\. Unintended Impacts (positive or negative): Positive changes are reported in the decision making power of the women MSEs who constituted 42 percent of the beneficiaries\. Women’s “Substantialâ€? influence, thus, increased by 11\.8 percentage points at the enterprise level and 12\.2 percentage points at the community level compared to the pre intervention level d\. Other: NA 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Satisfactory Satisfactory Risk to Development Negligible to Low Moderate Section 7 Outcome : Bank Performance : Satisfactory Satisfactory Borrower Performance : Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: Following are lessons from the ICR summarized : Ensure government involvement throughout the entire project life-cycle and allocate staffing and funding resources for the same\. Leverage existing capacities and resources of the target groups to create ownership and to cost-effective project implementation\. Establish a robust information management, monitoring, evaluation and reporting system \. Start early on project continuation planning and sustainability to design a viable project exit strategy and continuation plan agreeable to all stakeholders \. A well-functioning implementation agency is essential for a successful implementation of a multi-component and complex project\. In addition, IEG draws the following lessons: During the design phase, the Bank needs to carefully assess the capacity and willingness of all the key implementing agencies and identify any related risk with respect to each one of them and propose appropriate and workable mitigating strategies \. Appropriate restructuring options should be considered when any major components are cancelled \. Major changes and restructuring should be reflected in the M&E 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: 1\. The ICR is clearly written, detailing the context of the project and largely follows the guidelines\. The lessons learned generally flow from the analysis\. However there are several shortcomings\. Analysis of outcome and results were largely focused on intermediate outcomes and outputs\. The ICR would have been more complete and self-sufficient if it had incorporated more of the additional data source- the comparative analysis of the baseline data collected from 3,000 beneficiaries at inception vis-à-vis a 15 percent beneficiary sample at project closing- to support the achievement of the PDOs\. On the other hand the borrower’s ICR included in the annex does a detailed analysis of the results and outcomes and was used by IEG to arrive at the conclusions on the achievement of objectives\. The ICR makes no mention of sample selection methodology for the two data sources on which the achievement of PDO is based\. The description of efficiency is cursory\. It also did not provide any information on the bank ’s approval for the additional financing of US$ 1\.5 million\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P118036

 ICRR 13705 Report Number : ICRR13705 IEG ICR Review Independent Evaluation Group 1\. Project Data : Date Posted : 09/13/2011 Country : El Salvador Is this Review for a Programmatic Series? Yes No Series ID : First Project ID : P118036 Appraisal Actual Project Name : Sustaining Social US$M ): Project Costs (US$M): 100 100 Gains For Economic Recovery L/C Number : Loan /Credit (US$M): Loan/ US$M ): 100 100 Sector Board : Economic Policy US$M ): Cofinancing (US$M): Cofinanciers : Board Approval Date : 11/24/2010 Closing Date : 12/31/2010 12/31/2010 Sector (s): General education sector (40%); Health (30%); Other social services (20%); General transportation sector (10%) Theme (s): Health system performance (30%); Administrative and civil service reform (30%); Public expenditure; financial management and procurement (20%); Nutrition and food security (10%); Social safety nets (10%) Evaluator : Panel Reviewer : ICR Review Group : Coordinator : Melise Jaud Jorge Garcia-Garcia Ismail Arslan IEGPS2 2\. Project Objectives and Components: a\. Objectives: The objectives of this Development Policy Loan for El Salvador were : (i) to protect fiscal space for social expenditures (ii) to protect income and consumption of the vulnerable population; and (iii) to strengthen the institutional capacity for policy formulation and implementation in the social sectors for economic recovery\. The DPL, intended to support the Government’s Anti Crisis Plan and serve as a bridge between an on-going DPL and an upcoming programmatic DPL series\. The objectives are taken from the program document, p\. 21\. The Loan Agreement does not list any objectives\. b\. If this is a single DPL operation (not part of a series), were the project objectives/ key associated outcome targets revised during implementation? No c\. Policy Areas: The three objectives encompassed eight policy areas and nine prior actions \. I\. Protect fiscal space for social expenditures Policy area 1a: Rationalization of public transport subsidy \. The focus in this area was to reduce the transport subsidy, a source of adverse fiscal  pressures,and to create fiscal space for high-priority spending and public investment \. Policy area 1b: Protecting critical non-personnel recurrent expenditures in the social sectors and critical investments in the health sector \. The focus in this area was to prevent cutbacks on critical non-salary expenditures and investments such as education supplies, medicines, laboratory materials and other equipment to insure the quality of public education and health services \. II\. II\. Protecting income and consumption of the vulnerable population Policy area 2a: Expansion of school feeding program to urban pre-schools and basic schools\. The focus in this area was to improve students nutrition and school attendance through expanded coverage of the School Feeding program in urban pre-schools and primary schools\. Policy area 2b: Ensuring access to health services for the poor\. The DPL supported the removal of copayments in public hospitals to facilitate access to basic health services for the poor and vulnerable individuals \. Policy area 2c: Protecting income of the poor\. The DPL supported the implementation of the Temporary Income Support Program to support the income of the most vulnerable population in urban areas\. III\. III \. Strengthening institutional capacity for policy formulation and implementation in the social sectors for economic recovery Policy area: Strengthening institutional capacity and policy-making in: (3a) the Ministry of Education, (3b) the Ministry of Health and (3c) social protection\. The DPL supported institutional reforms in the education, health and social protection sectors to facilitate the development of medium-term sectoral strategies and subsequent long-term social development\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The single tranche stand-alone DPL was approved by the Board on November 24, 2009 for US$100 million\. The Salvadoran Congress approved the loan on July 19, 2010\. The DPL was fully disbursed on August 27, 2010 and closed on schedule on December 31, 2010\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Relevance of the objectives is rated high\. The objectives of the DPL were relevant and focused on strategic areas—fiscal expenditure, education, health and employment—given the deterioration of the fiscal deficit (increase from 3\.1 percent to 5\.6 percent of GDP between 2008 and 2009) and the increase in poverty (the poverty rate reached 40 percent at the end of 2008 and remained relatively high at 37\.8 percent in 2009) faced by El Salvador in 2008-2009\. The DPL was requested to support a number of immediate measures under the Government’s Anti Crisis Plan and its objectives were consistent with the guiding principles of the new Country Partnership Strategy FY 2010-2012\. b\. Relevance of Design: Relevance of the design is rated substantial \. The design of the DPL was appropriate and focused on a limited number of areas, which was adequate given the short time horizon of the DPL and the limited experience of the new government\. The government was strongly involved in the design of the result  framework including the identification of prior actions and outcome indicators\. However, the operation result framework revealed some insufficiencies \. First, it was insufficiently outcome driven \. Under pillar two the outcome indicators are rather output indicators that as a consequence partially relates to the objective\. Second, as pointed out in the ICR the target under policy area (3c) was too ambitious and indeed was not met\. 4\. Achievement of Objectives (Efficacy): An acceptable macro-economic framework was maintained throughout the DPL\. All prior actions were complied with by the time of the signing of the DPL\. Progress achieved in the three main objectives was as follows: Objective I \. Protect fiscal space for social expenditures \. Efficacy is rated substantial, reflecting good progress made in reducing the public transport subsidy and preserving levels of high-priority public spending in education and health \. Policy area 1a: Rationalization of public transport subsidy\. The associated prior action consisted in the enactment of a decree reducing the transportation subsidy\. The total subsidy amount was reduced by 42\.8 percent from US$84 million in 2009 to US$48 million in 2010\. However the decree expired on December, 31 2010 and subsidies to buses and microbuses increased to close to pre-decree levels, thus limiting the scope and sustainability of increase in fiscal space \. Policy area 1b: Protecting critical non-personnel recurrent expenditures in the social sectors and critical investments in the health sector\. The prior action was to maintain the levels of non-personnel recurrent spending in education and health in 2009 and 2010 at least at the levels of fiscal year 2008 and to ensure that the share of critical investment in total investment budgeted for hospitals was protected in 2009 and 2010\. Although, the Congress did not approve the decree to reform the Extraordinary Budget for Social Investment (PEIS), the Draft 2010 General Budget was, allowing the target outcome to be met\. The budget for education and health increased by US$ 87\.1 million, representing a 24 percent increase relative to the 2008 level\. This increase ensured that critical school supplies , medicines and laboratory materials were not absent\. Objective II \. Protecting income and consumption of the vulnerable population \. Given the difficulty to collect data for outcome indicators, over the short time horizon of the DPL, chosen indicators for policy actions under pillar two are mostly output indicators\. Efficacy in this area is rated substantial based on the good achievement of outputs rather than outcomes\. Policy area 2a: Expansion of school feeding program to urban pre-schools and basic schools\. The prior action was to expand the program to cover an additional 764 public schools and an additional 452,800 more students in urban and rural areas\. In 2010, the target was met; the program had benefited an additional 459,379 students in grade 1 to 9\. The chosen outcome indicator relates to the objective of expanding the coverage of the program, but does only partially relate to the development objective of protecting income and consumption of the poor\. Evidence of educational progress and learning, such as promotion rates, continuation rates and achievement tests was not available by the time the DPL closed, but data on attendance could have been gathered in the course of the program implementation\. To address this shortcoming the government, as a medium term policy action, plans to carry out an evaluation of the benefits of the program and improve its cost-effectiveness with technical assistance from the Brazilian Government\. Policy area 2b: Ensuring access to health services for the poor\. The prior actions consisted in the (a) enactment of a law prohibiting the collection of copayments in public hospitals and (b) provision of supplemental funds to the Ministry of Health to compensate for revenue losses\.  Co-payments in public hospitals were eliminated and the number of hospitals discharges increased by 11\.1 percent between 2008 and 2010\. The Ministry of Health supported hospitals and health units with an additional US$15\.7 million in 2010\. However, to assess achievements made in ensuring access to health services for the poor, the indicator should have focused on this group\. In the absence of data by income-group a more general indicator was selected\. Presumably, the elimination of co-payments will increase the demand for health services by the poor and as a result hospitals will likely discharge more of them \. Policy area 2c: Protecting income of the poor\. The associated prior action was the establishment of the Temporary Income Support Program\. The target of having the program operational in 11 municipalities was met\. These 11 programs were financed by USAID which was not mentioned in the PAD nor the ICR\. Regarding the chosen outcome indicator "the program is fully operational in 11 municipalities", it is more an output indicator\. However, recent data on the number and characteristics of program participants, made available in the course of this review, suggest that the program successfully targeted the most vulnerable population, that is young people and women\. III\. Strengthening institutional capacity for policy formulation and implementation in the Objective III\. social sectors for economic recovery \. Efficacy in this area is rated modest reflecting the little progress made in all three sectors: education, health and social protection\. Policy area 3a: Strengthening institutional capacity and policy-making in the Ministry of Education \. The prior action was the creation of a new Vice-Ministry for Science and Technology\. During implementation the outcome indicator became partially irrelevant following a change in priority by the Vice-Ministry of Education\. The Vice-Ministry decided to elaborate a new curriculum for primary school instead of upper secondary school as elaborating a curriculum for the latter was too ambitious\. Policy area 3b: Strengthening institutional capacity and policy-making in the Ministry of Health\. The prior action was the creation of a Vice-Ministry of Health sector policy and a Vice-Ministry of Health Care Services to monitor the implementation of the health care model (MAIS)\. Out of the in tended target of 80 poorest municipalities, 6 did not receive health care\. Nonetheless, the proportion of individuals receiving health care attention in those 74 targeted municipalities was very substantial (93 percent)\. Policy area 3c: Strengthening institutional capacity and policy-making in social protection: the prior action consisted in re-organizing the Technical Secretariat of the Presidency\. Progress in implementing the Comunidades Solidarias Urbanas (CSU) program is slow and the target of the Technical Secretariat piloting the program in two urban municipalities was not met \. 5\. Efficiency (not applicable to DPLs): 6\. Outcome: The program achieved the results associated with protecting the fiscal space for social expenditures and protecting the income and consumption of the vulnerable population but fell short in achieving the results associated with the objective of strengthening institutional capacity in the education and social protection sectors\. On achievements, it is worth noting that: (a) to protect the space for social expenditures the government reduced the transport subsidy by 43 percent (US$36 million) and increased expenditure in education and health by US$87 million, about 24 percent over the baseline value; (b) to protect the income of the vulnerable population the government expanded the school feeding program to cover 1\.3 million students, it eliminated the co -payments in public hospitals for  poor people, and expanded the temporary income support program in urban and rural areas\. The program, though, fell short of achieving its targets on (a) reforming the curriculum for science and technology for upper secondary school and (b) piloting the Comunidades Solidarias Urbanas program in two municipalities\. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The ICR identifies several risks to development outcome \. Among those it is worth noting the vulnerability of the economy to changing commodity prices, the limited institutional capacity of the government in social sectors and the high level of public debt \. The increase in fuel prices in 2010 led to an increase in transport subsidy spending\. The rise in food prices has increased the cost the School Feeding program straining government resources \. Therefore universalizing the program by the end of 2011 may not be feasible or sustainable\. On the fiscal front, El Salvador’s fiscal balance improved in 2010, and projections suggest a sustainable fiscal position \. The medium-term public debt position is sustainable, but remains sensitive to an economic slowdown and a lack of fiscal consolidation\. All in all the risk to development outcome is rated moderate\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: The Bank selected relevant areas of intervention that covered issues that needed to be addressed as the crisis aggravated\. Selectivity in the policy areas helped the government focus on key reforms and complete them\. The preparation of the DPL was based on substantive analytical work (in the form of Public Expenditure Review for FY10, policy notes in health, education and the social sector in general) and benefited from strong and continued dialogue with the government\. T he Bank undertook five missions for the preparation of the operation in a period of 4 month\. Macroeconomic and political risks were correctly identified and adequate mitigation actions put forward\. However the result framework was insufficiently outcome -driven, and some indicators were output indicators\. The economic and political situation in El Salvador at the time of preparation, as well as the tight time line of the DPL, made it difficult to collect data for outcome indicators\. Therefore output indicators for which data could be collected over the course of the DPL were preferred\. at -Entry Rating : Quality -at- Satisfactory b\. Quality of supervision: The Bank carried out one technical and two supervision missions after the loan was approved by the Board\. The bank maintained a dialogue with all parties in Congress to ensure its approval of the loan\. During implementation the quality of supervision benefited from a continued dialogue with the government as the Bank began preparing a new programmatic series of DPLs\. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The reforms conducted under this DPL were aligned with the Government’s Anti Crisis Plan and its reform program for economic recovery, suggesting strong ownership and commitment \. The Ministry of Finance was the primary implementing agency, but the Ministry of Education, Ministry of Health, Vice Ministry of Transportation, and the Technical Secretariat of the President were involved in the implementation of the DPL\. The Ministry of Finance provided competent coordination between all agencies\. All agencies but one carried out the actions they had to under the DPL\. There was a small shortcoming in the monitoring of one outcome\. The Technical Secretariat of the President reported incorrectly that the implementation of the CSU program in two municipalities was carried out when it was not\. The ICR mission confirmed it was not\. Government Performance Rating : Satisfactory b\. Implementing Agency Performance: Implementing Agency Performance Rating : Satisfactory Overall Borrower Performance Rating : Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The program set clear objectives\. Most prior actions are clearly linked with indicators and objectives \. Indicators were few (8), easily defined and measurable, with clear baseline and target values defined \. However, some indicators were rather output indicators \. b\. M&E Implementation: The Ministry of Finance and other lead ministries collected and reported on progress on outcome indicators\. Except for one shortcoming mentioned in Section 9, monitoring was adequately ensured\. c\. M&E Utilization: The Bank and the authorities used the data collected for the outcome indicators in this DPL to prepare the next programmatic DPL\. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: N\.A b\. Fiduciary Compliance: N\.A c\. Unintended Impacts (positive or negative): N\.A d\. Other: N\.A 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Satisfactory Borrower Performance : Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: There are two important lessons: First, it is critical to have the full commitment of both the Government and the Bank when preparing a rapid operation with a new administration that has limited experience\. In this DPL the new government of El Salvador was able to work very closely with the World Bank team in designing the policy actions and outcome indicators, helping to build ownership of the program and ensure that the program's objectives were in line with the government's anti-crisis plan and framework for economic recovery \. Second, a program that focuses on a small number of interventions with well defined and measurable indicators is more likely to succeed\. It helps the government focus on key reforms, implement them and monitor progress achieved\. This is all the more important as the government institutional capacity constraint is binding\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is clear and concise\. It provides enough information to assess the outcome of the program\. The choice of some indicators—such as those reporter for the school feeding program, or the elimination of co-payment, or the income support program— could have been justified better, notably in the light of data availability constraint faced\. In the lessons learned section, the first and last lessons partially contradict each other\. The first states that relevant analytical work is a critical input  for engaging the dialogue with the Government on key reform areas while the fourth states that taking the risk to support a reform where the government commitment is strong even if the Bank’s level of prior analytical work is moderate may be useful to open the door for longer term engagement \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P080104

Document of The World Bank Report No: 116922-MX IMPLEMENTATION COMPLETION AND RESULTS REPORT (P080104) ON A CARBON FINANCE OPERATION TO THE UNITED MEXICAN STATES FOR A WIND UMBRELLA (LA VENTA II) PROJECT November 30, 2017 Energy and Extractives Global Practice Mexico and Colombia Country Management Unit Latin America and Caribbean Region  ABBREVIATIONS AND ACRONYMS CDM Clean Development Mechanism CENACE National Energy Control Center (Centro Nacional de Control de Energía) CFE Federal Electricity Commission (Comisión Federal de Electricidad) CO2 Carbon Dioxide CO2e Carbon Dioxide Equivalent DOE Designated Operational Entity EIRR Economic Internal Rate of Return ERPA Emission Reductions Purchase Agreement FIRR Financial Internal Rate of Return FY Fiscal Year GEF Global Environment Facility GHG Greenhouse Gas GW Gigawatt GWh Gigawatt-hour ICR Implementation Completion Report INECOL Institute of Ecology (Instituto de Ecología A\.C\.) IPP Independent Power Producer kWh Kilowatt-hour MW Megawatt MWh Megawatt-hour NPV Net Present Value O&M Operation and Maintenance PDO Project Development Objective tCO2e Metric tons of CO2e USAID United States Agency for International Development Regional Vice President: Jorge Familiar Senior Global Practice Director: Riccardo Puliti Acting Country Director: Jutta U\. Kern Practice Manager: Antonio Barbalho Project Team Leader: Guillermo Hernández González ICR Team Leader: Guillermo Hernández González  IMPLEMENTATION COMPLETION AND RESULTS REPORT CONTENTS 1\. DATA SHEET \. 1 A\. Basic Information\. 1 B\. Key Dates \. 1 C\. Ratings Summary\. 1 D\. Sector and Theme Codes \. 1 E\. Bank Staff\. 2 F\. Emission reductions delivery to date \. 2 2\. ACHIEVEMENT OF IMPLEMENTATION OBJECTIVES AND OUTCOMES \. 3 3\. WORLD BANK AND PROJECT ENTITY PERFORMANCES AND PROJECT OUTCOME \. 7 4\. COMMENTS FROM PROJECT ENTITY \. 9 5\. JUSTIFICATION FOR MOVING TO THE SECOND PHASE (CARBON FINANCE MONITORING PHASE) AND SAFEGUARDS COMPLIANCE \. 10 ANNEX 1\. ECONOMIC ANALYSIS \. 14 1\. DATA SHEET A\. Basic Information Country: Mexico Project Name:Wind Umbrella (La Venta II) Project Project ID: P080104 ICR Date: June 30, 2017 PDD volume: 1,347,815 tCO2e for the first crediting period (July 1, 2007 - June 30, 2014); 1,152,437 tCO2e for the second crediting period (July 1, 2014 – June 30, 2021) ERPA volume: 1,260,000 tCO2e Bank/IFC lending or grant: US$17,473,211 from the Spanish Carbon Fund and the BioCarbon Fund Environmental Category: B Project Entity: Federal Electricity Comission (Comisión Federal de Electricidad) Cofinanciers and Other External Partners: The Spanish Carbon Fund and the BioCarbon Fund ICR prepared by: Eugene McCarthy Approved by acting CD: Jutta U\. Kern Approved by PM: Antonio Barbalho B\. Key Dates ERPA signing date December 12, 2006 ERPA effectiveness date January 2007 (same as Project commissioning date) ERPA amendment date October 15, 2010 (1st ERPA amendment) (if applicable) July 23, 2013 (2nd ERPA amendment) December 7, 2016 (3rd ERPA amendment) ERPA termination date June 30, 2018 (if applicable) Project commissioning date January 2007 C\. Ratings Summary Outcome (Project performance) Moderately Satisfactory Bank performance Moderately Satisfactory Project entity performance Moderately Satisfactory D\. Sector and Theme Codes Sector Codes (in percent) Renewable Energy 100 Theme Codes (Primary/Secondary) Climate Change Primary Pollution management and environmental Secondary health 1 E\. Bank Staff Name Position at ICR Position at ERPA signing Pamela Cox Vice President Isabel Guerrero Country Director Susan Goldmark Sector Manager Demetrios Papathanasiou Practice Manager Team Leader Jorge Familiar Vice President Gerardo Corrochano Country Director Antonio Barbalho Practice Manager Claudia Croce Senior Carbon Finance Specialist Guillermo Hernández Team Leader González Eugene McCarthy Primary Author Lara Born Team Member F\. Emission reductions delivery to date MEXICO LA VENTA1 Verified Energy Reporting Emission Verification Payment supplied to the From To Period # reductions Date Date grid (MWh) (tCO2e) 1 115,429 72,224 1/5/07 6/30/07 12/20/10 2/3/11 2 239,834 150,064 7/1/07 6/30/08 7/29/09 10/13/09 3 240,250 150,324 7/1/08 6/30/09 11/23/10 1/13/11 4 302,155 189,058 7/1/09 12/31/10 12/1/11 2/6/12 5 101,165 63,298 1/1/11 12/31/11 7/19/12 10/12/12 6 183,622 114,892 1/1/12 12/31/12 6/27/13 7/24/13 7 279,921 175,139 1/1/13 6/30/14 1/9/15 5/11/15 8 314,919 168,481 7/1/14 12/31/15 12/27/16 5/22/17 1,777,295 1,083,4802 1 For details, visit http://cdm\.unfccc\.int/Projects/DB/AENOR1168204945\.7/view?cp=1 2 2\. ACHIEVEMENT OF IMPLEMENTATION OBJECTIVES AND OUTCOMES 2\.1\. Project Description and Summary of Significant Changes since ERPA Signature 1\. Sector Context: Historically, Mexico has been heavily dependent on fossil fuels for power generation, with about 80 percent of its energy needs generated from thermal plants and the remainder from hydro, nuclear, and a small percentage from other renewables, including geothermal\. Following the government’s ratification of the Kyoto protocol in 1997, it had recognized the need to diversify the fuel mix for electricity generation\. Nevertheless, even though Mexico’s potential to develop alternative sources of energy had been known for some time, especially its wind energy potential, only a few Megawatts (MWs) of wind power were operating in the country at the time of project preparation in 2006\. 2\. Project Objective: The project supported the first large-scale investment in wind energy in Mexico through a Publicly-Financed Work (Obra Pública Financiada)\. The project development objective was to reduce greenhouse gas emissions from power generation in Mexico by promoting investment in wind energy in Mexico\. The objective was to be achieved through generating electricity using wind energy, with no associated Greenhouse Gas (GHG) emissions\. As a result, it would displace electricity, which would otherwise be generated using fossil fuel alternatives (as indicated by the heavily fossil-fuel dependent energy matrix in Mexico)\. 3\. Project Description: The project- i\.e\. Wind Umbrella (La Venta 2) project -consisted of a wind energy power plant, with a nominal capacity of 83\.3 MW(i\.e\. 98 wind turbines, each 0\.850 MW), and its associated interconnection system\. The plant is owned and operated by the Comision Federal de Electricidad (CFE), the state-owned Federal Electricity Commission, which provided electricity to most of Mexico’s consumers by the end of 20163\. The La Venta 2 plant was forecast to generate about 308 GWh annually on average and to result in an annual reduction of GHGs of about 190,000 tons of Carbon Dioxide emissions (tCO2e)\. The plant was the first large-scale wind energy plant in Mexico, and is located in the Ejido La Venta in the municipality of Juchitán de Zaragoza in the state of Oaxaca\. 4\. Verified Emissions Reductions (VER): from the project were purchased by the World Bank on behalf of the Spanish Carbon Fund during the reporting period 2007-2016; they will continue to be purchased by the BioCarbon Fund over the reporting period 2017-2019\. The original amount of VERs to be purchased annually by the World Bank was expected to be 180,000 tCO2e/yr, for a total of 2\.3 million tCO2e: 1\.8 million tCO2e on behalf of the Spanish Carbon Fund (over a 10-year period) followed by 540,000 tCO2e on behalf of the BioCarbon Fund (over a 3-year period)\. The amount of VERs has been verified periodically by a UN accredited organization, and they are summarized in the Table in Section F above\. 5\. Change in ownership: There were no changes in ownership from the Project Entity (PE) listed in the registered Project Design Document (PDD) by the time this ICR Report was prepared\. 6\. Changes in the ERPA: Three Emissions Reduction Purchase Agreement (ERPA) amendments had been signed by the time this Implementation Completion and Results Report (ICR) was prepared\. The first amendment was signed on October 15, 2010, and made a number of amendments to the ERPA which included the (i) Purchase Commencement Date (Section 1\.01a); (ii) Specification of Contracted VERs (Section 4\.01a); (iii) Call Option Volume and Exercise Price (Section 4\.03); (iv) Annual Payments for the 2 CFE reported an energy production of 183,231 MWh (equivalent to 98,029 tCO2e) in 2016\. This data still needs to be formally verified by a Designated Operational Entity (DOE)\. 3 Following a major reform in the energy sector in 2013-2014, power generation is now open to the private sector and wholesale and spot markets determine whose electricity (either CFE’s or private generatior’s) is dispatched\. 3  Transferred Contract and Option ERs (Section 4\.04); (v) Addition of a new article on Disclosure of Information (Section 9\.01); and (vi) Revised Schedule 2 for the Annual and Cumulative Amounts to be transferred in each reporting year\. As a consequence, the yearly target was reduced from 180,000 tCO2e/year to 150,000 VERs/year in the original agreement\. A second amendment was signed on July 23, 2013 which further reduced the expected cumulative VERs from 1,560,000 to 1,260,000 tCO2e until December 31, 2016, since the avoided CO2e emissions turned out to be much less than forecast during the 2-year period, 2010 and 2011\. Finally, a third and final amendment was signed on December 7, 2016, which extended the ERPA term from December 31, 2016 to June 30, 2018\. 2\.2\. Project Implementation and Commissioning 7\. The construction of the 83\.3 MW La Venta 2 wind power plant was undertaken by a consortium of two international companies, with extensive experience in the construction of such plants\. Preliminary construction work started in 2005 and was completed satisfactorily in late 2006\. The plant was commissioned in early 2007 and started generating electricity since January 2007\. Electricity continued to be generated from the plant over the 10-year period, 2007-2016\. The project will be transferred officially to the Bank’s Carbon Finance Unit in Fiscal Year FY18, where it will be monitored until the new closing date, June 30, 2018\. 8\. Electricity generated from the La Venta 2 wind power plant can be divided into three periods: (i) 2007- 2009; (ii) 2010- 2011; and (ii) 2012 -2016\. During the first period, manufacturers provided technical support under equipment guarantees and generation from the plant was in line with expectations; during the second period generation from the plant was consistently below the forecast output; the lowest generation was in 2011, corresponding to a capacity factor of only 14 percent\. The main reasons for the lower output were (i) the wind plant operated at a capacity factor significantly lower than forecast 4; (ii) frequent equipment failures, which led to lengthier downtime periods than originally expected (due mainly to delays in authorizing funds for maintenance within CFE, following expiration of the manufacturer’s warranty period; and (iii) technical problems with the transmission line as well as with the control and monitoring system\. The overall impact was less electricity generated, resulting in reduced volumes of avoided CO2 emissions\. As a result, the aggregate emissions reductions, which were being verified periodically, were revised downwards from an initial volume of 1\.8 million tCO2e to 1\.56 million tCO2e and then further reduced to 1\.26 million tCO2e in July 2013\. Nevertheless, by end December 2016, the revised target of 1\.26 million tCO2e had been almost achieved-at 93\.6 percent of this revised target\. 9\. A project cost benefit analysis was carried out to reassess the economic and financial viability at the time of the project Implementation Completion Report (ICR)\. The results can be found in Annex 1\. 2\.3\. Monitoring, Reporting, Verification, and Issuance of ERs 10\. While the monitoring of ERs was performed by the Project Entity through periodic Monitoring Reports, the verification of the emissions reductions was carried out by a UN accredited Designated Operational Entity (DOE), in accordance with CDM rules5\. The verifications, certifications and the issuance of emissions reductions were undertaken- and issued- periodically over the 10-year reporting period, 2007-2016\. The initial verifications for the period, 2007-2009 were delayed, due to delays in confirming the actual generation data needed by the auditor regarding the amount of electricity that was being dispatched to the 4 A lower capacity factor was also experienced for the La Venta 3 IPP plant, suggesting a more general overestimation of wind currents in this regional area of Mexico 5The Designated Operational Entity assigned to carry out the verifications was ICONTEC from Colombia 4  transmission lines and substations\. They were not completed until November 2010, after which the emissions reductions were issued in January 2011\. Once these early difficulties were overcome, the process of verification and issuance of the emissions reductions proceeded more smoothly\. Subsequently, the sharp fall in electricity generation in 2012 compared to forecast levels required CFE to carry out a quantitative analysis, explaining the reasons for this shortfall\. This led to a second ERPA amendment, which reduced cumulative emissions of tCO2 from 1\.56 million to 1\.26 million\. For the final period, 2013-2015, the verification of ERs was in line with the revised forecasts for electricity generation and projected to reach 93\.6 percent of the revised target (that is, 1,260,000 tCO2e) by December 2016\. 11\. Overall, the verification process functioned satisfactorily\. With regard to the project monitoring system, specified in the Operations Monitoring Plan (OMP), this system functioned moderately satisfactorily overall, the main problem being the sometimes lengthy delays in reporting\. 2\.4\. Lessons Learned 12\. The Carbon Finance project was implemented in parallel with a GEF Renewable energy project\. Both wind power projects have similar capacities and have been developed in the same regional area of Mexico\. The Carbon Finance project was implemented by the national power company, CFE, while the GEF Renewable Energy project was an independent power producer (IPP), implemented by an experienced international power company\. The specific lessons identified below are relevant for future Carbon Finance projects\. 13\. Lesson 1: Role of Carbon Finance in helping promote wind power development\. The availability of Carbon Finance played a catalytic role in stimulating a remarkable growth in Mexico’s wind energy potential over the 10-year period, 2007-2016\. At the time of project preparation, it is important to clarify that there was already a lot of activity by several private wind developers in the area of the Tehuantepec Isthmus (which took advantage of a specific generation alternative called Autoabastecimiento, -or self-supply- by which two private entities entered into an agreement for power purchase, using CFE’s transmission network to ‘complete’ the transaction)\. A number of projects were at different stages of development: some had “reserved” the land from ejidatarios, while others were in the advanced planning phase, either under construction or already commissioned\. Nevertheless, the signal being given that a commercial-scale investment was moving ahead- namely, CFE’s La Venta 2- provided an important signal to investors regarding the government’s policy commitment to developing the country’s renewable energy potential\. In addition, the preparedness of the government, and CFE, to undertake this investment within the social environment of the Oaxaca region gave additional confidence to investors that wind development could be successfully 'managed' in this volatile social environment, which had a long history of strikes, demonstrations and work stopagges\. 14\. Lesson 2: Importance of Ensuring Adequate Technical Capacity for Initial Wind Power Development The La Venta 2 wind power development was Mexico’s first, large-scale wind energy plant\. The importance of ensuring adequate technical capacity was acknowledged during preparation\. A 3-year guarantee agreement for this purpose was signed with two international companies, responsible for construction and early operation of the plant\. Also, the Project Appraisal Document (April 24, 2006) had described CFE as “a company with very good technical capacity-- operating a small pilot wind power plant in the same region for about a decade and has collected significant experience and data to ensure the management of the project’s technical and operational risks”\. In retrospect, given the operational difficulties experienced with the plant during the initial years of operation, the capacity needs of this project were underestimated; in addition, delays within CFE in 5  authorizing funds for maintenance were not anticipated\. A better arrangement might have been a guarantee agreement that extended throughout the first 5 years of operation instead of just 3 years\. While this would have resulted in an additional cost for CFE, it would have more than offset the energy lost during the two years of operations after the guarantee period expired, due to extensive periods when the plant did not operate\. 15\. Lesson 3: Good practices in the supervision of environmental and social safeguards As was the case for the La Venta 3 wind plant (supported under the Large-Scale Renewable Energy Development Project P0077717), a number of sound safeguards’ practices were developed during the supervision of the La Venta 2 project\. With regard to environmental safeguard concerns, the monitoring of bird and bat mortality was first tested in La Venta 2; monitoring adjustments were then made later, based on the collective experience acquired during operation of both wind farms\. Specifically, the decision to extend the monitoring of bird migratory patterns to a year-round monitoring was developed during supervision of the La Venta 2 project\. At the outset, limited data existed on bird migratory patterns in the Isthmus of Tehuantepec\. However, by the end of the project, the accumulated data enabled the plant to better anticipate periods of the year when it would not be able to operate due to these migratory patterns\. In addition, the involvement of the National Institute of Ecology (INECOL) in the monitoring of these migratory patterns, strengthened ‘safeguard ownership’ and built up local, professional expertise\. This has served to enhance the quality of information on bird migratory patterns not only in this regional area of Mexico but can be extended to other regional areas, such as Baja California and the Yucatan peninsula, where new wind energy developments are taking place\. In fact, aggregated information is being analyzed to understand the reaction of migratory species to the installation of many wind farms in the same geographical area\. Initial data indicate that migratory birds are adjusting their patterns to avoid paths with greater probability of collision\. However, additional analysis should be carried out to determine whether there is a limit to this observed resilience\. In regard to social safeguards, CFE maintained close relations throughout implementation with the local landowners (ejidatarios)\. An informal but effective system was put in place to deal with complaints and yearly compensation fees were paid to the landowners for the use of their land (CFE employed social and environmental specialists to agree on a fair compensation)\. In addition, CFE contributed to the ejido social program, which included asphalting of local streets, street lighting, offices and classrooms, including the donation of computers\. Each of these initiatives are examples good social safeguard practices, worth replicating in similar projects\. 16\. Lesson 4\. Longer term environmental and social impacts of wind energy development\. An unintended impact of this project (including also the Global Environment Facility-funded La Venta 3 project) has been that the beneficiaries i\.e\. ejidatarios, of compensatory payments for land use have started engaging in new economic activities, which is affecting the local environment\. Specifically, a number of the ejidatarios are using their land for agricultural purposes, which is resulting in some degree of deforestation, something that was not foreseen at the start of the project\. As a consequence, this development is having an impact on the nesting patterns of some bird species\. There is a need now to find ways to monitor more closely these longer-term impacts, once the project is closed\. 17\. Lesson 5: Importance of Building up a National Capacity to oversee the development o f Country’s Wind Potential 6  The development of a country’s renewable energy potential requires that governments also build up in parallel a policy and regulatory capacity to oversee such a development\. It may also require that the national power company build up a technical and operational capacity to develop and generate energy from its wind resources in parallel with private sector investors\. The experience of the Carbon Finance projects shows (i) the government, and in particular, CFE and INECOL, have both been successful in building up a policy, regulatory, and safeguards capacity to monitor and regulate future wind developments in Oaxaca and other regions of the country\. Also, CFE, which had already an established capacity with fossil fuel based and hydro power plants, has broadened considerably its operational experience as a result of the development of the La Venta 2 project\. The progress made over the past decade in building up a national capacity will benefit Mexico in the further development of its wind potential, especially now that power generation is fully open to the private sector and the first two power auctions show a strong interest by developers for solar and wind power development\. 3\. WORLD BANK AND PROJECT ENTITY PERFORMANCES AND PROJECT OUTCOME 3\.1\. Assessment and Rating of Overall World Bank Performance 18\. The World Bank acted as a trustee of the Spanish Carbon Fund and BioCarbon Fund for the purchase of emissions reductions\. Its main responsibilities were to ensure that the project design was technically sound and environmentally sustainable, the expected social benefits were achieved, GHG emissions reductions were generated, and the VERs were delivered\. 19\. A project concept note was first prepared in 2002-2003\. However, the bulk of project preparation took place during 2006 and the project was approved by the Board in December 2006\. The timing of the Carbon Finance operation was strategically sound, coinciding with a number of recent policy initiatives taken by the government, which aimed at improving the investment climate for renewable energy development in Mexico\. 20\. Project preparation\. The main areas that were important for achieving the project objectives were satisfactorily addressed: (i) the selection of the wind energy site was made by CFE on the basis of the exceptional wind energy resources available in the Oaxaca region of Mexico as well as the short-term and medium-term expansion plans of CFE; (ii) implementation arrangements for construction of the wind energy plant were entrusted to an experienced international company, selected through international competitive bidding, through a “turn-key‟ contract that provided for detailed engineering design, procurement of equipment and materials, construction, insurance, and training of personnel; (iii) environmental and social safeguards issues were carefully addressed; in this regard, CFE had developed links with the local community and employed social and environmental specialists to work with the local community and individual landowners to agree on a fair compensation for the use of land for wind turbines, and also to educate people on the benefits of wind energy in the region; and (iv) lessons from Carbon Finance wind energy operations in other countries were built into the project such as China, Colombia, Costa Rica, and the Philippines\. 21\. The one shortcoming in project preparation- which was to become apparent during implementation- was an underestimation of the project risk\. The overall risk was judged to be ‘Low’ overall, despite the fact that t his was the first large publicly-financed wind development project in Mexico and the first on this scale to be undertaken by CFE (other than a small 2MW pilot)\. Given the known wind variability in this regional area of Mexico, which was to result in lower annual wind currents than forecast (and lower avoided tCO2e emissions), together with CFE’s lack of operating experience with wind projects on this scale, the risks 7  should have been rated ‘Substantial’ rather than ‘Low’\. A higher risk rating might have led to mitigating measures being investigated more thoroughly during preparation to help offset these risks\. 22\. World Bank supervision covered a 10-year period from 2007 until mid 2017, that is, until the project was transferred to the Carbon Finance Unit\. The supervision of the Carbon Finance project can be divided into three periods: (i) 2007-2010, which comprised the early operational phase; (ii) 2011-2013, during which it became evident that annual energy generation from the plant was significantly lower than had been forecast (and, consequently, the emission reductions (ER)); and (iii) 2014-end 2016, during which period the project was regularly supervised and contractual changes made to reflect actual wind energy being generated annually at the La Venta 2 plant\. 23\. During the period 2007-2010, Bank supervision gave priority to the environmental and social issues identified during preparation\. Construction of the plant itself appears to have been highly satisfactory and completed ahead of the original schedule; the plant was commissioned in 2007\. However, concerns in regard to the lower energy generation (and, as a consequence, lower VERs) began slowly to emerge, though they were not clearly identified in the supervision reporting until mid-2010 when the ERPA was amended, reducing the annual target in the original agreement from 180,000 VERs to 150,000 VERs\. By mid-2011, it was clear that production of electricity had been consistently below the expected output since the commissioning of the wind plant\. The two main reasons for the unavailability of the wind turbines were (i) wind currents that were not in line with initial expectations and (ii) equipment failures\. As a result, implementation progress was downgraded from S to MS\. However, the development objective (DO) should have been similarly downgraded since it was clear that the original ER targets could no longer be achieved\. 24\. The final supervision period was characterized by pro-active Bank supervision during which two more amendments to the ERPA were made, reflecting the reality of lower annual energy being generated from the wind plant\. In addition, a closer working partnership was maintained with CFE as it gradually overcame the early operational and maintenance difficulties affecting operation of the plant\. Overall, taking into account both the preparation and supervision periods, World Bank performance was judged to be Moderately Satisfactory\. 3\.2\. Assessment and Rating of Overall Project Entity Performance 25\. The project implementing agency was Comision Federal de Electricidad, CFE, the national power company\. CFE had a strong technical capacity, with extensive experience in procurement, project management, and operation of major fossil-based power plants as well as hydro-plants throughout Mexico\. However, its experience with wind energy was limited to the construction and operation of a small pilot wind power plant in the same region for about a decade\. Nevertheless, during World Bank appraisal over this period, it was judged to be sufficient to ensure the management of the technical and operational risks of this large-scale wind plant\. 26\. Project preparation, bidding and construction\. A feasibility study for a similar wind energy project in the same location had been completed with funding from USAID in 2003-which demonstrated the wind project’s viability\. CFE prepared various engineering studies for the project site including: evaluation of the wind resource, topography, ground mechanics, and an energy flows analysis of the electric system\. The bidding documents for the La Venta II project were also prepared by CFE in accordance with international standards, using technical assistance provided by international experts on matters related to wind plant design and performance characteristics of the wind turbines\. The construction of the plant was awarded to a consortium of two international companies with extensive experience in the construction and operation of wind power plants\. As noted above in paragraph 7, the construction work was completed satisfactorily in 8  late 2006, commissioned in early 2007, and started generating electricity also in early 2007\. CFE’s role during this phase of the project was fully satisfactory\. 27\. Operational Phase\. The first three years of plant operation (2007-2009) were covered by a warranty period during which time the manufacturer was responsible for maintenance, including the provision of spare parts\. While energy production was below levels expected during preparation (mainly due to lower wind currents in this region of Mexico than had been forecast), the capacity factor of the plant was still 33\.6 percent on average, which was still an acceptable indicator, based on international experience at that time\. However, after the first three years of operation, the plant began to experience a significant decline in energy production, coinciding with the expiration of the warranty period, following which the manufacturer was no longer liable for providing specialized maintenance, including the provision of required spare parts\. The lowest energy production was observed in 2011 (capacity factor of 13\.9 percent), followed by a sharp improvement in 2012 (capacity factor of 25\.2 percent) which was sustained in 2013, 2014 and 2015 with capacity factors of 25\.6 percent, 28\.6 percent, and 27\.3 percent respectively, though still below levels achieved in the 2007-2009 period\. 28\. CFE was able to increase energy production from its lowest levels in 2011 due to (i) the implementation of an ambitious maintenance program, (ii) enhanced institutional capacity and (iii) modification of control algorithms to expand the ability of the wind turbines to operate for a wider span of wind speed\. However, CFE’s internal procedures continued to be the main challenge for a successful implementation of the maintenance program since spare parts were arriving later than expected, when the wind season was at its peak, and major maintenance work could not be undertaken\. Other technical factors also affected the wind farm operation -such as the presence of high harmonic content in the region's transmission network\. However, CFE, with support from the National Energy Control Center (CENACE), successfully resolved this issue and no further turbine outages were reported due to harmonic content in the network\. 29\. Overall, taking into account the preparation and operational phases over the period 2006-2016, the performance of CFE is judged Moderately Satisfactory\. 3\.3 Assessment and Rating of Project Outcome 30\. The La Venta 2 plant was forecast to generate 308 GWh annually while the amount of VERs to be purchased annually by the World Bank was expected to be 180,000 tCO2e/yr\. However, as explained earlier in paragraph 8, electricity generated from the wind plant turned out to be lower than forecast\. As a consequence, the aggregate emissions reductions was first revised downwards from an initial volume of 1\.8 million tCO2e to 1\.56 million tCO2e and then further reduced to 1\.26 million tCO2e in July 2013\. Since then, progress towards this revised target of 1\.26 million tCO2e has remained on track and was at 93\.6 percent of this revised target by end 2016\. 31\. Overall, the Project Outcome rating is considered to be Moderately Satisfactory\. This rating takes into account the two revisions that took place in the aggregate emission reduction forecasts, as well as the stabilization of generation from the plant that has occurred over the final three year period, 2014-2016\. 4\. COMMENTS FROM PROJECT ENTITY 4\.1\. Project Entity 32\. Since the 1990s, CFE has been exploring for and evaluating Mexico’s wind resources, particularly in the isthmus of Techuantepec in the state of Oaxaca\. In 1994, CFE built the country’s first wind energy pilot 9  plant for the generation of electricity, which helped confirm the excellent wind energy potential of this region and which led to the commercial scale development of the La Venta II wind plant in 2007 as well as a number of other wind energy plants undertaken by the private sector\. As of 2016, there is slightly more than 2,000 MW of installed wind energy capacity in the region\. 33\. Likewise, the wind energy resources in other regions of Mexico are being exploited to generate electricity such as in Monterrey, Baja California, Zacatecas, Chiapas, Yucatan, Jalisco and Tamaulipas\. Currently, Mexico has about 3,500 MW of installed wind energy capacity\. 34\. On the other hand, the La Venta II wind plant is the first and only CFE power plant linked to the UN’s Clean Development Mechanism, which has enabled it to obtain both environmental and economic benefits for CFE, by meeting satisfactorily the international requirements to obtain the Carbon Offset Credits through a sales purchase agreement with the World Bank\. 35\. As a result, CFE and entities in the electricity sector have been able to acquire a broad knowledge and experience on environmental matters (bird migratory patterns), social matters (reaching agreements with the affected ejidatarios on land compensation), and on technical matters (assuring the full life of equipment through regular maintenance), given the peculiarities of the wind patterns in this region of Mexico\. Consequently, the La Venta II wind development project has benefitted CFE\. 36\. Finally, the electricity sector continues to experience further change as a result of the energy reform of 2013\. As a consequence, CFE faces new challenges to develop clean and environmentally friendly energy sources in order to meet the goals and commitments of the new regulatory framework\. 5\. JUSTIFICATION FOR MOVING TO THE SECOND PHASE (CARBON FINANCE MONITORING PHASE) AND SAFEGUARDS COMPLIANCE 5\.1\. Compliance with safeguards and implementation challenges in the first phase - supervision phase 37\. A final supervision mission was carried out in December 2016, jointly with the Carbon Finance Unit, to review the status of the remaining technical, implementation, and safeguards issues before recommending transferring the project to the Carbon Finance Unit\. The key technical concerns identified throughout the implementation period, which were affecting achievement of the project development goals, were carefully reviewed\. Continuing compliance with both social and environmental safeguard requirements was also reviewed\. 38\. The current status of these issues is as follows: (i) Technical aspects\. During the implementation period, energy production from the La Venta 2 wind plant remained lower than in other wind farms in this regional area of Mexico\. In order to address this concern, CFE has been endeavoring to put in place a maintenance plan\. By the end of 2015, the unavailability rate due to maintenance issues was still 22 percent, whereas the unavailability rate due to failure stabilized at around 8\.5 percent\. By the end of 2016 (October 2016), the unavailability rate due to maintenance reached 24\.38 percent (slightly higher than 2015) while the unavailability rate due to failure was 8\.08 percent, i\.e\. slightly better than in 2015\. In addition, no further outages due to high harmonic content in the region’s transmission network have been observed\. In summary, carrying out essential maintenance work program on the La Venta 2 wind plant will be key to increasing future energy generation from this power generation facility\. 10  (ii) Implementation Aspects – One issue potentially affecting implementation of the maintenance plan is ensuring that CFE’s internal processes do, in fact, make the needed financial resources available in a timely manner; in the past, these processes have been slow\. Consequently, the effectiveness of future maintenance will depend on internal resources for this purpose being made readily available to carry out essential maintenance work when it is needed; (iii) Social safeguards\. The Indigenous Peoples Development Plan (IPDP) has been successfully implemented and payments to land owners have been made on a yearly basis since commissioning\. The IPDP was finalized in 2006 and by 2012 the agreements reached with the Ejido La Venta had been fully implemented\. During 2016, payments to land owners were made according to schedule (and reflected an increase of 5\.4 percent with respect to these payments in 2015); there were also no ‘extraordinary’ payments due to climate-related events (afectaciones) in either 2015 or 2016\. As a result, the only pending issue in terms of social safeguards is for CFE to submit evidence in regard to the formalization of procedures to deal with possible complaints from ejidatarios\. (iv) Environment Safeguards\.The final supervision mission confirmed that all environmental safeguards are now being enforced\. The hazardous waste depot is being well maintained and all records of waste disposal were made available for review\. Monitoring of birds and bats mortality is carried out throughout the year and the undercounting effect (‘subconteo’) has now been estimated for 2015\. CFE is familiar with procedures to stop the wind turbines in those cases where massive flocks are spotted; the last such event was recorded in 2015\. CFE also follows industrial safety protocols and continues to provide training for its staff\. The following is a list of pending issues in terms of environmental safeguards, which will be monitored by the Carbon Finance unit: a) Update of birds and bats mortality data from previous years, including the undercounting effect; b) Update the hazardous waste register continuously and avoid storing hazardous waste longer than 6 months; c) Prepare and submit to the Bank a formal plan to carry out flock spotting simulations, including actual wind turbine shutdown; this plan will need high- level authorization to guarantee its enforcement; d) Submit to the Bank evidence of staff training on industrial safety procedures, fire fighting, hazardous waste handling, and first aid; and e) submit to the Bank an update on the yearly tests on electrical grounding resistance\. 5\.2\. Project entity’s capacity to carry out key functions related to safeguard requirements 39\. Overall responsibility for ensuring compliance with the safeguard requirments rests with CFE, which has gained considerable experience since the start of implementation and is fully familiar with the Bank’s requirements\. As noted above in 5\.1 (iii), it has made all the required payments to the affected ejidatarios on time; in addition, it has undertaken a number of small infrastructure works to benefit local communities in the vicinity of this wind power development\. CFE has also gained extensive experience in monitoring bird and bat mortality in the vicinity of this wind plant development\. Based on CFE’s track record during project implementation, there is a high degree of confidence in the project entity’s capacity to continue to carry out these safeguard requirements during the carbon finance monitoring phase\. 5\.3\. Potential issues in post completion operation, including project entity’s capacity and ability of the project to deliver the contracted emission reductions\. 40\. A potential concern in delivering the contracted emissions reductions is the timely availability of funds for maintenance of the wind plant; as a consequence, it will also be a key factor in reducing the continuing, 11  relatively high levels of plant unavailability\. As noted in 5\.1 above, delays in making available these resources to CFE have impeded the effectiveness of CFE’s ongoing maintenance programs\. This will be an important issue that will require careful attention during carbon finance monitoring phase\. In particular, the availability of funds for essential maintenance needs to be monitored closely, starting in CY 2017\. 5\.4\. Justification for moving to the second phase - carbon finance monitoring phase 41\. Project implementation has been proceeding satisfactorily since 2015 and progress towards the project development goals was rated ‘Satisfactory’ in December 2016\. CFE’s implementation capabilty in operating the La Venta 2 wind power plant is well established over a period of nearly ten years while its record in ensuring compliance with the different social and environmental safeguards requirements has been strong and provides a high degree of confidence that this will continue during the carbon monitoring phase\. Based on these considerations, there is a sound justification to move to the carbon finance monitoring phase\. 5\.5\. Recommendations and guidance for project monitoring in the second phase - carbon finance monitoring phase (including Table 1) 42\. The project has now been implemented over several years\. In addition, no outstanding safeguards issues remain and those issues still pending can be monitored by the Carbon Finance Unit; furthermore, the reasons for lower energy production from the La Venta 2 wind power plant, when compared to similar plants in the region, have been also identified and addressed\. Consequently, the project is ready to be transferred to the Carbon Finance Unit\. Since the main remaining activity under the project is the monitoring of carbon credit delivery by CFE and payments by the World Bank once verified, the project is judged to be ready for transfer to the Bank’s Climate and Carbon Finance Unit\. During the second phase, it is proposed that safeguard compliance and ensuring timely availability of funds for maintenance be monitored through site visits and annual reports by the future task team leader\. Table 1 below summarizes the guidelines for supervision of safeguard compliance during Phase 2 until termination of the ERPA\. 12  Table 1 --: Phase 2 Monitoring Requirements Subject or Monitoring requirement and Frequency of Safeguard parameter associated evidence reporting policy triggered required in Phase 1 CDM data Monitoring report prepared for One for each None CDM verification verification period Environmental Site visits (normally once every two Annual OP/BP 4\.01 Management Plan: years) and annual reports: Environmental (i) Monitoring of - (i) Bird and bat mortality monitoring\. Assessment bird and bat Submit annual updates or reports of mortality; (ii) results generated by the responsible area\. Hazardous waste - (ii) Hazardous waste management\. management; (iii) Submit waste management logs and Wind turbine management and final disposal vouchers shutdown with authorized companies (delivery simulations; (iv) manifests receipt)\. Training workers; (v) Measurements - (iii) Wind turbine shutdown simulations of electrical by the passage of large numbers of birds\. Submit simulations program and Environment ground resistance\. evidences of its application\. - (iv) Training workers on industrial safety procedures, fire fighting, first aid and handling of hazardous waste\. Provide evidence of training completion\. - (v) Complete electrical grounding yearly tests and submit to the Bank the corresponding results as evidence\. NOTE\.- If the facilities have a “Clean Industry” certification (Industria Limpia), granted by PROFEPA, only the monitoring of birds and bats mentioned in subsection (i) must be complied with\. In such a case, a copy of the "Clean Industry" certification and the corresponding bi-yearly endorsements must be provided\. Social Safeguards Site visits (normally once every two Annual None Plan (i) Annual years) and annual reports Ejidatario Social payments; (ii) Formalization of complaints procedures; 13 ANNEX 1\. ECONOMIC ANALYSIS 1\. An ex-post economic and financial analysis of the Project was carried out to evaluate the efficiency of the Project and verify its financial and economic viability as presented in the Project Appraisal Document\. The economic analysis looked at the costs and benefits accruing to Mexico, including not only the actual values related to capital equipment and operating costs, but also the monetized environmental benefits\. The financial analysis compares the costs and benefits from the perspective of CFE\. Economic analysis 2\. Economic Benefits\. The main economic benefits of the La Venta II are: (i) the production of electricity; and (ii) the reduction of GHG emissions in the global atmosphere\. Other economic benefits, not quantified for the purposes of this analysis but useful in evaluating the Project in a qualitative manner include: (i) demonstration effect for future IPPs; (ii) local economic benefits of increased employment during construction, operation and maintenance of the wind power plant; (iii) increased income from land where the turbines are located and (iv) better access to agricultural land due to improved local infrastructure (e\.g\. roads)\. 3\. The economic benefits of electricity generation are set, for the purposes of this analysis, at the level of the avoided cost of generating electricity using other options, especially fossil fuels\. During appraisal, the estimated avoided costs of generation was US$0\.045/kWh based on an estimated crude oil price of US$46 per barrel\. Although the oil price dropped significantly in recent years to as low as US$43 per barrel in 2016, due to the increase of the oil price between 2012-2014 (above US$100 in these three years), the average actual oil price since the plant’s operation in 2007 is US$ 84\.67 per barrel\. The analysis also takes into account the World Bank forecasts of a steady price increase in the coming years of minimum 5 percent a year6\. Environmental benefits included in the analysis that are derived from reduced GHG emissions totaled US$ 17,473,211, which is equal to the amount disbursed from the carbon fund based on reduced emissions achieved over the course of the Project’s life\. 4\. Project Economic Costs\. The main economic costs of the wind energy project are: (i) the investment necessary for the construction of Venta II (i\.e\. US$ 111\.45 million, or an economic cost of US$93\.62 million, which excludes all taxes and transfer payments); and (ii) the costs of operation and maintenance of 0\.02US$/kwh7 totaling about US$5 million/year\. 5\. Results\. The cost-benefit analysis for the La Venta II shows that the Project has a positive Net Present Value (NPV) for a discount rate of less than 12 percent excluding environmental benefits\. The analysis also shows that, with the inclusion of benefits deriving from emissions reductions, the Project would have a much higher NPV\. Table 1\.1 below summarizes the results of the sensitivity analysis with and without the contribution of benefits from carbon emissions reductions for a range of discount rates\. 6 http://pubdocs\.worldbank\.org/en/732571470253390411/CMO-Pink-Sheet-August-2016\.pdf 7 Consisting of costs for staffing (US$0\.005), material (US$0\.002), third party services (US$0\.008) and others (US$0\.007)\. 14  Table 1\.1: Economic NPV for various discount rates Discount Rate Incl\. CO2 5 percent $70,069,262 $84,004,927 6 percent $57,826,153 $71,181,474 7 percent $47,120,612 $59,930,633 8 percent $37,731,058 $50,028,218 9 percent $29,471,482 $41,285,837 10 percent $22,185,262 $33,544,689 11 percent $15,740,127 $26,670,508 12 percent $10,024,039 $20,549,424 13 percent $4,941,816 $15,084,576 14 percent $412,362 $10,193,324 15 percent ($3,633,621) $5,804,952 6\. Including environmental benefits deriving from the 1,083,480 tCO2 emissions savings by the Project, the Project achieves an EIRR of 16\.51 percent\. Without taking into account those benefits, the Project reaches 14\.10 percent\. The results of the ex-post NPV and EIRR do not significantly deviate from the results estimated at the time of appraisal (NPV of US$24 million to Negative US$4\.5 million for discount rates of 8-12 percent; EIRR of 9 percent)\. The slightly better outcomes can be explained by the significantly lower O&M costs (46 percent lower than compared to design estimates)\. 7\. The economic rate of return of the La Venta II Project is highly sensitive to the estimates regarding the future costs of electricity generation in the system\. Given the significant exposure of the Mexican electricity generation to fossil fuels and uncertainties surrounding the future costs for combustibles, the optimal (least- cost) system expansion solution could vary\. Without the forecasted increase of oil price as stated above, the economic results will be much lower\. Financial analysis 8\. The Project’s income is derived from two sources: (i) electricity payments over the Project’s lifetime of 20 years and (ii) the carbon finance (namely, the Carbon Fund’s contribution of about US$17\.47 million over the first five years)\. Energy payments were based on a tariff of US$0\.04 per kWh from 2007-2016 and a tariff of US$0\.05 from 2017 onwards\. In addition, the analysis assumes a 5 percent tariff increase per year\. Financial outflows relate to expenses for operation and maintenance as detailed above\. The model also accounts for the potential of using accelerated depreciation provisions available in the Mexican tax system for such investments\. 15  Table 1\.2: Financial NPV for various discount rates Discount Rate NPV 5 percent $33,512,795\.2 6 percent $24,315,652\.4 7 percent $16,054,543\.0 8 percent $8,629,405\.3 9 percent $1,951,482\.9 10 percent ($4,057,992\.7) 11 percent ($9,468,965\.3) 12 percent ($14,343,581\.6) 13 percent ($18,737,097\.0) 14 percent ($22,698,675\.1) 15 percent ($26,272,092\.0) 9\. As was done in the original analysis to evaluate the financial viability of the Project, net present values of the Project's (financial) rate of return figures are calculated for a range of discount rates\. The Project has a positive NPV for discount rates of up to 9 percent (or a negative NPV when discount rates of 9 percent or more are applied)\. The FIRR for the Project is 6\.48 percent\. The FIRR was not calculated at the time of appraisal\. The lower financial results achieved compared to the appraisal (with NPV ranging from US$16\.77 million-US$13\.05 million, with discounts rates from 8-12 percent) are due to the significantly lower generation in the initial years of operation with, on average, 241 GWh of annual electricity produced compared to the design estimate of 350 GWh\. Without the contribution from the Carbon Fund, the project would not be financially viable i\.e\. NPV of Negative US$24,268,840 (at a discount rate of 8 percent) and with a FIRR of only 5\.06 percent\. The revised cash-flow analysis for the Project is presented in Table 1\.3\. 16  Table 3\.1: Cash Flow Analysis 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Revenues Energy Payment $7,914,014 $17,110,708 $13,429,448 $17,554,231 $5,777,302 $10,568,069 $15,899,728 $17,887,641 $17,048,339 $14,033,756 $16,562,921 $17,391,067 $18,260,621 $19,173,652 $20,132,334 $21,138,951 $22,195,899 $23,305,693 $24,470,978 $25,694,527 Revenues from carbon fund $1,164,752 $2,420,072 $2,424,265 $3,048,926 $1,020,803 $1,852,856 $2,824,455 $2,717,082 $0 - - - - - - - - - - Total Revenues $9,078,765 $19,530,780 $15,853,713 $20,603,157 $6,798,104 $12,420,924 $18,724,183 $20,604,723 $17,048,339 $14,033,756 $16,562,921 $17,391,067 $18,260,621 $19,173,652 $20,132,334 $21,138,951 $22,195,899 $23,305,693 $24,470,978 $25,694,527 Capital Costs $111,449,964 Operating Costs Fixed O&M Variable O&M $4,377,728 $9,464,985 $7,428,654 $9,710,325 $3,195,781 $5,845,849 $8,795,118 $9,894,755 $9,430,485 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 Site Owner Royalty Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Costs - - - - - - - - - - - - - - - - - - - - Total Operating Costs $4,377,728 $9,464,985 $7,428,654 $9,710,325 $3,195,781 $5,845,849 $8,795,118 $9,894,755 $9,430,485 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 $7,762,934 Operating income ($106,748,926) $10,065,795 $8,425,059 $10,892,832 $3,602,323 $6,575,075 $9,929,065 $10,709,969 $7,617,854 $6,270,822 $8,799,987 $9,628,133 $10,497,687 $11,410,718 $12,369,400 $13,376,017 $14,432,965 $15,542,760 $16,708,044 $17,931,593 Other expenses Interest on Loans $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Depreciation Percentage 100% 100% 100% 100% 20% 20% 20% 20% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Maximum possible depreciation $0 $0 $0 $0 -$3,602,323 -$10,177,399 -$20,106,464 -$30,816,433 -$38,434,286 -$44,705,109 -$53,505,096 -$63,133,229 -$73,630,916 -$85,041,634 -$97,411,034 -$110,787,051 -$125,220,016 $0 $0 $0 Maximum depreciation without compensation against other activties $0 $0 $3,602,323 $6,575,075 $9,929,065 $10,709,969 $7,617,854 $6,270,822 $8,799,987 $9,628,133 $10,497,687 $11,410,718 $12,369,400 $13,376,017 $14,432,965 -$125,220,016 $0 $0 Actual depreciation $0 $0 $0 $3,602,323 $6,575,075 $9,929,065 $10,709,969 $7,617,854 $6,270,822 $8,799,987 $9,628,133 $10,497,687 $11,410,718 $12,369,400 $13,376,017 $14,432,965 -$125,220,016 $0 $0 Pending depreciation $0 $0 $0 -$3,602,323 -$10,177,399 -$20,106,464 -$30,816,433 -$38,434,286 -$44,705,109 -$53,505,096 -$63,133,229 -$73,630,916 -$85,041,634 -$97,411,034 -$110,787,051 -$125,220,016 $0 $0 $0 Total other expenses $0 $0 $0 $3,602,323 $6,575,075 $9,929,065 $10,709,969 $7,617,854 $6,270,822 $8,799,987 $9,628,133 $10,497,687 $11,410,718 $12,369,400 $13,376,017 $14,432,965 -$125,220,016 $0 $0 Before-Tax Profit $10,065,795 $8,425,059 $10,892,832 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $140,762,776 $16,708,044 $17,931,593 Profit x tax rate $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Income Tax Paid $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 After-Tax Profit $10,065,795 $8,425,059 $10,892,832 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $140,762,776 $16,708,044 $17,931,593 Additions Depreciation $0 $0 $0 $3,602,323 $6,575,075 $9,929,065 $10,709,969 $7,617,854 $6,270,822 $8,799,987 $9,628,133 $10,497,687 $11,410,718 $12,369,400 $13,376,017 $14,432,965 -$125,220,016 $0 $0 Released from Reserve $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total additions $0 $0 $0 $3,602,323 $6,575,075 $9,929,065 $10,709,969 $7,617,854 $6,270,822 $8,799,987 $9,628,133 $10,497,687 $11,410,718 $12,369,400 $13,376,017 $14,432,965 -$125,220,016 $0 $0 Total subtractions Before-Tax Cash Flow ($106,748,926) $10,065,795 $8,425,059 $10,892,832 $3,602,323 $6,575,075 $9,929,065 $10,709,969 $7,617,854 $6,270,822 $8,799,987 $9,628,133 $10,497,687 $11,410,718 $12,369,400 $13,376,017 $14,432,965 $15,542,760 $16,708,044 $17,931,593 Taxes Payable (Benefit Received) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 After Tax Cash Flow ($106,748,926) $10,065,795 $8,425,059 $10,892,832 $3,602,323 $6,575,075 $9,929,065 $10,709,969 $7,617,854 $6,270,822 $8,799,987 $9,628,133 $10,497,687 $11,410,718 $12,369,400 $13,376,017 $14,432,965 $15,542,760 $16,708,044 $17,931,593 Cumulative after tax cash flow $10,065,795 $8,425,059 $10,892,832 $3,602,323 $10,177,399 $20,106,464 $30,816,433 $38,434,286 $44,705,109 $53,505,096 $63,133,229 $73,630,916 $85,041,634 $97,411,034 $110,787,051 $125,220,016 $140,762,776 $157,470,820 $175,402,413 Project Cash Flow ($106,748,926) $10,065,795 $8,425,059 $10,892,832 $7,204,647 $13,150,151 $19,858,131 $21,419,937 $15,235,707 $12,541,644 $17,599,975 $19,256,267 $20,995,374 $22,821,436 $24,738,801 $26,752,034 $28,865,929 -$109,677,257 $16,708,044 $17,931,593 17

REVIEW

P076809

Document of The World Bank Report No: ICR00003298 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-54759, IDA-41300, TF-56038) ON A CREDIT FROM THE INTERNATIONAL DEVELOPMENT ASSOCIATION IN THE AMOUNT OF SDR 13\.9 MILLION (US$ 20 MILLION EQUIVALENT) AND A GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF US$ 10 MILLION TO THE REPUBLIC OF MOZAMBIQUE FOR A TRANSFRONTIER CONSERVATION AREAS AND TOURISM DEVELOPMENT PROJECT December 30, 2014 GENDR Mozambique, AFCS2 Africa  CURRENCY EQUIVALENTS Exchange Rate Effective June 30, 2014 Currency Unit = MZN US$ 1\.00 = MZN 31\.45 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ANAC National Conservation Areas Agency AWF Africa Wildlife Foundation BioFund Foundation for the Conservation of Biodiversity CAS Country Assistance Strategy CBNRM Community-Based Natural Resource Management CEF Community Equity Fund CNR Chimanimani Nature Reserve CPS Country Partnership Strategy DANIDA Danish Development Agency DINATUR National Directorate for Tourism DNAC National Directorate for Conservation Areas DTMP District Tourism Master Plan ECDA Elephant Coast Development Agency GDP Gross Domestic Product GEF Global Environment Facility GEO Global Environmental Objective GOM Government of Mozambique ICR Implementation Completion and Results Report IDA International Development Association IDDP Integrated District Development Planning KfW Kreditanstalt für Wiederaufbau (German Development Bank) LNP Limpopo National Park M&E Monitoring and Evaluation MICOA Ministry of Environmental Coordination MITUR Ministry of Tourism MozBio Mozambique Conservation Areas for Biodiversity and Sustainable Development Project (TFCA Phase III) MSR Maputo Special Reserve MTR Mid Term Review NGO Non-Governmental Organization NP National Park PA Protected Area PARPA Action Plan for Poverty Reduction ii PATI Priority Areas for Tourism Investment PDO Project Development Objective PHRD Policy and Human Resources Development (Japan) PPF Peace Parks Foundation SEA Strategic Environmental Assessment SPDT Strategic Plan for Development of Tourism TFCA Transfrontier Conservation Area TFCAPISP Transfrontier Conservation Areas Pilot and Institutional Strengthening Project (TFCA Phase I) TFCATDP Transfrontier Conservation Area Tourism Development Project TPIS Tourism Policy and Implementation Strategy USAID United States Agency for International Development WB World Bank ZIMOZA Zimbabwe-Mozambique-Zambia ZNP Zinave National Park Regional Vice President: Makhtar Diop Country Director: Mark Lundell Practice Manager: Magda Lovei Project Team Leader: Dinesh Aryal ICR Team Leader: Andre Rodrigues de Aquino ICR Lead Author: Michael Carroll iii  REPUBLIC OF MOZAMBIQUE TRANSFRONTIER CONSERVATION AREAS AND TOURISM DEVELOPMENT PROJECT TABLE OF CONTENTS Data Sheet \.v A\. Basic Information \.v B\. Key Dates \.v C\. Ratings Summary \. vi D\. Sector and Theme Codes\. vii E\. Bank Staff \. viii F\. Results Framework Analysis \. viii G\. Ratings of Project Performance in ISRs \. xvii H\. Restructuring \. xvii 1\. Project Context, Development and Global Environment Objectives Design \.1 2\. Key Factors Affecting Implementation and Outcomes \.8 3\. Assessment of Outcomes \.15 4\. Assessment of Risk to Development Outcome and Global Environmental Outcome \.25 5\. Assessment of Bank and Borrower Performance \.25 6\. Lessons Learned\.29 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\.32 Annex 1\. Project Costs and Financing \.33 Annex 2\. Outputs by Component \.36 Annex 3\. Economic and Financial Analysis \.58 Annex 4\. Bank Lending and Implementation Support/Supervision Processes\.67 Annex 5\. The MozBio 1 project and its link to the TFCATDP \.69 Annex 6\. List of Supporting Documents \.72 Annex 7\. Map of TFCATDP targeted areas \.74 iv A\. Basic Information Transfrontier Republic of Conservation Areas Country: Project Name: Mozambique and Tourism Development Project IDA-41300,TF- Project ID: P071465,P076809 L/C/TF Number(s): 54759,TF-56038 ICR Date: 12/22/2014 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: MOZAMBIQUE Original Total XDR 13\.90M,USD XDR 13\.88M,USD Disbursed Amount: Commitment: 10\.00M 9\.97M Environmental Category: B Focal Area: B Implementing Agencies: Ministry of Tourism (MITUR) Cofinanciers and Other External Partners: N/A B\. Key Dates Transfrontier Conservation Areas and Tourism Development Project - P071465 Revised / Actual Process Date Process Original Date Date(s) Concept 02/06/2003 Effectiveness: 04/13/2006 04/13/2006 Review: Appraisal: 06/20/2005 Restructuring(s): 08/01/2011 08/01/2011 Mid-term Approval: 12/01/2005 06/15/2009 09/17/2009 Review: Closing: 06/30/2013 06/30/2014 Transfrontier Conservation Areas and Tourism Development Project - P076809 Revised / Actual Process Date Process Original Date Date(s) Concept 02/06/2003 Effectiveness: 04/14/2006 04/13/2006 Review: Appraisal: 06/20/2005 Restructuring(s): 08/01/2011 08/01/2011 Mid-term Approval: 12/01/2005 06/15/2009 09/17/2009 Review: Closing: 06/30/2013 06/30/2014 v C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes Moderately Satisfactory (MS) GEO Outcomes Moderately Satisfactory (MS) Risk to Development Outcome Moderate (M) Risk to GEO Outcome Moderate (M) Bank Performance Moderately Satisfactory (MS) Borrower Performance Moderately Satisfactory (MS) C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry MS Government: MS Quality of Implementing MS MS Supervision: Agency/Agencies: Overall Bank Overall Borrower MS MS Performance Performance C\.3 Quality at Entry and Implementation Performance Indicators Transfrontier Conservation Areas and Tourism Development Project - P071465 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Project at any time No None (QEA) (Yes/No): Problem Project at any Quality of Yes (2011) None time (Yes/No): Supervision (QSA) DO rating before Satisfactory Closing/Inactive status vi Transfrontier Conservation Areas and Tourism Development Project - P076809 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Project at any time No None (QEA) (Yes/No): Problem Project at any Quality of Yes (2011) None time (Yes/No): Supervision (QSA) GEO rating before Satisfactory Closing/Inactive Status D\. Sector and Theme Codes Transfrontier Conservation Areas and Tourism Development Project - P071465 Original Actual Sector Code (as % of total Bank financing) Central government administration 33 33 General agriculture, fishing and forestry sector 35 35 Other industry 20 20 Sub-national government administration 12 12 Theme Code (as % of total Bank financing) Biodiversity 29 29 Environmental policies and institutions 29 29 Other environment and natural resources 14 14 management Rural non-farm income generation 28 28 Transfrontier Conservation Areas and Tourism Development Project - P076809 Original Actual Sector Code (as % of total Bank financing) Central government administration 16 16 General agriculture, fishing and forestry sector 42 42 Other industry 27 27 Sub-national government administration 15 15 vii Theme Code (as % of total Bank financing) Biodiversity 29 29 Environmental policies and institutions 29 29 Other environment and natural resources 14 14 management Rural non-farm income generation 28 28 E\. Bank Staff Transfrontier Conservation Areas and Tourism Development Project - P071465 Positions At ICR At Approval Vice President: Makhtar Diop Gobind Nankani Country Director: Mark Lundell Michael Baxter Practice Richard G\. Scobey Magda Lovei Manager/Manager: Project Team Leader: Dinesh Aryal Jean-Michel G\. Pavy ICR Team Leader: Andre Rodrigues de Aquino N/A ICR Primary Author: Michael Carroll N/A Transfrontier Conservation Areas and Tourism Development Project - P076809 Positions At ICR At Approval Vice President: Makhtar Diop Gobind Nankani Country Director: Mark Lundell Michael Baxter Practice Richard G\. Scobey Magda Lovei Manager/Manager: Project Team Leader: Dinesh Aryal Jean-Michel G\. Pavy ICR Team Leader: Andre Rodrigues de Aquino N/A ICR Primary Author: Michael Carroll N/A F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To achieve growth in community-private sector led environmentally and socially sustainable tourism in TFCA\. Revised Project Development Objectives (as approved by original approving authority) N/A viii Global Environment Objectives (from Project Appraisal Document) To increase the area, connectivity, and effectiveness of biodiversity conservation in three TFCAs\. Revised Global Environment Objectives (as approved by original approving authority) N/A (a) PDO Indicator(s) Original Target Formally Actual Value Baseline Value Values (from Revised Target Achieved at Indicator approval Values Completion or documents) Target Years Increase number of local residents employed, formally and Indicator 1 informally, in conservation & tourism in target districts Value (quantitative or 75 3,500 2,000 2,027 qualitative) Number Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 The revised target was achieved\. At Mid Term Review (MTR), the target was judged overly optimistic and adjusted down by 43%\. This indicator Comments only measured the employment generated by the activities financed by the (incl\. % Community Equity Facility (CEF), not employment by private sector / achievement) community business linked to tourism, given the lack of available data on the latter\. Number of visitors and bed-nights in tourism facilities in the target Indicator 2 districts Value (quantitative or 15,000 100,000 220,000 196,149 qualitative) Number Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Target 89% achieved\. At MTR, the target was revised to only measure Comments ‘bed nights’ as they were perceived better indicators of tourism growth (incl\. % than ‘visitor’\. Although the target was not fully met, there was significant achievement) growth, with the numbers differing widely between the parks and reserves\. Percentage of tourism ventures (in target districts that have adopted a Indicator 3 District Tourism Master Plan-DTMP) that are in conformity with DTMP Value (quantitative - 80 80 N/A or ix qualitative) Percentage Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Target not achieved due to the fact that the preparation of DTMPs was Comments dropped from the Project, at restructuring\. The DTMPs were judged not (incl\. % necessary, as the Ministry of Planning and Development was supporting achievement) the targeted Districts in preparing their District Development Plans, which also encompassed tourism\. Amount, in $ million, of new private tourism or conservation-related Indicator 4 investment leveraged as joint-venture with communities in target districts Value (quantitative or - 2\.0 2\.0 3\.286 qualitative) Amount in Millions $ Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 The target was significantly exceeded by 64%\.The TFCA Unit increased its capacity on procurement, costing and planning and was able to Comments mobilize private tourism investment\. The supported tourism joint ventures (incl\. % also had a demonstration effect within MITUR / ANAC, which is achievement) important as ANAC attempts to scale this type of partnerships in the future\. Amount, in thousand USD, of total annual revenues generated by Indicator 5 targeted formal PAs (MSR 180, BNP 40, LNP 500, ZNP 10, CSR 20) Value (quantitative or 75 850 573 427 qualitative) Amount in $ Thousand Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Target partially achieved (72%) mainly due to the lower than envisaged number of visitors to the TFCAs\. Despite significant growth in revenue Comments generation, targets were overly optimistic since the tourism assets in these (incl\. % PAs were not fully developed (poor infrastructure, low stock of wildlife, achievement) difficult access), which reduced the number of tourists and expected investments\. (b) GEO Indicator(s) x  Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years 2 Km of new priority areas formally designated and managed for Indicator 6 biodiversity conservation Value (quantitative 0 1,400 1,400 1,910 or qualitative) Km2 Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 2 The target was exceeded at 1,910 km , particularly due to revised boundary demarcation in Zinave and Banhine National Parks\. Especially, Comments (incl\. % important to the achievement of the GEO was the creation of the Futi achievement) Corridor in the Maputo Special Reserve (MSP) which creates a corridor for elephants from the MSP to the Tembe National Park in South Africa\. Increase in bio-indicator species (2 species/area) in formal protected Indicator 7 areas LNP: Elephant 297 710 (197%) Zebra 194 375 (93%) BNP Oribi 51 399 (682%) Value Ostrich 210 519 (150%) (quantitative 10% increase ZNP Impala 150 457 (204%) or qualitative) (MSR, BNP, Nyala 143 No change 260 (81%) Number (and CNR); 20% MSR Elephant 329 452 (37%) Index for increase (LNP) Reedbuck 797 1212 (52%) CNR) CNR Dulker 3 8\.6 (186%) Sable 0\.97 3\.4 (250%) Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2012 Targets achieved for all species and for most by large margins\. Despite Comments constraints of infrequent census due to cost, and of changed methods, the (incl\. % target achievement largely reflects introduction and improved control over achievement) poaching (e\.g\. patrols have become more formal and frequent\.) % of area with agriculture habitation of incompatible land use in all Indicator 8 areas zoned for biodiversity conservation Value (quantitative 0 <10 No change 3\.5 or qualitative) Percentage Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 xi Comments Target achieved\. Although the analysis of the percentage land use within (incl\. % each of the protected areas in 2005, 2007 and 2012 varied, all showed that achievement) land use accounted for less than 3\.5% of the total land area within each PA\. (c) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Number of framework instrument developed and approved (1\. national policy, 2\. strategy, 3\. updated law for Conservation & Indicator 9 Wildlife, 4\. New regulation for conservation & wildlife, 5\. New tourism regulations) Value (quantitative 0 5 No change 4 or qualitative) Numbers Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Comments Target achieved; four were concluded and approved and one (the (incl\. % regulations of the Conservation Law) is currently under way, following achievement) the gazetting of the new conservation law\. Degree of establishment of the new conservation management Indicator 10 institution or PPPs as defined in the policy & law as measured by point system Value (quantitative 0 25 20 17\.5 or qualitative) Point Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Target partially achieved (88%)\. A new conservation management Comments institution (ANAC) was successfully established in April 2011, following (incl\. % a process of inter-ministerial consensus building, but the point-based achievement) targets for financial feasibility analysis and preparation of statutes were only partially achieved\. The Director General was appointed in July 2013\. International agreements/treaties & additional technical protocols for Indicator 11 TFCA management signed Value (quantitative 0 4 3 3 or qualitative) Number Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 xii Comments (incl\. % The target was achieved\. achievement) Number of DDPs prepared with IDDP process that are endorsed at Indicator 12 district and provincial levels = 1 Value (quantitative 0 2 1 1 or qualitative) Number Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Target achieved\. The Strategic District Development Plan for Matutuíne Comments was produced by the District authorities in 2006, and approved at district (incl\. % level\. The plan was strengthened in 2007 and 2008, with the support of a achievement) Technical Advisor for the National Directorate of Planning (DNP) recruited by the Project\. In Matutuine District, % of new development activities (other than tourism-related), which as per national environmental legislation Indicator 13 require EIA, comply with such legislation and with DDP = 50, 80 in 2013 Value (quantitative 0 80 80 N/A or qualitative) Percentage Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 The indicator could not be assessed during the life of the Project because the PIU did not have access to all development activities established in the Matutuine District\. Number of Tourism Plans prepared in conformity with regional Indicator 14 tourism and conservation overlays Value (quantitative 0 4 5 5 or qualitative) Numbers Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Comments Target achieved\. The requirement for reporting tourism data led to a more (incl\. % formal and organized approach to data gathering and reporting by park achievement) managers and district services\. New tourism concessions in targeted districts that conform with new Indicator 15 guidelines for tending concession Value (quantitative Deleted at 0 20 N/A or qualitative) restructuring Percentage Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Comments The MTR recommended that this indicator should be dropped because xiii (incl\. % even though the Project had prepared draft regulations for concession in achievement) protected areas, the Government had decided that these would be incorporated into the proposed Concession Law, which was not expected to be finalized during Project life\. Beds of new tourism operations in targeted districts that are in Indicator 16 conformity with Tourism Master Plans (TMP) Value (quantitative or qualitative) - 1480 500 244 Cumulative number Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Comments Target partially achieved (49%)\. The target at Project appraisal proved to (incl\. % be very ambitious, hence the significant downgrade at MTR\. achievement) New community organizations in targeted districts that are engaged Indicator 17 in conservation or tourism activity in conformity with TPs Value (quantitative - 20 20 24 or qualitative) Number Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Target was exceeded\. A community facilitator appointed and the CEF Comments Manual prepared in 2009 were both instrumental in establishing (incl\. % community enterprises in difficult locations, isolated from mainstream achievement) markets and where people have limited experience and capacity\. Indicator 18 % increase in investor satisfaction in targeted districts Value (quantitative or qualitative) 0 50 55 62 Percentage increase Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Comments Target exceeded\. Investor satisfaction was assessed using a four point (incl\. % scale in 2006 (37%), 2008 (48%) and 2011 (60%), yielding a net increase achievement) of 23% which is a 62% increase in investor satisfaction\. Indicator 19 Change in management effectiveness score for parks and reserves LNP: 43 LNP: 72 LNP: 65 LNP: 69 ZNP: 24 ZNP: 49 ZNP: 58 ZNP: 47 Value BNP:31 BNP:69 BNP:45 BNP: 41 (quantitative MR: 33 MR: 78 MR: 60 MR: 57 or qualitative) Futi: 7 Futi: 53 Futi: 30 Futi: 25 Score Ponta do Ouro: 1 Ponta do Ouro: 36 Ponta do Ouro: 45 P\.Ouro: 50 CNR: 36 CNR: 71 CNR: 60 CNR: 40 Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 xiv Comments Targets were under-achieved (except for Ponta do Ouro Marine Reserve) (incl\. % mainly due to the delays experienced with procurement and construction achievement) and with implementing community projects\. Number of existing protected areas that have developed, adopted and Indicator 20 are applying a performance-based management system and prepared a business plan = 3 out of 5 possible Value (quantitative 0 3 3 0 or qualitative) Number Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Target not achieved, as system is not being adequately implemented in Comments any of the PAs\. The intention of this indicator was to internalize a culture (incl\. % of management assessment in the conservation agency\. It was the achievement) responsibility of DNAC, rather than the TFCA Unit, to introduce and sustain performance-based management\. Number of planned structures completed in targeted formal protected Indicator 21 areas Value (quantitative - 80 45 31 or qualitative) Number Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Indicator was revised to read Number of planned structures completed Comments after MTR\. Despite good progress, target partially achieved (69%) due to (incl\. % cost overruns (arising from underestimation of infrastructure costs at achievement) appraisal) and capacity constraints that affected performance, particularly with procurement before MTR\. Indicator 22 % of deliverables in annual work plans completed each year Value (quantitative N/A 80 80 65 or qualitative) Percentage Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Target partially achieved (81%) due the complex multi-sectoral context of the TFCATDP\. Effectiveness in completing annual work plans improved Comments significantly the first years yet the non-achievement of target reflects the (incl\. % inherent complexities of the Project in terms of developing infrastructure achievement) in remote locations, working with communities and investors and limited staff capacity\. Project outcomes/outputs indicators updated accordingly to schedule Indicator 23 and incorporated in management decisions Value (quantitative N/A 100 100 N/A or qualitative) xv Percentage Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Comments This indicator was dropped at restructuring, as Project monitoring and (incl\. % evaluation were judged to be working well\. Evidence at ICR indeed achievement) suggests that data was effectively collected and processed\. Number of hits on website of deliverables in annual work plans Indicator 24 completed each year Value (quantitative or qualitative) N/A 35,000 20,000 166,355 Number in Thousands Date achieved April 13, 2006 April 13, 2006 August 22, 2011 June 30, 2014 Comments Target was significantly exceeded\. The site has been accessed from a (incl\. % great diversity of countries, including USA (25%), China (21%) and achievement) Mozambique (12%)\. xvi G\. Ratings of Project Performance in ISRs - Actual Date ISR Disbursements No\. DO GEO IP (USD millions) Archived IDA GEF 1 12/20/2005 S S S 0\.00 0\.00 2 06/30/2006 S S 0\.49 0\.25 3 09/29/2006 S S S 1\.54 0\.25 4 06/24/2007 S S MS 2\.58 0\.32 5 12/12/2007 S S MS 3\.47 0\.59 6 05/30/2008 S S MS 4\.25 0\.90 7 12/02/2008 S S MS 6\.55 1\.49 8 12/18/2008 S S MS 6\.87 1\.49 9 05/26/2009 S S MS 7\.88 1\.84 10 12/02/2009 S S S 9\.23 2\.43 11 05/28/2010 S S MS 10\.10 2\.70 12 03/22/2011 S S MU 12\.80 3\.88 13 09/06/2011 S S MS 14\.33 4\.37 14 03/26/2012 S S MS 17\.11 5\.06 15 08/16/2012 S S S 18\.79 5\.58 16 02/21/2013 S S MS 20\.26 6\.75 17 10/30/2013 S S MS 20\.68 8\.16 18 05/05/2014 S S S 21\.31 9\.27 19 06/22/2014 S S S 21\.31 9\.42 H\. Restructuring (if any) In March 2009, a reallocation of GEF proceeds was approved to increase the allocation of funds for training from US$ 400,000 to 700,000\. In September 2009, a mid-term review (MTR) of the Project was conducted and several changes were agreed\. The PIU adopted these changes immediately after the MTR, including changes in staff, adoption of revised indicator targets and a revised work plan\. xvii The corresponding formal restructuring (Level 2) happened in August 2011, due to Government’s delays in officially sending the request for Project restructuring\. At the time of restructuring, US$12\.8 million of the IDA Credit and US$ 3\.88 million of the GEF grant had been disbursed, and resulted in changes to the Project’s indicator targets, reallocation of Grant proceeds and changes to some Project activities\. In March 2012, a second Level 2 restructuring was approved to allow some corrections in the disbursement categories of Consultant Services and Training of the IDA Credit and GEF Grant Agreements\. In March 2013, the closing date was extended from June 30, 2013 to June 30, 2014\. I\. Disbursement Profile P071465 P076809 xviii 1\. Project Context, Development and Global Environment Objectives Design 1\.1 Context at Appraisal 1\. Mozambique is strategically located on the east coast of Africa, bordering six countries including South Africa\. With an area of 800,000 Km2, the country is richly endowed with natural resources (arable land, forests, water, gas and mineral resources)\. Despite this wealth, Mozambique is currently ranked as one of the poorest countries in the world with approximately 70% of its 22\.9 million people living and working in extreme poverty (<US$2/day)\. After emerging from a protracted fifteen-year civil war that ended in 1992, Mozambique achieved impressive economic growth rates, averaging 8\.5% annually (annual GDP per capita growth averaging 6%) between 1995 and 2002\. Although the benefits of this growth were mainly concentrated in and around Maputo and some other urban areas, over the 1996-2003 period poverty rate declined from 69 percent to 54 percent\. Despite this progress, at appraisal the country’s rural areas, where over 70 percent of Mozambicans lived and were mostly dependent on subsistence agriculture, continued to be affected by extreme poverty\. 2\. In terms of biodiversity, Mozambique falls within the biodiversity-rich Zambezian biogeographic region, and contains a wide diversity of habitats including mountainous, woodland, wetland and coastal/marine ecosystems\. Its 2,700 km of coastline are unique in the East African Marine Region in terms of the species quality, diversity and richness\. 3\. Consistent with the country’s overall economic growth pattern, tourism in Mozambique began to develop after the civil war\. Between 1995 and 2001, arrivals had increased by 10-15 % annually, reaching a total of 400,000 tourists by 2001\. Since tourism had become the third largest investment sector in the country, the Government of Mozambique (GMO) (i) created a separate Ministry of Tourism (MITUR) in 2001, (ii) adopted a Tourism Policy and Implementation Strategy (TPIS) in 2003; (iii) prepared a Strategic Plan for Tourism Development in Mozambique (SPTD, 2004-2008) and (iv) adopted a new Tourism Law that provided a framework for building regulatory capacity\. 4\. Within this policy framework, Transfrontier Conservation Areas (TFCAs) were considered as Priority Areas for Tourism Investment (PATIs)\. TFCAs, as described in the country biodiversity and tourism strategies, are large, defined areas which include both core Protected Areas (PA) and multiple-use areas where the primary management objective is to promote socially and environmentally sustainable development compatible with the area’s conservation goals\. The TFCA concept includes the participation of local communities and other stakeholders in PA management and the sustainable use of the natural resources by communities, particularly through sustainable tourism\. 5\. The GOM established a national TFCA Program in 1998 whose long-term objectives are to conserve the biodiversity and natural ecosystems within TFCAs, and to promote economic growth and development based on sustainable use of their natural resources by local communities, with a particular emphasis on ecotourism\. The Program 1 promotes GOM’s adherence to international agreements aimed at coordinating activities across national borders, and promoting conservation activities in the portions of the TFCAs within Mozambique\. This operation, within the context of the longer-term program, sought to increase the natural assets, especially wildlife, and improve the physical infrastructure within the TFCAs as a basis for encouraging and accommodating increased nature-based tourism in the Project area, thereby enhancing biodiversity while also stimulating greater and more sustainable local economic growth\. 6\. The World Bank has been supporting Mozambique’s TFCA Program for 15 years now\. An initial project (the Transfrontier Conservation Areas Pilot and Institutional Strengthening Project – TFCA I) was implemented by the Bank with GEF financing between 1998 and 2003, and launched the TFCA concept in Mozambique\. Its achievements included the establishment of three TFCAs (Greater Limpopo, Chimanimani and Lubombo), improved policy and institutional development, and modest investments to strengthen the management of the PAs within those three TFCAs\. The second Project, the Transfrontier Conservation Area and Tourism Development Project (TFCATDP), was implemented from 2006 to 2014, and its achievements are described in detail in this ICR\. Building on the results and lessons of these first two projects, the third phase of the Program will be supported by the MozBio Project, approved by the Board in November 2014, and expected to become effective in early 2015, whose goal is “to increase the effective management of the Conservation Areas and enhance the living conditions of communities in and around the Conservation Areas”\. 7\. The TFCATDP was fully aligned with (i) relevant country strategies (Tourism Development, Biodiversity Conservation, and Poverty Reduction); (ii) the Bank’s Country Assistance Strategy, (iii) GEF’s global priorities, and (iv) assistance provided by several donors in support of conservation\. The Project was also fully aligned with Bank and GEF global commitments, by addressing issues of global concern including ecosystem protection and management, species protection, and the enhanced management and protection of important transfrontier areas\. Specific to GEF, the Project was fully consistent with the objectives of the Biodiversity Conservation focal area, and covered several Operational Programs due the variety of habitats within the TFCAs: Semi-Arid Zone Ecosystems (OP#1); Coastal, Marine and Freshwater Ecosystems (OP#2), Forest Ecosystems (OP#3) and Mountain Ecosystems (OP#4)\. 8\. The TFCATDP Project area included the Mozambique portion of three TFCAs (Chimanimani, Lubombo, and Greater Limpopo)\. In these TFCAs, Project implementation was expected to be focused on 7 to 9 districts of 4 Provinces: Ihambane (Vilankulo District), Maputo (Matutuine District), Manica (Sussudenga District), and Gaza (priority 1: Chicualacuala, Massingir, Mabote, Massangena Districts; priority 2: Chigubo and Mabacane Districts)\. In the 3 TFCAs, the protected areas (PAs) targeted were Chimanimani National Reserve, Maputo Special Reserve, Limpopo National Park (NP), Banhine NP, and Zinave NP (see map)\. 9\. Regarding TFCATDP’s complementarities with other initiatives, several donors and international non-governmental organizations (NGOs) were also actively involved in 2 conservation-related activities in the Project area during the period of its implementation\. Most relevant among these were Kreditanstalt fur Wiederaufbau (KFW) and the Peace Parks Foundation (PPF), which supported the establishment of the Greater Limpopo Transfrontier Park; the Transfrontier Natural Resource Management initiative financed by the US Agency for International Development (USAID); the African Wildlife Foundation (AWF), which provided support for community land demarcation and capacity building in and around Zinave and Banhine National Parks (ZNP and BNP); and the joint DANIDA/GEF initiative on coastal zone management\. The Project also provided a link to IFC-supported activities such as the Small and Medium Grants program and the Southeast Africa Tourism Investment Program (SEATIP), aimed at facilitating private sector investment and developing the regional tourism market necessary for community-based tourism to succeed\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 10\. The Development Objective (PDO) of the Project was to achieve growth in community-private sector led environmentally and socially sustainable tourism in TFCAs\. The PDO’s reference to “community-private sector led environmentally and socially sustainable tourism” should be understood in the context of the overall objectives of the longer-term TFCA program – i\.e\., “to conserve the biodiversity and natural ecosystems within TFCAs, and to promote economic growth and development based on sustainable use of their natural resources by local communities, with a particular emphasis on ecotourism\.” 11\. Key indicators and targets for the PDO were:  3,500 local residents formally and informally employed in conservation and tourism in target districts;  100,000 visitors and bed-nights in tourism facilities in the target districts;  80% of tourism ventures in target districts have adopted a conforming District Tourism Master Plans (DTMP);  US$2 million of new capital in investment in private tourism and/or conservation- related joint-ventures with communities in target districts; and  Total annual revenues of US$0\.85 million generated by targeted formal PAs\. 1\.3 Original Global Environment Objectives (GEO) and Key Indicators (as approved) 12\. The GEO included in the PAD was “To increase the area, connectivity, and effectiveness of biodiversity conservation in three TFCAs\.” However, the objective stated in the GEF Grant Agreement is identical to the PDO, i\.e\. “To achieve growth in community-private sector led environmentally and socially sustainable tourism in TFCAs\.” 13\. Key end of Project indicators for the GEO were:  3,400 km2 of new priority areas formally designated and managed for biodiversity conservation; 3  10% increase in bio indicator species (2 species/area) in formal PAs; and  Less than 10% of area with agriculture, habitation or incompatible land use in all areas zoned for biodiversity conservation\. 1\.4 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 14\. The original PDO, GEO and Components remained unchanged throughout the life of the Project\. However, as part of the first restructuring (Level 2, August 2011), the scope of each component was revised and the target values of five key indicators and most intermediate indicators were revised to adjust to more realistic and measurable values and implementation capacity (see further details in datasheet, and sections 1\.9 and 2\.2)\. 1\.5 Revised GEO (as approved by original approving authority) and Key Indicators, and reasons/justification N/A 1\.6 Main Beneficiaries 15\. The Project had direct and indirect beneficiaries\. Among the direct beneficiaries were the local households and communities living within the three supported TFCAs, particularly within and in the buffer areas of the targeted PAs the Project’s revised target for formal and informal employment generation in conservation and tourism in the target districts (at least 2,000 local residents) was achieved\. Local communities also benefited from employment in civil works during Project implementation (such as construction of infrastructure), as well as from technical training on horticulture, water management and irrigation, conservation agriculture, carpentry, construction, electricity, financial management and accounting\. The formalization of community associations and the community-private enterprises promoted by the Project have also strengthened local-level communities’ and individuals’ capacity to undertake new businesses\. Community enterprise projects (e\.g\. chili production and marketing, horticulture, honey and community lodges) also created jobs and generated meaningful revenue for local communities\. Other community projects had widespread benefits within the community, such as boreholes in semi-arid Banhine and Zinave NPs areas\. Communities around the PAs likewise benefitted from higher fees collected by the PA administration, as 20% of those fees were redistributed to them\. 16\. Other direct beneficiaries included management and technical staff at the national level (i\.e\., at MITUR headquarters) and at the level of the PAs who received training and improved working conditions (infrastructure and equipment)\. 17\. Indirect beneficiaries included formal and informal business owners who benefitted from the construction phase through temporary jobs and new business opportunities (retailers), District management and staff, tourism industry in the PAs 4 (particularly in Ponta do Ouro)\. Although difficult to assess the extent of these benefits, indirect beneficiaries also included those households that benefitted from the increased value of local environmental services, such as better preserved forests and water flows, resulting from improved management of the TFCAs under the Project\. 1\.7 Original Components (as approved) 18\. The Transfrontier Conservation Areas and Tourism Development Project (TFCATDP) is a US$35\.1 million Project financed by an IDA Credit of US$ 21\.4 million equivalent, a US$10 million Global Environment Facility (GEF) Grant\. and co-financing from a US$3\.72 million PHRD Grant, (100% allocated to Technical Assistance) Parallel financing for management of targeted PAs was also provided to GOM by Peace Park Foundation (PPF) and African Wildlife Foundation (AWF) in the amount of US$ 2\.2 million\. Component 1: Strengthening Policy, Legal and Institutional Framework for TFCAs ($1\.15 M) - IDA: $0\.50 M; GEF: $0\.65 M\. Component 1 was designed to build on the achievements of the first phase and further strengthen the enabling environment for TFCAs by helping create the policy, legal and institutional framework for GOM to improve regional collaboration for management of transfrontier resources; promote interagency collaboration and vertical linkages between central and local governments; build the capacity of public sector institutions at all levels and communities to manage biodiversity and natural resources; and form productive partnerships with the private sector\. Community land and natural resource ownership and use rights were also to be addressed\. Component 2: Integrated District Development Planning ($0\.48 M) - IDA: $0\.29 M; PHRD $0\.19 M\. This component was aimed at piloting a proactive approach to integrated planning in two of the Project’s 7 to 9 districts, through the development of the Integrated District Development Plans (IDDPs) which focused on defining and implementing a series of practical steps to ensure that biodiversity and natural resource- based assets are mainstreamed into District Development Plans (DDPs)\. This component was divided into two Subcomponents: (2\.1) National capacity building and stocktaking, and (2\.2) Production, adoption and dissemination of the two IDDPs\. Component 3: Community and Private Sector-Led Tourism Development ($12\.96 M) - IDA: $5\.47 M; GEF: $4\.08 M; PHRD $3\.30 M\. Component 3 was designed to develop the capacity of the tourism sector (government, local communities and the private sector) to participate in the preparation and implementation of tourism master plans for key tourism districts (Matutuine and Vilankulos)\. This component intended to support MITUR to establish a comprehensive and clearly defined set of procedures to implement the process for land concessions, from land identification to on-the-ground investment\. It was also intended to support MITUR to implement legislation allowing it to ‘recuperate’ land previously allocated for tourism investment where the investment period had expired, so that this land could be marketed to appropriate investors\. This component was also divided into two subcomponents: (3\.1) building capacities in National Tourism 5 Directorate (DINATUR), Elephant Coast Development Agency (ECDA) and targeted private sector and community associations to unlock opportunities for sustainable tourism investment and growth; and (3\.2) Community-led conservation and tourism development through the establishment of a Community Equity Fund (CEF)\. Component 4: Protected Areas management ($16\.64 M); IDA: $8\.46 M; GEF: $5\.27 M; PPF and AWF: $2\.20 M\. This component aimed to support the identification, monitoring and protection of the most significant and vulnerable biodiversity assets within the three TFCAs, through the establishment/rehabilitation and management of a network of National Parks and Reserves under the direct administration of the National Directorate of Conservation Areas (DNAC)\. This was intended to initiate a long-term process of major improvement of the Maputo Special Reserve (MSR), including gazetting the Futi corridor and a new marine reserve; and supporting BNP and CNR\. In addition, modest support would be provided to Limpopo National Park to supplement current PPF, KfW and AFD efforts and to ZNP\. Component 5: Project Management, Communications, and Monitoring and Evaluation ($4\.90 M) - IDA: $4\.68 M; PHRD $0\.22 M\. This component would finance Project management costs, including procurement, accounting and monitoring and evaluation (M&E) activities\. This included strengthening the capacity of the TFCA Unit to coordinate the TFCA program by recruiting additional long-term staff for the Unit, as well as field-based TFCA Coordinators to support decentralization of planning and implementation to the Provincial and local levels\. The component included: (i) an M&E system to track and assess Project implementation and impacts; (ii) a system for adaptive management based on the M&E information generated; and (iii) an information system and communications strategy to ensure timely flow of accurate information among the implementing agencies, and to increase awareness and understanding about ecosystem management and TFCAs nationally, regionally and worldwide\. 1\.8 Revised Components 19\. The Project components remained unchanged throughout the life of the Project\. Their scope was revised after the MTR, and the targets for five key indicators and most intermediate indicators were adjusted upwards or downwards to more realistic values and the borrower’s implementation capacity (see details in the datasheet, and sections 1\.9 and 2\.2)\. 1\.9 Other significant changes 20\. The Project was declared effective on April 13, 2006\. It was approved to be implemented for a period of 7\.5 years and was scheduled to close on June 30, 2013\. In March 2013, the Project was extended through June 30, 2014 to allow for completion of ongoing construction contracts and community subprojects, as well as to ensure overlap with preparation of the third phase of the TFCA Program (the MozBio Project)\. As a result, actual Project implementation was 8\.5 years\. 6 21\. As mentioned in Section 1\.4, the MTR resulted in a number of changes to the scope of the components and subcomponents\. Although none had significant impacts on Project outcomes, such changes were needed to revise some of the initial targets\. Component revisions were aimed at addressing implementation problems identified by the MTR regarding: (i) GOM decisions to drop some of the institutional development instruments envisaged under Component 1, particularly the Integrated District Development Plans, for which an alternative funding source was found; (ii) delayed and under-budgeted infrastructure construction due to problems to retain contractors/engineers qualified and willing to operate in the remote areas of the Project; and (iii) limited engagement of communities, resulting mainly from complex operating procedures for the “Community Equity Fund”, as well as the PIU’s lack of expertise in community development\. Original and revised PDO and GEO indicators can be summarized as follows: Table 1: Objectives and Indicators in the PAD and after Restructuring Outcome Indicators PDO/GEO Indicators Indicators at following Appraisal Restructuring Numbers of local residents employed in 3,500 2,000 conservation and tourism target districts Numbers of visitors and bed-nights in 100,000 240,000 tourism facilities in the Project sites % of tourism ventures in Project sites that 70 (2012) and 80 have adopted a Tourism Plan (TP) are in 80 (2013) conformity with such a plan New private tourism or conservation- related investment leveraged as joint- $1,2 million (2012) $2 million venture with communities in target $2 million (2013) districts Total annual revenues (U$S 000s) 850 573 generated by targeted formal PAs (MSR 180, BNP 40, (MSR 150, BNP 3, LNP 500, ZNP 10, LNP 400, ZNP 10, CSR 20, Z 100) CSR 10) Km² of new priority areas formally 1,400 (Futi: 700, 1,400 (Futi Corridor: designated and managed for biodiversity Marine Reserve: 700, Maputo conservation 700) Marine: 700) % Increase in bio indicator species (2 10 (MSR, BNP, No change species/area) in formal PAs CNR); 20 (LNP) % of area with agriculture, habitation or incompatible land use in all areas zoned <10 No change for biodiversity conservation 7 22\. In addition, with greater emphasis given to community development and infrastructure following the MTR, it was necessary to reallocate funds between disbursement categories of both the IDA credit and the GEF grant\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 23\. The PDO and associated GEO were defined based on the underlying assumption that nature-based tourism could contribute to economic growth and poverty relief in adjacent rural areas while also promoting biodiversity conservation\. As such, the main strategic directions were to: (i) leverage private sector investment in association with conservation activities; (ii) develop tourism-related opportunities for greater community participation in rural economies, particularly those associated with protected areas; (iii) strengthen conservation areas and institutions; and (iv)expand and connect conservation areas to increase opportunities for tourism\. 24\. Building on the experience and lessons learned from the previous TFCAPISP, the design process of TFCADP was largely responsive to GOM’s development priorities, and recognized the need for five interrelated and co-dependent pillars linked to the Strategic Plan for Development of Tourism (SPDT): ï‚ Strengthen capacity and institutional arrangements for conservation from community scale upwards to the international scale of the TFCAs, supported by Component 1: Strengthening Policy, Legal and Institutional Framework for TFCAs; ï‚ Incorporate conservation and protected areas into planning processes at local, district and national levels, supported by Component 2: Integrated District Development Planning; ï‚ Integrate conservation into the tourism economy to provide opportunities for investors and local communities, supported by Component 3: Community and Private Sector-Led Tourism Development; ï‚ Introduce a professional approach to conservation management, supported by Component 4: Protected Areas Management; and ï‚ Improve the capacity of the TFCA Unit so that it performs its facilitation function efficiently and effectively through Component 5: Project Management, Communications, and Monitoring and Evaluation\. 25\. The components were designed as an integrated set to achieve both the PDO and the GEO while also seeking to address capacity constraints within the MITUR / TFCA Unit and GOM\. Both IDA and GEF resources were allocated to finance tourism-related infrastructure improvements in the Protected Areas (PAs), for example\. The envisaged duration, resources and approach were considered reasonable to achieve the desired outcomes\. Together, the five components present a logical and comprehensive approach to meeting the objectives of the SPDT\. However, Project design was lengthy (2\.5 years) 8 and complex given the scope and interdependence of the components, and, in retrospect, underestimated the capacity limitations of the TFCA Unit and GOM in general, the difficult conditions the Project started from, and that some of the variables to achieve the PDO were outside the scope of the Project, such as the overall tourism demand for Mozambique destination and infrastructure development outside the PA to ensure access to the PAs\. 2\.2 Implementation 26\. While initial Project implementation was relatively slow, it improved steadily as procurement and financial management capacity was strengthened\. During Implementation Support, the likelihood that the Project would achieve its development objective was consistently rated Satisfactory and implementation progress was Moderately Satisfactory\. However, at the time of the MTR (September 2009) the Project was experiencing considerable implementation delays resulting from: (i) infrastructure construction which was under-budgeted and suffering delays due to difficulties to retain suitably qualified contractors/engineers capable and willing to operate in the remote Project areas; and (ii) very limited progress with the community support activities, due to complex operational procedures to implement the CEF and lack of appropriate capacity within the Project team\. 27\. The comprehensive MTR was conducted in two stages during the second semester of 2009, and concluded on September 17, 2009\. Its main conclusion was that: “While tourism remains the economic driver on which the project is based, the project’s main focus will be on product development through all facets of management of Conservation Areas\. This requires a stronger focus on protected area development including community support and tourism through joint community-private investment in tourism accommodations\.” In line with this, the original targets for most key and intermediate indicators were assessed as having been overly ambitious, and/or difficult to measure, and were adjusted accordingly\. 28\. In addition, Project-financed activities were revised, funds were reallocated between disbursement categories, and arrangements for Project implementation were modified\. The perceived high cost of Project management relative to product delivery was addressed by closing the three regional offices (in Xai Xai, Chimoio and Matundo), a reduction of staff and the implementation of tighter control systems on operating costs and travel\. To achieve greater focus of resource allocation and improve return on investment the following measures were taken: (i) financing for infrastructure development was concentrated in the protected areas most likely to deliver economic or conservation benefits, namely the Maputo Special Reserve, the Zinave National Park and the Chimanimani Reserve; (ii) the proposed pilot Integrated District Development Plan in Vilanculos District was cancelled, as it was financed by other sources; and (iii) the capacity of the Project team to support infrastructure development in PAs and community subprojects in and around protected areas was strengthened\. 9 29\. Regarding Project activities supporting communities, the MTR observed that, although all service providers (Community Brokers) had been recruited, implementation was not proceeding as planned\. Population surveys had been conducted for each PA; however, each site presented different, often modest, approaches to organizing communities, socioeconomic surveys, if done, were superficial, awareness building was very limited in coverage, and community plans had not been developed\. As a result, there was a delay in approving subprojects\. The main reasons identified were related to challenges in the design of the subproject cycle, the inadequate approach and capacity of the Community Brokers, the operational instruments used (Process Framework and CEF Manual) and the structure of the TFCA Unit\. Corrective measures were identified by the MTR for each of these issues and implemented during the remainder of the Project\. 30\. Revised Costs – Project costs were revised at the MTR\. The changes in cost allocation appear in the table below\. As most tourism and community activities that occur in Protected Areas were moved to Component 4, the substantial decrease in Component 3 is accompanied by a parallel increase in Component 4\. Table 2: Changes in Cost Allocation Components PAD MTR Planned Actual Variance (US$) (2006-08 (%) Planned (2009-11) C1\. Strengthening policy, legal and institutional 1,140 1,035 -105 framework C2\. Integrated District Development Planning 430 47 -383 C3\. Community and Private sector led Tourism 13,050 3,437 -9,613 Development C4\. Protected Area management 16,910 26,848 9,938 C5\. Project Management, Communication and 5,010 6,613 1,603 Monitoring TOTAL 36,540 37,980 1,440 31\. From MTR to closing (4\.5 years), the Project was implemented in accordance with the above-described modifications formalized in the restructuring\. Overall Project implementation improved considerably, although the implementation period was longer than originally scheduled\. Procurement and Financial Management capacity were strengthened, and Project instruments were improved\. In particular, the scope of support to communities was improved through the revision of the Process Framework and the CEF Manual to facilitate subproject selection and implementation\. In addition, the Project management team was reorganized to improve delivery and efficiency while adding new critical skills such as community extension and infrastructure specialists\. 10 2\.2 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 32\. The M&E framework adopted by the TFCA Unit was comprehensive, well operationalized, and fully consistent with the PAD in terms of PDO, GEO and Intermediate indicators and targets\. The Results Framework was mainly founded on the assumption that the Project would attract investment in community-based tourism enterprises, although, in retrospect, the targets were not always realistic\. Identified shortcomings included: (i) the PDO indicators were not sufficiently linked to the PDO (GEO indicators were better aligned); and (ii) the framework was comprised of an excessive number of indicators (5 PDO, 3 GEO, and 16 Intermediate)\. 33\. In terms of utilization, the information generated by the M&E system was consistently used for progress reporting by the TFCA Unit and for Bank supervision, although the collection and processing of data for several of the indicators was costly, time-consuming and, in some cases, obtained from unofficial sources\. 34\. Complementing the indicator-based M&E framework, a Management Effectiveness Tracking Tool (METT) was adopted to assess the overall performance of all targeted PAs\. It was implemented and reported in a consistent manner, as well as utilized by Bank supervision to assess progress by individual PAs\. Its importance lied as much in its consistent application as in the scores achieved, but more particularly, in the management response to the score\. Performance-based management systems were also adopted towards the end of the Project to assess performance of the TFCA Unit, and are expected to be further strengthened and expanded under the MozBio Project, thus contributing to the system’s institutionalization and long-term sustainability\. 2\.3 Fiduciary and Safeguard Compliance Procurement 35\. An assessment of the TFCA’s procurement capacity was carried out during appraisal, and it was concluded that the future implementing unit would require additional support in procurement, which took them time to implement\. Thus, during the initial stages of implementation the Project unit experienced difficulties in areas such as procurement planning, record keeping, contract management, which led to delays in payments of the suppliers, contractors and consultants\. 36\. The implementation of the Project was challenging due to its nature, complexity and specificity, including: (i) the existence of many small transactions, requiring involvement of several stakeholders in the process; (ii) implementation in remote areas with difficult access; and (iii) procurement staff with limited exposure to complex projects and inadequate for dealing with technical aspects such as the drafting of TORs, specifications, evaluations reports, etc\. 37\. Over time, with dedication and interest of the TFCA Unit’s procurement officer and the enhancement of the procurement function by an additional procurement officer and a procurement assistant, implementation showed considerable improvement\. 11 Procurement training, procurement clinics, and hands-on support provided by the Bank also contributed to this positive turn of events\. 38\. During the life of the Project, several post procurement reviews were conducted by the Bank and none uncovered any misprocurement\. Nevertheless, some minor deviations were found\. As a result, the Project was rated Moderately Satisfactory (MS) during at least four consecutive years\. Mitigation measures, action plans with the recommendations were prepared after each post procurement review exercise and closely monitored\. Due to implementation of these recommendations, the Project was upgraded to Satisfactory (S) following the post-procurement review of April 2013 and continued to be so rated until the closing date\. Financial Management 39\. The Project performed well with regards to financial management and fiduciary aspects, and no significant internal controls issues identified\. It was adequately staffed throughout its life with experienced and qualified FM personnel, and all the required quarterly un-audited reports, as well as audited reports were generally submitted in a timely fashion\. Audit reports under the operation had unqualified (clean) opinions\. Overall, the Project had a satisfactory financial management performance\. Environmental safeguards 40\. The World Bank’s safeguard policies triggered by this Project were OP 4\.01 Environmental Assessment; OP 4\.04 Natural Habitats; OP 4\.09 (Pest Management), OP 4\.36 Forestry, and OP 4\.12 Involuntary Resettlement; Three stand-alone safeguards instruments were prepared by the Borrower: (i) an Environmental and Social Management Framework (ESMF); (ii) a Policy Framework to deal with issues related to restriction of access in PAs; and (iii) a Resettlement Policy Framework (RPF)\. According to OP 4\.01, TFCATDP was categorized as “B” - partial assessment - since its potential negative impacts were localized, site- specific and thus easily manageable\. The Project was also required to be in compliance with applicable national environmental regulations, which are generally aligned in principle and objectives with the World Bank’s safeguard policies\. 41\. The Project has shown a good record of compliance with both Mozambique’s environmental requirements and the Bank’s safeguards policies\. Under Mozambique’s requirements, those sub-projects which entailed construction activities for tourism infrastructure, such as the community lodges, required Environmental and Social Impact Assessments (ESIAs) to be prepared and consulted with local stakeholders, which was adequately carried out by the TFCA Unit\. The environmental and social impact assessment studies were successfully conducted by specialized consultants, and disclosed following clearance by the Ministry of Environmental Coordination (MICOA) and the Bank\. Reporting on the status of the implementation of the Environmental and Social Management Plans (ESMPs) as per MICOA’s requirements and the approved ESMF, however, should have been carried out more systematically\. Overall, therefore, 12 implementation of environmental safeguards within the Project was moderately satisfactory\. Social Safeguards 42\. As stated above, two social safeguards instruments were prepared: a Policy Framework and a Resettlement Policy Framework (RPF)1\. To mitigate potential impacts caused by potential loss of access to livelihoods in the targeted PAs, Participatory Community Action Plans (PCAPs) were prepared in accordance with the principles and prerogatives of the Process Framework for all targeted PAs\. The PCAPs were implemented through Community Management Committees\. Several capacity building activities, such as training and community participation, were also carried for sub- projects financed by the Community Equity Facility (CEF), benefiting households and communities within the TFCAs\. 43\. Despite the lack of a social scientist in the TFCA Unit during Project preparation and the early years of Project implementation, the Bank was able to encourage the Government to ensure due consideration of social issues during Project design and implementation\. Consultative and inclusive community consultation and participation workshops were organized during Project preparation, and most of the concerns of project-affected communities, including those from women and youth, were retrofitted in the Project design documents\. Overall, social safeguards implementation was Moderately Satisfactory (see footnote 1)\. 2\.4 Post-completion Operation/Next Phase 44\. The third phase of the TFCA program, the Mozambique Conservation Areas for Biodiversity and Sustainable Development Project (MozBio 1), has been approved by the Board and is expected to start in early 2015, six months after the closing of TFCA II, 1 Involuntary resettlement within the targeted TFCAs was not an objective of the TFCATDP, and no project funding was allocated to resettlement activities\. However, the World Bank agreed to provide advisory services to involuntary resettlement activities funded by the KfW in Limpopo National Park, but outside of TFCATDP implementation and Bank supervision\. Since the Bank was collaborating with other development partners in support of the TFCA Program, it agreed to supervise this resettlement as a way of helping to build capacity within the Government and of sharing best practices with the partners through the application of Bank’s safeguards policies\. The implementation of both RAPs faced some issues, mainly due to (i) the Government’s lack of knowledge and commitment; (ii) KfW’s lack of knowledge on Safeguards, particularly on Involuntary Resettlement, plus insufficient budget for implementation; and, (iii) on the Bank’s side, the lack of a local Social Scientist, knowledgeable on Social Safeguards to guide the process\. The involvement of Social Scientist, especially from TFCA II as well as the classification of TFCA II in the list of Corporate Risk Projects in 2011 helped to resolve the situation on the ground\. The Bank’s Social Safeguards Specialists offered a series of safeguards training workshops as well as on-the-job training to MITUR, Park wardens, the National Institute for Disaster Management (INGC) and local officials on the appropriate ways of implementing resettlement operations\. These efforts were further expanded with joint supervision missions (3 times per year) encouraged by the Bank that involved all interested parties (The Government, KfW and the Bank) and supporting agencies (INGC, and Local Administrations)\. The Plans were implemented with enthusiasm and commitment was shown by the local government in collaboration with other relevant actors which ensured that the livelihoods of affected communities would likely be improved once the process has been duly concluded\. 13 which will ensure a smooth transition between TFCA II and MozBio 1\. MozBio 1 was structured as a four-year Project, and is part of a ‘Series of Projects’ (SoP) approach in support of the recently-prepared national MozBio Program, which will replace and scale up the TFCA Program in the years to come\. TFCA II financed some of the preparatory work for MozBio, and ensured continuation of the project management/fiduciary team that will also be in charge of implementing MozBio, a significant asset in the face of the capacity constraints of the National Agency for Conservation Areas (ANAC), which was established with support from the present Project\. In the context of the long-term support sustaining the TFCA program, post-completion aspects of the TFCATDP, including infrastructure operation and maintenance (O&M) and consolidation of technical, operational and institutional achievements, will be maintained and further developed by the follow-up operation\. 45\. The MozBio 1 Project is expected to consolidate and scale up the achievements of the TFCA Program by continuing to address the threats to conservation and to help reduce poverty among the rural population within and around PAs, including through tourism promotion\. Key lessons from the TFCATDP have also been incorporated in Mozbio 1’s design\. The first is that Mozbio 1 was structured as an SoP, which means that the World Bank recognizes the need to maintain its long-term engagement in the conservation agenda in order to ensure sustainable outcomes\. MozBio 1 will also emphasize consolidation of the entities established with support from TFCATDP – ANAC and BIOFUND – so as to ensure a solid foundation for conservation in the country\. In addition, MozBio has assessed the tourism potential of the PA network in Mozambique, and will targeted tourism development in those areas considered to have highest tourism potential, particularly the marine PAs\. Annex 5 presents further information on the MozBio 1 operation, particularly how it fits in the long-term WB engagement in conservation in the Project area\. 46\. Engaging communities in the sustainable use of natural resources within and around CAs in Mozbio 1 is in line with two lessons learned from TFCATDP: (i) nature- based tourism cannot be achieved before tourism assets, namely, well established and managed wildlife and infrastructure in the Conservation Areas is developed; and (ii) a broader array of integrated conservation development activities, particularly those related to sustainable natural resource management (such as conservation and climate-smart agriculture, community forestry and fisheries, and appropriate wildlife management) should be promoted among local communities surrounding the targeted PAs\. As the enabling conditions to promote community tourism facilities is not yet present in Mozambique (including an adequate level of education of targeted communities, tourism potential in the short-term in the terrestrial CAs), MozBio 1 will promote a broader menu of integrated conservation-development interventions\. It will also seek to improve implementation of the existing benefit sharing mechanism of PA revenues with local communities, as another way to ensure that they benefits from conservation\. 47\. Another important lesson derived from the present Project that has been incorporated into MozBio is the adoption of a landscape approach to PA management\. In two of the targeted PAs by MozBio, sustainable landscape pilot projects will be launched 14 whereby support to CA management will be coupled with natural resource management (NRM) activities (i\.e\., agriculture, forestry, fisheries, wildlife management) outside the PAs, in the Districts wherein the PAs are found\. This is expected to reduce the threats to the PA integrity including deforestation and associated carbon emissions and biodiversity loss\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation Rating: Substantial 48\. The objectives of the TFCA program (and the TFCATDP Project) remain highly relevant to the objectives of GEF’s Biodiversity Conservation Focal Area\. They also support one of the major pillars (Competitiveness and Employment) of the Bank’s 2012- 2015 Country Partnership Strategy (CPS) for Mozambique, which specifically highlights increased employment and growth in the mostly nature-based tourism sector\. In terms of the GEO, the Project was aligned with the renewed emphasis at the World Bank (and internationally) on: (i) wildlife management in the face of the poaching crisis in southern Africa; and (ii) climate change mitigation and adaptation, particularly with respect to rural land use sector (forestry and agriculture)\. The vision promoted by the Project, namely linking NRM to economic growth and to rural poverty reduction through nature- based tourism development, remains highly relevant to the World Bank’s current NRM strategy\. The relevance of design was also substantial, as the Project built on lessons from the TFCAPISP and drew on important analytical work (McEwen, D\. 2005\. Study of the Economic Potential of Tourism in Mozambique: Final Report, Ministry of Tourism, Maputo)\. The components design and results framework were well aligned, although some targets were high, and adjustments were subsequently made\. Implementation was led by the Ministry of Tourism, in partnership with other entities actively engaged in the management of PAs, including NGOs\. The MTR introduced changes to the Project which resulted in tangible improvement in performance and results\. Thus, relevance of implementation is also deemed substantial\. 49\. Implementation of the broader TFCA Program remains a top priority within GOM’s investment framework, as demonstrated by the recent regulatory and institutional reforms (including the new conservation law, the establishment and strengthening of ANAC, the creation of new PAs (such as Primeiras e Segundas in Northern Mozambique and the Magoe National Park in Tete province), bi-lateral agreements with South Africa to combat wildlife poaching), and the increasing technical and financial support being provided for conservation initiatives by several bilateral and multilateral development partners, including the Bank and GEF through the recently approved MozBio 1 Project\. 15 3\.2 Achievement of Project Development Objectives and Global Environment Objectives The TFCATDP Project Development Objective (PDO) was to: achieve growth in community-private sector led environmentally and socially sustainable tourism in TFCAs (Substantially achieved)\. 50\. As demonstrated by one of the key performance indicators - number of visitors in tourism facilities in the target districts - there was considerable growth in private sector- led tourism in the three TFCAs 2 (a total of 196,149 bed nights in 2013 compared to 66,182 in 2006, an increase of almost 200%)\. A large proportion of this tourism was concentrated in the beach destination of Ponta do Ouro, located within the Lubombo TFCA, to which the Project made relevant contributions through the improved tourism- related policy and regulatory instruments developed by the Project (Components 1 and 2) and, most importantly, by establishing the Ponta do Ouro Partial Marine Reserve\. 51\. Growth in terrestrial nature-based tourism in PAs within the TFCAs was lower than originally expected but still positive (a total of 10,811 bed-nights in 2013, representing a growth of 32% compared to 2008) This was largely due to the fact that the basic assets required for tourism development in PAs (park infrastructure, lodging facilities and, above all, wildlife populations) were slower to develop than anticipated in Project design\. Project design was premised on the assumption that the concept of bush- beach tourist routes would gain traction within GOM and would become a priority for investment and marketing\. This did not happen as quickly as anticipated\. Without greater and more timely investment in infrastructure required to service tourism and encourage investment at bush locations, inland lodges have not yet been able to compete with coastal facilities, particularly when wildlife populations still need to be rehabilitated, a process that also requires time\. In any case, the somewhat modest expansion of tourism within the PAs has been facilitated by the construction of lodges and tent camps under rigorous environmental standards and the active participation of private sector entrepreneurs in partnership with local communities\. This growth was instrumental for achievement of the revised targets for the remaining key indicators of the PDO (leveraging of investments, community employment and PA revenue)\. It should be noted that the growth in tourism in the targeted TFCAs is, to a large extent, attributable to the Project, since it created the conditions (infrastructure, tourism facilities, better managed wildlife, etc\.) to attract tourists\. An evidence of this is that the number of tourists has increased more significantly in some of the TFCAs (particularly the Lubombos TFCA) than the national average\. A detailed analysis of the specific contributions of each Project component to the achievement of the PDO is provided in Annex 2\. 2 Most data for this section comes from the Annual Project Implementation Reports and from the Borrower’s Completion Report, prepared by the TFCA Unit\. When a different source is cited, it is mentioned in the main text\. 16 52\. In this context, six new tourism ventures were implemented, but have not yet realized their potential in terms of visitors and income\. At the present, Mozambique is still widely perceived, particularly by neighbouring South Africans, as well as by national tourists, as a ‘beach tourist destination’ rather than as a ‘nature or wildlife destination’\. This was acknowledged at Project appraisal\. Although not explicitly stated, the assumption was that enhanced ‘bush’ tourist operations would draw on tourists whose principal motivation was to spend time at the coast, once wildlife quality and the hospitality experience offered could compete with other locations\. 53\. The Project has contributed to employment of local residents\. Over 2,000 have been employed by the activities financed by the Community Equity Facility (CEF), including community lodges (the CEF-financed activities are detailed in Annex 2)\. This figure does not include tourism-related employment by private sector/community business due to the lack of available data\. Hence, this figure understates actual direct and indirect tourism-related employment in the target districts\. 54\. Despite the slow start, the end-of-Project target of leveraging US$ 2 million in private investments was exceeded by US$ 1\.2 million\. A single private investment, the Chemucane Lodge (opening December 2014 in MSP/Libombo) contributed US$ 2 million (or 82% of the total), enough to meet the target by itself\. Together with two other investments (Covane Lodge in Limpopo) and Ndzou Lodge in CNR) these three facilities contributed almost 96% of the total funds leveraged\. Excluding investment in lodges, the Project invested US$ 794,695 in eighteen community projects that directly benefited local communities (including Chikwidzi Lodge)\. The ex-post analysis of costs and benefits (Rylance, 2014) shows that private sector investments did not start until the fourth year of the Project (2009), and reached US$ 2,447,143 by the end of 2013\. Funding provided by the Project to CEF initiatives totalled US$ 2\.1 million (52% of the PAD estimate); while the amount disbursed for technical assistance (Community Brokers) was US$ 1\.4 million\. Despite these shortfalls, as the main indicators for achievement were measured in terms of the amount of funds leveraged and local residents employed (proxies to community revenue), the revised end-of-project (EOP) target was exceeded\. 55\. In terms of revenues generated by the PAs through visitor fees, annual revenue doubled from US$ 187,400 in 2006 to US$ 373,304 in 2012 and increased by a further 14% in 2013 (US$ 426,977)\. Of the total, LNP raised 68 %, MSR 31% with less than 1% from BNP, CNR, and ZNP\. The requirement for visitors transiting LNP to overnight in the park helped increase revenue generation but, on the other hand, also provided a disincentive to use this route to the coast\. This, together with a general decline in tourists to neighbouring Kruger National Park in South Africa contributed to the slowing of growth in revenue generated by LNP between 2012 and 2013\. This contrasts with MSR, where revenue increased by 53% between 2012 and 2013, providing justification for the decision made to invest additional resources in improving the MSR, establishing Ponta do Ouro Partial Marine Reserve, and developing tourist facilities and concessions in this TFCA\. 17 56\. The Project also achieved major policy and institutional accomplishments, including the approval of a new Conservation Policy and Conservation Areas Law and establishment of the Administração Nacional das Areas de Conservação (ANAC) as an autonomous public agency tasked with the management of all Conservation Areas\. New Protected Areas, such as the Ponta do Ouro Marine Reserve and the Futi Corridor (part of the Maputo Special Reserve) were also established by GoM with Project support\. MITUR together with civil society and private sector stakeholders, and with support from the TFCATDP, also facilitated the establishment of the Foundation for the Conservation of Biodiversity (Biofund), which will play a significant role in raising funds to support the long-term management of Mozambique's PAs through an endowment fund, and other mechanisms such as biodiversity offsets\. The Project also supported the signature of three international treaties for cooperation on TFCA management\. These institutional accomplishments lay the foundations for future conservation and nature-based tourism promotion\. 57\. In summary, despite the post-war context, the poor conditions of the PAs and the limited initial basis for business development, the Project put in place much needed infrastructure and equipment in the targeted PAs, established management processes at both national and PA levels and promoted innovative partnerships with private sector, other development agencies, NGOs and communities, hence significantly contributing to the conservation and tourism agendas in Mozambique\. The Global Environment Objective (GEO) was to “Increase the area, connectivity, and effectiveness of biodiversity conservation in three TFCAs\.” (Substantially achieved) 58\. The Project substantially achieved the GEO by providing significant Project resources, from both IDA and GEF, which resulted in: ï‚ Increased area under conservation, including boundary realignment and establishing a new marine reserve (Ponto do Ouro Partial Marine Reserve), the first marine transfrontier conservation area (TFCA) in Africa, the Ponta do Ouro- Kosi Bay TFCA, part of the Lumbombos TFCA\. ï‚ Improved effectiveness of conservation through institutional reform, infrastructure and implementation of park management plans; and as evidenced in the increased socres in the “Management Effectiveness Tracking Tool (METT)”\. ï‚ Increased wildlife populations and diversity, including presence of species (such as giraffes in the Zinave National Park) long absent from the country\. ï‚ Better management processes and practices, and increased professionalism in PA management\. ï‚ Increased area under conservation management, and improved operational, managerial and conservation-related infrastructure and equipment; ï‚ Increased connectivity, particularly through the establishment of the Ponto do Ouro Partial Marine reserve, and of the Futi Corridor, terrestrial corridor part of the Maputo Special Reserve (MSP), which connects the MSP to the Tembe National Park in South Africa and allows movement of elephants and of other species\. 18 59\. More specifically, the area under formal conservation increased by 1,910 Km2 of which 679 Km2 was due to establishment of the Ponta do Ouro Marine Reserve and the remainder by realigning the boundaries of three PAs within the Limpopo TFCA (ZNP, BNP and CNR)\. Regarding encroachment, remote sensing was used to map land use and determine incompatibility with biodiversity conservation\. The analysis of the percentage of land use within each of the protected areas in 2005, 2007 and 2012 showed that inappropriate land use accounted for less than 3\.5% of the total land area, well below the target of 10%\. 60\. Regarding the goal of increasing wildlife populations in the PAs, the Project financed a comprehensive reintroduction program which contributed to their numbers and diversity having exceeded the targets in all of the PAs\. The counts indicate that populations exceeded targets in all cases, and in some cases by large margins (see Table in Annex 2)\. This likewise reflects improved control over poaching as Project records show that patrols have become more formal and frequent, and have perhaps also led to modifications in community hunting behaviour\. 61\. In terms of improving the management of the PAs within the targeted TFCAs (Zinave NP, Banhine NP, Limpopo NP, Maputo Special Reserve and Chimanimani Nature Reserve), the Project supported a number of investments in infrastructure, equipment and capacity building (see the table in Annex 2), including: (i) improvement of park design and planning (Management Plans); (ii) increasing the area under protection; (iii) building or rehabilitating essential infrastructure; (iv) procurement of essential equipment required for management; (v) deployment and capacity building of staff; and (vi) improvement of communication and information\. This, together with the substantial increase in wildlife populations achieved through introductions, contributed to the development of the assets, namely, well managed wildlife and infrastructure in the PAs required for the establishment of a sustainable nature-based tourism industry\. 62\. In addition, through the achievements of Component 1 (Strengthening Policy, Legal and Institutional Framework for TFCAs) and Component 4 (Protected Areas Management), the Project contributed to the long-term sustainability of the GEO by: ï‚ Improving the institutional foundations for conservation by supporting the drafting and adoption of a new Conservation Policy and Conservation Law; ï‚ Establishing the new autonomous conservation agency (ANAC) and, together with civil society and private sector stakeholders, facilitating the establishment of the Foundation for the Conservation of Biodiversity (Biofund); ï‚ Reducing the potential for adverse impacts on protected areas from local communities by providing access to resources (particularly water) outside the PAs, and by realigning park PAs to reduce the population living within some of them; 19 63\. The adoption of the Conservation Law together with the establishment of ANAC and Biofund represent highly relevant instruments developed with Project support, as they provide the legal and institutional framework for the long-term management and sustainability of the PA network\. Both institutions create an enabling environment to attract further private investments in or around the parks and reserves, thus strengthening the much needed tourism infrastructure in the country's PAs\. 64\. In assessing TFCATDP’s achievements, it is also important to analyse the PDO and GEO both in the context of the Project’s contribution to the longer-term objectives of the TFCA Program, of which the Project constituted the second phase, specifically: (i) the conservation of biodiversity and natural ecosystems within a number of large Trans- frontier Conservation Areas (TFCAs); and (ii) economic development within these areas based on sustainable use of their natural resources by local communities\. Concerning the Program’s objective 1, the substantial achievement of the GEO discussed above attests to the Project’s contribution to the conservation of biodiversity in TFCAs\. In turn, the moderately satisfactory achievement of the PDO, also discussed above, attests to the Project’s contribution to the TFCA Program’s objective 2\. 3\.3 Efficiency 65\. The Project achieved the following benefit streams: (i) additional employment in tourism and conservation; (ii) additional income for previously unemployed local residents; (iii) additional visitation to TFCAs and money spent by tourists in the local economies; (iv) additional investment from the private sector and NGOs; and (v) additional government revenues from tourism entrance fees\. The value of these streams throughout the Project period is displayed below: Figure 1: Value of Benefit Streams (2005-2013) 20  $14,000,000 Total annual revenues generated by $12,000,000 targeted formal Pas $10,000,000 New private tourism or conservation- related investment leveraged as joint- $8,000,000 venture with communities in target districts $6,000,000 Total Tourist Spend in Targetd TFCAs (per annum) $4,000,000 Value of Employment for $2,000,000 Conservation Staff $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 66\. The total cost of the Project by the end of 2013 was US$ 36,165,500\. The table below accounts for the accumulated costs and benefits and net benefits of the TFCATDP between 2005 (Y0) and 2013 (Y8)\. Table 3: Benefits and Costs of TFCA TDP: 2005 (Y0) to 2013 (Y8) USD Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 BENEFITS 0 825,918 1,681,311 2,746,050 4,050,568 6,117,634 7,124,053 9,309,313 12,842,420 COSTS 0 2,620,420 3,113,300 5,297,175 4,846,180 5,199,032 5,717,022 6,000,518 3,371,811 NET - BENEFITS 0 -1,794,502 -1,431,989 2,551,125 -795,612 918,602 1,407,030 3,308,795 9,470,609 67\. The Project was economically desirable with returns above the 12% threshold, notwithstanding the factors that delayed and constrained progress of the Project and even with the assumptions and uncertainties applied in the analysis (see Annex 3)\. Although no economic analysis was conducted at appraisal, the ex-post analysis estimates an Economic Rate of Return (ERR) of 17\.84% and a Net Present Value (NPV) equal to US$ 2,205,726 (at a 10% discount rate)\. If the benefits after year 8 were taken into account, these values would be even higher\. Thus, efficiency is assessed to be substantial\. 3\.4 Justification of Overall Outcome and Global Environment Outcome Rating Rating: Moderately Satisfactory 68\. Overall, the TFCATDP reached satisfactory levels of achievement in relation to the PDO and substantially achieved the GEO, as measured by the revised targets of the key performance and intermediate indicators, as well as, and perhaps more importantly 21 for the longer run, by the tangible strengthening of the institutional and regulatory framework supporting the country’s PA system\. Furthermore, the Project’s PDO and GEO remain highly relevant to the conservation and tourism development priorities of MITUR, as well as within the broader development priorities of GOM and the Bank’s current CPS with Mozambique\. The Project also shows satisfactory levels of efficiency based on the positive net economic benefit flows resulting from Project interventions\. The contribution of the Project to the long-term objectives of the TFCA program has been significant, both in terms of providing valuable lessons and establishing more favourable conditions for the implementation of the follow-on MozBio Program\. 69\. In spite of these achievements, the Project was affected by a number of design shortcomings and implementation delays that affect the overall assessment of outcomes, particularly in relation to a number of the original indicator targets, which, by the time of the Mid-Term Review had been recognized by both the Bank and the Borrower as having been too optimistic\. In addition, it was also acknowledged at that time that insufficient attention had been devoted to human resource development of PIU and MITUR staff, and that higher level political support to the Project objectives was needed to ensure PDO achievement\. These issues justify an MU rating for the Project outcomes prior to the MTR\. However, the shortcomings were identified during the MTR, remedial actions proposed and immediately adopted by the PIU\. 70\. Consistent with OPCS Guidelines, the overall outcome rating of the Project has been determined using the evaluation methodology which takes into account the original and formally revised targets, weighing pre- and post-revision performance by the share of actual disbursements before and after the restructuring\. Against Original Against Revised Overall Targets Targets Rating Moderately Moderately - Unsatisfactory Satisfactory Rating Value 3 4 - Weight (% of total 49\.6% 50\.4% 100% disbursements)* Weighted Value 1\.5 2\.0 3\.5 Final Rating - - Moderately (rounded) Satisfactory *Combined IDA Credit, GEF Grant and PHRD disbursements at restructuring 71\. The team considers the overall outcomes as Moderately Satisfactory, given the significant contributions made by the Project to meet the PDO and the fact that the GEO was substantially achieved, combined with a number of additional achievements, including (i) significant contribution to strengthening the national institutional and legal framework for conservation and nature-based tourism, including establishment of ANAC, the new Conservation Policy and Law, the establishment of the innovative BIOFUND (conservation trust fund); (ii) the significant contribution to the objectives of the longer- 22 term “parent” program (the TFCA program), including the creation of new PAs (including the Ponta do Ouro Marine Partial Reserve and the Futi Corridor, part of the Maputo Special Reserve) and continued follow-up to international agreements; and (iii) the fact that the GEO was implicitly part of the PDO as reflected in the significant allocation of IDA resources to finance infrastructure improvements in the PAs\. Finally, Project restructuring occurred de facto right after the MTR, i\.e\. towards the end of 2009, as the agreed changes were implemented by the PIU immediately, including changes to PIU staffing, use of revised indicator targets, new work plan; which resulted in Project’s disbursements to increase in the following years\. Hence, it would have been more appropriate to use disbursement rate at MTR, rather than at formal restructuring, in this exercise, which would result in a higher final weighted value, further making the case for an MS\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 72\. Project design was premised on a need for socio-economic interventions and while indicators such as revenue and numbers of beneficiaries were included in the design, an assessment of the social consequences of the proposed interventions was not made\. 73\. The Project was designed to influence the wellbeing of communities living in or adjacent to protected areas through the Community Equity Grant Facility (CEF) that made available technical assistance and additional funds for specific subprojects initiated by organized communities\. To this effect, Project design included indicators of employment and revenue flow to local people\. Despite not been designed as a Community Based Natural Resources Management (CBNRM) project, TFCATDP included interventions to address some of the key processes in CBNRM, including definition of land rights, development of conservation-based commercial enterprises, support to investments in productive assets, and strengthening of community governance through establishment of community associations\. Due to the institutional, operational and capacity challenges mentioned in previous sections, the implementation of these relevant processes was not consistently applied during the life of the Project, nor in each of the TFCAs\. 74\. In terms of the Project’s impact on communities, the formalization of community associations and the resulting opportunities for community-partner enterprises have been foundational processes, but their impact has not yet been determined\. Community enterprise projects within MSR, CNR, LNP and BNP (e\.g\. chili production and marketing, horticulture, honey and community lodges) nonetheless created jobs and generated meaningful revenue generation for local communities\. 75\. The Project was also structured on the assumption that improving the wellbeing of the communities would reduce their dependence and negative impact on resources within the protected areas, while encouraging support for conservation management\. Although it 23 could be assumed that interventions that improve employment, revenue accruing to communities and access to basic services, such as potable water, would lead to community support for conservation management and sustainable use of natural resources, possible changes in beneficiary community attitudes towards conservation and the impact of the Project on these premises were not assessed\. (b) Institutional Change/Strengthening 76\. The intention of both GOM and the TFCATDP was to strengthen the public and community-level institutional framework related to conservation in ways that would support conservation-based tourism\. In the case of conservation, the impact can be measured by indicators such as the establishment of ANAC, the improvement of policies and legislation (including the Conservation Policy and Conservation Law), and the introduction of greater structure and discipline into PAs management\. Undoubtedly, the most significant institutional achievement for GOM was the establishment of ANAC\. The Project also supported the signature of three international treaties for cooperation on TFCA management\. The TFCATDP has likewise had a substantial impact on MITUR’s capacity and competence, as well as on national awareness in relation to conservation and its role in social and economic development\. Although still somewhat limited, national competence was also strengthened through training, including master’s degrees (3 persons), diplomas (one person) and attendance at wildlife management courses (13 persons)\. 77\. Regarding communities, Project achievements can be measured by the establishment of community associations\. While EOP targets were achieved (24 associations were established and supported), the effectiveness of these transformative interventions in improving the performance of community associations individually and in their interactions with the PAs has not been assessed\. Creation of a Community Enterprise Fund at the start of the Project signalled the strong intention that communities should be targeted as beneficiaries\. However, the lack of adequate operational instruments and the difficulties in establishing community enterprises in locations isolated from mainstream markets and where people have limited experience and capacity were underestimated\. The challenges were partially addressed in 2009 when a community facilitator was appointed in the TFCA unit and a CEF Manual was prepared\. As a result, the process gained the desired momentum\. In addition, community brokers and commercial operations are required to link these enterprises with markets and to leverage additional financial and human resources\. (c) Other Unintended Outcomes and Impacts (positive or negative) N/A 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 24 4\. Assessment of Risk to Development Outcome and Global Environmental Outcome Risk: Moderate 78\. In terms of institutional sustainability, the Project supported the establishment of two semi-autonomous institutions: the National Agency for Conservation Areas (ANAC) and the BioFund\. These institutions, particularly ANAC, will be in charge of managing the PA network in Mozambique, often in partnership with other partners (including NGOs)\. ANAC’s capacity is still weak given its recent creation, but has recently shown sign of strengthening (including through the appointment of a highly-qualified General Director)\. The consolidation of the culture of management by objectives and ongoing evaluation promoted by the TFCATDP will further strengthen ANAC\. Moreover, the approval of the Conservation Policy and Conservation Law will further enhance the institutional sustainability of Project outcomes, as it clarifies provides a strong legal foundation for conservation management in Mozambique\. 79\. The sustainability of the community activities promote varies\. Some have shown signs of financial sustainability, such as the chilli production project around the Maputo Special Reserve which is now being scaled up to a larger area and to encompass more households\. The sustainability of the community lodges, such as the Covane lodge in Limpopo and the Chemucane lodges, are difficult to assess at this stage, as it will depend on the overall tourism industry and their capacity to attract tourists\. It should be noted, however, that tourist arrivals to Mozambique are projected to continue to increase at about 8% annually to reach 3 million in 2017, and nature-based tourism is the sub-sector growing at the fastest rate\. 80\. Financing sustainability of the PAs is a major concern, not only in Mozambique but throughout the developing world\. While the PA network in Mozambique continues to be critically under-funded by government sources, the prospects are better, as ANAC places a strong emphasis on income-generating activities, including the promotion of tourism (particularly in marine PAs) and sports hunting\. In addition, the Biofund, which was established with TFCATDP support, will have its endowment fund capitalized by 2015 (with funds from KfW and WB/GEF through the MozBio 1 Project), and will be able to start disbursing funds to support the operational costs of PAs\. It should be noted, however, that the expectation that all PAs, regardless of their geographical location, can become self-sustaining through tourism is unrealistic, at least in the medium term\. 81\. On the other hand, emerging threats to PAs create new risks to the TFCATDP outcomes\. Two are particularly noteworthy: i) wildlife poaching in Mozambique, particularly of rhino and elephants, is on the rise in Mozambique (and throughout southern Africa); and ii) pressure for infrastructure development (including mining) in PA areas is likely to increase given the economic boom the country is going through, particularly in the extractive industry sector\. 5\. Assessment of Bank and Borrower Performance 25 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 82\. The Bank participated actively and constructively in the design phase, ensuring that the Project took account of Bank and national government priorities, and built on the experience and lessons learned from the first phase of the TFCA Program (TFCAPISP)\. Among the lessons included in the design were: i) integrating communities into the design of the Project through sustainable projects with local benefits, such as private- communities partnerships around tourism; ii) approaches to involving communities in conservation and PA management, other than promotion of involuntary resettlement, should be favoured\. 83\. TFCATDP objectives were well aligned with the Government’s Tourism Policy and Implementation Strategy (TPIS) and project components with the Strategic Plan for Tourism Development in Mozambique (SPTD, 2004-2013)\. The Bank encouraged modern business approaches through rigorous requirements for planning, monitoring, assessment and reporting, and recognized the need and challenges (despite overlooking some critical risks) of a multifaceted, complex Project\. Overall, the components were designed as an integrated set to achieve both the PDO and the GEO while attempting to take into account capacity constraints within the TFCA and GOM\. The design also correctly addressed the different aspects of conservation and tourism promotion – including strengthening institutions at national and local (District) level, building infrastructure and providing operational support to PAs’ functioning, and promoting community-led businesses around tourism and other types of revenue-generating activities\. 84\. By placing emphasis on the promotion of “community-private sector led environmentally and socially sustainable tourism in TFCAs”, the Project promoted a business-oriented mind set within ANAC, which resulted in the attracting of new investments in PAs which would likely not have occurred otherwise\. Some of the key indicator targets were too ambitious and later required adjustments to make outputs clearer and more realistic and no performance indicator related to the important legal and institutional objectives promoted by the Project was included at the level of the PDO\. The Bank could have assessed more realistically the time requirement needed for improved natural asset development, particularly the sustained restoration of wildlife, as prerequisites for tourism development as well as the recipient’s poor implementation capacity (i\.e\. training needs)\. 85\. The institutional arrangements proposed at entry were also adequate\. A well- staffed PIU within the Directorate of Protected Areas (DNAC) at the Ministry of Tourism led the technical, fiduciary, safeguards and management aspects of the Project, with the main office in Maputo and three regional offices (which were later closed to reduce operational costs)\. The PIU capacity could have been strengthened earlier on to deal with 26 community aspects, which led to delays in the implementation of the Community Equity Facility activities\. 86\. The safeguards instruments prepared, particularly the ESMF and Process Framework, were adequate to the country’s and sector’s reality, which allowed their smooth implementation during the Project\. The M&E framework was also overall well- designed, and encouraged systematic data collection not only within the PIU, but at MITUR in general, including among the PA managers\. In retrospect, the M&E Framework could have been simpler, with fewer indicators\. (b) Quality of Supervision Rating: Moderately Satisfactory 87\. Bank supervision/implementation support missions were frequent, regular and constructive, and actively contributed to improved Project performance\. The Bank team was able to identify issues readily, extract lessons from practice and propose solutions to challenges proactively, including on technical, fiduciary and safeguard matters\. A total of 33 formal and follow-up supervision missions were conducted during the life of the Project, averaging four missions per year from effectiveness to closing\. Aide Memoires and internal reporting through ISRs were timely and detailed, with commendable efforts to maintain all indicators adequately updated\. The Bank team included most of the expertise needed to supervise the Project\. The initial lack of a Community Development specialist was later remedied through the active participation of a Senior Social Development Specialist\. The frequent missions allowed the Bank to provide close technical assistance to the Project team (and MITUR more broadly) on conservation, tourism and natural resources management which contributed significantly to strengthening capacity\. The transaction costs from these frequent missions were mentioned by the TFCA personnel as a downside\. However, they also recognized that this assistance was needed given the innovative nature of the Project and the low capacity base that the Implementing Agency started from\. 88\. The Project team demonstrated great adaptive management capacity at the Mid- Term Review (September 2009), by thoroughly identifying the main challenges faced by the Project and proposing effective remedial actions\. The MTR confirmed overall Project design, and identified changes to the results framework needed to improve the realism and measurability of indicators\. The MTR also proposed institutional organizational changes that improved the focus on community-related activities and expedited these activities, and unblocked delays infrastructure construction\. The MTR shifted some of the Project funds towards activities that would build the tourism assets, such as building infrastructure in the PAs or further promoting wildlife management (such as the reintroduction of some species in the Zinave NP), to ensure the pre-conditions for PDO achievement would be available\. The MTR process resulted in the formal restructuring of the Project, approved by the Bank in August, 2011\. The Task Team also actively followed up on the recommendations of the MTR, which were immediately implemented, even though formal Project restructuring happened in August, 2011\. However, because of 27 the delay between the MTR and formalization of the first restructuring, quality of supervision is rated moderately satisfactory\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 89\. The Bank provided valuable support to the client during Project preparation and was able to translate a complex set of innovative interventions (given the complex and interconnected nature of nature-based tourism promotion) into a coherent set of components and activities\. The Bank subsequently provided significant guidance and technical assistance during supervision, and was highly proactive in identifying and addressing implementation constraints, in particular through the revisions in Project scope and focus that resulted from the MTR, albeit their formalization was delayed\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 90\. Government supported the Project throughout its implementation, although with varying intensity during the period\. Evidence of Government’s support to the Project and to the conservation and tourism agenda more broadly, include: i) Government followed up on most of the commitments from the TFCA treaties they signed, and actively participated in the TFCA inter-country meetings and committees during the period\. As a result, joint TFCA work plans were prepared and implemented; ii) Government’s established an independent agency to manage the Protected Areas network in the country, ANAC; iii) Government passed a new Conservation Policy and a Conservation Law, which establishes a progressive vision for conservation in Mozambique; iv) Government established new highly relevant PAs, including the Ponta de Ouro Partial Marine Reserve and the Futi Corridor (part of the Maputo Special Reserve); and revised the limits of other areas (including Bahine and Zinave National Parks and Chimanimani National Reserve)\. On the other hand, government support has been less evident in: i) creating an enabling environment for tourism promotion in PAs, including delays in adopting new concession regulations; ii) in clarifying the type of development they wanted in some areas, resulting in a perception of possible threats to the integrity of existing PAs, particularly in case of a potential construction of the Dobela Habour in the Maputo Special Reserve; and iii) in lack of leadership of the Project Steering Committee, which was not active in the final years of Project implementation, and resulted in lack of inter- sectoral collaboration for the management of the TFCAs\. (b) Implementing Agency Performance Rating: Moderately Satisfactory 28 91\. After a slow start in the first years of Project implementation, given capacity constraints and inexperience on WB procedures, the PIU within MITUR performed satisfactorily during Project implementation, particularly after the MTR (prior to that, its performance was moderately unsatisfactory)\. The PIU was managed with outstanding professionalism, counted on a good team of technicians during most of the Project implementation period, and had a very strong fiduciary team\. The PIU team demonstrated enthusiasm, competence and commitment to the Project\. The PIU developed not only its own capacity but that of other departments within MITUR (at headquarters and at the level of the PAs) and partner organizations (such as the National Tourism Institute), particularly on data-driven management of PAs\. The PIU is now recognized in Maputo as a centre of excellence on conservation, and that knowledge will be mainstreamed into the recently-created ANAC with the help of the follow-up operation (the MozBio 1 Project)\. 92\. The PIU was able to successfully implement recommendations by Bank missions which led to reorganization and tighter control systems that improved efficiency and effectiveness, particularly regarding procurement and financial management\. It is noteworthy that the Project had one of the highest disbursing rates in the Mozambique CMU portfolio; and was closed with 100% of disbursement\. In terms of M&E, Project staff was required to collect primary data, and reported according to the indicators\. One weakness identified is that the PIU should have used the data collected in a more analytical way to guide their actions\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 93\. The substantial institutional and regulatory reforms adopted by the Government, the demonstrated commitment and support to Project objectives by MITUR, the strong performance of the TFCA’s Unit (after MTR), and the Project achievements on the ground outweigh the shortcomings, including delays in establishing an enabling environment to support Project objectives and in providing the necessary guidance through the Steering Committee\. Hence, overall borrower performance is rated moderately satisfactory\. 6\. Lessons Learned 94\. Continued and high-level political commitment to conservation is needed to move the agenda forward, particularly when pressures from other sectors on protected areas are strong\. Government leadership was needed throughout TFCATDP implementation: enabling concessions for investment, fostering inter-sectoral collaboration, expanding and re-delineating PAs and following up on transfrontier collaboration\. Government leadership varied during TFCATDP implementation, and failed the Project at times, as evidenced by the inability of the MITUR to have mining permits in the Chimanimani National Rserve cancelled\. Interventions that seek to promote conservation goals in the face of pressure to the integrity of the CAs from other 29 sectors should guarantee that the institutional arrangements are well designed, so as to ensure cross-sectoral coordination and effective participation of policy makers\. The plans and decisions from sectors less concerned with conservation, such as agriculture, mining, and infrastructure, with an impact on PAs should be discussed in a transparent way by a high-level inter-sectoral body (such as the Council of Ministers, in the case of Mozambique)\. The participation of non-governmental entities and of the private sector engaged in conservation in public discussions (e\.g\., tourism and safari operators) should also be promoted\. 95\. Long-term World Bank engagement in the conservation and tourism agendas\. The TFCATDP is a flagship Bank operation that demonstrates the value of long-term programmatic engagement in national programs (such as the TFCA Program)\. Through a programmatic phased-approach, the World Bank was able to foster institutional changes, human capacity development and the establishment of partnerships in a way that a traditional short-term single Project cannot achieve\. Given the Bank’s intention to continue engaged in the conservation agenda in Mozambique, the follow-on MozBio Program has, appropriately, been structured as a “Series of Projects”\. 96\. Develop nature-based tourism asset is a long-term process\. Although not explicitly stated, the TFCATDP assumed that most ‘bush’ tourist operations would draw on tourists whose principal motivation to come to Mozambique was to spend time at the coast, at least until the quality of wildlife and hospitality experience offered could compete with other locations\. This Project has shown that it takes much more than establishment of accommodation facilities and basic infrastructures to draw tourists in sufficient numbers to bush experiences in Mozambique\. At issue is not the supply of accommodation, or even accessibility, but rather quality of experience (the ‘tourism asset’)\. While coastal destinations carry a marketable brand, this is generally not so for bush destinations in Mozambique, as wildlife has been significantly reduced during the civil war and PA infrastructures are poor\. 97\. Tourism as a means to generate sustainable financing for PAs\. TFCATDP also showed that not all PAs will be able to really generate tourism at a level to allow them to be self-sustaining, which means that public resources to maintain these areas (which provide local and global public goods and services) should be ensured\. This also shows that not all PAs should be assessed by the national government against their capacity to generate tourism business, as not all have the same potential to do so\. Governments and development partners should be realistic and business-oriented when assessing PAs’ potential to generate tourism revenue, and they should also bear in mind that PAs generate other types of ‘positive externalities’ (environmental services) which calls for continued public financing\. 98\. Enhancing the benefits from PAs to local communities needs to go beyond the promotion of tourism, and encompass a broader array of integrated conservation development activities, particularly those related to sustainable natural resource management (such as conservation and climate-smart agriculture, community forestry and fisheries, wildlife management)\. Not all PAs have high tourism 30 potential, and yet surrounding communities expect direct benefits from the PA and are likely to support conservation goals more readily when they experience benefits directed linked to the PA\. Community-led tourism businesses benefitted fewer people in the community than other types of NRM activities, such as boreholes and small commercial agriculture ventures, particularly when the US$/beneficiary ratio is assessed\. Tourism- related community development options need to be focused on the areas with real short- term tourism potential, while other income-generating activities should be promoted in other areas\. 99\. Private sector investments in tourism and partnerships with communities\. Professional facilitation is needed for the public sector to be able to attract private investment into PA concessions\. In the case of the Chemucane lodge in the Maputo Special Reserve, the role of IFC in facilitating the joint venture between the private sector and local communities was fundamental to create trust and common understanding about the terms and conditions of the undertaking, and to reduce the perceived risks by all parties\. Other sites did not involve such professional facilitation services, and mistakes were made in dealing with the package offered to investors which resulted in their pulling out, such as the cases of in Zinave and Banhine National Parks\. Agencies in charge of managing CAs should seriously consider engaging specialized support to deal with private sector investments, while also increasing in-house capacity to do so\. As to community-private partnerships, an important lesson from TFCATDP is that such initiatives can shift the balance of power within the communities, and can hence support or disrupt property rights regimes and increase or decrease vulnerability of certain community members\. As such, strong attention should be given to building community- based institutions (such as Associations and Cooperatives), in addition to strengthening the capacity of individual community members\. 100\. Importance of innovative partnerships in conservation\. In order to mitigate the lack of local capacity and appropriate institutional coordination, the Project partnered with NGOs\. The modality of these partnerships was innovative, as NGOs were required to provide technical and fiduciary staff and support as well as co-financing\. Although the arrangement was not equally successful in all cases, it worked better than the classical Technical Assistance approach\. The NGO partnership in the Maputo Special Reserve was fundamental to complement the support from the TFCATDP and ensure that the CA management could continue seamlessly\. This was particularly important towards the end of the Project, as funds for some of the CA operational costs became scarce, and were completed by the partner NGO (Peace Parks Foundation)\. This lesson underscores the importance of the trend in southern Africa to develop partnerships with NGOs for the management of protected areas\. In moving forward, Mozambique should clarify the scope of these partnerships as well as the respective rights and responsibilities of the Government and the NGOs in managing the PAs\. 101\. Landscape approaches to conservation\. The TFCA concept is closely linked to the landscape concept, since TFCAs encompass areas with different types of land uses in addition to protected areas, and their management requires collaboration across several entities (such as local and provincial governments) and multiple stakeholders (including 31 communities, smallholders and large-scale private land owners)\. The TFCATDP focused most of its efforts on the strengthening of the CAs and gave limited attention to building the relationship between the CA and the broader landscape it is inserted in, including facilitating better relationships with the Districts where the CAs are located, and with other sectoral bodies, such as the forest services\. Since significant threats to the integrity of the CAs and their biodiversity come from outside the PAs, adopting a more comprehensive ‘landscape approach’ to CA management is required for effective results\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Recipient / implementing agencies The report was shared with the counterpart (MITUR) on November 25, 2014\. However, no comments were received before the ICR finalization\. (b) Cofinanciers No comments were received\. (c) Other partners and stakeholders No comments were received\. 32 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Transfrontier Conservation Areas and Tourism Development Project - P071465 Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate (USD Appraisal millions) millions) Component 1 1,060,000 915,540 86\.3 Component 2 480,000 42,700 8\.9 Component 3 12,230,000 5,212,468 42\.6 Component 4 15,210,000 23,730,799 156\.0 Component 5 4,530,000 7,124,177 157\.3 Total Baseline Cost 33,510,000 37,025,684 Physical Contingencies 560,000 Price Contingencies 2,630,000 Total Project Costs 36,700,000 37,025,684 PPA 610,000 626,020 Front-end fee IBRD 0\.00 Total Financing Required 37,300,000 37,651,704 102\.5 Source – TFCA Unit (b) Financing P071465 - Transfrontier Conservation Areas and Tourism Development Project Appraisal Actual/Late Type of Estimate st Estimate Percentage Source of Funds Financing (USD (USD of Appraisal millions) millions) Borrower 0\.78 0\.78 100 International Development 20\.00 20\.6 103 Association (IDA) JAPAN: Ministry of Finance - 3\.72 3\.69 99 PHRD Grants Local Sources of Borrowing 2\.20 2\.20 100 Country P076809 - Transfrontier Conservation Areas and Tourism Development Project Appraisal Actual/Late Type of Estimate st Estimate Percentage Source of Funds Financing (USD (USD of Appraisal millions) millions) 33  Borrower 0\.00 0\.00 \.00 Global Environment Facility 10\.00 9\.87 98 (GEF) (c) Breakdown by Financier and Disbursement Categories (i) Total Disbursements (World Bank IDA Credit + GEF + PHRD) Use of Funds by Category of Disbursement (August 31, 2014) Disbursement Categories and Disbursement % PAD Expenditure Type Estimate A\. Civil work 9,682,205\.60 111% 8,740,000\.00 B\. Equipment 3,140,628\.63 193% 1,630,000\.00 C\. Consultant services 11,885,912\.77 116% 10,230,000\.00 D\. Training and workshops 1,438,415\.10 142% 1,010,000\.00 E\. Operating costs 5,355,805\.30 119% 4,500,000\.00 F\. Community Enterprise Fund 2,066,495\.98 52% 4,010,000\.00 G\. Refunding PPA 626,020\.71 104% 600,000\.00 H\. Unallocated 0\.00 0% 3,000,000\.00 Total PROJECT COSTS 34,195,484\.09 101% 33,720,000\.00 Source – TFCA Unit (ii) IDA Credit No 4130 Use of Funds by Category of Disbursement (August 31, 2014) Disbursement Categories and Disbursement % PAD Expenditure Type Estimate A\. Civil work 7,411,105\.30 85% 8,740,000\.00 B\. Equipment 3,140,628\.63 193% 1,630,000\.00 C\. Consultant services 3,356,420\.29 150% 2,240,000\.00 D\. Training and workshops 749,843\.05 119% 630,000\.00 E\. Operating costs 5,355,805\.30 129% 4,160,000\.00 F\. Community Enterprise Fund 0\.00 0% 0\.00 G\. PPA Refund 626,020\.71 104% 600,000\.00 H\. Unallocated 0\.00 0% 2,000,000\.00 Total 20,639,823\.28 103% 20,000,000\.00 Source – TFCA Unit 34 (iii) PHRD Grant No TF054759 Use of Funds by Category of Disbursement (August 31, 2014) Disbursement Categories and Disbursement % PAD Expenditure Type Estimate A\. Civil work 0\.00 0% 0\.00 B\. Equipment 0\.00 0% 0\.00 C\. Consultant services 3,685,964\.37 99% 3,720,000\.00 D\. Training and workshops 0\.00 0% 0\.00 E\. Operating costs 0\.00 0% 0\.00 F\. Community Enterprise Fund 0\.00 0% 0\.00 Total 3,685,964,37 99% 3,720,000,00 Source – TFCA Unit (iv) GEF Grant No TF056038 Use of Funds by Category of Disbursement (August 31, 2014) Disbursement Categories and Disbursement % PAD Expenditure Type Estimate A\. Civil work 2,271,100\.30 0% 0\.00 B\. Equipment 0\.00 0% 0\.00 C\. Consultant services 4,843,528\.11 113% 4,270,000\.00 D\. Training and workshops 688,572\.05 181% 380,000\.00 E\. Operating costs 0\.00 0% 340,000\.00 F\. Community Enterprise Fund 2,066,495\.98 52% 4,010,000\.00 H\. Unallocated 0\.00 0% 1,000,000\.00 Total 9,869,696\.44 99% 10,000,000\.00 Source – TFCA Unit 35 Annex 2\. Outputs by Component 1\. The Transfrontier Conservation Areas and Tourism Development Project (TFCATDP) was a US$35\.1 million Project with an IDA Credit of US$ 21\.4 million equivalent, a US$10 million Global Environment Facility (GEF) Grant\. Its implementation also benefitted from a US$3\.72 million PHRD Grant\. 2\. The Project area included the Mozambican portion of three Transfrontier Conservation Areas (Chimanimani, Lubombo, and Greater Limpopo)\. In these TFCAs, Project implementation was focused on 9 districts of 4 Provinces: Inhambane (Vilanculos District), Maputo (Matutuine District), Manica (Sussudenga District), and Gaza (priority 1: Chicualacuala, Massingir, Mabote and Massangena Districts; priority 2: Chigubo and Mabacane Districts)\. 3\. In the 3 TFCAs, the protected areas targeted were Chimanimani Special Reserve (CSR), Maputo Special Reserve (MSR), Limpopo National Park (LNP), Banhine National Park (BNP), and Zinave National Park (ZNP)\. In addition, improvements in environmental infrastructure were envisaged for the beach tourism towns of Vilanculos and Ponta do Oro (see map in Annex 7)\. 4\. The Project was implemented through five components: Component 1: Strengthening Policy, Legal and Institutional Framework for TFCAs\. Component 1 was designed to build on the achievements of the first phase and further strengthen the enabling environment for TFCAs by helping create the policy, legal and institutional framework for GOM to improve regional collaboration for management of transfrontier resources; promote interagency collaboration and vertical linkages between central and local governments; build the capacity of public sector institutions at all levels and communities to manage biodiversity and natural resources; and to form productive partnerships with the private sector\. Community land and natural resource ownership and use rights were also to be addressed\. Component 2: Integrated District Development Planning\. This component was aimed at piloting a proactive approach to integrated planning in two districts, through the development of the Integrated District Development Plans (IDDPs) which focused on defining and implementing a series of practical steps to ensure that biodiversity and natural resource-based assets are mainstreamed into District Development Plans (DDPs)\. Component 2 was divided into two Subcomponents: (2\.1) National capacity building and stocktaking, and (2\.2) Production, adoption and dissemination of the IDDP\. Component 3: Community and Private Sector-Led Tourism Development\. Component 3 was designed to develop the capacity of the tourism sector (government, communities and the private sector) to participate in the preparation and implementation of tourism master plans for key tourism districts\. This component supported MITUR to establish a comprehensive and clearly defined set of procedures to implement the process for land concessions, from land identification to on-the-ground investment\. The component was 36 divided in two subcomponents: (3\.1) building capacities in the National Tourism Directorate (DINATUR), the Elephant Coast Development Agency (ECDA) and targeted private sector and community associations to unlock opportunities for sustainable tourism investment and growth; and (3\.2) the establishment of a Community Equity Fund (CEF)\.to support community-led conservation and tourism development Component 4: Protected Areas Management\. This component aimed to support the identification, monitoring and protection of the most significant and vulnerable biodiversity assets within the three TFCAs, through the establishment/rehabilitation and management of a network of National Parks and Reserves under the direct management of the National Directorate of Conservation Areas (DNAC)\. This was intended to begin a long-term process of major improvement of the MSR including gazetting the Futi corridor and a new marine reserve; and supporting BNP and CNR\. In addition, modest support would be provided to LNP (supplementing efforts by PPF, KfW & AFD), and to ZNP\. Component 5: Project Management, Communications, and Monitoring and Evaluation\. This component financed project management costs, including procurement, accounting and monitoring activities\. The design of the component included: (i) an M&E system to track and assess project implementation and impacts; (ii) a system for adaptive management based on the M&E information generated; and (iii) an information system and a communications strategy to ensure timely flow of accurate information among the implementing agencies, and to increase awareness and understanding about ecosystem management and TFCAs nationally, regionally and worldwide\. 5\. In order to monitor Project outcomes and outputs, a results framework was developed during Project preparation\. This framework included 8 key performance indicators to assess compliance with the PDO and GEO, as well as 16 intermediate indicators linked to the individual components of the Project\. The full set of indicators, together with the targets and achievements are summarized in the data sheet of this ICR\. 6\. At Project completion, the outputs produced by each components were as follows: Component 1: Strengthening Policy, Legal and Institutional Framework for TFCAs 7\. Component 1 was designed to develop an enabling environment for effective/sustainable management of biodiversity, including the institutional arrangements for conservation that would be required for consistency and integration, vertically from local community-based initiatives to international TFCAs and horizontally across the country\. 8\. Through technical assistance, consultation, workshops, training (master’s degree programs (3 persons), diplomas (one person) and attendance of wildlife management courses (13 persons)) and study tours, as well as the production, publication and dissemination of available information materials\. A total of 18 policy or regulatory 37 documents were prepared by the Project and adopted by GOM\. Of these, four represent major Project outputs and have contributed significantly to the development of an improved policy and legal framework supporting tourism and conservation, as well as the establishment of a new institutional structure: ï‚ Conservation Policy and Strategy: Approved by the Council of Ministers on the 18th of August 2009 (Resolution 63/2009) and gazetted in the Boletim da República on November 2, 2009 (BR Série I, Nr 43); ï‚ Conservation Law: The Draft was approved by the Council of Ministers and by Parliament, and was gazetted in the Boletim da República on June 20, 2014 (BR Série I, Nr 50 - Law 16/2014) on June 30, 2014\. Preparation of Regulations is underway\. ï‚ Tourism Concession Manual: The draft Manual was developed with Project support and is awaiting approval by MITUR\. The Manual is intended to be applicable at all levels of government (Central to District)\. ï‚ New institution for management of conservation areas: ANAC (Agency for Managing Conservation Areas) established in April 2011\. ï‚ Together with civil society and private sector stakeholders, the Project facilitated the establishment of the Foundation for the Conservation of Biodiversity (Biofund), in August 2011 through approval for the Council of Minister, and a public utility status attributed to it on April 2012; 9\. Regarding the institutional framework, a new conservation management institution (ANAC) was established in April 2011 (Ordnance 11/2011), following a process of inter-ministerial consensus building\. Reports were prepared to support transition to and functioning of ANAC: Manual of Administrative and Financial Procedures for the National Administration of Conservation Areas; ANAC business plan and the plan of transition of DNAC and other relevant institutions to ANAC; Draft Statutes distributed to appropriate ministries; and Terms of Reference for staff recruitment\. The first Director General was appointed in July 2013, and a new Director General took functions in August 2014\. The Statutes and Regulamento Interno have been approved and adopted\. Six technicians were moved from former DNAC to ANAC and the recruitment process for staff and advisors is underway\. 10\. In addition, the Project supported Mozambique in advancing a number of TFCA- related initiatives with neighbouring countries\. International protocols for management have been agreed for Lubombo and Limpopo TFCAs\. The target of 4 agreements was revised down to 3 at MTR because of slow progress with setting up collaboration among Zimbabwe, Mozambique and Zambia (ZIMOZA)\. A technical and ministerial meeting took place on May 26, 2009 to discuss the proclamation of the ZIMOZA TFCA\. The Ministers requested changes and agreed that once suggested amendments were made the legal process would follow\. Although the ZIMOZA Agreement was completely negotiated at technical level, the Ministers of Zambia, Zimbabwe and Mozambique did not meet to ratify the Agreement\. On September 29, 2013 a MOU was signed by the 38 Mozambican Minister of Tourism and the Zimbabwean Minister of Hospitality with the intention of developing tourism and promoting economic growth, but the TFCA has not been established yet\. 11\. Also in 2013, a Joint Operational Strategy was adopted by park agencies in Mozambique, Swaziland and South Africa\. This is intended to focus effort on PA administration, management of biodiversity, and law enforcement\. In support of law enforcement, a draft MOU between Mozambique and South Africa was signed to provide an integrated, international approach to the control of rhino poaching\. 12\. The Project also supported the development of a series of management and operational instruments some of which have contributed to strengthen MITUR’s administrative capacity, while others have provided improved tools for PA management and tourism development at the district level\. A full list of instruments produced by the Project is presented in the table below\. Table 1- Documents prepared by the TFCA Unit and approved by Government Nr Document Date Observations 1 Procurement Manual February 6,2006 2 Financing Manual February 8, 2006 3 Monitoring and Evaluation Manual April, 2006 4 Principles of the Conservation Areas June, 2006 5 Vilanculos District Tourism Master Plan July, 2006 6 National Conservation Policy and November 2, Strategy 2009 7 Process Framework (revised) September, 2009 8 Community Enterprise Fund Manual November, 2009 9 Manica District Tourism Plan February 2010 10 Management Plan for Banhine National August, 2010 Park 11 Management Plan for Maputo Special 2010 Reserve 12 Management Plan for Zinave National February, 2011 Park 13 Sussendega District Tourism Master Plan February, 2011 14 Management Plan for Chimanimani August 2011 National Reserve 15 Management Plan for Ponta do Ouro October, 2011 Partial Marine Reserve 16 Conservation Law May 21, 2013 Approved by Council of Ministers 17 Joint Operational Strategy 2013 Adopted by Park Authorities: Mozambique, Swaziland and 39  South Africa 18 Tourism Concession Manual January, 2014 Draft awaiting approval by MITUR and Council of Directors Component 2 - Integrated District Development Planning (IDDP) 13\. A specific indicator of the Project’s result framework, the intention of supporting the preparation of two pilot IDDPs was to ensure that all developments in the selected districts (Matutuine and Vilanculos) were aligned with, and did not adversely impact, nature-based tourism\. The District Development Plan for Matutuíne District was produced, with Project support, by the District authorities in 2006 and approved at the district level\. The plan was strengthened in 2007 and 2008, with assistance from a Technical Advisor for the National Directorate of Planning (DNP) recruited by the Project\. The Mid Term Review did not change Component 2 although it formalized the decision of Vilanculos District to withdraw from the initiative and acknowledged the limited direct influence of the Project by not requiring the TFCATDP to be accountable for the IDDP process\. As a result, the elaboration of IDDPs was limited to Matutuíne district\. Later, the Ministry of Planning and Development took the leadership in further preparing the IDDPs for Matutuine District\. 14\. The Elephant Coast Development Agency (ECDA) had responsibility to promote tourism in Matutuine district, along the Ponta do Ouro coast, and gather tourism data\. Although it managed to gather some data on overall tourism for the district, it failed to deliver in a series of areas, and as a result the Agency ceased to exist in 2010\. Attempts made by the TFCATDP to have the Instituto Nacional de Turismo (INATUR) continue the implementation of the ECDA tasks were not successful, due to lack of capacity of INATUR\. As a result, the contribution of the overall growth in tourism has not been assessed\. Component 3 – Community and Private Sector-Led Tourism Development 15\. The overall intention of Component 3 was to situate PAs within a broader planning process such that they would be protected from inappropriate development and income could be generated through increased tourism\. The role of the Project was to support (i) building capacities in the National Tourism Directorate (DINATUR), the Elephant Coast Development Agency (ECDA) and targeted private sector and community associations to unlock opportunities for sustainable tourism investment and growth, including the preparation of tourism plans in the target TFCAs; and (ii) support community-led conservation and tourism development through the establishment of a Community Equity Fund (CEF)\. Although progress would be measured by the number of 40 plans prepared, how they were implemented and adapted would determine attainment of the intention to link conservation with tourism\. 16\. Regarding the Capacity Building Subcomponent, the Tourism Framework for the Maputo Special Reserve and Futi Corridor was produced and approved by MITUR in 2006, and was helpful in facilitating tourism in the Lubombo TFCA\. In 2012, additional Tourism Master Plans (TMPs) were prepared for the Districts of Vilanculos, Sussundenga and Manica\. 17\. While the target output (increased from 4 to 5 Tourism Plans at Mid Term Review) was achieved, the anticipated benefits of integrated development planning (such as appropriate concessioning) were not fully realized due to the late preparation of the plans and the institutional problems described previously, except to some degree in the MSR\. However, the TFCATDP requirement for reporting tourism data has generated significant improvements, as it has led to a more formal and organized approach to data gathering and reporting\. Park managers and the District services for economic activities are responsible for data collection\. This has become a routine activity that, in addition to providing regular updates, also makes conservation personnel conscious of the importance of visitors in park management\. 18\. One of the indicators in the results framework was the level of conformity of new tourism ventures with the new guidelines for awarding of concessions\. The MTR recommended that this indicator should be dropped because even though the Project had prepared draft regulations for concession in protected areas, the Government had decided that these would be incorporated into the Concession Law\. Consistent with this decision, the new Conservation Law (approved during the last year of the Project) provides a revised framework for awarding concessions\. 19\. In addition, investor satisfaction was assessed using a four point scale in 2006, 2008 and 2011\. The determinants of investor satisfaction, or lack of, were consistent across the three TFCAs, as illustrated by the tables below\. Level of investor satisfaction in 2006 was 37% increasing to 48% in 2008 and 60% in 2011 yielding a net increase of 23% which is a 62% increase in investor satisfaction\. As a result, the EOP target of 55% was exceeded\. Table 2 - Problems that affect investor satisfaction in targeted districts Main Problem 2006 2008 2011 Libombo TFCA Condition of access roads Limpopo TFCA Chimanimani TFCA Libombo TFCA Access to credit and funds Limpopo TFCA Chimanimani TFCA Libombo TFCA Absence of commercial Limpopo TFCA services Chimanimani TFCA 41  Libombo TFCA Marketing Limpopo TFCA Chimanimani TFCA Libombo TFCA Capacity in Tourism Limpopo TFCA Chimanimani TFCA Libombo TFCA Access to services Limpopo TFCA Chimanimani TFCA Number of visitors/clients Chimanimani TFCA Table 3 - Investor satisfaction (% of respondents) TFCA Year Distribution 0 1 2 3 Libombo 2006 38 35 26 ` TFCA 2008 5 26 69 ` 2011 5 14 67 14 2006 ` 75 25 ` Limpopo 2008 ` 33 67 ` TFCA 2011 ` 30 50 ` 2006 ` 86 14 ` Chimanimani 2008 ` 33 50 ` TFCA 2011 10 20 60 10 0 – Very dissatisfied with the investment environment; 1 – Not satisfied with the investment environment; 2 – Satisfied with the investment environment; 3 – Very satisfied with the investment environment (Data from Annual Reports)\. Sample size varies across years\. In 2013 assessment included 26 respondents from Libombo, 18 from Limpopo and 16 from Chimanimani TFCA 20\. The second subcomponent focused on support to enable communities to develop enterprises and to partner with the private sector\. To achieve his goal, the Project established a Community Enterprise Fund (CEF) at the start of the Project reflecting the strong intention that communities should be targeted as beneficiaries, and provided technical and financial assistance for the following activities: (i) increase in tourism operations in the target TFCA in conformity with environmental and social standards contained in TMPs; (ii) establishment of community associations; (iii) conservation and/or tourism-related community subprojects; and (iv) partnerships between private investors and communities for the construction and operation of tourism operations\. 21\. The Project monitored the growth in tourism operations in conformity with Tourism Master Plans (TMP) in the target districts\. The target at Project appraisal was 1,200 beds in 2012 and 1,480 beds in 2013, which was considered unrealistic at MTR and was downgraded to 400 for 2012 and 500 for 2013\. By the end of 2013, a total of 244 beds had been established\. This shortcoming can be attributed to the delays in preparing, 42 approving and giving effect to the TMPs, and particularly because development of concessions for Milibangala and Ponto Dobela did not materialize\. 22\. Of the 244 beds established, 45 were located within PAs and developed with Project support mainly through the CEF (26 at Ndzou Camp, 10 at Tondo Lodge, and 19 at Covane Lodge)\. Additional 24 beds were added to the Chemucane lodge, in the MSR\. 23\. As illustrated below, the CEF, with support provided by contracted NGOs (performing as community brokers) established a total of 24 community associations (exceeding the original target of 20 associations)\. Because of the emphasis given to community development in the Project not only the number of beds was important but also that all operations had strong community involvement and have generated employment for community members\. Despite the limited outputs generated by this activity, the establishment of lodges within PAs has provided an extremely valuable demonstration effect, as well as important lessons learned for MozBio to improve and expand the type of initiatives supported by the CEF\. Table 4 - Community Associations established with broker support in TFCAs Year Community Protected Area Name of Community Association Established Broker Limpopo TFCA Banhine Avestruz Association 2009 AWF Banama Community Association 2011 TFCATDP Zinave Vuka Zinave Association 2009 LVIA Limpopo Mapai Ngala Association 2010 LUPA Libombo TFCA Ahi Zameni Chemucane 2009 PPF Association Pfuka Guengo Association in 2010 PPF Guengo Community Maputo Special Matchia Community Association 2010 PPF Reserve Massuane Development 2010 PPF Association Phuza Development Association 2010 PPF Mabuloko Development 2010 PPF Association Chimanimani TFCA MICAIA & Moribane Community Association 2008 TFCATDP Verde Tsetserra Association 2006 TFCATDP Associação de Commuitaria Mussapa 2010 Ambero & KSM Chimanimani Wassimuca de Mussapa-Rotanda Associação de Apicultores Kubura 2010 Ambero & KSM Kushinga de Mussapa-Rotanda Associação Kpfeca Kwacanaca 2010 Ambero & KSM Mussapa-Rotanda 43  Year Community Protected Area Name of Community Association Established Broker Associação Comunitária Kukura 2010 Ambero & KSM Kurérwa de Pheza Associação Comunitária Kubatana 2010 Ambero & KSM Chikukwa/Chimanimani Associação do Comité de Gestão de 2010 Ambero & KSM Recursos Naturais de Tsetsera Associação de Mulheres de 2010 Ambero & KSM Mupandeia Mohoa Associação de Apicultores Kudya 2010 Ambero & KSM Kunonaka de Sembezeia-Muhoa Associação de Apicultores Ngatiite 2010 Ambero & KSM Zvedo Muoco in Dombe Associação Comunitária Budiriro de 2010 Ambero & KSM Machire-Muoco Zomba Community Association 2011 MICAIA Nhabawa Nhaedzi Community 2011 MICAIA Association 24\. In terms of specific subprojects, the CEF supported a number of initiatives in all three TFCAs\. The formalization of community associations and the resultant opportunities for community-partner enterprises have been foundational processes promoted by the Project\. In addition to supporting tourism development in community – investor partnerships, the CEF invested US$ 794,695 in 18 community projects that directly benefited local communities\. In total, CEF supported subproject provided benefits to almost 3000 community members and generated over 1100 jobs\. Community enterprise projects within MSR, CNR, LNP and BNP (e\.g\. chili production and commercialization, horticulture, honey and community lodges) created jobs and generated meaningful revenue generation opportunities for local communities\. The Project focused on creating employment through small-scale enterprises and\. Three community enterprises dedicated to production of chilies (one) and honey (two) are linked to markets and are potentially viable\. Craft projects have been less successful as beneficiaries were not connected to markets, either through local tourists or agents, so production has been supply- rather than market-driven\. Tour guide and hospitality training to community members have improved economic opportunities associated with tourism ventures\. Little attention was directed specifically at sustainable natural resource use projects and those to promote conservation agriculture and horticulture were not successful, mainly due to design deficiencies\. In addition, community boreholes supported by the Project have made tangible contributions to improving living conditions of beneficiary communities\. 25\. The tourism subprojects supported have not yet generated meaningful outputs given that construction took place during the final years of the Project\. Regardless, because of its beautiful beaches, Mozambique is widely perceived as a ‘beach tourist 44 destination’ rather than a ‘nature or wildlife destination’\. Although not explicitly stated, the implied assumption is that most ‘bush’ tourist operations would draw on tourists whose principal motivation was to spend time at the coast, at least until the quality of wildlife and hospitality experience offered could compete with other locations\. Even then, more aggressive marketing and incentives would be required to establish a compelling brand\. Experience of this Project has shown that it takes much more than establishment of accommodation facilities to draw tourists in large numbers to bush experiences in Mozambique\. At issue is not the supply of accommodation, or even accessibility, but rather quality of the bush tourism experience\. While coastal destinations carry a marketable brand, this is generally not yet the case for bush destinations in Mozambique\. 26\. The types of CEF subprojects and number of beneficiaries are described in the table below\. 45  Table 5 - Location, types, and beneficiaries of individual projects Direct Total Project Community Beneficiaries Resident Population F M T F M T Libombo TFCA Chilli Production, MSR Matchia 20 10 30 160 145 305 Honey Production, MSR Gender issue- males only Madjadane 25 25 300 305 605 Arts and Crafts, MSR Madjadane 12 13 25 Chemucane Lodge Chemucane 11 15 26 200 190 390 TOTAL 43 63 106 660 640 1290 Limpopo TFCA Covane Lodge LNP Canhane 17 23 40 600 500 1100 Water supply in Canhane LNP Benefits all Canhane 1100 Tourism Promotion and GLTP Cultural Fair LNP Canhane 8 12 20 Curio Training BNP Tchove 17 13 30 30 Conservation Agriculture BNP Tchove 440 360 800 Horticulture Production ZNP Zinave 30 20 50 230 200 430 Borehole for cattle ZNP Gender issue - males only Zimane 100 100 Community Borehole BNP Benefits all Covane 650 650 Community Borehole ZNP Benefits all Covane 320 270 600 600 Rehabilitation of Fish Eagle Tented Camp BNP NPTChove 15 15 420 380 800 TOTAL 392 453 2605 1690 1440 4410 Chimanimani TFCA Ndzou Camp Lodge CNR Moribane 10 15 25 580 520 1100 Additional Ndzou Camp CNR Moribane 2 2 Tourist guides training CNR Mussapa 20 20 390 360 750 Honey Production, CNR Mussapa 5 95 100 Chikwidzi Lodge CNR Mussapa Tsetsera Campsite CNR Tsetsera 2 7 10 425 430 855 TOTAL 17 139 157 1395 1310 2705 GRAND TOTAL 452 655 2868 3745 3390 8405 46  27\. In addition to the outputs described in this section, three key performance indicators are directly related to the achievements of this component\. 28\. Number of visitor and bed nights in tourism facilities in the target districts\. The PAD indicator included two variables (visitors and bed nights) which created uncertainty\. The Restructuring Paper increased the target from 100,000 to 220,000 and selected bed nights and the M&E Framework recorded bed nights in TFCAs\. Project staff continued to record both bed nights in tourism facilities and visitors\. Both statistics are considered relevant because they measure different things: bed-nights measures use of lodging facilities which is particularly pertinent for community employment, while the number of visitors measures use of the parks\. 29\. The Project contributed to considerable growth in private sector led tourism in the three TFCA’s (a total of 196,149 bed nights in 2013 compared to 66,182 in 2006, an increase of almost 200%)\. Although a large proportion of this tourism was concentrated in the beach destination of Ponta do Ouro, located within the Lubombo TFCA, the Project made relevant contributions to this growth through the improved tourism-related policy and regulatory instruments developed by the Project (Components 1 and 2) and, most importantly, the creation of the Ponta do Ouro Marine Reserve\. The total number of bed nights and visitors in TFCA districts and PAs is presented in the table below\. Table 6 - Total number of bed-nights and visitors in TFCAs and PAs Total number of bed-nights Total number of visitors TFCA or Park 2008 - 2013 2008 - 2013 TFCAs Libombo TFCA 669 770 Limpopo TFCA 58676 Chimanimani TFCA 22 799 Protected Areas Banhine National Park 254 416 Chimamimani National 872 753 Reserve Maputo Special Reserve 12 582 25 202 Limpopo National Park 17 636 327 782 Zinave National Park 264 1 495 47 30\. Growth in terrestrial nature-based tourism in PAs within the TFCAs was significantly lower (a total of 10,811 bed-nights in 2013, nevertheless representing a growth of 32% compared to 2008)\. This was largely due to the fact that the basic assets required for tourism development in PAs (park infrastructure, lodging facilities and wildlife populations) were slower to develop than anticipated\. Regardless, the expansion of tourism within the PAs was facilitated by the construction of lodges and tent camps under rigorous environmental standards and the active participation of private sector entrepreneurs in partnership with local communities\. By generating employment, private sector investments and payment of park fees, this expansion was also instrumental for achievement of the revised targets for the remaining key indicators of the PDO (leveraging of investments, community employment and PA revenues)\. 31\. Percentage of tourism ventures (in target districts that have adopted a District Tourism Master Plan-DTMP) /’;in conformity with the DTMP\. Although the Project had originally intended to establish Integrated District Development Plans (IDDP) in five TFCAs, during implementation it was decided to pilot only two District Development Plans: one in Matutuine (which was completed and approved), and one in Vilanculos\. Other DTMPs were judged not necessary, as the Ministry of Planning and Development (MPD) was supporting the targeted Districts in preparing their District Development Plans, which also encompassed tourism\. 32\. This indicator was included in an effort to ensure that all tourism-related facilities and operations were developed in the context of wider district planning and met social and environmental and environmental standards\. Conformity was measured against GOM legislation and the Tourism Framework that was developed for the Maputo Special Reserve and Futi Corridor as well as the Tourism Master Plans prepared for the districts of Vilanculos, Sussundenga and Manica\. Project reports record that the four tourism ventures listed in the table below conformed to plans\. Table 7 - Tourism ventures conforming to plans Name of Tourism District Date Venture Ndzou Camp Sussundenga 2010 Chikwidzi Lodge Sussundenga 2013 Chemucane Matutuine 2014 Tsetserra Lodge Sussundenga 2014 33\. Amount of new private tourism or conservation-related funds leveraged as joint-venture with communities in target districts\. Despite the slow start, the Project exceeded the EOP target of US$ 2 million by US$ 440,000 (22%), as a result of the six tourism projects that were implemented with Project support through the CEF\. A single private investment, the Chemucane Lodge (opening December 2014 in MSP/Libombo) contributed US$ 2 million (or 82% of the total), enough to meet the target\. Together with two other investments (Covane Lodge (Limpopo) and Ndzou Lodge (Chimanimani)) they contributed almost 96% of the total funds leveraged\. In general, subprojects which did 48 not include a private sector partner, did not leverage significant funding, as most counterpart funding provided by communities was in kind\. 34\. Excluding major investment in lodges established through investor-community partnerships, the Project invested US$ 794,695 in 18 additional conservation-related community projects (including Chikwidzi Lodge) that directly benefited local communities\. Financial information and funds leveraged are described in the following table\. 49 Table 8 - New private tourism or conservation-related investments leveraged as joint-ventures with communities in target districts (US$)\. Leveraged % of total Project Project Investment investment leveraged Libombo TFCA Chilli Production 49 715 70 000 58% Honey Production 21 590 3 000 12% Arts and Crafts 18 290 2 000 10% Chemucane Lodge 500 000 2 000 000 80% SUB-TOTAL 589 595 2 075 000 78% Limpopo TFCA Covane Lodge LNP 500 000 250 000 33% Tondo Lodge 836 000 100% Water supply in Canhane 30 710 10 000 24% Tourism Promotion and GLTP Cultural Fair 40 000 Curio Training BNP 4 000 6 000 60% Conservation Agriculture 12 000 8 000 40% Horticulture Production 5 000 Borehole for cattle 35 000 2 Community Borehole 150 000 2 Community Borehole 120 000 Rehabilitation of Fish Eagle Tented Camp 143 000 Hospitality Training 30 000 10 000 25% SUB-TOTAL 1 069 710 1 120 000 51% Chimanimani TFCA Ndzou Camp Lodge 205 000 85 000 29% Additional Ndzou Camp 15 000 6 000 29% Tourist guides training 12 330 Honey Production 24 460 Chikwidzi Lodge 33 000 Tsetsera Campsite 50 000 SUB-TOTAL 339 790 91 000 21% GRAND TOTAL 1 999 095 3 286 000 62% Initial Target 2012 2 000 000 Revised Target 2012, 2013 2 000 000 % of target achieved 164% 50 Component 4 – Protected Area Management 35\. This component supported the identification, monitoring and protection of the most significant and vulnerable biodiversity assets within the three TFCAs, through the establishment/rehabilitation and management of the network of National Parks and Reserves under the direct management of DNAC (now ANAC) within the target TFCA\. It initiated a long-term process of major improvement of the Maputo Special Reserve, including gazetting the Futi corridor and the new marine reserve; support to Banhine National Park and the Chimanimani Special Reserve\. Modest support was also provided to Limpopo National Park, to supplement existing efforts of The Peace Parks Foundation (PPF), KfW & AFD, and to Zinave National Park\. 36\. Component 4 was designed to develop a professional approach to management of protected areas in support of the conservation of biodiversity and included two subcomponents\. The first focused on capacity building and the second on management, including improvement of facilities\. With funding from the IDA credit and GEF, specific support provided by the Project included construction and/or rehabilitation of infrastructure, operating equipment and supplies, technical assistance and training, and introduction and management of wildlife\. As a result of this support, PAs improved their basic assets and management, increased the area under protection; improved communication, information and law enforcement; and increased their’ revenue generation capacity\. 37\. The area under formal conservation increased by 1,910 Km2 of which 918 Km2 is due to the establishment of the Ponta do Ouro Marine Reserve and the Futi Elephant Corridor, and the remainder to the realigning the boundaries of three PAs within the Limpopo TFCA (ZNP, BNP and CNR)\. The realignment of boundaries not only resulted in a significant reduction in the population living inside the protected areas (from 2,050 to 448 families), but also contributed to an increase in the total area under conservation in the target TFCAs\. The first table shows the changes in area achieved due to Project supported activities, while the table below quantifies the reduction in population in the PAs due to demarcation\. Table 9 - Area (Km2) of new PAs formally designated & managed for biodiversity conservation\. Park Target Km² Hectares Km² Comment achieved achieved Banhine Redefined Loss of 57 000 Loss of 570 National Park boundaries Chimanimani Redefined National 4 900 49 boundaries Reserve Zinave National Redefined 151 300 1513 Park boundaries Limpopo None 51 National Park Lubombo TFCA (FC and SMR 1400 below) Futi Corridor 700 240 New Special Marine 700 678 New Reserve Total Net gain 1,910 1400 136% of target Table 10 - Number of families resident in CNR, BNP and ZNP before and after the boundaries were redefined\. Number of families resident in the park Park area (ha) before and after Net Park before and after new boundaries new boundaries gain/loss Before After Area before Area after CNR 494 72 63 400 68 300 4 900 BNP 647 74 700 000 643 300 -57 000 ZNP 909 302 399 400 550 700 151 300 Total 2 050 448 1 162 800 1 262 000 99 200 38\. In terms of incompatible land uses, remote sensing was used to map rural land use and determine the presence of uses incompatible with biodiversity conservation\. The analysis of the percentage of land use within each of the PAs in 2005, 2007 and 2012 showed that incompatible land use accounted for less than 3\.5% of the total land area, which did not result in any significant loss of natural habitat and was well within the Project target of 10%\. This analysis also reflected Government concern about the impact of incompatible land use, as it was difficult to contain impacts when people live in the parks, including expansion of agriculture, grazing and poaching\. This encouraged DNAC to consider ways of reducing the number of people residing in the parks by excising (i\.e\. re-demarcation) the more densely populated areas so that fewer people would have to be resettled while at the same time including new unpopulated areas with high conservation value into the parks\. 39\. The process of developing infrastructure experienced considerable delays during the initial years of Project implementation\. At the time of the MTR these delays were attributed under-budgeting of cost estimates, problems in tendering due to capacity limitations in the TFCA Unit, and the absence of suitably qualified contractors/engineers capable and willing to operate in the remote Project areas\. Because of these constraints, it 52  was only after the Mid Term Review, when targets were redefined and more funds were allocated to infrastructure, that progress improved, Based on the needs of each PA, infrastructure provided included office blocks, senior staff housing, dormitories, ranger posts, entrance gates, water supply, fences, crossings, and internal roads\. Equipment included vehicles, solar panels and generators, pumps, and office equipment The post MTR improvement is illustrated by the results summarized in the table below, showing that a significant portion (48 out of 53) of the structures were completed during the last three years of the Project\. In addition to Project Bank and IDA funds, PPF also contributed to the provision of infrastructure at the MSR, including aircraft hangar and, airstrip, fencing, boreholes and ranger post\. Table 11 - Park infrastructure financed by the Project in the target Protected Area Infrastructure ZNP LNP BNP MSR CNR Total Office Block 1 1 1 1 4 Staff House 1 2 1 4 Ranger dorm 1 1 2 Fence Crossing 1 1 2 Road 1 1 2 Kitchen 1 1 2 Wildlife sanct\. 1 1 2 Borehole 1 1 1 1 4 Gate 1 1 Solar panels 1 set 1 Table 12 - Comparison of planned and achieved infrastructure in target PAs PA 2009 2010 2011 2012 2013 ZNP Revised 1 4 10 10 Achieved 1 1 5 7 LNP Revised 1 1 1 1 1 Achieved 1 1 1 1 BNP Revised 2 2 5 5 Achieved 1 4 6 MSR Revised 5 11 15 Achieved 6 12 CNR Revised 2 10 11 Achieved 1 5 Total Revised 1 4 14 37 45 Achieved 2 3 17 31 53 40\. Wildlife reintroductions contributed to ensure that diversity and numbers increased above targets\. The 2006 TFCA Annual Report identifies two bio-indicator species for each PA\. The 2006 – 2009 targets were somewhat arbitrary because little was known of the status of these species in the PAs\. Targets were revised to 10% or 5% increase in population depending on the species\. Although standard practices were used for assessment, it is accepted that counts, particularly for smaller species, especially when populations are low, commonly show wide variation\. Censuses were infrequent because of cost, and the changes introduced in surveying procedures, as improved techniques and equipment became available\. 41\. Within these constraints the counts indicate that wildlife populations exceed targets in all cases and in some by large margins (see Table below)\. This reflects introductions and possibly also improved control over poaching as patrols have become more formal and frequent\. However the generally low numbers of wildlife initially and the wide confidence limits associated with wildlife estimates suggest the need for caution in drawing conclusions\. Table 13 - Increase in bio-indicator species in formal protected areas PA Category Baseline 2006 2007 2008 2009 2010 2011 2012 LNP Indicator 1: 297 630 693 710 N/A Elephant Indicator 2: 194 325 357 375 N/A Zebra BNP Indicator 1: 51 51 221 402 N/A 399 Oribi Indicator 2: 210 210 213 361 N/A 519 Ostrich ZNP Indicator 1: 150 150 160 457 Impala Indicator 2: 143 143 150 260 Nyala MSR Indicator 1: 329 329 348 350 452 Elephant Indicator 2: 797 797 824 850 1212 Reedbuck CNR* Indicator 1: 3 0 4\.55 3\.2 8\.6 Dulker Indicator 2: 0\.97 0 0 0\.54 1 3\.4 Sable ï‚ Population Index 42\. In terms of PA performance and management, two indicators were used to monitor Project outcomes: (i) Increase in PA revenues; and (ii) Change in management effectiveness\. 54 43\. PA Revenues: Although revenues differ considerably between the different PAs, overall, annual revenue generated by all PAs increased by more than 120% during the life of the Project, from US$ 187,400 in 2006 to US$ 426,977 in 2013 Of the total revenues, LNP raised 68 %, MSR contributed 31%, while BNP, CNR and ZNP combined generated less than 1%\. In the case of LNP and MSR (both terrestrial and marine), the growth in revenues is not only significant for the operation of the PA, but also has contributed to increase the incomes of communities as they received 20% of the annual revenues generated by the PA\. 44\. Project design was premised on the assumption that the concept of bush-beach tourist routes would gain traction within GOM and would assume priority for investment and marketing\. This did not happen to the extent anticipated\. Without investment in infrastructure required to service tourism and encourage investment at bush locations, inland lodges would not be able to compete with coastal facilities, particularly when wildlife populations had still to be rehabilitated\. Although there was encouraging growth in revenue generation, targets were overly optimistic and did not adequately take account of the remoteness, poor infrastructure, visitor preferences and the associated difficulty of attracting private investors\. Infrastructure investments planned for MSR, LNP and Chimanimani were not realized and anticipated revenue generation was adversely affected\. Also, most visitors from South Africa use coastal destinations (of which MSR is one of many) and transit through LNP and MSR to these locations\. The requirement for visitors transiting LNP to overnight in the park helped increase revenue generation but provided a disincentive to use this route to the coast\. This, together with a general decline in tourists to Kruger National Park in neighboring South Africa contributed to the slowing of growth in revenue by LNP between 2012 and 2013\. This contrasts with MSR where revenue increased by 53% between 2012 and 2013, which justifies the decision made to increase investment in improving the MSR, establishing the Ponta do Ouro Partial Marine Reserve and developing tourist facilities and concessions at those locations\. Revenue growth at CNR was adversely affected by the political unrest in Zimbabwe and Zimbabew’s weak commitment to establishing the Chimanimani TFCA as a tourist destination\. 45\. PA management effectiveness: In accordance with the requirements of the GEF, design of Project activities was largely configured by the Management Effectiveness Tracking Tool (METT)\. Scores were intended to largely be used as a strategic self- management instrument to identify areas requiring attention\. The intention was that park authorities should regularly assess performance, not only when required to do so by the terms of reference for a particular Project\. The table below shows that management effectiveness has been assessed consistently during the life of the Project, suggesting that the process has been internalized in the culture of park management and will be sustained beyond the Project and expanded to other PAs, partly due to the specific assistance allocated by MozBio to further improve management effectiveness \. 46\. At Mid Term Review most targets were judged to be overly optimistic and were reduced\. However, with the exception of the Ponta do Ouro Partial Marine Reserve, none 55 of the others achieved the target\. This is not surprising given the delays experienced with procurement and construction and with implementing community subprojects through the CEF\. Although the relatively high score for the Marine Reserve can be attributed to promulgation of the reserve, it also reflects the commitment of the PAs management and staff to law enforcement\. Table 14 - Change in management effectiveness TFCA Year Distribution 0 1 2 3 Lubombo 2006 38 35 26 ` TFCA 2008 5 26 69 ` 2011 5 14 67 14 2006 ` 75 25 ` Limpopo 2008 ` 33 67 ` TFCA 2011 ` 30 50 ` 2006 ` 86 14 ` Chimanimani 2008 ` 33 50 ` TFCA 2011 10 20 60 10 47\. Park management cannot be effective if a PA does not have a management plan and a tourism management plan\. While the 2013 Annual Report records that management plans with performance-based management systems were successfully completed and approved for all Project PAs such plans are not yet being fully applied to assess performance\. Contributing factors for this are that the plans do not include business plans and approved performance indicators\. 48\. The intention of deploying this indicator was to internalize a culture of management assessment in the conservation agency, thereby improving professionalism in conservation practice that would have positive outcomes for tourism\. That this has not yet happened is disappointing\. It is the responsibility of ANAC, rather than the TFCA Unit, to introduce and sustain performance-based management and it would be helpful to see greater commitment to this\. Including contribution to performance-based management as Key Performance Areas (KPAs) for staff would encourage commitment\. The EOP target was that three PAs would have operational performance-based management\. At present it is not being adequately implemented in any of the PAs\. \. Component 5 – Project Management, Communications and Monitoring and Evaluation 49\. This component was designed to finance a team of technical and fiduciary staff to undertake Project management, including Project procurement, accounting and monitoring as described by their respective manuals\. Inputs expected to be financed were aimed at (i) strengthening the capacity of the TFCA Unit to coordinate the TFCA program; (ii) support its related operating costs; and (iii) enable recruiting a few 56 additional long-term staff for the Unit, including TFCA Coordinators based in the field in order to support the shifting of planning and implementation to the Provincial and local level\. However, the MTR concluded that rather than facilitating operations, the field coordinators were adding a level of complexity and inefficiency\. The organization of Project management was restructured to increase specialist capacity and efficiency\. The regional management office and positions were cancelled while the TFCA team added a community development specialist and an infrastructure specialist\. In addition, the component included the implementation of an M&E system to track and assess Project implementation and impacts, a system for adaptive management based on the M&E information; and the development and implementation of an information system and a communications strategy to ensure timely flow of accurate information, and to increase awareness and understanding about ecosystem management and TFCAs nationally, regionally and worldwide\. 50\. The performance of the TFCA Unit was assessed based on the effectiveness in completing tasks included in annual work plans, which improved from 48% in 2006 to 80 % in 2008 (Table 23) reflecting the growth in capacity within the TFCA Unit\. The EOP target was set at 80%, a value that would be difficult to achieve in the complex multi- sectoral context of the TFCATDP, which was characterized by multiple interdependencies and actors over which the Unit had limited control\. The comparatively low score obtained in 2013 reflects both the delays of GOM with respect to legislation and concessioning, and the challenges of developing infrastructure in remote locations as well as of working with communities and investors\. Table 15 - Percentage of deliverables in annual work plans completed each year Indicator 2006 2007 2008 2009 2010 2011 2012 2013 Revised 80 80 80 80 80 80 80 80 Actual 48 64 80 79 81 82 76 65 51\. Although a Communication strategy was prepared it had only been partially implemented and relied largely on the web site and annual reports\. Annual Reports were timely and comprehensive, with a detailed description of activities implemented, progress of indicators, and issues encountered\. However, only two editions of the proposed Newsletter have been released\. The Project also financed the design, operation and maintenance of the website\. The target was originally set at > 10 000 hits at year 2, to be increased by 25% every year thereafter\. As the site only became operational in 2008, this would have set an EOP target for 2013 at more than 30,000 hits\. However, there has been rapid growth from 3,539 in 2009 to 86, 218 in 2011 and 166, 355 hits in r 2013\. In 2013, the site was accessed from a great diversity of countries, predominantly the USA (25%), China (21%) and Mozambique 12% in 2013\. 57  Annex 3\. Economic and Financial Analysis 1\. The TFCATDP PAD presented some economic analysis of tourism potential to generate foreign exchange, employment and contribute to GDP\. It presented three scenarios for the tourism sector in 2015\. The optimistic scenario estimated that tourism would contribute to around 3\.4% of GDP, which has probably been achieved at present (2013 figures indicate that tourism contributed to 3\.2% of GDP)\. An ERR for the Project was not carried out at Project preparation, probably because data on tourism was very scarce\. 2\. A cost-benefit analysis to calculate the TFCATDP’s economic rate of return (ERR) and its corresponding net present values (NPV) was conducted during ICR preparation\. It predominately focuses on the economic benefits generated within TFCA’s in Mozambique as a result of the Project\. The Project development objective (PDO) indicators provide the basis for determining which benefits to assess\. Methodology 3\. Data collected by the Ministry of Tourism (MITUR) TFCA Unit was used but, where necessary, was supplemented with information from previous national reports\. Assumptions (presented below) were made in collaboration with local experts and the TFCA Unit\. 4\. The cost benefit analysis was conducted for 8-year Project period (June 2005 to June 2013) with a discount rate of 10% (with 5% and 12% rates included for comparison)\. This could be considered a conservative discount rate for a public investment in conservation as it may undervalue the expected long-term benefits as well as additional ecosystem benefits not directly assessed here, but to which the Project contributed3\. 5\. Activities financed under this Project were expected to generate five main benefit streams (of which four are quantifiable): (i) Numbers of local residents formally and informally employed in conservation and tourism in target districts; (ii) Number of visitors and bed nights in tourism facilities in the target districts; (iii)Percentage of tourism ventures in target districts that have adopted a conforming District Tourism Master Plan (unable to quantify the economic impact of the indicator); (iv) Volume of new capital investment in private tourism and/or conservation-related joint-ventures with communities in target areas; and, 3 The value of ecosystem services is not quantified in this section, but can potentially represent significant indirect benefits from the project, especially in the long term\. 58  (v) Volume of total annual revenues generated by targeted formal Protected Areas (PA)\. 6\. The level of benefits for each quantifiable indicator is annexed to this report\. In addition, the following activities provided a benefit to neighbouring communities but are not quantified: Table 16: Additional benefits resulting from the TFCATDP Non-monetary Additional Benefits4 No of Beneficiaries Water supply in Cahane (Limpopo) 1100 Curio Training (Banhine) 20 Borehole for cattle (Zinave) 100 Community Borehole (Banhine) 650 Community Borehole (Zinave) 600 Assumptions 7\. Quantifiable benefits resulting from the Project are dependent upon the following main assumptions: (i) Local residents employed in conservation and tourism in target districts\. The Mozambique Ministry of Tourism (MITUR) TFCA Unit reports the number of local residents employed each year\. An average annual salary (2013 prices) was calculated for conservation staff working within the following National Parks and Reserves: Limpopo, Ponta do Ouro, Banhine, Chimanimani, Qurimibas, Gorongoza\. The 2013 average salary was correctly annually by the average rate of inflation (8\.4% between 2004 and 2013)\. In order to avoid double counting the salaries of tourism staff is not counted here as it is assumed that it is captured within the ‘number of bed-nights’ indicator (explained further in (ii))\. Therefore, the aggregated total salaries of all conservation staff employed between 2006 and 2013 as a result of the Project are presented\. (ii) Number of visitors and bed nights in tourism facilities in the target districts\. The original Project Appraisal Document (PAD) recommended that bed-night data be collected for the districts surrounding TFCAs, rather than just the TFCA itself\. However, this approach is based on the assumption that all people staying within accommodation in target districts are visiting TFCAs, which is not the case\. As a result, this analysis uses the bed-night data from the National Parks that form the Mozambican component of targeted TFCAs, which is significantly lower 4 No data had been collected on livelihood improvements as a result of the interventions during the project period\. 59  than the indicator-reported data\. The value of the bed-nights is determined by multiplying the numbers of bed-nights by the average daily expenditures of a tourist\. This is a proxy for determining the revenue generated by tourism in PAs (with the exceptions of tourism entrance and concession fees)\. Batey (2011:43) provided an “average daily expenditures” of a tourist visiting Vilanculos, which includes spending on accommodation, food and beverages, in-house activities, as well as goods and services\. It excludes car hire and international flights, which would distort the average value\. It therefore assumes that the money spent by tourists for accommodation and services include the salaries of local residents employed in the tourism sector, as salaries are funded from tourism expenditures\. (iii)New private investment in target districts\. As above only private investment within TFCAs is counted in order to avoid distorted figures, as not all investments within Districts are linked to PAs\. (iv) Annual revenues from PAs\. Entrance fees paid by tourists and concession fees paid by private operators do not form a component of the tourist daily expenditure reported by Batey (2011), and therefore not double counted\. Benefits Stream and Project Costs 8\. Based on the average exchange rate (2006-2013) of MTS 27\.28 = USD 1, the Project achieved the following benefits streams: (i) additional employment in tourism and conservation; (ii) additional income for previously unemployed local residents; (iii) additional visitation to TFCAs and money spent by tourists in the local economies; (iv) additional investment from private sector and NGOs; and (v) additional government revenues from tourism entrance fees\. The value of these streams throughout the Project period is displayed below: Figure 1: Value of Benefit Streams (2005-2013) $14,000,000 Total annual revenues generated by $12,000,000 targeted formal Pas $10,000,000 New private tourism or conservation- related investment leveraged as joint- $8,000,000 venture with communities in target districts $6,000,000 Total Tourist Spend in Targetd TFCAs (per annum) $4,000,000 Value of Employment for $2,000,000 Conservation Staff $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 60  The total cost of the Project by the end of 2013 was USD 36,165,500\. Although costs accrued to the Project in 2014, monitoring of activities is only available until 2013\. The table below accounts for the costs and benefits from the TFCA TDP between 2005 (Y0) and 2013 (Y8)\. Table 17: Benefits and Costs of TFCA TDP: 2005 (Y0) to 2013 (Y8) USD Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 1,681,31 2,746,0 4,050,5 6,117,6 7,124,0 9,309,3 12,842,4 BENEFITS 0 825,918 1 50 68 34 53 13 20 2,620,42 3,113,30 5,297,1 4,846,1 5,199,0 5,717,0 6,000,5 3,371,81 COSTS 0 0 0 75 80 32 22 18 1 - - - NET 1,794,50 1,431,98 2,551,1 - 1,407,0 3,308,7 9,470,60 BENEFITS 0 2 9 25 795,612 918,602 30 95 9 9\. The total value of direct benefits equate to USD 44\.7 million as compared with a total Project cost of USD 36\.2 million between 2006 and 2013\. The Project has budgeted an additional USD 2\.1 million for Project costs in 2014 but data on the benefits accrued in 2014 have not been collected\. Therefore 2014 is not reflected in this analysis\. However, it is assumed, based on 2013 performance, that the benefits would significantly outweigh the costs\. 10\. The analysis has provided three scenarios based on discounts rate of 5%, 10% and 12%, representing a range of low to high rates\. The table below displays the NPV depending upon the selected discount rate\. Table 18: NPV of TFCA TDP Scenario Discount Rate NPV Low 5% $4,665,060\.70 Medium 10% $2,205,716\.40 High 12% $1,490,562\.77 ERR (NPV=0) 17\.84% Sensitivity Analysis 11\. The sensitivity analysis shows that the average annual wage of conservation staff have a significant impact on the ERR as well as the exchange rates\. Private investment and tourism revenues are not assessed as they represent real numbers\. Only the economic assumptions are scrutinised\. The results of the sensitivity analysis are displayed in the table below: 61  Table 19: Standard Sensitivity Analysis of TFCA TDP NPV Assumption Scenario New Value ERR % Daily spend of a tourist (US$) Decreases by 25% 207\.21 12\.45 Daily spend of a tourist (US$) Increases by 25% 345\.36 23\.12 Average Annual Wage (CA Staff) (US$) Decreases by 25% 2536\.75 2\.77 Average Annual Wage (CA Staff) (US$) Decreases by 25% 4227\.92 32\.13 Average Inflation Price (%) Increase by 2% 10\.43% 12\.44 Average Exchange Rate (Conversion Increased by 10 MTS between MTS and USD) (MTS) to 1 US$ 37\.28 1\.62 Conclusion 12\. Subject to the above assumptions and uncertainties, results suggest that overall the Project was economically desirable (returns above the 12% threshold)\. The ERR is 17\.84% and the NPV equals US$ 2,205,726 (at a 10% discount rate)\. 13\. Other benefits from this Project, such as improvement of environmental services, have also not been reported as no data was collected during the course of the Project\. Had this been monitored it would have resulted in a significant increase in the NPV and ERR\. The result of the economic analysis should therefore be considered within this context\. Indicator 1: Figure 1: Number of local residents full-time employed per activity (tourism and conservation) per PA within TFCAs from 2006 to 2013\. 1200 1000 800 600 400 200 0 2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013 Conservation Tourism Libombo 24 54 48 36 57 61 96 208 342 506 572 799 718 698 644 1052 Limpopo 164 208 268 263 246 245 263 397 36 38 41 37 46 56 63 77 Chimanimani 56 55 62 55 60 57 64 133 18 29 20 23 28 32 38 167 Source: MITUR TFCA : 2013 Annual Report (2013 :23) 62 Indicator 2: Figure 2: Number of bed-nights per TFCA from 2006 to 2013 250,000 2006 2007 2008 2009 2010 2011 2012 2013 195,700 200,000 182,228 157,115 168,812 153,637 150,000 150,556 108,641 100,000 63,071 50,000 34,370 31,492 14,791 17,351 8,686 9,449 8,399 7,792 9,986 2,617 5,607 494 3,005 2,537 1,017 1,467 0 Libombo Limpopo Chimanimani Source : MITUR TFCA : 2013 Annual Report (2013 :25) Indicator 4: 63 Table 20: New Investment leveraged during TFCA TDP TFCA BROKERS/PARTNER AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT PROJECT SPENT SPENT SPENT SPENT 2012 SPENT 2009 2010 2011 2013 Lubombo Bell Foundation/ Anvil 167,127\.91 265\.458,20 Chemucane (salaries, wages, Bay USD USD building materials, transport, fuel & consultancy fees) PPF 28\.000,00 180\.000 USD 35\.517,2 Technical assistance (Matchia, USD USD Chilli, Chemucane project) and capacity building for Matsia and Chemucane communities FF/ASL/Barra 215\.000 30\.500,00 30,000\.00 Technical assistance and USD USD USD supervision (Chemucane project) LUPA 5\.000,00 2,5000\.00 15\.000 Juridical and technical support USD USD to Covane and Madjadjane communities - - - - 61\.871,8 Chemucane hospitality USD training - - - - Feasibility studies for community projects in Comon Fund Matchia and Guengo 64  communities 414,918\.4 USD Limpopo ASL - - 25\.200,00 44,400\.00 67\.775,50 Covane-Chemucane route\. USD USD USD Construction, training, establishmet of CBT and employment Barra Resorts - - 10\.300,00 2,500\.00USD 12\.000 Beach Bush Strategy & USD USD covane lodge furniture fees, water and marketing LVIA - 448\.500 655\.000,00 76,300\.00 Vuka Zinave USD MZM USD LUPA - - 14\.500,00 2,500\.00 Technical assistance to USD Madjadjane (Honey and Handcrafts) SNV - - 34\.965,00 0,00USD - Advisory TFCA/Barra AWF - - N/A N/A 50\.000 USD Chimanimani ECO MICAIA 36\.000 83\.600USD 38\.500,00 6\.800,00USD - Binga/ Moribane Community USD MZM Associação\. Mussapa 0,00MZM 2\.857,14 - Matsia Project USD YAUNDRY Tsetserra - - - - 5\.000 USD Construction of Tsetserra campsite TOTAL in 36\.000 747\.100 221\.517,36 514\.985,05 927\.541,1 USD Cumulative 2\.447\.143,51 USD 2009/2013 65 Indicator 5 : Figure 3: Annual revenues generated by PAs within TFCAs from 2006 to 2013(‘000s USD) 350 Maputo S\.R\. 300 Limpopo N\.P\. 250 Banhine N\.P\. 200 150 100 50 0 2006 2007 2008 2009 2010 2011 2012 2013 Source : MITUR TFCA : 2013 Annual Report (2013 :29) 66 Annex 4\. Bank Lending and Implementation Support/Supervision Processes 7\.1\.2 (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Task Team Agnes Kiss Lead Ecologist Leader Jean-Michel Pavy Sr\. Environment Specialist AFTS1 Task Team Leader Cedric Boisrobert Operation Officer AFTS1 Mohamed Arbi Ben Senior Sociologist AFTS1 Achour Judith Oglethorpe Conservation Specialist Consultant Luisa Moises Matsinhe Task assistant AFTS1 Joao Tinga FMS AFTQK Slahedine Ben-Halima Lead Procurement AFTQK Rod De Vletter IDDP Specialist\. Consultant Iain Christie Tourism Specialist\. Consultant Supervision/ICR Jean-Michel Pavy Sr\. Environment Specialist AFTS1 Task Team Leader Dinesh Aryal Sr\. NRM Specialist AFTN3 Task Team Leader André Rodrigues de Task Team Aquino Leader (ICR) Amos Martinho Malate Procurement Analyst GGODR Aniceto Timoteo Bila Senior Rural Development Sp\. GFADR Antonio L\. Chamuco Senior Procurement Specialist GGODR Cheikh A\. T\. Sagna Senior Social Development Sp\. GSURR Elvis Teodoro Bernado Financial Management Sp\. GGODR Langa Emerson John Vasco Team Assistant AFCS2 Financial Management Joao Tinga GGODR Specialist Sr Financial Management AFTME - Jonathan Nyamukapa Spec\. HIS Jose Domingos Diogo AFTTR - Transport Specialist Lopes Chembeze HIS AFTN1 - Karsten Feuerriegel Consultant HIS Luisa Moises Matsinhe Senior Executive Assistant AFCS2 Maria Isabel Nhassengo Procurement Assistant AFCS2 67 Mohamed Arbi Ben- Consultant GSURR Achour AFTDE - Samuel Bruce-Smith Consultant HIS Senior Investment Policy Shaun Mann GTCDR Officer Michael G\. Carroll NRM Specialist Consultant ICR Author (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) USD TUSD Thousands Stage of Project Cycle No\. of staff weeks (including travel and consultant costs) Lending P071465 77 301,632 P076809 (GEF) 36 283,754 Total: 113 585,386 Supervision/ICR P071465 175 868,688 P076809 (GEF) 43 321,886 Total: 218 1,190,574 68 Annex 5\. The MozBio 1 Project and its link to the TFCATDP 1\. Building on the TFCA I, and II the GoM has requested WB assistance to implement the Mozbio Program – an ambitious long-term Program that brings biodiversity conservation, tourism development and poverty reduction together\. The Mozbio Program will continue to serve as a platform to address the threats to the conservation of Mozambique’s natural capital, take full advantage of the potential tourism growth in Mozambique, and contribute to the reduction of the high poverty levels around CAs\. Mozbio will be financed with GoM’s resources and support from various donors (WB, AFD, KFW, USAID, international NGOs, among others)\. 2\. The objective of the Mozbio Program is to sustain and improve the progress made during TFCA I, and II, by further strengthening Mozambique's institutions and policies for CAs and tourism development\. The institutional and policy framework for tourism development to manage Mozambique's CAs system, built with the support of TFCA II, are still quite new and require significant technical assistance and support to ensure that the new laws, policies and institutions are fully implemented\. Furthermore, most terrestrial CAs do not yet have sufficiently attractive products, or a level of public infrastructure, to scale up tourism\. Tourism development requires improved basic infrastructure and access to areas with potential tourism attraction, improved tourism investment promotion and facilitation and clear and simplified tourism licensing and registration procedures\. 3\. The Mozbio Program will address challenges through six strategic pillars (Table 1)\. The WB will provide support to the MozBio Program through a ‘Series of Projects (SoP)’\. The first phase, Mozbio 1 (the follow up Project) will be a four-year project with a focus on reducing rural poverty through: i) improving the benefit-sharing mechanism that returns tourism revenues to communities; ii) increasing job creation and business opportunities from tourism; and iii) promoting alternative livelihood activities that reduce destructive practices, particularly those linked to NRM (agriculture, forestry, fisheries and wildlife management)\. 4\. MozBio 1 will implement the new institutional framework for conservation in Mozambique, with a strong emphasis on building the capacity of the recently-established CAs Management Agency (ANAC) and the Biodiversity Foundation (BIOFUND), founded under the TFCA II, while strengthening the management of key CAs with the highest potential for generating revenue and reducing poverty in rural communities\. The Project will promote nature-based tourism by improving regulations, strengthening government capacity and promoting the sector\. The Project will also finance sorely needed infrastructure and some of the recurrent costs of existing CAs to ensure they can attract tourism and manage biodiversity adequately\. 5\. New and important objectives of Mozbio 1 is also to strengthen communities’ rights to land and resources and promote livelihood alternatives to local communities, though a broader landscape approach (within and around the CAs), that goes beyond tourism\. This includes for example improved agricultural methods (such as climate smart agriculture techniques), community forest management and non-timber forest products management 69 and sustainable fisheries\. To enable a broader beneficiary base and to better monitor results, two socio-economic household surveys will be carried out, in year one, and three of the Project\. These surveys will be carried out in the targeted CAs and will look at the economic conditions of the population inside the CAs, their buffer zones, as well as the benefits they obtain from their surrounding natural resources, and their levels of satisfaction with the CAs\. The Project is estimated that over 11,200 households (around 56,000 people) will benefit directly from the Project\. A significant portion of this population is found in the poorest areas of Mozambique: the rural population in the Central and Northern regions and coastal areas\. 6\. The Project is expected to create the foundations for future MozBio Program phases\. Potential future phases of the SoP would draw on lessons from the Project\. They would extend financial and technical support to other CAs (including support to further infrastructure development) and scale up the support to local communities, particularly by providing more technical and financial support to scale up those income-generating activities shown to be viable in Phase 1\. Table 4 - MozBio Program's six strategic pillars to ensure the sustainable development of Mozambique’s CAs and their contribution to poverty alleviation and growth Sustainability of TFCA I and II MozBio 1 (the Future MozBio CAs Project) Phases 1\. Policies and Conservation Policy & Regulation of Conservation Legislation Law drafted and Areas Law Implementation of adopted regulation and policies at the Challenge: The framework Policies and guidelines for national and local levels for CAs is inadequate improved tourism investment Policies and guidelines for improved community participation Improved response by MZ to wildlife crisis & international conventions (CITES) 2\. Institutional & Human Resources ANAC & BIOFUND ANAC & BIOFUND ANAC & BIOFUND established operationalization operates with full cadre of Challenge: Institutions staff and GOM budget dedicated to conservation Training on law enforcement fulfilling their mandate and management in the MZ do Limited capacity and community development able to take new not exist building provided responsibilities Higher level training of Mozambicans on ENRM (scholarship and graduate studies) and establishment of park rangers and tourism schools in MZ 3\. Financial Sustainability BIOFUND Endowment Endowment Fund Endowment for CAs of MZ Challenge: No long term established operational (revenues reach growing financial system developed CAs) and endowment is Revenues from Private 70 Sustainability of TFCA I and II MozBio 1 (the Future MozBio CAs Project) Phases 1- Endowment fund growing sector and other sources 2- Private sector flowing Private sector contributes to (offsets) CAs Tourism revenues increased 3- Tourism and redistributed to CAs and revenues Tourism revenues collection local communities system improved within ANAC 4\. CAs Management Challenge: CAs are not New CAs created Basic management support Strengthened Infrastructure properly managed Basic infrastructure and to 11 CAs for conservation 1- National Parks & management support to management and tourism 5 TFCAs Infrastructure to 5 CAs with development Reserves tourism potential 2- Coutadas and Fazendas Improvement in Wildlife 3- Community monitoring and management Areas 5\. Contribution of CAs to poverty reduction Censuses and early Establishing enabling Scaling up livelihood engagement with conditions to engage with support in ENRM related Challenge: Lack of communities communities activities conservation-oriented integrated conservation Capacity building of local Improved contribution of development models committees conservation activities to around CAs district and provincial Piloting livelihood support planning for local communities 6\. Contribution of CAs to economic growth Piloting CEF with Improve systems and Increase number of well- limited results enabling environment for managed tourism Challenge: Ther full Limited Tourism private sector to invest in concessions in CAs potential of nature-based development plans MZ CAs tourism is not explored Continued increase in Increase promotion of CAs employment in nature-based to tourism sector tourism and in community- led tourism initiatives 71 Annex 6\. List of Supporting Documents Government of Mozambique 2014\. TFCA II Borrower Completion Report (Prof\. Charles Breem - June 16, 2014)\. Submitted to World Bank by Ministry of Tourism Government of Mozambique 2003\. Tourism Policy and Strategy, Ministry of Tourism, Maputo\. Government of Mozambique 2004\. Strategic Plan for the Development of Tourism in Mozambique 2004-2013, Ministry of Tourism, Maputo\. Government of Mozambique 2006\. Principles for Administration of Protected Areas in Mozambique\. Ministry of Tourism, Maputo\. Government of Mozambique 2009\. Conservation Policy: Politica Nacional de Conservacao - Resolucao 63-2009 de 18 Agosto\. Ministry of Tourism, Maputo\. Government of Mozambique 2009\. 2009 Ponta do Ouro Partial Marine Reserve Decreto 42\.2009\. Ministry of Tourism, Maputo\. Government of Mozambique 2010\. Ponta do Ouro Partial Marine Reserve Management Plan\. Ministry of Tourism, Maputo\. Government of Mozambique 2011\. Management Plan for Maputo Special Reserve\. Ministry of Tourism, Maputo Government of Mozambique 2013\. Safeguards Action Plan\. Ministry of Tourism, Maputo\. Government of Mozambique 2013\. Safeguards Action Plan: Monitoring and Evaluation: September 2013\.Ministry of Tourism, Maputo\. International Finance Corporation 2013\. Assessment of Readiness of Mozambique’s Conservation Areas for Tourism Investment: Mozambique Tourism Final Scoping Report\. Submitted to Ministry of Tourism and World Bank\. McEwen, D\. 2005\. Study of the Economic Potential of Tourism in Mozambique: Final Report, Ministry of Tourism, Maputo\. Rylance, A\. June 2014\. Ex-post evaluation of the costs and benefits for the TFCATDP Project\. Draft report prepared for the TFCA Unit The World Bank 2005\. Project Appraisal Document Report No 32148-MZ, Washington\. The World Bank 2009\. Transfrontier Conservation Areas and Tourism Development Project Mid Term Review Mission Aide Memoire\. Washington\. 72 The World Bank 2011\. Restructuring Paper on a Restructuring of the Transfrontier Conservation Areas and Tourism Project\. Report No: 63944\. Washington\. The World Bank 2012\. Mozambique Conservation Areas for Biodiversity and Development Project (P131965 & P132597): Project Concept Note\. Washington\. TFCA Unit 2006\. Community Enterprise Fund Manual\. Ministry of Tourism, Maputo TFCA Unit 2006-2013\. Project Annual Reports\. Ministry of Tourism, Maputo\. 73 Annex 7\. Map of TFCATDP targeted areas 74

REVIEW

P050891

Document of The World Bank Report No: ICR0000161 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-41810) ON A LOAN TO THE RUSSIAN FEDERATION FOR ELECTRICITY SECTOR REFORM SUPPORT PROJECT June 27, 2007 Sustainable Development Department Russia Country Unit Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective: May 2007) Currency Unit = Ruble Ruble 1\.00 = US$ 0\.0388 US$ 1 = Ruble 25\.73 FISCAL YEAR January 1- December 31 ABBREVIATIONS AND ACRONYMS ATS Administrator of Trading System CAS Country Assistance Strategy CHP Cogeneration Heating Plant CIS Commonwealth of Independent States ESC Energy Sales Company FEC Federal Energy Commission FTS Federal Tariff Service GENCO Generation Company IAS International Accounting Standards IDGC Interregional Distribution Grid Company IECAS Information exchange, Communication, and Analysis System IMF International Monetary Fund IGM Investment Guarantee Mechanism MAP Ministry of Anti-Monopoly Policy M&E Monitoring & Evaluation MFE Ministry of Fuel and Energy MIE Ministry of Industry and Energy MIS Management Information Systems MOE Ministry of Energy MOEDT Ministry of Economic Development and Trade MOF Ministry of Finance PIU Project Implementation Unit QAG Quality Assurance Group RAO UES RAO EES Rossii, Russian Unified Electric Systems Company RGC Regional Generating Company SAL Structural Adjustment Loan SO-CDA System Operator ­ Central Dispatch Administration TGC Territorial Generation Company TA Technical Assistance TTL Task Team Leader UIAS Unified Information and Analytical System UNPG Unified National Power Grid WGC Wholesale Generation Company Vice President: Shigeo Katsu Country Director: Klaus Rohland Sector Manager: Charles Feinstein Project Team Leader: Gevorg Sargsyan ICR Team Leader: Gevorg Sargsyan  RUSSIAN FEDERATION ELECTRICITY SECTOR REFORM SUPPORT PROJECT CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design\. 1 2\. Key Factors Affecting Implementation and Outcomes \. 6 3\. Assessment of Outcomes\. 12 4\. Assessment of Risk to Development Outcome\. 19 5\. Assessment of Bank and Borrower Performance \. 20 6\. Lessons Learned \. 24 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 26 Annex 1\. Project Costs and Financing\. 27 Annex 2\. Outputs by Component \. 28 Annex 3\. Economic and Financial Analysis\. 35 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 36 Annex 5\. Beneficiary Survey Results\. 39 Annex 6\. Stakeholder Workshop Report and Results\. 40 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR\. 41 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders\. 48 Annex 9\. List of Supporting Documents \. 49 MAP  A\. Basic Information Country: Russian Fed\. Project Name: ELEC SECTR REF Project ID: P050891 L/C/TF Number(s): IBRD-41810 ICR Date: 06/27/2007 ICR Type: Core ICR RUSSIAN Lending Instrument: TAL Borrower: FEDERATION Original Total USD 40\.0M Disbursed Amount: USD 34\.9M Commitment: Environmental Category: C Implementing Agencies: RAO United Energy Systems Ministry of Industry and Energy Federa Tariff Service Cofinanciers and Other External Partners: B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 04/29/1997 Effectiveness: 08/12/1998 08/12/1998 Appraisal: 05/03/1997 Restructuring(s): 02/17/2000 Approval: 06/05/1997 Mid-term Review: Closing: 12/31/2000 12/31/2006 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Moderately Satisfactory Overall Bank Overall Borrower Performance: Satisfactory Performance: Moderately Satisfactory i  C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project Yes Quality at Entry Highly Satisfactory at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 20 20 Power 80 80 Theme Code (Primary/Secondary) Access to urban services and housing Secondary Secondary Infrastructure services for private sector development Secondary Secondary Regulation and competition policy Primary Primary Rural services and infrastructure Secondary Secondary State enterprise/bank restructuring and privatization Primary Primary E\. Bank Staff Positions At ICR At Approval Vice President: Shigeo Katsu Johannes F\. Linn Country Director: Klaus Rohland Michael F\. Carter Sector Manager: Charles M\. Feinstein Jonathan C\. Brown Project Team Leader: Ranjit J\. Lamech Gary Stuggins ICR Team Leader: Gevorg Sargsyan ICR Primary Author: Sati Achath F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objectives of the Russia Electricity Reform Support Project have been formulated first in the Technical Annex serving as the project appraisal document for this project (Report No\. T 7126 RU, May 16, 1997)\. Then, they were also described in the Loan Agreement (Loan No\. 4181 RU, October 9, 1997, amended in January 17, 2000)\. ii  The objective of the project, as stated in the Technical Annex, was "to lay the groundwork for improving the short- and long-term efficiency of the Russian electricity sector, thereby ensuring the reliable supply of electricity to the customers at competitive prices\. In this regard, the project is directed at assisting the Government in further evaluating, elaborating and carrying out its proposed reform of the electricity sector by supporting a program of Technical Assistance (TA) to agencies and commercial enterprises involved in the reform process\. The TA program would also assist the Government in implementing the specific actions which it has committed to under the Structural Adjustment Loan (SAL)\. Revised Project Development Objectives (as approved by original approving authority) The changes introduced by the Amendment of January 2000 did not affect the definition of the project objectives in any substantial way and were formulated as following: the objectives of the Project are to assist in: (i) refining and developing the Russian electricity sector reform program; (ii) implementing the said reform program and (iii) strengthening and restructuring the concerned sector entities (including the operating companies and regulatory agencies)\. (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : Financial performance of the sector\. RAO UES remains RAO UES shows profitable (though Value financial losses, and RAO UES net profit declined quantitative or collects only 70% of profitable, and during the last Qualitative) revenues (of which only collects 100% of year), and collects 16% in cash)\. revenues in cash\. all revenues in cash\. Date achieved 06/05/1997 12/30/2005 12/31/2006 Comments (incl\. % 100% achievement) Indicator 2 : Existence of effective regulatory system\. Federal Tariff Service (FTS) and Value Effective Regional Energy quantitative or No regulatory institutionsregulatory Commissions Qualitative) exist institutions exist (REC) exist and function with limited autonomy\. Date achieved 06/05/1997 12/31/2005 12/31/2006 Comments (incl\. % 100% achievement) iii  Indicator 3 : Introduction of competitive wholesale market\. Since 09/01/2006, new rules of the wholesale electricity A competitive (capacity) market wholesale market were introduced by Value No electricity traded on established, and the corresponding quantitative or competitive wholesale accounting for a RF Qualitative) market substantial Gov\.Resolution\. proportion of These rules electricity trade\. changed the whole system of relations between buyers and sellers of electric power and capacity Date achieved 06/05/1997 12/31/2006 12/31/2006 Comments (incl\. % achievement) (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Indicator 1 : Status of industry restructuring process\. Creation of 6 wholesale thermal gencos, 1 wholesale All new generation hydro genco, entities (wholesale Federal Grid gencos, territorial Company, System gencos) registered Operator, Trading Value RAO-UES acts as as legal entities System (quantitative vertically integrated and operating; Administrator, 65 or Qualitative) national monopoly network assets of of 74 AO Energos region\.energos were transferred to FGC unbundled\. RAO and interregional Directors Board discos\. approved restructur\.projects for 71 out of 72 AO energos Date achieved 06/05/1997 12/31/2006 12/31/2006 Comments (incl\. % 100% achievement) iv  G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived DO IP Disbursements (USD millions) 1 11/26/1997 Satisfactory Satisfactory 0\.00 2 07/06/1998 Unsatisfactory Unsatisfactory 0\.00 3 06/23/1999 Unsatisfactory Unsatisfactory 0\.00 4 12/30/1999 Unsatisfactory Unsatisfactory 0\.00 5 06/28/2000 Unsatisfactory Unsatisfactory 0\.00 6 09/20/2000 Satisfactory Satisfactory 0\.00 7 06/29/2001 Satisfactory Satisfactory 2\.08 8 12/26/2001 Satisfactory Satisfactory 2\.30 9 06/28/2002 Satisfactory Satisfactory 2\.58 10 12/05/2002 Satisfactory Satisfactory 3\.11 11 05/07/2003 Satisfactory Satisfactory 5\.23 12 10/14/2003 Satisfactory Satisfactory 11\.73 13 12/24/2003 Satisfactory Satisfactory 16\.54 14 03/09/2004 Satisfactory Satisfactory 18\.41 15 12/20/2004 Satisfactory Satisfactory 23\.00 16 04/15/2005 Satisfactory Satisfactory 26\.49 17 01/04/2006 Satisfactory Satisfactory 31\.55 H\. Restructuring (if any) ISR Ratings at Amount Restructuring Board Restructuring Disbursed at Reason for Restructuring & Date(s) Approved Restructuring PDO Change Key Changes Made DO IP in USD millions to modify project impl\.arrangements in view of the changed ec\.environment in Russia and its electricity sector via deeping the project design through: (i) improved 02/17/2000 N U U 0\.00 ownership of the main elements of the project, and (ii) increased linkage to the reform of infrastructure monopolies/electric power component of the 3 SAL for Russia v  I\. Disbursement Profile vi  1\. Project Context, Development Objectives and Design (this section is descriptive, taken from other documents, e\.g\., PAD/ISR, not evaluative) 1\.1 Context at Appraisal (brief summary of country and sector background, rationale for Bank assistance) Country and Sector Background: At the time of project preparation, the electricity sector in Russia was the second largest in the world after the United States in terms of generating capacity\. Like the rest of the economy, the electricity sector was suffering from economic downturn and turmoil during the transition to a market economy\. The electricity sector accounted for approximately 15 percent of industrial production, more than the oil and gas industries combined\. Until 1992, the electricity sector was organized into vertically integrated companies in each of the 72 regions (oblasts)\. In that year, the government both converted the regional companies (Energos) into joint stock companies and superimposed a nation-wide holding company, RAO EES Rossii (RAO), over the Energos\. RAO was given ownership of the high voltage transmission grid (2\.5 million km of high-voltage lines), the largest thermal and hydropower plants, the dispatch centers, and research and design institutes\. RAO was also given a controlling shareholding in most of the regional Energos\. RAO organized its power stations into generation company subsidiaries (Gencos)\. Because of opposition from regional authorities, some-of these larger power stations were kept under regional control and remained with the Energos\. Generation was predominantly thermal (70 percent), with hydro (20 percent) and nuclear (10 percent) stations comprising the balance\. Regionally, however, over 50 percent of the hydro capacity was located in Siberia and the Far East, while over 80 percent of the nuclear capacity was located in the Northwest and Center regions\. The Energos were integrated regional monopolies that distributed electricity to the final consumers and owned the smaller generating plants typically producing both electricity and heat, on a monopoly basis, for local district heating systems\. Though the size of plants owned by the Energos was usually small, the number was large\. Thus Energos managed 62 percent of the generation capacity\. The RF government was a 100 percent owner of the nuclear power plants and was majority owner (currently holding approximately 52 percent) of RAO\. RAO, in turn, was a 100 percent owner of the transmission grid and dispatch system, 49 percent or larger owner of the Gencos, and 49 percent or larger owner of most of the 72 regional Energos\. Sector Regulation\. At the Federal level, the electricity sector was regulated by the Federal Energy Commission (FEC), an independent agency established in 1995, whose seven members were appointed by the President for four years\. Sector Problems\. The power sector faced many serious problems including (a) non-payment and non-cash payment; (b) uneconomic dispatch; (c) operating and investment inefficiency; (d) distorted pricing; and (e) inferior quality of supply\. Rationale for Bank assistance: The Bank, together with the International Monetary Fund (IMF), had committed to support the Government's Medium Term Reform Program both through a Structural Adjustment Loan (SAL), and through the structural component of the IMF's Extended Fund Facility\. The project represented important and necessary support to ensure that the components of the program related to the restructuring of natural monopolies could be 1  implemented successfully and in a timely fashion\. In particular the project supported the development and implementation of a plan for restructuring the power sector, further development of the wholesale market (including establishment of an independent market operator and licensing of market participants), and rationalization of electricity pricing\. The project was noted in the Country Assistance Strategy (CAS) that was discussed by the Board in conjunction with this project as representative of the type of implementation support which the Bank proposed to provide in support of the government's reform efforts\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The objective of the project was to lay the groundwork for improving the short- and long-term efficiency of the Russian electricity sector, thereby ensuring the reliable supply of electricity to the population and to economic entities at competitive prices\. In this regard, the project is directed at assisting the Government in further evaluating, elaborating and carrying out its proposed reform of the electricity sector by supporting a program of Technical Assistance (TA) to agencies and commercial enterprises involved in the reform process\. The TA program would also assist the Government in implementing the specific actions which it has committed to under the Structural Adjustment Loan (SAL)\. The key performance indicators were as following: (1) financial performance of the sector, (2) existence of effective regulatory system, (3) introduction of competitive wholesale market\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The objectives were not revised\. 1\.4 Main Beneficiaries, (original and revised, briefly describe the "primary target group" identified in the PAD and as captured in the PDO, as well as any other individuals and organizations expected to benefit from the project) The PAD (Technical Annex) identified that the proposed reform initiatives were expected to result in substantial benefits to the Russian economy\. These included: (a) reduction in the fuel- related cost of electricity supply as a result of more economic dispatch of plants; (b) reduction in system operating and maintenance costs as a result of better regulatory oversight, improved corporate management, and competitive pressures; (c) decreased investment needs through better use of existing assets; (d) increased value of the government shareholdings in sector agencies as a result of reduced regulatory risk and improved long-term earnings outlooks; (e) improved customer service; and, (f) economic benefits related to the elimination of cross-subsidies and non- payments\. In this regard, beneficiaries of the project included: Consumers of electricity were expected to receive electricity in a reliable manner at an affordable cost in the long run\. By improving the pricing structure, consumers would have a greater incentive to conserve on the use of electricity and reduce waste and inefficiency\. Ministry of Fuel and Energy The project supported development of legislative and regulatory framework for reform implementation in the sector, interaction Reform Implementation 2  Component, interaction of the fuel and energy sectors in the area of the electricity Sector restructuring, as well as institutional strengthening of the MFE RAO UES\. The project supported reforms which envisioned the eventual dissolution of this organization\. Federal Energy Commission (FEC) was scheduled to receive funds for the training of its staff and also to invest in physical infrastructure, including IT systems\. Private Sector was expected to improve its opportunities to invest in the power sector\. 1\.5 Original Components (as approved) The Technical Assistance (TA) consisted of the following activities: (i) Implementation Management and Coordination\. Advisors would support the ERIU in coordinating the work of other consultants, government agencies, sector companies, and donors, and in carrying out general project management activities including scheduling, budgeting, procurement and disbursements\. (ii) Policy Analysis and Development\. Advisors would assist the ERIU in analyzing policy issues necessary to refine the Government's concept for restructuring the sector, develop an action plan for realizing the concept, and modify the concept and action plan as new issues arise during implementation\. (iii) RAO Commercialization\. Focal areas of the assistance would include: (a) Accounting and Financial Controls included establishing systems to provide critical financial data to senior management, evaluating and modernizing the system of financial controls, developing a system of internal audits, and developing a system of financial reporting\. (b) Economics and Investment included determining the nature and extent of investment projects and proposed, implementing a system to evaluate and conduct feasibility studies, and developing an investment plan for the company\. (c) Corporate Finance would develop a sound financial strategy that would allow the company to access capital markets\. (d) Personnel and Staffing included assessing the skills and capabilities of the existing staff, developing a compensation and benefits plan, and developing a promotion and recruiting strategy\. (iv) Transmission Network Commercialization and Restructuring\. This would include developing the organizational structure for this entity, developing a business and investment plan, negotiating a regulatory license with the FEC, and negotiating transmission service agreements with the Market Operator\. (v) Generation Commercialization and Restructuring\. Assistance would be provided to create independent and viable generation companies composed of the existing generation assets, including developing technical and economic criteria for the creation of the Gencos, proposals for grouping the plants into companies, and the licenses under which the new Gencos would be regulated by the FEC\. 3  (vi) Federal Energy Commission Institutional Development\. Assistance would be provided to improve the internal operation of the FEC and its regulatory methodology\. (vii) Wholesale Market Operator Support\. The Project would assist in determining: the physical infrastructure (communications, computers, software, etc\.) required for this task; the legal and organizational structure and funding of the new organization\. (viii) Regional Energy Commission Institutional Development\. This would include helping them develop efficient tariff structures, regulatory methods and procedures for local electricity markets, a model organizational structure, model business plans, and regulatory procedures\. (ix) Regional Energo Commercialization\. Assistance would cover such issues as organization, business, financial, accounting, and invent planning so that the Energos become more commercial and thus can compete as buyers or sellers in the markets for electricity\. 1\.6 Revised Components At the time of project restructuring in February 2000, the components were revised as follows: Part A: RAO "EES Rossii"\. Activities envisioned included: (i) Commercializing and Restructuring of RAO\. The provision of consultants' services (including for the carrying out of the 1998 audit of RAO's financial statements), training and equipment to introduce efficient management practices, improve corporate governance and facilitate further restructuring of RAO, including possible divestiture of its subsidiaries\. (ii) Commercializing and Restructuring of Power Generation Companies\. The provision of consultants' services, training and equipment to establish independent power generation companies with existing power stations incorporated in them\. (iii) Wholesale Market Development and Operator Support\. The provision of consultants' services, training and equipment to develop and support wholesale market operations with the purpose of improving the operational efficiency of the power network\. (iv) Commercializing and Restructuring of the Regional Energy Companies\. The provision of consultants' services, training and equipment to improve the internal organization and operation of AO Energos, including more intensive support to selected AO Energos to improve their operation in a competitive market environment\. (v) Public Relations\. The provision of consultants' services and training to assist in developing and implementing a public relations and communications strategy\. (vi) Legal Support\. The provision of consultants' services in the area of legal support in the process of achieving the objectives of company and sector reform\. (vii) RAO Program Implementation Unit Support\. The provision of consultants' services (including for the carrying out of audits of the project accounts), training and equipment to support the operation of the Program Implementation Unit within RAO\. Part B ­ Federal Energy Commission (FEC): Activities included: Consultants' Services and Training: (i) Project implementation assistance (General Consultant of the Project); (ii) Development of a concept for the information and analytical system; (iii) 4  Development of a concept for training and training of the staff members from the FEC and RECs; and (iv) Creation and further support for the FEC website\. Goods: (i) Procurement of computers and office equipment for the FEC Project Implementation Unit (the Working Commission); (ii) Procurement of computers and office equipment for the FEC; and (iii) Building of the Information and Analytical System\. Part C ­ Ministry of Fuel and Energy (MFE): Activities under this component consisted of the following: (i) Development of individual projects for reforming temporarily isolated power systems (ii) Reforming the mechanism for managing the state equity in the electricity sector (iii) Development and implementation of the state program of incentives for private investments in the electricity sector at the transition stage of structural reforms (iv) Analysis of the impact made by the restructuring processes in the electricity sector on the fuel supplying sectors of the fuel and energy complex (v) Institutional strengthening of the MOE, including: - Training of the MOE staff - Equipment procurement - Consultants' services of the Project Implementation Unit 1\.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) There were changes in project design, scope and scale, implementing arrangements, project schedule, and funding allocations during implementation\. (a) Project design, scope and scale, and implementing arrangements\. The Loan was formally restructured on February 17, 2000\. The substance of the restructuring was agreed with the government and project beneficiaries\. The Loan was restructured at government's request to reflect the changed environment in Russia in general and in the electricity sector in particular\. The restructuring was fully consistent with the project's original objectives and sought to deepen project design through: (i) improved ownership of the main elements of the project, and (ii) increased linkage to the reform of infrastructure monopolies/electric power component of the Third Structural Adjustment Loan for Russia\. Key aspects of the restructuring were: The project was effectively split into two components: (i) Part A (utility component) of US$ 29 million with RAO UES as the beneficiary and implementing agency; and (ii) Parts B and C (federal component) of US$ 11 million with the Federal Energy Commission (FEC/US$ 8\.9 million) and the Ministry of Fuel and Energy (MFE/US$ 2\.1 million) as the beneficiaries and implementing agencies of their respective parts The restructured project would fund well-focused technical assistance to MFE, FEC and RAO UES at the federal and regional level An option to have multiple Special Accounts was introduced A relocation of loan proceeds, with an increase in the "Goods" category to support the rapid development and implementation of a Wholesale Market Operator, was agreed International competitive bidding and other relevant procurement procedures were introduced, with a corresponding decrease in the previously approved amount for national shopping 5  (b) Project Schedule\. The closing date of the project was extended five times\. At the time of restructuring in February 2000, closing date was extended for one year, to December 31, 2001\. On the basis of the importance of the sector and the implementation of the sector reforms, and based on emerging procurement activity, in August 2001 the Bank approved an extension of the closing date for another two years, to December 31, 2003\. At the request of the Ministry of Finance, the closing date was extended for a third time to December 31, 2004\. The closing date for Part A of the project was extended again to December 31, 2005 and then further extended to December 31, 2006 to finance several priorities in the Power Generation Sector Reform Plan for 2005-2006 approved by the government, including the establishment of a mechanism to attract and guarantee investment to the power sector, reorganization of Joint Stock energy companies, development of guidelines for wholesale/retail power market operation\. It was expected that the utilization of the loan would reduce the burden of financing the reform on the final consumers, and contribute to a smoother transition to a more efficient and competitive electricity sector structure\. (b) Funding allocations\. During implementation, the funds under the Loan were reallocated twice between categories as shown below: First reallocation of funds: In August 2002, the government requested reallocation of proceeds under Part A of Loan\. Accordingly, the Bank reallocated the proceeds of the Loan as follows: US$600,000 from Category (2) (a) (Consultants' Services and Training under Part A of the Project) and US$1,400,000 from Category (4) (a) (Unallocated under Part A of the Project) to Category (1) (a) (Goods under Part A of the Project)\. Second reallocation of funds: In February 2004, the government requested reallocation of proceeds of proceeds under Part B of Loan\. The Bank acceded to the government request and reallocated the proceeds of the Loan as follows: US$4,086,248\.89 from Category (2) (b) (Consultants' Services and Training under Part B of the Project) to Category (1) (b) (Goods under Part B of the Project)\. (d) Loan Cancellation\. In February 2004, an amount of US$1,521,216\.66 (US$430,018\.58 for Part B and US$1,091,198\.08 for Part C of the project) was cancelled at the request of the Ministry of Finance, based on its assessment that future financing of operating expenditures required less funds use than what was available for such expenditures under the loan\. After the implementation of Parts B and C of the project had been completed, undisbursed loan funds in the amount of $373,482\.28 under Parts B and C of the project were cancelled in September 2005, and $214,711\.85 after the project closure\. In total, US$2\.1 million was cancelled during the project period\. \. (d) Donor financing\. At the time of appraisal, the financing plan included a donor contribution of $12\.7 million consisting of $8\.7 million from USAID, $2\.4 million from UK KHF, and $1\.6 million from EU-TACIS\. However, no co-financing from donors was received during the project implementation\. Reportedly, some donor's did provide limited technical assistance and other support outside of the project scope\. In addition, the gaps were filled by RAO funds and modified project funds\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 6  (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable) The project was approved by the Bank's Board of Directors on June 5, 1997, but it became effective only on August 12, 1998\. The delay of 15 months was caused by various factors such as internal political uncertainties and power struggles, resistance from anti-reformists, delay on the part of the government in finalizing the institutional arrangements, and the financial crisis that was sweeping the country during that period\. During preparation, the project design took into account lessons learned from previous Bank- assisted projects in the power sector in Russia and other countries\. Likewise, the design considered the risk factors and appropriate measures were adopted to mitigate all major risks identified at appraisal\. The project also provided a participatory framework involving stakeholders and direct beneficiaries in the decision-making processes\. Lessons of earlier operations taken into account\. TA loans have been among the weakest performers in the Bank's portfolio\. OED findings have indicated that governance problems and weak management have been the two main reasons for these problems\. Borrower commitment to the project's strategy, intent and design are determinants of good performance\. Factors which are important to a successful outcome, include: (a) a focus on establishing a sound financial basis for sector operations; (b) early and extensive support and training for sector enterprises as they adapt to a more commercial environment; (c) development of broad based support for the program within the government, the industry, and among consumer groups to ensure sustained commitment throughout the reform process; (d) careful attention to social impacts of the reform program and to putting appropriate mitigation measures in place; (e) early resolution of issues relating to the market structure; and, (f) parallel focus on establishing strong regulatory mechanisms to ensure that the public interest was protected during and after the reform\. Risks and their mitigation identified\. The project faced the following risks and the measures mentioned below were taken to mitigate them: Risk 1: Government commitment to reform may not be sustained long enough to allow full realization of the concept and hence of the expected efficiency gains\. Mitigating measure: The project was prepared quickly to respond to what was viewed as a window of opportunity to broaden and deepen the reform agenda\. Project preparation focused on speed in the trade-off between speed and attention to detail\. However, because of the unique opportunity, this approach was felt to be appropriate\. The project attempted to address this risk by providing immediate and extensive support to the program, and by concentrating on areas which would yield large, early, and visible gains in terms of efficiency improvements\. Risk 2: Risks related specifically to the technical assistance included the difficulties in coordinating and absorbing assistance of this magnitude, and the difficulties in predicting and monitoring the effectiveness of programs with substantial training components\. Mitigating measure: Coordination was addressed through the establishment of a high-level, knowledgeable Working Group within the government to oversee the project, supported by a panel of international experts to advise on policy matters, and by an implementation advisory team to assist the ERIU in project coordination\. Risk 3: Training risks 7  Mitigating measure: Training risks were addressed by providing a combination of long-term, on- the job assistance coupled with formal training programs, by a preliminary needs assessment, and by careful selection of training candidates\. Training performance indicators would be agreed at an early date and monitored closely\. In addition, the Bank would provide extra resources to ensure adequate supervision of the project\. Adequacy of participatory processes\. The government and power sector entities were intimately involved in the strategic aspects of the design of the electricity sector reform program\. Their involvement accelerated during the preparation of the Japanese Government funded study related to the Krasnodar Combined Cycle Project\. This resulted in the formation of an Inter-Ministerial Commission which established the principles for electricity sector reform\. This later became a component of the Government's Commission on Natural Monopolies, supported by the Bank's Structural Adjustment Loan\. The government had assigned a high priority to deal with reforms in natural monopolies through a Decree which stipulated the government's strategy and by establishing an Inter-Ministerial Working Group to guide its implementation\. 2\.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, and actions taken, as applicable) As mentioned in Section 1\.7, the project was restructured in February 2000\. For reasons mentioned below, the project was "at risk" status during implementation\. There was no formal mid-term review of the project\. However, informal reviews of the project's progress were conducted whenever a new Task Team Leader (TTL) took charge of the project\. The following factors had affected the project's implementation: Factors outside government control or implementation agency Positive Factor\. The Bank's flexibility: The flexible approach of the Bank was a favorable factor during implementation\. The Bank maintained flexibility which allowed the project to adapt itself to the emerging situations in the country and changing needs of the power sector\. This flexible approach enabled the Bank to act on a just-in-time basis, and adjust implementation to make it more effective and ultimately achieve the project objective\. Negative Factor\. Frequent change of TTLs\. The high turnover of TTLs (seven TTLs during eight years of the project) led to lack of continuity and different approaches to the supervision of project implementation\. Factors subject to government control or implementation agency (i) August 1998 financial crisis\. Starting in late 1997, the rapidly spreading financial crisis in emerging markets and declining world market prices for oil gas and metals, superimposed on Russia's underlying unsustainable fiscal/debt fundamentals, and tipped the Russian economy into a series of crisis episodes\. During the ensuing six months, investors started to exit the government securities market, driving interest rates sharply higher and depleting Russia's foreign exchange reserves in the process\. These events, which culminated in August 1998 financial crisis, devastated the ruble, and produced a radical impact on the economic environment in Russia\. This situation also resulted in suspension of the program of cooperation with the Bank for a year in 1998-1999, and caused implementation to be delayed by nearly two years\. 8  (ii) Frequent change of government\. During the project period, the government changed at least five times, and consequently, support of the reform agenda had been intermittent\. (iii) The project was implemented much slower than planned because of the delays in the Russian State Duma's approval of the electricity sector reform legislation\. For example, after the project was restructured in February 2000, the loan was not used much until 2002, as the implementing agencies (RAO UES, MFE, and FEC) were reluctant to use significant funds before they became sure that the reform would get political approval from Duma\. (iv) Lack of coordination and proper interconnection among three different components of the project (`A', `B' and `C')\. The three different components of the project had lived separate lives, with each one not being coordinated with the others, and all three not being coordinated as parts of a single project effort\. RAO UES (v) The political struggle around the restructuring plan had been massive, demanding the full attention of political and regulatory authorities as well as RAO UES management\. (vi) The top management of RAO UES was not keen in using the Bank loan for financing studies, having less expensive and cumbersome alternative funding available from operations and bilateral donors\. FEC/FTS (vii) Attempted abolition of FEC\. The FEC which had been the most stable element of the power sector and, hence, the source of most of the reforms, went off-track when the prevailing government undertook to abolish the FEC toward the end of 1998 and pass its responsibilities to the new Ministry of Anti-Monopoly Policy (MAP)\. The next government issued a Presidential Decree (No\. 651) in May 1999 abolishing the FEC and transferring its responsibilities and budget to the Ministry of Anti-Monopoly Policy\. These changes made reform policy dialogue (and, hence, the technical assistance to support this program) difficult\. (viii) FECs implementation progress was hampered by change of Project Implementation Unit (PIU) staff in December 2000, and again in September 2001\. These PIU changes were partly influenced by the change of Chairman of FEC (February 2001) and related substantial personnel changes\. (ix) Due to transformation of the regulatory authority, a lot of persons who had undergone training had left the regulatory authority\. The massive resignation of the former FEC staff, which had undergone training under the project, from the power sector regulatory authority had a negative impact on the effectiveness of component `B' of the project\. Ministry of Fuel and Energy (MFE)/Ministry of Energy (MOE) (x) The Ministry of Energy went through internal structural and personnel changes, adversely affecting implementation of their part of the project\. (xi) During 1997-2004, the implementing agency for component `C' of the project (initially Ministry of Fuel and Energy) was completely reorganized 2 times (in 1999 and 2004)\. The Minister was changed seven times and there was no officially appointed Minister at all for more than six months in 2001\. The project had also experienced negative impact of this turmoil in terms of frequent changes of top executives in charge of the project, large periods of uncertainty 9  with regard to project implementation framework in between such changes, and frequent rearrangement of the project's procurement plan\. (xii) MOE - PIU activities were considerably slowed down in 2002, partially due to the uncertainty over taxation and remuneration for PIU consultants, and mostly due to the insufficient ownership of the project on the part of MOE senior management, as demonstrated by the continuous redistribution of managerial responsibilities and partial changeover in senior management\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design\. The government had agreed to establish policies and procedures adequate to allow ongoing monitoring and evaluation of the execution of the project and the achievement of the objectives\. Monitorable indicators were expected to be agreed with the Bank\. The government had also agreed to prepare twice-yearly reports to the Bank (on March 31 and September 30), outlining the progress achieved during the preceding period with respect to the monitorable indicators, and setting out measures to ensure efficient execution and achievement of objectives\. The government had further agreed to review project progress with the Bank by April 30 and October 31 of each year and take the Bank's views into account in project implementation\. M&E Implementation\. Until 2005, there was no explicit system for evaluation and there were no specific criteria for judging the progress\. However, the implementing agencies were monitoring the outcome of the consulting assignments, and seeing what recommendations were to be implemented\. They also followed the procurement plans agreed with the Bank on a continuous basis, and prepared financial records on a monthly basis, and the progress report of the project were submitted to the Bank and also to the Federal Center for Project Finance\. After introducing monitoring indicators in 2005, sufficient data were collected to monitor the project's progress\. M&E Utilization\. Since 2005, monitoring indicators were used for decision-making and resource allocation\. For instance, modifications of procurement plans were done based on these indicators\. 2\.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) Being a TA, there were no safeguard issues related to the implementation of the project\. Fiduciary Issue\. At the time of preparing this report, Audit for Part C of the project was pending for 2003, and 2004\. Preparations for the audit were made as early as December 2003 when an auditing company was selected to conduct the audit\. However, due to the liquidation of the Ministry of Fuel and Energy and creation of the Ministry of Industry and Energy (MIE) in March 2004, the contract signed by the former Ministry with the company was suspended pending a formal transfer of responsibilities to the new Ministry\. By the time the transfer was completed, it was not possible to finance the audit out of the loan proceeds (as Part C was closed by then), and the new Ministry did not have funds available to finance the audit\. The ICR team was informed that Ministry of Finance (MOF) has agreed with the MIE's proposal to finance the audit from the federal budget\. The MIE and MOF are currently 10  doing the paperwork which should allow the MIE to contract an audit company to conduct the audit of the Part C\. In addition, the Bank has so far not received supporting documents and the Special Account recovery application for $37,183\.08 that was disbursed under the Part C\. These funds are now subject to refund\. 2\.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, Operation & Maintenance arrangements, sustaining reforms and institutional capacity, and next phase/follow-up operation, if applicable) (a) Transition arrangements\. RAO UES The power sector unbundling is largely completed\. The sector performance, including collections and service quality, has significantly improved\. RAO UES has introduced modern practices of corporate governance and financial management in the holding company as well as all subsidiaries\. RAO UES as well as some of its regional generation companies' shares are traded on Russian and European stock exchanges\. According to the plans approved by the government, RAO UES plans to cease its existence by mid 2008, effectively privatizing most of its generation and distribution subsidiaries\. If these and other factors listed below are fully implemented it will ensure sustainability of the reforms\. RAO UES has taken appropriate technical, financial, commercial and institutional provisions to ensure effective project operation\. For example: Policy guidelines have been made available to assist in developing new pricing mechanisms for heat on a competitive electricity market, as well as in the context of competition with alternative heat suppliers\. Adoption of the new rules of wholesale electricity (capacity) market of the transition period has become one of most important measures designed to achieve the target wholesale electricity (capacity) market model\. The new rules were specified in the Russian Federation Government Resolution 529 of August 31, 2006 "On Improving Operations of the Wholesale Electricity (Capacity) Market"\. Guidelines for reforming the system of cross subsidizing have been developed and implemented\. A model of electricity metering on the retail market has been developed and tested; a set of regulatory requirements has been prepared and approved for setting up a system of commercial metering of electric power\. Concurrently, a system of model agreements for players on the wholesale and retail markets of electricity and heat has been developed\. Documentation has been prepared for the first six projects built as part of the process of implementation of the Investment Guarantee Mechanism (IGM)\. Description and profiling of the investment climate in the locations of the investment project sites have been provided; assessments of the investment strategy in the regions and forms of support of the investment processes in the investment site locations have been made\. Many staff members who were previously working earlier with RAO are currently working with independent power companies which were separated from RAO\. MIE and Ross Energo will be in charge of compliance with reliability standards\. Regarding the development of wholesale market, market rules will be the function of 11  Trading System Administrator\. After RAO ceases, Market Council, a new non-profit entity will be in charge of market rules\. Market accounts will build on the recommendations, documents, rules and procedures, agreements developed by the project\. FTS: Management Information Systems (MIS) has been put in place, and it continues to be developed and expanded by the FTS\. Expansion program is being financed by several sources, including: (i) federal budget; (ii) funds of FTS meant for research and development; (iii) funds of Regional Energy Commissions; and (iv) funds allocated by companies of electricity sector\. For the timely provision of all necessary inputs, some activities will be conducted by outsourcing them to companies selected on a competitive basis\. In addition, departments of FTS will also be involved in further development of systems\. Appropriate financial, economic and other policies required for effective operation and maintenance are being implemented by the FTS\. For instance, under the pilot mode all tariff decisions were made during 2006 with the help of systems\. These pilots were moved to production and regular operation in December 2006\. Project staff has become part of the regulator\. (c) List of performance indicators\. RAO: After the dissolution of RAO, the Indicators for M&E will be market oriented\. FTS: The following set of monitoring and evaluation indicators have been developed and they will be used as part of the FTS's regular systems operations: (i) Number of users; (ii) number of decisions made using the system; (iii) number of calculations done in regions; (iv) number of new functions implemented, for example, methods to calculate tariffs; (v) number of staff trained to work in the system for Moscow and other cities; and (vi) number of errors made in the calculation of tariffs\. (c) Follow-up by the Bank\. Any follow-up project by the Bank is unlikely in the near future\. The Bank may provide a Partial Risk Guarantee for developing new generation capacity\. (d) Suggested priority and optimum timing of any future impact evaluation\. It will be important to make an evaluation after two or three years on whether the reforms, including unbundling and privatization, have been completed and achieved desired objectives\. It will also be equally important to see whether the move to liberalized market has produced the expected outcomes, like improved efficiency of power sector, mobilization of investments in new generation, and eventual cost reduction and quality improvement\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) The project's objective is still relevant, and important to Russia's economic development\. It is timely and appropriate to the current needs of the country's power sector\. The project is also consistent with the Bank's partnership strategy for Russia\. The main objectives of the strategy include Sustaining Rapid Growth and Improving Delivery of Social and Communal Services\. A 12  reliable and good quality power sector is critical for achieving these objectives\. The growth of the economy and population income has increased demand for electricity\. This in conjunction with lack of investments in modernization and creation of generation capacity has led to deficit of power supply\. Commercialization and privatization of the power sector and creation of the electricity market should attract investments in generation capacity and improvement of service quality\. 3\.2 Achievement of Project Development Objectives (including brief discussion of causal linkages between outputs and outcomes, with details on outputs in Annex 2) Satisfactory\. The project facilitated the power sector reform process in Russia\. As the reform effort gathered pace in 2001-2004 after the adoption of the power sector reform program by the Russian Government (Resolution #526 of July 11, 2001) and the power sector reform legislation (March 2003), measures taken under the project did play a significant role in achieving the goals and objectives of the project and in improving the general power sector performance\. Major achievements of the reforms, which the project supported, are the following: Wholesale electricity (capacity) market of the transition period started operation since November 1, 2003\. In early 2005, the Operation Center for improving the model of the transition wholesale electricity (capacity) market was created\. The Operation Center is responsible for making decisions related to successful functioning and development of wholesale and retail electricity (capacity) markets (further Operation Center)\. Adoption of the new rules of wholesale electricity (capacity) market of the transition period has become one of most important measures designed to achieve the target wholesale electricity (capacity) market model\. The new rules were specified in the Russian Federation Government Resolution 529 of August 31, 2006 "On Improving Operations of the Wholesale Electricity (Capacity) Market"\. They came into effect in September 2006\. Liberalization of the wholesale market is continuing\. In spite of the fact that during the 1st stage, i\.e\. by the end of 2006, 100% of electricity included in the FTS consumption forecast was covered by regulated bilateral contracts concluded between all wholesale market participants (buyers and sellers) and thus sold at regulated prices, the volume of trade in the day-ahead market has substantially increased as compared with the free trade sector\. This was caused by the fact that since September 1, 2006 all electricity included in production/consumption schedules have been participating in competitive selection of price bids in the day ahead market\. The volumes of electricity sold in the wholesale market at unregulated prices (excluding electricity supplied to the population) will gradually increase\. As a result, those volumes of electricity that are no longer covered by regulated contracts (alongside with those electricity volumes that exceed the FTS forecast for 2007) and all electricity produced by new generators will be traded at free competitive prices\. 13 out of 14 Territorial Generation Companies (TGCs) have undergone the state registration procedure\. The RAO UESR Board of Directors approved establishment projects for all 14 TGCs\. Spin-off of grid companies from AO Energos has been almost completed\. 55 out of 56 trunk grid companies have been established on the basis of reorganized AO Energos\. 13  By now all four interregional distribution grid companies have undergone the state registration procedure\. The development strategy for the electricity distribution system has been worked out\. According to it, the number of Interregional Distribution Grid Companies (IDGCs) will increase: the strategy implies creation of 12 IDGCs, which will be comparable in terms of asset value\. Main infrastructure organizations have already been formed\. They are responsible for the formation of the electricity market\. The following companies have already been created: - FGC UES ­ the management organization, which controls the Unified National (All- Russian) Power Grid (UNPG), thus providing unity of technological management, and renders paid services to market entities on a contractual basis\. - SO-CDA UES (System Operator ­ Central Dispatch Administration of the Unified Energy System) ­ the organization, which renders dispatching services to wholesale market participants\. - Administrator of Trading System of the wholesale power market (Non-commercial partnership "Administrator of Trading System of the Wholesale Power Market within the Unified Energy System") (further ­ NP ATS)\. Since November 1, 2003 this company has been organizing the trade in the wholesale market free trade sector\. Since 2005, a closed joint-stock company Financial Settlement Center (ZAO CFR) has been making financial arrangements for participants of the wholesale electricity market\. ZAO CFR is a wholly- owned subsidiary of NP ATS\. As of January 1, 2007, as a result of functional unbundling of regional AO-Energos, 57 energy sales companies (ESCs) have undergone the state registration procedure\. All energy sales companies of the Holding, as well as those AO-Energos that have not yet finished unbundling by activity type (a total of 68 companies) have become suppliers of last resort\. This status was given to them by regional regulatory bodies\. According to the energy legislation on obligations freely undertaken by the companies, this obliges them to conclude energy supply or energy sales/purchase contracts with any consumer who applies to them\. All seven Wholesale Generation Companies (WGCs) have undergone the state registration procedure\. All thermal WGCs have been formed according to their target models\. Shares of all thermal WGCs have been admitted to trading on the stock market\. Besides, HydroWGC Holding was formed ­ placement of HydroWGC additional shares was completed with payment for them in RAO UES-owned property\. The main outcomes of the project's activities are the following: Part A\. RAO UES Commercializing and restructuring of RAO UES\. Restructuring of the RAO UES has been largely completed\. The company has introduced new management and business processes based on modern information technologies, which is envisioned to improve the technical reliability of the MIS\. 14  An advanced integrated and high-capacity management information system has been developed, which has doubled the computation capabilities of RAO UES\. This has enabled establishment of data base and data flow backup facilities, development of the corporate data storage, implementation of accounting and reporting software tools, a multi-tier system of budgeting of the Holding, a system of decision making and electronic data interchange and transmission support, reduction of the time required for data processing and analysis\. The implementation of the data support engineering solutions as part of the Project has helped in improving the efficiency of RAO UES\. RAO UES helped to launch and coordinate the development of the technical regulatory framework to ensure implementation of the Federal Law "On technical regulatory control", which defines completely new relationships arising in the process of development, adoption, enforcement and compliance with the requirements to products, production processes, maintenance, storage, transportation, sale and recycling, as well as to provision of services\. Risk assessments have been made for emerging low-efficiency power usage costs in RAO UES\. Various policies have been examined, which target resource saving and improved energy efficiency in budget-funded and housing utilities organizations, including government-sponsored, public and business strategies\. Commercializing and Restructuring Power Generating Companies\. Guidelines were provided for evaluating the cost-effectiveness of establishing alternative regional generating companies (RGC) on the basis of Cogeneration Heating Plants (CHPs), i\.e\. enhanced capacity heat supply companies incorporating (e\.g\. on credit or on leasing terms) municipal heating plants and heat supply pipelines, energy consuming companies including industrial-scale heat consumers (e\.g\. large manufacturing companies), joint "LC-energos" and municipal heat supply companies, fully or partially owned by the municipal authorities, etc\. Policy guidelines were made available to assist in developing new pricing mechanisms for heat on a competitive electricity market, as well as in the context of competition with alternative heat suppliers\. The existing legislation and the proposed draft heat supply law were reviewed, and alternative solutions were put forward to enable implementation of the objectives of the proposed law and address the key heat supply issues\. A computer model of business planning was developed based on technological and economic indicators of district heating companies owned by RAO UES, which should be instrumental in evaluating alternative investment solutions for making the most cost-effective choice\. Development of Wholesale Electricity Market and Support of Market Operator\. A model of electricity metering on the retail market was developed and tested; a set of regulatory requirements was prepared and approved for setting up a system of commercial metering of electric power\. Concurrently, a system of model agreements for players on the wholesale and retail markets of electricity and heat was developed\. Initial steps have been made to develop a common electricity market within the Commonwealth of Independent States (CIS), whose performance is expected to contribute to the improvement of the efficiency of market mechanisms in the power sector of the CIS countries, including Russia\. Based on the international best practices a model of common electricity market has been developed within the CIS\. The United Digital System of communications of the electricity sector has been put in place, which should assists in providing efficient solutions for technological and administrative tasks on a competitive electricity market\. Commercializing and Restructuring of Regional Power Companies\. A proprietary methodology and techniques for appraisal of the market value of business performance and assets of RAO UES and "LC-energos" has been developed and successfully implemented in the course of the 15  companies' restructuring, which were subsequently adapted to the nature of the Russian electricity sector\. Public Relations\. The corporate image of the OAO RAO "UES of Russia" and its subsidiaries as viewed by key stakeholders have been assessed\. Public dialogue on socio-environmental aspects of the sector development has been held in order to increase corporate responsibility of the OAO RAO "UES of Russia" and support a successful implementation of reforms in the electric power industry\. Independent non-financial audit of social reporting procedures employed by the OAO RAO "UES of Russia" has been made in compliance with the AA1000 AS standard, with certification of social reporting of the OAO RAO "UES of Russia" by external stakeholders as well as its verification in compliance with ISAE 3000\. Legal Support\. Draft amendments and supplements to the Federal Law "On joint-stock companies" have been prepared meeting the following requirements: (a) more complete and clear corporate procedures of reorganizing joint stock companies in the form of split-off, division and takeover; and (b) special regulation in respect of requirements of compliance with special procedures for natural monopolies to engage in large-scale transactions and related-party transactions which they are required to do by law\. Part B: FEC/FTS After the creation of FTS, the project has managed to assist to bring the information technology of the regulatory process to an entirely new quality level by introducing the information exchange, communication, and analysis system (IECAS)1 assisting the communication between federal and regional regulators and regulated companies\. This task was quite important with regard to improving efficiency of the power sector regulatory system in Russia\. In accordance with the conditions of this component, by the time component closed on December 31, 2004, the new information system was installed in nine RECs, and during the following year of 2005 FTS was prepared to introduce the system country-wide (i\.e\. in about 80 RECs), this task was fulfilled\. This undoubtedly contributed to a more timely and efficient regulatory process throughout the country\.' Details of the achievements of Part B are as follows: The layout of the FEC website was developed and placed in the Internet, this website is operational and successful\. In 2005 the FTS of Russia together with regional executive agencies involved in state tariff regulation launched a project intended to put in place online exchange of information between regional websites and the FTS website\. New systems for collecting and processing information have been put in place: - A local network of the FTS has been created; - Legal, accounting, human resource, communication and other information systems have been installed; - The Unified Information and Analytical System (the UIAS), which is a key delivery of Part B of the Project has been developed and made operational in the FTS with the view of improving processes and methods of tariff setting\. The FTS Unified Information and 1 Referred to in some documents as Information and Analytical System (IAS)\. 16  Analytical System provides automation of information interaction between the FTS and regional executive agencies involved in state tariff regulation, regulated entities and expert organizations in the course of tariff setting and provides automation of functions described below\. By the time Part B was completed in December 2004, the FTS UIAS was installed in the FTS and in nine regions of the Russian Federation; the FTS UIAS included a subsystem for data collection and integration; a data warehouse; an information security subsystem; a subsystem for backup of operational activity; a subsystem for calculating tariffs and preparing forecasts in the electricity sector\. The FTS UIAS is intended to provide transparency and improve efficiency of state tariff regulation as well as to reduce the timeframe for making tariff decisions\. Today all regional executive agencies involved in state tariff regulation in 84 regions that form part of the Russian Federation are connected to the FTS UIAS\. On the other hand, there was a lack of success in assisting the regulator in designing and introducing an improved regulatory framework\. The component did little to help establish the fundamental principles of independence and transparency in the legislation, or provide an institutional impact\. Further, after the transformation of FEC into FTS in 2004, it appears that the regulator has only limited mandate and less independence than before\. Part C: MEC/MOE/MIE Although the component fully disbursed its funds, most funds were spent on policy studies which had little direct relevance to reform process and were not used during development of the real policy decisions in the power sector\. The Ministry, support of which was one of the objectives of the project, was abolished during the reorganization of the Russian Government in March 2004, did not create any direct impact on the reform process\. 3\.3 Efficiency (Net Present Value/Economic Rate of Return, cost effectiveness, e\.g\., unit rate norms, least cost, and comparisons; and Financial Rate of Return) N/A being a TA 3\.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Satisfactory Based on the discussion given in Sections 8\.1 and 8\.2, the overall outcome is rated satisfactory\. 3\.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development Poverty Impact\. In the short-term, power sector reform may result in price hikes and affect vulnerable sections of the population\. In the long run, however, it is expected that a healthy power sector will make an important contribution to sustainable development and thereby help reduce poverty\. Also, the reforms have significantly reduced reliance of the sector on state or municipal subsidies and hence have made more funds available for targeted social assistance\. 17  Socia Development\. A program of social reintegration of personnel of electricity sector companies involving communication with persons or groups of employees, laid off as a result of the electricity sector reform, has been developed\. The main purpose of the program consists in establishment of an efficient system of creation of jobs and its development in the area of small and medium-sized business, based on the entrepreneurial potential, to maintain the labor resources along with anticipatory skill training and retraining courses provided for the manpower laid off, as well as training them in new professional skills\. Gender Aspects\. N/A (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) The project resulted in a substantial institutional development impact\. For instance, the project helped to ensure full restructuring of electricity sector\. New entities such as FGC were put in place, and companies such as WGCs and TGCs were created with the technical assistance of the project\. Consequently, a new institutionalizing of electricity market has been achieved, and the old institutions which cannot strictly coexist with the new institutional infrastructure are being phased out\. PIU members of RAO UES and FTS were exposed to the Bank's procurement process under competitive basis\. They have gained necessary skills and experience, and developed the capacity to manage complex projects\. RAO UES benefited in terms of strengthening its ability in project management\. Even after RAO is dissolved as a holding company, the capacity built by the project will remain in the power sector, which has a huge demand for such skills\. Even though many of RAO's existing staff may eventually move to private companies formed as a result of unbundling, their skills will still be useful to the sector\. RAO staff took interest on how reform is to be implemented in the electricity sector in other countries by visiting those countries\. By their direct involvement in the project and the reform process, they have developed a good level of expertise in electricity reforms\. Other institutional strengthening aspects derived from the project are the following: Corporate standards have been developed to promote compliance with requirements to the system of skill upgrade of personnel of power companies and educational organizations responsible for training\. Consolidated financial statements of the holding RAO UES have been brought into compliance with the International Accounting Standards (IAS) and these requirements have been implemented in the regional electricity sector companies\. FEC/FTS improved its capacity in the following ways: The introduction of information systems has helped in improving the efficiency of operations of FTS\. For example, FTS collects information and reports from regulated entities very quickly electronically which helps process information efficiently and in a timely manner with reduced number of errors that could be made in making electronic versions of paper documents\. 18  The project has also facilitated in improving transparency of decisions of FTS because regulated entities have received from FTS special software that FTS uses in calculating tariffs of electricity sector\. As a result, regulated entities are able to verify the correctness of FTS tariff calculations\. FTS has also increased the speed of information exchange and communicating decisions faster to electricity companies because all decisions are posted in websites and regular reports are accepted electronically\.' (c) Other Unintended Outcomes and Impacts (positive or negative) Positive impact\. One direct unintended positive impact of the project was the introduction of a corporate procurement system in RAO in 2002\. The indirect outcome was the implementing of the system in the whole of the electricity sector in Russia\. The corporate procurement system is recognized as the best system among state controlled entities\. It continues to be improved since 2003\. New modules have been built, including e-bidding module developed in 2004\. In the original project design, it was estimated that 6000 utility entities would be regulated\. But by the end of the project, 20,000 such entities were being regulated through FTS\. With the installation of a large module, FTS is now capable of calculating tariffs/providing guidance to regional commissions for 20,000 utility entities\. There was no unexpected negative impact of the project\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) N/A 4\. Assessment of Risk to Development Outcome Rating: Moderate The achievements of Part A are highly sustainable\. On the other hand, Part B, while having produced a convincingly sustainable outcome with regard to the deployment of the FST UIAS, has not produced an outcome that would assure that FST will not lose even the limited degree of independence that it has now\. With respect to Part C, as mentioned earlier, it did not create any direct impact on the reform process\. Based on the varied achievements of these three components, the overall risk of sustaining the project's outcome is rated as Moderate\. 19  5\. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i\.e\., performance through lending phase) Rating: Satisfactory The project's overall quality at entry received a "Highly Satisfactory" rating from the Quality Assurance Group (QAG)\. This was comprised of Highly Satisfactory ratings for the project's concept, objectives and approach, institutional capacity analysis, and the Bank inputs and processes, and Satisfactory rating for technical and economic aspects, poverty and social aspects, readiness for implementation, and risk assessment and sustainability\. The project was prepared in a record time of three months from the government request to Board presentation, with strong support at the highest levels in the Bank\. This was done in order to respond to what was viewed as a window of opportunity to broaden and deepen the reform agenda\. Project preparation focused on speed in the trade-off between speed and attention to detail\. However, because of the unique opportunity, this approach was felt to be appropriate\. The Bank's performance in the identification, preparation, and appraisal of the project was satisfactory\. The project correctly identified the core problems in Russia's power sector, and the fact that the project was relevant even after 10 years, confirms the correctness of the Bank's approach in dealing with the sector\. The project was consistent with the government's priorities and was clearly linked to achieving specific CAS benchmarks\. During preparation and appraisal, the Bank took into account the adequacy of project design and all major relevant aspects, such as technical, financial, economic, and institutional, including procurement and financial management\. In addition, major risk factors and lessons learned from other earlier projects in the power sector were considered and incorporated into the project design\. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory A Quality of Supervision Assessment was carried out by a QAG panel of reviewers for the project in January 2002\. The panel rated the overall supervision of the project as satisfactory\. QAG noted that: "The political consensus finally reached on the structural framework for sector reform was a major accomplishment, and the task team contributed to that success through continuous attention to the policy dialogue over the two year period under review\. Under the circumstances, the panel felt that the time spent on moving issues related to the structural framework of the power sector was well spent, and that definition of the restructuring program was a necessary input for defining the specific TA to be financed by the project\. However, there was also a need to give attention to implementation start up issues - especially developing a credible procurement and implementation plan for the TA, consistent with the implementation capacity of the three implementing agencies - in parallel with engaging in discussions on sector reform\. 20  Under the cover of this TA loan, the task team has contributed very substantially to the strategic dialogue leading to decisions that were taken in July 2001 by the Russian Government on how to reform the power sector\. Because of the size of the sector and the massive investment requirement, there was no alternative to giving the private sector a major role in the Russian power industry\. As a result, both of those objectives are likely, although it is difficult to assess the extent to which the TA project will have contributed to that success\. At the same time, an important purpose of this loan was to enable the major sector agencies to obtain institutional development support in preparation for sector reform\. The panel's assessment that this objective is likely to be realized is based on feedback from the region that RAO-UES already has the capacity to manage and lead the sector reform program and that staff at the regulatory agency already have the skills to perform their functions\. Therefore, the TA covered by the project will serve mainly to increase the "reach" of the two organizations during the high pressure period of reform implementation\. The extent of the delays in approving a sector reform proposal i\.e\. over 4 years was not easily anticipated at entry, though the high risk nature of the project was clearly recognized in the MOP\. The difficulties in designing and implementing sector reform, including the difficulty in generating the necessary political consensus around the reforms, could have been better anticipated based on global experience\. It does not appear to have been prudent to proceed with a large TA loan prior to the reform program having been well established\. There should also have been a much more realistic assessment of the implementation difficulties that a TA project typically faces\." The ICR team concurs with the above findings of QAG\. The ICR team considers the Bank's overall performance during the whole project period as satisfactory\. The task team focused on the project's development impact\. The Bank allocated sufficient budget and staff resources, and the project was adequately supervised and closely monitored\. The task team regularly prepared Aide-Memoires, alerted the government and implementing agencies about issues found during project execution\. The Implementation Status Reports (ISRs) realistically rated the performance of the project both in terms of achievement of development objectives and project implementation\. Bank's procurement and financial management staff worked with the staff of the implementing agencies to explain the rules and procedures to be applied during project implementation, with regard to procurement of goods and works, and selection of consultants, accounts and audits, based on the Loan Agreement\. The Bank was very opportunistic in supporting the proposed reform program in Russia\. It did not promote supporting power sector reforms in the early days of the Bank's involvement in Russia as the Bank felt that they the government was not ready for it\. But once a government which was reform-oriented was in place, the Bank jumped at the chance to support them\. The Bank's flexible approach to adapt itself to the changing circumstances played a crucial role in the success of the project\. This flexibility required continuous follow-up and monitoring with the government\. For example, the Bank had regular consultations with the government on restructuring monopolistic RAO, and finally the Bank succeeded to make the government realize that the restructuring was needed to be done without much delay\. The Bank also helped to formalize the overall concept of reforms, including details of reforms and the timing schedule of reforms\. 21  The persistence of the Bank in supporting the government in its efforts contributed to a successful culmination of reforms in the power sector\. The Bank's interventions and policy dialogue bore fruits in terms of successful reforms\. The Bank's role in the restoration of the FEC as an institution was substantial\. In May 1999, the government issued a Presidential Decree (No\. 651) abolishing the FEC and transferring its responsibilities and budget to the Ministry of Anti-Monopoly Policy\. These changes made reform policy dialogue (and, hence, the technical assistance to support this program) difficult\. The Bank responded to the Russian Government's action with several letters and other official notifications saying that the abolition of FEC was in a serious conflict with the project objectives and that without an independent regulator in place, the regulatory reforms as well as the financial viability of the sector would be compromised\. In July 1999, the initial Presidential Decree on the abolition of FEC was reversed and FEC was restored as an independent regulatory authority (to a large extent, due to the assistance of the Bank)\. Coordination between the Bank headquarters (HQ) in Washington D\.C\. and the Country Office in Moscow worked well\. In addition, the team included staff who engaged Russian authorities very effectively on the framework of sector reform\. On the other hand, as mentioned in Section 2\.2, the high turnover of TTLs during the project period led to lack of continuity and different approaches, which were not helpful for smooth implementation of the project\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory Based on the Bank performance during lending phase and supervision as discussed above, Overall Bank Performance is rated as Satisfactory\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory The government commitment to achieving development objectives was strong at the project concept and preparation stages\. The government adopted an ambitious concept for reform of the electricity sector with the objective of improving its efficiency\. The key elements of the concept were the following: (i) Wholesale Market for trading of power in those regions in which such a market was, or could be made feasible; (ii) Restructuring RAO to encourage competition, focusing first on commercialization of the different operating units within RAO, and ultimately on divesting the State's (RAO's) shares in generation and distribution; and (iii) Improving the quality of government regulation and control by substantial institutional capacity building for the Federal Energy Commission (FEC) and the Regional Energy Commissions (RECs)\. The government also intended to enact legislation requiring the regulators to set tariffs so that: (a) electricity sector companies would recover all reasonable costs of generation, transmission, and distribution; and (b) tariffs were differentiated according to differences in cost of providing service thus eliminating cross-subsidies\. But the government commitment fluctuated during implementation stage due to frequent change of administrations, as well as due to resistance for reforms from some bureaucrats and politicians\. Enabling environment for implementing reforms was also not consistent during the project period as Russia went through turbulent periods\. Soon after the project became effective in 1998, Russia 22  was engulfed in a severe financial crisis which adversely affected the implementation for some time\. Likewise, regarding pricing, even though the government was committed to liberalize power market, there was pressure on the part of the government to keep the tariff low\. For the resolution of implementation issues, very often there were delays and they were not timely\. The speed at which government was taking decisions varied, depending on the political context\. Generally, the sector reform being a politically sensitive area, government was extending the schedule for taking decisions\. Towards the later stage of the project, however, there was strong ownership and commitment from the government\. The government's performance on fiduciary matters especially in terms of financial management, governance, provision of counterpart funding, procurement, reimbursements, and compliance with covenants, was generally satisfactory\. Appropriate levels of review and approval were usually in place; financial accountability and follow-up was mostly observed; and documentation was maintained properly for periodic review\. The project did not suffer from any counterpart funding problems, as the government took timely corrective measures and made appropriate budget provisions\. During the last two years of the project, M&E data were utilized in decision- making and resource allocation\. Some minor fiduciary problems are mentioned in the Section 2\.4\. The government's relationship and coordination with the Bank were satisfactory\. The government officials worked closely with the Bank's project team on a continual basis, and cooperated fully with the task team\. On the other hand, there was a significant lack of consultation and coordination among the three implementing agencies during implementation\. Due to lack of a single supervisory authority within the government and the existence of three autonomous implementing agencies, it was very difficult for the government to manage and coordinate the project's diverse activities\. Transition arrangements for regular operation of supported activities after Loan closing are deemed adequate\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory RAO UES The performance of RAO UES was satisfactory\. RAO UES was the champion of reforms\. It was broadly involved in development of the key policy decisions with regard to reform process, starting from the initial development of the power sector reform program, adopted by the Russian Government in 2001\. RAO UES was highly committed and had a strong ownership of the project\. It was well organized and efficient and had a very supportive management structure\. It was very effective in carrying out all aspects of project management, such as financial management, procurement arrangements, and reporting activities\. Financial Management Review\. The financial management system including accounting, controls, auditing and reporting was adequate and satisfied the Bank's financial management requirements\. Procurement Arrangements\. Procurement of all works, goods and technical services under the project followed the Procurement Guidelines "Procurement under IBRD Loans and IDA Credits"\. RAO UES' procurement activities were set up on a program basis in compliance with the general Power sector reform implementation plan first approved in 2001 and periodically amended by the Russian Government\. Most of the procurement activities under component `A' of the project had direct relevance to the objectives of the power sector reform and commercialization of RAO UES and its subsidiaries\. 23  Reporting Arrangements\. RAO UES submitted all required quarterly and annual reports in a timely manner\. These reports were informative, and provided valuable feedback on how the RAO UES was progressing on project activities\. FEC/FTS The performance of FEC was satisfactory\. FEC staff was interested in the project's activities under Part B and demonstrated strong ownership\. It was reasonably well organized and effective in dealing with procurement, disbursement, progress reports, and in maintaining proper records of the project\. Financial management procedures were conducted in line with the Bank's guidelines\. FEC staff was receptive to the Bank's advice, and collaborated well with the Bank's task team\. Activities under Part B were largely completed under FEC\. FEC was transformed into FTS in March 2004 in connection with the general reorganization of the Russian Government\. FTS had different institutional framework and quite reduced responsibilities as compared to the FEC\. A lot of activities under component `B' were based on the assumption that a substantial part of FEC's institutional framework, established in accordance with the international best practices for power regulatory environment, will be preserved and developed further\. However, the transformation of FEC led to significant change of previous institutional regulatory features of the FEC, making FTS a less independent regulatory authority than FEC was\. In terms of implementing information systems, performance of FTS was highly satisfactory\. MFE/MOE/MIE The performance of MFE/MOE/MIE was unsatisfactory\. The Ministry was generally opposed to the reforms\. It was sometimes at odds with other entities involved in the reform process\. There was insufficient ownership of the project on the part of MFE/MOE/MIE's senior management, as demonstrated by the continuous redistribution of managerial responsibilities and partial changeover in senior management\. The project activities were generally managed by low level officials in the Ministry\. The Ministry's change from MFE to MOE and then to MIE and the personnel changes adversely affected implementation\. Because of the small size of the component, it ended up as insignificant\. The policy studies conducted by the Ministry had little direct relevance to reform process as they were not used during development of the real policy decisions in the power sector\. Due to reorganization of the Russian Government in March 2004, the MFE was abolished, and the newly established Ministry of Industry and Energy was never formally involved as full- grade formal successor of the MFE with regard to implementation of the project (the new Ministry had only partially inherited the functions of the abolished MFE)\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory In light of the government and implementing agencies' performance as discussed above, the overall performance of the Borrower is rated Moderately Satisfactory\. 6\. Lessons Learned 24  (both project-specific and of wide general application) Positive Lessons The Bank played a catalytic role and the project provided the appropriate tool to initiate and implement power sector reforms\. The project was a high-risk, high-reward endeavor\. When the project was initiated, reforms were triggered by individuals within the government, who were champions of reforms\. At that time, it appeared that it was right for the Bank to bet on these individuals, even though the overall capacity of the government was not so impressive in terms of reforms\. So, the Bank decided to be opportunistic and take a calculated high-risk, high-reward approach, which finally paid off in terms of a successful reform in the power sector\. Those reforms, which are politically charged and very difficult to implement, do take time to achieve the desired goals\. The project demonstrated that it is important to be patient and persistent when the Bank gets involved in a reform-oriented project, especially in a country such as Russia which did not have any previous experience in implementing sector reforms\. The success of the project showed that it is important for the Bank to adopt a flexible approach during implementation\. Instead of being impatient with the project cycle, the Bank was quite realistic and responded appropriately by being flexible in extending the project deadlines and the closing date\. This flexible approach enabled the Bank to adjust implementation to make it more effective and ultimately achieve the project objectives\. (general applicability) The ideal situation for a reform-minded project is to initiate it when the situation is stable, the government is stable and government is reform-minded (general applicability) Negative Lessons It is very difficult to manage and coordinate a project which has several implementing agencies\. For a project of this magnitude and importance, it would be better that there is only one champion/owner as a counterpart, even though there may be several beneficiaries of the project\. For instance, dealing with RAO UES, FTS, and MIE as three different implementing agencies was akin to implementing three different projects\. On the other hand, in case multiple agencies cannot be avoided due to political reasons, then, as a precondition, the government should establish an effective coordinating and management mechanism or a working group that will manage the entire project\. (general applicability) The Bank should clearly simplify the project design and not attempt to deal with each and every aspect of the sector, especially when multiple agencies are involved, which makes implementation difficult both for the Bank and the government\. (general applicability) It is important for a regulatory agency to have minimum standards of independence, transparency, and appropriate powers in the discharge of its duties and function\. 25  Continuity of implementing agency staff members, irrespective of change of governments is essential for smooth implementation\. (general applicability) Political factors played an important role for implementing reforms in Russia\. It was difficult to move towards technical solutions without thinking about political implications, especially when there was a massive power struggle in the country\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Comments received from the Borrower on the Bank's draft ICR were considered and appropriate changes have been incorporated into the text of the draft ICR\. (b) Cofinanciers NA (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) NA 26  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Components Appraisal Estimate* Actual /Latest Estimate Percentage of (US$ million) (US$ million) Appraisal Part A N/A 34\.88 Part B N/A 8\.43 Part C N/A 1\.42 Total Baseline Cost 44\.73 Physical Contingencies Price Contingencies Total Project Costs 44\.73 Project Preparation Facility (PPF) Front-end fee (IBRD only) Total Financing Required 44\.73 Note: * Appraisal figures are not available as the components and project activities changed after the project was restructured in February 2000\. (b) Financing Appraisal Actual/Latest Source of Funds Type of Percentage of Financing Estimate Estimate (US$ million) (US$ million) Appraisal [Government] 12\.1 6\.80 [IBRD/IDA] 40\.0 37\.93 95\.36% [Donors] 18\.2 0\.0 [Donor B] [Parallel financing] 27  Annex 2\. Outputs by Component Part A\. RAO UES Commercializing and restructuring of RAO UES Restructuring was completed in the Holding management and business processes based on state- of-the-art information technologies, which constitutes an important factor for improvement of the financial management efficiency, and has ensured technical reliability of the corporate management information system against the background of the on-going diversification and increasing sophistication of the existing economic and technological relations in the sector\. Consolidated financial statements of the holding RAO UES have been brought into compliance with the International Accounting Standards (IAS) and these requirements have been implemented in the regional electricity sector companies\. All the necessary prerequisites have thereby been provided for the proposed commercialization of the Russian electric power sector, for transition from administrative control to corporate governance policies in the power industry, as well as for the improvement of its investment attractiveness An advanced integrated and high-capacity management information system has been developed, which has doubled the computation capabilities of RAO "UES of Russia", has enabled establishment of data base and data flow backup facilities, development of the corporate data storage, implementation of accounting and reporting software tools, a multi-tier system of budgeting of the Holding, a system of decision making and electronic data interchange and transmission support, reduction of the time required for data processing and analysis\. The implementation of the data support engineering solutions as part of the Project has provided a major impetus in improving the efficiency of RAO "UES of Russia" Based on the assessment of approaches and hardware tools, used abroad for forecasting the development trends on the liberalized electricity market, specific proposals have been drafted and customization and implementation activities have been undertaken to provide hardware facilities for putting on-stream a system of regular forecasting of the evolution of a liberalized electricity sector in Russia, which should enable the Agency for Forecasting Electricity Sector Balances, as successor of RAO "UES of Russia", to address the following tasks in performing its responsibilities: - Forecasting the requirements in commissioning (phasing out) of power generating facilities, operating within the Power Grid of Russia; - Assessment of power balance availability for the forecasted consumption with due account of the commissioned (phased out) power generating facilities and potential participation of electricity consumers in regulating the consumption schedules in the Power Grid of Russia and in its individual power supply zones for a medium and long term; - Forecasting of electricity and capacity prices in a competitive electricity and capacity market environment; - Assessment of operating income and profits of power generating companies for evaluating their investment potential\. RAO "UES of Russia" has undertaken immense efforts to launch and coordinate the development of the technical regulatory framework to ensure implementation of the Federal Law "On technical regulatory control", which defines completely new relationships arising in the process of 28  development, adoption, enforcement and compliance with the requirements to products, production processes, maintenance, storage, transportation, sale and recycling, as well as to provision of services\. "Development of a set of standards providing regulatory framework for compliance with security and production management requirements to operating and technical maintenance of boilers, pipelines, vessels, steam and gas turbines in cogeneration plants" has been implemented\. The following five corporate standards were developed (corporate regulatory documents of RAO "UES of Russia") as Model Manual of operation of: steam-turbine and gas-turbine equipment in cogeneration heating plants (CHP) steam turbines in cogeneration heating plants (CHP) steam and hot water pipelines recovery system vessels in cogeneration plants (CHP) high- and supercritical-pressure steam boilers in cogeneration plants (CHP) The regulatory documents thus developed, are designed to ensure continuity in the regulatory framework and prevent reduction in the level of operation and performance reliability of the United Power Grid on the basis of the corporate standards (RAO "UES of Russia") The project provided an assessment of the proposed establishment of a corporate GHG emissions trading system\. Based on the assessment of the latest innovations in the Russian legislation regulating the implementation of Joint Implementation Projects (JIPs) and Green Investments (GIs), as well as with due regard to the international best practices, a draft corporate emissions trading system has been developed for RAO "UES of Russia", which is contemplated for implementation in several steps\. Risk assessments have been made for emerging low-efficiency power usage costs in RAO "UES of Russia", as well as their negative impact on the national economy as a whole has been demonstrated\. Various policies have been examined, which target resource saving and improved energy efficiency in budget-funded and housing utilities organizations, including government- sponsored, public and business strategies\. Recommendations have been provided as guidance to RAO "UES of Russia" in choosing the right policy of action in the current economic environment\. Efforts were undertaken to develop a system of feedback interfacing with electricity consumers, which provides efficient tools for resolution of conflicts, as well as for upgrading the level of social responsibility of power generating companies\. Recommendations have been elaborated to assist in establishing interactive dialog with power consumers in cases of electricity supply breakdowns both in large cities and in medium- to small-size towns and rural settlements\. A distance learning course, dealing with current issues of the electricity sector reform, has been developed and posted on the Website of the Company\. Methodological, technological and financial management plans of running distance learning modules have been developed for the electricity sector\. Provision has been made for leasing arrangements to provide hardware and communication channels for video conferencing sessions as part of the distance learning system of skill upgrade for power sector personnel located in different regions of the Russian Federation\. Under this component 15 training courses were provided to study the experience of liberalization and improvement of the efficiency of electricity sector companies, establishment of electricity tariffs on a liberalized market, managing financial settlements and payments within a wholesale electricity market, planning, budgeting, internal auditing and control over electricity sector companies, their restructuring, improvement of management systems, etc\. 29  Commercializing and Restructuring Power Generating Companies Assessments were made to come up with the most feasible and productive solutions for the proposed restructuring of district heating systems operated from CHPs owned by subsidiaries of RAO "UES of Russia" and establishing regional power generating companies with the ability to run sustainable business on the emerging competitive market of electric power\. Strategies and guidelines for the development of heat supply (heating business) in Russia were defined, as well as methods of consolidation of cogeneration plants within regional power generating companies, including the proposed consolidation of generating assets of the adjacent regional power supply companies ("LC-energos")\. Guidelines were provided (based on appropriate economic assessments) for evaluating the cost-effectiveness of establishing alternative regional generating companies (RGC) on the basis of CHPs, i\.e\. enhanced capacity heat supply companies incorporating (e\.g\. on credit or on leasing terms) municipal heating plants and heat supply pipelines, energy consuming companies including industrial-scale heat consumers (e\.g\. large manufacturing companies), joint "LC-energos" and municipal heat supply companies, fully or partially owned by the municipal authorities, etc\. Policy guidelines were made available to assist in developing new pricing mechanisms for heat on a competitive electricity market, as well as in the context of competition with alternative heat suppliers\. The existing legislation and the proposed draft heat supply law were reviewed, and alternative solutions were put forward to enable implementation of the objectives of the proposed law and address the key heat supply issues\. A computer model of business planning was developed based on technological and economic indicators of district heating companies owned by RAO "UES of Russia", which should be instrumental in evaluating alternative investment solutions for making the most cost-effective choice\. The model was tested in the pilot projects in Belgorod ("Data collection and analysis") and in Nizhny Novgorod ("Assessment of consolidation of Sormovo CHP with municipal main and distribution heat supply systems and heating plants of Nizhny Novgorod")\. A heat supply business planning manual has been developed\. Different alternative solutions, involving maintenance and restoration of the available steam turbines, were reviewed, assessed and rated by cost-benefit analysis, based on the estimated service life of the turbines\. Equipment failure incremental risk assessment for extension of service life scenarios was made, and guidelines provided on the use of available information sources for investment decision on turbines\. In order to improve the efficiency of the operating power generating units by reducing the costs of production and identification of competitive advantages of power generating companies, target indicators have been identified (established) for performance and environmental compatibility of the most representative power-generating units of gas-and-oil power plants and coal-fired stations, as well as hydroelectric power stations in Russia, and comparison has been made between these indicators and similar ones on foreign power stations\. Target values have been established for the economic and production indicators of power stations incorporated in Wholesale Generating Companies (WGC), including HydroWGCs and RGCs, as well as recommendations have been provided on their use\. Development of Wholesale Electricity Market and Support of Market Operator A model of electricity metering on the retail market was developed and tested; a set of regulatory requirements was prepared and approved for setting up a system of commercial metering of electric power\. Concurrently, a system of model agreements for players on the wholesale and retail markets of electricity and heat was developed\. 30  Initial steps have been made to develop a common electricity market within the Commonwealth of Independent States, whose performance is expected to contribute to the improvement of the efficiency of market mechanisms in the power sector of the CIS countries, including Russia\. Based on the international best practices a model of common electricity market has been developed within the CIS\. The example of Kazakhstan and Russia defined practical measures of technological, commercial, regulatory and institutional nature to be contemplated in building a common electricity market in the CIS\. Fundamentals of contractual system implementing the model of such a market have been elaborated\. Methodological and technical assistance were provided in developing and activating key elements of the infrastructure of the wholesale electricity market for the system operator and business operator (NP "Administrator of Trading System") on the market\. In particular, principles of financial management of the System Operator have been developed\. Policies, methods and regulations have been defined to govern relations between the System Operator and other market players\. Technical requirements, specifications and feasibility reports were provided to facilitate subsequent development of a state-of-the-art automated monitoring and control system for the electricity sector SCADA/EMS\. Modern digital communications hardware tools were procured and put into operation, which enable the System Operator and the Administrator of Trading System to have on-line data exchange with a large number of new independent market players on contractual terms\. Thus the United Digital System of communications of the electricity sector has been put in place, which should assists in providing efficient solutions for technological and administrative tasks on a competitive electricity market\. Study trips were organized to the USA, France and Switzerland (2004-2006), which contributed to broadening the horizons and improvement of skills of the key personnel of RAO "UES of Russia", by introduction to specific best practices of formation of electricity markets, management of financial flows of power companies and attraction of investments in a market environment\. On the basis of the currently available international experience (US, Germany, Denmark, UK, etc\.), recommendations were provided to assist in creating favorable conditions for the development of wind power facilities in Russia\. The following regulatory documents have been prepared: draft law on renewable energy sources, layout of the national register of wind power resources, corporate standard of safety and reliability of wind power plant, policy guidelines on selection of wind power equipment based on European standard EN 45510-5-3, etc\. Commercializing and Restructuring of Regional Power Companies Assessments were made of business performance and assets of the Federal and regional power plants to provide feasibility for establishing wholesale power generating companies (WGCs) as the key players on a competitive electricity market\. A proprietary methodology and techniques for appraisal of the market value of business performance and assets of RAO "UES of Russia" and "LC-energos" has been developed and approved by the Board of Directors of the Company, which were subsequently adapted to the nature of the Russian electricity sector\. On the basis of the available policy data base, specific evaluation was undertaken for the establishment of four out of the seven wholesale power generating companies (WGC-1, WGC-2, WGC-4 and WGC-6)\. In addition, the market value of the appraised facilities was identified based on the value of share holdings and property owned by RAO "UES of Russia", as well as the market value of each facility based on one share in a 100% share holding of the WGC for the determination of the stock buyout price as per Article 75 of the Federal Law "On joint-stock companies"\. The market value of each facility was identified for the purposes of payment for additional shares of the WGC and acquisition of shares in accordance with the Article 80 of the Federal Law "On joint-stock companies" 31  Public Relations For enhancing the corporate responsibility of RAO "UES of Russia" and ensuring successful completion of the reform in the electricity sector, a dialog was initiated with the public on social and environmental aspects of the on-going development campaign in the sector\. Expert assessment of the risks associated with the reform implementation efforts in the electricity sector, was completed; a conference "Transparent Power Sector" and a seminar on "Energy Efficiency and Social Accountability" were organized and took place; recommendations have been elaborated on managing monitoring of risks identified in the course of the project, and optimization options presented, as well as recommendations on environmental and social impact assessment of investment projects in the electricity sector based on public opinion inputs; policy guidelines were provided on matters of the proposed assessment of environmental impact of power projects\. A detailed analysis of the business reputation, RAO "UES of Russia" and its subsidiaries have among their key stakeholders, has been provided\. For this purpose views and comments of the key stakeholders on the business reputation of RAO "UES of Russia" and its subsidiaries were collected and analyzed, experts were surveyed, as well as comparative analysis of the status of the corporate reputation was undertaken involving different target respondent audiences\. Based on the collected comments and expert evaluations, lists of risks for the near future were compiled, and policy recommendations on managing the corporate reputation and formation of a favorable information and social and psychological context of the reform in the electricity sector were offered\. For the benefit of proper preparation of power companies for operation on a competitive market, when non-financial risks acquire special importance, external non-financial audit was performed on the status of social accountability of RAO "UES of Russia" per standard AA1000 AS, special measures were taken to ensure certification of its social accountability by external stakeholders, as well as a limited verification procedure was administered in conformity with the International standard ISAE 3000 "Assurance engagements other than audits or reviews of historical financial information" Legal Support Draft amendments and supplements to the Federal Law "On joint-stock companies" have been prepared meeting the following requirements: (a) more complete and clear corporate procedures of reorganizing joint stock companies in the form of split-off, division and takeover; and (b) special regulation in respect of requirements of compliance with special procedures for natural monopolies to engage in large-scale transactions and related-party transactions which they are required to do by law\. Pursuant to the Federal Law "On joint-stock companies" a new draft of the corporate Articles was prepared as a single document meeting the most stringent requirements to its structure, contents and legal format pursuing the objective of enabling Russian and foreign shareholders, investors and creditors to exercise their rights in the process of restructuring and reforming the electricity sector of the Russian Federation, and, in particular, rights of each and every shareholder to have access to information on restructuring activities which affect, or may affect, his legal rights, which, in turn, enhances the transparency of decision-making in the course of the reforms, to avoid conflicts with minority shareholders that may arise due to the lack of information, and, thereby, facilitate implementation of the above decisions\. 32  Part B: FEC/FTS Implementation of Part B of the Project achieved the following results: - Seventy staff members of the FEC and 340 staff members of executive agencies from Russian regions involved in state tariff regulation received training on state regulation and tariff setting in conditions of natural monopoly reforms, including international experience exchange; - The layout of the FEC website was developed and placed in the Internet, this website is operational and successful\. In 2005 the FTS of Russia together with regional executive agencies involved in state tariff regulation launched a project intended to put in place online exchange of information between regional websites and the FTS website\. In 2006 the FTS website became a laureate of the annual National Prize for Contribution to Development of the Russian Segment of the Internet, which is the Runet Prize, the FTS website won in the `State and Society' nomination\. New systems for collecting and processing information have been put in place: - A local network of the FTS has been created; - Legal, accounting, human resource, communication and other information systems have been installed; - The Unified Information and Analytical System (the UIAS), which is a key delivery of Part B of the Project has been developed and made operational in the FTS with the view of improving processes and methods of tariff setting\. The FTS Unified Information and Analytical System provides automation of information interaction between the FTS and regional executive agencies involved in state tariff regulation, regulated entities and expert organizations in the course of tariff setting and provides automation of functions described below\. By the time Part B of the Project was completed in December 2004 the FTS UIAS was installed in the FTS and in nine regions of the Russian Federation; the FTS UIAS included a subsystem for data collection and integration; a data warehouse; an information security subsystem; a subsystem for backup of operational activity; a subsystem for calculating tariffs and preparing forecasts in the electricity sector\. The FTS UIAS is intended to provide transparency and improve efficiency of state tariff regulation as well as to reduce the timeframe for making tariff decisions\. Today all regional executive agencies involved in state tariff regulation in 84 regions that form part of the Russian Federation are connected to the FTS UIAS (by the time Part B of the Project was completed, nine agencies got connected to the system using proceeds of the loan) and the system makes it possible to fulfill the following functions: - document flow in the system of agencies of state tariff regulation; - document flow between regulatory agencies and regulated entities regarding issues of tariff (price) setting for products (services) of natural monopolies and monitoring of their activity; - collection of regular reports prepared by regulated entities as well as justification of tariff (price) setting; their registration and verification; - calculation of tariffs (prices) for products (services) of natural monopolies, analysis of justification of tariff setting, calculation of statistical indicators and forecasts; - preparation, optimization and analysis of the balance of electric power and capacity in the Unified Energy System; - maintenance of the register of natural monopoly entities; 33  - maintenance of the register of tariffs set for natural monopoly entities\. After completion of Part B of the Project during trial operation and development of the FTS UIAS functions throughout 2005 a mechanism of electronic digital signature that makes it possible to make documents, which are disseminated within the system, legally valid was tested\. Starting from 2006 onward all modules of the FTS UIAS have been used in the course of preparing tariff decisions regarding tariff caps for electricity and heat, preparing and optimizing the forecast balance of electric power and capacity, preparing tariff decisions regarding electricity generation and transmission\. The application of the system in 2006 made it possible to process 10,258 forms with calculations in the automated mode and set up a database on 792 grid companies, 321 power plants, 210 sales companies and system entities (JSC RAO UES of Russia, the System Operator-the Central Dispatch Administration, the Federal Grid Company and the Trading System Administrator)\. In 2006 the system was run in a trial mode to computerize processes of monitoring tariff decisions made by regional tariff regulators and to collect information on regulated entities\. As a result, an analytical database with information about more than 19,000 enterprises of the utility sector was put in place\. As a result of successful implementation of the system in a trial mode starting from December 18, 2006 key components of the system have been running in a regular mode\. Part C: MEC/MOE/MIE Studies conducted under this component consisted of the following: (i) `Development of individual projects for reforming temporarily isolated power systems' (ii) `Development and implementation of the state program of incentives for private investments in the electricity sector at the transition stage of structural reforms' (iii) `Analysis of the impact made by the restructuring processes in the electricity sector on the fuel supplying sectors of the fuel and energy complex' Activities under institutional strengthening of the MOE included: (i) Training of the MOE staff (ii) Equipment procurement (iii) Consultants' services of the Project Implementation Unit 34  Annex 3\. Economic and Financial Analysis (including assumptions in the analysis) N/A 35  Annex 4\. Bank Lending and Implementation Support/Supervision ProcessesTask Team members 36  Names Title Unit Responsibility/ Specialty Lending (from Task Team in PAD Data Sheet) Mr\. Gary Stuggins ETWEN TTL Supervision (from Task Team Members in all archived ISRs) Mr\. Gary Stuggins ETWEN TTL Mr\. Igor Lojevsky ECSIE Coordinator Ms\. Janet A\. Koch ECSIE TTL Mr\. Bjorn Hamso ECSSD Program Team Leader, Energy Economist Mr\. Vadim Voronin ECSIE Res\. Mission Rep\. Mr\. Nikolay Nikolov ECSSD Operations Analyst Ms\. Gunn Oland ECSIE Senior Energy Specialist Mr\. Alexander Pozin ECSIE Energy Specialist/Operations Officer Mr\. Vladislav Krasikov ECSPS Procurement Specialist Mr\. Alexander Mizgunov ECSPS Financial Management Specialist Mr\. Vladislav Vucetic ECSIE TTL Mr\. Karl Skansing ECSPS Senior Procurement Specialist Mr\. John Besant-Jones ECSSD Lead Economist Mr\. Michael Haney ECSIE Energy Specialist Mr\. Gleb Zinoviev ECSIE Operations Officer Mr\. Victor Loksha ECSSD TTL/Energy Economist Mr\. Alexander Roukavichnikov ECSPS Procurement Specialist Ms\. Vivien Foster ECSSD TTL Mr\. Matthew Buresch ECSIE Senior Energy Economist Ms\. Galina Kuznetsova ECSPS Financial Management Specialist Mr\. Eric Groom FEU Senior Regulatory Specialist Mr\. Henk Busz ECSSD Energy Sector Manager Mr\. Vladimir Milov ECSIE Independent Consultant Mr\. Larry Ruff ECSIE Independent Consultant Mr\. Ashley Brown ECSIE Independent Consultant Mr\. Ranjit Lamesh ECSSD Program Team Leader Mr\. Gevorg Sargsyan ECSSD TTL Ms\. Tatyana Shadrunova ECSSD Operations Analyst Mr\. Sati Achath ECSSD Consultant 37  (a) Ratings of Project Performance in ISRs (all fields are pre-populated by the system) No\. Date ISR Archived DO IP Actual Disbursements (US$mln\.) 1 11/26/1997 Satisfactory Satisfactory 0 2 07/06/1998 Unsatisfactory Unsatisfactory 0 3 06/23/1999 Unsatisfactory Unsatisfactory 0 4 12/30/1999 Unsatisfactory Unsatisfactory 0 5 06/28/2000 Unsatisfactory Unsatisfactory 0 6 09/20/2000 Satisfactory Satisfactory 0 7 06/29/2001 Satisfactory Satisfactory 2\.08 8 12/26/2001 Satisfactory Satisfactory 2\.30 9 06/28/2002 Satisfactory Satisfactory 2\.58 10 12/05/2002 Satisfactory Satisfactory 3\.11 11 05/07/2003 Satisfactory Satisfactory 5\.23 12 10/14/2003 Satisfactory Satisfactory 11\.73 13 12/24/2003 Satisfactory Satisfactory 16\.54 14 03/09/2004 Satisfactory Satisfactory 18\.41 15 12/20/2004 Satisfactory Satisfactory 23\.00 16 04/15/2005 Satisfactory Satisfactory 26\.49 17 01/04/2006 Satisfactory Satisfactory 31\.55 (c) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No\. of staff weeks USD Thousands (including travel and consultant costs) Lending FY97 155\.66 FY98 0\.00 FY99 0\.00 FY00 0\.00 FY01 0\.00 FY02 0\.00 FY03 0\.00 FY04 0\.00 FY05 0\.00 FY06 0\.00 FY07 0\.00 Total: 155\.66 Supervision/ICR FY97 27\.03 FY98 151\.30 FY99 111\.07 FY00 50 190\.86 FY01 32 114\.60 FY02 43 111\.36 FY03 33 116\.77 FY04 25 79\.38 FY05 27 133\.69 FY06 5 69\.19 FY07 9 28\.46 Total: 224 1133\.71 38  Annex 5\. Beneficiary Survey Results (if any) N/A 39  Annex 6\. Stakeholder Workshop Report and Results (if any) N/A 40  Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR Part A\. RAO UES Market oriented reform of the Russian energy sector plays a key role in infrastructure sector development of Russian economy to ensure dynamic economic growth\. But for all that in spite of high priority and complexity of the reform process being implemented none of Russian government federal task programs provide for financing of measures related to preparation and execution of energy sector reform\. Thus the World Bank's loan funds, which have a long-term repayment period and low interest rate, have been an essential source to finance the process during transition towards competitive market\. This allowed RAO UESR to avoid current costs, which could result in either undesirable additional increase of tariffs on electricity and heat or revenue losses of the state, which is the main shareholder of RAO UESR\. The Loan Agreement 4181-RU between the Russian Federation and IBRD (providing for USD 40 million) to finance Electricity Sector Reform Project (hereinafter called Project) was signed on 10/09/1997 and approved by Russian Government Decree No 661 dated 06/27/1998\. RAO UESR's portion of funds (Part A) amounts USD 29 million and is provided on chargeable, fixed- term, and repayable basis\. At the very beginning implementation of the Project encountered a sequence of problems, as a matter of fact most of which have been force majeure circumstances for end borrowers and beneficiaries of the Project, particularly for RAO UESR (during 1997-1998 ­ reiterated change of RAO UESR's management and the August Default, which significantly modified economic situation in the Russian Federation and temporarily suspended Russia-IBRD cooperation program; during 2000-2001 ­ search for public consensus with regard to electricity sector restructuring as well as development of corresponding Governmental program)\. Not to forget the initial management structure of the Project which was found practically ineffective\. All the above determined the need to issue an Amendment to the Loan Agreement, which was signed on 12/17/2000 and permitted to optimize the Project management, as well as defined the program and sub-loan terms and conditions for all beneficiaries\. Taking into account subsequent issue of Electricity Sector Reform Program approved by the Russian Government (2001) and adoption of corresponding laws (2003) the whole set of preconditions necessary to start practical realization of the Project has been developed only by mid-2003\. Since then the use of loan funds has been accelerated significantly\. The Project implementation provided an appreciable support to Russian Electricity Sector restructuring process over all directions including the following: a) commercialization and restructuring of state energy monopolist - RAO UESR Holding as well as of regional energy companies; b) formation and development of electricity competitive market in the Russian Federation; c) establishing and supporting the new infrastructure entities\. The following main practical results were directly achieved with the Project support: - Switch of consolidated statement of RAO UESR to the IAS and spreading of this practice over regional companies\. This established necessary preconditions to These contributions were received from the Beneficiaries and Implementing Agencies of the Project (RAO UES ­ for Part A, FTS ­ for Part B, and MIE ­ for Part C) and submitted to the RF Ministry of Finance for No-Objection 41  commercialize Russian energy sector, to shift from administrative to corporate management methods within the sector, to enhance its investment attractiveness; - Restructuring of managerial and business-processes within RAO UESR Holding on the basis of contemporary information technologies\. This has been important factor to enhance financial management efficiency and provides for technical reliability of corporate management information system under progressing diversification and complication of economic and technological relations within the sector; - Development of methodology and algorithms for business and assets valuation for Holding enterprises ensuring minimization of human factor as well as providing for transparency, fairness, and consistency when implementing the valuation while forming new entities and participants of electricity market; - Conceptual and technical support during creation and operation of System Operator and Federal Grid Company as key elements of wholesale electricity market infrastructure; - development and introduction of the system of standard contracts for the participants of wholesale and retail electricity and heat markets\. By guaranteeing uniform and consistent application of norms of civil, fiscal and other applicable legislation on the market this contributes to formation of a solid legal base for market transformations in the Russian energy sector; - working out of the key principles of RAO UESR heating business development, organization of heating business and centralized heat supply at municipal and regional levels with transfer to business planning; - valuation of business and assets of federal and regional power stations for the purpose of formation on this basis of the wholesale generating companies as key participants of the competitive electricity market; - creation and launching of the Unified Digital Communication Network of Electricity Sector, which guarantees efficient communicatory interaction between the System and Commercial Operators and a large number of new independent market members on a commercial basis; - development, coordination with the government of the Russian Federation and launching of the Investment Guarantee Mechanism, which stimulates private investments into generation objects during transition period to the competitive energy market; - development and implementation of measures as regards to reforming of the cross- subsidizing in the energy sector; - development of the basic principles of unified energy market development within the framework of the Commonwealth of the Independent States, activity of which in the long term shall contribute to enhancement of efficiency of market mechanisms in the energy sector of the CIS states, including the Russian Federation; - analysis of corporate reputation of the RAO UESR Holding and its subsidiaries among key stakeholders and holding of a public dialogue on social and environmental aspects of the sector development in order to enhance RAO USER corporate responsibility and carry out energy sector reform successfully; - implementation of external assurance of the process of social accountability of RAO UESR pursuant to the AA1000 Assurance Standard with assurance of the social reporting of RAO UESR by external stakeholders of the company, as well as limited 42  assurance in accordance with International Standard on Assurance Engagements (ISAE) 3000; - development of corporate GHG emissions trading system within the framework of Kyoto Protocol, which allows to use comprehensively project and program mechanisms within the framework of joint implementation projects and target ecological investments in order to attract additional investments and also to switch to emissions trading system similar to the one used in the EU in the future; - development of the methodological and software framework to generate regular forecasts for the development of the liberalized electricity sector of Russia, which is essential specifically for determination of necessity for putting into operation/retirement of generating capacities of RAO UESR, forecasting of prices on electricity and capacity, as well as of investment potential of generating companies in the competitive market conditions\. At the same time taking into account the nature of energy sector reforming system tasks that were solved within the framework of the Project, the following indirect results of its implementation should be mentioned among others: - launching in 2003 of the wholesale market free-trade sector «5-15», which already during the first year of functioning became one of top ten world's energy trading sites, as well as launching in 2006 of the new model of the wholesale energy and capacity market NOREM; - implementation of regional energy companies' reforming projects through functional unbundling with creation of self-sustained generating, sales and distribution grid companies; - creation and start of functioning (2001) of non-commercial partnership "Trade System Administrator", which acts as a commercial operator on the wholesale energy market\. On the whole in the course of Project realization RAO UESR has concluded 141 contracts, application of Loan funds amounted to 28,790,000 US dollars\. Procurement of goods and services under the Project was carried out in strict correspondence with the IBRD requirements, which envisage accurate regulation of procurement activities with an emphasis on open competitive procedures\. Allowing to significantly increase procurement efficiency this also positively influenced general system of procurement activity organization in RAO UESR\. Corporate regulatory and methodical documents that regulate procurement activities were developed and introduced in the Holding\. At the same time taking into account experience that was accumulated in the course of Project realization RAO UESR successively widens field of application of competitive procurement procedures, which is one of the key mechanisms of cost management\. Ministry for Economic Development and Trade of the Russian Federation has acknowledged the RAO UESR corporate system of procurement regulation and realization to be the best among Russian companies with state participation\. Part B: FEC/FTS Information support, day-to-day consultations and a constructive position taken by staff members of the World Bank Moscow Office allowed the FTS to complete Part B of the Project successfully and in a timely fashion during the second half of 2004 by the end of 2004 despite major institutional and personnel changes, such as 43  - Transformation of the FEC into the FTS in line with the administrative reform of federal executive agencies launched in 2004; - Approval of the Federal Law on November 10, 2004 introducing changes in the 2004 federal budget that actually took into account the completion of Part B of the Project in 2004 and allocated funds from the federal budget for these purposes; - Changes in the composition of the FTS PIU six months before completion of Part B of the Project; and - Changes in the personnel of the MOF responsible for implementation and coordination of projects using proceeds of external borrowings, which made the process of getting clearance of technical issues in accordance with loan procedures longer (approval of the signing authority, reallocation of funds among loan categories)\. The project-based principle in administration of Part B of the Project provided an opportunity to disseminate project culture among FTS staff members and achieve the objectives set within the shortest period\. During implementation of Part B of the Project FTS staff members acquired and developed skills of conducting competitive tenders to procure goods and services, skills of using standard World Bank contracts and financial reports\. The FTS of Russia manages and coordinates the UIAS development\. Starting from 2006, a program intended to provide support to the regions has been under implementation\. This program includes: - provision of software, documentation and instructions to get connected to the system on a non-for-profit basis; - technical and methodological support for subscribers of the FTS UIAS; - assistance to regional tariff regulators in dissemination of the system\. Under the program for providing assistance to the regions 32 training workshops on FTS UIAS application have been conducted in 12 cities since 2005\. The total number of trainees is more than 950 specialists from regional tariff regulatory agencies, regulated entities and experts\. Application of the FTS UIAS in the regulatory process provides an opportunity to set up and update the single database with information on regulated entities and tariff decisions\. The use of the single database and computerized procedures of data exchange helps reduce costs to conduct the expertise of tariff decisions and conduct efficient analysis under specified scenarios\. A number of projects aimed to apply the FTS UIAS in other regulation areas are being implemented, building on experience of practical application of the FTS UIAS in regulation of tariffs in the electricity sector and the housing and communal services sector\. Part C: MFE/MIE Part C of the Loan Agreement, dated October 9, 1997, provided to finance the Electricity Sector Support Project included activities aimed to refine the state program of reforms in the Russian electricity sector (the Program) at the Russian Ministry of Energy\. The Action Plan of the Russian Government regarding social policy and streamlining of economy developed for 2000-2001 and approved by Russian Government Resolution No\. 1072-r, dated July 26, 2000, set specific short-term tasks for the MOE related to restructuring of the natural monopoly in the electricity sector that specified further the content of the future Program\. The implementation of the Government Action Plan is to be treated as an integral part of the Electricity Sector Reform Support Project (the Project) financed using the proceeds of the Loan\. 44  The Project Concept Note for Part C to be implemented by the Russian Ministry of Energy was reviewed and agreed upon at the Interagency meeting held on August 25, 2000, and attended by representatives from the Russian Ministry of Energy (the MOE), the Russian Ministry of Finance (the MOF), the Russian Ministry of Economic Development and Trade (the MOEDT) and the Federal Center for Project Finance (the FCPF)\. The Concept Note regarding activities to be implemented by the MOE was intended to specify activities under Part C of the Project in accordance with the Government Action Plan on reforms of the natural monopoly in the electricity sector and development of the fuel and energy sector\. Implementation To implement Part C of the Project, Agency Agreement No\. 01-01-06/27-481, dated July 20, 2000, On Disbursement of Proceeds under Part C of Loan No\. 4181 RU Provided by the International Bank for Reconstruction and Development to Finance Technical Assistance under the Electricity Sector Reform Support Project was signed by the MOF and the MOE (the Agency Agreement) for the amount of $2\.0 MM\. The Project Implementation Unit (the PIU) consisting of the Ministry staff was set up at the MOE\. To implement Part C of the Project, contracts for consultants' services were signed by the MOE and the following three legal entities: 1\. Contract No\. ME-1 was signed with the close joint stock company the Bureau of Financial Analysis and Investment Analysis on July 30, 2003\. The Terms of Reference included development of a program for restructuring temporarily isolated regions that was supposed to be one of the activities implemented at the first stage of the reforms during the period from July 2001 to July 2004\. It was planned to reform the electricity sector and the heat generation sector in such areas that were located within one region or several regions of the Russian Federation on principles and conditions differing from principles and conditions approved by the Russian Government for a majority of other regions of the Russian Federation\. Objectives of the assignment were as follows:(a) to develop a draft Program for the Unified Power System of Siberia, which was treated as a region temporarily isolated economically;(b) to develop a draft Program for the Unified Power System of the East that was treated as a region temporarily isolated economically\. The price of Contract No\. ME-1, dated July 30, 2003, and signed by the MOE and the Bureau of Financial Expertise and Investment Analysis amounted to 516,456\.00 in the dollar equivalent, including the value added tax of $86,076\.00\. All activities regarding consultants' services provided by the Bureau of Financial Expertise and Investment Analysis were fulfilled, with results presented in the final report entitled `The Russian Electricity Sector Reform Support Project\. Development of Specific Projects for Reforming Temporarily Isolated Systems' (on 417 pages) with annexes (on 84 pages) in December 2003 and submitted to the MOE for subsequent use\. 2\. The close joint stock company Consulting Group Progressor signed Contract No\. ME-3 on September 10, 2003\. The Terms of Reference included development of a program of incentives 45  for investments in the electricity sector at the reform stage, which was to become an integral part of state policy on Russian electricity sector reforms\. Such a program was needed in the existing situation to avoid inadmissible reduction in operational reliability of the Unified Energy System of Russia due to worn-out assets and a shortage of generating capacity in some areas\. The Russian Government was to undertake measures of targeted support of investments in the electricity sector at the reform stage\. The price of Contract No\. ME-3, dated September 10, 2003, and executed by the MOF and the Consulting Group Progressor amounted to 602,406\.00 in the dollar equivalent including the value added tax of $100,401\.00\. All activities regarding consultants' services provided by the Consulting Group Progressor were fulfilled, with results presented in the final report on Development of the State Program of Incentives for Investments in the Russian Electricity Sector at the Reform Stage (on 217 pages) with annexes (on 103 pages) in December 2003 and submitted to the MOE for subsequent use\. 3\. Contract No\. ME-4 was signed with NERA UK Limited, registered in London, on October 16, 2003\. The task under the Terms of Reference was to define assignments for a consultant hired by the MOE to do analysis of impact of restructuring processes in the electricity sector on fuel supplying subsectors of the Fuel and Energy Sector, such as the coal sector, the nuclear energy sector, the gas sector, the oil sector, including pipeline, railway and water transportation of fuel, and to develop measures for alleviating potential negative impact of reforms in the electricity sector on the aforesaid subsectors of the Fuel and Energy Sector\. A need to conduct such a study was stipulated by the fact that when the decision was made regarding the concept for reforms in the electricity sector, the Russian Government did not conduct the analysis of impact such reforms would have on fuel supplying subsectors of the Fuel and Energy Sector\. The price of Contract No\. ME-4, dated October 16, 2003, and signed by the MOE and NERA UK Limited amounted to 480,000\.00 in the dollar equivalent, including the cost of consultant's services of $400,000\.00 and the value added tax of $80,000\.00\. All activities regarding consultant's services provided by NERA UK Limited were fulfilled, with results presented in the final report on Analysis of Impact of Restructuring Processes in the Russian Electricity Sector on Fuel Supplying Subsectors (100 pages in the English language and 117 pages in the Russian language) with annexes (17 pages in the English language and 20 pages in the Russian language) in December 2003 and submitted to the MOE for subsequent use\. 5\. Payment for Consultants' Services Provided by Legal Entities Under the aforesaid contracts, all activities regarding consultants' services were fulfilled in 2003, and the MOE accepted relevant reports in 2003, issuing eight acceptance certificates, with nine invoices attached for the total amount of $1,598,862\.00, including the value added tax of $266,477\.00\. Payment for consultants' services provided was made by the International Bank for Reconstruction and Development in the amount of $1,332,385\.00, including the first stage payments in the amount $425,476\.00 made in 2003; the second stage payments in the amount of 46  $648,192\.00 made in 2004; and the third stage payments in the amount of $258,717\.00 by the deadlines set out in the aforesaid contracts\. Refund of the value added tax regarding the first stage in the amount of 2,552,856\.00 rubles (85,095\.20 in the dollar equivalent) was made in December 2003 using the proceeds of the federal budget under the Agency Agreement\. To ensure the refund of the value added tax regarding consultants' services in the total amount of $181,381\.80, including $129,638\.40 for the second stage payments and $51,743\.40 for the third stage payments, the MOE sent letters to the MOE with a request to allocate funds from the federal budget for co-financing of Project implementation\. In connection with abolishment of the Russian Ministry of Energy in conformity with Presidential Decree No\. 314, dated March 9, 2004, On the System and Structure of Federal Executive Agencies, and in accordance with Russian Government Resolution No\. 903-r, dated July 1, 2004, the Russian Ministry of Industry and Energy (the MOIE) assumed the rights and obligations under Agency Agreement No\. 01-01-06/27-481, dated July 20, 2000, On Disbursement of Proceeds under Part C of Loan No\. 4181 RU Provided by the International Bank for Reconstruction and Development to Finance Technical Assistance under the Electricity Sector Reform Support Project signed by the MOF and the MOE (the Project)\. These issues were formalized in the Agreement, dated February 4, 2005, which was signed by the Liquidation Commission of the MOE, the MOIE, and the MOF\. 47  Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders N/A 48  Annex 9\. List of Supporting Documents** Project Implementation Plan Memorandum and Recommendation of the President: Russian Federation Electricity Sector Reform Support Project (ESRSP) dated May 16, 1997 (Report No: P7126 RU) Technical Annex: Russian Federation Electricity Sector Reform Support Project (ESRSP) dated May 16, 1997 (Report No: T 7126 RU) Aide Memoires, Back-to-Office Reports, and Implementation Status Reports\. Project Progress Reports\. Borrower's Evaluation Report dated March 2007 **including electronic files 49  MAP

REVIEW

P071131

 ICRR 12439 Report Number : ICRR12439 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 07/18/2006 PROJ ID :P071131 Appraisal Actual Project Name :Sri Lanka Central Bank Project Costs 42\.00 39\.2 Strengthening US$M ) (US$M) Country :Sri Lanka Loan /Credit (US$M) Loan/ US$M ) 30\.30 32\.20 Sector (s):Board: ): FSP - Banking US$M ) Cofinancing (US$M) 1\.00 1\.28 (68%), Payment systems securities clearance and settlement (30%), Law and justice (2%) L/C Number :C3525 FY ) Board Approval (FY) 01 Partners involved : SIDA Closing Date 07/31/2005 07/31/2005 Evaluator : Panel Reviewer : Division Manager : Division : Ilka Funke Lily L\. Chu Kyle Peters IEGCR 2\. Project Objectives and Components a\. Objectives According to the PAD and ICR, the project aimed at supporting the Central Bank of Sri Lanka (CBSL) in its efforts to effect a fundamental restructuring and reorganization program to create a lean, well functioning, modernized, and efficient central bank capable of supporting strong economic growth over the medium to long term \. The project was also expected to pave the way for further financial sector reforms with the ultimate objectives of establishing a fully private, competitive, and prudentially managed banking system \. The legal document uses a more narrowly defined objective : “to enhance the efficiency and capacity of CBSL and to improve the financial sector policy and regulatory framework to promote financial sector development â€?\. In the absence of monitorable performance indicators (see also 6\.), this ICR review will measure results against the more clearly defined objective as stated in the legal document \. b\. Components (or Key Conditions in the case of Adjustment Loans ): 1\. Institutional Restructuring and Reorganization of the CBSL (estimated costs at appraisal US$ 26\.34 million, actual costs US$ 18\.25 million) a\. Revamp the human resource management function and introduce a merit based reward system \. b\. Implement a Voluntary Retirement Scheme\. c\. General Support for Capacity Building of various departments \. 2\. Improvement of Payments and Securities Clearing and Settlement System (estimated costs at appraisal US$ 9\.21 million, actual costs US$13\.58 million) a\. Introduce a Real Time Gross Settlement System (RTGS)\. b\. Upgrade the Scripless Government Securities System (SGSS)\. c\. Automate the General Ledger in the Central Bank \. 3\. Financial Markets Regulations and Developments (estimated costs at appraisal US$ 0\.83 million, actual costs US$ 1\.43 million) a\. Support legal reforms\. b\. Conduct other financial sector studies in priority areas \. 4\. Implementation Support / Others (estimated costs at appraisal US$ 0\.62, actual costs due to adding of a new component (see 2c\.) US$ 5\.94 million) c\. Comments on Project Cost, Financing, Borrower Contribution, and Dates A Project Preparation Facility of US$ 600\.000 was provided for an up-front technical assessment of the payment system, design HR policies and develop a VRS scheme (actual costs US$ 430\.000)\. The Swedish International Development Agency (SIDA) granted the equivalent of US$ 1 million to fund restructuring and training under the HR component\. Government counterpart financing fell short of initial expectations, with only US$ 5\.72 million of the anticipated US$ 11\.72 million materializing\. IDA funds, denominated in SDR, were almost fully disbursed (99\.89% of estimated costs)\. The project became effective on time, but closed half a year late to allow completion of the North East Reconstruction Program, a new component for which US$ 5 million of project funds (together with funds from two other WB projects ) were relocated in December 2002 upon request of the Government \. Neither the Project Status Reports nor the ICR give further details on this new component, or who is in charge of implementing and supervising it \. The project objective was not revised to accommodate this new component, although it does not really fit into the overall objective of the operation\. 3\. Relevance of Objectives & Design : Strengthening the Central Bank was a relevant component to reform the fragile financial system in Sri Lanka \. Given the strong commitment by the Central Bank management to tackle unpopular measures and refocus the Central Bank on its core function, the project was perceived to be a feasible point of entry to broader financial sector reforms \. The relevance of the reforms was also confirmed by the Financial Sector Assessment Program (FSAP) in 2002\. Regarding the design, the project objective was ambitious given the sensitive and controversial nature of some reforms (such as the Voluntary Retirement Scheme and the switch to an incentives based human resource management system), and the lack of broad ownership of reform outside the Central Bank Management (particularly with regard to refocusing of the Central Bank on its core functions and enforcing prudential regulations )\. The formulation of the objective was vague, leaving too much room for interpretation in the absence of clearly defined and monitorable performance indicators (see also 6\.)\. 4\. Achievement of Objectives (Efficacy) : Overall, the Central Bank of Sri Lanka has made commendable progress towards enhancing the efficiency and capacity of the CBSL: 1\. A comprehensive human resource reorganization and development program was initiated \. Staffing levels fell by 40 % (compared to be 50% estimated at appraisal) due to the implementation of a Voluntary Retirement Scheme in combination with outsourcing of some support services (Drivers, Lankaclear, Cleaning)\. Against initial reservation by staff and unions, a first set of performance evaluations were introduced, job description for all staff completed and a skill evaluation undertaken to develop a well -targeted training program which was launched in 2004\. According to the CBSL Annual Report in 2005, 191 officers were sent abroad for short training seminars on core central bank functions, and on average every employee participated in more than one local training in 2005\. 2\. Substantial progress was made with regard to upgrading the core financial system infrastructure \. A Real Time Gross Settlement System, a Scripless Securities Settlement System and an automated General Ledger System were introduced, and work on a Cheque Imaging and Truncation System (CIT) was initiated\. The automation led to increased efficiency (i\.e\. in 2005, the new RTGS system handled 149,627 transactions with a total value of 17,543 billion, which is an increase of 60% in number and 48% in volume compared to the former system (based on CBSL statistics) and also to a reduction of systemic risks (i\.e\. the overall settlement time of the RTGS was reduced to “nearâ€? real time compared to end of day settlement according to the ICR \. It is estimated that the CIT will reduce the transaction time from between 2-7 days to one day)\. 3\. Several reforms were initiated to reform the Central Bank core policy framework \. Formally, a floating exchange rate regime was adopted in 2001, and a system of Open Market Operations as prime monetary instrument introduced in 2003\. The Central Bank’s main objectives were redefined as (i) economic and price stability and (ii) financial system stability, which is far broader than the project ’s originally anticipated focus on price and financial system stability alone\. This leaves significant flexibility, which the Central Bank has used until recently to conduct an expansionary monetary policy to offset the negative economic impact of rising oil prices and a drought \. According to the IMF (Article IV, September 2005), the expansionary monetary policy contributed to an increase in broad money to 20% in 2004 (compared to 15% in 2003 and 14% targeted by the CBSL for 2004), negative real interest rates, and a private credit boom (+22%)\. Inflation has again risen to around 10%, after a low of 5% in 2003\. 4\. With project support, preparations to shed major non -core functions were undertaken, but actual transfer of responsibilities has yet to follow suit in some areas \. The CBSL fully divested its holdings in Rural Development Banks, but it is still in charge of Public Debt Management and the Employees Provident Fund, functions as apex institution for currently 14 larger Lines of Credit and 2 Credit Guarantee Schemes, and engages in managing foreign exchange, albeit within a broader range \. Progress towards improving the financial sector policy and regulatory framework to promote financial sector development has been substantial : Several measures to improve prudential regulations were taken (increased capital requirements, stricter exposure limits, consolidated supervision, fit and proper criteria for management and enhanced public disclosure requirements) and, according to the IMF, the Central Bank has made commendable progress in off -site and on-site supervision\. This has likely contributed to a general improvements in financial sector indicators (i\.e non-performing loans, increased CAR, and raised provisioning levels )\. However, significant shortcomings persist with regard to provisioning requirements (i\.e\. loans overdue between 3-6 month do not require any provisioning ), and the Central Bank lacks adequate powers to strictly enforce adherence as illustrated by the attempted resolution of Pramuka Savings Bank\. Despite a Central Bank decision in 2002 to suspend business of this bank, actual resolution has been challenged repeatedly, and the government considered restructuring the Bank in 2005\. With project support, a new Monetary Law Act, Banking Act, Finance Companies Act and Payments Act were drafted \. North East Reconstruction: The ICR does not provide adequate information to evaluate the results of this component \. 5\. Efficiency : Efficiency has been generally satisfactory \. Based on calculations provided in the ICR, the payback period for the Voluntary Retirement Scheme (around 40 % of project funds) was 38 months, and outsourcing has led to some cost savings (the costs for the outsourced drivers are half those of in -house drivers, and LankaClear has converted from loss-making to being profitable after outsourcing )\. Additionally, gains in efficiency were realized by introducing automated payment schemes and by enhancing the skill levels of the staff (see above)\. 6\. M&E Design, Implementation, & Utilization: Monitoring and evaluating was weak \. The key performance indicators provided in the Project Appraisal Document were mostly verbal in nature (“ i\.e\. expansion of open market operations â€?, “effective reorganization of the CBSL â€? or “ efficient and modern HR departmentâ€?), and did not give any baseline indicator against which to measure results \. There is no indication in the supervision documents that any efforts were undertaken to monitor and evaluate the performance of the North East Reconstruction Component 7\. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative): During project implementation, the Central Bank of Sri Lanka also received technical support in relevant areas from the IMF\. 8\. Ratings : ICR ICR Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Highly Satisfactory Institutional Dev \.: High High Sustainability : Highly Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Highly Satisfactory Highly Satisfactory The Central Bank should be commended for having implemented politically sensitive human resource reforms \. Quality of ICR : Unsatisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness \. 9\. Lessons: 1\. Project objectives for a technical assistance operation need to be clearly specified, and adequate performance indicators developed to support monitoring and evaluation \. 2\. Strong ownership of reforms within management combined with an early -on effort to communicate and engage stakeholders can be a successful strategy to implement human resource management reforms in a difficult environment\. 3\. When reallocating project funds to a non -related new component, the objective and monitoring arrangements of the project need to be amended to reflect the change or the funds should be relocated to a different project which was put in charge of implementing and supervising the funds \. 10\. Assessment Recommended? Yes No 11\. Comments on Quality of ICR: The ICR does not provide a balanced and well -founded account of achievements \. There are too many statements like “the modernization program has enhanced the credibility of the CBSL â€? which are not supported by the presentation of objective evidence as i \.e\. available in IMF and CBSL Reports, or by the mentioned evaluation of the HR component by SIDA\. The argumentation centers around achievements, without sufficiently discussing shortcomings or embedding the results into the broader picture \. For example, under core functions, reforms in support of price stability are discussed, but actual policy implementation leading to raising inflation rates and a deviation from the monetary targets is not presented \. The ICR should have been clearer on whether actual reductions in staffing levels led to productivity / efficiency gains or were mostly achieved through outsourcing and also mentioned that the Public Debt Management was re -transferred from the MOF to the Central Bank \. The ICR should also have discussed how the supervision and completion reporting of the North East Reconstruction Program (for which 18% of the project funds were directed ) were to be handle (i\.e\., through separate supervision and a separate ICR )\. The reasons for rescheduling the closing date by 6 month are not discussed, nor deviations in actual counterpart financing \. Finally, on a minor note, the data on project costs is inconsistent (i\.e\. IDA disbursements were mentioned to be approximately US$ 35 million on p\.5, while Annex II lists the costs at 32\.2 million, the components costs are the disbursed IDA funds, not the total project costs )\.

REVIEW

P065825

 ICRR 11043 Report Number : ICRR11043 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 07/20/2001 PROJ ID : P065825 Appraisal Actual Project Name : Pub Exp Support Project Costs 30 30 US$M ) (US$M) Country : Albania Loan/ US$M ) 30 Loan /Credit (US$M) 30 Sector (s): Board: PS - Central Cofinancing government administration US$M ) (US$M) (76%), Banking (8%), Other social services (8%), Other industry (8%) L/C Number : C3197 Board Approval 99 FY ) (FY) Partners involved : Closing Date 09/30/2000 09/30/2000 Prepared by : Reviewed by : Group Manager : Group : Michael R\. Lav Alice C\. Galenson Ruben Lamdany OEDCR 2\. Project Objectives and Components a\. Objectives The Public Expenditure Support Credit (PESC) was designed during the very early stages of the Kosovo hostilities, in April, 1999, when Albania experienced daily inflows of 10,000-20,000 refugees from Kosovo, and its public finances and institutions came under severe pressure to provide public services to these refugees \. The PESC was designed to prevent the derailment of the ongoing reform program by providing budgetary support, while the SAC was put on hold for a few months\. The specific objectives of the PESC were : 1\. Help safeguard Albania's functioning public institutions during a period of crisis so that the adopted reform agenda can be maintained \. 2\. Maintain macroeconomic stabilization during a period when serious shocks will depress orderly economic activities and put exceptional demands on public expenditures, while reducing possibilities for revenue collection \. 3\. Help monitor and enforce an orderly public expenditure pattern during the emergency \. 4\. Establish a vehicle for cofinancing and parallel financing for other donors willing to provide support to Albania in support of the above objectives \. b\. Components 1\. Macroeconomic stabilization\. 2\. Fiscal resource allocation - safeguard essential public services \. 3\. Ensure transparent and accountable use of budget funds - support the public investment review, specify aid coordination financial and policy mechanisms \. 4\. Coordinate and ensure transparency of the relief program c\. Comments on Project Cost, Financing and Dates The project cost US$30 million and was financed in full by an IDA credit, in one tranche \. The project was appraised in April, 1999, approved by the Board on May 6, 1999, made effective on May 13, 1999, and closed on schedule on September 30, 2000\. 3\. Achievement of Relevant Objectives: 1\.The budget cost of the crisis was estimated at US$ 75 million, financed by the Public Expenditure Support Credit and foreign assistance triggered /coordinated by the credit\. With this support and with prudent relief and macro policies, inflation fell, and the current account deficit as a percent of GDP for 1999 was 3\.5 percentage points below projected levels (11\.3%)\. 2\. Fiscal allocations remained prudent, and military expenditure was contained to 4\.3 percent of the total as agreed under the Credit \. 3\. A budgetary account was opened to channel foreign aid to cover the relief effort\. 4\. Daily monitoring mechanisms for the distribution of aid were established \. A representative of the Albania Country Office participated actively in the Emergency Management Group \. 4\. The SAC was approved following resolution of the crisis situation \. 4\. Significant Outcomes/Impacts: The Credit helped to stabilize the economy and provided a framework for other donors' contributions, the sum total of which offset the costs imposed on Albania of the external crisis in Kosovo \. By working quickly and creatively structuring this credit, the Bank was able to help Albania avoid severe disruptions to its adjustment program which the refugee crisis could have generated \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Substantial Substantial Sustainability : Likely Likely Bank Performance : Highly Satisfactory Highly Satisfactory This rating is justified by the speed and flexibility shown by Bank staff in formulating and implementing this credit \. Borrower Perf \.: Highly Satisfactory Highly Satisfactory The Government kept its programs on track through what could have been a severe crisis with the help of this credit \. Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: A quick disbursing budget support operation well -coordinated with other donors can play a key role in offsetting the costs of an externally imposed crisis \. To do so, a quick response to the crisis is essential \. In the context of supporting a reform program, it is essential for such an operation to be followed quickly by another to build on and maintain reform initiatives\. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR covers the main topics clearly and concisely \. It was done without benefit of a mission to Albania \.

REVIEW

P117355

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) Report Number: ICRR0022208 1\. Project Data Project ID Project Name P117355 DJ-Rural CDD & Water Mobilization Country Practice Area(Lead) Djibouti Agriculture and Food L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-58260,IDA-H7060,IDA-H7780 31-May-2017 15,408,228\.17 Bank Approval Date Closing Date (Actual) 14-Jun-2011 31-Dec-2019 IBRD/IDA (USD) Grants (USD) Original Commitment 5,830,000\.00 0\.00 Revised Commitment 15,830,000\.00 0\.00 Actual 15,408,228\.17 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Hassan Wally J\. W\. van Holst Christopher David Nelson IEGSD (Unit 4) Pellekaan 2\. Project Objectives and Components DEVOBJ_TBL a\. Objectives The Project Development Objectives (PDO) for this Rural Community Development and Water Mobilization Project (PRODERMO) as articulated in the Project Appraisal Document (PAD, paragraph 17) was identical to the PDO as stated in the Financing Agreement (FA, page 5) and aimed to: Page 1 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) "increase access of rural communities to water and enhance their capacity to manage water and agro- pastoral resources in the project areas using a participatory approach to community-based development\." PRODERMO focused its interventions in two geographic regions covering in total of about 120,000 hectares: (i) the Khor Angar-Obock area in the northern region of Obock; and (ii) the Cheiketi-Hanlé area, in the southern region of Dikhl (PAD, paragraph 15)\. For the purpose of this review "increasing access to water" and its "management" by communities were viewed as tightly linked objectives and their joint achievement was therefore assessed as one objective\. b\. Were the project objectives/key associated outcome targets revised during implementation? No c\. Will a split evaluation be undertaken? No d\. Components 1\. Priority Community Investment Sub-projects (appraisal cost: US$3\.46 million, actual cost: US$11\.88 million)\. The increased cost was due to additional financing\. This component would finance priority community investments in the project areas that have been included in the Annual Water and Pasture Management Plans (SAAHPs), formulated and prioritized by the targeted communities through a participatory approach and in accordance with the project Operations Manual\. Community investments were expected to be demand-driven and in the following specific sub-categories: (i) Water mobilization and soil conservation sub-projects; (ii) Agriculture and livestock sub-projects; and (iii) Income-generating activities on a pilot basis\. 2\. Capacity Building and Provision of Technical Assistance (appraisal cost: US$0\.73 million, actual cost: US$2\.96 million)\. This component would finance capacity building and technical assistance to the Implementing Agency (the Ministry of Agriculture, Water, Fisheries, Livestock, and Halieutic Resources or MAEM-RH) and its Project Management Unit (PMU), as well as to the community development committees (CPL) and grassroots organizations (such as water users associations and community groups) targeted by the project to support the formulation and implementation of participatory SAAHPs in the project areas, while fostering the application of a participatory approach to local and community-based development\. This component would also support the sensitization and mobilization of beneficiary communities and other project stakeholders in order to facilitate and enhance their effective involvement in the participatory planning and project implementation process\. This would be done through: (i) Enhancing the capacity of the MAEM-RH and PMU; and (ii) Enhancing the capacity of the beneficiary communities\. 3\. Project Coordination and Management (appraisal cost: US$1\.40 million, actual cost: US$2\.83 million)\. This component would support the PMU through the provision of goods, works, consultant services, training and incremental operating costs associated with project management, implementation, monitoring and evaluation, and audits\. Page 2 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost\. The total project cost was estimated at US$6\.13 million which included contingencies\. The actual cost reported in the ICR (Annex 3) was US$17\.67 million which is consistent with the total cost of US$15\.84 million in the ICR’s Data Sheet which does not include the World Food Programme (WFP) financing valued at US$1\.82 million\. The considerable increase in total project cost resulted from the project receiving two additional financing amounts that totaled US$10\.00 million plus the value of WFP contributions and those from the project’s beneficiaries (see below for more details)\. Financing\. The project was financed by an International Development Association (IDA) Grant of US$5\.83 million equivalent\. The project received two additional financings (totaling US$10\.00 million) funded by IDA: a Grant of US$3\.0 million was approved on June12, 2012 (AF1), and on May 31, 2016 a Credit in the amount of US$7\.00 million (AF2)\. The actual amounts disbursed according to the ICR (page vi) were: US$5\.55 million, US$2\.86 million, and US$6\.99 million against the initial financing, AF1 and AF2, respectively\. The total amount disbursed was US$15\.40 million\. As noted above the WFP contributions valued at US$1\.82 million augmented the funds available\. Borrower Contribution\. Contributions from local beneficiary communities were estimated at US$0\.30 million (in cash or in kind)\. This was revised upwards with the AF-2 to US$0\.44 million\. The actual amount according to the ICR (Data Sheet, page vi) was about US$0\.44 million\. Dates and Restructuring\. The project was approved on June 14, 2011 and became effective seven months later on January 19, 2012\. The Mid-Term Review (MTR) was conducted on March 30, 2014\. The PAD did not include a pre-set date for the MTR\. The MTR was conducted about two years and three months after effectiveness, which was reasonable given the implementation time-frame at appraisal was five years\. The project closed on December 31, 2019 compared to an original closing date on May 31, 2017\. The extension of the closing date was necessary after the project received two AFs and activities were scaled-up\. The project was restructured three times; each of them was a Level two restructuring as follows: 1\. On June 12, 2012, when the amount disbursed was US$0\.93 million, in order to approve the first AF and expand the project coverage area to six additional areas\. 2\. On February 11, 2015, when the amount disbursed was US$4\.41 million, in order to introduce changes to the Results Framework (RF) and reallocate funds between disbursement categories\. 3\. On May 9, 2016, when the amount disbursed was US$6\.88 million, in order to approve the second AF to help support the costs associated with scaled-up activities to further enhance the impact of the project, namely, the Directorate of Livestock and Veterinary Services (DESV) received laboratory equipment and veterinary drugs to treat and vaccinate livestock, as well as the distribution of livestock feed to pastoralists affected by the drought (based on information provided to IEG by the Bank project team)\. Other changes included: (a) extending the closing date by 31 months (from May 31, 2017, to December 31, 2019), (b) amending the current project location description to include the Arta Region; (c) revising and simplifying the Results Framework (RF); (d) reflecting the current categories of expenditures under a single category; and Page 3 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) (e) adjusting the disbursement and implementation schedules to reflect the scope and increased targets (Project Paper, paragraph 9)\. 3\. Relevance of Objectives Rationale Context at Appraisal\. Djibouti is an extremely water-scarce country, with conditions set to be exacerbated by population growth and climate change\. Djibouti averages 150 mm of rainfall per year and has no perennial surface freshwater flow\. Due to the climate, less than five percent of total rainfall reaches the water table, with the remainder lost to either evapotranspiration or flow to the sea due to flash floods\. The project’s objective, namely to "increase access of rural communities to water and enhance their capacity to manage water and agro-pastoral resources in the project areas using a participatory approach to community-based development" aimed to target some of the geographic areas not yet benefiting from the Program for Mobilization of Surface Water and Sustainable Land Management (PROMES-GDT)\. The project would introduce innovative approaches, such as the emphasis on enhancing added-value of agricultural and livestock production to increase the resilience, reduce the food insecurity, and improve the nutrition of households living in these water-scarce areas\. At appraisal, objectives were in line with the Government's National Program for Food Security (NPFS, 2010-2020)\. The NFPS identified thirteen priority projects grouped under six main themes: (i) water resource management; (ii) agricultural development in the oases; (iii) livestock development and improved health; (iv) fisheries development; (v) capacity building and human resource development; and (vi) studies\. Objectives were also in line with the Government's initiative for water mobilization under the Program for Mobilization of Surface Water and Sustainable Land Management (PROMES-GDT)\. The PROMES-GDT aimed to improve the living conditions of the pastoral communities while promoting the sustainable management of the natural resources\. Objectives were also in line with the Bank's Country Assistance Strategy (CAS) for Djibouti (CAS FY09- FY12)\. The CAS was prepared with the explicit objective of helping the implementation of the Government's INDS\. Also, the CAS Outcome 2\.3 which called for strengthening social protection and direct support to the poor\. Context at Completion\. At completion, objectives continued to be in line with the Government's NPFS as stated above\. Objectives were also in line with the Government’s Vision 2035 to consolidate human capital and the corresponding action plan (Strategy of Accelerated Growth and Promotion of Employment 2015– 24), notably Pillars 1 “economic growth” and 4 “sustainable development\.” Objectives were also in line with Bank's Country Partnership Framework for Djibouti (CPF 2020–24)\. The CPF called for launching an Advisory Services and Analytics activity in FY2020 to seek sustainable solutions for rural development with an emphasis on improving water availability and livelihoods in rural areas\. Conclusion\. The statement of objectives clearly targeted relevant beneficiaries namely "rural communities" and stated the potential benefits of the project interventions (increase access to water and capacity enhancement)\. However, the PDO statement lacked an explicit connection to higher level objectives, such Page 4 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) as improving food security, reducing poverty, increasing rural prosperity, and enhancing resilience of rural communities to climate change\. Based on the above-mentioned assessment, the relevance of this project’s objectives to the water supply challenges facing rural communities in Djibouti is rated Substantial\. Rating Relevance TBL Rating Substantial 4\. Achievement of Objectives (Efficacy) EFFICACY_TBL OBJECTIVE 1 Objective To increase access of rural communities to water and enhance their capacity to manage water and agro- pastoral resources in the project areas using a participatory approach to community-based development\. Rationale Theory of Change (ToC)\. To achieve the stated objective, the project would support community-based development and planning for water management and soil conservation activities, including the rehabilitation and construction of water infrastructure\. The project would also support income generating activities through financing agriculture and livestock sub-projects\. These activities were expected to result in the implementation of a local development plan in an integrated manner, which would strengthen participatory approach to community development\. Also, the activities would result in improved availability of water for human, livestock and agriculture consumption, which would lead rural communities to achieve higher standards of living and increased agricultural productivity\. At the same time, the project would support capacity building activities for grass-root organizations and the staff of the Ministry of Agriculture\. These activities were expected to improve the capacity of grass-roots organizations and the technical staff of the Ministry of Agriculture to support community-based development and agro-pastoral resource management\. This would in turn result in enhancing the capacity of rural communities to manage water and agro-pastoral resources\. Longer term impacts include: improved livelihoods for the poor, benefits for women and youth, improved food security, empowered local communities and enhanced resilience of rural communities to climate change related shocks such as erratic rainfall and drought\. The ToC was underpinned by the following assumptions: (a) local communities are willing to participate, develop and monitor the implementation of local development plans, (b) water and pasture management Page 5 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) committees are formalized; and (c) the project does not experience severe drought that would impact water availability\. Overall, the ToC depicted in the ICR included activities that were linked to the stated objectives\. The stated assumptions were logical and realistic\. Outputs The outputs below were reported by the ICR (Annex 1) and targets are provided where available\. Water mobilization and soil conservation ï‚ The project constructed or rehabilitated 116 water mobilization units, including 54 cisterns, 12 open reservoirs, 10 boreholes, 36 wells, and 4 weirs (water-spreading micro-dams) (102% of the revised target)\. ï‚ The total volume of water mobilized reached 1,985,300 cubic meter (m3), for both human and animal consumption (199% of the revised target)\. ï‚ Cisterns\. The project supported the construction of 54 cisterns (52 new and 2 rehabilitated), each with a capacity of 100 m3, serving a total of 3,325 households (62 households per cistern on average)\. ï‚ Reservoirs\. Eleven open-air reservoirs with a nominal individual capacity of 20,000 m3 (compared to 10,000 m3 planned at appraisal) were constructed, and one was rehabilitated\. ï‚ Boreholes\. The project constructed seven boreholes and rehabilitated three existing ones, and equipped them with a photovoltaic pump, a tank with a capacity of 100 m3, a drinking fountain, and water troughs for animals\. All were functional when the project closed\. The total volume of water pumped annually is estimated at 460,800 m3 ï‚ Pastoral wells\. The project supported construction of 12 pastoral wells, each equipped with a concrete tank of 13 m3, a drinking fountain, and a watering trough\. These wells mobilize 194,400 m3 of water annually ï‚ Agricultural wells\. The project constructed 24 agricultural wells in the Dikhil and Tadjourah regions that each provide water to grow vegetable crops (2 cycles per year) and fodder on about 22 ha\. Each well pumps 33–35 m3 daily, of which 90% is used for irrigating crops\. ï‚ Weirs (water spreading micro-dams)\. The project supported the construction of four new weirs\. Weirs spread floodwater upstream, improving the recharging rate of the water table, increasing deposits of fine, fertile sediment in the flooded area, and ultimately improving the quantity and quality of vegetation and pasture\. The recharge capacity of each weir is estimated at 234,075 m3; each weir spreads water over 1,290 ha of pasture that directly benefits 580 households\. ï‚ Grazing set-aside and improved sites\. The project supported 21 units of pasture of 400 ha each (8,400 ha in total) that were protected from grazing for 17–22 months and improved through soil and water conservation works (CES) to increase pasture productivity\. These sites are now benefiting 1,235 pastoral households\. Agriculture Development ï‚ The project provided support for the Directorate of Agriculture and Forestry (DAF) to acquire and distribute seed and fertilizer to 870 small-scale farmers\. Page 6 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) ï‚ 60 micro-irrigation kits were distributed to 50 gardens covering 25 ha, and two tree nurseries were established in Obock and Tadjourah Regions\. ï‚ Irrigation networks developed by coating concrete ditches from the above-mentioned wells allowed the extension of irrigated area to 30 ha, bringing the total irrigable area developed through project support to 84 ha\. ï‚ A 178-m2 greenhouse with an anti-heat veil was installed at the Directorate of Agriculture and Forestry (DAF) greenhouse site and equipped with 8 production modules\. Thirteen lettuce production cycles (each approximately 40 days) were carried out between October 2018 and March 2019; lettuce yields were 0\.4– 2\.8 kg/m2\. Fisheries Development ï‚ Eight priority sites were selected by the project to distribute to small-scale fishing gear to traditional fishing associations, and organized training sessions in the use of that equipment\. ï‚ Nine warehouses for fish were built, and the fish market and the ice unit in Obock were both rehabilitated\. ï‚ 33 income generating activities (IGAs) related to fish production, handling and marketing were financed buy the project\. ï‚ The project financed the purchase of a refrigerated truck for the fish marketing in the Tadjourah Region, and equipped the Goubet association with a solar ice unit\. ï‚ To improve capacity, the project organized a study tour to Morocco to benefit from the rich fisheries experience of that country\. Livestock Development ï‚ The project supported livestock mainly through provision of inputs, for example, the project financed the acquisition of laboratory equipment and veterinary drugs to treat and vaccinate livestock, as well as the distribution of livestock feed to pastoralists affected by the drought\. Also, the project provided office and computer equipment to the Directorate of Livestock and Veterinary Services and covered its operating costs\. Income Generating Activities (IGAs) ï‚ The project supported the implementation of 110 IGA sub-projects, exceeding the target of 97, of which 33 focused on animal production, mainly goat farming; 30 focused on agriculture (30 sub- projects); 14 focused on handicrafts; and 33 focused on fish production (the acquisition or repair of boats, engines, and fishing gear), fish handling, and marketing\. Individuals who participated in income-generating sub-projects were required to open a bank account and deposit a cash contribution of a minimum of 10% of sub-project costs to access matching funding\. Capacity Building and Technical Assistance The project supported three types of community-based institutions/associations: ï‚ Strengthening the capacity of Local Steering Committees (CPLs )\. CPLs were "community-based structures, for each of the 18 grazing area (parcours) of the project, after consultation with the communities and the designation of CPL members by community leaders\. The CPL is representative Page 7 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) of a group of villages and communities possessing traditional grazing rights over a common area of rangeland (parcours)\. Each CPL comprised about 12 members, representatives of communities living in the parcours, including 20% of women\. Specific roles of the CPL include: (i) representing the beneficiary communities vis à vis the PMU; (ii) participating in participatory diagnostics and preparing the indicative list of needs and potential investments to be included in the preliminary SAHPs; (iii) validating and signing the approved SAHPs; and (iv) overseeing the work of the CGEPs (project team)\." For each of the 18 pasture sites, a CPL was established and received hands-on technical, organizational, and management training to fulfill its role and prepare a multi-year Water and Pasture Management Plan (SAHP)\. One SAHP was prepared for each grazing site, with the support of regional and local project teams, which then followed up on implementation with the CPLs\. ï‚ Strengthening the capacity of Water Point and Pasture Management Committee (CGEPs)\. CGEPs were "community-based structures, which were reinforced and/or established around each water point and were responsible for: (a) the regular maintenance of water mobilization subprojects in terms of labor and tools directly undertaken by the water management committees; (b) the organization of the water supply for human and animal consumption; (c) the monitoring of water quality in water mobilization subprojects; (d) the maintenance of rangelands and set-aside areas; (e) the enforcement of set-aside rules and (f) general mobilization of community participation (project team)\." For each identified water mobilization unit or grazing improvement site prioritized in SAHPs, a management committee (CGEP) which had benefited from capacity building was established as a condition for works to start\. CGEPs handled O&M activities\. ï‚ Strengthening the capacity of associations\. IGA associations were "associations supporting Income Generating Activities, to benefit to a larger number of persons, in accordance with eligibility criteria and procedures set forth in the Project Operations Manual (project team)\." All IGA associations received organizational and managerial training delivered to set up simple systems for accounting and monitoring activities\. Artisanal fishermen and women’s associations were also trained to use fishing gear, to add value and preserve fish, and to manage their association (ICR, page 34, paragraph16)\. Participatory Approach for Community Development ï‚ 18 territorial SAHPs (one per targeted common grazing area) prepared in a participatory, iterative, and bottom-up way\. ï‚ 18 CPLs and 106 CGEPs elected under fair and transparent mechanisms\. ï‚ 18 CPLs trained to prepare SAHPs in a participatory way and monitor their implementation in close coordination with CGEPs and associations benefitting from IGAs and other types of direct support\. ï‚ SAHPs used by CPLs as communication and resource mobilization and negotiation instruments vis-à- vis the administration, Regional Councils, NGOs, and donors\. Outcomes Increased access of rural communities to water in project areas\. The project supported the construction or rehabilitation of 116 water mobilization units (102% of the revised target)\. This resulted in the availability of a total of 1,985,300 cubic meters (m3) of water (199% of the revised target) for humans, animals, and irrigation (ICR, paragraph 24)\. As result of the project support, 9,942 (133% of the revised target) rural households had more secure access to drinking water within a reasonable travel time (two hours roundtrip) in project areas, and 140,459 (168% of the revised target) heads of livestock had more secure access to water within a reasonable distance (20-km radius) in the project areas\. Page 8 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) Enhancing the capacity of rural communities to manage water and agro-pastoral resources in project areas using a participatory approach to community-based development\. The project established a Local Steering Committee (CPL) for each of the 18 pasture areas covered\. The project also provided each CPL with technical, organizational, and hands-on management training to prepare them to implement their Water and Pasture Management Plans (SAHPs)\. Training was also provided to each of the 116 Water Point and Pasture Management Committees (CGEPs)\. Also, all Income-generating activity (IGA) associations received organizational and managerial training to set up simple systems for accounting and monitoring activities\. The project also provided training for artisanal fishing associations to use new fishing equipment, add value to fish products, preserve fish, and manage their associations (ICR, paragraph 31)\. The impact of the provided training was not captured by the project due to the absence of relevant indicators to assess enhanced capacity\. That said, the ICR (Box 2) reported that a qualitative survey by the PMU in September 2019 provides evidence on the development and engagement of CGEPs to manage local water resources\. The survey showed that 100% of CGEP members had participated in several training sessions, 56% held a General Assembly every year, 76% meet every month to take stock of prior actions and discuss and plan future activities, and 92% regularly developed monthly or bimonthly activity schedules\. The evidence provided in the ICR verifies the success of the project in increasing access of rural communities to water in project areas\. Outcome and intermediate outcomes for this this element of the PDO were either fully achieved or significantly exceeded\. It is also plausible to conclude that the project-supported capacity building activities which contributed positively to enhancing the capacity of the three community-based organizations mentioned above to manage water and agro-pastoral resources\. In a further communication to IEG, the Bank project team explained that "Local Steering Committees (CPLs), Water Point and Pasture Management Committees (CGEPs), Fishermen and women cooperatives and associations as well as Income Generating Sponsors (IGA) benefited from intensive information campaigns and capacity building program on technical, organizational and managerial aspects\. Enhanced capacity of rural communities to manage water and agro-pastoral resources in the project areas can be assessed for various groups at various levels through: the collective capacity of rural communities to apply a participatory approach to Community Based Development through the CPLs; the capacity to operate and maintain each water mobilization unit or grazing site supported by the project through CGEPs; the capacity of grassroots organizations to better advocate for the needs of the community vis-à-vis other stakeholders; and the capacity of the staff at the PMU and in the MAEPERH technical directorates on water mobilization, watershed management, fisheries, environmental safeguards, application of the Environmental and Social Management Framework (ESMF), climate change and sustainable development, fiduciary management, results-based M&E, use of the ARCGIS software was enhanced\." Based on the above-mentioned evidence, this review concluded that the efficacy with which the project's PDO was achieved was High\. Rating Page 9 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) High OVERALL EFF TBL OBJ_TBL OVERALL EFFICACY Rationale The evidence provided in the ICR verified the success of the project in increasing access of rural communities to water in project areas\. Outcome and intermediate outcomes for this this element of the PDO were either fully achieved or significantly exceeded\. While the M&E design lacked adequate qualitative PDO/Intermediate level outcome indicator(s) to assess the extent to which the capacity of rural community organizations was enhanced, the ICR and the Bank project team provided plausible evidence to support a conclusion that the project's capacity building activities positively contributed to enhancing capacity of grass roots community organizations to manage water and agro-pastoral resources\. The indicators used to assess enhancement in capacity did not provide information on whether rural communities became stronger, better and more resilient as a result of the project intervention\. On the other hand, the results in terms of improved water supply infrastructure and water delivery were sound and reflected a sound capacity of the various rural institutions involved\. Therefore, the overall efficacy with which the PDO was achieved was rated High\. Overall Efficacy Rating High 5\. Efficiency Economic and Financial Efficiency ex ante ï‚ Based on the estimates of the quantified benefits from investments in underground cisterns, open-air water reservoirs, construction or rehabilitation of boreholes, construction of shallow wells, establishment of grazing set-aside areas, and the promotion of income-generating activities the project ERR over 20 years was estimated at 12%\. ï‚ The economic analysis included the costs of Component 1 (Priority Community Investment Sub- projects) plus the part of those in Component 3 (Project Coordination and Management) that are related to the implementation of Component 1\. Benefits of component 2 (Capacity Building and Provision of Technical Assistance) were explained in the PAD but not included in the analysis\. ï‚ No Sensitivity analysis was included at appraisal\. ex post Page 10 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) ï‚ The economic internal rate of return (EIRR) estimated for the project at completion was 18% compared to an appraisal estimate 12%\. This was also significantly higher than the economic opportunity cost of capital (6% per year)\. The benefit/cost ratio was 1\.78\. ï‚ The analysis at completion followed the same approach as mentioned above at appraisal, except for using actual values from the project M&E system and PMU surveys in addition to updated technical, price, and cost data\. ï‚ A sensitivity analysis showed that the benefits of water management infrastructure are very resilient under a range of challenging scenarios\. Scenarios examined in the analysis included a reduction in benefits, an increase in recurrent costs after the project implementation period, a delay in accruing benefits, and a combination of a reduction in benefits and increase in recurrent costs\. The EIRR and net present value (NPV) were robust under all scenarios\. ï‚ Cost Effectiveness\. When compared to similar projects, this project was cost effective\. For example, unit costs of boreholes and pastoral wells installed under the project were 16% and 40% lower, respectively, than the same technology installed under the Soil and Water Management Programme (PROGRES), an IFAD-financed project, in Djibouti\. Also, the unit costs of micro-dams (weirs) were ten times lower per cubic meter of recharge capacity and four times lower per hectare of water-spreading capacity than costs of dams constructed under PROGRES\. While cisterns constructed by the Surface Water Mobilization and Sustainable Land Management Project (PROMES-GDT- also an IFAD-financed project in Djibouti - cost about the same, those constructed under this project (PRODERMO) incorporated additional features to increase durability and harvested more water (ICR, paragraph 39)\. Administrative and Institutional Efficiency The project closed on December 31, 2019 compared to an original closing date on May 31, 2017, i\.e\. two years and seven months beyond the original closing date\. The extension of the closing date was necessary after the project received two AFs and activities were scaled-up\. According to the ICR (paragraph 40) the project did not "face any major procurement nor financial management issue and disbursements were made on a regular basis\." The project's implementation benefited the stability of project staff on both sides, the Government and the Bank\. Overall, Efficiency is rated Substantial\. This rating reflects a higher EIRR at completion compared to appraisal (18% compared to 12%), high cost effectiveness, and timely implementation of project activities\. Efficiency Rating Substantial a\. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) Page 11 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) 64\.00 Appraisal  12\.00  Not Applicable 78\.00 ICR Estimate  18\.00  Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome Relevance of Objectives was rated Substantial\. Overall efficacy was rated High\. The evidence provided in the ICR point to the success of the project in increasing access of rural communities to water in the project areas\. Outcome and intermediate outcomes for this element of the PDO were either fully achieved or significantly exceeded\. While the M&E design lacked adequate PDO/Intermediate level outcome indicator(s) to assess enhanced capacity of rural communities, supplementary evidence from the World Bank task team (along with evidence of the attributable results of enhanced capacity building) established that project-supported capacity building activities positively contributed to enhancing the capacity of communities to manage water and agro- pastoral resources\. Efficiency was rated Substantial based on a higher EIRR at completion compared to appraisal (18% compared to 12%), high cost effectiveness, and timely implementation of project activities\. Based on these results this review concluded there were no shortcomings in the project's achievement of its objectives, relevance or efficiency and its Overall Outcome is therefore rated Highly Satisfactory\. a\. Outcome Rating Highly Satisfactory 7\. Risk to Development Outcome The following three risks could potentially impact the development outcome: 1\. The risk that Local Steering Committees (CPLs) and Water Point and Pasture Management Committees (CGEPs) will not continue to operate after project completion, despite the heavy investment in training for CPL and CGEP members and field technicians\. It is important to finalize the formalization of these committees\. In addition, as rural populations are semi-nomadic, some members of these committees may relocate, so refresher training must be provided regularly (ICR, paragraph 65)\. In a further communication, the project team explained that "refresh training was provided to the Local Steering Committees (CPLs) as well as to Water Point and Pasture Management Committees (CGEPs), by the Ministry of Agriculture and the Secretary of State for Decentralization, after the closing of the PRODERMO\." According to the ICR (Box 4), the secretary General of the Ministry of Agriculture, Water, Fisheries, Livestock, and Halieutic Resources stated that: "The technical departments (DGT, DHR) are now in charge of PRODERMO’s water mobilizing units and are supporting the water point committees\. After the end of the project, the technical departments are responsible for supervising the management committees and making the repairs\. because it has produced simple and robust infrastructure to guarantee longevity and ease of maintenance\." Page 12 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) 2\. There is a risk that the achievements of the first element of the PDO (Increased access of rural communities to water in the project areas) might not be sustained as currently intended\. To further ensure the sustainability of the financed infrastructure, aside from finalizing the formalization of CGEPs, it is recommended by the ICR to give them more responsibilities within the decentralization agenda (ICR, paragraph 66)\. 3\. The risk of climate change\. Sustaining improvements in access to water could be negatively impacted if protracted droughts occur\. This would result in a reduction in the efficacy of surface water mobilization infrastructure, most notably the infrastructure for providing drinking water (ICR, paragraph 66), and perhaps aquifers\. 8\. Assessment of Bank Performance a\. Quality-at-Entry The project built on the successful participatory approach of the Government's Program for Mobilization of Surface Water and Sustainable Land Management (PROMES-GDT) that aimed to address the thirst problem in the country\. The project used the same central implementation unit for PROMES-GDT, which according to the ICR (paragraph 61) allowed the project "to initiate activities on the ground and achieve results very quickly\." The project design featured support for developing agriculture, livestock, and fisheries\. Also, the design aimed to diversify income sources and reduce pressure on pasture land by supporting income generating activities (IGAs) through a matching grant initiative\. Design also included nutrition education; and greater social accountability through beneficiary feedback and a grievance redress mechanism (ICR, paragraph 48)\. The project benefited from the geographic and thematic complementarity with the IFAD-supported PROMES-GDT, which enhanced learning, and enhanced coordination between the Bank and IFAD (ICR, paragraph 48)\. According to the ICR (paragraph 48), the project benefited from high implementation readiness with a detailed project manual available before project effectiveness\. However, there were some design limitations including the reliance on consultants for the functioning of the project management unit (PMU) rather than building the capacity of local staff\. Also, the institutional anchoring of the PMU was not clearly defined whether in the Office of the Secretary General, Ministry of Agriculture, Water, Fisheries, Livestock, and Halieutic Resources or the Project Management Bureau (ICR, paragraph 49)\. Another limitation was the limited visibility over the five-year horizon of the project provided by the local development plans (SAAHPs) as they initially covered only one year (SAAHPs)\. Sixteen risks were identified at the preparation stage relating to the implementation agency and overall project risks, as well as environmental risks, with the overall risk rated High\. The PAD (Annex 4) included detailed mitigation measures\. The ICR (paragraph 56) reported that an environmental risk related to poor quality of drinking water materialized and the mitigation measure was successfully implemented\. Other than this, the ICR did not report on other risk(s) that materialized, and whether the suggested mitigation measure(s) worked as expected\. M&E design had minor shortcomings, most notably the lack of indicators to assess enhanced capacity (see section 9 for more details)\. This Review rates Quality at Entry as Satisfactory\. The rating reflects high implementation readiness and a generally robust project design, and M&E design shortcomings\. Page 13 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) Quality-at-Entry Rating Satisfactory b\. Quality of supervision Over the eight years implementation period, the Bank carried out 20 implementation support missions\. Missions regularly carried out field visits to the three project areas\. According to the ICR (paragraph 62) "mission teams had high levels of expertise in rural infrastructure engineering, agronomy, M&E, financial management (FM), procurement, environmental and social safeguards\." However, according to the ICR (paragraph 62) the project could have benefited from better expertise and advice on income generating activities\. As noted already, the project benefited from the stability of the task team with one TTL from start to completion\. Implementation also benefited from regular audio conferences in-between the support missions to address any implementation bottle necks\. The Bank addressed some design limitations including extending the timeframe of the local development plans to cover multiple years rather than one year, and strengthening social accountability mechanisms through requiring a 10% beneficiary contribution to qualify for IGA match grants\. The Bank also introduced hydroponic agriculture on a pilot scale, a promising technology for water-scarce countries\. The project team followed up on environmental and social safeguards, and fiduciary compliance\. This Review rates Quality of Supervision as Satisfactory\. The rating reflects successful implementation of the project and continued support by the team to address implementation challenges, including the several droughts experienced during implementation\. Based on the above-mentioned assessment for sections 8a and 8b, Bank Performance is rated Satisfactory\. Quality of Supervision Rating Satisfactory Overall Bank Performance Rating Satisfactory 9\. M&E Design, Implementation, & Utilization a\. M&E Design The project appraisal document (PAD) did not include a Theory of Change (ToC) as it was not mandated at appraisal\. Nonetheless, the ICR (page 2) included one which reflected the relation between the planned project activities, its outputs, outcomes and long-term impacts\. The achievement of the PDO was to be assessed through four PDO level indicators: #1\. Increase of the number of rural households with more secure access to drinking water within a reasonable travel time (two hours roundtrip) in the project areas, #2\. Increase in the head of livestock with more secure access to water within a reasonable distance (20 km radius) in the project areas, #3\. Increase in available grazing biomass in the targeted rangelands in the Page 14 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) project areas, and #4\. The number of the communities in the project areas organized in community-based structures that actively prepare and implement the local development plans\. Indicators 1, 2 and 3 address the first part of the PDO (increase access of rural communities to water)\. However, Indicator #3 was dropped as part of AF-2 in February 2015, as it was assessed to be not directly linked to the PDO (ICR, paragraph 14)\. Indicator #4 was intended to assess "enhancing the capacity of rural communities to manage water and agro-pastoral resources in the project areas using a participatory approach to community-based development\." Indicators #1 and #2 were specific, measurable, achievable, relevant, time-bound and included realistic targets\. However, indicator 4 was qualitative and not comprehensive enough to assess enhancement in capacity, which was part of the PDO\. The Results Framework (RF) included ten intermediate results indicators to assess the different activities supported by the project\. All intermediate indicators were quantitative, measurable and with clear targets\. M&E design called for a baseline study, a mid-term review, and an end-of-project evaluation of outcomes and results\. Overall, M&E design was sound\. However, a notable shortcoming was the lack of adequate qualitative PDO/Intermediate level outcome indicator(s) to assess enhanced capacity of rural communities\. The indicators used to assess enhancement in capacity did not provide information on whether rural communities became stronger, better and more resilient as a result of the project intervention\. On the other hand, the Bank task team provided additional evidence of capacity building in the project (see Section 4 in this review)\. The results in terms of improved water supply infrastructure and water delivery were sound and reflected a sound capacity of the various rural institutions involved\. b\. M&E Implementation The PMU had the overall responsibility of M&E implementation\. M&E capacity improved after the first two years of implementation when a deputy coordinator with extensive experience in M&E was hired (ICR, paragraph 52)\. Also, M&E implementation benefited from an international M&E specialist who supported the operation of the project's M&E system, clarified procedures and responsibilities, and developed data collection forms for community organizations to track activities in the field\. The PMU monitored project activities through a Geographic Information System (GIS), which allowed spatial monitoring\. A baseline study was conducted in 2013, a mid-term review in April 2014, and a second-level 2 restructuring in 2015 to update the Results Framework\. As part of the project completion process, two types of assessments were produces\. First, a qualitative assessment to assess the performance of the community organizations, IGAs, and nutrition activities as well as an assessment of beneficiaries'’ perceptions of project achievements and shortcomings\. Second, a quantitative end-of-project evaluation by an independent agronomist\. Revisions/Changes to the RF\. The 2015 restructuring included updating the RF by adding baseline values for the three PDO-level indicators, changing the targets of some indicators to reflect scaling-up of project activities\. Also, core sector indicators were included along with other additional indicators to assess the results of project support for the fisheries sub-sector, accountability, and beneficiary feedback\. c\. M&E Utilization Page 15 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) According to the ICR (paragraph 54) "the M&E system was used successfully to inform project management and stakeholders of progress and identify additional actions required to achieve the PDO\." The M&E system was successfully used to track project activities and update the RF\. This enabled the project management and the Bank to address any implementation bottlenecks promptly\. M&E information also provided the basis for the 2015 restructuring\. By project completion, the M&E system accumulated an extensive amount of data that informed the ICR, the economic and financial analysis as well as the Borrower Completion Review (ICR, paragraph 54)\. However, the PMU could have improved documentation of knowledge production and dissemination\. Overall, M&E Quality is rated Substantial\. This rating reflects a sound design, an implementation that produced most deliverables despite initial delays, and effective utilization of M&E findings\. M&E Quality Rating Substantial 10\. Other Issues a\. Safeguards The project was classified as an environmental Category B\. The safeguard operational policy for Environmental Assessment (OP 4\.01) was triggered\. An Environmental and Social Impact Assessment (ESIA), including an Environmental and Social Management Plan (ESMP) was prepared\. The project activities (sub-projects) were expected to result in positive impacts on the environment and living conditions of affected populations\. However, construction and operation activities under Component 1 were expected to have some negative impacts\. According to the PAD (paragraph 75) "the environmental assessment established that the project will not create significant or irreversible negative impacts on the environment\." The Environmental and Social Impact Assessment (ESIA) was disclosed at the World Bank’s Infoshop before project appraisal and disclosed in Djibouti on January 29th, 2011\. Environmental Compliance\. According to the ICR (paragraph 56) the project "complied with all required World Bank environmental safeguards\." Each sub-project for which funding was requested was required to submit a simple environmental and social screening form\. However, a water quality analysis conducted in 2019 found that water samples collected primarily in cisterns were contaminated with coliform bacteria\. To address this problem, the project worked with the National Public Health Institute of Djibouti (INSP) under the Ministry of Health for a water treatment campaign to sensitize communities to the issue, distribute water treatment kits, and train CGEPs to use them\. According to the ICR (paragraph 56) "no gastrointestinal or other water-borne illness was reported at any site covered by the project, and no complaints were reported\." Social Compliance\. While the project did not trigger any social safeguard policies, it implemented a number of activities related to addressing social inclusion\. These included: (a) activities to strengthen the technical and managerial capacities of women’s groups and associations; (b) supporting IGAs for women; (c) promoting gender inclusion in decision-making and planning by gaining active participation by women in operating and maintaining water infrastructure and improved pastures; and (d) addressing malnutrition among pregnant women and stunting in children through nutrition education (ICR, para 57)\. Also, a Page 16 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) grievance redress mechanism (GRM) was established in 2017 and communities were trained to use it (ICR, para 57)\. b\. Fiduciary Compliance Financial Management (FM)\. According to the ICR (paragraph 58) the project had "sound fiduciary arrangements and complied with all World Bank financial management (FM) requirements\." FM benefited from a qualified administration, a finance manager and an accountant funded by the Surface Water Mobilization and Sustainable Land Management Project (PROMES-GDT)\. FM also benefited from training provided by the Bank's FM support missions\. Audit reports and Interim Financial Reports were filed in a timely with the Bank and were found to be of acceptable quality\. However, the ICR did not mention whether the audit reports were qualified or unqualified\. In a separate communication, the Bank project team advised IEG that "all audit reports were received and were unqualified\." Procurement\. According to the ICR (paragraph 60) "the borrower complied with World Bank procurement requirements, with no major shortcomings in procurement and improved performance over the years\." That said, procurement processing started slowly due to poor record keeping\. Procurement activities improved with support from the Bank and after hiring a competent procurement officer at the MTR stage\. c\. Unintended impacts (Positive or Negative) --- d\. Other Food security\. The World Food Program (WFP) food security indicators (Coping Strategy Index (CSI) Food and CSI Asset Depletion) showed positive trends over the course of the project\. The percentage of food- deficit households (CSI Food) fell continuously from 21% to 5%\. The CSI Asset Depletion indicator also decreased from 50% to 30%\. The proportion of households that adopted emergency coping strategies because they lost savings or productive assets such as gardens, and production equipment also decreased\. Results of the two most recent Food Survey Monitoring System surveys in project areas were also positive and could according to the ICR be attributed to the effects of the project (ICR, paragraph 46)\. 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Highly Satisfactory Highly Satisfactory Bank Performance Satisfactory Satisfactory Page 17 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) Quality of M&E Substantial Substantial Quality of ICR --- Substantial 12\. Lessons The ICR included four lessons\. The following three are emphasized with some adaptation of language: ï‚ There is a need to ensure that the enabling environment for specific project interventions is assured\. For example, in this project the regeneration of vegetative cover, particularly tree cover, was introduced to reverse desertification to ensure the feasibility of micro dams, soil and water conservation works\. Such interventions are more essential than ever in the context of climate change in Djibouti and alike countries\. ï‚ Accessible innovation, advisory services and access to markets are key elements for sustainable agriculture and livestock development\. The project focused mainly on water mobilization units and less on agriculture and livestock development\. The adoption of advanced agricultural technologies (e\.g\. micro-irrigation, greenhouses, hydroponics), requires cutting-edge skills compared to more traditional agriculture\. Such skills can be acquired through well-trained, and experienced teams providing agricultural and management advice\. However, marketing advice to producers to improve their economic performance in the newly irrigated areas was not an objective of the project\. Nevertheless, the lesson from this project is that producers who adopt advanced agricultural technologies require commercial partnerships with buyers and input suppliers (along the lines of productive alliances) to generate sustained profits\. ï‚ Beneficiaries’ contributions to income-generating activities (IGAs) strengthened their ownership of these activities and the likelihood of success\. IGAs are a high-risk project component that requires careful planning, preparation, selectivity, and strong complementary support such as business skill development; participatory preparation, review, and monitoring of business plans; and market analysis)\.The 10% contribution requested to access matching grants for IGAs was accepted by all participants in this project\. Even the poorest found the means to meet this threshold for disbursement of the matching grant\. The lesson is that this requirement prevented distortions in eligibility and provide an incentive to be successful\. Indeed most IGA participants were successful, which was attributed to a large extent to the requirement for 10% contribution, which instilled a sense of ownership among beneficiaries\. 13\. Assessment Recommended? No 14\. Comments on Quality of ICR Page 18 of 20  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) Quality of Evidence\. The ICR benefited from a sound M&E system that provided important inputs to the ICR and efficiency analysis\. Since the M&E design lacked adequate indicators to assess the enhanced capacity of communities, the ICR's coverage of this issue was supplemented for this review by an exchange with the Bank's project team\. Quality of Analysis\. The ICR provided clear linking between evidence and findings\. However, the evidence on enhanced capacity was limited\. Lessons\. Lessons reflected the project experience and were based on evidence and analysis\. Results Orientation\. The ICR included a good discussion on outcomes\. However, the connection of some sections to the PDO was not clear, for example, food security\. Internal Consistency\. Various parts of the ICR were internally consistent and logically linked and integrated\. However, the sections on hydroponics and food security might have fitted better under section E (Other Outcomes and Impacts) rather than being discussed as part of section B (Achievement of PDOs)\. Consistency with guidelines\. The ICR used the available data to the extent possible to justify the assigned ratings\. Discussion of outcomes was thorough, and the efficiency analysis was reasonable\. Conciseness\. The ICR was well written and provided thorough coverage of the implementation experience and candidly reported on shortcomings\. There was enough clarity in the report’s messaging\. The ICR could have discussed whether the recommended risk mitigation measures worked\. Also, the ICR did not report on the status of audit reports, whether qualified or unqualified\. The Bank's project team provided comprehensive responses to questions from IEG about the project's performance\. These responses were very much appreciated and many were used in this review to elaborate the outcome of the project\. Overall, the Quality of the ICR is rated Substantial\. a\. Quality of ICR Rating Substantial Page 19 of 20 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review DJ-Rural CDD & Water Mobilization (P117355) Page 20 of 20

REVIEW

P052247

 ICRR 11912 Report Number : ICRR11912 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/17/2004 PROJ ID : P052247 Appraisal Actual Project Name : Ma-pilot Fisheries Dev\. Project Costs 12\.9 8\.98 US$M ) (US$M) Country : Morocco Loan/ US$M ) 5\.0 Loan /Credit (US$M) 2\.69 Sector (s): Board: RDV - Ports Cofinancing waterways and shipping US$M ) (US$M) (52%), Central government administration (18%), Agricultural marketing and trade (14%), Animal production (8%), Agro-industry (8%) L/C Number : L4464 Board Approval 00 FY ) (FY) Partners involved : Closing Date 12/31/2002 12/31/2003 Prepared by : Reviewed by : Group Manager : Group : John English Fernando Manibog Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives The objectives of the project were to : strengthen the capacity of the Ministry of Marine Fisheries (MOMF) to manage and develop the fisheries sector, mainly by improving sector planning and information systems; and test on a pilot basis new approaches to improving fish product quality, upgrade landing infrastructure, and consolidate dialogue with the industry at the local level \. b\. Components The project had two components : Institutional development (US$1\.0 million or 8 percent of total cost: Final cost, US$1\.06 million)\. This comprised support to institutional reforms, information systems, and support to sector planning \. Pilot Marketing chain component ( US$11\.9 million or 92 percent of project cost: Final cost, US$7\.92 million) This included sub-components covering improvements in quality at sea, fish landing, marketing, and processing, including; the promotion of measures to improve the handling of the catch at sea; the facilities for landing and marketing fish (including auction halls with relevant facilities for fish holding during sale ); and the management of these handling and marketing facilities \. c\. Comments on Project Cost, Financing and Dates At appraisal, estimated project cost was US$ 12\.9 million\. The final estimated expenditure was about US$ 9 million, or 70 percent of the original estimate\. The principal reason for the shortfall was that only one of three fish auction halls was built\. The closing date was extended once by a year \. 3\. Achievement of Relevant Objectives: The project strengthened MOMF's capacity to manage and develop the fisheries sector \. A sector planning unit has successfully been created, an integrated management information program is operational, and preparation for sector reorganization is nearing completion \. The pilot marketing chain improvement component successfully demonstrated ways to improve quality and value added in the sector through a model for improved artisanal fisheries, a pilot of modern fish marketing facilities, and development of tools to improve quality and value -added both at sea and on shore \. Joint public-private institutions have been developed at both the central and local levels \. 4\. Significant Outcomes/Impacts: The expected outputs from the institutional development program have been largely achieved \. The redefinition of the roles of central and decentralized public institutions and their relation to the private sector has been partially achieved\. The integrated management system is operational and the MOMF planning system is operational and the gender program is underway\.  In the marketing/processing area a number of improvements have been made : A pilot model for upgrading artisanal fisheries facilities was completed, although on only two sites, rather than the five planned\. The facilities are ample and the construction good \. An environmental monitoring program has been set up to measure the facilities' impact on the marine environment and on fish stocks \. Management arrangements provide for co-management, with local fisheries cooperatives taking over most responsibility later \. One of the three proposed auction halls was constructed (the other two sites had technical difficulties ) to test improved methods handling and marketing \. A joint management plan was developed and implemented, with the hall starting operations in early 2003 and has demonstrated that the improved technology can increase quality and value added, provided management is adequate \. Three activities were undertaken in fish processing \. A diploma program for fish factory workers was successfully implemented by MOMF\. A series of "good practice guides" was also developed and are being utilized and appreciated by the industry \. The project also developed a label ("Label Maroc") to identify products which meet high quality standards\. Publicity has been widespread and the take -up is good\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): There was rapid turnover of political leadership of the ministry which led to some decisions that undercut project efforts, particularly in strengthening capacity of the ministry \. For example, at the beginning of the project FAO was providing assistance to the ministry in improving fish stock assessment and fisheries management \. When this agreement was terminated this hampered the project's efforts to strengthen planning capacity in the ministry, since a considerable gap was left in the required skills \. Partly as a result, the project scaled back or dropped several planned activities such as an evaluation of fleet modernization and a study of strengthening of the Marine Fisheries Department\. Thus, the overall institutional impact was more limited than anticipated \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Moderately Satisfactory The text of the ICR is not consistent with the rating\. While the number of pilot activities in the fish handling /marketing component of the project was reduced, the full range of planned activities was maintained and the project objectives were not changed\. Those activities that were undertaken were completed largely satisfactorily\. There were shortcomings, particularly on the institutional side, but the project did achieve most of its major relevant objectives\. Institutional Dev \.: Modest Modest Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Unsatisfactory Unsatisfactory \. Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: A neutral, third party agency with appropriate expertise, such as the Bank, can play a catalytic role at a time when government and industry are trying to develop new paths of cooperation in sector management \. This may not require significant lending\. This catalytic type role can be particularly significant when sensitive issues such as the monitoring of commercial activities are being addressed \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR provides a concise, but thorough review of project performance \.

REVIEW

P088319

 ICRR 14475 Report Number : ICRR14475 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 12/29/2014 Country : Honduras Project ID : P088319 Appraisal Actual Project Name : Barrio-ciudad Project US$M ): Project Costs (US$M): 16\.5 16\.6 L/C Number : C4096 Loan /Credit (US$M): Loan/ US$M ): 15\.0 15\.0 Sector Board : Urban Development US$M): Cofinancing (US$M ): Cofinanciers : Board Approval Date : 07/07/2005 Closing Date : 06/30/2011 06/30/2013 Sector (s): Sub-national government administration (80%); Water supply (12%); Sanitation (8%) Theme (s): Municipal finance (25% - P); Urban services and housing for the poor (25% - P); Municipal governance and institution building (24% - P); Other urban development (13% - S); Other social protection and risk management (13% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Roy Gilbert Alain A\. Barbu Christopher David IEGPS1 Nelson 2\. Project Objectives and Components: a\. Objectives: Original : "(a) To improve the quality of life for the urban poor in the Borrower's territory; and (b) to enable their municipal governments to continue and sustain improvements through capacity building and improved access to credit \." (Development Credit Agreement - DCA, Schedule 2 p\. 30; Project Appraisal Document - PAD p\.6) Revised : "To improve the quality of life for the residents in selected poor urban neighborhoods of the Borrower in Eligible Municipalities\."(DCA-Amended 2008, Schedule 2 p\. 26; Project Paper 2008 p\.1) b\.Were the project objectives/key associated outcome targets revised during implementation? Yes If yes, did the Board approve the revised objectives /key associated outcome targets? Yes Date of Board Approval: 05/19/2008 c\. Components: Original Components As per Schedule 2 of the DCA, these were: Part A - Urban Services and Infrastructure : (appraisal cost: US$6\.1m\.; actual cost US$0\.0m\.) through subloans to eligible municipalities to finance city level infrastructure investments to : (i) promote urban development and attract new investment, such as markets, transportation terminals, slaughterhouses and extensions /improvements to water and sanitation systems; and (ii) help equip cities with basic facilities, such as fire stations, city center improvements and communications services \. Part B - Neighborhood Upgrading : (appraisal cost: US$6\.1m\.; additional restructuring cost US$ 4\.7 m\.; actual cost US$10\.9m\.) grants to eligible municipalities for typical urban upgrading interventions, such as land titling, water and sanitation connections, drainage, access roads, recreation centers, parks, community facilities, street lighting, child care facilities and risk mitigation works \. Part C - Technical Assistance : (appraisal cost: US$1\.1m\.; actual cost US$3\.8m\.) Provision of technical assistance (TA) to: (i) build the capacity of eligible municipalities and neighborhood organizations for participatory planning and execution of urban upgrading; (ii) improve the capacity of eligible municipalities for commercial borrowing and debt management through help with local financing proposals, financial statements, urban planning, water and sanitation service delivery, financial management, revenue collection, project management and environmental management and regulation; and (iii) strengthen the capacity of the General Directorate for Housing and Urban Development within the Government's Secretariat of Public Works, Transport and Housing (SOPTRAVI) to deliver TA to municipalities, to formulate policy and provide oversight and regulation in urban development \. The scale of this component expanded during implementation in response to strong demand at the municipal and neighborhood levels\. Part D - Urban Crime and Violence Prevention : (appraisal cost: US$1\.0m\.; actual cost US$1\.3m\.) Public works and prevention strategies to enhance community security and integration, including : (i) situational prevention, which includes measures that reduce opportunities for particular crime and violence problems through spatial interventions such as "crime prevention through environmental design; (ii) capacity building, training and technical assistance in multi sectoral crime and violence prevention (excluding police activities), such as community crime mapping and diagnostics, preventing juvenile delinquency and domestic violence, community safety and monitoring and evaluation; and (iii) complementary investments and activities, including municipal plans for crime and violence prevention and provision of grants to eligible municipalities for complementary infrastructure and programs for community safety (excluding police activities)\. Part E - Project Administration : (appraisal cost: US$1\.3m\.; actual cost US$0\.7m\.) Provision of TA, equipment, training and incremental operational costs as necessary to operate and strengthen the implementing agencies to enable them to effectively monitor and evaluate project implementation, including audit services \. Revisions With the May 2008 project restructuring, the Part A component was cancelled at the request of the Government \. Municipal demand for Part A lines of credit was weak, with declining market interest rates making the project terms less attractive\. The resources committed to Part A were reallocated to the Part B component, which almost doubled in size\. Other components remained unchanged, although within Part C TA related to commercial lending and debt management was eliminated, while other TA for urban and neighborhood planning and crime and violence prevention work expanded\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project cost : Overall, actual project costs were close to those estimated at appraisal and at the time of restructuring \. At the level of components, however, some actual costs were significantly different from earlier appraisal estimates \. As just noted, the Part A Urban Services and Infrastructure Component, estimated to cost US$ 6\.1 million at appraisal was cancelled altogether\. As a counterpoint, the Part B\. Neighborhood Upgrading Component, that had a similar appraisal cost estimate, almost doubled its actual costs owing to the reallocation of funding just mentioned to expand the scope of the investment \. The actual costs of the Part C \. Technical Assistance Component were more than three times the amount estimated\. The ICR does not give the reasons for this \. Financing : The project was almost entirely financed by an IDA Credit that was practically fully disbursed by completion \. Borrower contribution : There was no direct counterpart funding by the national government \. Municipalities, that were expected to contribute US$1\.5 million, actually paid in US$1\.7 million\. Dates : Credit Effectiveness was March 31, 2006, as originally planned\. In order to fully disburse the IDA Credit, however, the original project closing date had to be extended by two years, partly because of the interruption of project implementation through the political crisis of the ousting of President Zelaya in 2009\. The extension also allowed the Honduran Social Housing Fund (FHIS) that had become the sole project implementing agency in 2010 to complete a full cycle of additional sub-projects arising from the expansion of Part B \. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Rated : Substantial In seeking to improve the quality of life of Honduras' urban poor (original objective) and the quality of life for the residents in selected poor urban neighborhoods (revised objective) , the ICR notes that the project objectives were consistent with the Government's priority for implementing an integrated approach to urban development, but the report does not cite a specific Government strategy document embodying this approach \. It refers, however, to the priorities of an undated Country Vision and National Plan with the generic priorities of (i) improving social investments and opportunities; (ii) crime and violence prevention; (iii) social protection and reaching those in extreme poverty; and (iv) building Government capacity to implement multi -sectoral projects (ICR p\. 12)\. In trying to enable their municipal governments to continue and sustain improvements through capacity building and improved access to credit (original objective), the project's intent was consistent with the National Plan highlighting the need to enhance good governance at the local level in Honduras \. IEG later learned from the Region that the new Honduran government that has just taken office in 2014 has yet to produce a strategy /policy document that specifically lays out its priorities in the field addressed by the project objective \. The policy dialogue with the Bank thus far demonstrates that improving the quality of life of the urban poor, especially with respect to crime and violence, is always at the heart of the discussions These four government priorities are the same as those embodied in the Bank's current Country Partnership Strategy for Honduras (CPS 2012-2014) according to the ICR (ICR p\. 12)\. IEG later learned from the project team that the 2012-2014 CPS and its priorities have been extended to 2015\. Furthermore, a new Country Diagnostic for Honduras, scheduled for 2014, focuses upon crime and violence and how it affects the poor in particular \. b\. Relevance of Design: Rated : Substantial Instead of assessing the project's chosen activities as being the right ones to achieve the objectives through a logical results framework, as its review of the relevance of design, the ICR looks at how the project design relates to the country's development challenges \. Honduras, one of poorest countries in Latin America; faces, among other things, municipalities without financial resources; and high rates of murder and kidnapping (ICR p\. 12)\. IEG notes, however, several features that point to a relevant design following the standard assessment \. The project's Results Framework demonstrates logical linkages between project activities and the achievement of the objectives \. Thus, project investments in urban service and infrastructure and in neighborhood upgrading could lead directly to the improvements in the quality of life for the urban poor sought by the project (by both the original and the revised objectives)\. To help ensure that these improvements brought results to the urban poor targeted by the project objectives, the project design screened eligible neighborhoods by ensuring that their inhabitants were low income--reliably measured by the country's power utility through the proxy of household electricity consumption of less than 150Kw/month\. The proposed line of credit to municipalities (in the pre-restructuring project design ), as well as the broad gamut of technical assistance offered by the project to local government, could help them achieve their consolidated role in providing better urban services as the original project objectives sought \. 4\. Achievement of Objectives (Efficacy): Original - covering 10\.8% of disbursements: : (a) to improve the quality of life for the urban poor - rating : substantial (Since this part remained substantively unchanged after the revision of the overall objective, the results relating to it are assembled under the 'revised' objective (c) below\.)\. (b) to enable their municipal governments to continue and sustain improvements through capacity building and improved access to credit - rating : negligible The project made no disbursements against interventions linked to this objective during the 2005-2008 period that it was in force\. Hence no results were achieved \. While this objective remained only 10\.8% of the project's credit disbursements were made\. Its failure, therefore, has a proportionately small impact upon the overall outcome rating of the project\. Revised : - covering 89\.2% of disbursements (c) to improve the quality of life for the residents in selected poor urban neighborhoods - rating : substantial Outputs Water supply: 100% of households (9,790 h/h) were served by completion against a before project baseline of 90% (8,811 h/h) and a target of 97% (9,476 h/h) (ICR p\. iii)\. IEG notes that the difference between the baseline and endline figures, in other words the gain through the project was to 979 more households\. In a different part of the report, however, the ICR informs that the project provided new or rehabilitated connections to 2,187 h/h, more than twice the baseline:endline difference\. Reportedly, this had been achieved by building more than 18 kms of water networks (ICR p\. 13)\. IEG notes that the inconsistency between the two figures would imply that the project provided twice as many water connections as needed to cover the reported expansion of the service \. Comments received later explained that this difference were due to the demand -driven nature of this project, and also clarified that only 339 h/h of the 2,187 h/h total received new connections, while the remaining 1,848 were served by improvements to their existing connections \. Sanitation: 81\.6% of households (7\.988 h/h) had access to sanitary sewage systems by completion, against a  before-project baseline of 25% (2,447 h/h) and a target of 79% (7,784 h/h) (ICR p\. iii)\. For IEG, these results point to an additional 5,541 h/h served\. The ICR later reports (ICR p\. 13) that the project incorporated 2,291 h/h into the sanitation system\. For IEG, the discrepancy between these figures indicates that, contrary to an apparent over-supply of water connections, the project provided only half the number of sanitation system connections needed to achieve the increased coverage reported earlier by the ICR \.Again, later comments clarified that this difference was the result of the demand -driven nature of the project\. Public lighting: 96\.5% of households (9,447 h/h) had functioning public lighting available by completion against a before project baseline of 61% (5,972 h/h) and a target of 88% (8,615 h/h) (ICR p\. iii), IEG notes that these results show an additional 3,475 h/h having public lighting available \. On the other hand, the ICR later reports that over 14,000 households directly benefited from public lighting near their houses (ICR p\. 13)\. For IEG these figures indicate that the project provided four times as much access to public lighting than was needed to achieve the ICR's reported increase in coverage from the baseline \. An increased sense of security, as an element of quality of life, was perceived by 54% of households (5,286 h/h) who felt safe in their houses by completion, against a before project baseline of 49% (4,797 h/h) and a target of 65% (6,363 h/h)\. Project assessments showed a better performance of project neighborhoods with respect to crime and violence, when compared with control neighborhoods that had not been improved under the project \. Two important differences emerged: (i) reports of worsening violence over project period came from 5% of project neighborhood households compared with 19% from control neighborhoods; (ii) perceptions of improvements in security came from 5% of project neighborhood households compared with 0% in control neighborhoods\. IEG learned from the project team that a reliable time series of data on crime and violence at the national level, which could have served as a benchmark against which to compare neighborhood performance, is not available in Honduras\. Other outputs (ICR pp\. 13-14) included: (i) more than 4,7 km of access roads paved plus another 21\.0 km of access roads otherwise improved; (ii) more than 2\.8 kms of path and stairways improved; (iii) 1\.3 kms of retention walls built to mitigate against landslides and floods; (iv) 12 multi purpose sports and playground facilities built or rehabilitated\. Outcome Altogether, 21 neighborhoods with a total population of 48,949 in 2005 were upgraded by the project (ICR p\. 26)\. The ICR does not report the result in terms of the number of households, the metric used at appraisal \. IEG reckons the reported beneficiary population to be the equivalent of approximately 9,790 households (h/h), assuming an average of five persons per household \. Resulting improvements in the quality of life in these neighborhoods derived from the delivery of project component outputs across several sectors \. As a result of the project, an improved quality of life as far as a safe water supply is concerned was enjoyed by all residents of these 21 low-income neighborhoods\. Although it did finally reach as many as water did, the increased coverage of sanitation services, when compared with the low level prior to the project \. was even greater, bringing about an important improvement of the quality of life for these low income beneficiaries \. Finally, a greater sense of security, no doubt helped by the project's widespread public lighting, helped raise the quality of life for these residents, as the findings of neighborhood surveys detailed below demonstrate\. IEG note on the reported numbers of beneficiaries The ICR informs (ICR p\. 15) that the Borrower ICR estimates that the total number of direct beneficiaries of the project, being the inhabitants of the 21 neighborhoods benefitting from project infrastructure and social interventions, was 55,891\. This is probably a more recent figure than the 48,949 inhabitants reported earlier for 2005\. The ICR explains that, for this project, "the direct beneficiaries are the inhabitants of the neighborhoods that benefitted from the infrastructure and social interventions " (ICR p, 15)\. "Indirect" beneficiaries are reported to be "over 925,000 people, including 883,500 benefitting from the urban upgrading and the remaining from social interventions components", By these figures, the project would have spent only US$ 17\.3 per indirect beneficiary and all the indirect beneficiaries of this project would constitute 11-12% of the total population of Honduras \. The ICR does not explain clearly how such large numbers of indirect beneficiaries as these extrapolate from the 11,000 - 14,000 range of beneficiaries receiving various types of project assistance, as reported by the ICR and calibrated by the size of the population of the neighborhoods benefitted \. Comments received later confirmed 55,891, the total population of the 21 neighborhoods benefited in one way or another by the project, as being the total number of beneficiaries \. The comments also acknowledged that the ICR could have been more explicit about the numbers of direct and indirect beneficiaries within this total\. 5\. Efficiency: rating : Modest A complex method of "hedonic pricing" was applied at appraisal to estimate the values of benefits to be generated by project investments in three selected neighborhoods for the upgrading component that, overall, would account for 37% of the total project cost\. This appraisal cost:benefit analysis did not provide an estimated ERR, however, the reason given being that the actual investments eventually made in each of the project's upgrading interventions would differ (PAD p\. 94)\. In fairness to the appraisal, ex ante estimates of rates of return can only be that, namely estimates\. They cannot foretell exactly how each investment will turn out, nor are they expected to \. An estimate of the likely results is, nevertheless, a good starting point as it should be for any appraisal that includes cost :benefit analysis\. The ICR informs that the appraisal hedonic pricing model could not be re -run at completion as the appraisal documentation and data of the original model could not be found by the ICR team \. While this is an important loss, it should not, by itself, impede the realization of a new ex post cost:benefit analysis at completion \. That means that this project lacked an ex post ERR as well as an appraisal one\. A model using imputed rental values of improved properties to measure benefits against the costs incurred, for instance, could have easily estimated the ERRs of project investments in neighborhood upgrading that, by project closing, had accounted for 67% of final costs of the project\. Comments received later, however, informed that the ICR had looked into this option but found that there was not readily available and reliable data in Honduras to estimate rental values, where land markets are not yet well developed and municipalities rarely have good cadastral data \. As a proposed alternative to cost :benefit analysis, the ICR looked at the unit costs of the project investments \. It found that the actual unit costs were similar to those planned at appraisal and that the costs of these investments per beneficiary household were similar to standards set by the UN Millennium Project for Latin America \. While interesting results in themselves, these results fall short of a robust assessment of this project's efficiency in achieving its objectives for two reasons: (i) the absence of measures of the benefits of the project investments and the comparators; (ii) uncertainty about the whether the comparators considered, which may involve altogether different investment packages, are truly comparable \. The efficiency rating for this project is determined largely by the lack of available data \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re -estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: With relevance Substantial for objectives and for design, the project's efficacy in achieving its objectives Substantial, but efficiency only Modest, the project encountered moderate shortcomings and its overall outcome is rated accordingly\. Actions prior to the project's formal restructuring, when 10\.8% percent of disbursements were made, led to an overall outcome rating of Moderately Unsatisfactory (value: 3)\. After the restructuring, when 89\.2% of disbursements were made, the overall outcome rating was Moderately Satisfactory (value 4)\. The final rating (reported below) derives from mean of the pre- and post-restructuring ratings, weighted by the share of total disbursements behind each one, as per the following : (3 x 0\.108) + (4 x 0\.892) = 0\.32 + 3\.57 = 3\.89, rounded to 4, the value of Moderately Satisfactory \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The following factors help lower this risk : Communities' demonstrated commitments throughout project implementation and immediately afterwards to ensuring minor infrastructure operation and maintenance --such as street cleaning and unblocking drains --bodes well for sustained community ownership of these assets and their operational performance into the future \. Some patronatos --officially recognized but community based social control groups at the municipality level --have initiated charging user fees for the use of community facilities, such as public spaces and community facilities, according to the ICR (ICR p\. 19)\. The ICR reports that some municipalities "receive support"--without specifying exactly what, from whom and how much--to help them operate and maintain project infrastructure in the neighborhoods \. While these factors contribute to increasing it : Lack of strong evidence in the ICR about consumers' willingness and ability to pay for water and sanitation services\. The ICR notes that the higher tariffs would be high enough to generate revenues needed by water utilities, while still costing less than what consumers had to pay previously to private water vendors (ICR p\. 19)\. There is no evidence, however, on actual revenues collected, the total amounts year by year and the share of  amounts due that are actually paid in \. Evidence of consumers actually paying for the service would be particularly important\. The data should be easy to collect, in the case of this project's neighborhoods where 90% of residents were already connected to the water supply network before the project \. Consumers interviewed for the ICR reported their willingness to pay for the water and sanitation services \. Willingness to pay, however, is a more interesting and useful concept for an appraisal that is trying to estimate how the project (hopefully) might perform in the future\. An ex post evaluation at the completion of a fully operational project should be asking question about what was actually paid\. Municipal staff turnover every four years disrupts local government commitments to sustaining the results of the project\. Crime and violence is affected by factors beyond the control of the project and could worsen, especially as far as youth-at-risk is concerned\. The rating here takes account of these positive and negative factors a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry: The project design was soundly based upon the Bank's long and extensive experience with upgrading informal settlements\. It was innovative in marrying a well tried approach to pilot interventions aimed at reducing crime and violence in the beneficiary neighborhoods \. According to the ICR, this was through an approach called "Crime Prevention through Environmental Design (CPTED)", that added security features to existing locations \. These would be through better lighting, fewer and more transparent physical access points into communities, actions that could enhance local residents' quality of life through perceived better security (ICR p\. 8)\. Another strength of the design was its inclusion of clear eligibility criteria for selecting municipalities and neighborhoods to participate in the project \. The ICR reports that these helped ensure fairness in access to project funding by these interested parties (ICR p\. 5)\. Furthermore, as a demonstration of their ownership and commitment, the project required municipalities and communities contribute at least 15 percent of the total sub-project cost up front (ICR p\. 7)\. Being the first Bank financed urban project in Central America for ten years, the Bank adopted a cautious approach when defining the scope of the operation \. It focused upon second tier cities, where crime and violence were still significant but not on the scale of Honduras' largest cities \. To facilitate the involvement of participating communities, the project set up technical municipal liaison teams (ETEM), each consisting of an urban specialist, a community development specialist, and up to three social workers for the duration of the project \. Each ETEM also served as a bridge between the communities themselves and their respective local government, as well as national authorities involved in the project \. Project preparation and design included a line of credit to municipalities for financing infrastructure \. While a standard feature of many Bank financed municipal development projects, its feasibility and priority for the Government could have been more thoroughly appraised (ICR p\. 20)\. With its shifting priorities\. the Government requested to drop the line of credit from the project, a component that had made no headway three years after start up\. A shortcoming of quality at entry was the insufficient attention paid by the Bank to M&E, as is evident by the lack of data on baselines and targets for the majority of the large number of performance indicators chosen (details in Section 10)\. at -Entry Rating : Quality -at- Moderately Satisfactory b\. Quality of supervision: Project supervision was intensive, even during the political crisis of 2009-2010, with the ICR showing 17 missions reporting performance ratings between 2006 and 2013 (ICR p\. vi)\. These ratings were appropriately downgraded during 2007 and 2008 as it became evident that the project's capacity building and improved access to credit by municipalities were going nowhere \. The higher ratings were appropriately restored after project restructuring had dropped the project objective and component related to this aspect of the original design \. Through this restructuring the Bank team demonstrated flexibility in responding to the Borrower's request to cancel the component\. Thereafter, Bank supervision channelled technical support on crime and violence prevention to local project teams \. The ICR reports that supervision supported strengthening FHIS management, including organizing exchanges with equivalent organizations in Georgia and Jamaica \. There were some shortcomings, however, with inadequate Bank attention to fiduciary issues and procurement in the project's first years (ICR p\. 21)\. This did not result in reported cases of non -compliance or misprocurement, however (details in Section 11)\. Moreover, supervision could have focused more upon M&E, whose initial design was known to be weak (details Section 10)\. Finally, the ICR notes that the Bank itself could have done more to disseminate some of the important experiences of this project \. It could also have encouraged and helped the Borrower in setting up knowledge management systems for this purpose \. The present concern is that much of the learning from this project might become lost forever without a systematic approach to managing the knowledge that it has generated\. Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: A shortcoming was one Government administration's having first agreed to include a line of credit component for municipalities, for another elected shortly after appraisal to have backed down when it requested the cancellation of the relevant objective and component \. IEG learned from the TTL that the original commitment had been genuine, and not forced upon the Government by anybody \. By excluding a central role for municipalities in the project, however, the cancellation represented a major shift in direction \. Among other things, this resulted in very slow disbursements for the first three years \. Instead of nearly half the funding that should have been disbursed by then, only 11% was\. This could have been avoided with a clear Government position on this issue at the outset, and during preparation and appraisal \. After the Government's position was clarified by restructuring, however, Government support for the remainder of the project was consistent until completion \. During implementation, Government entities did not always give the support needed for the smooth execution of the project\. The ICR cites the examples of bureaucratic internal reviews and protracted processing of approvals (ICR p\. 22)\. Project implementation was initially delayed by the incompatibility between the financial systems of FHIS and those of the Ministry of Finance that prevented the easy flow of project funds between them \. Furthermore, the ICR notes that project implementation saw seven different FHIS ministers that meant frequent shifts of political agendas and staff turnover in areas close to the PIU \. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance: There was close and continuous PIU interaction with local officials and communities (ICR p\. 6)\. This included "participatory diagnostics" that involved "walk-throughs" of the community by day and night, making local residents active partners who would insist upon full completion of the works promised by the project (ICR p\.7)\. These interactions were made possible by the intense work of the dedicated and proactive team of professionals at the PIU\. This engagement with local communities helped accelerate the start up and completion of a Neighborhood Upgrading component that was almost twice as large as that initially planned \. Overall, the PIU ensured the compliance of the project with fiduciary and safeguard requirement, regarding which no serious non-compliance was reported\. Implementing Agency Performance Rating : Satisfactory Overall Borrower Performance Rating : Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: Altogether, the original M&E design foresaw collecting data for 16 performance indicators\. None of the five PDO indicators had baseline or target values at the outset, though \. As well as weakening M&E, the lack of baseline material can reveal insufficient knowledge of the start up conditions that the project intended to improve \. Baselines were constructed and measured during project implementation, however \. Ideally, the baseline conditions of local communities, for instance, should be known prior to implementation since they can help prioritize those communities most in need of project assistance \. As originally foreseen at appraisal, FHIS was made responsible for M&E data collection and analysis, a function it retained throughout project implementation \. b\. M&E Implementation: FHIS fulfilled its responsibilities during M&E implementation \. In response to weaknesses it observed in M&E implementation, the Bank team provided technical support to FHIS and the PIU \. In spite of these efforts, data collection and analysis for M&E implementation were not conducted in a timely manner \. That meant that some key outcome indicators were not systematically monitored right up to project closing \. At that time, according to the ICR, additional data on performance indicators had to be collected ex post \. Again, to be useful for ongoing M&E to be useful to guiding and managing project implementation, M&E data should be available during implementation\. If the collection of such data had been part of the original M&E design, it could have provided valuable feedback for project management\. c\. M&E Utilization: The absence of systematic M&E throughout implementation undermined the usefulness of the M&E data and findings that often were assembled too late \. Despite these shortcomings, the project M&E did lay the groundwork for a subsequent impact evaluation that was useful identifying the key results of the project that had not been picked up earlier by the M&E\. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: The project triggered two safeguards : 01 ) The project classified as a category B operation, as no irreversible Environmental Assessment (OP 4\.01) environmental impacts were foreseen (PAD p\. 21)\. The project's Environmental and Social Management Framework (ESMF) was updated in 2009 and subsequently applied in a satisfactory manner, according to the ICR (ICR p\. 10)\. Bank supervision missions and the ICR itself did not report significant negative environmental impacts or non-compliance with Bank safeguards policies during implementation \. Instead, the ICR reports the project had benign environmental effects especially through introducing drainage and sewerage services to communities previously harmed by the pollution resulting from the lack of these services \. While the project interventions almost certainly will have improved the environment of the areas served, a broad environmental assessment also needs to consider possible averse effects of the discharge of untreated wastewater from this project's own infrastructure, for instance\. To help raise awareness of such issues and to enhance environmental monitoring generally, the project supported the strengthening of FHIS's environmental monitoring unit (UGA) through providing technical assistance \. Involuntary Resettlement (OP 4\.12) 12 ) Most physical sub-projects financed by this operation did not require land acquisition or the displacement of existing residents since they focused primarily on upgrading existing sidewalks, paths and stairways along their existing alignments \. As a precaution, nevertheless, the project appraisal included the preparation of an Involuntary Resettlement Framework by the Government that was approved by the Bank \. Thanks to the careful design of sub -projects to avoid resettlement, the Framework did not have to be applied, however \. b\. Fiduciary Compliance: 30 )\. As the original design of the project included the financial intermediation Financial Intermediary Lending (OP 8\.30) of a line of credit to municipalities, project appraisal ensured that the design was compliant with Bank OP 8\.30\. With the complete cancellation of the relevant Part A component of the project, however, that policy no longer applied to this operation\. Fiduciary Issues The ICR reports that there were none during project implementation \. Financial Management The ICR reports shortcomings in this area that included : (i) delays in issuing audit reports because the auditors were contracted late; (ii) delays in submitting the project's financial management reports; (iii) some accounting records could not be reconciled (the ICR does not specify amounts or frequencies involved )\. Toward the end of project implementation, however, financial management showed some improvement \. Procurement Delays were reported initially with processing procurement, but these lessened after the local staff had undergone a steep learning curve in this area \. Even so, slow approvals by FHIS continued to hinder more agile procurement management for the project \. No cases of misprocurement were reported during implementation, however\. c\. Unintended Impacts (positive or negative): d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Satisfactory Satisfactory Risk to Development Moderate Significant The higher risk rating here derives from Outcome : staff turnover in municipalities when four yearly elections change the administrations\. Also evidence that community members are willing to pay for water supply (at project completion) is less assuring than data on the actual payments they have made thus far, the evidence of which is scarce in the ICR \. Bank Performance : Moderately Moderately Satisfactory Satisfactory Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: From the ICR: If an initial design of M&E should fail for whatever reason, then Bank and Borrower can make efforts during supervision to re -establish it or replace it with another \. This project gave limited attention to establishing a solid M&E system, but its weakness that became apparent soon after start up \. Such cases as this should focus the attention of project supervision early in trying, if necessary, to set a new one up \. In low-capacity countries such as Honduras, it is crucial to keep the design of the M&E framework as simple as possible and clearly define from the beginning methodologies to use throughout implementation to monitor progress towards achieving the project's objectives \. M&E indicators should not be sidelined in the midst of other priorities during implementation\. Twin- Twin -track project designs, such as combining the delivery of physical infrastructure with the provision of community social programs, should be considered when attempting to achieve complex goals such as crime and violence reduction \. This project's approach of changing the built environment to help prevent certain types of crime with community participation where residents themselves help identify hotspots, is worthy of further application\. To be successful such innovative work requires highly qualified liaison teams that include social development specialists to work with municipalities and communities \. Given the additional costs of these features, it is important to assign sufficient funds for project management and activities of integrated urban upgrading projects \. Active community participation and strengthening of community organization structures should be supported throughout the entire cycle of a project \. Multi-phase participation by communities especially included household surveys, crime and violence diagnostics and the active monitoring of implementation sub-projects by beneficiaries, helped keep this project focused upon its principal objective of improving the quality of life for the urban poor \. To be effective this approach required existing organizational structures to be strengthened and the training of community leaders, When preparing similar urban upgrading projects, task teams should not underestimate the importance of these activities to ensure transparency and sustainability of  subprojects, but also their contribution to increasing the self -esteem and voice of the targeted communities by making them active partners of the municipalities in the development of their neighborhoods \. Some more lessons added by IEG: Baselines should be identified and measured during project preparation not just to satisfy the needs of M&E, but to demonstrate that there has been a clear understanding of the problems that a project intends to solve \. M&E for this project lacked baseline information at the outset \. When baseline data is collected only near implementation completion, it means that M&E was unable to provide useful feedback during implementation\. It also raises concerns that the conditions existing prior to the project may not have been fully understood, Ex post economic analysis should, as far as possible, be founded upon what has actually been achieved in getting the results intended by an operation \. In the case of this project, too much weight was perhaps given to beneficiaries' "willingness to pay" for project services\. At completion, economic analysis should be able to avail itself of evidence of actual payments made --much more convincing as evidence of achieving stated objectives that statements of intent, however honestly given \. Project preparation by the Bank should take care to ensure that key project objectives and components, with municipalities in a central role, are feasible and have full backing of the Borrower \. For this project's appraisal, the Government, formally at least, fully supported a major financial role for municipalities in providing urban infrastructure, only to back down shortly after start up, disrupting and considerably delaying project implementation that had to take a major new turn \. A more complete assessment at appraisal might have helped avoid this\. 14\. Assessment Recommended? Yes No Why? To learn more and update results on crime and violence prevention \. To learn more about the role of municipalities in urban development in Honduras and present Borrower and Bank support to them \. 15\. Comments on Quality of ICR: The ICR provides a fair account of most aspects of the preparation, appraisal and implementation of the project \. One important aspect that could have received more attention is the story of wavering Bank and Government support for the operation giving a central role to municipalities in financing and implementing urban infrastructure \. On project results, the ICR provides a candid treatment of shortcomings, but provides inconsistent data on some of results, raising doubts about what the project actually achieved \. The findings would have been more convincing if the ICR had focused more on providing concrete data of what had been achieved instead of relying upon promises of future support by stakeholders and willingness to pay by consumers \. Later comments by the Bank helped clarify some of the data issues\. They noted that only 8 of the 21 beneficiary neighborhoods received full -blown integrated neighborhood improvement projects so that the PDO -level indicator reported only on these 8 on whose population figures, 16,947 in 2005 and 18,600 in 2013, the reported figures of results were based \. The ICR could have paid more attention to compiling the lessons \. They included one lesson about 'placing municipalities in the lead', not an appropriate lesson for a project that had removed municipalities from the central role it had originally assigned to them, as foreseen in the original design \. Other areas in which the ICR self evaluation could have been stronger include its assessments of relevance and efficiency \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P008479

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 24065 IMPLEMENTATION COMPLETION REPORT (CPL-37050; SCL-3705Aj ON A LOAN IN THE AMOUNT OF US$100 MILLION TO THE Hungarian Power Companies Ltd\. (MVM Rt) FOR Energy and Environment Project 04/16/2002 \.is1 U\.Lu1r,entL hadb a rlestictedU LUbULUUU1I rIiU IrW)Y Ub USed Uy rUecJIipiens only in Lhe periorinniiic of uiiir official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. l  CUrTRRENCY EQUP VALE NTS (Exchange Rate Effective as of November 30, 2000) Currency Unit = Hungarian Forint (HUF) HUF 1 = US$ 0\.003 US$ I = HUF 280\.00 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS MVM - Hungarian Power Companies GNP - Gross National Product GDP - Gross Domestic Product EMS - Energy Management System NDC - National Dispatch Center RDCs - Regional Distribution Control Centers UICTE - I Inion for Coordination of Transmission of Electricity ICR - Implemention Completion Report EU - Eurmopen Union SCADA - System Control and Data Acquisition ?,AXvnR D ge ower System\. erXt- 0--\. pn \.-IVA V A - IAJlCllf \.Jf \.tU OI\.tt ' \. -\.n\.Z5tlJ*jJ A HEO - Hungarian Energy Office Vice President: Johannes F\. Linn Country Manager/Director: Roger W\. Grawe Sector Manager/Director: Eva Molnar Task Team TLeaclr/Tpsk- Manager: Deian R\. Ostojic  HUNGARY Energy and Environment CONTENTS Page No\. 1\. Project Data 2 Principan Performance Ratings 1 3\. Assessment of Development Objective and Design, and of Quality at Entry 1 4\. Achee,es AfOuciea, upz c't eviiierWit~ 01O VJL;LIYViWIU%~JULVULb 5\. Major Factors Affecting Implementation and Outcome 7 6\. Sustainability I1 7\. Bank and Borrower Performance 13 8\. Lessons Learned 13 9\. Partner Comments 14 10\. Additional Information 14 A _l 1\. IL-\., D _ _ nance ITA;-\.+A/In , A I A \.na - _ I IC Annex 2\. Project Costs and Financing 16 Annex 3\. Economic Costs and Benefits 18 Annex 4\. Bank Inputs 19 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 21 Annex 6\. Ratings of Bank and Borrower Performance 22 Annex 7\. List of Supporting Documents 23 A nnex 8\. Borrower's Contrbution tn the iCR 25   jrojec ILD: P00847y jProjecr ivame: Energy Environment Team Leader: Dejan R\. Ostojic TL Unit: ECSIE ICR Type: Core ICR Report Date: June 20, 2002 1\. Project Data Nanme: Energy Environment LIC/TF Number: CPL-37050; SCL-3705A Counny/Department: HUNGARY Region: Europe and Central Asia Region Sector/subsector: PT - Thernal KEY DATES Original Revised/Actual PCD: 08/10/90 Effective: 04/15/94 04/15/94 Appraisal: 10/23/92 MTR: 06/30/2000 12/03/2001 Approval: 02/17/94 Closing: 12/31/99 12/31/2001 Borrowt?er/Implementing Agency: Hungarian Power Companies Ltd (MVM Rt\.) Other Partners: STAFF Current At Appraisal Vice President: Johannes Linn Kemal Dervis Countrv Manager- Roger W (irawe Sector Manager: Henk Busz Bemard Montford Team Leader a!\.ICR: Dejan Ostojic TamasMarkus ICR Primary Author: Dejan Ostojic 2\. Principal Performance Ratings (HS-=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainabdiity: HtL Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: Project at Risk at Any Tinte: No 3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: Background in i99i, Hungary's indigenous resources (coai, oii, natural gas and nuclear power) provided 53% of the country's primary energy and imports (oil, natural gas, coal and electricity) came mainly from the Commonwealth of Independent States (CIS)\. During the year, 21% of total electricity consumption was  me oyI " le ` t r\.n y , - t tI Ar - ----- 61A met by imports, preaommanuy from une CiS\. riungary's energy mtensity was nigh I 1\. 1a Kg oi; equivatenu US$ of GNP in 1990 compared to 0\.18 in Austria) and household electricity prices were at 70% of economic cost recovery levels\. By 1994, Hungary was well advanced in economic reform and the creation of a fully-functioning market economy\. A comprehensive package of structural reforms had been initiated to increase competition, tighten financial discipline and enhance productivity throughout the economy\. National and local authorities were moving towards commercialization and privatization in a variety of sectors\. Diversification of energy sources was an explicit policy objective and the Government was committed to a well defined schedule of residential tariff increases to bring prices to cost-recovery levels by the end of 1995\. Although all electricity assets were still under state ownership, in 1992, a transmission company, eight power gen\.er-t:ling companies -A six Awer '\.LiUUi c\.4o-+JIU-5;U--_1-A\. ArlA --WL4A 1 M00 of the transmission company and 50%/o of the generation and distribution companies, the State Property A Own - I A 'f/ -- LI L- ~ i__ A L \.1_ L'J , lf%f%A XXIM L\.A -f__ _ t1gencMy IwCUe ' 7O U 1anu IipalItIes IICIU UIf remamuCr\. ^L U U Ol 17 , iVIlVl IV4U iUJU 1155ts 01 HUF 329 billion and shareholders' equity of HUF 301 billion\. They also incurred a loss of almost HUF 3 billion during the year\. In macro-econormic terms, Hungary was classified as an upper-middle income country, with a 1992 GNP per capita for its population of 10\.3 million of $2,980\. Inflation averaged 23% during that year, and the unemployment rate averaged 12\.7%\. The Government's financial deficit was 2\.4% of GDP, while the trade deficit for 1992 was 0\.4% of GDP\. Obiective The objectives of the project were to: (i) reduce Hungary's dependence on energy imports from a single source: (ii) increase efficiency, reliability and flexibility in the production of electricity and heat: and (iii) establish the necessary basis for strong interconnection with the Western European Power Pool\. In addition, the Prniert wnuld suppnrt eontiniied -nvirnnmental imprnovemennts in the power sec1tnr nnd ns'siqt in improving institutional capabilities\. The project objectives were clearly stated\. They supported the country's objectives for the energy sector by nelping to reinforce the economic supply of electric power ara neat and by improving associaxeu environmental controls\. The objectives were also consistent with the Bank's assistance strategy that supported policies and investments that encouraged market-based growth and social development\. 3\.2 Revised Objective: The original obJectives of tiie proJect re1mained unchanged tUrOUgnOUt the life of the project\. However, MVM's financial covenants under the loan were somewhat revised under the Quick Start Gas Turbine Project, that became effective in July 1997, while the continuing restructuring and privatization of the electricity industry during implementation increased the project's emphasis on the liberalization of the power market\. 3\.3 Original Components: MVM took formal responsibility for the project components as the Borrower\. However, at the time of Board approval, MVM had only part ownership in Dunamenti and the distribution companies that were responsible for implementing some project components\. MVM entered into a formal agreement with Dunamenti on imnplementation of the Dunamenti component and on meeting certain financial targets\.  Following pLrVWi4zatlOLI, W'L hIIad lessaa %ASIIUJoJI I e m en l ta\.,n t iatofn\. The Project included a pr[gra-i[ of acuviLies UhiL cis-ibteu o1 uhe following corUA1pon1ei-iL\. Component A: Construction of one gas-fired combined cycle cogeneration plant of 235 MWe and 240 MWt at Dunamenti Ltd site, about 30 km southwest of Budapest, consisting of the following equipment: (i) installation of a 145 MW gas turbine and auxiliary equipment; and (ii) installation of a steam cycle equipment and the provision of associated civil works and ancillary facilities at the plant site\. Component B: Upgrading of the Borrower's existing Energy Management System (EMS)\. (i) Upgrading of the National Dispatch Center (NDC) through: (a) replacement of the EMS master station at the NDC located in Budapest, with associated remote facilities at mainr substatinons and power plants; and (b) expansion and upgrading of the data communication network that will be required to support the national EMS facilit:iep (ii) Upgrading of the Regional Distribution Control Centers (RDCs) through: (~a) P\.-ov~isionof tJUl --A\. mLd ES eqauipr\.e\.t Uand cor,puter;ation of four regiona! distr:bution companies (in Debrecen, in Pecs, in Gyor, and in Budapest); and (b) supply of remote terminal units and da-a concenuators to Lle selected Dis\.IcLt i a cpa LLI cnLer of each of the respective regional distribution companies\. Component C: Human Resource Management and Training: (i) provision of consultants' services and appropriate training to the HR Department of the Borrower to upgrade its professional capacity in the areas of personnel management, development of human resources policies and transferring of relevant methodologies to the Borrower's subsidiary companies; (ii) provision of consultants' services and short-term intensive training at management level, focusing on the Development, Economic and Operation Departments of the Borrower; and (iii) training of the Borrower's personnel in selected areas and visits to professional meetings, courses, conferences and similar events\. Component D: Environmental Management and Training: (i) consulta\.cy assistance in caying out an Envir-onmenta! Master Plan for the power sector; (ii) training of the Borrower's staff in areas of environmental management, pollution control technology fori power pla\.s en\.vi\.v\.n\.e\.tal a_ssmsrent, mo\.deling (eeg/en-ivrnmenta! p!qami-1) Mronitoring IUi jUWtI i4 La VIIVUuIUIJLILIaiL aaae i~ii l itJtt\.U& Bk\.Lt\.51 \.fa~ft\.lA\.'pl and international cooperation; and (iii} installation of water pollution, ambient air and noise level r-onitoring equipm11en\.t on selec-ted si es\. The project was designed to support the original development objectives\. Component A is supportive of ihe first and second objectives by increasing generation capacity, improving the efficiency and reliability of electricity supply and by extending the life of facilities\. Comporient B supports Hungary's connection to the Western European Power Pool (UCTE) and improvements in power system reliability, efficiency and cost reduction\. It also establishes necessary infrastructure for competitive electricity market\. Components C and D help to build institutional capacity in MVM in the areas of personnel, resource and environmental management\. Component D also helps with the introduction of pollution controls\. The project design drew upon lessons learned from other projects in the sector and country\. Specifically, a series of agreements and monitonring measures were agreed as part of project design to assist in maintaining -3- r o __t-  UIJI UILa\.ULUA1 V4UiliLy VI uih pouwe LcUmpa4ly\. III adUUitLi, Uauhilig, LAJLIbU1LIUc 411U a Unds LVIpUII arrangements were well defined during preparation to address the technical and institutional aspects of implementation\. J\.? Wr3U~Uf,JfCf3 The components remnained the same throughout the life of the project\. However, adjustments were made to Uthe Enviro,1nmentaUMl Manageml-entL cUIUllpURIL as a result o[ -uiie privatizationi o1 th1 -ier-mai power plants\. Because of that, only Phase I (Diagnostic) of the Environmental Master Plan was completed\. Phase n (Identification of Priority Actions) and Phase -11 (Impiementation) of the Environmental Master Plan were cancelled as all but one of the power stations concemed were privatized and the new owners made environmental improvements of their own\. The Vertes thermal power plant (that remains under 40% ownership of MVM) has until the end of 2004 to implement actions to reduce emissions to the levels stipulated in the Hungarian environmental regulations\. The privatization of Dunamenti power plant (component A) and all distribution companies (component B(ii)) did not\.change the scope of project components A and B, but had a significant impact on the project implementation as detailed below\. 3\.5 Quality at Entry: There was no Quality Assurance Group assessment of the project at entry\. The quality at entry of this project, as assessed in this ICR, is considered satisfactory\. The development objectives for the proiect are consistent with the Bank strategy and the Govenmment's priorities in Hungary at the time of project appraisal and approval\. Project design adequately reflected the development objectives and identified priorities\. Lessons learned from other projects in the sector/region were incorporated into project design and taken account of during project preparation\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The overall outcome of the project is rated as satisfactory\. The project is judged to have been successful and to have achieved or exceeded all the project objectives\. 1\. Reduce Hungary's dependence on energy imports from a single source\. While total net electricity imports in 2000 were virtually unchanged from the 1992 figure (3,440 GWh, or about 100/n of gross consumption), the proportion of gross inports supplied by the CIS declined from 55% in 1992 to 16% in '(100 The addedt1 fl\.ybihility civpn hy the fl,ln2minti nnd EMS invuetmepnts f2eilitftpd this mnrrPaCPA diversity of import sources\. 2\. Increase efficiency, reliability and flexibility In the production of electricity and heat\. The Dunamenti and EMS components increased the efficiency of power generation in Hungary, both by increasing the proportion of power generated in modem gas-fired combined cycle turbines, and by facilitating more efficient disnatching of generating niants and transmission facilities Snecificallv at Dunamenti, a unit was converted to combined cycle cogeneration, thereby increasing the power and heat nrod,u'tinn at th*t unit The nvPr2gP pflficiPnc nfH-1lronaran nrx,por nla2nte re,-A ched 35\.0% ;n ')200 compared to 30\.6% in 1990 and 33\.6% in 1995\. -In the same period, the number of forced outages in Ahe powe \.e (exluin -iIb\.:o \.-Jwoss 4was reue 'l713 in 199 to AA6 i :99 land _ U1I- jJuwlFd oyammd I,VA&\.RU11r UIaUILIUtLLII IkVLWV1&b) Wdb 11CUUlltU JIIUII I IJ1 Iii917 LU t'tU III 1L7J\. 4iUU to 396 in 2000\. While the heat supply of thermal power plants decreased in the last five years, due to the deciine in industriai demand, the snare of cogenerated heat production as a percentage of total heat  supply increaned ofrm I M8 in I Q95 to 26% in 2000\. 3\. Establish the necessary basis for strong interconnection with the Western European Power Pool\. T\.be EMScorpoerthelped mee UCTME \.u_e \. n\.s mnd ' H rn e n \. a f\.ia! member of the Westem European Power Pool in 2001\. In addition to providing technical infrastructure \.,\.L T Tr'-rr \.L - 1~ LC' necessary for ule syuLcil'u-ius 0U-S -CFLIw-Iui UI UCTE, uhe EMVSa UUMnIpUleI esbL:UlisheU tchni prerequisites for a liberalized electricity market in accordance with European Acquis communautaire\. A ) ,n h tc \.n rn, nnotc 4\._ Outputs by mpn\.s Component A: Construction of gas-fired combined cycle cogeneration plant at Dunamenti Ltd (Cost: SAR - US$140 million/' US$51\.8 ~',' loan, Actual - U5$ ' '03 r;l ":on u t ta:/ US$ 33\. 'D lon) \.i L~7z-x%' -U OPK-WV ,11VI %JOV\.JA\. TV JP lUMit, %k~LUA - 0,T J AU- HIM\.11 t\.1 T Y\.Y\. J TVuJ au)\. I \. 111 component was completed within budget but with a 14 month delay in the completion date for conriiiiissioning of the plant\. Deiays were caused by issues with project bidding documents; design and implementation of control and instrumentation system; the performance of main contractor and sub-contractors; failure of the steam turbines during the unit testing and start-up\. However, despite these problems, the gas fired combined cycle block (G2) is now operating economically, at high efficiency (53\.4% for electricity production) and availability (98\.4% in 2000 instead of the contracted 96%)\. Pollutant emissions parameters are low and comply with regulatory requirements\. There has also been a significant decrease (50% from 1994) in the emission of sulphur dioxide from the Dunamenti power plant due the closure of old BEAD units which was made possible by the start of G2\. This component is rated as satisfactory\. Component B: Upgrading of Energy Management System (Cost: SAR - US$ 51\.9 million/ US$35\.2 million WR loan, Actal - IUS' 73\.6 million totaLl US$ 33\.8 million WR loan)\. Thi-t rnmnonent exceeded the original budget estimate, but only in the local costs (financed by the Borrower) because it included refirbishment of the Nation-al Dispatch Center buildng\. There Ia -- 2ea - d * nblntatinn due to a number of problems associated with the availability of contractor's resources and revisions in the project scope :-UlVdcdbr\.wonr of -reira dispatch -ys\. -- afer - -rv\.;zto of dstrb\.o companies\. Implementation of this component established technical conditions for the synchronous operation with the Western European Power Pool and the Hungarian power grid oecame a fulI member of UCTE on May 17, 2001\. The associated economic benefits include improved reliability of power supply, increased security and available capacity of transmission network, sharing of spinning reserves with the UCTE grid, improved dispatch of power facilities and better quality of electricity supply\. The use of newly introduced EMS functions should reduce network losses, improve load management and generation dispatch, defer some operating and maintenance costs and improve transaction scheduling\. Finally, the EMS component established technical conditions for power market liberalization and introduction of an Independent System Operator (MAVIR) on January 1, 2001\. Overall this component is rated as highly satisfactory\. Component C: Human Resource Management and Training (Cost: SAR - US$0\.6 million (100% WB financed), Actual - US$ 0&27 million total/ USS0=\.06 million WB ln)nl This cnmponent was cnmpleted on time and within budget\. A number of issues during irnplementation affected the efficiency of this comrponenrt, ir\.ich-ding \. fe reo-\.-iza\.to\.n of ih\.e-r lan-i rnanoger\.rt nhar\.ge, \.the rean\.,lon, framework; and privatization of generation and distribution segments of MVM\. Training practices have bee1n mUUifieU da a resUUl Uo ULeC 11LIPU\.Lp airU \.IdVC hae LVU proesioraII41 sr-lb Udevelp\.entL, 4U411LY control, information processing and foreign languages\. Training has been well organized, efficient and continuous and has been successful due to its support by both management and staff\. MVM financed the majority of the training from their own resources\. A high' proportion (75%) of employees of MVM have benefited from training programs during the course of project implementation\. An increasing number of - 5-  Pmnlnvppc appnrnyimaltplv 1 5 - 2W0% nper vyar hnvp partic-ipntPA in fnrpiarn l2n\.criPg nrnarmm5 narticuiilariv English\. MVM achieved certification to IS09001 (Quality) in 1999 following a training and uLJyur\.,Jflfle\.en^ j5\.war\.L\. --i------ c o is\.-+-at zaL\.O\.actoiy\. Component D: Environmental Management and Training (Cost: SA - USS4\.9 milon (iO0% -Wi- financed), Actual - US$ 0\.38 million total/ US$ 0\.27 million WB loan)\. This program was completed on time and within budget, albeit with a reduced scope of work\. The amendment to the work plan was a result of privatization in the power sector that commenced in 1995\. Under this component an Environment Management System was established for MVM that was certified to MSz EN ISO 14000 standards in 2001\. The project provided assistance in the implementation of the National Grid's Environmental Project, specifically with field evaluation of remediation plans and development of a monitoring system\. As a result environmental management in the power sub-sector has been enhanced and air pollutant emission values at Dunamenti have been reduced substantially\. This component is rated as satisfactory\. 4\.3 Net Present Value/Economic rate of return: At appraisal, the economic rate of return was calculated to be 16% for component A, the cogeneration plant at Dunamenti (Annex 3)\. This was based on an assumed operating time, investments, transmission losses, operating and maintenance costs\. Benefits based on a willingness to pay were electricity sales and heat sales to the refinerv\. Dunamenti was privatized during the project implementation and a complete set of data on the performance of the G2 unit after its commissioning was not made available to the ICR mission bv the new owner\. Conseauentlv revised estimateg of costs and benefits conuld not he made and the economic rate of return could not be re-estimated\. A separate economic rate of return for the EMS, component B, was not calculated at appraisal\. At the time, t*\.- were m\.ar\.y uncertain;es rregarding +U_ Aecision --f poeAsse\. --a\.h-Lhat rela,e to+- a_ -a\.-ge U1l~WI iai uu\.ItaJ\.Lzue L~~L AI%, LIU%1 W LLhLIIa VI jJUWIL aOyOLIL\.L UlajaL%~,IIVIa ujLaL WIZILVU LU a II'\. variety of possible network configurations of electricity demand and supply\. 4\.4 Financial rate of return: AU SIl\.cial rate VI rebtull was nota calculated 4orUlLe pr0j3ect at uie tiUme oi 4appraisal\. "nlnen Ule prVo3ect \.Was appraised, financial rates of return were often not calculated for power projects\. Consistent with this approach, tne projects viabiiity was assessed from the iecnnicai and economic points of view\. Tne nnanciai aspects were handled by investigating the projected future financial performance of both MVM and Dunamenti, and by including legal covenants designed to ensure'that both companies' financial performance would be satisfactory\. 4\.5 Institutional development impact: At appraisal a key Govemrnment objective in the energy sector was to continue with the reform and restructuring of the Hungarian power sub-sector\. The national energy strategy aimed at the "development of organizational and control forrnulae corresponding to the market economy, and the control of monopoly interests"\. In the power sub-sector, this necessitated a regulatory framework to ensure appropriate resource allocations and cost recovery and to ensure that the public's safety and interest were well served\. An appropriate regulatorv framework was also needed to facilitate the entry of private interests in the energv sector\. Putting in place such organization and control was a necessary precondition for the opening up of the TWncrarizn electririty mrk-et\. Privirnc eontrol were needed to achieve nnti-m-2 cost nornhinntinnq on the generation side, non discriminatory access to the networks and progressive liberalization of the retail -6 -  The SC,\.AT1AIKS coA,,vn,,ert of this e a finAr\.er\.tw! in *chp,%Anq this goal\. Tt f6ei;itQted the establishment of MAVIR, the Hungarian power system operating company, as a separate entity\. This was UinIially as a sUUbLUiary Uo lviv vI, UUL ultutlaly as a bVFWdJLV bL4LV-VWII1ZU cI\.alpa9iy\. IVIf^ V lb III U1e process of putting in place all the resources and skills needed for an Independent System Operator to manage the nationai grid in the interest of an efficient and transparent electricity markeL During the seven years of project imnplementation, MV-M Rt\. has been transformed from being the dominant force in all aspects of the Hungarian power sector, controlling not just transmission but also a majority of the generating assets and half of the distribution systems, to being a transmission system operator meeting the requirements of the European Union's Electricity Directive (96/92), with a limited continuing involvement in power generation\. Consistency at the policy and regulatory levels, supported by management strength of purpose, allowed this transition to be achieved successfully\. The evolution of MVM's financial structure reflects the downsizing and changing functions of the company over the last seven years\. The financial position of MVM Rt\. has suffered from the write-offs that accnmpanied the pnrivati7ation pnrneq,- and more rece-ntlv fmrm the Government's nolicv of holding down the growth in retail electricity prices by restricting MVM's wholesale margin\. In 2000, a pre-tax profit of HTTF !2 bilion -as e-arr\.ed, rep,entia a 5%/\. reriirn k \.n equitu rather th,n the a_rpee RO\. PEvn this however, derived primarily from dividends received from MVM's investments rather than from electricity w IJoJisa1uIg\. - ~~~~~~~ -~~_ T - - A ~t L Co0venant Complidanceu: T'ne finadncial covenanis inmclude Hin uie LoanH ~Agreernert, as revised by uL,e \.e,,,\.s of the Quick Start Gas Turbine Project (Loan number 42050) required that MVM meet target values in relation to certain financial ratios and performance indicators\. Tne table below sets out actuai performance for 2000 and 2001 in relation to the target set for each covenant and indicator, together with the company's projections for the years to 2003\. i Project Period i Post Project Period Covenant/lndicator Target Actual Actual | Draft Estimated 2000 2000 2001 2002 2003 Self financing ratio 55% 92% 135% 117\.9% 40% Current ratio | 1\.0 1\.66 1\.4 [ 1\.7 j 1\.39 Debt service coverage ratio 1\.5 | 2\.82 I 4\.2 I 2\.8 f 0\.85 Average retail tariff 16\.25 15\.6 16\.5 n\.a\. n\.a\. (HUFtkWh) FAccounts receivable (days) 15 | 23 [ 29 [ n\.a\. n\.a\. n\.a\. - Not Applicable\. The projected deterioration in MVM Rt\.'s financial position foreseen for 2002 and 2003 is primarily due to 'Ulelc- 111wniffl Stnacturm dand evel\. -7 -  5\. Maonr oaptore Affetino ImmnlPmpntatinn and nlutnemc\. 5\.1 Factors outside the control of government or implementing agency: Energy Demand The trend in energy demand reflects the growth of the economy and a trend towards lower intensity of use\. Total primary energy consumption, estimated at 1039 PJ in 2000, was 12% less than in 1991, but declined much slower after 1995 when it was about 1067 PJ\. At project appraisal, a 3% growth- had been- foreseen for the period\. However, industrial restructuring, involving the closure of old, inefficient energy-consumers; greater efficiency in energy utilization and reduced waste in industry and households had a greater than expected impact on energy consumption\. The share of primary energy consumption for electricity generation and heat supply in public power plants declined from 40% in 1995 to 37% in 2000\. The Electricity Market Total consum\.ption of electricitv bottomeA out at 35\.2 TW\. h,i 1QQ!992 ater a stpep decline pfrom the historIc peak of 40\.7 TWh reached in 1989\. From 1995 to 2000, the total consumption of electricity showed a s,'I but a\. y :r\.creas (abot 1 %) to 38\.U6 TV lYI\. IU 1\.-ecer a consu1wiJpuu'JI ofUelecuPctl haa stabilized at around the level of 5\.5 kWh per 1,000 HUF of GDP\. Future demand growth may be very much in line wih the volumre growthI of GDP, b-ut will be suoject to the continuing effects of indust-ial restructuring and the upgrading of industrial plants\. On a per capita basis, Hungary's electricity demand is stiil iess than half that of Austria, 60% of the Czech Republic's, and marginally greater than Poland's\. The electricity sales increased from 28,356 (Wh in 1995 to 30,631 GWh in 2000\. During that year, industrial consumption of electricity amounted to 12,800 GWh, 4% higher than in 1995\. Household consumption in 2000 was 9,800 GWh, about the same as five years ago\. This reflects the switch to more efficient household appliances, but also a low rate of new house construction during the 1990s and an increase in electricity tariffs\. Consumption in households seems to have stabilized, and industrial and service sector demand is expected to be the main driver of future consumption growth\. Fuel Costs A further relevant aspect of the evolution of the electricity sub-sector, that is largely outside the control of the GCovemment or the imnplemnenting agenry, has been th\.e trend in input prices, most notnhly fie!\. According to US Department of Energy data, heavy fuel oil prices for electricity generation in Hungary fell 1- )AO\. I, 1OOA arA 1000 ! toa ave-age of 71\.61- \.e\. In* hes e period 1 verna\.=algas Sri U- AlS 41lI-' r - -n\.I l -i cu ,IU5, VIW\. VI A\.litIt\. ALA -n Oac, ia n nFv \.,% ALV t,\.atIa prices for electricity generation in Hungary rose by 59%, to an average of $134\.4/tcm\. The following table illustrates ute Iirunpomt\.ce oi viuious iuel types in nurLgarian eciiLriciLy geineration\. Share of Fuels in Electricity Generation (by T hermal Content) Fuel 1990 r 1995 J 2000 Lignite, coal 34% 29% 30% Fuel oil 5% 15% 11% Natural gas 20% 17% 20% NI X X \.1~\. v r X A I /A I 0 /A 200Z\. TOTAL 100% 100% 100% 8--  5\.2 Factors generallv subiect to zovernment control: The Economy Since 1994 the overall climate for nolitical develonments in Hungarv has continued to be favorable to the implementation of the project, and to the continued liberalization of the electricity sub-sector\. The eco\.nnom\. ha cshovnu steAudy m-ujth ,ith thi ectimratpd tnt_l GDP in 2000 hpino 5 10/ of the FU avernae and 27% greater in real terms thanr in 1993 (average increase 3\.5% per annum)\. Industrial production has inre1n \. --\.~A -____A, A A01L; ')AA _~ , I +W PIT growr,rstL-ngl\.y inL re ye-s, Iand U&M-11UUVYlM\.fl1L ave5\.aged V\.-'U U\. 2V00 below Sfh EU Cv'\.4U5\. Much of the industrial growth has been in electronics industries and automobile manufacture, while traditional industries sucn as miing and chermicals have beenuir irelative decline\. However, inflation, while much reduced on the levels of previous years, was 10% in 2000, and long-term interest rates were twice the EU level\. Foreign direct investment over tne fnve years to 2000 totaied almost S90 oiiiion, inciuding significant investments-in the energy sector\. The Electricity Law The general direction of structural and regulatory change in the electricity sub-sector has been governed by Act XLVIII of 1994 on the Production, Transport and Supply of Electric Energy (the 1994 Electricity Law)\. The law defines the responsibilities of the Minister of Industry and Trade and the Hungarian Energy Office and sets out the governing principles of consumer protection, safety, licensing of activities, supervision of licensees, real estate issues, and the operation of the electricity market\. The market is defined in terms of a single buyer market model, with non discriminatorv rules of trade, but without competitive access to the networks\. This is the basic model under which the various changes in the industry rince 19Q4 have been implemented, and under which all parts of the industrv worked until December 2001 when the new Electricity Law was passed\. The new Law paves the way to the opening of at least 35% of elec\.tr\.c--to, -nrbrt lk- TJn,-on-, ;n nrrnarot;mn f^r FPT I or'pcc,nn vS%tLfl_1J VCl -r - I J - __ Re'5tnithirin and PriVath7atinn The developments in the structure and ownership of the electricity sub-sector since the project started have take\.n\. t\.he formn of increme\.ntal im\.pleentaion of exis'\.;ng strtegy\.I 1991, ge\.neraton, trmi\.ssion and distribution/ supply had already been separated from each other through the unbundling of MVM Rt\. At , a; ti\.,, hoee-, all- \.,\.-t of* 'utywr -\.de C!S+wt w, ; -an ---+-\.tol --A the\. focu of policy makers since has been to introduce competition and private capital into the system\. In 1994 MVM Rt\. owned 50% of all generators and distributors, with the remaining 50% were held directly by the State through APV Rt\. in i995, in the first phase of privatization, APV Rt\. substantiaily sold its 50% shares in all six distribution companies and in two generating companies - Matra and Dunamenti\. In December 1995 MVM and APV carried out a share exchange\. Accordingly, M-VM transferred its 50% shareholdings in the distributors to APV, in return for which APV transferred its approximately 50% shareholdings in Paks Nuclear Power Plant Ltd\. and OVT (the grid operating company) to MVM\. In further phases of privatization during the 1996-98 period, APV sold its remaining stakes in distribution, and MVM and APV sold all or part of their remaining shareholdings in the generating business\. MVM ret2ined nwnerqhin of ahouit 250%4 of the shares in Matra and Dunamenti nower nlants- 40% in Vertesi power plant, as well as nearly 100% of Paks nuclear power plant\. As of February 1, 2002 the control 4\.4_16*i -f TAAlDtW P+ tr,nc,f\.a-\.A tA fn LfAn,ctvr nf Pnnvnr\. A ,irv fl*1*t YJ *VA f V^ v f flt fl'St\. UCMZOC%fl* V W *lVv^s-} V VV&flSAfl L1\.JSflS&*  Currently, the consolidated shareholdings of major investors in the distribution and generating companies arc ar follows: Consolidated Shareholdings of Major Investors [investor Generation Transmission [ Distribufton MVM 31 100l Tractabel 3110 AES 18 4 Bayernwerk - | 35 12\.U - Z\.- Other 10 | [Total [ 100 l 100 100 The privatization of MVM assets that occurred in the 1995-98 period, and the share transactions between MVM and APV, generally resulted in book losses to MVM\. This was partly because the prices at which sales were made were lower than the value at which assets were held in MVM's books, and partly because sales at such prices necessitated downward revaluations of any remaining shares held by MVM in the companies concerned\. The impact on MVM's balance sheet was estimated to be approximately HUF 100 billion, and about 20% of the companv'y issued canital was written off in IQ99 to rpflect more 2\.^ru1rqtP1v MVM's net value at that time\. Hungarian Energy Office RegU14LUIion of *he eLUcii,Ly sU-bU-se\.o i il b H nLII d oifiU V UIV, fLUI1gar11W LAEnergy IJiI\.%X HElLAO), UhatL Wa established about the time of project effectiveness\. The duties of the HEO include the approval of contractual iframeworks between companies in the sub-sector; consumer protection; the issuance of operating licenses and the monitoring of compliance with license conditions and with the Electricity Act\. In 1997 the HEO became responsible for the development or technical preparation of electricity tariffs, although the actual approval of tariffs remained the responsibility of the Minister for Industry and Trade (recently the Minister of Economic Affairs), acting on behalf of the Government\. In addition, the HEO determines the information required from sector entities, such as cost-of-service studies, arbitrates disputes between suppliers and consumers, and enforces the least-cost approach to the satisfaction of demand\. Tariff and Subsidy Policy While the HEO operates as an independent arbiter of cost deterrninants in the electricitv sector, the actual setting of prices has been carried out at political levels during the project implementation period\. The G\.overnment has hpbn cn^erneAd to rchtrnin thp gmroth of rptnil prices hbth t^ asscit manufacturing industry and to moderate the evolution of the retail price index, that has a knock-on effect on wages and sl-i-4 Sl +ouhou the- eco1 \.,y How--r the p",atati-on of the gener\.tion and disu;b ition sub--seto-ra has necessitated assuring a reasonable rate of return to investors\. The reconciliation of these two rather opposed policy objectives has oeen at the expense of MVNi Rt\. Generators' seiing prices have been allowed to rise in line with production costs, thus ensuring reasonable financial returns\. Distributors' retail selling prices have been set in relation to the Government's inflation objectives\. Also, wholesale purchase price was regulated to ensure that investors in the distribution business earn reasonable rates of return\. MVM, therefore, has borne market costs whilst earning regulated revenues, and its margin has suffered accordingly\. n1-  For examnle, in 2001 the (nvprnment althnri7ed r-tnil nridce increases nvprnagina 6%0, whilp cinmuiltnnpniusv allowing an average price increase of 18% for the operating companies\. These increases could only be r,eCODnnnl aA th th a- o -f the Adisnbutre' ,-oit nm,,r,5 hi, rohct,r,g *1e increase in NA TMj's wholesale price to 13%\. There was an attempt to restrict the margins of the distribution companies, and t _\. t___ _________ _ -- J1- -, x s A_ __ _2__ __ I I)/ _M! t__1 zt__ _-e__ \. -r _ \. \.:_Ywrel_ _ Uliq WlUivU1v4 piliCi uIIll1b 01 iVivi Wvit; UU1 lVlU lJ- /70\. 11Un 11 1U Ulu u11c U 1 UUILUI5 lng VlIVI V iildJgUi by 45%, from 8% - 9% in 1999 and 2000 to less than 5% in 2001\. By July 1, 2001, due to pressure from tne distribution companies, the purchase price increase for distribution was decreased to 6% tirough modification of the decree on electricity prices\. With this intervention, the order of magnitude of the yearly margin of the distribution companies (for 2001) was restituted and restriction of MVM's margin continued\. As a result of this measure, MVM's margin turned negative\. MVM incured losses on this margin, and the company's solvency has been maintained by direct bugetary transfers from the Government, amounting to HUF 32 billion for 2001\. 5\.3 Factors generally subject to implementing agency control: MVM started the project preparation in 1991 and formned two project tearns\. The first team was responsible for the Dunamenti G2 block and included representatives of the plant\. The second team was responsible for the EMS project and included representatives of regional distribution companies, power plants and the national dispatch center\. The overall management and coordination was provided by MVM's Strategy and Development Division and the Infrastructure Development Department\. Both teams carried out preparatory and imnlementation tasks professionally and efficiently until the privatization of Dunamenti power nlant and distribution companies in 1995-1996\. The private owners requested changes in project implementation and accnrdingly the first tP:Im was prncti"lly rethdced to the Dunamenti stafr while the second tenm continued as a joint task force headed by an MVM project manger\. The joint team set an excellent example of effective project rnarnagement *hroughn intensive coordination and active resolution of cor-plex and challenging implementation issues of the large EMS project\. From 1996 until the project completion in 1998, the implementation of the gas fired combined cycle G2 block was tie responsibility of Dunamenti Eromu Rt\. a subsidiary oi uine iractabel Group\. Most oi tne project delay occurred during this period and some delays were undoubtedly due to the major change in plant management and restructuring of the company which included a reduction of 35% of staff\. However, the main reasons for project delay are related to the under performance of contractors, specifically failures of newly installed steam turbines during the start-up and commissioning due to structural deficiencies in turbine manufacturing\. 5\.4 Costs andfinancing: The total project cost, excluding duties and taxes, was US$184\.6 million equivalent, of which US$67\.3 million was funded by the World Bank Loan and US$117\.3 million was financed by MVM and Dunamnenti\. These figures compare to the appraisal estimates of US$197\.4 million for the total cost and US$92\.5 million for the Bank-financed part\. The unused portion of the World Bank Loan (US$32\.7 million) was canceled\. This compares to the total project contingencies of US$31\.3 million estimated at the appraisal\. The detailed proiect costs and financing are shown in Annex 2\. After the cnmpletion of the G2 hlock at Dunamenti- the privateowner of unamnmenti decided to prepay a portion of the World Bank Loan used for this component\. Therefore, the amount of US$31\.0 million was nrepaid to *1he Wuorld Bark, in 1000 A+ t+ha ti\.+ , +;\.--\. \.Ta-oreai \. o-A MVM a -A\.i+ of' b,-t+ F\. '-\. - Al - l '0RSl JaZtin \. aL uhOt Dfhf' uI ne* i tsh* aflso\. mF"LujO t'0 "I v'IL J L\.iUi '01 a ut US$87\.7 million equivalent which was included in the Operational Agreement' between MVM and ru~~- - \. _ _ 1_\.: t ___ tr1L '%C AIA \. _ r __t : _ L_ _P ___1 _\. __M u _n \. _ r\._ \.- _ _ -1- DUnamentilGI bilgnzted Ull o vnarchll 25, 194to fUac ilitate th UoImplleo Ul Ulu G2 unit alter ute planLts privatization\.  6\. Sustainability 6\.1 Rationalefor sustainability rating: The sustainability of the project objectives is highly likely\. The reasons for this assessment derive, inter alia, from the positive political climate in Hungary, the steadfastness of the reform process in general, and the well-established and widely-accepted principles underlying the restructuring and privatization process in the electricity sector\. The confidence that foreign investors have shown in the sector supports this judgrnent\. The market and regulatory arrangements summarized below are robust, and, when accompanied by continued high standards in public policy-mkring and in the governanc-e of MVM Rt\., provide a sustainable basis for long-term benefits both from this project and from Hungary's continuing process of reform in the I h ll\.e rur\. r\. is ULA\. 'W\.J IIAIU\.4ILL a appareIn Leluc,a1iLe to aillw lull ecno\.UU\.cjJ pr UIr ar\.U :L\. continuing use of subsidy mechanisms\. Future Electricity Market Tlne new Electricity Law details the future sector restructuring and market model that aims to: * ensure that the market takes over price regulation; * increase competition and consumer satisfaction; * achieve transparent market operation and regulation; * assure free access to the transmission and distribution network; * strengthen environmental protection; * promote energy saving; and * encourage the utilization of altemative energy sources\. Parallel "Public Utility", i\.e\. non competitive, and Comnetitive Power markets are envisaged\. Within the "Public Utility" market, MVM will be the wholesaler and the six regional distributors will be the retailers (refer tn pae 9) nn the hbsis nf nfficia! nrwp'c Anti nn e'nwmr\.ptitirnw In the Crnrn,ptitiup Pnwer ma e-pt th\.re will be gradual opening up of the market\. This will commence with 35% to 40% of the market on January 1, 2003, *\.;MM which -L e elii\.ble consurners will ble flree to choo3s tt\.leir suppliers\. E\.lgible '\.ULUlrLeJL3 a1- expected to be those consuming in excess of 6\.54 GWh per annum - an estimated 300 to 400 consumers at thl-e outset\. Fooreigpn trade will be libenalized and pnces will be uireguwated\. Eligible customers will be allowed to import up to 50% of their needs\. The Independent System Operator, MAVIR Rt\., will be responsible for balancing the power system, integrating short- and long-term capacity plans and trade contracts, and operating a price monitoring system to increase transparency\. The Law sets out rules on stranded costs (projected to be about HUF 50 billion in the 2003-2010 period), strengthen the status of the system operator, promotes the use of renewable energy, and provides for a distribution network code and a conmnercial code, as well as a grid code\. MVM's Functions MVM Rt\. wonlld havet fnur flinctinnq iinder the neuw m,rlet gtrnwtiirp\. * Pu^blic Senr ie I-holesate:, --4--tperto -\.d powerAer I \.fl bJ- IC -O\. -SJO 11 E~ VV\. -ML\. eazz u jJU WV %,L aua Ld * power supplier; * generator, albeit throughl legally separated enti-ties; and - 12,  a enmnanv meeting a rnne nf qiuihidinrv needs indiiudina he2t siinnlv and netwnrk develpnnmPnt and construction\. It is envisaged that some of these functions could\.be privatized in the future, and that MVM could form pm ituebIips Wiutl private scoLUI inILFIZte r Ul f HlIIC pUrposUe\. It lb tneViLtL)Ib th1at urUir tUhle new- M\.arkIet structure the present policy of direct state subvention of MVM Rt\. (to compensate for inadequate wholesale tariffs) will end\. This implies a substantial tariff increase, probably in the latter part of 2002\. Future Regulatory Environment The independence of the HEO is expected to be reinforced as part of the continuing reform process\. The Office's Director General and his deputy were appointed by the Prime Minister for fixed terms of six years and are removable only for specific reasons\. In the case of appeals against HEO decisions, the final decision will be a matter for the courts to decide instead of the Minister of Economic Affairs\. The financing of HEO operations will continue to be from fees\. 6\.2 Transition arrangement to regular operations: The EMS component of the project is in full operation\. The first phase (SCADA system) started in June 1999 and the second phase (complete EMS) was commissioned in September 2001\. The new dispatch system calls for continuous improvements particularly in relation to the eventual liberalization of the electricity market: * the system shall be continuously maintained in accordance with the signed maintenance contracts with the supplier; * the process control system should be expanded to accommodate developments in the nower eTid (e\.g\. new transmission substations and power plants) and its hardware and software should be regularly trntin-td Sc thi tpt'hnrlnrv Pvn1,voP * the system should be extended with new functions to meet the requirements of the expected market flflUt,fl alfl\.ULflJflfl\. '\.J* 6CUf la Vio oflthe s \.er\. dstch \.and ociated\. fl 5aosJ shulu "low b updaIte, * extension of the telecommunication network will continue in support of the above developments in E4V13 \. For Component C, Human Resource Management and Training, a human resource strategy is under preparation\. This will address training, development and management of human resources\. A new training model is also proposed\. Work will continue with preparation for market deregulation, successful participation in a competitive market and accession to the European Union\. Operating procedures will be regulated to ensure they meet the quality control measures introduced in 2000\. 7\. Bank and Borrower Performance Bnk 7\.1 Lending: TeV pvmmolIllltv um oif Bar stLaf was satlsLfactLUIj lir, uIv InIIUing s\.agV\. IThey pVViLdeU sL,ULIg s-UppU1L LU Hungary's new policy of converting power and heat plants to combined-cycle cogeneration units fueled by natural gas\. Tney also showed fiexiDility in adapting the proposed project to the rapidly evolving restructuring of MVM and planned privatization of parts of the company, including Dunamenti and the distribution enterprises, that would benefit directly from the project\. - 13 -  7 \. V,nporvicinn The supervision of the project was satisfactory\. Supervision missions were conducted on a regular basis w\.i co,,petet stf who e siahed ua p ,prdtiern xyAth the NAVMK4'p nrn jt imnlpmpntti\.nn team\. Reporting was timely and reflected project progress\. All legal covenants were complied with (refer to page 7)\. T h,ere - we\.-e r\. \. n Uiect elsi\. '7 21\.3 v 3eralL ___\.r_o,,,lare: Overall the Bank's performance is rated as satisfactory\. Borrower 7 A D Lf\. This Project has had a significant importance for both MVM Rt\. and other participants of the energy secLor\. ILt was U\.e seco,-\.d 'ivUyoIu Bank Loan LU0 LVIDV rVI ILDt\. and the fiustonc, vvhe\.-e t wLs - Rt\., with the guarantee of the Hungarian State\. Preparation of the project began in 1991\. Work teams were set up for the two major project components\. Tnese teams consisted of experts fromii vvivi, DuRnaenti Power Station (for the G2 component), regional distribution companies and power stations (for the EMS/SCADA component) and engineeringiconsulting firms\. MVM's performance was satisfactory, especially since it carried out most of the preparatory work (including feasibility studies) before inviting the Bank to finance the project\. 7\.S Government implerimentation performance: The Government's implementation performance was satisfactory as demonstrated by its policy and reform actions\. Furthermore, the steadfast approach to reform, the continued privatization of generators and distributors, and the restructuring of MAVIR, all contributed to the creation of a rational structure for the electricity sub-sector\. In addition, the effort put into the drafting of the new Electricity Law provides comfort to operators and potential investors, while the strengthening of the Hungarian Energy Office will enhance the protection of consumers as well as market players\. 7\.6 Implementing Agency: MVM project implementation team exemplified a high degree of professionalism and skill in dealing with complex implementation issues of the large SCADA/EMS project and managing a joint task force including renresentatives of four privatized distribution companies\. MVM's financial performance improved during the project implementation and after 1998 MVM fully met all covenants\. The recent deterioration in MVM's fianncial position is mainly related to the tariff structure which is beyond the company's control\. MVM's performance during the project implementation is rated satisfactory\. 7\.7 Overall Borrower performance: _% 1-1 Xs - \. +-A - A+;-\. UJVirall uouz WEN pC yiou11r1H, Ir 1;s raIu saL,\.acL\.oLr\. 0 Ir sons T eaoed Ii\. Jhe\. a3UI LJulU AI%5 The Importance of Reform and Restructuring The commitment of the Hungarian Government to rapid reform and restructuring of the electricity sub-sector decisively reinforced the benefits of the investments made under this project\. The Hungarian Government's active program of privatization and regulatory development ran in parallel with the \.-n,a -t,i4nt a fn;noA *n the TPnerami,nA aPnurnnmpnt Pmcip,t nntitnnina the e'n,rntrv tn mnYiyni7p the benefit it will derive from liberalized energy markets, both Hungarian and European\. - 1 -  ile u iLtgaIala FL pvea lesson\.Jii Ifo VU1h,L 1AJuUirLL uhaL Imlay Liv aL a a sumil&- u, ar, ir, uhe refo1\.L process as Hungary was ten years ago\. Also, it shows that the Bank is able to participate in investment progrdms im cases where siructrdi and regulatory- reform is a Government priority\. Thie Need for Economic Pricing A recent reluctance of the Government to expose the Hungarian consumer to the full costs of electricity supply - understandable though such reluctance may be in the context of anti-inflation and other policy considerations - constrains the ability of MVM Rt to plan confidently for the future needs of the sector weakens the company's credit worthiness\. This shows that the independence of energy regulation and economic pricing remain key performance indicators to monitor and evaluate in the energy sector well after its restructuring and privatization\. The Benefits of Good Project Management The highly professional and motivated management orovided by MVM Rt throughout the imnlementation process was a crucial ingredient in the Project's success, and underlines the importance - both for Borrower and Bank - of ensuiring that the inititutinnn1 and mrnagement arrangements in place are apprpnriate to the project's size and complexity\. Such arrangements not only assure the effectiveness of the investments, but also reduce t-he -M-1nsaction costs -associat-ed ~with ift\. 9\. Partner Comments\. (a) Borrower/implementing agency: Comments provided by MVM are in Annex 8\. The main co-financier is MVM Rt\. whose comments are included in (a) above\. No comments were received \.LoM L\.UMUn-LenU\. Rt\. wIho 9Lo-firLWrL%eU zUIh GZ componer,t\. (c) Other partners (NGOs/private, sector): There were no other partners\. 10\. Additional Information  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome I Impact Indicators: 1\. Eledctiity imporW total electricity supply - 2% in 1998 8\.9% in 2000 target 2% 1 18 2\. Progress in power sector regulatory reform Hungarian Energy Ofrice was set up in 1994 New Electricity Act (passed in Dec\. 2001) - target indepenrdent regulator strengthens the independence of the rungnan r-nergy nITIce, ai up i ,9'\. 3\. Adoption of environmental master plan Phase 1 was completed\. Other phases were Phase 1 was completed\. Other phases were I\.: snot started due to the \.rivatization of maJor thermal power plants\. 4\. Monftodno equipment should be installed The monitoring eouipment was not installed\. The monitoring equipment was not installed\. at the Dunamenti G2 unit\. The BEAD plant The BEAD Plant was shut in mid 1998\. The BEAD Plant was shut in 1998\. should be decommissiomed when the G2 unit 1sbris opera60n\. Output indicators: 1 tnWctr iMatfrb iaix~:~~ * |' -'-'- ' 'Projer-e r 'iin last-PSR A |aI t ' f; - e-l 1\. Complete Dunamenti combined-cyde unit G2 completed in April 1998 |G2 completed in April 1998 2\. Commission the EMS |The SCADN EMS project was completed in |The SCADA/ EMS project was completed in September 2001 September 2001 I End of project  A nnor I Pro,ectd Cnosts andA 1'i,y\.nicinw Prn\. Cost b\. Cor\. t&one: i US$~ \. illio euivAer\. v* w* F % % tAJOt A A_) *J\.lL%I |<U %JIJ a l_ ' -| |' i ~~ r ~; ;i |- TiG |MC i> ~*~-*''*,-\.~ I A~uaIlMaWst Pern-g o uunamenti Combined Cycle Unit 140\.00 i 0\.33 79 Energy Management System 51\.90 73\.60 142 Environmental Program [ 4\.90 0\.38 8 I Human Resource Management and Training I 0\.60 1 0\.27 45 Total Baseline Cost | 197\.40 184\.58 1 Physical Contingencies 15\.90 Price Contingencies 15\.40 _ _ I Total Project Costs 228\.70 184\.58 I I~~~~~~~~nteraqt tliirint rnn-qtrurtinn I ta QnR Total Financing Required | 242\.50 184\.58 | Droject rcts hv DiiP-e rm-nt Arrnnnamanta iAnnrvicil 1At;motn 1 Il Qt miIlinn, | ~~~~~~~-- \.- r'- - '- - \.9-~"\. _ _ k \. | - r* -i 11\. Works I' "() I I M0 00 1 ? 1 \.0 1 21 _____________________ (0\.00) (0\.00) 1 (0\.00) 1 (000) 101 I I 1 V\.V( UV 1v I 0 1\.0U (86\.80) (0\.00) (3\.00) (0\.00) (89\.80) 3\. Services 0\.00 0\.00 10\.20 15\.50 25\.70 (0\.00) (0\.00) (10\.20) (0\.00) (10\.20) 4\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 _____________________ _ I (0\.00) 1 0\.00) 1 (0\.00) M(0\.00) (0\.0)M 5\. Miscellaneous 0\.00 0\.00 1 0\.00 1 0\.00 1 0\.00 I__ __ _ _ __ _ _ _ ( *v\.00) k(\.00) I (0\.00) I (0\.00) 6\. Miscellaneous 0\.00 | 0\.00 j 0\.00 | 0\.00 f 0\.00 I ______________I______ (0\.0 j) (0\.00) (0\.00) (0\.00) 1 (0\.00) Total 111\.40 0\.00 | 13\.20 104\.10 228\.70 (86\.80) (0\.00) j (13\.20) j (0\.00) j (100\.00) - 17 -  Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) Ex dWC3i I -~2 Qh!':: ______ 1i\. Works 0\.00 0\.00 \.00 23\.34 23\.34 __ __ __ __ __Works 000 I o __ 446 I I (0\.00)_ 1 (0\.00) (0\.00) (0\.00) (0\.00) 12 Goods I 34 1 0 1 0A0 o 80\.30 o 144\.64 64\.34 0\.00) (0\.00) (0\.00) (64\.34) 3\. VOicC5 0\.U0 0\.00 2\.94 13\.66 16\.60 (0\.00) (0\.00) (2\.94) (0\.00) (2\.94) 4\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 5\. Miscellaneous 0\.00 0\.00 0\.00 1 0\.00 0\.00 (0 00n (o 00) (0\.00) (0\.00) (0\.00) 6\. Miscellaneous 0\.00 0\.00 \.00 | 0\.00 0\.00 fn ANn tA Ann tA Ann tn nnt tA Annx ___________________________ J \.JuJ 'V'IJ) ~ JJ)j \vvJ--_______ Total 64\.34 0\.00 | 294 117\.30 184\.58 | (64\.34) 1 (0\.00) (2\.94) - (0\.00) (67\.28) "Figures in parenthesis are the amounts to be financed by the Bank Loan\. All costs include contingencies\. 2'Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units\. Project Financing by Component (in US$ million equivalent) ,--t_- p- t\.; Q H\.,4f,--SS' AEmate\. -\. -- Cycle Unit51\.808820 1 31-77\.20 64I0I8 Energy Management 35\.20 16\.70 33\.82 39\.78 96\.1 238\.2 Environmental Program 4\.90 0\.00 0\.27 0\.11 5\.5 0\.0 Human Resources 0\.60 0\.00 0\.06 0\.21 I 10\.0 I 0\.0 | Management and Training Physical Contingencies 3\.80 12\.10 0\.0 PPrice Contingencies 3\.70 11\.70 0\.0 0\.0 Interest During 0\.00 13\.80 0\.0 0\.0 Construction I _ I _ I _ I _ I [ A kLIf 1LA D\. -18 -  Annex 3\. Economic Costs and Beneftis A 16% economic rate of return was calculated for the Dunamenti Combined Cycle (Co-generation) niant\. Component A\. This was based on the following assumptions: * the G2 unit operates for 6500 hours per year and produces (annually) 3120 GWh of electricity and 2555 TJ of heat * the benefits based on willingness to pay consist of electricity sales, valued at the 1992 average revenue or Ti IX Y7 Ar 1, r It TIC' - - - 1TL IL\.-\.L\. 112lM2 L 0fI MVM V U\. VI J\.3 Ua kn1ALWILW1l I,ULe higllhest arr\.ual average aciueve -up to appraisa;), aund heae sales to the Refinery, valued at the 1993 price of US$3\.67 GJ * the costs consist of: investment expenditures in Dunamenti G2; allowance for investments to replace old tranemiq-ion and distrihution facilities: fuel costs; lones in tranrmi-qion and diitrihiition at the 1990 level of 10\.9% of net generation; operating costs for Dunamenti G2 and its transmission and rlictr,h to * annual depreciation is measured as a constant percentage of assets, that were newly revalued in 1992\. This was used in place of average incremental cost as a measure of the investment cost in transmission and distribution since the system will have surplus capacity for many years to come\. * fuel valued at the economic cost of gas to MVM power stations, equal to US$2\.71/ GJ * foreign costs converted at the corresponding year's rate Dunamenti was privatized during the implementation period and a complete set of data on the performance of the G2 unit after its commissioning was unavailable to the ICR mission\. Consequently, revised estimates of costs and benefits could not be made, and the economic rate of return could not be re-estimated\. A sepa\.-at enor \.^\.ic roa of rtr\. for-t\. n AQ EMScornponent was\.,o nt c1ale1\.ltA appraisa due to tim n\.ar\. \.l w'~ a\.av em -Jfl r-At -lt\. S~l*'\.fftlJlbft YL ~mltf~Itva \. \.-r - t\.% U UjFl\. ~ \.U-Of Mt L\.) ft,fhIJ uncertainties regarding the decisions of power system dispatchers under a large variety of possible network confi1ul-ations o0 elecuicit;y udmiuiu adU buppiy aL uifU1erenL ule ll1s uof uday diu yea,\. I l1CLU101C, a sepatc rate of return for the EMS component was not calculated during the ICR mission\. However, it is well known from the MVM's experience that the benefits include fuei savings, reduced spinning reserve requirements, better generation scheduling and avoided outages\. Similarly calculation of an economic rate of return for human resource management and environmental management components was not calculated\. - 19 -  An nex 4\. Bank Inputs (a) Missions: |Stage of Project Cycle\. No\. of Persons and Specialty Performance Rating\. (e\.g\. 2 Economists\. I FMS\. etc\.-l\. IlmnlnPmantatnn I N\.vPlnnnmPnt% Month/Year | Count | Specialty | Progress | Objective | identilcationorreparanon S February 1991 | 3 1 economist; I engineer, I linian-ciat analyst April 1991 4 2 economists; I engineer; I financial analyst December 1991 4 2 economists; I engineer; I \. f ~~~~~~nancia; anaiysy May 1992 5 I engineer; I financial analyst; 2 eonomisEs;h-uiinreoie specialist |Appraisal/egotiation N\.ovemhert 7 1 environmental snecialist: 1 December 1992 engineer; I financial analyst; 2 economists; I energy planner; I operations officer October 1993 7 1 engineer; I financial analyst; 2 economists; 1 energy planner; I lawyer; 1 disbursement officer Supervision Myv I C-N HS November 1994 HS HS May 1995 kA\.nrlfll \. |financial analyst; I engineer ] ~~~MayJ 1996 131l cn\.-s;!fnci!ayt S I S I : 1 engineer A,mt 917 I I 1 enviror\.enta! specia!ist; A-i4 1 | engineer; I econornist V I Apr\.l I998\. 1 3 1 1 ~~~~Ien-i-nm \.enta-I specia!ist; I \. \. I Q engineer; I economist October !98 1 3 1 environ\.ental specialisto I engineer; I economist | uly I97|3 I A 1inanGcia' aalystwy a M4LI |, S | economist T c)nnn- j 0 |II I \. gi 'S JaGaarI7 £UUU J L gI%IL5~Ic June 2000 1 1 engineer, I specialist S S ICR June 200i i L engineer, i speciaiist D ICR J 1 e 1 s | ~~~December 2001 | I 1 engineer, I specialist | S | S |  (b) Staff: Stage of Project Cycle | Actual/Latest Estimate |de |tifw~tinn/Pr~par~tinn No\. Staff weeks US$ ('000) I dentifientin-n-/Prema-rntionn ll Appraisal/Negotiation 723\.91 UP 'F,ns: l l a475\.11 ICR lTotall 1190X Note: SAP does not provide a breakdown of staff time by weeks spent\. It does not distinguish between identification/ Preparation and Appraisal/ Negotiation, therefore ail costs reiated to project preparation are shown under the AppraisalU Notification entry above\. - 21 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantiai, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies OH * SU O M O N O NA Oi SectorPolicies * H OSUOM O N O NA Li Physical *1H OSUOM O N O NA OFinancial O H OSUOM O N O NA LI Institutional Development 0 H 0 SU 0 M 0 N 0 NA OI Environmental O H * SU O M O N O NA Social UI Poverty Reduction O H OSUOM O N * NA FII Gender OH OSUOM O N * NA CI Other (Please specify) O H OSUOM O N * NA I Private sector development * H O SU O M 0 N 0 NA I Public sector management 0 H * SU O M 0 N 0 NA O Other (Please specify) * H OSUOM O N O NA Other - rating provided because of the reduced energy vulnerability of the country through less dependence on a single energv import source and by being connected to the European eneryv nool\.  Annex 6\. Ratings of Bank and Borrower Performance (HS-Hi Af!yL SifaLOctor;, LI Iat=\.T\. tal Unsafd\. MlHU= hlI Uneatkfarteru) A\. I Rnklr nar,rmnaneo Rntina Ol Lendinog OHS OS OU OHU Q Supervision OHS OS OU OHU fn Overall OHS OS O U O HU 6\.2 Borrower performance Rating EL Preparation OHS OS OU O HU H Government implementation performance O HS O S O U 0 HU O Implementation agency performance OHS OS O U O HU O Overall OHS OS 0 U O HU  Annex 7\. List of Supporting Documents Staff Appraisal Report, Hungary Energy and Environment Project, January 19 1994, Report No\. 1 1582-HU Implementation Completion Report on the Completion of the Energy and Environment Project No\. 3705-HU, MVM Rt, Budapest, December 2001\. Loan Agreement Energy and Environment Project, between IBRD and Hungarian Power Companies Ltd, March 25 1994\. Loan nutmber 3705-HLJ\. PSRs 1 t\.o 16, Hungary Energy and Environent Project, pl0AA79\. - 24 -  Additional Annex 8\. Borrower's Contribution to the ICR Implementation Completion Report nu- 1-) Budapest, November 2001 I Introduction The Energy and Environment Project was completed in Hungary\. The Borrower is the Hungarian Power Companies Ltd\. and the ol2urrnntnr is the T41inonrian State\. Peathireq of the Loan Agreement- and the loan include: I Loan No\.: 1 3705-HU; l I Date: l Marcn, isYY; Amount: USD 100,000,000\. Maturity of the Loan: | 15 years (grace period: 5 years), l Closing date (modified) 131 December, 2001 IfI 1r\.dJ IUUI r4j Lb LU UI1U PIUJUtA\. Part A Lonstructlon or one gas-nrea combined cycie cogeneration plant OT ZJD Mwe ana 2410 I MWt at Dunamenti Ltd\. site, about 30km southwest of Budapest Part B Upgrading of the Borrower's existing Energy Management System (EMS)\. Part C Human Resource management and Training [Part D Environmental Management and Training 2 Project Objectives The project would support Hungary's reform program by'mitigating the country's dependence on energy imports from single source; by increasing efficiency, reliability and flexibility in the production of electricity and heat; and by establishing the necessary basis for strong interconnection with the Western European Power Pool\. In addition, the Proiect would support continued environmental improvements in the power sector, and assist in improving institutional capabilities\. 3 Background Ten years ago the Hungarian electricity scertnr c-nnsictid of 2 si lng!e company: the himng2rinn Power Company operating in the form of an industrial trust\. This vertically integrated company incorporated all public utility generators, the power grid and the uismounon network as we;I as te uisinoutiun cumpauuic directuy suppyuing pouw[r 'o 'uie umelI\. u,c past decade fully changed the structure of the industry\. As a first step the trust was reorganized into a concem-like organization with two levels of economic entities via the separation of the generation, transmission and distribution activities\. Parallel to this process the previous system of centralized instructions applied by the planned economy was replaced by the contractual relationship between the entities\. Act XLVIII of year 1994 on the generation, transmission and distribution of electricity defined the framework for the sector's new type of operation as well as the responsibilities of the state vis-a-vis the power industry\. - 25 -  As a second step a significant part of the generators and the distribution business as a whole were privatized which, beyond diminishing the state indebtedness, resulted in the appearance of investment capital required for development purposes\. Presently the process of the third transformation phase is underway: i\.e\., the preparation for the liberalization of the market\. 3\.1 Restructuring of the MVM Group and Privatization of the Electricity Sector The significant preconditions to attracting investment capital into the electricity sector via privatization have been established, on the one hand, through the restructuring of the Hungarian Power Companies Trust in 1992, and on the other hand, through the official declaration of the new Electricity Act in 1994\. The method as well as the scheduling of privatization were regulated by Government Resolutions the most important of which was Resolution No\. 1114/1994 defining the new ownership structure to be developed in the sector though privatization\. Privatization started in 1995 and the last transaction that was made in the spirit of the above mentioned Government Resolutinn took nlace at the end of 1997\. As a result of this process the presently nrevailing structure of ownership in the sector had evolved\. In consideration of the ownership conditions the privatization brought the following important changes for * new aridU b1llall[ IVIVlVi %JGro-Up Was iU1iiUlt,-LVU Uie Udecisive rl-eIIJUeL5 of WIhI U1ar IVi\.ViVi RtL iHI 11170 state ownership as well as PA Rt\. (Paks Nuclear Power Plant) and OVIT Rt\. (National Power Line Company Ltd\.) practically in iO0% ownership of MVM Rt\. * MVM was left with 25% + I share as ownership in the privatized Dunamenti Power Plant Rt\. and Matra Power Plant Rt\.; the former one having the biggest, the latter one the third biggest installed capacity in the power system\. * MVM Rt\. also has a significant share of ownership in the non-privatized Vetes Power Plant Rt\. * MVM Rt\. has fully withdrawn from the power distribution sub-sector\. 3\. A hanges in tne r inancia; l iruatin of ivi VI\. Beiween ; Z5 anu ;Y The privatization of the Hungarian electricity sector, taking place between 1995 and 1998 brought significant changes in the assets of M1VM Rt\. in 1994, one year prior to the privatization, the equity investments of MVM Rt\. in the electricity industry - embodied in the 50% of the share capital of the power companies - amounted to HUF 259 Billion, which equals to about 79%/o of the total assets of MVM Rt\. At the end of the privatization process, the proportion of equity investments to total assets was reduced to 49% (less than HUF 152 Billion)\. The loss of assets of about HUF 107 Billion can be attributed to the write-off of assets only to a lesser extent (the write-off was HUF 5\.8 Billion in 1995, 2\.8 Billion in 1996, 8\.6 Billion in 1997 and 4\.0 Billion in 1998, in total HUF 21\.2 Billion), while the majority of it was related to the privatization process\. Dizrinor the ve-5r I WI; hbfnre the nriv2ti72tinn td-enuci-r fnr the Ple'tinritv cirnmn2niPe W2S onnOnnr-d thprp was an asset swap deal concluded between MVM Rt\. and its owner, the Hungarian Privatization and State Tj,\.jA;-n ( ,,IAr (D17 D+ I -A-\.,,\.4n en tI,- A-nn XNA Pt " ICA~f 0/\. _1 - I,_1A : --!IL\.15 Compar\.y(APV *'\. WAflW\.1flJ del\. u%i, IM v IV ix&\. V~A\.xchr\.guei %fl O %V s\.harem F pac%kagea heldU Ul the six regional power distribution companies for the shares of Paks Nuclear Power Plant Company (Paksi  At\.omi-rAmil Rt\.) and the Natinna! Pnuopr Gr\.d rnarennn (OY!T Rt\.) nprtlu n npd hu the APPV Pt at the time\. The asset swap was made at a parity value in theory, however the shares of the power distribution ~~ ~ a ~ ,~LJ1i~~ 1~A A ~ *L_ kL\.--\.- _ IL" TXI DA #\.Lt _ *I \. -- 4 cr\.a\.ewere regis-\.ered wiu\. z valueJ of\.JI lL12\.A IBillion in ile U woJ- of Lvi v lviL III, Whie u1h vaIlU Ue the shares of Paksi Atomeromtl Rt\. and OVIT Rt\. amounted only to HUF 65\.4 Billion\. The difference (no less than HUE 55 Billion) was accounted in the DOOKS of IVIMV Rt\. as an extraoruinary loss\. 1The partial sale of the MVM-owned shares of the Dunamenti and Matrai power plants and the full sale of the shares of Tiszai power plant were realized in 1996\. The sale of further Dunamenti shares and all the shares of Budapesti power plant in 1997, and the full sale of the shares of Bakonyi and Pecsi power plants in 1998 followed\. The book value of the privatized shares of these generation companies was close to HUF 30 Billion\. The sale of investments during the privatization process was accompanied by a significant capital loss: it was mainly the result of the asset swap with APV Rt\. in 1995, but to a lesser degree it could also be attributed to the privatization of the, shares of the generation companies below book value\. The extraordinary losses of HUTF 57\.9 Billion in 1995, 9\.5 Billion in 106 and !0 5 Rillinin in 1007 are a!l linked closely to the privatization process\. Because of these losses, the equity capital of MVM Rt\. reduced between 1994 and 1998 from HUF 301\.2 ID:1: t 1 I ~7 0 n:U:- AM -_ L -- TV!rlL 7 1) \. L2I I_pr fi BLi110n11 to 1\.0 2 12 1 lllon\. 1teiJL IIIr,o uIWia fur 173 01111li of losses, u1e iaculluUated pii resci-ve account showed a negative balance of more than HUF 75 Billion, so the equity capital of the company sank well beiow the stock capital of iLHur 249\.6 Biiiion (the capital reserve was Hiur 52\.3 Biiiion)\. The inevitable alignment of the equity structure was made in 1999\. The stock capital was reduced by HUF 49\.9 Billion and the capital reserve by 21 Billion, and these funds were used for the replenishment of the profit reserve\. After the stock capital reduction, the nominal value of the shares was devaluated from HUF 10,000 to 8,000\. The new regulatory framework that commenced in 1996 ensured the application of regulated prices for electricity allowing for an 8 percent normative return on the assets for all of the companies in the electricity sector\. However the consistent application of these princiDles would have led to drastic price hikes\. because the end-user price for electricity was previously held at an artificially low level\. Consequently the Government decided to abandon itS claim for dividends in regyard to the stnte-owned companies of the electricity sector, thus the announced prices not only reduced the calculated profit rate of MVM Rt\. to zero, huit aeln f_ilpd tn rppnnrn;7P ,rtain rnct PlhnimntC NntuAthetan2inc that thp rom,l tnru frnmDonnr1 iic up , unfavorable, the company - because of partly the privatization income flows, partly the dividends from the genematuon Com,panies (bin i +U_\. o\.erhi ofnx' vs :\.) L-- has-ruAd -an w:ill enu-e :_ +1ef\.- \. its_ a%nn\.nal\.kL LJll~ ~ kv-3 mrUI ILL un\. Uw Pl1iv1ijJp VJl LVIL V LVIL A-L\.J - Z14LO --12ut%uU Cum Witl 1-ULUI UII ULIU AULUL 11%IL financial stability, and has been able to meet all of its financial obligations in a timely manner\. MVM even nad ute necessary financial background To make tLe network grid iniastructure invesunents required by the joining of the Hungarian electricity network to the Western European UCTE system\. 4, a V luation of Ir ple\.en-dat:on This Project has had significant imnportance for both MVM Rt\. and other participants of the energy sector\. This was the second World Bank Loan Agreement of MVM Rt\. and this was the first one, which Borrower was MVM Rt\. itself with the guarantee of the Hungarian State\. The first World Bank Loan Agreement - Loan No: 2697-HU - was taken out by the Hungarian State in 1986 and was closed in 1996\. -97 -  The preparation of the project began in 1991\. Work teams were set up for the two major sub-projects\. These teams consisted of experts from MVM Rt, Dunamenti Power Station (for G2), regional distribution companies and power stations (for EMS/SCADA) and engineering/consulting firms\. The World Bank provided support for MVM Rt\. (and the sector) to prepare for the interconnection to the Western European Power System\. A very important point of project implementation is that after or due to privatization the common execution of EMS/SCADA sub-project was not broken, the harmonization of (occasional) different interests was successfully solved by the exemnlarv cooneration of the participating experts\. It was only Dunamenti Power Station who wanted to get rid of the World Bank Loan Agreement nn'1 the rnnnip-t\.d ionnnp-rtinn with MVM Rt's nnfd World B2nt's expenrts as soon possible\. The snli!tinn for making this was an early repayment of its loan amount\. 4\.1 Major factors effecting implementation iJunulg iLs lorng life, tiie ruuject was uifluencedi by severai serious changes: * Following the privatization of the regional electric utilities, the contract structures had to be revised, and the new owners' interests had to be taken into account\. * Implementation of the telecommunication system was delayed, increasing the operating costs of MVM (leased telecommunication lines)\. * Due to the two-phase implementation of the EMS/SCADA System, MVM and the regional electric utilities had to mobilize more financial resources\. * The scope of the Project was extended several times (Region "E" in telecommunication, EMS/SCADA System hardware upgrade, software additions, back-up metering system, reconstruction of the NDC (MAVIR) building, etc\.)\. * Struchtral and technical changes of the regional utilities required modifications in the EMS/SCADA System (new substations, combining and moving DDCs)\. * Following the structu ral chan\.ges of the MVM, the NDC was separated from MVM and has being operated as MAVIR (Hungarian Power System Operator Company Ltd\.) from I January 2001, which _eq;-dAe\.dn sorne con-ct Specific details are provided below\. Part A - Delay in project preparation The project preparation docufen-te were prepared and issuled in delay and the related conntrcts were also conducted in delay due to the following reasons: * complete revision of the consulting draft tender document and as a consequence, delay in the contract conc;-wiun WiuLn rnnedy wnkin u r\.q\. * change in the World Bank standard Bidding Documents for the turnkey implementation of the Steam Cycle (the World Bank introduced a new sample document including a very long two stage Bidding Procedure)\. * elimination of the deficiencies in the draft tender document for the turnkey implementation of the Steam Cycle\. Part A - Control and Instrumentation The control and instrumentation design and implementation activities were shifted to SKODA Controls (Czech Republic) and further to SIEMENS KWU (Germany)\. SKODA Turbiny and SKODA Controls (both Czech Republic) were not able to define the right contractual scope and there were many discussions - 28 -  amonnc the nlwhnntr-Art-ors on this is<iue (asa conclusion, SIEMFNS KWI J shniild have been promoted as a direct Sub-contractor of MITSUI)\. Major problems during design and implementation: * gas turbine diverter damper operation * automatic start-up of the HRSG and the steam turbines * gas turbine - steam cycle interface * alarm sequence recording All problems were solved at site during commissioning\. Part A - The role of MITSUI (Japan) and its Subcontractors Though, in its bid MITSUI (Japan) presented acceptable technical references, its activity in respect of the contract was shown only in the general and contractual commercial issues (insurance, Letter of Credit, pavments, etc\.), and the supervision of the technical activities was shifted to its Subcontractors (CMI- Belgium and SKODA Turbiny - Czech Republic)\. The Subcontractors did not perform their obligations properly and as a consequence, incomplete designs we\.re prepared w-rith inferior quality an-d contracts were concluded in a delay with oth\.er subcontractors\. The latter case was especially characteristic for the control and instrumentation resulting in a delay of app\.-o0-&uaIUly U-I M r uIS VI uRe Cor\.ILplIet:\.o LDedUli1n\. Part A - Faiiure of the steam turbines A considerable delay was also caused by the failure of the steam turbines\. The condensing steam turbine was damaged on March 10, 1998\. One segment in the stiffening shroud in stage 4 of the high pressure rotor blades has broken off during operation and damaged the other intemal parts of the high pressure turbine\. The reason of the damage was a crack in the rivet smash during manufacturing\. After the repair in the turbine factory Plzen (Czech Republic) the turbine was restarted on April 29, 1998\. The back pressure steam turbine was blocked and repaired in the above factory twice: between June 5, and August 20, 1998 and between September 5, and November 13, 1998\. The technical investigation showed that reason of the damage was the improper drain system of the lower turbine casing\. In order to allow the proper drainage\. a new drain channel was manufactured bvyassing the turbine stages and resulting some loss in electricity production\. The new system and new operation inetn tonnc nmrovided th\. annod tPr-h1ninn nvAinhil4iv yf the hbrac nresiire thurhine\. D\.u\. A- l\. \.oo thl l\. I altt%1 K1 IVaMIL&LIV1VIUkLnuK IMEI As the biggest Plant in Hungary, the Plant was privatized in 1996\. The Tractebel (Belgium) as the new Owner created a new Plant setup diagrain and cut the stafi by approximately 35%\. Tractebel decided to repay the provided loan to MVM and to settle the commercial and contractual problems with MITSUI\. Part A - Settlement of commercial and contractual Problems The above delay and damages did not make possible to issue the Operational Acceptance by the Employer (it was not even requested by the Contractor)\. In order to promote the situation and-to use the Plant in the meantime a separate Minutes was signed by the Parties on October 7, 1998\. The Minutes declared that the 24 month Defect Liability Period for the Plant started on August 21, 1998 and it shall be extended for the back pressure turbine by the period of its second repair\. - 29 -  AU other remaining contractual issues were settled in the Memorandum of Understanding dd\. August 31, 1999 and Amenuinent to the Contr-act Agrerement wh'ich became effective on June 30, 2000\. Major issues of the Amendment to the Contract Agreement: * payment for spare parts, * payment for training, * payment for 10% of the Contract Price and counter payment of the same amount for liquidated damages of delay, * payment for 5% of the Contract Price\. As the Letter of Credit expired on December 31, 1999, all payments were effected by direct transfer between the Employer and the Contractor\. The Operational Acceptance Certificate was issued on the date of effectiveness of the Amendment to the Contra-t Agreemtennt The Final rne\.rt-inn:n Arcpnta2ncP Cr,-r:ft2tt was issued on Ne v'MnhPr m 7 2000\.W D-rt B - JH1\.GXa\. Qi TEMQS'S A 1r A C-*-- Having delivered the developing systems, Siemens Energy and Automation Inc\. who supplied the …Ly- t_ I ' 1 C' IC'f' A T% A System- -\.!i … Hiler-archiicalu EMS/SADaL'A Sys\.er,, wasb nIe able to p-rovidelurue reso-z V5u1;0urc hrluror burio-us problemsb arose in the progress of the project in the second year of the implementation\. MVM has initiated negotiations with Siemens on the implementation schedule several times and finally an agreement was made on a two-phase implementation\. In the first phase Siemens provided a SCADA system for the NDC and RDCs with RTUs and data concentrators\. The system of NDC was also suitable for performing automatic generation control tasks\. In the second implementation phase the systems became redundant, were extended with the EMS functions, advanced applications and, in the case of the NDC and ELMti systems, with dispatcher training simulators\. Thus, the scope of the original contract was implemented almost completely\. The technical specification, developed prior to signing the contract, defined verv detailed future demands, some of them not even existing at that time, that could not be provided completely\. Had standard demands been specified, the imnlementation might not have suffered such a delavy Di-e to thie 1,vo-inh ce- im\.1!Prn#enntt\.on as ell- n as r\.eet\.nff the\. nadf;\.^;nal ftechmXca] reuieerkao t Purchaser, there was a delay of nearly two and a half years in the implementation of the project\. However, LdUL-Ln1 LJhis PsI;odIU UL\.e hlual-Wae V,quipI11Vet was upgadedU aIIU U new version of uLe SFC-LIUIIl sIL\.WaUV was3 installed\. The RTUs were delivered and installed according to the original time schedule\. During the implementation structural (two-phase implementation) and quantitative changes had to be made, covered by eight Change Order Agreements\. Up to the split of the implementation into two phases, cooperation with Siemens Energy and Automation Inc\. was difficult, the responses to the problems and questions came slowly and far between\. After signing of the agreement for splitting the implementation into two phases, the contractor made resources available and the nrogress became accentable\. -30 -  The proiect develonment was significantlv supnorted by the OJT (on-job training) during which the Hunganran specialists became familiar with the system and were able to generate the database properly\. Part B - Associated Telecommunication Network Tr ALT (whT ic,1,h h,as been tsf\.n\.- seve\.-! t\.es- d A,,Ann tha i;mr\.PumPnnt,te\.n - Ziemprnc Telekommunicazioni S\.p\.A\., later ITALTEL, then Siemens Information and Communication Network S\.p\.A\.) was unable to meet th\.e delivery deadlines\. hLereforeV the I lu plemlenation had to be r-esheduled\. The technical scope of the telecommunication network was extended with a region "E", west to the Danube\. Thie changes were included in two contract amendments during the impiementation phase\. The system delivered was not completed by the deadline and did not provide the MVM with all the functions (e\.g\., the TMN system) included in the contract, therefore, the MVM applied the sanctions it was entitled to under the contract, i\.e\. ITALTEL was obliged to pay liquidated damages and a part of the Performance Bond was used\. Part B - Domestic Activities The domestic activities - apart from those hindered by the delay in EMS/SCADA and the associated telecommunication system - were implemented according to the original time schedule\. Pirt V The implementation of the preliminary program elaborated with assistance from the Bank's representatives was - \. b A -e *n trp m,,an,ag ,mri\.t The Phnncyse an the regulatory framework, the privatization procedure, the emergence of international investors and the changes iII U1e seL-Up VI UIe IVi V IVI 1UUa 41L IIlUaj effects Part D The parties prepared a detailed Work Plan for the project which served as a basis for the activities\. However, the parties deemed necessary to amend the contract, even clirectly after the signing procedure\. T ne reason of this was the privatization commenced in the power sector in 1995, prior to which evaluation of the environmental performance of the companies in the power sector had been initialled\. The results and experience gained thorough this process had to be included in the Plan and certain tasks became unnecessary\. The privatization itself required some further modifications: the parties had to understand that the privatized power plant companies did not demand the advantages provided by the Plan, but being individual and private companies, refused these possibilities\. Therefore, the Work Plan had to be further reduced\. Regardless of the modifications mentioned above, the contractual parties remained engaged and the governmental organiations (fitst of all the Ministry of Envi\.ro\.nmet Protertion) supported the work efficiently\. S Environmental protection Tne emission values of tre Dunamenti Power Station are determined basic-ally by tie quanLity anid quality of utilized fuels, ratio of the used oil and natural gas, and the characteristics of the power engineering technology\. Only from 1987 through 1991, the emissions from the BEAD blocks for heat supply were 7000-12000 tons of sulphur dioxide, 177-3000 tons nitrogen oxide, as well as 370-630 tons solid materials each year\. - 31 -  In addition to the electrical energy production, the aim of the G1 combined cycle block was to supply the neigh'Doring oii refmery with steam, which was earlier provided mainly by the "BEAD" part of the power plant\. The G1 block alone, however, was not able to meet the steam demand of the oil refinery, the hot water demand of the power station and the town, the process steam demand of the power plant, therefore the G2 combined cycle block had to be implemented\. The G2 block was implemented in two stages; the GT unit was commissioned at the beginning of 1996, the trial operation of the heat recovery steam generator-steam turbine unit was completed on 31 May, 1998\. The implementation of the above mentioned projects made changes not only in the power engineering technology, but in terms of the environmental protection as well\. The new combined cycle - mainly natural gas fired - gas turbine blocks are characterized by the extremely high efficiency and the low air pollution\. In addition to the ahbve, the npwer plant iunits are u tili7ing so ca!led power plant oil of redrieed suilphur content instead of heavy heating oil used earlier (sulphur content at about 3%) and instead of burning of \.fi_1 n; racIA,,\. raanprti,,ph, thi\. A n-r--- tin- n ta j rA,-nrn,a,'mnt At -MoirAn-nrntol ,,1lnpC I l1e quaintULy Vo ULIV IL,LLVU i, UIpdIsIU UIVAIUd UdewV4VU si,iuuxI\.,aIuy \.o app,oALi\.iately 5V /0 oI ue Values measured in 1994\. These changes resulted from the commissioning of the Gl and G2 gas turbine blocks, and shutuown oi the o01 DBEADL ana L" units\. The question of environmental control had major importance during the initial stage of the project\. Dunamenti Power Station guaranteed to keep the emission values at low level, and to construct an emission and immission environmental monitoring system, of which the emission monitoring system was implemented\. 6 TECHNICAL Performance Requirements Part A The major technical requirements for Part A are as follows: * high total efficiency of the combined cycle unit\. which was fulfilled on the basis of the guarantee measurement performed (53,36 % for the el\. production)\. * high availability of the comnbined cycle iunit to ensire power generation, 17 bar steam and disrict heating (98,4 % in 2000 instead of the contractual 96 %)\. * tA\.flcompli*ance of -Se envirJlfmelntafl iss:\.o \. n, va-e -ith the j*- prsc-t\. fons, TVich was fulfilled according to the guarantee measurement (NOx 25 ppm)\. l \.__ z\. -- - 0 -N -1 P **j- ~ - \.,i f I~ r , - * iieire UV flu S02J elsUUsiun siii iUe GJl unit\. I ne NOjx aiiiuai ernission is equai apprvximateiy 5 70 oi the total Plant emission (330 t/a from 7397 t/a)\. The main guarantee parameters included in the steam cycle contract were as follows: guaranteed measured |Net electrical output (MWe): 83\.313 85\.194 1 Net snecific heat consumption (kcal/kWh): 2535-405 24R7n08 Max\. pressure drop on the HRSG (mbar): 27 24,9  Part R The most important requirement for Part B, the EMS/SCADA System, - that was realized by the j\.nrnrnlc\.;na inf -b e',an -- *- tA -\.,,A\. t\. 0hI,, tn - -o *t\., T--n h4 m, - \.-ta a\.e fofl %t_ial l [1 Lm\. tS VL -zozs' * F- -s V ntS\., -\.L OAJfli\.l iS S\. - l -E-W -, -- -- Fo -- the UCTE system\. The Hungarian electric power system is a full member of the UCTE power pool since 17 Mylay 2I\.0\. Thanks to its instailed interfaces, the system meets the requirement that, foliowing the necessary software extensions, the NDC (MAVIR), as an independent system operator, will be able to perform the tasks required in the liberalized energy market\. In case of the regional electric utilities where the operations control was not supported by process control systems earlier, state-of-the-art dispatcher systems were realized\. The installed data concentrators made it possible for the regional utilities to implement their district dispatcher centers\. Introduction of advanced applications (automatic generation control, voltage/var control, network applications) resulted in the decrease of the network losses for all users\. 7 Financial Summary Summary of Estimated Project Costs according to Staff Appraisal Report | |o1 ~Item CRIGINAL ESTIMATE I otai rrom woria BsanK l _ l | [million I Loan I I I ~~~~ ~~~~~~~~USD] I [milliOn USD] I IPart "A" Innunimenti Power Stntion G2 Rlnek I !40 0 [ l 518 tPart "B" EMSSCADAI 51\.9 | 35\.0 r Part "C" Human resource 0\.6 0\.6 Part "D" EnVironment 4\.9 4_9 1 l 'otal base cost 19lY\.4 l s\.3 rota Physi:ca! contingencies 195\.: \. Price contingencies 15\.4 3\.8 Total project cost J 228\.7 100\.0 Interest during construction 13\.8 Total financing required | 242\.5 - 33 -  Actual Expenditure: I Item I Actual expenditure ~~~Dunamenti G21|| m fr from the total Repayment 2l082 69 amount: |Prepayment 31 042 933\.97 |MVM Rt - loan account debit with the initial deposit Undisbursed amount / Cancelled in December 2001 g |Grandtotal 10 00 000 Part A' The Dunamenpi G2 combined cycle unit was financed from thruee sources: (1) Loan from the World Bank (h2 Lo- An -\.fr the Hungari\.e an \. teen W rld B and toe aima-ar\. Power o a L tu nania t L td\. (MVM Rt\.) on 25 March, 1994 with the guarantee of the Republic of Hungary\. The loan amount was USD 100 M fvio r, whic UaSD 5:\.0 Mv was U1r6g1r\.lly plarr\.ed \.oL be apspiedu for fin1ar\.cing1 uhis 0uL projec\.' at preparation phase\. The total amount which was spent to Dunamenfi G2 is USD 33,125,626 this sum was repaid to tMe Wortd Bany in R 999\. (2) Loan from the Hungarian Power Companies Ltd\. to Dunamenti PS (DE Rt\.) The amnount of the credit was USD 87,745 M (HUF 9,301 billion), which was included in the contract (Operational Agreement) signed on 25 March, 1994 between the Hungarian Power Companies Ltd\. and Dunamenti Power Station for the preparation and implementation of the project\. This amnount was also repaid to MVM Rt\. by DE Rt\. So the financial resources of DE Rt\., devoted to the project, increased by this amount\. (3) Financial resources of Dunamenti Power Station The planned amount of Dunamenti's own resources was USD 18,868 M (HUF 2,000 billion)\. Part B I ULti&, asupply WI lth, aJOlALIn3 s Asc ted UT1%,rn"\.a natn,\.n Syster,zwl foreign consultancy services and the charge of the on-job training were financed from the World Bank loan; while ue oLier investUmenIls werc fiiianced ioumn Li coIIlmpanies' Uwii r[so-uiJcs\. IliR 'wIrld BaiLk paylilirs in the case of the two major contracts were made through L/C\.  The following was included in the Investment Program as investment costs approved in September 1994: EMS upgrading LOCAL COST [ FOREIGN COST TOTAL l r':~~, \.a\.~~~~ I ' A 'I AI I -vIiL wulo j ,'t __ j _ Master station 3,0 21,6 24,8 RTUs 4,9 5,3 10,2 | Data Concentrators | 0,4 1,5 1 1,9 Internal software 1,3 - 1,3 Associated Telecommunications 3\.3 3\.5 6\.8 Dispatch training 0,4 0,3 0,7 l Constction 0AA_g730,82, Construction management 0,2 0,9 TOTAL 18,7 33,2 51,9 As a part of the total investment costs, the contract with the World Bank provided USD 33\.2 million plus 15\. % physical contingency for the purposes of the EMS/SCADA Project to cover the foreign supply and project services\. The following table includes the actual costs, used so far and planned for the further implementation, as per the nroiect enloure of 130 Sentemher 2001 taking into account the 1HACMP imnlementation\. IEMS I LOCALCST 1 FOREwIGN COST TOTAL 1 Civil works 10,80 10,80 Master station 9,73 i9,65 29,38 RTUs 8,02 6,61 14,63 Data Concentrators 2,06 | 0,94 | 3,00 Internal software l 1,30 l l 1,30 [Associated Telecommunications 3,40 5,88 9,28 I Mnieatnh hn;;ini i n o I n an I A nA I |Engineenng 3:89 | 0,34 | 4:23 l Consiruction management 0,39 \. 0,39 TOTAL j 39,78 33,82 73,60 The above figures prove that the EMS/SCADA System Project implemented the extended technical content approved by the management (additional Siemens deliveries, taking over Power Plant RTUs, security enhancement, implementation of telecommunication region "E", SWTS relocation, additional telecommunication spare parts, installation of six 400-kV busbar potential transformers, additional resident nmorammning' additional engineering sunnort\. etc-); including HACMP imnlementation\. within the cost and contingency budget provided in the modified Investment Program\. To a great extent this was the result of the systematic application of the bidding procedures required by the 'v'tir-d Bark a_I -lsofr_*edretc rcrr,n from C\.he very be- r\. of *he loJe, but ' aplcaio vv uIIuUML)diJ\. \.1M) iUl Ui UU1IlMSULC pLV%UV\.L1I1,UL IIIJIII LLI,V-I~y V1 U~5uL111115 VkU~I i\.JL LJV%L, IJUL U1'\.~ UJiF\.R(LtIVJ of the liquidated damages and the Performance Bond on several occasions in the cases of both Hungarian and foreign suppliers also contributed to reaching the above targets\. - 35 -  8 Con+\. ng,, the Bank The Bank put sample documents to MVM Rt's disposal for appointing a consultant having international expe:nlcs and-iur -zu----g Uot uvru'l unpierneaiuU u rnauonal prucureaiJents\. I fle SamplC documents were completed by the engineering offices in line with the demands\. The modified documents were approved by the Bank\. The evaluation of the bids, the draft contracts, and the contract amendments made were in each case reviewed and approved by the Bank\. Complying with the stipulations of the Loan Agreement, MVM submitted quarterly Progress Reports to the Bank presenting the progress and the problems raised in the course of the implementation phase\. The Bank reviewed the progress of the Project implementation and the use of the loan through its annual missions\. Power engineering skills of the Bank's representative provided great support in clarifying the problems with the suppliers (delay of ITALTEL, two-phase implementation by SIEMENS)\. The methodological sunnort of the Bank for the elaboration of programs, nersonal guidelines from the representatives, persistent adherence to the targets and regular control that supported the finding of innnvntive soluitions- 2re a!! hihlv 2nnprnr\.rinted Th\.e Ban's representat\.ives regulJarly paid visits at the company and consulted on the results ach fevea4 sor as well as on the future tasks\. In addition to keeping personal contact, advice and guidelines could be reqaes\.ed-U also uJAoug^ 11lL\.e, ia t under= 9 Evaluation of the role of NVIWIVI Rt\. Part A Phase I\. (untii the privatization)\. An "on-site management team" was set up to coordinate the preparation and implementation of the G2 project performing first of all the preparatory functions for decision making and supervision purposes\. Its main task was to prepare plans for the scope of preparation and implementation of the project, for division of liability, costs, time schedule, quality and orders of procedure\. In addition, the team provided supervision of any deviations from the contract\. MVM Rt\. delegated a project manager and a coordinator into the project organization set up\. Phase II\. (after the privatization) After the privatization MVM Rt\. did not take part in the daily work of the site management team, however, the overall supervision of the major milestones and payment were nrpvided= Part B MVM, as* the borrower and the contracting Party in the EMS/SCADA Project, established a project team L,aL pL4yVUd all illjLUUILuL lUIVe UI leprVes1ULtin ULU Mregional ClVLeUil U\.i:LVit,esIU a In juAWri p lwealb to UI, BarK and the contractors\. During periodic clarifications (domestic project meetings) MVM collected the problems and requirements and forwarded them to the contractors\. On the basis of the participants' data supply, MVM compiled the Progress Reports\. The project organization established by the MVM, in cooperation with the engineering firms, performed the following tasks: distribution and archiving of the documents, summary of their review by engineering\. sections; management of the contracts, compilation of change order agreement drafts\. checking the completion, approval of payments\. The MVM took out an overall insurance policy that covered the scope -36 -  of the imnlementation tin to the cnmpletion of the crmmmiq-inning One of the most imnortant activities of the project organization was the coordination of the domestic works\. During the implementation phase the A4VA4 aentered nmore tflian\. 320 l CrOnt*-crC arn\. chlange or-der aomatc ,vth about a60 nmntnortnr anWi successful in supervising the contractors' perfornance with the assistance of its engineering offices\. In addUiLUIo to UIV aUVwV, IVI V IVA CULUL,-e cUVltUw\.t WIUI "U, iUgIoV1ai ItyII ULUi1LIU, as We1l\. Part C The MVM paid major attention to the training courses and progress of the personnel, partly due to its previous position\. The previous training-planning practice had to be modified according to the new situation of the company\. Following the formulation of the training priorities, the requirements of the various professional areas had to be coordinated\. A substantial part of the financing for training came from the budget of each department The major part of the training courses was financed from own resources: anyway, the use of the available foreign currency budget would be unreasonable for local training courses due to exchange costs\. The breakthrough was more difficult in the case of top manager training because they have been overIonded huit the training of the middle mrnnoerq and would-he managers started the desired change in the attitude\. The participation in the training courses is a natural and permanent demand of the new A li profeusiunal, quai,Ly LIUoUVI, UIALUIILIaLLVII prIUocsin a11r, forU iU1\.1 Ialguar uaiil1ir %oLUU1 a\.e- Very important\. The participation reaches 75% of the workforce\. The cost of training is 4% of the costs of salaries and wages\. One of the key factors in the high quality operation of the company is the well-organized, efficient and continual training, the employees' commitment to their personal progress\. This commitment is further strengthened by the training support provided by the company, well above the Hungarian average\. The MVM considers training as an investment promising higher-than-average profits in the future and being of crucial importance for maintaining its competitive edge\. The knowledge and expertise gained by the employees of the company, the transfer of this knowledge and the utilization of the resulting synergies are things on which more emphasize could be put in future training and day-to-day oneration\. The strenathenhin antrieam\.lining of qualitu onntrnl seAf\.inrrPrtito npr\.Med,rec are another rnniiAl fac\.tnr of the further efficiency\. 10 Project Performance and Future Operations Part A in accordance with the present technical standard, the G2 gas fired combined cycle unit (Part A) is operating at high efficiency and availability and low pollutant emission parameters\. Therefore, the availability of the combined cycle unit is extremely high, on the long term, the operation of the G2 unit is advantageous and economical for Dunamenti Power Station\. The production data of the Plant and G2 unit in 2000 were as follows: - 37 -  (a _% lict pr-doc% (so:d) --I aun to=:: O\.9585 MWh;L G2' u it :\.057\.5 lVWl\. \.N'i\.e~ 5iM) tCItLFEI:Ity jJIIUUUUUIE k&UIUY\. rIdIlL LULilI\. J\.UYJ\.OJ' li IYV UI, %\.J/L UILIL\. I \.0\. 1\.JJ I lI VI LtI\. I tic figures show that the G2 unit produced twice more electricity than it should have been based on the instalied capacity\. (b) heat production (sold)\. The total heat demand for the oil refinery (5\.374\.741 GJ) was provided by GI gas turbine unit and the total district heating demand (708\.976 GJ) was provided by G2 combined cycle unit\. The old units did not produce any heat to sell\. The tendency shown above will continue in the future\. Part B The imnlemented proiect is scheduled for further development * The EMS/SCADA system shall be ctontinuously maintained (at the levels of RTI, DDC and master station) therefore the users signed maintenance contracts with the supplier\. Due to the rapid dev-lo 1\.nt Of thO\. i4-o^a\.yn pr^wasinn devices they \.ill be soon outdataA tehd - cnnf-\.<-\.c upgrading is required\. The Contractor is developing also the software system and regular information is p[UVIUWU Ui Ulu iid Wul U0 UIt IlLUuILVIl1Ri; I\.UIIUU - I IUU, ujiUlI lb pIu\.bluTie ibU III U1s case\. * During the extension and development of the energy system the process controi system shaii be modified as well (new substations, power stations)\. Due to the modifications the development of the database, software and hardware is required from time to time\. * The system shall be extended with the required functions due to the expected market liberalization to be introduced from 2003\. The additional HACMP server implemented in the project is able to run these software functions\. The organization of the system operator and proper regulations shall be developed\. * The extension of the telecommunication network continues due to the increased demands and the installed OPGW sections\. Part C The strategy for human resources management is under preparation, dealing with training, development and managenent of human resources at their real value\. In addition to the training plans; our new management is preparing the introduction of a new training model\. (A new head of human resources department is to be We a\.-e pJ\.epa,-e '\.to reg* ulaute our\. Upe\.~1aLAn6 p\.t tsu\.l%\. acco t,,;ing Ito LIhe\. newV qualit; contro1k LfltO issuedu Ui 2000\. Based on the new Electricity Act we go on with our preparations for market deregulation and successful participation in the competitive market\. We are preparing for joining the European Union, for being present and cooperating in the unified European market\. - 38 -  Part D A%s res-ul's of UIV rIVjVtL Uf IoIUWiln shbiall Ub Ir\.entio1nU\. (a) Tne Project made contribution to foundation of ine M'vM Environment Managernent System and promoted the international qualification of MVM as per MSz EN ISO 14001:1997 in 2001, and (b) it provided considerable assistance to implementation of the Environmental Project of the National Grid being in progress now, first of all in the field of evaluation of the remediation plans and development of the monitoring system\.      IMAGING I mruf No\.: 24065 Tp & I V\. p I Type; \.

REVIEW

P061214

 ICRR 11017 Report Number : ICRR11017 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 07/18/2001 PROJ ID : P061214 Appraisal Actual Project Name : Sb-sac Project Costs 12 7 US$M ) (US$M) Country : Solomon Islands Loan/ US$M ) 12 Loan /Credit (US$M) 7 Sector (s): Board: EP - Central Cofinancing 0 0 government administration US$M ) (US$M) (44%), Forestry (19%), Banking (13%), General education sector (13%), Health (11%) L/C Number : C3252 Board Approval 00 FY ) (FY) Partners involved : Closing Date 12/31/2000 12/31/2000 Prepared by : Reviewed by : Group Manager : Group : Elliott Hurwitz Laurie Effron Ruben Lamdany OEDCR 2\. Project Objectives and Components a\. Objectives The SAC supported government efforts to : (1) achieve macroeconomic stability; (2) implement structural reforms in public finance; (3) strengthen the financial sector; (4) improve management of forestry resources; (5) improve the environment for private business; (6) assure more efficient and equitable delivery of social services \. b\. Components Support to government for (1) macroeconomic adjustment, including stronger tax collection efforts, domestic debt restructuring, and improved monetary and exchange rate policies; (2) more efficient public expenditures, including higher expenditure on preventive care in the health sector, rationalization of some educational expenditures, and stronger budget management and control; (3) institution of financial sector reforms; (4) implementing more sustainable management of forestry resources; (5) improving the environment for private business, including enhanced access to land and infrastructure, streamlined investment approval, and tariff reform; (6) poverty alleviation, including higher social sector expenditures (within a constant budget envelope ), maintaining or increasing budgetary expenditures on preventive health care, improving the efficiency of educational services, and implementation of a poverty assessment \. c\. Comments on Project Cost, Financing and Dates The credit was US$12 million, of which US$7 million was disbursed on effectiveness as the first tranche \. Because of the severe civil unrest which prevented and then reversed project progress, the second tranche of US$ 5 million was canceled\. The project became effective on 7/15/1999, and closed on schedule on 12/31/2000\. 3\. Achievement of Relevant Objectives: Unfortunately, the positive early achievements of the SAC were undone by ethnic violence --which resulted in a coup d’etat--that occurred prior to second tranche disbursement \. Consequently the project did not achieve any of its major relevant objectives\. The achievements prior to the ethnic crisis were substantial : all pre-Board conditions were achieved, and further progress was being made, before the regrettable violence and diversion of government attention \. For example, the solid macroeconomic gains of early 2000 were reversed as the substantial violence led to major economic losses, with GDP estimated to have declined 14 percent over the entire year \. Inflation increased to around 9% in 2000 from 2% in 1999, and when revenues contracted sharply, government started to borrow from the central bank to meet expenditures, in excess of budgeted amounts \. This breached the limit that the central bank had placed on government borrowing\. While structural reforms in public finance were implemented, plans to conduct external reviews of two key development institutions, the Development Bank and the National Provident Fund, were not undertaken, undermining progress that had been made in this area \. In the area of public finance, the previous government had made substantial progress toward discontinuing tax remissions, but the new government restarted the practice on a large scale as they were seen as necessary to boost economic activity disrupted by the crisis \. The environment for private business was not improved \. Forestry reforms were initiated early in the project, but were reversed after the coup\. And progress in the social sector could not be maintained\. 4\. Significant Outcomes/Impacts: Because of the violence and the diversion of government's attention to efforts to establish and maintain peace, the project did not have any significant outcomes or impacts \. According to the Borrower contribution provided by the current government, the ethnic crisis wiped out all of the economic development progress the country had made in the previous ten years\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The project did not achieve any of its major relevant objectives \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Highly Unsatisfactory The project did not achieve any of its major relevant objectives\. Institutional Dev \.: Modest Negligible See "outcome" above\. Sustainability : Unlikely Highly Unlikely The crisis diverted the attention of officials working on the reform program, and many did not remain in the same positions \. The new government has quite different priorities than the previous government \. Bank Performance : Satisfactory Satisfactory Bank performance was admirable under these difficult conditions\. Borrower Perf \.: Unsatisfactory Unsatisfactory Quality of ICR : Exemplary NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: In an ethnically diverse country with significant regional variation in income, the Bank should consider efforts to mitigate inequalities Based on initial progress under the project, even where government capacity is thin, a patient and painstaking dialogue can yield substantial benefits in reform progress 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR is comprehensive, frank, and well -organized\. Remarkably, it presents 2 Borrower Contributions, one from the present government and one from its predecessor \. Both contributions praise the role of the Bank in project identification, but the emphasis of the present government is on the need for a near -term emphasis on reconstruction to contribute to peace and political reconciliation \.

REVIEW

P146280

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) Report Number : ICRR0020170 1\. Project Data Operation ID Operation Name P146280 AL Financial Sector DPL Country Practice Area(Lead) Albania Finance & Markets L/C/TF Number(s) Closing Date (Original) Total Financing (USD) IBRD-83730 30-Jun-2015 100,000,000\.00 Bank Approval Date Closing Date (Actual) 15-May-2014 30-Jun-2015 IBRD/IDA (USD) Co-financing (USD) Original Commitment 100,000,000\.00 0\.00 Revised Commitment 100,000,000\.00 0\.00 Actual 96,279,914\.78 0\.00 Sector(s) Banking(80%):General finance sector(20%) Theme(s) Other Financial Sector Development(70%):Legal institutions for a market economy(30%) Prepared by Reviewed by ICR Review Coordinator Group Nestor Ntungwanayo Fernando Manibog Christopher David Nelson IEGFP (Unit 3) 2\. Project Objectives and Policy Areas a\. Objectives The PDO is to strengthen the financial sector regulatory and supervisory regime and mitigate key vulnerabilities of the bank and non-bank financial sectors (Program Document on page 3)\. b\. Were the program objectives/key associated outcome targets revised during implementation of the series?  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) No c\. Pillars/Policy Areas The DPO supported three policy areas set out in the program document as follows: (i) Strengthening regulation and supervision of the banking sector and financial safety net: Key targeted outcomes included enhanced inspections of main banks and adoption of recovery plans by all banks, and compliance of eligible savings and credit associations (SCA) with requirements of the Albania Deposits Insurance Authority (ADIA)\. Prior actions achieved under this policy area were the following: (i) the Bank of Albania (BOA) Supervisory Council adopted a new comprehensive risk-based supervisory manual and a new supervisory operational policy to increase effectiveness of banking supervision, (ii) the BOA Supervisory Council issued a new instruction for banks to adopt recovery plans to demonstrate their ability to operate during periods of stress, and finally (iii) amendments to the Law on Deposit Insurance were accepted by the Cabinet of Ministers and submitted to Parliament, to better align the legislation and operations of Albania Deposits Insurance Authority (ADIA) with the Core Principles for Effective Deposit Insurance Systems\. (ii) Expediting the resolution of non-performing loans (NPLs): Outcomes expected under this policy area were a decrease in the ratio of NPLs/total loans, and a write off of a pre-set level of NPLs\. Five prior actions were completed before operation approval as follows: (i) the Cabinet of Ministers submitted draft amendments of tax law No\.8438 to Parliament to resolve key NPL tax ambiguities to enable banks to write-off NPLs in protracted litigation, (ii) the BOA Supervisory Council adopted amended regulation on “Credit Risk Administration” for the obligatory write-off of stale-dated NPLs following a fixed period of time classified in the “loss category, (iii) the BOA issued three sets of guidelines on: (a) loan restructuring for businesses; (b) loan restructuring for individuals; and (c) real estate appraisal, based on international good practice, (iv) the BOA Supervisory Council adopted a new regulation on “Risk Administration for Banks’ Large Exposures” to strengthen credit underwriting practices and NPL recovery and resolution for large borrowers, and finally (v) the Ministry of Justice and the Ministry of Finance issued new instructions to provide market-based incentives for private bailiffs’ compensation\. (iii) Strengthening regulation and supervision of non-bank financial institutions (NBFIs): Key expected outcomes were the adoption of a new organizational structure for the Albania Financial Sector Authority (AFSA) Board and market-based salary scale, and the replenishment of the Motor Third party Liability (MTPL) Compensation Fund\. Two prior actions were completed under this policy area before approval: (i) to ensure that AFSA achieves financial and operational independence and the Cabinet of Ministers accept and submit to Parliament a new Insurance bill, amendments to the AFSA Law, a Law on Salaries of Independent Institutions, and the Civil Servant Law; and (ii) the AFSA adopted market stabilization measures by issuing a regulation on minimum Motor Third Party Liability (MTPL) reserving standards, as well as a time-bound plan to replenish the funding of the Compensation Fund\. d\. Comments on Program Cost, Financing, and Dates Costs: Total costs amounted to a disbursed amount of US$96\.3 million\. Financing: The operation was financed by an IBRD loan of US$100\.0 million, out of which US$3\.7 million was not withdrawn and cancelled when the operation closed\. Borrower Contribution: There was no planned borrower contribution, and none took place\. Dates: The operation was approved on March 31, 2014 and closed on schedule on June 30, 2015 3\. Relevance of Objectives & Design a\. Relevance of Objectives At appraisal, the DPL objectives were highly relevant as they were in line with the pillars of the country's and Bank's strategies\. The objectives were consistent with the following pillars of the National Strategy for Development and Integration (NSDI) for 2014- 2020: (i) growth through fiscal stability and increased competitiveness; and (ii) sustainable growth through efficient use of resources\. While implementing the two pillars of the strategy, the Albanian financial sector authorities have undertaken significant reforms in recent years to address vulnerabilities in the financial sector\. The reforms aimed to encourage the development of the financial sector, complementing and building on the reforms supported by the proposed operation, in the areas of NPL management and resolution, enhancement of the deposit insurance framework, public debt management and government bond market development, regulatory framework for investment funds, and corporate financial reporting\. In particular, they were also in line with the Government’s National Strategy for Development and Investment that emphasizes the importance of the financial sector as a key objective in Pillar 1, towards helping businesses in gaining access to capital needed to support medium and long-term investment\. The DPO objectives were consistent with the first pillar of the Bank’s Country Partnership Strategy (CPS) for FY10-FY13: “supporting a  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) recovery in Albania's growth rates through improved competitiveness, by strengthening macroeconomic and public expenditure management, improving the business climate, addressing infrastructure bottlenecks, and deepening access to credit”\. Moreover, the objectives of this operation are also coherent with the objectives of the new Country Partnership Framework (2015-2019)\. The new CPF had three broad focus areas: (i) restoring macroeconomic balances, (ii) creating conditions for accelerated private sector growth, and (iii) strengthening public sector management and services\. The CPF considers macro-fiscal sustainability and financial sector stability to be the highest priority, having a fundamental impact on the country’s ability to move towards a sustainable growth model\. It lays a strong program of technical and financial support to implement the agreed medium-term macro-fiscal framework, including addressing financial sector vulnerabilities\. Overall, the PDO objectives were simple and clearly defined, and were still highly relevant when the operation closed\. Rating High b\. Relevance of Design The country's macroeconomic policy framework was considered adequate at approval\. The Government was committed to fiscal consolidation, to arrears clearance, and to putting public debt on a downward trajectory\. The 2014 budget included significant fiscal consolidation measures and fiscal policy was calibrated to accommodate a gradual recovery of real sector growth while steadily reducing public sector debt from 2014 onwards\. The planned pace of fiscal consolidation was also supported by structural policies in support of growth, such as reforms of the energy and financial sector as well as improvements in the business climate\. In parallel to the preparation of the Financial Sector Modernization DPL, a proposed First Public Finance and Growth DPL was the first in a series of two programmatic development policy loans that aim to minimize the macroeconomic vulnerabilities, by improving Albania's public finances and sustaining poverty-reducing growth\. Prior actions were carefully selected, were achievable, and set the stage for the continuation of the reform agenda\. For instance, toward fast resolution of NPLs, prior actions consisted of a series legal and regulatory measures aimed at enabling banks to write-off NPLs in protracted litigation; and, for those classified in the loss category, to strengthen NPL recovery and resolution for large borrowers, as well as to provide market-based incentives for private bailiffs' compensation\. The results framework was adequate, and was comprised of six outcome indicators, each of them having a baseline and a target\. The outcome indicators were specific and achievable, like the adoption of a new AFSA organizational structure, or the submission of recovery plans by banks\. There was a logical chain between the prior actions, the outputs and outcome indicators, and the DPL objectives\. As an illustration, in order to allow the MTPL to pay insurance claims, the DPL supported the revision of MTPL regulations as a prior action, and targeted the replenishment of the MTPL compensation fund\. Overall, the financial sector DPL was an adequate response to the country's fiscal imbalances\. It aimed to complement another parallel series of DPLs and strengthen the institutional and operational performance of the country's financial sector\. Rating Substantial 4\. Achievement of Objectives (Efficacy) PHREVISEDTBL Objective 1 Objective (i) To strengthen the financial sector regulatory and supervisory regime: Rationale Progress made toward outcome indicators is as delineated below: (i) When the operation closed, six banks (four being large systemic banks) were inspected, using the new risk-based supervision manual, against a target of 5 banks, including at least two systemic banks\. The new risk-based supervisory manual, which was approved by the BOA Supervisory Council in December 2014, fully replaced the old manual for the inspections carried out starting in January 2015\. (ii) The Supervision Department of the BOA prepared instruction material during 2014 that was sent to systemically important banks in  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) January 2015\. All seven systemic banks determined as systemically important submitted enhanced Recovery Plans (RPs) to BOA, in line with the new BOA instruction that formalizes the content to be included in banks’ recovery plans\. After receiving the RPs, the Supervision Department of BOA is to assess compatibility with the requirements laid out in the above-mentioned instruction\. (iii) The new deposit insurance Law brought ADIA closer in line with the core principles established by the International Association of Deposit Insurers (IADI), and specifically: (i) ensured ADIA’s budgetary independence and enforcement powers; (ii) increased its efficiency in deposit payout; (iii) improved reserve management requirements; (iv) ensured legal protection for ADIA staff; and (v) defined the level of coverage and premiums for Savings and Credit Associations (SCAs)\. By end-March 2015, ADIA completed the assessment of compliance of eligible SCAs with the legal and technical requirements of ADIA, in order to ensure that eligible SCAs enter the deposit insurance scheme by end-2015\. The assessment of compliance of SCAs eligible to enter the deposit insurance scheme was completed in September 2014, ahead of the deadline set for end-2015\. (iv)The new ADIA Law empowered ADIA’s board to approve the new budget without BOA’s ratification\. As result of the amended powers, ADIA’s board approved in January 2015 the new budget without BOA’s ratification\. Rating Substantial PHREVISEDTBL Objective 2 Objective (ii) To mitigate key vulnerabilities of the bank and non-bank financial sectors Rationale Outputs and outcomes achieved toward this sub-objective are delineated below: (i) By end-March 2015, the ratio of NPLs/total loans was to decline to 20 percent or less, with the write-off of at least ALL 20 billion of NPLs\. After peaking at 24\.9% in September 2014, the NPL ratio fell to 20\.6 % as of end-September 2015, and Lek 20\.3billion of NPLs were written off by the end of September 2015, six months after the targeted date due to the delay in the enforcement\. (ii) AFSA’s Board was to adopt its own organizational structure and market-based salary scale independently from Parliament, allowing it to regulate and supervise NBFIs more effectively\. The Parliament approved all the necessary legal amendments put forward by the Government that would ensure the full financial and operational independence of AFSA\. The new AFSA board, based on the powers granted through amendments, has currently full power to approve AFSA’s organizational structure and salary scale\. Indeed, AFSA approved its own structure, including a new salary scale\. (iii) By end March-2015, the MTPL Compensation Fund was to be replenished in the amount of ALL 430 Million to enable payment of pending insurance claims\. Following the AFSA’s Board decision (February 2014), the insurance companies were obliged to contribute ALL 1,348 million (around EUR 10 million) into the compensation fund to pay insurance claims pending at the Motor Bureau\. The MTPL Compensation Fund was replenished as expected, with an achievement ratio of 105%\. During 2014, a total of ALL 451\.5 million was paid into the Compensation Fund, or more than the agreed amount for the year\. Rating Substantial 5\. Outcome Throughout the period of DPO implementation, economic recovery continued, with GDP growth reaching about 2\.8 percent in 2015\. Inflation stayed low, around 2 percent, in part reflecting globally low price pressures and output still below potential\. Fiscal consolidation continued in 2015 with the budget aiming for a primary surplus of 0\.3 percent of GDP, designed to allow sufficient room for growth-supporting capital investment while enabling public debt to gradually decline over time (IMF, November 2015)\. The country would need to continue  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) improving tax compliance and broadening the tax base to sustain fiscal consolidation, and ensure medium-term debt sustainability, while allowing fiscal space for productive spending\. The relevance of objective is high and the relevance of design is substantial\. The DPO objectives were derived from the country's priorities, and were consistent with the Bank's strategic agenda in Albania\. The results framework was realistic and comprised reforms, outputs and outcomes that were achievable, and which set the stage for a better-performing financial sector\. The achievement of the first objective is rated substantial\. Toward strengthening the financial sector regulatory and supervisory regime, key achievements were (i) enhanced inspection and recovery plans of the large systemic banks, (ii) completion of assessment of compliance of eligible SCAs to enter the deposit insurance scheme ahead of schedule, and finally (iii) ADIA’s board approved on time the budget without BOA’s ratification, thereby gaining stronger independence to exert its supervision mandate\. The achievement of the second objective is rated substantial\. Progress toward mitigating key vulnerabilities of the bank and non-bank financial sectors included: (i) the reduction of the NPLs ratio, through the write-off of stalled NPLs, (ii) the approval of AFSA’s new organizational structure and salary scale, thus upgrading its ability to oversee independently the financial sector, and finally (iii) the replenishment of the MTPL Compensation Fund, enabling the fund to pay pending insurance claims\. Despite some implication of other donors in achieving the above reforms, the contribution of the Bank's operation is deemed to have been critical in getting the results\. a\. Outcome Rating Satisfactory 6\. Rationale for Risk to Development Outcome Rating The first series of outcomes supported the surge in inspecting and strengthening large and systemic banks, the promotion of SCAs to enter the deposit insurance scheme, and the enhancement of ADIA's independence\. The second series of outcomes comprised the reduction of the NPLs ratio through write-offs and the approval of AFSA’s new organizational structure and salary scale (thus upgrading its ability to oversee independently the financial sector), and the replenishment of the MTPL Compensation Fund (thus enabling the fund to pay pending insurance claims)\. These achievements occurred because of Government's commitment to reforms, and adequate local technical capacity\. During implementation, there was sustained coordination of the three branches of the Government while initiating, implementing and completing challenging reforms supported by the DPO\. Moreover, Albania had a three-year Extended Financial Facility (EFF) program with IMF, as well as support by the World Bank through existing operations that helped Albania to meet its financing needs, while helping to strengthen its fiscal and debt sustainability and lower public financing risks\. However, the Greek debt crisis remains a major threat to the Albanian economy and its financial sector\. Greek-owned banks may come under further pressure, even when these banks are well capitalized and liquid\. The approval of Albania’s EU candidacy status in mid-2014 reconfirms the strategic orientation and focus of the country, and serves as a policy anchor with regard to key economic, legal and financial reforms\. Moreover, a new financial sector Development Policy Operation is currently under preparation, and aims to address vulnerabilities in the financial sector, including further reduction of NPLs and the restoration of credit growth across the financial sector, as well as the systemic risks posed by the investment funds sector\. While the Albanian authorities cannot directly influence developments in Greece and the Eurozone, they can proactively further prepare to mitigate risks and effectively manage potential negative effects to ensure non-reversal of reforms\. Overall, the risk to development outcome is rated substantial, on account of the eventual external risks from Greece and the Euro-zone\. a\. Risk to Development Outcome Rating Substantial 7\. Assessment of Bank Performance a\. Quality-at-Entry The DPO design drew from the findings and recommendations of the Financial Sector Assessment Program (FSAP) report completed in 2013\. It also benefited from new guidance disseminated from the EU Directives, including from the new focus on macro-prudential oversight, global liquidity standards and identification of key attributes of a bank resolution regime, and capital requirements\. The operation was designed in parallel with two large Bank operations: a Public Finance and Growth DPL, and a Power Recovery project, which all had direct and indirect impact on the public finances of the country\. The World Bank team also coordinated closely with the IMF on financial sector reforms and built on the Bank-Fund collaboration during the  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) delivery of TA regarding investment funds\. The Bank team consulted with other key donors supporting the financial sector, including the European Commission and USAID\. Under the European Commission funding, the European Central Bank (ECB) provided TA to the BOA to strengthen banking sector supervision, while the USAID provided technical assistance to BOA, ADIA, and the AFSA\. Finally, the authorities consulted with the banking industry on issues related to NPL resolution, reforms in insurance regulation, supervision and strengthened powers and tools of the AFSA\. At appraisal, the Bank team conducted a careful analysis of the local and external risks that could impact negatively the outcomes expected from the operation\. Key internal risks identified in the PAD (p\.31-32) included (i) insufficient political consensus to pass the legal and regulatory changes featured in the prior actions, (ii) a weak economy and further deterioration in the domestic fiscal outlook, (iii) a crunch in the context of deleveraging pressures from parent banks on the 90 percent foreign-owned banking sector, and (iv) further deterioration in the portfolio asset quality\. External risks could arise from (i) a slower than projected pace of recovery in the Euro area, and (ii) a possible exit from unconventional monetary policy in the United States\. Substantive mitigating measures were identified in each case\. For instance, to create a national consensus toward reforming the financial sector, there were broad consultations with the relevant ministries and regulators, and an inter-ministerial committee was formed to coordinate implementation\. Quality-at-Entry Rating Satisfactory b\. Quality of supervision The Bank worked effectively with the Ministry of Finance as the coordinator of activities on the Borrower’s side, and maintained very close cooperation with the Ministry of Justice, the BOA, ADIA and AFSA, which were key counterparts in the financial sector reform program\. The Bank assisted the authorities through a number of challenging policy reforms with persistence and by delivering high-level support\. Moreover, the task team monitored the timely adoption and effective implementation of the agreed policy actions\. They also validated the Borrower’s monitoring and evaluation findings on the progress and results of policy implementation\. Further, the task team regularly consulted and coordinated with the IMF in carrying out its supervision work\. During DPL implementation, the Bank team contributed in the mitigation of some of the multiple risks identified at appraisal\. For instance, to address the risk of large external current account deficit and the funding pressures that could lead to a depreciation of the Lek, which would threaten the solvency of banks due to the presence of a large proportion of un-hedged borrowers, the FIRST Initiative technical assistance provided support to public debt management and the BOA’s strengthening of its systemic liquidity and market operation mechanisms, and TA was provided to AFSA regarding insurance, private pensions, and investment funds\. Quality of Supervision Rating Satisfactory Overall Bank Performance Rating Satisfactory 8\. Assessment of Borrower Performance a\. Government Performance The Government showed strong commitment to the process of consultation with stakeholders on important legislative amendments and regulatory reforms\. In implementing agreed measures, the professionalism, dedication of the Government proved to be the determining factor\. The Government showed the path to establishing institutional frameworks to strengthen regulation and supervision of the banking sector and its safety net; expedite resolution of NPLs; and strengthen regulation and supervision of NBFIs\. The viability of the Financial Sector Modernization DPL program could have been undermined if there had been insufficient political consensus to pass in Parliament the five underlying legislative pieces featured in the prior actions\. That risk was partially mitigated by broad and inclusive consultations with the relevant Ministries and regulators\. Moreover, an ad hoc inter-Ministerial Committee was formed to coordinate the implementation of prior actions, and the Governement set up a Financial Stability Advisory Group\. Government Performance Rating Satisfactory  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) b\. Implementing Agency Performance Key counterparts in the implementation of the financial sector reform agenda were the Ministry of Justice, the BOA, the AFSA, and the ADIA\. They all worked under the supervision of the Ministry of Finance, and their cooperation was very strong, with often difficult discussions as regards to specific reform measures\. The authorities completed all of the financial sector DPL prior actions, readily shared information with the Bank team, and continued to implement reforms in a very difficult regional and domestic environment\. Implementing Agency Performance Rating Satisfactory Overall Borrower Performance Rating Satisfactory 9\. M&E Design, Implementation, & Utilization a\. M&E Design There were seven indicators to monitor the outcomes, for which targets were established for each indicator to capture the results achieved\. The baselines and outcome indicators were objectively formed, demonstrating both the regulator’s and financial sector’s performance\. Having said that, DPL Pillar II was composed of five prior actions and one results indicator - the reduction of NPLs\. The headline NPL figure represents a reliable proxy to improve the authorizing environment necessary to support the reduction of NPLs\. Yet, the reduction of NPLs is per se outside the direct control of the authorities and could be undermined by other factors, including an economic slowdown and weak credit growth\. It is thus welcomed that the team added an indicator on the write-off claims in order to gauge the direct impact of the reforms supported with this operation\. b\. M&E Implementation The M&E and implementation arrangements were continuous throughout the preparation phase and contributed to the implementation of key reforms and the achievement of development objectives\. c\. M&E Utilization The systematic efforts by the authorities to define a mix of quantitative and qualitative indicators, which were intended to facilitate the monitoring of the operation, supported measures to improve financial sector performance and to reform/ enhance the regulation and supervision of the bank and non-bank financial sectors\. M&E Quality Rating Substantial 10\. Other Issues a\. Environmental and Social Effects The completed operation did not have significant effects on environment, natural resources and forestry\. The focus of policy measures was on legal, regulatory, and supervisory reforms to strengthen and further develop the financial sector, with no impact on the environment\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) b\. Fiduciary Compliance The ICR did not raise any fiduciary issues related to the disbursement of the operation's resources\. Beyond asking the Government to ensure that upon deposit of an amount of the credit into the foreign exchange account, an equivalent amount is accounted for the Government's budget management system and reflected in the budget, no additional fiduciary arrangements were required\. c\. Unintended impacts (Positive or Negative) NA d\. Other --- 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Satisfactory Satisfactory --- Risk to Development Outcome Substantial Substantial --- Bank Performance Satisfactory Satisfactory --- Borrower Performance Satisfactory Satisfactory --- Quality of ICR Substantial --- Note When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 12\. Lessons IEG agrees with the following three lessons identified by the ICR and rephrased below: (i) It is important for the Bank to maintain a continuous engagement with its clients even when the lending portfolio is small or inexistent\. As the Bank continued to support knowledge sharing activities (the 2013 FSAP, technical assistance with the bank of Albania), it was able to react quickly to the pressing needs in the financial sector during the preparation phase of this operation, and the team succeeded to build sufficient ownership of the many policy and regulatory changes\. Continuous engagement put the Bank in a position to adapt and respond raipidly to the client's needs and economic realities\. (ii) Having key stakeholders on board facilitates the DPO implementation\. This points to the need to carefully identify and recognize in advance the ability of groups of stakeholders to lobby with authorities (government and parliament) and factor their interests in the scope of the reform agenda\. This allows the authorities and the WB to discuss freely the issues affecting the interest groups and, if no common understanding is reached with them, raise adequate safeguards and understanding with the decision makers to push the reform agenda forward\. Alignment of key policy makers and a high level commitment to the reform agenda by all stakeholders are key to the completion of relatively ambitious prior actions, and should be considered carefully at the design phase\. (iii) Regular coordination with other donors and partners positively impacts the expected outcomes\. The Bank's consultation with other international agencies (IMF, USAID, and EU) proved essential to the performance of the operation, given the extensive technical assistance that needed to be aligned with the country’s and sector’s priorities\. In particular, this operation benefited extensively from IMF's support to knowledge sharing activities and the three-year EFF program\. This program has ensured the adequacy of the macroeconomic framework by helping Albania to meet its external financing needs, while providing the necessary support to strengthen fiscal and debt sustainability\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review AL Financial Sector DPL(P146280) 13\. Assessment Recommended? No 14\. Comments on Quality of ICR The ICR had strengths and weaknesses\. On the positive side, the ICR was comprehensive and concise and was results-oriented\. It focused on analyzing the efficacy of prior actions and the achievements toward outputs and outcomes, on identifying how risks were mitigated, and how a follow-on operation would build on achieved progress\. On the weaker side, the analysis of the above could have been strengthened further, especially as regards to the link between achieved outcomes and the evolution of the fiscal stance of the country, as this was a budget support operation\. Furthermore, evidence and information to underpin performance of the Bank, the Borrower, and the M&E system were insufficient\. Lessons learned from this operation were adequate and based on evidence and analysis of the operation's experience, but could have been packaged better\. a\. Quality of ICR Rating Substantial

REVIEW

P062991

 ICRR 11399 Report Number : ICRR11399 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 02/03/2003 PROJ ID : P062991 Appraisal Actual Project Name : AR Special SAL (SSAL) Project Costs 8,300 40,000 US$M ) (US$M) Country : Argentina Loan/ US$M ) 2,525 Loan /Credit (US$M) 2,275 Sector (s): Board: EP - Central Cofinancing 5,775 37,725 government administration US$M ) (US$M) (28%), Banking (28%), General finance sector (17%), Compulsory pension and unemployment insurance (15%), Other social services (12%) L/C Number : L4405; LB115 Board Approval 99 FY ) (FY) Partners involved : IMF, IDB Closing Date 12/31/1999 10/31/2000 Prepared by : Reviewed by : Group Manager : Group : S\. Ramachandran Alice C\. Galenson Kyle Peters OEDCR 2\. Project Objectives and Components a\. Objectives The stated objective of the Special Structural Adjustment Loan (SSAL) was to reduce Argentina's "vulnerability to external financial shocks " while "simultaneously increasing (its) capacity for sustainable and equitable growth \." The loan was consistent with the 1997 CAS (and the February and November 1998 updates)\. Specifically, the loan was to: (A) facilitate the re-entry of Argentina into international capital markets without depleting foreign exchange reserves; (B) protect vulnerable groups during the period of high uncertainty; (C) help the banking system withstand liquidity shocks; and (D) continue the long term development of savings and capital markets with better regulation, tax and spending policies\. The larger objective of the SSAL, along with other loans from the Bank, Fund and the Inter -American Development Bank, was to help Argentina maintain its currency peg during what was perceived to be a temporary disruption in international capital flows aggravated by the August 1998 Russia crisis (but before the Brazilian devaluation in early 1999)\. b\. Components The SSAL supported reforms in three broad areas : (A) intergovernmental fiscal relations under which intergovernmental transfers would be simplified and better allocated; (B) financial sector under which (1) banking supervision would be improved and public sector involvement would be reduced; (2) SME access to credit would be improved through better leasing laws; (3) capital markets would be deepened by introducing private pensions and by liberalizing insurance; and (C) human development under which (1) poverty programs would be better managed and targeted, (2) the quality and efficiency of public education would be improved, and (3) the health system efficiency would be improved \. The loans were to give the Government time to make its fiscal balance consistent with its currency peg \. The SSAL's tranche release conditions supported structural reforms, and while some were central to averting the crisis (e\.g\. fiscal relations with provinces) others had longer term benefits (e\.g\. measures to make banking, education and health more efficient)\. Some measures like labor reforms would have reduced unemployment and thereby pressures on government spending\. The measures were based on the Bank's considerable ESW in these sectors \. c\. Comments on Project Cost, Financing and Dates The SSAL of $2,525 m, along with a $505 m Special Repurchase Facility Support Loan (Repo loan described in the same President's Report) approved in November 1998, were the Bank's portion of a $8\.3 b package of international support that included the Fund's Extended Fund Facility of $ 2\.8 b (in early 1998) and $2\.5 b from the IDB (which cofinanced the Bank's SSAL and repo loans with $ 2,000 m and $500 m respectively)\. The SSAL differed from standard Bank terms : the loan was to be repaid in five years (including 3 years grace) with an interest rate of LIBOR plus 400 basis points\. The loan was also processed quickly and approved speedily \. Disbursement was in three tranches (with the first two being $1,000 m each), but when Argentina's financing needs rose after the SSAL was approved, there was a delay as a new package was assembled \. The Fund had increased its support from $2\.8 b to $7\.4 b (Standby Arrangement March 2000, after the Brazilian crisis) and $250 m of the SSAL's second tranche was cancelled and allocated to a (separate) $1\.1 b policy based guarantee in October 1999\. The SSAL's last tranche was released by September 2000 -- when the stabilization program appeared to be on track \. Argentina's program with the Fund went off track in November 2000\. The Fund further increased its support to $ 15\.5 b (January 2001); but even these proved insufficient to maintain the currency peg which was abandoned in late 2001\. 3\. Achievement of Relevant Objectives: The agreed measures were passed despite difficulties \. Specifically (A) Intergovernmental fiscal relations : the tax pooling arrangement was simplified, and poorer provincial governments were to receive larger transfers \. A provincial VAT was introduced, and earmarked taxes were consolidated to make them more transparent \. (B) Financial sector: Fiscal requirements prevented full reforms of the financial instruments tax, and Congress did not pass the law giving regulators full immunity; but supervision and regulation are now better coordinated \. The mortgage bank was privatized and laws on leasing and fund management were approved \. (C) Human development: poverty and health are measured better now, and government programs are better targeted\. Labor laws that reduced taxes and eased restrictions on new workers were passed (when these issues were decoupled from collective bargaining reforms )\. More comprehensive proposals reducing severance payments and creating individual worker accounts were substituted for the original conditions (that were waived)\. Improvements in health insurance included increasing the number of providers and making their procurement transparent\. Three federal nutrition programs were consolidated, cutting duplication, and new eligibility criteria were prepared for beneficiaries\. Preparations began for reforms in higher education (merit selection, greater cost recovery etc\.), although standardized tests may not have much backing (provincial responsibility)\. 4\. Significant Outcomes/Impacts: The international package of support (of which the SSAL was a significant part ) failed to maintain Argentina's pegged exchange rate ("Convertibility Plan")\. Outputs by SSAL's components were largely achieved, although the outcomes of the structural reforms were swamped by the subsequent economic collapse (in 2001)\. For example, the Government's decision to freeze banking deposits and convert them into pesos at a different exchange rate than loans has bankrupted the banks and undermined the improvements in banking supervision that the SSAL supported \. Some of the improvements that the SSAL supported could bear fruit when conditions improve; hence the outcome is rated "unsatisfactory" (rather than "highly unsatisfactory")\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The peso's depreciation disrupted the economy because many contracts were dollar denominated \. In particular, the Government required bank loans and deposits to be converted into pesos at differing rates thereby bankrupting banks\. The political and economic turmoil undid many of the SSAL's achievements (e\.g\. in banking and provincial fiscal relations), and the economy is expected to shrink by 15 percent in 2002\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory (See section 4) Institutional Dev \.: Modest Modest Sustainability : Unlikely Unlikely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Unsatisfactory The Government did not maintain the necessary fiscal measures and was forced to abandon the peg in 2001, leading to banking controls, street protests, a change in government\. GDP is expected to decline by 15% in 2002\. Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: (A) Detailed ESW done during years of little lending allowed the Bank to lend quickly to support structural reforms that were identified earlier\. (B) It is appropriate for crisis loans to support those structural reforms that directly and immediately help in dealing with the crisis (e\.g\. improving tax collections or inter -governmental fiscal transfers ) or social programs protecting the economically vulnerable\. It is less clear whether other needed structural reforms (e\.g\. improving the insurance industry) should be included (see section 8 below)\. The SSAL supported reforms of both types and the ICR mentions the conflicts between disbursing for liquidity support and the time -consuming process of getting the reforms underway\. (B) A short term crisis calls for a short term loan, and the SSAL is more appropriate than conventional Bank instruments\. It is less clear, however, if the Bank should be a "residual lender" in Fund supported financial rescue packages\. The loan amounts are unrelated to the benefits of structural reforms, and these benefits do not follow if stabilization fails\. 8\. Assessment Recommended? Yes No Why? The large risks were well understood when the SSAL was prepared and approved \. The sequence of events that subsequently unfolded leading to the economic collapse in 2001 are widely described both in the attachment to the ICR and in other publications \. A crisis is often seen as an opportunity for structural reforms because the political logjam is broken \. On the other hand, (A) they could distract key people in government from focussing on more urgent issues and (B) any benefits may be swamped by the chaos of failed stabilization \. It would be useful to know if the Bank should seek reforms in areas not directly related to the crisis at hand and if so, which type of reforms or sectors are more likely to endure \. A cluster audit of similar loans to different countries conducted in a few years may help determine this \. 9\. Comments on Quality of ICR: The ICR rightly emphasized the broader context and background of the loan \. The Retrospective Review (attached as an Annex to the ICR) was particularly useful\.

REVIEW

P000936

Document of The World Bank Report No: 27064 IMPLEMENTATION COMPLETION REPORT (IDA-25680) ON A CREDIT IN THE AMOUNT OF SDR 27\.7 MILLION (US$ 38\.5 MILLION equivalent) TO THE REPUBLIC OF GHANA FOR THE LOCAL GOVERNMENT DEVELOPMENT PROJECT October 28, 2003 Water & Urban II Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective September 9, 2003) Currency Unit = Cedis 8,690 = US$ 1\.00 US$ 1\.00 = 8,690 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS ADRP Accra District Rehabilitation Project APL Adaptable Program Lending CAGD Controller and Accountant General's Department DA District Assembly DACF District Assembly Common Fund DCE District Chief Executive ECOWAS Economic Community of West African States EOP End of Project GOG Government of Ghana GPRTU Ghana Private Road Transport Union HIPC Highly Indepted Poor Countries ICR Implementation Completion Report IDA International Development Association KfW Kreditanstalt fur Wiederaufbau KVIP Kumasi Ventilated Improved Pit LGDP Local Government Development Project LGPSU Local Government Project Support Unit LI Legislative Instrument LVB Land Valuation Board MA Municipal Assembly MFEP Ministry of Finance and Economic Planning MLGRD Ministry of Local Government and Rural Development MoU Memorandum of Understanding MWH Ministry of Works and Housing NDPC National Development Planning Commission NGO Non-Governmental Organizations O&M Operation and Maintenance PNDC Provisional National Defense Council PSCS Personal Services Contract Staff PWP Priority Works Project QAG Quality Assurance Group RCC Regional Coordinating Council RIAP Revenue Improvement Action Plan SAR Staff Appraisal Report SD Survey Department TCPD Town and Country Planning Department TSC Technical Services Center UESP Urban Environmental Sanitation Project Vice President: Callisto Madavo Country Director: Mats Karlsson Sector Manager: Inger Andersen Task Team Leader: Charles K\. Boakye  GHANA LOCAL GOVERNMENT DEVELOPMENT PROJECT CONTENTS Page No\. 1\. Project Data 1 2\. Principal Performance Ratings 1 3\. Assessment of Development Objective and Design, and of Quality at Entry 2 4\. Achievement of Objective and Outputs 4 5\. Major Factors Affecting Implementation and Outcome 12 6\. Sustainability 14 7\. Bank and Borrower Performance 15 8\. Lessons Learned 17 9\. Partner Comments 19 10\. Additional Information 23 Annex 1\. Key Performance Indicators/Log Frame Matrix 24 Annex 2\. Project Costs and Financing 28 Annex 3\. Economic Costs and Benefits 30 Annex 4\. Bank Inputs 34 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 36 Annex 6\. Ratings of Bank and Borrower Performance 37 Annex 7\. List of Supporting Documents 38  Project ID: P000936 Project Name: LOCAL GOVT DEV\. Team Leader: Charles K\. Boakye TL Unit: AFTU2 ICR Type: Core ICR Report Date: October 29, 2003 1\. Project Data Name: LOCAL GOVT DEV\. L/C/TF Number: IDA-25680 Country/Department: GHANA Region: Africa Regional Office Sector/subsector: General water/sanitation/flood protection sector (38%); General transportation sector (38%); Sub-national government administration (12%); Central government administration (12%) Theme: Access to urban services for the poor (P); Municipal finance (P); Municipal governance and institution building (P); Decentralization (P); Pollution management and environmental health (S) KEY DATES Original Revised/Actual PCD: 12/11/1989 Effective: 12/30/1994 12/30/1994 Appraisal: 06/10/1993 MTR: 02/01/1997 06/23/1997 Approval: 02/17/1994 Closing: 12/31/2001 03/31/2003 Borrower/Implementing Agency: GOVERNMENT OF GHANA/Local Government Project Support Unit Other Partners: Kreditanstalt fur Wiederaufbau (KfW) STAFF Current At Appraisal Vice President: Callisto Madavo Edward V\. K\. Jaycox Country Director: Mats Karlsson Edwin Lim Sector Manager: Inger Andersen James O\. Wright Team Leader at ICR: Charles K\. Boakye Jagdish K\. Bahal ICR Primary Author: Charles K\. Boakye and Gerhard Tschannerl; assisted by Ephrem Asebe 2\. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome:S Sustainability:L Institutional Development Impact:M Bank Performance:S Borrower Performance:S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No  3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: The objectives of the project were to: a) Improve basic infrastructure and urban services in secondary cities, especially services benefiting lower-income people\. b) Promote the sustainability and expansion of urban services by strengthening the District Assemblies' (DAs) financial, technical and managerial capacities\. c) Support the Government's decentralization program to promote accountability and efficiency in the provision of infrastructure and services\. The project objectives were in accordance with the Government's priorities of infrastructure provision to urban areas with decentralized management of urban services\. The project objectives were in line with IDA's Country Assistance Strategy (CAS) for Ghana that supported decentralized development and local ownership of the development process\. The Project was preceded by Sector Study: Ghana, Strengthening Local initiative and Building Local Capacity, (Report No\. 11369)-GH, Washington, D\.C\.: February 1993\. It addressed the process and scope of devolution of functions, and the local/central fiscal relationships, including revenue sharing, and reviewed the capacity of DAs to plan, finance, manage and maintain local infrastructure and service delivery\. A previous urban study - Ghana, Reviving the Urban Sector (July 1988) - had also proposed a comprehensive agenda on decentralization, urban management and institutional development, and key elements were incorporated in the preceding Urban II project, which also remained relevant for the follow-up Local Government Development Project (LGDP)\. While Part (a) of the objective was clear, Parts (b) and (c) contained cause and effect statements, which made it difficult to choose a consistent set of Performance Indicators (PI) for impact (see Annex 1)\. Nevertheless, the intention of the objective was clear\. The PIs, developed during the Mid-Term review of July 1997 offered the opportunity for DAs to review their understanding of project objectives and components\. 3\.2 Revised Objective: The project objectives were not changed\. 3\.3 Original Components: a) Rehabilitation and Upgrading of Infrastructure and Urban Services Component (US$35\.69 million)\. This included the rehabilitation and upgrading of three types of basic infrastructure and urban services: i) Roads and Storm Water Drainage consisted of the rehabilitation of 73\.9 km of existing key town center roads and links with the trunk road network; associated storm water drains; and basic traffic management measures, including intersection improvements and traffic signs\. ii) Markets and Lorry Parks involved rehabilitation and upgrading of existing markets and lorry parks, including the provision of paving, drainage, water standpipes, sanitation and washing facilities, security lighting, and structures\. iii) Waste Management included a) Solid Waste, covering the establishment of environmentally engineered landfill sites in each of the 11 towns, fencing of refuse collection stations, and provision of containers, tractors, and other equipment; and b) Liquid Waste, involving the establishment of liquid waste disposal sites, renovation of public toilets, construction of new pubic toilets, extension of water and lighting to public toilets, provision of cesspit emptiers, construction of underground holding tanks, and funding of matching grants to households for latrine construction\. b) Institutional Strengthening Component (US$7\.74 million): i) Improving the financial, managerial, and technical capacity of District Assemblies to perform functions consistent with Ghana's overall economic reform program; and ii) Strengthening the capacity of selected central government agencies to support the District - 2 -  Assemblies\. The central Government agencies involved in this component included the Land Valuation Board (LVB) for the revaluation of properties; Survey Department (SD) for the preparation of maps; Town and Country Planning Department (TCPD) for the preparation of simple land-use plans; and Technical Services Center (TSC) for project management and coordination for Ministry of Local Government and Rural Development (MLGRD) and the DAs\. c) Operation and Maintenance Component (US$5\.21 million) included establishing and maintaining a fund for operation and maintenance of the facilities provided under the project, and recurrent cost of DA's key professional staff\. d) Contingencies (physical and price) (US$6\.88 million) 3\.4 Revised Components: The project objectives were not changed\. 3\.5 Quality at Entry: The quality at entry is rated satisfactory\. The project was designed in the context of the Government of Ghana's evolving decentralization policy, the basic premise of which was that the DAs would eventually have discretionary responsibility for policy formulation, planning, implementation and maintenance\. It focused on improving the living conditions of the population of 11 secondary towns, namely Bawku, Bolgatanga, Wa, Techiman, Sunyani, Ho, Koforidua, Agona-Swedru, Keta/Anloga, Cape Coast and Elmina\. Six of the towns are regional capitals while the remaining five are district capitals\. The lessons learned from previous projects were taken into account during project preparation\. The project evolved after the success of the IDA-financed Accra District Rehabilitation Project (ADRP) and the Urban II projects first in Accra and Tema, then in the five Metropolitan/Municipal cities\. The Government felt the need to replicate the lessons for the development of 11 District headquarters that were next in the order of size and economic importance\. The project objectives were consistent with Government's priority for the sector\. The Government's ambitious decentralization program started in 1988 with the passage of the Local Government Law (PNDCL 207) that gave authority for the establishment of 45 new local Governments bringing the total to 110\. This was followed by the 1992 constitution of the Republic of Ghana after 11 years of military rule, and Chapter 20 of the new constitution was devoted entirely to "Decentralization and Local Government\." The Local Government Law assigned to the DAs the responsibility for performing the functions previously carried out at the local level by the 22 central government departments, making the DAs directly responsible for health, construction, rehabilitation, maintenance of buildings, roads and drains, markets and lorry parks and community development\. The project therefore focused on building capacity in the DAs, while other services were managed by the central government\. The project was consistent with the results of sector work and the CAS objectives\. Two World Bank sector studies that were carried out about the same time stressed the need for the Bank to support the sector to deepen the decentralization program (see Section 3\.1)\. The project had local government ownership from the start, but limited community participation\. The subcomponents selected for financing in each district were prepared with the involvement of the Assembly members, and all the draft designs were presented to the General Assembly in the District before the designs were finalized\. The consultations took place with the local political establishment, although not directly with the intended beneficiaries\. The potential environmental and social impact was adequately studied\. Most of the works were small and had a low potential for negative environmental impact, with the exception of the final waste disposal sites, which were located away from settlements\. Environment Impact Assessments (EIAs) were carried - 3 -  out on all the sites\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The overall outcome of the project is rated satisfactory, and the impact on poverty reduction is modest\. More than 100,000 low-income people who did not have access to proper sanitation benefited from household toilets in their homes\. Traders and other commuters also benefited immensely from public toilets and transport terminals that were renovated or improved under the project\. A number of skilled and unskilled laborers got temporary employment from over 60 civil works contracts that were awarded\. While a gender objective was not explicitly stated, many of the infrastructure works benefit women more than men, including, markets, lorry parks (used largely for moving goods to and from the market), and urban roads and drains (facilitating trading and making cleaning easier)\. They also benefit from the improved working environment at lorry parks and health conditions in the markets\. A\. The improvement in basic infrastructure and urban services in the project towns is satisfactory\. a) Most DAs have met the target of no additional refuse accumulating outside designated areas and at least 90 percent of the refuse collection equipment in operating condition (see Annex 1)\. Most of the refuse that has accumulated in parts of the cities over several years has been removed and unauthorized dumping of fresh refuse in the town has ceased, which will improve the health status of the people\. Some accumulated refuse remains in the towns' and it is noteworthy that some DAs are gradually removing them on their own\. b) There is greater access to sanitation and better maintenance of latrines through the use of more cesspit emptiers, which in some cases have served other towns in the region in addition to project towns\. c) The construction of urban roads and drains has made an impact\. Road construction has eased traffic congestion (aided by the introduction of one-way systems), improved accessibility to businesses and residences, improved road safety through the introduction of traffic signals, and reduced dust\. d) In most DAs drainage has eliminated flooding on improved or rehabilitated roads adjacent to, as well as in markets and transport terminals (Annex 1)\. In three towns drainage has helped to reclaim seriously eroded land\. e) The improvement of 14 markets combined with transport terminals was successful after long delays\. To date, some markets have not yet been put to use\. Only three towns erected all the market sheds and two erected a part of them with their own funds as originally planned\. f) All the lorry parks are in operation, managed by GPRTU\. Some have already encountered major maintenance problems\. In Bolgatanga, as a result of substandard work performed by the contractor, the servicing and washing of vehicles, as well as general use of unauthorized heavy duty articulated trucks on the lorry park, the condition of the pavement in the Bolgatanga lorry park deteriorated rapidly\. Subsequently, it was rehabilitated again through the project just before the credit came to a close\. B\. The outcome of promoting the sustainability and expansion of urban services by strengthening the DAs' financial, technical and managerial capacity is satisfactory\. The objective was to implement and sustain project benefits through effective integration of the staff of previously centralized departments assigned to the DA level\. The project was to support this objective by assisting the 11 DAs to reduce the number of district-level departments and establish an effective internal structure within departments\. The project elements focused on integrating staff of the centralized departments into District administration, adopting efficiently-oriented approaches, where feasible to District Assembly employment (greater use of fixed term or contract employment), and demonstrating effective commitment to adequate recurrent financing of O&M requirements of infrastructure investments financed under the project, including the involvement of the private sector\. The project demonstrated that strong institutional capacity in the fields of planning, management, finance and operational and maintenance are essential to providing adequate services, and assuring the - 4 -  sustainability of services\. The Zonal Officers and District Contract Staff (see Section 4\.2 B) helped to strengthen the District Works and Finance Departments\. The personnel assisted in the preparation of annual implementation action plans for all the DAs, assisted DAs in identifying on-the-job training needs for staff of the works department, and created awareness in the reorganization of the districts in conformity with the Local Government Law Act 462\. They did not only work on the project, but also several other projects, including education, health and agriculture projects implemented by the DAs and financed by other donors and GoG\. The staff also privatized the operation of the public toilets that improved the revenue generated from this source by about 700 percent in some DAs\. In addition to the revenues generated, the DAs further saved the costs involved in the running of the toilets, such as disinfectants and the wages of the attendants and conservancy laborers\. However, the additional Legislative Instruments (LI) under Act 462, which were expected to be implemented to enable the decentralized departments work together, were not put in place by the Government\. Of the 22 decentralized departments of the district, only the Department of Agriculture was integrated into the DA as envisaged under Local Government Act 462\. All other constituent departments acted independently of each other as in PNDC Law 207\. As the working arrangement for the decentralized departments was not in place, the Zonal Officers could not achieve the required results\. A new Local Government Act was enacted in August 2003 that is designed to place the DA staff under a separate working arrangement from the Civil Service\. While the contract staff were effective in producing short-term outputs of the project, they had only a limited long-term impact on the capacity of the DAs to carry out the tasks (see Section 4\.2 B)\. Performance of DAs Revenue Collection All 11 DAs exceeded the target of increasing the internal revenue collection by at least 10 percent in real terms (adjusted for inflation) in the period of 1997-2002\. However only 7 DAs met the target of increasing market revenue collection by at least 30 percent in real terms (see PIs in Annex 1)\. The reason for the shortfall on market revenues was that the rehabilitation or upgrading of markets was completed only towards the end of the project and could therefore not have had a significant impact on the market rates collected\. The combined internal revenues for all DAs increased by 169 percent (Annex 1, Table 1)\. The collection of property rates for all DAs combined increased by 887 percent over the period (Annex 1, Table 2) and the collection of market revenues by 107 percent (Annex 1, Table 3)\. As the property re-valuation was completed around 1999, an increase in the property rates collection could be expected in the period of 2000 to 2002, which was indeed the case: the average annual collection for all DAs combined increased in real terms by 68 percent from the period of 1997-1999 to the period of 2000-2002 (Annex 1, Table 2)\. In 2003, a pilot computerized budgeting and accounting system was established in four selected DAs that had the capacity to ensure proper management, and there are indications that the system will improve DAs financial management system\. There was considerable variability in the revenue collection performance of the different DAs, which was particularly high for property rates\. By and large, the performance followed the same pattern for the different kinds of revenues and in most cases can be ascribed to the prevailing social, economic, and political conditions in the respective DA\. Bolgatanga had the biggest overall increase, followed by Koforidua and Cape Coast\. Bawku, Keta and Elmina had the lowest and showed a decline in market revenues\. Keta has suffered economic decline due to the devastating advance of the sea, and Bawku due to periodic communal strife\. Bolgatanga showed an unusual trend, where the property rates increased 63-fold, while the market revenues declined over the period\. As a result of the direct intervention made on property revaluation, property rates now form the major share of locally generated revenues in most DAs\. Figures recorded show that average DA revenues from property revaluation have increased from a range of 3 and 20 percent of internal revenues at the time of appraisal to 5 and 58 percent of internal revenues in 2002\. (The rates formed 58 percent of revenues from Koforidua, but only 5 percent from Keta)\. The share of property rates as a proportion of total DA internal revenues collected increased over the period from 7 percent to 27 percent, while that of market revenues rose from 22 percent to 30 percent from 1997 to 2000 and then declined to 17 percent by 2002 (Annex 1, Tables 2 and 3)\. Projections of total revenues were made at the time of appraisal up - 5 -  to the year 2000\. The actual performance surpassed the projections for all DAs, which can be attributed more to an underestimation of the inflation rate at appraisal than to a consistent overachievement on revenue collection by the DAs (Annex 1, Table 4)\. Most DAs have contracted out the public toilets to private management through a competitive bidding process, and substantial revenue has been collected from these toilets in Agona Swedru, Koforidua and Sunyani District Assemblies\. Keta, Bolgatanga, Bawku and Wa have not been able to involve the private sector in the management of these toilets, and it was learned that the DAs actually spend considerable amount of money in maintaining them\. Privatization of public toilets was successful in DAs that put in place competitive procedures to the award of contracts, resulting in increased revenue from toilets\. A survey was undertaken in 1999 to sample public opinion on the privatization of public toilets in Sunyani and the response was positive\. Ninety-three percent of those sampled were satisfied with the privatization exercise and with the level of services provided by the operators\. C\. The outcome of the support to the Government's decentralization program for better efficiency and accountability in infrastructure provision is satisfactory\. The project was not intended to support a comprehensive program on decentralization, but to make some specific interventions to advance decentralization\. Most of the support was in the form of technical assistance within the confines of the prevailing state of decentralization, in the areas of reform as well as capacity building at the District level\. Based on recommendations of the sector study, the project was designed to provide Government with technical assistance to review the revenue mobilization and transfer system, and generate proposals for giving districts more autonomy and flexibility in revenue raising and making transfers more predictable\. During implementation, the Government decided to undertake this assignment on its own due to the political issues involved, and actually moved ahead of the project in that respect\. Subsequently, based on the provisions in the Local Government law that established the District Assembly Common Fund (DACF) grants, the Government established a formula for allocating grants to the Districts\. The allocation is approved by Parliament every year\. Since 1995, central government has transferred nearly all of the targeted 5 percent of revenues to the DAs on a quarterly basis\. The transfers were irregular in the early years and fell short of the targeted 5 percent, but the situation has improved in the past two years\. All the central government agencies, i\.e\., Survey Department, TCPD and LVB contributed to the satisfactory performance of the institutional strengthening components\. As a result of the capacity built, the agencies are carrying out similar assignments for follow-up Bank-financed projects, as well as GoG projects\. Prior to the year 2000, the property rates billing and collection system was manual\. However, after the preparation of a new valuation roll by the LVB, the system has been computerized, and staff has been trained to operate the system\. The new Chief Executives engage LVB staff regularly on contract to resolve valuation-roll updates and other nagging issues that come up from time to time\. 4\.2 Outputs by components: See Annex 1 for the output indicators\. A\. Rehabilitation and Upgrading of Infrastructure and Urban Services Component (US$34\.6 million SAR; US$38\.0 million ICR)\. The output of the component is satisfactory\. - 6 -  Road improvement and stormwater drainage (US$15\.5 million SAR; US$16\.6 million ICR)\. The output of this component is satisfactory\. A total of 57\.6km was constructed out of a targeted 73\.9km\. The shortfall resulted from increase in cost of implementing road contracts and changes in DAs priorities\. Some roads were dropped because they were planned or had in the meantime been constructed by the Ghana Highway Authority\. Some savings from the road works were used to finance the construction of more storm drains and street lights\. About 4\.2km of storm drains were constructed in 4 towns, as against a target of 3\.2km, and 1,196 street lights installed, more than twice the original target of 503\. The inclusion of major electrical works in some civil work contracts was ill advised as some of the contractors did not have the necessary expertise in electrical works, with the result that some of the lights installed were sub-standard\. Market and lorry park infrastructure (US$6\.6 million SAR; US$9\.6 million ICR)\. The output of this component is satisfactory\. A total area of 42 hectares compared to appraisal target of 28 hectares was covered\. KfW contributed the bulk of the funds for the market and lorry parks infrastructure at the original cost of DM16 million (US$ 8\.7 million) while GoG contributed the rest\. KfW also financed the construction of 85 market sheds in Wa, Bolgatanga and Bawku, and 16 sheds in Anloga\. KfW assistance included the services of a consultant who was the lead supervisor\. An additional amount of DM1 million was later transferred to the project from the Promotion of District Capitals project to finance the extra cost of the market sheds in Bolgatanga, Bawku, Wa and Anloga, bringing the total KfW contribution to $9\.14 million\. IDA also contributed about $0\.6 million for the construction of 8 market sheds in Techiman, lockable stores in Elmina and 10 market sheds, loading bay and drive area in Ho\. Waste Management(US$12\.5 million SAR; US$11\.8 million ICR)\. The output of the overall component is satisfactory\. Ten of the planned 11 final disposal sites, for both liquid (i\.e\. sludge) and solid waste, were constructed\. An additional solid waste disposal site was rehabilitated in Koforidua, which was already in place and well engineered\. All final disposal sites are now managed by the DAs and nearly all of them have had problems with their operation due to one or more of the following reasons: poor site selection, poor designs, and inadequate operational management\. The liquid waste facilities in some of the towns were constructed as waste stabilization ponds and the rest were open pits\. Some of the solid waste disposal sites were open spaces, but most of them were controlled tipping cells in a walled enclosure\. Of the targeted 125 refuse collection points that served as transfer sites of solid waste, the project constructed 193\. The following waste management equipment was delivered to the DAs: 11 bulldozers, 23 skip loaders, 23 cesspit emptiers, 11 tractors, 15 Roll-on Roll-off trucks, 64 trailers, 241 Open containers, 16 covered containers, 22 night soil containers, and 36 Roll-on Roll-off containers\. Some assemblies converted one of the two septic tank emptiers that were supplied to them to a water tanker, and the bulldozer that was provided for the efficient filling of final solid waste disposal sites was frequently hired out to contractors for construction work\. Of the 277 public toilets targeted for rehabilitation or construction, about 206 were completed\. Fewer suitable sites could be identified than had been planned, and many of the toilets that were meant for construction only needed rehabilitation\. This shortfall was amply made up by the construction of 5,968 household toilets, more than twice the targeted 2,700\. They benefited an estimated 135,800 people instead of the originally planned 70,000, and consisted of several popular types: 70 percent were water closets and the rest were KVIPs, Aqua privies, and other types\. Based on preliminary estimates, the total cost of a toilet facility was put at $300 to $400 and the project paid up to 50 percent ($200) of the cost into a DA sanitation fund for each household\. An audit report carried out in 2002 showed anomalies in the disbursement of funds in some DAs, and recommended that in future, the component should be implemented by NGOs\. B\. Institutional strengthening (US$7\.7 million SAR; US$11\.9 million ICR)\. The overall outcome is satisfactory\. - 7 -  Technical Assistance to DAs (US$2\.7 million SAR; US$2\.0 million ICR)\. The overall outcome is satisfactory\. Technical assistance was provided through 12 national consultants in three key fields of municipal engineering, financial management and district planning and management over a three-year period\. The 11 participating towns were grouped into four zones\. Each zone was served by a Zonal Office, and comprised a Civil Engineer, a Finance Officer and a Planning Officer, to advise DAs in their respective fields for three years\. The most senior of the three served as Project Coordinator\. Adequate resources, including equipment and operational support were provided to enable the professionals provide the needed assistance for capacity building\. Although there were outstanding tasks, the contracts of the zonal officers were not extended after the scheduled three years\. Factors that affected their performance included conflicts with DAs personnel, lack of acceptability by DAs staff, the inability of the Assemblies to recruit their requisite chartered accountants as counterpart staff, and the fact that the various departments of the Assemblies had not yet been decentralized\. Furthermore, the zonal officers were supposed to assist the DAs in the adaptation and introduction of improved budgeting and accounting systems, as well as software and manuals, which had been developed under the Urban II project\. MLGRD apparently was not committed to carrying out these reforms\. It never made these studies available to the zonal officers and the DAs and did not procure the necessary computer networking equipment required for their implementation\. The major infrastructure works from which revenues could be collected, that is markets, lorry parks and public toilets, were not fully completed when the zonal officers were in place, and billing for property rates could not start since the property revaluation had not been completed\. Key outputs are as follows: The Planning Officers in the zonal offices facilitated the preparation of 5-year medium term development plans, prepared for the Assemblies by consultants, and introduced the costing element to the plan\. The limited success was due to the lack of an institutional link between the zonal planning unit and the National Development Planning Commission (NDPC\.) The latter body has statutory responsibilities for the administration of planning studies throughout the country, and the support provided by the zonal planning office conformed to the technical requirements of the NDPC\. The zonal planning officers could also influence the perceptions of the NDPC through the field experiences submitted to them\. The Engineers organized briefing sessions for senior staff of DAs on relevant aspects of civil works contracts\. Although the engineers were supposed to be advisors to the DA staff, they played a major role in both LGDP and non-LGDP civil works contracts, especially in towns where DA staff was not available\. They helped to put in place arrangements for the maintenance of the waste management equipment and established modalities for the privatization of public toilets\. The Finance Officers, who were chartered accountants, helped to introduce activity based budgeting in some DAs, which better reflects reality than incremental budgeting\. The existing accounting system in most DAs reported only cash transactions, and the officers helped to record bills according to the accrual system of accounting\. As a result of difficulties encountered in the recruitment of chartered accountants as counterpart staff in the DAs, (see below), the zonal Finance Officers not only advised, but also implemented the finance component in the Districts\. Their effectiveness was severely constrained by the institutional fragmentation of financial management at the District level\. Budgeting is controlled by the Budget section, headed by the Budget Officer who was a staff of Ministry of Finance and Economic Planning (MFEP), whereas accounting is controlled by the District Finance Officer, a staff of the Controller and Accountant General's Department (CAGD), who concentrates on expenditure controls in the assembly, leaving the revenue generation to the revenue section, controlled by Revenue staff who are not under any Ministry, but are staff of the Assembly\. This arrangement, which still prevails in the Assemblies, creates a low incentive for revenue generation, and is responsible for a lack of coordination among the different sections\. Strengthening the capacity of selected central government agencies to support the DAs Town and Country Planning Department (TCPD) for Land-Use Planning (US$0\.33 million SAR; US$0\.17 million ICR)\. The outcome of the component is satisfactory\. Land-Use Planning was completed in 2003 with the delivery of electronic and hard copies of structural plans for both developed and undeveloped areas of two urban towns\. The scheme will guide public and - 8 -  private investments in infrastructure, revenue generation and urban planning, ensure efficient urban growth and reduce environmental problems\. It was originally meant for 9 towns, but due to insufficient cooperation among the TCPD, the consultants, and the project implementation unit, it was reduced to two towns, Sunyani and Techiman, with the understanding that Planning Officers in the other towns will replicate lessons in their respective towns at the end of the assignment\. The replication has not yet materialized\. TCPD staff in the head office and regional offices have, however, been trained in various aspects of development planning\. All six regional offices were supplied with 6 double cabin pick-ups, 6 motorcycles and computers\. Land Valuation Board (LVB) for Property Revaluation (US$0\.66 million SAR; US$1\.16 million ICR)\. The outcome of the component is satisfactory\. A total of 125,043 properties were revalued in 12 towns, as against the targeted 74,300\. The increase was due to the addition of 40,000 newly constructed properties\. LVB staff carried out the revaluation and completed the exercise in 8 towns at the cost of $680,187 while three private sector valuation firms revalued properties in the remaining 3 towns, which amounted to 39 percent of properties at the cost of $481,361\. LVB staff also carried out post-valuation exercises, involving outreach with DAs, updating of valuation rolls and a computerization program\. Two LVB staff members were exposed to valuation techniques in the United Kingdom's Valuation Office and other staff members were trained in various aspects of valuation\. The project also supplied 5 double-cabin pickups, 33 motorcycles and 2 computers, printers and accessories to the Department\. Survey Department (SD) for Mapping (US$1\.6 million SAR; US$1\.8 million ICR)\. The outcome of the component is satisfactory\. Of the targeted 300 sq\. km, about 700 sq\. km of large-scale maps of scale 1:2500 were produced for 11 project towns\. The additional 400 sq\. km covered the undeveloped areas of the urban towns to facilitate future planning\. The maps, which are available in both digital and hard copy forms covering the project towns, will also be used for infrastructure programming and revenue mobilization services\. The maps are essential to enable land users, planners, engineers, land valuers, and providers of utility services to carry out their work properly\. The component was implemented by private sector contractors under the overall supervision of the Survey Department (SD), which is also responsible for the maintenance of the maps\. The SD had undertaken a similar assignment under Urban II and other GoG projects\. Their staff received overseas training in digital mapping techniques\. Technical Services Center (TSC) for Project management (US$0\.7 million SAR; US$1\.3 million ICR)\. The overall outcome of the component is satisfactory\. Under a Memorandum of Understanding between the Ministry of Works and Housing (MWH) and the Ministry of Local Government and Rural development, the TSC provided overall implementation and project management support to the other agencies and DAs\. TSC had overall responsibility, on behalf of MLGRD, for accounting, procurement, monitoring, coordinating and reporting functions\. The MLGRD was responsible for the institutional strengthening component, especially with respect to technical assistance for improving local revenue collection performance, financial management systems, and DAs organizational structure and staffing\. It was resourced and benefited from an accounting system that enables the production of various reports\. Both TSC and MLGRD performed satisfactorily under the project and by 1999, the MLGRD wanted to improve project coordination to enhance overall implementation of the follow-up bank financed UESP\. The MoU was abrogated and most of the professional staffs were co-opted in the LGPSU that was established in the MLGRD with the responsibility for implementing all Bank-financed projects\. The LGPSU carried out the functions previously undertaken by TSC well, but could not adequately handle the technical assistance support to the DAs\. C\. Incremental Recurrent costs and Operation and Maintenance (US$5\.2 million SAR; US$2\.3 million ICR)\. The overall output of this component is unsatisfactory\. Operation and Maintenance (US$3\.3 million SAR; US$1\.4 million ICR)\. The output of this component is satisfactory\. - 9 -  By the end of 1998, all DAs had established an O&M fund, and both IDA and the DAs made contributions to this fund up to December 2001, after which IDA financing stopped according to the declining disbursement percentage for this category\. IDA financing into this fund was 50 percent for the first 3 years and 30 percent for subsequent years\. The reported cumulative contribution of the DAs is $828,129 equivalent and that of IDA $538,330\. These funds were used mainly for the servicing and fueling of waste management trucks, street cleaning, and drain cleaning for the DAs and were not necessarily limited to the infrastructure and equipment provided through the project\. A technical and financial audit of the O&M funds, completed in August 2003, revealed irregularities in the disbursement of the funds\. Some DA staff did not follow the guidelines for the disbursement of funds and LGPSU did not put in place adequate procedures for monitoring\. The report recommended that future funds should target specific maintenance activities, and not all maintenance works\. A follow-up on the recommendations contained in the report has been impaired by the fact that most of the DA staff who supervised the component had been transferred at the time of the audit\. Personal Service Contracts Staff (PSCS) (US$1\.9 million SAR; US$0\.9 million ICR)\. The output of this component is unsatisfactory\. In parallel with the establishment of Zonal Offices, a pilot scheme to test a "labor market approach" in local government employment was initiated to recruit 33 key staff in higher-level positions in the DAs on contract basis, and as counterparts to the Zonal Officers\. The aim was to improve the competency of key staff at the District level, which could in general not be maintained due to the unattractive conditions of employment in the civil service, and was to ensure that all DAs had at least one qualified Engineer, one Planning Officer, and one Finance Officer\. At the end of the recruitment drive, only 22 positions were filled, including 11 Planners, 10 Engineers and 1 Finance Officer\. The Finance Officers were particularly difficult to find, as they were required to be chartered accountants, and they were not satisfied with the $1,000 (equivalent in cedis) remuneration offered for the position\. The financing of the District Contract Staff was initially to be shared by the Government and DAs, and was based on the premise that as DAs' self-generated revenues increased as the Revenue Improvement Action Plans (RIAPs) were implemented, the DAs would increase their share of the financing over time\. The terms and conditions of their contracts were negotiated with the MLGRD and the District Chief Executives (DCEs), and a uniform rate was agreed on for all the staff\. The assignments started in mid-1997, and there was an initial lack of cooperation from DAs, who saw the recruitment as top-down\. The wide salary gap between the PSCS and the DA civil servants also made matters worse\. PSCS were not fully embraced by the DAs, and they did not involved them in their work\. Subsequently, their contracts were not extended after the initial four years\. The Government also financed 100 percent of the recurrent cost throughout the entire contract period of 4 years although it was meant to be shared with the DAs\. These difficulties notwithstanding, the District staff contributed to improving the technical capacities of the DAs\. After their contracts ended, the Government filled these positions with civil service staff\. Other Cross-Sectoral outcome Training\. A wide range of training activities was undertaken as part of improving capacity of the DAs and central government agencies\. More than 50 courses were provided, benefiting professional staff, heads of departments and general Assembly staff\. They included computer skills, computerized budget and accounting, monitoring and evaluation, staff development, performance evaluation, engineering, and planning\. The training had only a limited impact as few of the senior DA staff trained were still in their posts at End of Project (EOP)\. They were either transferred to other DAs as part of a routine exercise by the PSC, or left to join the private sector\. There was also a widespread duplication in training, as other District-based projects, supported by the Bank or other donors, included a similar training program at the DA level, and often for the same personnel\. The widespread duplication has created an attitude towards training as a form of salary supplementation\. This calls for better coordination and inter-sectoral harmonization between the departments and agencies promoting urban development\. Private Sector Participation (PSP)\. Modest gains were made in involving the private sector in the management of infrastructure services\. The civil works contracts were executed by private sector contractors, and public toilets and lorry parks have been put under private management\. However, the private sector could not be involved in the management of the operation and maintenance of markets - 10 -  and waste collection services\. After a delay of several years, a pilot study for 4 urban towns was completed for the establishment of a waste management system through PSP\. The consultant designed ways of implementing a basic waste management system that takes into account financial, legal, institutional, social, technical and environmental aspects and details of the potential role of the private sector\. Technical assistance with the implementation of these recommendations was provided to the four Districts near the end of the project, cutting short the completion of their implementation\. The waste management equipment supplied under the project had not been leased to the private sector by EOP and implementation of this is being planned for within the next phase of the ongoing Urban 5 program\. 4\.3 Net Present Value/Economic rate of return: The economic viability of the project was measured in the SAR by calculating the EIRR of 14 road rehabilitation activities, 3 market interventions and two each of the solid waste and liquid waste management activities\. These constituted about 20 percent of the project cost\. An ex-post evaluation was carried out for the 14 road rehabilitation activities using actual contract values and updated traffic data\. The data used for the analysis, the assumptions made, and the results of the exercise are presented in Annex 3, which shows an average weighted EIRR of the projects of 68 percent, well above the 15 percent required for approval of projects in the sector\. These results also compare favorably with the corresponding figures of 84 percent overall weighted EIRR for the roads and drainage component, as given in the SAR\. 4\.4 Financial rate of return: No financial rate of return calculation is shown in the SAR\. 4\.5 Institutional development impact: The institutional development impact is rated as modest\. 1\. At the end of the project, few of the senior DA staff trained was still in place\. They were transferred to other districts every three or four years, but some of them left for employment in the private sector, depriving the project DAs of the full benefits from the training that had been provided\. The project assemblies have also benefited from senior professionals from other DAs\. 2\. The O&M account that was established in every District was not actually used for the upkeep of the entire municipal infrastructure services as intended\. It has nevertheless increased the awareness of most Districts that better O&M of the equipment can be achieved through planning and budgeting (Section 4\.2 C)\. 3\. An attempt was made to improve the management, financial and technical capacity of the DAs through the recruitment of key staff on better terms than the civil service conditions\. The rationale was that the additional revenue generated and the increased budgeting and accounting efficiency would far exceed the additional salary cost of these employees\. This idea was successful insofar as it demonstrated that strong institutional capacity in the fields of planning, management, finance and operational and maintenance can provide improved municipal services\. It failed, however, as a long-term measure because not enough chartered accountants could be attracted to these jobs, and the contract staff were largely considered "outsiders" (Section 4\.2 B)\. 4\. A pilot system for improved budgeting and financial management was introduced in 4 DAs that had a relatively good management capacity, and there are indications that this will improve financial management and budgeting (Section 4\.1 B)\. 5\. The TSC under the Ministry of Works and Housing was virtually dismembered in the course of project implementation and replaced with LGPSU\. MLGRD found the cooperation with TSC across institutional lines increasingly difficult and in 2000 abrogated the MoU and moved the core of the TSC project implementation staff to MLGRD to form its own project implementation unit\. While this may have improved the implementation of several World Bank-assisted projects, it did not result in a greater role for the regular MLGRD staff\. - 11 -  6\. The project has improved the capacity of the LVB and SD to better carry out their mandate\. As a result, the DAs now use a permanent database for property revaluation and a computerized property rates billing and collection system\. LVB monitors the use of the system in the DAs and provide them with needed technical assistance\. LVB and SD are implementing similar services under the Urban 5 project\. The improvement of land use planning in the DAs was less successful\. 7\. The local construction and consulting industry was strengthened through the awarding of contracts\. All civil works construction, including two ICB contracts, was carried out by national contractors, and all design and supervision services were likewise done by national consultants\. The absence of any form of performance monitoring in the construction industry affected the quality and efficiency of construction services\. 8\. Most DAs have contracted out the management of public toilets to private operators through a competitive process and are collecting substantial revenues (Section 4\.2 C)\. 9\. The waste management equipment supplied under the project had not been leased to the private sector by EOP, as intended\. A study on PSP in waste management was completed only 2 years prior to the end of the project and could be introduced only as a pilot in 4 DAs, none of which showed significant improvements in their waste management by EOP, which would require more time and a systematic follow-up (Section 4\.2 B)\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: 1\. Absence of additional Legislation Instruments (LI) under Act 462, which were expected to be implemented to enable the decentralized departments work together\. 2\. Inflexibility\. Strict interpretation of project covenants often led to reduction in scope of the civil works, so as to keep within budget\. However, in almost all contracts, civil works were completed with excess funds available, necessitating going through another round of the bidding procedures, and above all, paying additional supervision fees\. 5\.2 Factors generally subject to government control: 1\. High inflation and depreciation of the local currency adversely affected the implementation of the project\. The average annual inflation was about 25 percent, and peaked at 75 percent in 1995 \. Internal revenue generated under the RIAPs program depreciated as a result of inflation, and contractors and consultants persistently complained of depreciation of the value of the contracts\. This compelled the project unit to introduce price adjustment clauses in almost all contracts\. 2\. The Government lacked the commitment to proceed decisively with decentralization\. Issues relating to leadership, accountability and full devolution of power in DAs are almost absent in the local Government administration\. This is largely due to the nature of the local Government law that currently exists\. Generally, political decentralization has not, so far, been accompanied by a commensurate decentralization of authority: transfer of significant decision-making authority has not accompanied creation of fully locally elected legislative bodies at district level\. 3\. Nearly all the District Chief Executives were changed in 1996 and 1999 as part of the local government reshuffle administration, and subsequently most of their senior staff was also changed\. The new Chief Executives did not understand the project and attempted to change the priorities that had been agreed with the predecessors\. This caused considerable disruption to the project\. Following the change in government after the elections of December 2000, the Chief Executives were again changed, but by this time nearly all the components were completed\. They did, however, give an impetus to the revenue generation components\. 4\. Counterpart Funds: The Government reneged on their counterpart fund contribution and this - 12 -  affected the implementation of civil works components in the first few years\. The implementing agency was left with no option but delay the payment of withholding tax deductions due the Internal Revenue Service (IRS), thus creating a kind of vicious cycle, where there was no money for counterpart fund contribution as a result of poor performance in tax collection, contributed in part by the inability of project officers to pay tax deductions promptly\. This arrangement, apparently with the approval of MFEP and MLGRD, helped improve the cashflow and eased the counterpart fund crises\. 5\. More than half the DAs obtained adequate evidence of land rights for the solid waste disposal sites before the project became effective, which allowed a quick start of the project\. The other DAs obtained such evidence soon after Effectiveness, with the exception of Ho, where issues arose after the contractor moved onto the site; after 3 years the problem in Ho was resolved\. 6\. Delays in completing civil works\. Out of 60 contracts awarded under the project, none was completed on schedule, with some of them lasting beyond 18 months, instead of the 6 months stipulated in the contract, and 4 were terminated\. The quality of work by some contractors was unsatisfactory\. The reasons for this are nationwide, but much worse for contracts administered by MLGRD and DAs than the Ministry of Roads and Transport\. There is little incentive for contractors--as well as supervising consultants--to complete the construction on time, as the contractual provisions (such as liquidated damages) are not enforced, delays are the norm, and payments to contractors are often seriously delayed\. The Government and the industry failed to put an effective monitoring system in place to regulate the performance of contractors and consultants\. 5\.3 Factors generally subject to implementing agency control: 1\. Staff turnover in LGPSU was stable throughout, and the experience gained in managing previous projects contributed to the satisfactory civil works implementation performance achieved\. 2\. Rising inflation compelled LGPSU to introduce price adjustment formulae in civil works contracts, reducing the risks to contractors\. 3\. The presence of a Financial Management Specialist in LGPSU, even on a short-term basis, could have improved the performance of the RIAPs program\. Both MLGRD and LGPSU did not find the need to recruit one\. 4\. Inadequate outreach to Zonal Officers and District Assembly staff by MLGRD and project unit contributed to the modest gains on the institutional building component\. After the abrogation of the MoU (Section 4\.2), the unit was mandated to manage the technical assistance component, but it was still preoccupied with civil works, and did not adequately provide the needed advise on institutional issues\. 5\. Inadequate coordination between the accounting and engineering staff in the project unit, and lack of financial forecast of outstanding project funds and required contingency sums, resulted in identifying excess funds belatedly at the end of each contract\. This contributed to the extension of the credit and the cancellation of more than half a million US dollars of uncommitted funds after the closing of the Credit\. 6\. As two new urban projects (Urban Environmental and Sanitation and Urban V) were under preparation, attention shifted from implementation of LGDP to the preparation of the new projects, and this had adverse effects on some LGDP components\. 5\.4 Costs and financing: Total project cost, as estimated in the SAR, was US$55\.51 million, comprising US$26\.02 million (47 percent) in local cost and US$29\.49 million in foreign costs (53 percent)\. Financing was to be provided as follows: IDA: US$38\.51 million (69\.3 percent of total project cost); KfW: US$8\.29 million (15 percent); District Assemblies: US$3\.16 million (5\.7 percent); and GoG: US$5\.55 million (10 percent)\. Final financing was US$52\.28 million, comprising US$26 million in local cost and US$24\.63 million in foreign cost\. Final disbursement were IDA: US$36\.88 million, KfW US$9\.14 million, GoG US$3\.08, DAs - 13 -  US$1\.77 million and also beneficiaries contribution of US$1\.41 million for household toilet, which was not included at appraisal\. Out of total SAR counterpart forecast of US$5\.55 million, US$3\.08 million was actually received by the project unit as counterpart fund contribution, representing about 55 percent of forecast\. A withholding tax amount of about US$0\.8 million that should have been paid to GoG was used to meet a part of the counterpart fund shortfall\. An unspecified amount was also waived in taxes and custom duties (import, ECOWAS tax, and destination inspection) during the importation of vehicles, waste management equipment and computers\. It was not possible to assess the exact Government contribution associated with the granting of exemptions for taxes and duties, however, this could be substantial\. On the whole, Government total financial contribution could be much closer to SAR's forecast\. The total disbursed amount was reduced to US$52\.28 million due to the following factors: i) US dollar appreciation against the SDR decreased the total IDA contribution from US$38\.5 million to US$37\.5 million; ii) undisbursed amounts of about US$0\.6 million earmarked for cancellation; and iii) large foreign exchange ratio of payments that were allowed in civil works contracts, which increased IDA proportion for disbursements and reduced GoG proportions\. The District Assemblies and beneficiaries were expected to contribute US$3\.16 million being their share of the costs associated with the Personal Service Contracts, and Operation and Maintenance Fund\. The total amount contributed was US$1\.77 million due to the late start and early completion of the PSCS and O&M assignments\. The total counterpart funds from Government stood at US$3\.08m, the share from the District Assemblies was US$0\.83 million, being their contribution to the Operation and Maintenance Matching Funds, which was what was affordable to them\. Generally, actual cost was in line with SAR forecast, with the exception of consulting services and training\. The cost of the former category of expenditures was higher as a result of more than 100 percent increase in the cost of consultant's supervision services\. The cost of the latter was much lower than anticipated\. The local currency, the Cedi, depreciated by about 1100 percent during the life of the project at an average annual rate of about 25 percent\. The annual high depreciation of the local currency compelled the project unit to introduce price adjustment formulae in civil works contracts and this reduced the risk to contractors and consultants\. 6\. Sustainability 6\.1 Rationale for sustainability rating: The sustainability of the project is rated as likely\. 1\. Since the project lasted for slightly more than 8 years, many of the activities provided under the project were completed long before the closing date\. This has provided an opportunity to observe that most of them have performed satisfactorily\. For example, since 2001 DAs have on their own employed the services of LVB to update their valuation rolls for the collection of property rates\. Lorry parks are under the management of a private transport body, the Ghana Private Road Transport Union (GPRTU)\. Some facilities, such as markets, lorry parks, public toilets, generate their own maintenance revenues\. Road maintenance is covered by the Road Fund\. 2\. The capacity of the DAs to prepare investment plans and implement projects has by now been well established\. The investment and maintenance funds available to the Assemblies have substantially increased in recent years\. Nearly all capital expenditures are financed through grants, which have mainly consisted of the DACF, donor-assisted project funds, and recently, HIPC funds\. In 2002, ¢1 billion (US$125,000) was released from the HIPC fund to every Assembly regardless of size, and in 2003, ¢2\.3 billion (US$270,000) to every Municipal Assembly and ¢1\.4 billion (US$165,000) to every DA\. There were 3 MAs and 8 DAs in LGDP\. The flow of HIPC funds is expected to increase in coming years as the Government reaches the completion point of the program\. - 14 -  3\. In response to complaints about the disruptions caused by frequent staff transfers, the PSC has recently improved on the posting of qualified professional staff into the DAs\. The CAGD also trains and posts Finance officers to vacant positions in the DAs\. Attrition to the private sector, however, continues to be a problem, which is due to low remuneration in the civil service\. Currently, the DAs do not have authority over their own staff\. Since the Local Government Service Act was gazetted (passed by parliament in August 2003), DAs will have a say in hiring, promoting and transferring their staff, which is expected to improve the efficiency in staff management and responsiveness to staffing needs\. 4\. The private sector has gained experience through implementing components of the project and the opportunity has been created to involve them in maintaining the facilities\. 6\.2 Transition arrangement to regular operations: 1\. Ongoing Bank-assisted urban projects that are planned under the APL program through 2011, and other GoG and donor-financed projects will advance the decentralization objective through a greater role for the DAs in decision-making and in the implementation of their infrastructure improvements\. These projects will build on the achievements of LGDP in regard to sustaining urban services\. A second phase of the Urban V APL, which would include the project towns that participated in LGDP, is under preparation\. The proposed project will build on the achievements of LGDP in property revaluation, mapping, waste management systems, and planning for O&M\. The introduction of performance agreements and eligibility criteria for accessing funds would provide an incentive for DAs to improve on such management aspects as revenue generation, O&M, and planning\. 2\. Most infrastructure facilities that were provided are revenue generating, which can cover at least part of the maintenance cost\. With rare exceptions, these revenues are deposited in the general budget of the Assembly and are allocated according to the priorities prevailing at the time\. 3\. Since subsidies for O&M from the credit stopped in December 2001, the DAs have continued to use their own O&M funds to finance the operation of waste management trucks and other sanitation activities\. For some equipment\. the collected revenue (such as that obtained from the occasional hiring out of bulldozers to contractors) is set aside for maintenance and repair\. 4\. The management of nearly all public latrines is done by private operators, who collect user fees and remit part of their earnings to the DA\. They carry out routine maintenance and, depending on the provisions of their contract, some periodic maintenance\. It was the intention to have all project-related maintenance carried out by contractors and establish unit rates for this purpose\. While some maintenance is carried out through contractors, others are still done through force accounts\. In some DAs private sector operators are starting to carry out solid waste removal\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: The Bank's performance in lending was satisfactory\. 1\. The Bank took the experience gained from previous urban projects in Ghana well into account in supporting the creation of zonal implementation support units to aid the DAs\. 2\. The Bank's team launched two sector studies as part of the preparation of this project, participated in project preparatory missions for almost two years, and arranged a PPF of US$1 million to finance project preparatory activities\. Most of the team members who carried out the preparation and implementation of the preceding Accra Districts Rehabilitation Project (ADRP) and the Urban II projects also participated in the preparation of this project\. 3\. A valuable contribution of the Bank was to maintain a balance between physical infrastructure, institutional capacity building, and financial reform\. This stemmed from the recognition that urban infrastructure may not be sustainable without accompanying measures\. - 15 -  4\. Cofinancing with KfW allowed more flexibility in adjusting the project content to the needs of the DAs, helped to attain the project objectives, and brought the experience of another development partner to the project\. 5\. One area where the Bank did not sufficiently apply its rich experience was in the supply of waste management equipment to the DAs\. This project has shown again that such equipment tends to have a short life and may discourage the private sector from providing these services\. The risks were correctly identified by the Bank and included inadequate management and financing of infrastructure works and a shortfall in revenue collection due to ineffective implementation of the revenue mobilization components\. These risks did in fact materialize in the course of project implementation, limiting the degree to which the project development objectives could be attained\. 7\.2 Supervision: The Bank's performance on supervision was satisfactory\. 1\. A Quality of Supervision Assessment was carried out by QAG in 1998, which rated the supervision performance satisfactory in the overall as well as for every one of the main themes of: focus on development impact; supervision of fiduciary aspects; adequacy of supervision inputs and processes; and realism of project performance ratings\. Already at that time, inadequate local government commitment to the financing of O&M was identified as a problem\. 2\. There were only two Task Team leaders in charge of supervision during the life of the project and they were based in the country office; this ensured regular monitoring of project activities\. In the first few years the supervision teams tended to be small, limited mostly to a financial analyst and an engineer with the occasional addition of a training specialist\. Between them they covered all the supervision topics\. Later, more specialists from the country office joined the missions as the decentralization of operational functions progressed, including on procurement and financial management\. Had there been more specialists participating in the earlier Bank supervision teams, it may have been possible to avoid the problems that occurred in later years and which required two extensions of the closing date\. 3\. The performance indicators listed in SAR, Annex 19, proved to be unsuitable for monitoring the progress of project implementation, as they were not quantified and too numerous, containing aspects of process, input, output and impact\. The Logframe that was retrofitted in June 1997 during the mid-term review contained a better set of indicators, but it was not until the mission of October 2001 that a satisfactory set of output and impact indicators was developed and used to monitor progress with project implementation (see Annex 1)\. The reporting through the PSR format was weak in the first half of implementation, with information gaps\. The reporting improved considerably over time\. 4\. The Bank may have been able to better advise the Client about bringing the project to a close\. It was extended twice, mainly to buy additional waste management equipment\. Due to a change in government in 2001, critical decision about completing the project could not be made in time (see Borrower's performance)\. In retrospect, it may have been better to either agree on a longer initial extension period to allow enough time for a range of additional activities or to close the project on the original date\. 7\.3 Overall Bank performance: The overall rating of the Bank's performance is satisfactory\. Borrower 7\.4 Preparation: The Borrower's performance in preparation is satisfactory\. The Borrower's participation is rated satisfactory\. The project was high on the government's priority list of providing basic infrastructure and urban services to the less endowed local governments\. 7\.5 Government implementation performance: - 16 -  The Government's performance in implementation is satisfactory\. In spite of the serious downturn of the economy in 1995 and subsequent years arising out of high interest rates, high inflation and depreciation of the cedi, the project stayed on course\. Counterpart funds contributions from central government improved over time\. New DCEs appointed in 2001 contributed to the modest gains made on the revenue generation components\. Government, however, lacked the political will to proceed decisively on decentralization\. 7\.6 Implementing Agency: The overall implementing agency's performance was satisfactory, despite some shortcomings\. 1\. The agency performed well in managing the civil works components, coordinating and preparing timely and informative progress reports\. They had gained experience in undertaking similar assignments under previous Bank-financed projects, and assisted in the preparation of follow-up projects\. However, while accounting was carried out in a satisfactory manner, the forward financial planning was inadequate\. 2\. The project unit acted virtually as a separate entity, manned by consultants, with very few regular staff from the Ministry\. This may have been an adequate arrangement for the implementation of the physical components of the project, but lacked the long-term institutional commitment for capacity building in the Ministry as well as in the DAs\. 3\. The agency performed well in providing technical advice on infrastructure, but was hesitant to commence any arrangement that would involve the private sector in managing completed facilities, especially solid waste and markets\. 4\. The MLGRD's decision to cede institutional strengthening components to the project unit when the MoU was the reason for the limited achievements made in the institutional strengthening components\. The advisory role expected from the ministry was not forthcoming and advise given by the Bank to engage short-term consultants to continue specific aspects of the technical assistance components was not heeded\. The unit however, consolidated all the bank-financed urban projects and brought synergy to the portfolio\. 5\. The competitive process of procuring the additional waste management equipment resulted in the award of the contract to a different supplier from the one who provided the equipment during the first round\. After a complaint had been filed, the resulting investigation that was carried out by the Borrower at the Bank's request did not adequately address the matter, and the Bank was compelled to carry out its own investigation\. Finally, the Bank decided that the deviation, even though it occurred, was not of sufficient magnitude to declare misprocurement and to cancel the value of these contracts from the credit\. 7\.7 Overall Borrower performance: The overall rating of the Borrower's performance is satisfactory\. 8\. Lessons Learned Project Design 1\. Decentralization should form a major part of the project objectives only when the Government has demonstrated its commitment in practice\. A project -- or even a series of projects -- cannot advance the decentralization of public sector functions if the Government lacks a firm commitment to decentralization (see Section 5\.2)\. 2\. Projects assisted by various donors should be better coordinated and harmonized at the District level\. Different donors, and even different projects of the same donor, now contain diverse provisions on the same subject\. The need for harmonization is particularly important for training, where duplication and tenuous links of the training programs to the functions of the trainees create a culture of using participation in training as a form of additional remuneration for staff\. - 17 -  3\. Waste management equipment should only be supplied to the public sector under exceptional circumstances\. Such equipment is not adequately maintained by the public sector\. Mechanisms for leasing the equipment to the private sector to carry out the services should be built into the project design and monitored closely by all parties\. The design of the project should also be done in order not to discourage the entry of the private sector into providing services\. 4\. Property revaluation programs should only be carried out if anticipated increases in revenue exceed the costs\. Revaluation is relatively expensive, especially when it involves aerial photography and mapping, and is not justified unless the anticipated increases in revenue from property taxation exceed the costs of the exercise\. In towns with a large proportion of low-income residents or in those that for one reason or another experience an economic decline, very little, if any, additional revenue from properties can be expected (see Section 4\.1 B and Annex 1, Table 2)\. 5\. IDA subsidies deposited into a District O&M account are unlikely to increase the sustainability of infrastructure services in the long-run\. IDA financing for O&M, on a declining-scale basis, was used in this project to operate and maintain waste management equipment and had no discernible influence on the O&M of other infrastructure services, contrary to what was intended\. In fact, an audit revealed instances where the funds were misused, that is, expended for purposes unrelated to infrastructure services (Section 4\.2 C)\. 6\. In the absence of any form of performance monitoring and evaluation system in Ghana's construction industry, all future urban projects should have built-in mechanisms to ensure quality and efficiency of construction delivery\. The procurement process should start with prequalification of contractors in all civil works contracts, to eliminate contractors with any previous record of poor performance (see Sections 4\.5 and 5\.2)\. The road agencies, Ghana Highway Authority and Department of Urban Roads, who are in a better position to monitor road contractors should be more involved in the implementation of urban road contracts\. Implementation Arrangements 7\. Project implementation support to the Districts should be provided by the Regional Coordinating Councils (RCC)\. The project established four Zonal offices, staffed by consultants, to provide technical assistance in policy planning, knowledge transfer, and capacity building to District Assembly staff\. This was a temporary measure and is not sustainable\. The RCCs should participate in project implementation under their mandate to assist and monitor the DAs, on the one hand and coordinate with the sector agencies at the center, on the other\. 8\. The project management teams should be composed of staff with a variety of skills, to include institutional, financial management and planning, and not only engineering and accounting\. This applies especially to projects with a decentralization and local government capacity building orientation\. A team that consists mainly of technical specialists is likely to give preference to the implementation of the physical components at the expense of capacity building and reforms\. For the same reason, project management should be led by regular staff of the project implementing agency (here the MLGRD), with consultants engaged for specific tasks, when needed (see Sections 5\.3 and 7\.6)\. 9\. Proposed contracts should be chosen with the participation of the effected population and should be contained in DAs Medium-Term Development plans\. This will reduce the risk that a decision made by local officials is questioned, or even changed, by their successors when an all-too-frequent change in the local leadership takes place (see Section 5\.2)\. 10\. Project activities involving aerial photography, mapping, land valuation, and other land-related themes should be implemented in collaboration with the Ministry of Lands and Forestry\. It was difficult in this and other projects for the MLGRD to coordinate the project activities of the various land-related agencies\. - 18 -  9\. Partner Comments (a) Borrower/implementing agency: The implementing agency, LGPSU of the Ministry of Local Government and Rural Development prepared the evaluation report, which is shown below, and contributed data for ICR preparation\. The agency also gave comments to an earlier draft of this ICR\. No comments were received from the Ministry\. 1\. Introduction 1\.1 The local Government Development Project was implemented in 12 medium-sized towns from December 1994 to March 2003\. This report provides an assessment of the performance of the project from the point of view of the Ministry of Local Government and Rural Development and its implementing agencies\. The assessment covers a\. The degree to which the project achieved its development objectives as set out in the project documents; b\. Other significant outcomes and impacts; c\. Prospects for the projects sustainability; d\. Bank/Borrower performance, including compliance with relevant Bank safeguard and policies; and e\. Identified lessons learned from implementation\. 2\. Project Objectives and Components 2\.1 The project was formulated to achieve three main objectives, namely: a\. Improve basic infrastructure and urban services in 12 towns, especially services benefiting lower income people\. b\. Strengthen the district assemblies financial, technical and managerial capacities as a means of promoting sustainability of urban services c\. Support government's decentralization programme and thereby promote efficiency in service delivery\. 2\.2 These objectives were to be attained through the implementation of two main components, namely (i) rehabilitation and upgrading of infrastructure and urban services, including markets, lorry parks, roads, storm drains, solid and liquid waste disposal, provision of waste collection equipment, and matching grants for household latrine construction; and (ii) strengthening the capacity of 11 participating DAs to plan, finance and manage urban services through technical assistance, training, equipment, vehicles and operational support\. 3\. Extent of Achievement of Project Objectives 3\.1 Rehabilitation and upgrading of Infrastructure The rehabilitation and upgrading of infrastructure was generally successfully implemented, despite the longer than expected completion periods\. Specific achievements and constraints are summarised below: - 19 -  Component & Objective Outcomes Achievement (i) Rehabilitation of roads and A total of 57\.6 km of town roads were The objective of the component was Storm water drainage to improve reconstructed in 10 towns, against an satisfactorily achieved\. However the impact key road segments, traffic original target of 77\.8 km in 12 towns\. was often limited because of limited budget\. management and circulation Proposed works in Keta was cancelled\. Road works tend to be much more About 4\.2km of storm drains were also expensive than other municipal services, reconstructed in 4 towns to alleviate therefore the impact of road works tend to flooding, against a target of 3\.2km\. Scope be limited if substantial funding is not of works was increased in Wa and provided\. In some towns, the impact of the Techiman\. road works on the total road network in the town was quite marginal\. (ii) Rehabilitation and expansion 11 existing markets were provided with The objective of the component was of basic infrastructure in Markets drains, paving of open areas, toilet satisfactorily achieved\. However, the and transport terminals to support facilities and some security lighting\. Two original "project concept" - where basic economic activity and improve new Markets and lorry parks were infrastructure alone was to be provided the financial position of the constructed in Anloga and Elmina\. A late whilst the beneficiary district were to beneficiary district assemblies\. decision was taken to allow the provision provide market sheds- did not give the of a limited number of market sheds in 4 desired impact\. In several cases, the towns\. beneficiaries were unable to provide all the sheds as expected, thus significantly reducing the impact of the investment made\. There were also delays on the part of contractors in completing the works on schedule worsened the situation for nearly 3 years\. (iii) Improve solid and liquid 12 towns have acquired disposal sites This component was the most satisfactory waste collection and disposal which have been fenced off and provided of all the infrastructure subcomponents, systems to enhance the urban with ditches for liquid waste disposal\. The despite problems encountered with siting environment and promote health plan to provide engineered sanitary landfill and management of the completed facilities\. and productivity of residents sites did not materialise due to budgetary Solid and liquid waste collection and constraints\. Instead, simple control dump disposal has improved significantly in 10 sites were provided for solid waste out of 12 towns\. disposal, whilst open ditches were constructed for liquid waste disposal\. 193 skip pads, skip trucks, waste containers and other equipment supplied to all 11 DAs 3\.2 Strengthening District Financial and Technical Capacity The four subcomponents designed to achieve this objective were only marginally successful\. This may not be surprising as institutional reforms are generally more difficult to accomplish than infrastructure rehabilitation\. - 20 -  Component & Objective Outcomes Achievement (i) Improving the management Modest progress was made, with the The objective of this component was only marginally capacity of 11 district assemblies assistance of Zonal Officers, in assisting achieved\. The component faced serious challenges both through (a) district reorganization with the promotion of management team at the national and local levels which limited its impact\. (b) improved local policy and building\. The pilot use of personal Not much was achieved in the area of district legislative oversight (c) management services contract got off to a late start, reorganisation and improved local policy and legislative team building (d) pilot use of with one planning officer and one oversight The 1996 general elections and frequent personal services contracts engineer for each of 11 DAs from April changes in political leadership at the districts affected 1998 to Dec\. 2001\. Finance officers the ownership and commitment of new officials to the turned down the offer of monthly project concept\. In fairness to the DAs however, some of remuneration of US$1,000\. The only the concepts themselves did not take account of local finance officer who accepted the offer situation and were difficult to implement\. For example resigned after one year\. the pilot use of personal services contracts created institutional problems in most districts\. (ii) Strengthening the capacity of Equipment, vehicles, training and The provision of equipment and appropriate training for central government agencies - LVB, operational support were provided for central government agency staff (where there are T&CP, SD, TSC, MLGRD to these institutions to enhance their trainable staff) should be pursued as a means of building support the appropriate activities of institutional capacity\. the capacity of such agencies\. Technical assistance those district assemblies\. This was to support however had mixed results\. Whilst some be achieved through the provision of budgets were not utilised at all ­ e\.g, TSC for MIS, equipment, vehicles, training, MLGRD for Policy Review, and LVB for property technical assistance and operational revaluation, others were utilised quite late in the project support\. period, thus minimising their impact\. (iii) Improved availability of 700sq km of land area in 12 towns The use of the maps for the intended purpose has been information for urban planning, mapped\. limited\. In relation to the objective of improving infrastructure programming and availability of information, the objectives were met\. revenue mobilization through aerial However a lot of concern has been raised about the photography and digital mapping\. adequacy of the maps for Urban planning and infrastructure programming since only built up areas of the towns were covered by the exercise, making them useful for revenue mobilization but inadequate for Urban planning\. (iv) Provision of a comprehensive About 125,043 rateable properties The assumption that revalued properties would result in register of rateable properties in each revalued by LVB and valuation rolls increased revenues turned out to be an of the 11 towns to enhance existing submitted to DAs\. oversimplification of the issues\. A better appreciation of revenue sources all other factors affecting property rating at the District level would help improve the impact of the component 4\. Significant Outcomes and Impacts 4\.1 The most significant outcomes and Impacts made under the infrastructure upgrading component include the following a\. Provision of final disposal sites acceptable to the community for both solid and liquid waste management b\. Provision of about 5,968 household sanitation facilities benefiting an estimated 135,807 people c\. Provision of waste management and waste collection equipment for DAs in support of waste collection services\. d\. Construction of new markets at Elmina and Anloga 4\.2 With regard to the institutional strengthening component, the following outcomes were significant a\. Training provided to DA staff b\. Vehicles and equipment to support DAs and Other agencies\. c\. Provision of digital maps for 12 towns\. 5\. Prospects for Project Sustain ability 5\.1 The probability of maintaining the achievements generated from the project in relation to its objectives vary from component to component\. It is highest for the waste management component, and lowest for the institutional strengthening/capacity building component\. - 21 -  5\.2 One of the major problems phasing emerging Urban Towns in Ghana is the difficulty encountered with land acquisition for waste disposal\. The project has enabled the 12 town acquire designated sites for waste disposal, thus enabling them plan future development appropriately\. 5\.3 It is unlikely that the achievements generated by the three most significant outcomes of the institutional strengthening component can be maintained in view of budgetary constraints within most sectors\. 6\. Bank/Borrower performance The Bank provided useful support through regular supervision missions\. The Bank should however take note of the concerns raised under section 7 below\. The Ministry and its implementing agencies also performed satisfactorily in meeting compliance with reporting and audits\. 7\. Lessons Learned from implementation 7\.1 A number of issues directly or indirectly affected the outcome of the project\. These can be classified under the following headings: (a) Project Preparation: Several of the problems encountered during implementation, particularly in relation to the infrastructure development, could be attributed to inadequate time and resources spent on project preparation activities\. Detail engineering was rushed to meet tight credit processing schedules\. This should be avoided in future\. (b) Limited Institutional capacity: Most staff within implementing agencies tend to be preoccupied with their normal day to day activities, and do not have the motivation and incentives to adequately focus on project preparation and implementation\. Consequently, several important decisions have had to be taken without the involvement of these agencies\. Incentives must be created for staff to show commitment to programmes\. (c) Ownership: Although DAs and agencies are encouraged to comment and/or confirm agreement with proposed interventions, the funding agencies decisions tend to override those of the DAs and agencies\. This creates the wrong notion right at the outset that the project is owned by the funding agency, and not the beneficiary\. For example, the Ministry had raised issues likely to affect the proposed pilot recruitment of Personal Services Contract Staff, but this was overlooked until its implementation faced difficulty\. (d) Procurement Processes: The time taken for bid documents to be prepared, and bids to be evaluated are the main causes of delays, and not the procurement process per se\. Therefore, advanced planning needs to be encouraged while approval processes are expedited\. (e) Consultant and Contractor's Performance: This is by far the most important factor that affected the infrastructure development component\. Contracts for rehabilitation of basic facilities such as public toilets in some towns, took more than three times the original contract period to be completed\. The poor performance of contractors created problems for supervision consultancy services, whose fees had been fixed\. (b) Cofinanciers: KfW participated in the project through the construction and rehabilitation of markets and lorry parks, including market sheds\. The principal lessons learned during the implementation of the KfW-assisted Second Towns Project are as follows: 1\. Provision of Market Superstructures\. In many cases the beneficiaries' failure to provide market superstructures, as required by the project, proved to be an obstacle to the prompt re-opening of the rehabilitated markets and subsequent revenue collection\. In future projects, the provision of market superstructures should form part of the rehabilitation or upgrading of markets\. This would not only be - 22 -  advantageous from a technical point of view (coordinated design of market infrastructure and superstructures, clear contractual responsibilities, no-limit-of-contract problems, erection of superstructures before paving and drainage works, etc\.,) but would also result in the handing over of a completed market within a contractually stipulated time\. 2\. Relocation of Market Traders\. The large-scale relocation of market traders followed by the demolition of the existing market superstructure should be avoided wherever possible\. Since location is of great importance to traders, they usually agree only to return to a completed market after relocation, either renovated or new\. Failure to construct the required market superstructures in time puts the achievement of the project objective into jeopardy\. 3\. Rehabilitation of Markets and Lorry Parks While in Use\. The rehabilitation of existing markets and lorry parks while trading and lorry park activities continue causes considerable inconvenience to the public, traders and drivers, as well as to contractors, and leads to increased construction costs and longer contract periods\. But these disadvantages pale in comparison with the provision of a better public service and of creating revenues for the assemblies, and the rehabilitation works should therefore be carried out while the respective facilities are in use wherever possible\. 4\. Market Stalls Allocation Plans\. Allocation plans for the market superstructures to be used by the various traders should be prepared by the Assemblies during the design phase and in close cooperation with the design consultant\. This would help the collection of subscription fees of interested traders and would avoid the construction of unsuitable superstructures\. The subscription fees and monthly dues should be used to finance part of the construction of the superstructures and should be considered part of the GoG financial contribution to the project\. 5\. Paving of Lorry Parks\. Lorry parks should be paved with concrete blocks\. Only under exceptional circumstances should small lorry parks with a light traffic load be sealed with a bituminous double-surface dressing\. 6\. Project Implementation\. The pooling of two to three project towns into one geographically defined zone, served by one design consultant, proved to be adequate for some zones\. For others, where there were great distances between the project towns, it was difficult for one consultant to cover all the towns in the area, especially in the North\. For future projects, it is recommended to assign one supervision consultant for each project town\. 7\. Project Design\. All markets and lorry parks should have well-defined entries and exists\. This is best achieved by the provision of lockable stores along the periphery of these facilities and the installation of gates\. Bathhouses are generally not much utilized\. They should only be provided where there is an explicit demand from market users\. Refuse collection facilities provided by the Project are also used inadequately\. It is recommended that they be placed centrally within the markets, equipped with containers and provide clearly defined access roads be provided for easy refuse removal\. (c) Other partners (NGOs/private sector): Not applicable 10\. Additional Information - 23 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate 1\. Number of DAs without additional refuse 11 9 accumulation outside designated areas 2\. Number of DAs in which at least 90% of 11 11 refuse collection equipment is functional 3\. Number of DAs without flooding on 11 11 improved or rehabilitated roads adjacent to markets and lorry parks 4\. Number of DAs without flooding in 11 11 markets and lorry parks 5\. Number of DAs in which market revenues 11 7 increased by at least 30% in 3 years\. 6\. Number of DAs in which internal revenue 11 11 generation increased by at least 10% in real terms Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate 1\. Number of final waste disposal sites 11 11 rehabilitated or constructed (solid combined with liquid) 2\. Number of public toilets rehabilitated or 277 206 constructed 3\. Number of domestic toilets constructed 2,700 5,968 4\. Kilometers of roads with drains improved 73\.8 57\.6 or rehabilitated 5\. Number of markets combined with lorry 12 14 parks improved and provided with public toilets and security lights 6\. Number of properties re-evaluated 74,300 125,043 7\. Number of DAs in which a billing and 11 11 collection system based on the new rolls for property tax was introduced 8\. Digital maps produced for number of 300 700 square km at 1:2,500 scale 9\. Number of DAs in which training was 11 11 provided according to their annual training plan 1End of project - 24 -  STATUS OF CIVIL WORKS IN THE PROJECT TOWNS Roads(km) Markets & Lorry Refuse Collection Street Lights Public Toilets (No\.) Household Toilets (No\.) Property Revaluation Parks (ha\.) Points (No\.) (No\.) (No\.) Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual Sunyani 10\.6 14\.1 4 4\.5 20 19 72 75 20 11 185 763 14,250 20,868 Ho 6\.4 4\.1 1\.55 2\.5 0 25 14 260 9 11 410 549 7,700 6,832 Keta/Anloga 4\.1 7\.2 0\.2 5\.6 10 10 27 176 30 24 410 317 6,600 10,651 Koforidua 4\.8 2\.5 1\.75 2\.5 25 25 50 105 27 18 307 1,520 8,700 11,845 Agona Swedru 6\.08 6\.1 0\.63 1 0 10 20 60 9 9 83 651 3,350 10,600 Wa 3\.5 1\.7 1\.36 3\.2 25 15 28 40 34 23 122 129 3,150 5,971 Cape Coast 3\.5 3\.3 2\.5 2\.1 25 24 38 125 42 24 410 451 12,650 13,711 Elmina 4 4\.3 1 2\.2 0 10 15 80 17 16 205 385 4,000 10,320 Bolgatanga 9\.2 2\.4 2\.2 2\.8 20 25 36 135 35 26 245 344 5,200 10,555 Bawku 13\.7 5\.7 3 6\.1 0 10 70 45 35 30 122 236 4,400 5,340 Techiman 8 6\.2 9\.6 10 0 20 133 95 19 14 201 623 4,300 18,350 Total 73\.88 57\.6 27\.79 42\.5 125 193 503 1196 277 206 2,700 5,968 74,300 125,043 DISTRIBUTION OF WASTE MANAGEMENT EQUIPMENT IN THE DAs Bulldozer Skip Loaders Cesspit Emptiers (No\.) Tractors (No\.) Roll-on/Roll-off Trucks Trailers (No\.) Containers (No\.) (No\.) (No\.) (No\.) Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual Target Actual Sunyani 1 1 2 3 2 2 0 0 0 0 0 0 21 31 Ho 1 1 2 3 2 2 0 0 0 0 0 0 21 31 Keta/Anloga 1 1 0 0 2 2 3 3 2 2 18 18 10 10 Koforidua 1 1 2 3 3 3 0 0 2 2 0 0 45 73 Agona Swedru 1 1 0 2 1 2 3 3 0 0 18 18 0 20 Wa 1 1 1 3 1 2 0 0 0 0 0 0 18 38 Cape Coast 1 1 1 2 1 1 0 0 0 0 0 0 29 39 Elmina 1 1 0 2 1 2 2 2 0 0 10 10 0 20 Bolgatanga 1 1 2 3 2 4 0 0 0 0 0 0 26 23 Bawku 1 1 0 1 1 2 3 3 0 0 18 18 0 10 Techiman 1 1 0 1 1 2 3 0 0 2 18 0 0 20 Total 11 11 10 23 17 24 14 11 4 6 82 64 170 315 Total containers delivered include: Open containers (241); Covered containers (8); Night soil containers (30) and Roll-on/Roll-off containers (36) - 25 -  Table 1\. TOTAL INTERNAL REVENUES, 1997 - 2002 In constant prices (December 2002), million Cedis Annual Annual Change in District Total Change 1997 1998 1999 2000 2001 2002 Average Average Annual Assembly 1997-2002 1997-2002 1997-99 2000-02 Average Sunyani 730 913 1,094 831 952 1,328 5,848 82% 912 1,037 14% Ho 518 847 1,070 995 1,592 1,356 6,378 162% 812 1,314 62% Keta/ Anloga 378 506 455 292 435 494 2,560 31% 446 407 -9% Koforidua 844 1,210 1,254 1,470 843 3,176 8,798 276% 1,103 1,830 66% Agona 396 704 860 645 937 964 4,507 143% 654 849 30% Swedru Wa 482 418 423 575 569 990 3,458 105% 441 711 61% Cape Coast 500 561 680 685 1,341 1,763 5,530 253% 580 1,263 118% Elmina 267 524 390 528 504 375 2,588 41% 393 469 19% Bolgatanga 479 440 443 1,066 3,204 3,709 9,341 674% 454 2,660 486% Bawku 746 1,045 1,084 818 778 966 5,436 30% 958 854 -11% Techiman 1,077 1,298 1,744 1,759 1,806 2,110 9,796 96% 1,373 1,892 38% Total 6,418 8,466 9,498 9,666 12,962 17,231 64,240 168% 8,127 13,286 63% CPI 38\.7 45\.6 50\.9 71\.6 86\.8 100\.0 CPI = Consumer Price Index (December 2002 = 100) Note: The annual average is calculated over 3 years at a time, one average for 1997-1999 and another for 2000-2002, to show the difference between the revenue improvement implementation phase of the project and the period, when the revenue collection was expected to improve\. The last column contains the % change in these two values\. Table 2\. PROPERTY RATES , 1997 - 2002 In constant prices (December 2002), million Cedis Annual Annual Change in District Total Change 1997 1998 1999 2000 2001 2002 Average Average Annual Assembly 1997-2002 1997-2002 1997-99 2000-02 Average Sunyani 171 156 145 106 107 384 1,069 125% 157 199 27% Ho 8 11 20 571 328 289 1,227 3614% 13 396 2948% Keta/ Anloga 4 4 5 2 2 69 86 1563% 4 24 446% Koforidua 18 22 33 202 170 1,860 2,305 10161% 24 744 2972% Agona 23 60 84 111 110 229 617 906% 56 150 170% Swedru Wa 88 93 32 25 80 464 781 428% 71 190 168% Cape Coast 26 38 75 98 289 304 831 1075% 46 231 396% Elmina 104 121 64 110 61 129 589 25% 96 100 4% Bolgatanga 11 11 9 59 56 740 886 6390% 10 285 2642% Bawku 13 15 18 15 6 17 84 30% 15 13 -18% Techiman n/a n/a n/a 89 78 107 n/a n/a n/a 91 n/a Total 465 531 484 1,389 1,287 4,592 8,748 887% 493 2,331 372% Share 7% 6% 5% 14% 10% 27% 14% 6% 18% Share = Property Rates as a proportion of Total Internal Revenues for all DAs combined n/a Data not available - 26 -  Table 3\. MARKET REVENUES, 1997 - 2002 In constant prices (December 2002), million Cedis Annual Annual Change in District Total Change 1997 1998 1999 2000 2001 2002 Average Average Annual Assembly 1997-2002 1997-2002 1997-99 2000-02 Average Sunyani 107 171 232 214 221 206 1,150 92% 170 213 26% Ho 109 140 146 169 216 197 976 82% 131 194 48% Keta/ Anloga 124 135 144 98 108 121 730 -2% 134 109 -19% Koforidua 109 140 146 627 228 171 1,420 58% 131 342 160% Agona 88 203 165 118 149 172 893 96% 152 146 -4% Swedru Wa 41 122 36 45 44 72 360 76% 66 54 -19% Cape Coast 29 61 68 67 114 176 516 503% 53 119 126% Elmina 53 39 46 44 37 51 270 -3% 46 44 -4% Bolgatanga 83 88 237 73 77 56 614 -32% 136 69 -49% Bawku 109 139 146 120 93 91 698 -16% 131 101 -23% Techiman 564 805 1,293 1,314 1,131 1,608 4,774 639% 414 1,177 184% Total 1,413 2,044 2,658 2,889 2,417 2,922 14,343 107% 2,038 2,743 35% Share 22% 24% 28% 30% 19% 17% 22% 25% 21% Share = Property Rates as a proportion of Total Internal Revenues for all DAs combined Table 4\. TOTAL INTERNAL REVENUES - PROJECTED vs\. ACTUAL In constant prices (December 2002), million Cedis District 1997 1998 1999 2000 Total Assembly P A P A P A P A P A D Sunyani 276 730 270 913 277 1,094 229 831 822 2,737 233% Ho 231 518 227 847 235 1,070 195 995 693 2,435 252% Keta/ 302 378 332 506 384 455 357 292 1,018 1,339 32% Anloga Koforidua 764 844 833 1,210 955 1,254 882 1,470 2,552 3,309 30% Agona 370 396 402 704 462 860 429 645 1,234 1,961 59% Swedru Wa 146 482 145 418 152 423 128 575 443 1,323 199% Cape Coast 281 332 282 561 298 680 255 685 861 1,573 83% Elmina 180 267 189 524 208 390 185 528 577 1,180 105% Bolgatanga 264 479 249 440 249 443 200 1,066 762 1,362 79% Bawku 482 746 215 1,045 220 1,084 184 818 917 2,875 214% Techiman 546 1,077 547 1,298 578 1,744 492 1,759 1,671 4,120 147% Total 3,844 6,250 5,309 8,466 4,016 9,498 3,534 9,666 13,169 24,213 84% P Projected, A Actual, D Difference Note: The assumed inflation rate for the projections was 10% per year\. The actual inflation rate was much higher, about 30% per year from 1993 (the base year) to 2000, causing the forecasts to be underestimated\. - 27 -  Annex 2\. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million Rehabilitation and upgrading of urban infrastructure and 35\.69 38\.00 64 services Institutional strengthening 7\.74 11\.98 14 Incremental recurrent costs 5\.21 2\.30 9 Total Baseline Cost 48\.64 52\.28 Physical Contingencies 3\.48 6 Price Contingencies 3\.40 6 Total Project Costs 55\.52 52\.28 Total Financing Required 55\.52 52\.28 Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N\.B\.F\. Total Cost Other 1\. Works 10\.79 15\.82 0\.00 7\.94 34\.55 (10\.12) (12\.22) (0\.00) (0\.00) (22\.34) 2\. Goods 6\.60 0\.43 0\.35 0\.00 7\.38 (6\.50) (0\.42) (0\.34) (0\.00) (7\.26) 3\. Services 0\.00 0\.00 9\.41 0\.64 10\.05 (0\.00) (0\.00) (7\.45) (0\.00) (7\.45) 4\. Operating and 0\.00 0\.00 3\.53 0\.00 3\.53 Maintenance (0\.00) (0\.00) (1\.46) (0\.00) (1\.46) Total 17\.39 16\.25 13\.29 8\.58 55\.51 (16\.62) (12\.64) (9\.25) (0\.00) (38\.51) Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N\.B\.F\. Total Cost Other 1\. Works 9\.02 14\.98 0\.00 9\.14 33\.14 (8\.07) (12\.23) (0\.00) (0\.00) (20\.30) 2\. Goods 6\.19 0\.40 0\.35 0\.00 6\.94 (5\.92) (0\.20) (0\.20) (0\.00) (6\.32) 3\. Services 0\.00 0\.00 9\.41 1\.02 10\.43 (0\.00) (0\.00) (9\.40) (0\.00) (9\.40) 4\. Operating and 0\.00 0\.00 1\.77 0\.00 1\.77 Maintenance - 28 -  (0\.00) (0\.00) (0\.84) (0\.00) (0\.84) Total 15\.21 15\.38 11\.53 10\.16 52\.28 (13\.99) (12\.43) (10\.44) (0\.00) (36\.86) NBF- KfW financed $9\.14 million on market and lorry parks; and Works (NCB) beneficiary household financed $1\.41 million of the Household Toilet scheme\. 1/Figures in parenthesis are the amounts to be financed by the IDA Credit\. All costs include contingencies\. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units\. Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate IDA Govt\. CoF\. IDA Govt\. CoF\. IDA Govt\. CoF\. Rehabilitation and 18\.07 2\.70 7\.70 19\.19 1\.95 7\.71 106\.2 72\.2 100\.1 Upgrading Institutional Strengthening 15\.68 0\.78 0\.60 15\.40 0\.08 1\.34 98\.2 10\.3 223\.3 Operating and 1\.46 2\.07 0\.54 0\.83 37\.0 40\.1 Maintenance - 29 -  Annex 3\. Economic Costs and Benefits The SAR estimated the economic viability of the project by calculating the EIRR of 14 Road Rehabilitation Activities, 3 Market Interventions, and two each of the Solid Waste and Liquid Waste Management Activities\. The ex-post economic evaluation of the project covers the roads and drains investments\. A total of 56km was constructed compared to the SAR estimate of 73\.9km\. The economic analysis is based on re-evaluation of the data on traffic, costs and benefits of sample project components\. The Model used is RTIM2\. The methodology used in the re-evaluation is similar to the SAR\. The capital investment and maintenance costs were revised to reflect January 2003 and are included in the cost stream\. The benefits consist of Vehicle Operating Cost (VOC) savings\. The project economic life of 25 years is assumed and the capital investment period for all projects ranged from June 1996 to December 2002\. Economic Evaluation of Roads Sample Roads used in pre- and post-construction EIRR estimates Road sections Length in km Reconstructed Existing km LIBRARY ROAD 0\.79 0\.79 DARPORTIDONGO ROAD 0\.82 0\.82 STADIUM ROAD 0\.69 0\.69 TANO ROAD 1\.43 1\.43 BAMIRI ROAD 1\.78 1\.78 GYARKO ROAD 0\.89 0\.89 MARKET STREET 1\.20 1\.20 AHMADIYA ROAD 0\.89 0\.89 LITTLE WOOD ROAD 4\.20 4\.20 CMB JUNCTION 1\.90 1\.90 SHELL ROAD 1\.03 1\.03 MANKESIM ROAD 0\.94 0\.94 NSAWAM ROAD 1\.86 1\.86 Economic Cost Economic costs were mainly discounted capital cost of the intervention, routine and periodic maintenance costs, appropriately shadow priced (factor: 0\.93) to remove distortions introduced by such impositions as custom duties and taxes\. Traffic Projection Traffic data was collected for each road\. Traffic is assumed to grow at an average rate of 2%\. For each road, the traffic for year of completion is summarized below\. - 30 -  SAR Road Section Traffic Year of Completion (YC) LIBRARY ROAD 3220 DARPORTIDONGO ROAD 2320 STADIUM ROAD 5888 TANO ROAD 16,128 BAMIRI ROAD 2,576 GYARKO ROAD 8768 MARKET STREET 13648 AHMADIYA ROAD 8080 LITTLE WOOD ROAD 18480 CMB JUNCTION 1376 SHELL ROAD 6688 MANKESIM ROAD 9792 NSAWAM ROAD 5072 Economic benefits Economic benefits were expressed in terms of the monetary value of the annual road user savings resulting from VOC savings due to improved surface and traffic flows\. Benefits accruing from saving in peak traffic volumes were included in the analysis, which was run using a VOC sub model of the RTIM2\. Vehicles Car (1) Pickup (2) Mammy/Wago Buses Light Axle Medium Heavy n Axle Axle WITHOUT CONGESTION GOOD 0\.14 0\.14 0\.21 0\.35 0\.37 0\.53 0\.89 FAIR 0\.17 0\.17 0\.26 0\.37 0\.44 0\.65 1\.02 POOR 0\.35 0\.40 0\.47 0\.71 0\.96 1\.16 2\.05 WITH CONGESTION FAIR 0\.32 0\.33 0\.39 0\.60 0\.80 0\.96 1\.71 POOR 0\.46 0\.53 0\.62 0\.95 1\.27 1\.54 2\.73 - 31 -  Economic Evaluation The weighted EIRR of the sample roads is estimated to be 68% well above the 15% requirement stipulated for the projects in the sector\. The result also compare favorably with the corresponding figures of 84% overall weighted EIRR for the roads and drainage component as given in the SAR\. The main reason for the variation was due to significant cost increase as is evidenced below\. ERR AT PROJECT ERR AT PROJECT APPRAISAL COMPLETION ROAD NAME COST ERR AADT COST ERR % 000'US$ % 000'US$ % LIBRARY ROAD 240 78\.91 3200 642\.2 20% DARPORTIDONGO ROAD 200 77\.01 2320 667\.0 15% STADIUM ROAD 230 50\.8 5888 561\.0 33% TANO ROAD 552 49\.62 16128 336\.0 177% BAMIRI ROAD 690 49\.08 2576 418\.3 47% GYARKO ROAD 345 78\.2 8768 209\.0 112% MARKET STREET 460 162\.42 13648 282\.0 107% AHMADIYA ROAD 345 62\.17 8080 209\.0 105% LITTLE WOOD ROAD 690 67\.57 18480 1985\.0 79% CMB JUNCTION 253 39\.11 1376 447\.0 47% SHELL ROAD 230 93\.77 6688 242\.0 93% MANKESIM ROAD 460 163\.52 9792 221 111% NSAWAM ROAD 455 105\.41 5072 437 68% TOTAL & WEIGHTED AVG 5150 84 6657 68 Sensitivity Analysis A sensitivity analysis was carried out using changing assumptions about the benefits and costs\. With 50% decrease in benefits and 50% increase in costs, the EIRR estimates indicate the EIRR estimates are greater than the minimum requirement of 15% for such projects\. The results shown below, give an indication of a very robust program with considerable benefits of the economy in terms of reduced vehicle operating costs, representing some 80% savings in cost of items for which the country is a net importer\. - 32 -  ERR AT PROJECT APPRAISAL ERR AT PROJECT COMPLETION ZERO TRAFFIC ROAD NAME EIRR % (Base) 50% DECREASE 50% INCREASE % GROWTH IN BENEFITS IN COSTS EIRR % ALONE ALONE EIRR % EIRR % LIBRARY ROAD 20% 19% 10% 13% DARPORTIDONGO ROAD 15% 14% 7% 10% STADIUM ROAD 33% 32% 18% 23% TANO ROAD 177% 176% 111% 134% BAMIRI ROAD 47% 45% 27% 33% GYARKO ROAD 112% 110% 69% 83% MARKET STREET 107% 88% 69% 82% AHMADIYA ROAD 105% 103% 65% 78% LITTLE WOOD ROAD 79% 75% 46% 57% CMB JUNCTION 47% 61% 22% 30% SHELL ROAD 93% 91% 56% 68% MANKESIM ROAD 111% 106% 69% 83% NSAWAM ROAD 68% 62% 41% 50% TOTAL & WEIGHTED AVG 68 65 40 49 - 33 -  Annex 4\. Bank Inputs (a) Missions: Stage of Project Cycle No\. of Persons and Specialty Performance Rating (e\.g\. 2 Economists, 1 FMS, etc\.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation February 1992 2 TL (1); Financial Analyst (1) December 1992 4 Fin\. Analyst (1); Engineer (2); Valuation Specialist (1) March/April 1993 10 Sr\. Urban Fin\. Spec\. (1); Urban Planner (1); Pr\. Institutional Dev Spec\. (1); Proc\. Spec\. (1); Engineer (1); Mun Engineer (1); Mun\. Fin\. Spec\. (1); Fin\. Analyst (1); Sr\. Training Spec\. (1); Econ\. (1) Appraisal/Negotiation June/July 1993 8 Sr\. Urb\. Fin\. Spec\. (1); Urb\. Planner (1); Pr\. Inst\. Dev\. Spec\. (1); Proc\. Spec\. (1); Eng\. (1); Mun\. Eng\. (1); Mun\. Fin\. Spec\. (1); Fin\. Anal\. (1) 11/29/1993 Negotiations Supervision 05/14/1995 2 Civil Eng\. (1); Sr\. Urb Fin\. S S Spec\. (1) 09/27/1995 3 Civil Eng\. (1); Sr\. Urban Fin\. S S Spec\. (1); Rating Valuation (1) 01/31/1996 2 Civil Eng\. (1); Sr\. Urban Fin\. S S Spec\. (1) 06/27/1996 4 TL (1); Rating Expert (1); S S Training Con (1); Civil Eng\. (1) 6/27/1997 5 TL (1); Infra\. Eng\. (1); KfW S S Cons\. (1); Rating Valuation Cons\. (1); Training Cons\. (1) 03/01/1998 3 TL (1); Civil Eng\. (1); Training S S Spec\. (1) 11/11/1998 2 TL (1); Municipal Engineer (1) S S 04/06/1999 4 TL (1); Public Sector Mgmnt (1); S S Mun\. Eng\. (1); Training Con\. (1) 10/13/1999 2 Team Leader (1); Engineer (1) S S 05/31/2000 8 Sr\. Urban Fin\. Spec\. (1); TL (1); S S Pr\. Mun Eng\. (1); Fin\. Analyst (1); Transp\. Spec (1); Consultant (2); Team Assist (1) 1/19/2001 5 TL (1); Urban Fin\. (1); Mun\. S S Eng\. (1); San\. Eng\. (1);Trng Cons\. (1) - 34 -  10/19/2001 7 TL (1); Urban Fin\. (1); Mun\. S S Eng\. (1); San\. Eng\. (1); Rating Cons\. (1); Trng Cons\. (1); Team Asst\. (1) 04/17/2002 8 TL (1); Urban Fin\. (1); Mun\. S S Eng\. (1); Transport (1); Proc (1); Trng (1); Fin\. Man (1); Team Assist\. (1) 09/13/2002 6 TL (1); Mun\. Eng\. (1); Urban S S Fin\. Spec\. (1); Proc\. Spec\. (1); Fin\. Mgmnt\. Spec\. (1); Team Assist (1) ICR 08/04/2003 4 TL (1); Sr\. Urban Dev\. Spec\. (1); Mun\. Engineering - Consultant (1); Team Assistant (1) (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation 384,474\.83 Appraisal/Negotiation Supervision 407,305\.28 ICR 21,800\.82 Total 806,235\.45 - 35 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 36 -  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6\.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 37 -  Annex 7\. List of Supporting Documents 1\. LGDP ICR Aide Memoire - August 2003 2\. Private sector participation in the Management of solid waste systems in 4 DAs (2003) 3\. Technical and Financial Audit of Operation and Maintenance (O&M) fund (2003) 4\. Computerization of Budgeting and Accounting system in 4 pilot DAs (2003) 5\. Technical and Financial Audit of Domestic (Household) toilet scheme (2002) 6\. Land Use Planning and Development Guidance (2003) 7\. Consultancy Services for 25 urban towns under the proposed Urban V project (1999) 8\. Digital Mapping of 11 LGDP urban towns (1999) 9\. Revenue Improvement Action plan (RIAP) (General and Specific for 12 towns) (1995) 10\. Training needs and Training Institutions Assessment report (1995) - 38 -  - 39 -

REVIEW

P074072

Document of The World Bank Report No\. 31021 IMPLEMENTATION COMPLETION REPORT TANZANIA FIRST POVERTY REDUCTION SUPPORT CREDIT AND GRANT (CREDIT NO\. 37720) JANUARY 27, 2005 Poverty Reduction and Economic Management Unit 2 (AFTP2) Tanzania and Uganda Country Management Unit (AFCO4) Africa Region  Simplified Implementation Completion Report For Programmatic Adjustment Operations Operation ID: P074072 Operation Name: Poverty Reduction Support Credit and Grant Team Leader: Robert Utz TL Unit: AFTP2 Report Date: December 27, 2004 1\. Program Data Name: Poverty Reduction Support Credit and Grant L/C Number: 37720 Country/Department: Tanzania Country Department Unit Region: Africa Sector/subsector: Central government administration (40%); Sub-national government administration (20%); General agriculture, fishing, and forestry sector (20%); Micro and SME finance (10%), Water (10%)\. Theme: Public expenditure, financial management, and procurement; Municipal Finance; Rural markets; Tax policy and administration; Environmental policies and institutions\. KEY DATES Original Revised/Actual PCD/PR: February 13, 2003 Effective: July 18, 2003 July 18, 2003 Appraisal: February 26, 2003 MTR: Approval: May 29, 2003 Closing: June 30, 2004 June 30, 2004 Borrower/Implementing Agency: The United Republic of Tanzania, Ministry of Finance and other Ministries Other Partners: KfW STAFF Current At Appraisal Vice President: Gobind Nankani Callisto Madavo Country Director: Judy O'Connor Judy O'Connor Sector Manager: Kathie L\. Krumm Fredrick Kilby Team Leader at ICR: Robert Utz Benno J\. Ndulu ICR Primary Author: Alema Siddiky 2\. Principal Performance Ratings (focused on this operation's contribution toward overall program objectives) (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S 2  QAG (if available) ICR Quality at Entry: S Operation at Risk at Any Time: No 3\. Program Description 3\.a Description of the Program 1\. Tanzania launched the participatory Poverty Reduction Strategy (PRS) in 1999 with the preparation of an interim PRS followed by the approval of a full PRS in 2000\. The PRS built on the 1997 National Poverty Eradication Strategy (NPES), which set out long term poverty reduction goals consistent with international development goals, and the medium term expenditure framework (MTEF), which focused on resource allocation to the priority sectors\. 2\. The PRS has focused on three main areas of outcomes: (i) reducing the breadth and depth of income poverty, including reducing basic needs poverty and food poverty with a particular focus on rural areas where poverty is more prevalent; (ii) improving the quality of life and social well being: this entails improving human capabilities, enhancing longevity and survival, and social well-being (social inclusion and personal security), improving nutrition, and containing extreme vulnerability (mainly through safety nets); and (iii) creating an environment conducive to development that can be sustained\. The environment encompasses macroeconomic stability and good governance\. 3\. The first and third area entail cross-sectoral and institutional measures and the second is primarily dealt with through sector-specific interventions in areas such as health, education and water which are designated as priority sectors\. As part of the PRS process the government has prepared, realigned and approved sector development programs for basic health, basic education, agriculture and water\. These now provide the framework for supporting the implementation of the PRS targets that are specific to the sectors\. 4\. The first, second and third PRS progress reports were endorsed by the Bank's Board on November 27, 2001, May 29, 2003 and June 2, 2004, respectively\. At present, the Government of Tanzania is in the final stages of preparing its second PRSP (i\.e\. the National Strategy for Growth and Reduction of Poverty - NSGRP)\. A second draft of the NSGRP was presented to stakeholders during the Poverty Policy Week in early November 2004\. It covers the period (2004-2008) and builds on the achievements and lessons of implementing the first PRSP (2000-2003)\. 3\.b\. Description of the Operation 5\. The implementation of the above reform program is supported by a series of Poverty Reduction Support Credits (PRSCs) and PRSC-1 is the first in a series of three single tranche operations\. PRSC-1 was approved by the IDA Board on May 29, 2003\. Programmatic adjustment lending was proposed under the Bank's Country Assistance Strategy (CAS) to support the implementation of policies and institutional development programs for sustainable growth and poverty reduction\. PRSC-1 selectively supports the implementation of key priority areas of Tanaznia's Poverty Reduction Strategy (PRS)\. The key feature of the PRSC-1 operation is that it focused on cross cutting and institutional issues\. In coordination with other external assistance programs, the PRSC-1 supported Tanzania's effort to scale up growth, broaden the impact of growth on reducing poverty and improve access to and quality of public services\. The operation aimed to support actions to raise the 3  level of private investment, enhance competitiveness and productivity of the Tanzanian economy create an attractive environment and reduce bottlenecks in the growth of the rural economy and support cross cutting reforms in public sector management\. 6\. The design of the PRSC takes into account requirements for coordination and harmonization with other development partners particularly the Poverty Reduction Budget Support (PRBS) donors\. The motivation for this effort derives from the clear desire of both GoT and the development partners to ensure that all operations adopt : a clear poverty focus guided by the homegrown PRS, coherence in policy dialogue at cross-cutting levels and in sector wide programs, enhanced efficiency in policy dialogue and performance assessment and enhance flexibility and predictability of resource flows\. 7\. PRSC-1 has been harmonized with the PRBS with respect to both substance and process\. The Policy Action Framework(PAF)/Policy matrix, including the set of prior actions and triggers for PRSC-1 was developed in close cooperation with the government, the PRBS donors and the Bank\. As part of the support to the PRS and in the context of the PRSC-1, the Government has carried out the following key policy actions : Table 1: PRSC-1 Focus Areas and Priorities : PRS Objective/Impact Indicator Sector PRSC-1 areas of dialogue PRS Pillar : Reduce Income Poverty Breadth-proportion below poverty Rural Development Reform of crop boards line\. Recommendation of micro finance legislation, regulations and supervisory framework Implementation of Agriculture Sector Development Program Land Act and Village Act implementation Private Sector Land market reform Development Preparation of SME and PSD strategy Implementation plan for Business environment PRS Pillar : Achieve and Sustain a Conducive Development Environment Macro Stability Debt contracting & Approval of National Debt Strategy (NDS) management Draft work plan for the implementation of NDS\. Domestic Revenue Establishment of large tax payer department Completion of diagnostic studies for TRA's tax admin system; Development of the harmonization of local government tax\. Governance- Improve Budget formulation & Approval and execution of budget consistent with effectiveness in the delivery of management PRS; pubic services and the overall Budget guidelines consistent with PRS priorities incentive environment and MDGs Improvement of budget classification for the priority areas and local government; Initiation of expenditure tracking studies Public Service Reform Pay Reform 4  Public Service Act Governance ­ Minimize resource Financial Management PFMRP approval leakage and strengthen System and accounting manuals finalized; accountability Implementation of all commitments appropriated by Parliament in the budget Training of AO's and access to IFMS to all AO's Procurement Revision of local authority tender board Preparation and issuance of LGA Procurement regulations; Anti-corruption Reporting of anti-corruption activity Revision and approval of National Anti-corruption strategy; Completion of anti-corruption plans to all LGA's Aid Management Action plan for LGA's Inclusion of aid in budget Reporting of LGAs on aid Finalization of TAS action plan PRS Pillar : Improve Quality of Life and Social Well-being Environment Environment Complétion of environnemental management Confirmation of preferred institutional framework for environmental management; Understanding of environmental and poverty linkages; Poverty Monitoring and Evaluation Poverty Monitoring and Poverty Monitoring and PRS reporting evaluation evaluation Review of PRS progress report 4\. Achievement of Objectives and Outputs 8\. The assessment of progress under PRSC-1 has three core elements\. Firstly, progress in the implementation of the PRS is assessed in the second PRS progress report with a focus on outcomes\. Government has developed a list of key indicators which are also part of the PRSC assessment to monitor results\. Secondly, budget formulation and implementation is assessed in the context of PER process through the external evaluation\. Finally, government, PRBS donors and the Bank jointly reviewed progress in the implementation of the PRSC supported reform agenda during the annual review\. 9\. Overall PRS implementation: The Second PRS progress report (covering the period July 2001-2002) and the related Joint Staff Assessment (Report No\. 25859), which were presented to the Board together with PRSC-1, confirm that Tanzania continued to make significant progress both in the implementation of the country's PRS, and in further refining the strategy\. With respect to policy, sound macro-economic management and further articulation of the key agricultural and rural strategies are highlighted\. Progress against the targets set out in the PRSP has been generally good, with the growth and education targets surpassed, but slower-than-hoped for progress on health indicators\. 10\. Public expenditure performance: The government-led, participatory Public Expenditure Review and Medium Term Expenditure Framework processes are the key mechanisms for translating the PRS into annual budgets\. The FY03 PER (Report No\. 26807-TA) shows that real per capita spending in the sectors and areas defined as pro-poor has more than doubled between FY99 and FY04\. The PER also suggests important improvements in public finance management, but points towards remaining weaknesses in fully aligning sector spending plans with the PRSP\. 5  11\. Implementation of actions identified in the Performance Assessment Framework: The government has satisfied all original triggers and benchmarks related to PRSC-1\. Under the Memorandum of Understanding between the Government of Tanzania and the donor group providing programmatic support to the implementation of the PRS, progress in implementing the actions in the Performance Assessment Framework was reviewed during the joint annual review in October 2002 and the mid-year review in March 2003\. Both reviews assessed overall progress as being satisfactory\. Policy measures undertaken under PRSC-1 are discussed in Table 1 in Annex A\. Given the lag in translating policy actions into impacts, outcome achievements will be discussed in the programmatic ICR for the last PRSC of the series\. 12\. Next Planned Operation: PRSC-2 was approved by the Bank's Board of Executive Directors on July 29, 2004 upon completion of all prior actions\. Overall progress in the implementation of the PRSP and the Performance Assessment Framework remains satisfactory and PRSC-3 is under preparation\. 5\. Major Factors Affecting Implementation and Outcome 13\. Strong leadership from the top and broad ownership of the reform agenda by government were critical factors in the progress achieved under PRSC-1\. Continued political and macro-economic stability created a conducive environment for the implementation of PRSC-1\. 14\. The comprehensiveness of the reform agenda stretched the very weak capacities in Government to their limit\. Complementary technical assistance was thus important in facilitating the implementation of the reform program, together with efforts to strengthen public sector capacities and incentives\. 15\. An important aspect of the Tanzanian program is also the progress in donor harmonization achieved with PRSC-1\. Achievements include both greater consistency in the government-donor dialogue as well as a reduction in transaction costs which is important, given government's weak capacities\. 6\. Bank and Borrower Performance 16\. Bank Performance : Overall Bank performance has been satisfactory\. PRSC-1 was prepared by the country team with significant contributions by country office staff (TTL based in the country office) which played a crucial role in both substance (by providing local knowledge) and contribution (coordination with Government, donors and HQ)\. Cross sectoral cooperation and coordination have been effective\. The operation complied with all relevant Bank environmental and business policies\. The Bank through its country office presence under the direction of a proactive Country Director has provided an effective voice to implement the series of PRSC's through its lending policies outlined in the CAS\. Through direct supervision on the ground, Bank resident staff helped ensure the smooth and successful supervision of the operation\. 17\. The interaction with the IMF was also satisfactory, with the Bank complementing the Fund's Poverty Reduction and Growth Facility\. In addition, the team also cooperates with multilateral and bilateral donors to ensure an appropriate division of responsibilities in support of the country's PRS\. 6  18\. Borrower's Performance : The Government of the United Republic of Tanzania played an active role in the preparation of the Credit under the direction of the Senior Permanent Secretary of the Ministry of Finance and the sense of program ownership was strong among the government officials\. Reflecting this strong ownership, the government implementation of the program was effective and satisfactory\. The PRSC group maintained a continuing economic dialogue with Bank and PRBS donors, coordinated and monitored the program under the direction of the Senior Permanent Secretary and helped carry out the policy actions called for in PRSC-1 before Board presentation and effectiveness\. Government of Tanzania was proactive in meeting the requirements called for by the Credit\. 7\. Findings and Implications for Subsequent Operation(s) in Series 19\. In Tanzania, a stable political environment has contributed to the successful implementation of macroeconomic and structural reforms\. The forthcoming presidential election in October 2005 may divert attention from macroeconomic management and slow down market oriented structural reforms\. However, the government appears to be committed to sustain the reform program over the medium term by improving outreach activities to broaden consensus on the direction of reforms\. 20\. Development and implementation of a common performance assessment framework and a joint review process, which harmonizes general budget support of 12 donors, is a major achievement\. At the same time, it also poses significant challenges for the Bank to adjust its internal requirements to the government-led harmonization process on the ground\. 21\. Weaknesses in government processes such as the poverty monitoring system or the budget system impact directly on the ability of the PRSC program to present adequate results orientation and monitoring frameworks\. It will be important to continue focusing on improvements in the underlying government processes rather than attempting to circumvent these problems and weaknesses by developing separate PRSC processes\. 7  Annex 1 Table 1: Achievements under PRSC-1 (Triggers and Policy Matrix) PRS/PRSC Objective Sectors Achievement under PRSC-1 Current Status PRS Pillar : Reduce Income Poverty Breadth-proportion Rural Prepared the Agriculture Sector Key coordination and monitoring below poverty line\. Development Development Programme (ASDP) benchmarks have been developed as Framework and Process document; follows : (i) effective functioning of various coordination for a; (ii) timely reporting and monitoring of the sector in accordance with ASDP M&E framework (iii)share of ASLMs budgets and actual; (iv) expenditures going to ASDP priorities\. Prepare recommendation for legal, Passed by Parliament in February 2003 and assessented by President in regulatory and supervisory framework for April 03\. microfinance; Private Sector Prepared a position paper after The Land Act, 2003 was submitted Development consultations with stakeholders, reviewed for the first reading to November 2003 the Land Act and secured Government Parliamentary Session\. (Bill supplement approval of the amendments\. No\. 20 of October 17, 2003 published in the Government Gazette No\. 42 Vol\. 84 dated 17th October 2003)\. Assented by the President on 30/03/04\. Initiated the process of preparing an The ToRs were discussed by the integrated private sector development stakeholders early this year, including strategy through inter ministerial and public DANIDA who have offered to co fund sector/private sector dialogue\. the exercise\. Negotiation with the consultant has started and it has been decided that the revised ToRs should undergo last round of revision by stakeholders before being finalized\. Secured Govt approval for the SME Implementation of the SME policy policy \. has started and some of the activities have been financed by 2003/04 budget while additional activities have been included in the MTEF 2004/05-2006/07\. Zonal workshop was held in April 2004\. Approval of implementation plan for 3 government staff have been the Business Enviornment Strengthening seconded to Better Regulation Unit\. The for Tanzania (BEST) programme by the process of recruiting the CEO is at an Integrated Framework Steering advanced stage and that it is expected that s/he will start working on 1st July Committee\. 2004\. PRS Pillar : Achieve and Sustain a Conducive Development Environment Macro stability Debt contracting Presented for Parliament approval Implementation of National Debt & management the amended Loans, Guarantees and Strategy recommendation has been Grants Act No\. 30 of 1974 to ensure a completed\. Work plan developed , however, further detail to be added to prudential debt contracting and ensure easier implementation\. management system for government and independent public institutions\. Developed a draft work plan for the implementation of all the National Debt Strategy (NDS) Draft DSA completed and 8  Removed government exemptions submitted\. Comments have been Domestic on VAT and import duties ; tendered from the IMF and World Bank\. Revenue Established Large Tax Payers The proposed new Income Tax Act and proposed amendments to existing Department in TRA; tax laws will serve the same purpose\. Completed diagnostic studies of Pre-1997 Government notices relating to TRA's tax admin system; exemptions under agreements with development partners will be incorporated in the proposed amendments to existing tax laws\. The government will pursue discussions of tax exemptions with development partners on a bilateral basis over the coming years and also pursue this issue in international for a, amendments of EPZ regulations are being prepared\. A new Custom Code for the East African Community (EAC) is currently being drafted with the aim to establish a Customs Union for the EAC\. The EPZ Developed a strategy for regulations will be amended to be in line harmonization of local government with this new code\. taxes and levies and issued relevant guidelines to local authorities; Nuisance taxes removed with effect from July 2003\. The Ministry of Agriculture and Food security together with the Ministry of Cooperation and Marketing prepared a report on the rationalization of roles, functions and financing of Crop Boards\. A through study on the roles, functions and financing of the coffee, cotton, cashews nuts and tea started in September 2003\. Governance- Improve Budget Approved Budget for 2002/03 in line Priority sectors and items are effectiveness in the formulation & with PRS objectives\. classified by GFS codes\. Budget review delivery of pubic management Budget guidelines for 2003/04- joint analysis conducted by Government services and the 2005/06 consistent with PRS priorities and and donors\. With supplementary budget, overall incentive issued to MDAs/LGAs there is a net increase in allocation to Identification and definition of PRS sectors, compared to approved environment expenditure codes for priority sector items budget, mainly due to need to replenish and their inclusion in the budget guidelines Strategic Gain Reserve\. for 2003/04; Budget Guidelines published in Budget guidelines for 2003 issued to January 2004\. PER sector reports LGAs requiring use of GFS classification prepared more timely\. PRS Progress for preparation of LGA budgets Report III delayed and could therefore Expenditure tracking baseline survey not feed into BG preparation\. initiated as planned in PER; Education sector tracking study is planned and expected to be finalized by May 04\. Road study carried by Technical Audit Unit of MoF\. Non- priority sector study also planned under PER\. Public Service Pay enhancement in line with the Annual operating plan and action Reform approved budget for FY04 plans for 5 ministries and 8 independent departments are finalized, based on self assessment and service delivery surveys\. Self-assessments have been completed for all MDAs and 29 SDs have also been completed\. The remaining 5 are in draft form and will soon be finalized\. Public Service Act approved by the Rather than amending the Public 9  parliament\. Service Act, work is in progress to harmonize the Public Service Act and Local Government Service Regulations by considering management staff in the Public Service Regulation which stipulates the whole process of appointment of staff in LGAs\. Governance ­ Financial Approval by GoT of the revised Implementation of the PFMRP was Minimize resource Management PFMRP which includes the key agreed completed in June 2004 leakage and strengthen recommendations of the CFAA; accountability Systems and accounting manuals finalized and issued; Implement measures to control all Currently under implementation commitments as appropriated by Parliament involving the establishment of a disaster in the budget; recovery plan/site\. An IT-consultant under the program is currently in place assisting and advising on the implementation\. (AOs) have signed their letters of Audit committee are in place and appointment and have received training in operational in MDAs\. Currently training their roles and responsibilities as Aos\. sessions are being conducted in order to All AO's have access to IFMS\. sensitize the MDAs on the effective use of the committees\. Local Authorities Financial Undertake Financial Management Memorundum (LAFM) review benchmarking in all LGA's through Zonal conducted in LGRP Annual Programme\. Reform Teams\. TOR for the review completed, minister to sign revised LAFM in September 2004; Procurement The Government revises and changes Following the issuance of the LG the composition of the Local Authority Procurement Regulations, 2003 LGA Tender Board by excluding Councilors; Tender Boards are now established in LGA Procurement Regulations compliance with Regulations\. Manual to prepared and issued; assist implementation of Regulations is nearing completion\. Anti corruption There has been significant Quarterly reports depicting progress improvement in MDA's reporting made in the implementation of anti- though with some gaps in the various corruption action plans for priority areas reports\. GGCU commissioned work on available timely (within 3 months end of quantitative and qualitative data in the previous quarter) for key MDAs identified areas of monitoring and controlling in the PRS\. public procurement, public finance and legal and judicial processing\. For the published quarterly reports of Q3 and Q4 of 2003, quantitative indicators have been added which will facilitate the monitoring of progress made in the fight against corruption\. Recruitment of an National Anti-Corruption Strategy and economist/programme officer and an Action Plan (NACSAP) 2003-2005 revised accountant completed\. Under public and approved\. service reform programme role of GGCU to be expanded and strengthened\. To be looked at in the context of the State House Strategic planning exercise and not separately\. Anti-corruption action plan funding Concept paper to guide the preparation will be available in 04/05 budget\. of anti-corruption plans for LGAs completed\. Aid Completed for Budget 2003/04 and management Consolidated projections for FY02/03 for budget guidelines Dec 2003\. 10  of external resource flows The system for integrating all Implemented a system for MDAs to government donor resources flowing report to MoF on levels of direct external within or outside the government system assistance budgeted and disbursed\. is already in place\. However, capturing the resources that flow directly to projects and programmes implemented by sector ministries and LGAs remains the key challenge for MoF Finalized TAS action plan The first annual implementation report of TAS was prepared and circulated by MoF following the successful launch of the TAS in June 2002\. The report provides a clear overview of progress made to date by GoT and local DAC in implementing TAS priorities in its first year according to the TAS Action Plan\. PRS Pillar : Improving Quality of Life and Social Well Being Environmental Environment Completed report which outlines Draft Bill Completed\. Cabinet has sustainability options for preferred institutional approved the Bill awaiting submission arrangements for environmental to Parliament management ­ILFEMP I Draft action plan developed under Government confirmed the preferred ILFEMP II revised\. To be completed institutional framework for environmental after the enactment of the Bill\. management Action Plan on capacity building Initiated the process for improving under implementation\. Coordinator for understanding of environmental and poverty Programme to integrate environment linkages; into PRS engaged; some equipment procured, workshop conducted to commence capacity building component\. Poverty Monitoring and Evaluation Poverty Monitoring and Poverty Published a stakeholder-reviewed Final version issued and posted in Evaluation Monitoring and PRS progress report for FY02 and the the Government website\. Contains Evaluation Poverty and Human Development Report comment against achievement toward (PHDR) including HBS and LFS quantitative targets\. JSA is under findings; progress\. Positive review of 2nd PRS Progress Report\. 11

REVIEW

P008143

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 18031 IMPLEMENTATION COMPLETION REPORT URUGUAY TRANSPORT PROJECT I (LOAN 3021-UR) JlUNE 19, 1998 Transport Cluster Finance, Public Sector, and Infrastructure Sector Management Unit Country Management Unit LCC7C Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit Uruguayan peso US$1 = NUr$329 on March 31, 1988 US$1 = Ur$10\.15 on March 31, 1998 WEIGHTS AND MEASURES Metric System FISCAL YEAR OF BORROWER January 1 - December 31 ABBREVIATIONS AND ACRONYMS AETE Technical Economic Evaluation Unit ANP National Port Administration ANSE National Administration for Stevedore Services (non-existent) BID Inter-American Development Bank CREMA Rehabilitation and Maintenance Contract DNH National Directorate for Hydrography DNV National Directorate for Roads EFAU Economic and Financial Advisory Unit JEXIM Export-Import Bank of Japan ICR Implementation Completion Report IPTI Transport and Infrastructure Planning Institute MTOP Ministry of Transport and Public Works SAM Road Maintenance Management System SAR Staff Appraisal Report SAT Traffic Management System SIPLA Road Planning System UCP Project Coordination Unit (MTOP) UDP Technical Unit (ANP) Vice President Shahid Javed Burki Country Management Director Myrna Alexander Sector Management Director Danny Leipziger Task Manager Jose Luis Irigoyen  FOR OFFICIAL USE ONLY TABl,E OF CONTENTS PREFACE \.iv EVALUATION SUMMARY\. v Part L PROJECT EMPLEMENTATION ASSESSAIENT A\. Statement of Objectives\.1 B\. Achievement of Objectives \. C\. Major Factors Affecting the Project\.7 D\. Project Sutainability\.10 E\. Bank Performance\.10 F\. Borrower Perfora ncece\. G\. Assessment of Outcome\.12 H\. Future Operations \.13 I\. Lessons Leamed \. \.13 Part ]EL Statistical Tables Table 1: Sumnimary of Assessment \.16 Table 2: Related Bank Loans/Credits \.17 Table 3: Project Timetable \.is\.w1 Table 4: Loan Disbursements: Cumulative Estimated and Actual \.19 Table 5: Key Indicators for Project Implementation\.20 Table 6: Key Indicators for Project Operation\.21 Table 7: Studies included in Project r 22 Table 8A: Project Costs5 2 Table 8B: Project Financing 25 Table 9: Economic Costs and Benefits 26 Table 10: Status of egal Covenants \.28 Table 11: Compliance with Operational Manual Statements \.30 Table 12: Bank Resources: Stafins \.u ,30 Table 13: Bank Resources: Missions\.31 Appendix A: Aide Memoire for Final Supervision Mission \. 32 Appendix B: Borrower Summary of the Project and Sector Action Plan \. 41 |This document has a restricted distribution and may be used by recipients only in the| perfonmance of their official duties\. Its contents may not otherwise be disclosed without World Bank authoiozation\.  iv IMPLEMENTATION COMPLETION REPORT URUGUAY TRANSPORT PROJECT I LOAN 3021-UR PREFACE This is the Implementation Completion Report (ICR) for the Transport Project I in Uruguay, for which Loan 3021-UR in the amount of US$80\.8 million equivalent was approved on February 7, 1989 and made effective on October 19, 1989\. The Borrower secured additional external financing for the project from the Export - Import Bank (EXIMBANK) of Japan\., in the amount of US$73\.9 million equivalent\. The original closing date was June 30, 1995, eventually extended to December 31, 1997\. The Bank loan was 99\.5% disbursed, and the last disbursemert took place on May 14, 1998\. The EXIMBANK loan was 68\.4% disbursed (equivalent to 91\.7% of the U\.S\. dollar equivalent amount estimated at appraisal); the remainder, which resulted from an appreciation\. of the yen during project implementation, was canceled\. The ICR was prepared by Jose Luis Irigoyen (LCSFP), Maria Lucy Giraldo (LCSHD), Raul Auzmendi (Consultant), and Albert Amos (LCSFP) and it was reviewed by Maria Victoria Lister (Quality Assurance Support Unit, LCSFP), Asif Faiz, Sector Leader, and Myma Alexander, Country Director, LCC7C\. Preparation of the ICR was begun during the Bank's supervision mission in October 16, 1997\. It is based on material in the project file and discussions with the Borrower\. The latter also contributed to the preparation of the ICR by conducting an ex-post economic evaluation of sub-projects\. The Borrower provided statistical data and prepared a retrospective assessment of the project (Appendix B)\. Appendix B provides a summary of actions and steps taken by the Government during project implementation to comply with the Action Plan agreed at appraisal and negotiations\.  v EVAIUATION SUMMARY URUGUAY: TRANSPORT PROJECT I LOAN 3021-UR Introduction The project followed three previous operations in the transport sector in Uruguay, which has traditionally been a steady, if somewhat slow executor of Bank projects\. Delays in the appointments of key ministries and agencies, deterioration in macroecononic conditions, and the lack of counterpart funds resulted in a significant lag in project implementation\. As a result, the project received an unsatisfactory rating until 1996, required three extensions, and was completed 28 months beyond the original closing date\. Despite these difficulties, the project completed nearly all of the agreed works and technical assistance programs envisioned at appraisal\. Project Objectives Project objectives were to support the GOlJ in instituting legal and institutional reforms in the transport sector, with an emphasis on improving ser-ice provision by the Ministry of Transport and Public Works (MTOP), the Directorates for Roads (DNV) and for Hydrography (DNH), and the National Port Administration (ANP)\. Specifically, the project was intended to: (i) strengthen managerial and planning capabilities throughout the sector; (ii) increase competition and private sector participation (iii) improve cost recovery and operating efficiency; Ead (iv) provide support for high priority investments for rehabilitation, construction and maintenance of roads and ports\. Implementation experience and results The project was characterized by severe delays, especially in the first half of project execution\. By mid- 1995, the original closing date, less than two-thirds of the Bank loan had been disbursed\. Despite these delays, the GOU completed the civil works (road and port subsectors) and technical assistance programs designed at appraisal, both of which appear to be sustainable\. The external factors that had a significant impact on project implementation were: (i) changes in governments in 1992 and 1995; (ii) deterioration in macroeconomic conditions, which led to tight fiscal policies and the limited availability of counterpart funds; (iii) delays in approving legal and institutional reforms in ports and roads\. The following factors relating to deficiencies in project design resulted in additional delays but did not affect the project scope: (i) a complex multimodal approach; (ii) submission of preliminary engineering designs for port works during appraisal; (iii) insufficient coordination between the Bank and JEXIM; (iv) differences in the procurement practices used by the Bank and Borrower\. I'he project was amended three times and ended 28 months later than anticipated at appraisal\. Following the inauguration of the Sanguinetti administration in March 1995, and the improved availability of counterpart funds, project execution improved significantly\. The Departmental road maintenance program and the ports component were cormpleted in a satisfactory and sustainable manner\. The following physical targets were achieved: (a) improved loading and container terminal facilities in Dock No\. 8 in the Montevideo Port; (b) construction of small\. craft berths at the Punta del Este and capacity increases at Piriapolis port; (c) construction of about 70 km of primary roads (reduced from 149 km as a result of the first project Amendment); (d) rehabilitation of 7 bridges; (e) rehabilitation and maintenance of 470 km of primary roads; (f) maintenance of 10,000 km of Departmental roads;  vi Ports\. The project supported major reforms in the Montevideo Port through key infrastructure improvements and technical assistance\. ANP reform, which started in 1992, involved the outsourcing of major port operations, e\.g\. container handling, tugboat-services, loading, unloading, and internal movement of general cargo, passenger handling and equipment services\. ANP reduced its staff from 4,400 employees in 1992 to 1,350 employees in 1997\. Port traffic increased by 120 percent, container traffic by 100 percent, and passenger volume by 300 percent\. ANP instituted a 16% reduction in import tariffs, further improving the competitive position of the Montevideo Port\. Labor strikes, frequent before the reform, have not occurred since 1992\. In a survey of port users, 72% expressed satisfaction with present port operations\. Roads\. The early success in ports was essential in gaining commitment for the on-going reform in the roads subsector\. In 1988, the year the project was appraised, the total Departmental gravel road network was about 20,000 km, with only 35 percent in good condition\. By December 1997, the length of the gravel road network increased to about 32,000 km with 79 percent in good condition\. For the primary road network managed by DNV, the main objective of the reforms was outsourcing of road operations and maintenance to microenterprises, concessioning of main highways to private operators to finance and manage new road investments, and review of road-user charges\. DNV has reduced its work force from a total of 3,700 employees in March 1995 to 2,400 employees by late-1997\. In a pilot project, DNV awarded three contracts to microenterprises formed by ex-DNV staff to carry out routine maintenance of 285 km of national roads and 422 km of signs and markings\. Early results support the use of microenterprises, which provide better service quality than average force account operations, and at a much lower cost\. Institutional Strengthening\. Although the institutional strengthening component has demonstrated improvement in recent years, overall results have been mixed\. The project supported the improvement of operations within DNV through a variety of technical assistance programs\. The Maintenance Management System (MMS) has become a valuable tool for the systematic monitoring of performance standards and resource use by DNV's ten maintenance districts\. The project financed a traffic systems management study, resulting in the design of two innovative outsourcing schemes: (i) collection and processing of traffic data; and (ii) control of truck overloading on the national road network\. A review of road-user charges, which delineated critical elements for improving financial sustainability and increasing user accountability, was also carried out under the project\. Bank Performance The project addressed major investment needs and supported institutional strengthening programs in the transport sector\. The following factors related to project design slowed implementation: (i) overly optimistic projections; (ii) the lack of performance indicators for monitoring implementation progress; (iii) inadequate risk mitigation strategies; and (v) an overly complex multimodal strategy\. Disagreements in procurement practices between the Bank and the Borrower, and insufficient coordination between the Bank and JEXIM led to further implementation delays\. Nevertheless, the decision to amend the closing date three times and extend project implementation by 28 months was appropriate and justified\. Bank supervision was critical in supporting the transport sector reforms and completion of the physical works and institutional strengthening initiatives\. Borrower Performance Uruguay has been a steady, if slow executor of Bank projects\. Initial delays were manifested during the establishment of a new legal framework and institutional structure for the transport sector\. Once these reforms were in place, GOU was diligent in assessing critical implementation and personnel needs\. The rapid and impressive reform of ANP achieved significant improvements in port operations without major  vii labor disturbances\. Road contraction and maintenance works have been completed and the DNV reform has increased private participation in roads\. Finally, progress and audit reports were produced in an acceptable though belated manner and compliance with loan covenants was satisfactory\. Summary of Findings Overall project outcome is considered to be satisfactory\. The majority of the sector policy objectives and physical works were achieved in an adequate manner and appear to be sustainable\. The project contributed positively to the delineation and implementation of transport reforms\. Passage of the 1992 Port Law represented a major change in managing port activities, especially in the Port of Montevideo\. MTOP reforms led to internal restructuring, improved resource allocation, consolidation of key activities, and reduction in personnel\. Although the MTOP institutional strengthening program was only partially implemented, technical assistance prograrns for ANP, DNV, and the departments have been successful\. Future Operations Improvements in intermodal transport coordination are being supported by the ongoing Forestry Products Transport Project (Ln\. 4204-UR), which is using an integrated approach for the transport of forest products\. This project also supports the continuation of the Departmental road maintenance program A proposed Transport II Project, scheduled for FY99, is intended to: (i) support the rehabilitation and maintenance of the primary road network and restoration of bridges; (ii) increase private sector participation in road maintenance through performance-based contracts; (iii) strengthen road sector management at DNV through further restructuring of its organization and work processes; and (iv) assist in technology transfer to the Departments to support the maintenance of gravel road networks\. Lessons Learned The following lessons emerge from the implementation of this project: Mobilizing Support for Reform\. Mobilizing support from affected parties within a given institutional structure is critical to ensure the effectiveness of reforms\. The reforms in MTOP and ANP required restructuring of the management, while maintaining frequent contacts with key actors, obtaining timely feedback, and producing early results\. Potential complaints from ANP employees were avoided through well-designed social compensation packages\. The early success in port reforms was essential to gain commitment for the more difficult reform agenda in the roads sector\. DNV substantially reduced personnel through outsourcing road maintenance activities to microenterprises started by former staff\. The quality of maintenance done by the mnicroenterprises was found to be better with a cost saving of about 20 percent\. Phasing-In Institutional Development Plrograms\. The institutional restructuring components of projects and broader reform programs have often\. fallen short of achieving their objectives due to: (i) changes in administration or top sector management, that often deprive reform programs of the necessary leadership and; (ii) the scope and timetable of refonns being incompatible with the existing political environment and institutional capacity\. These risks can be minimized when project implementation is aligned with the country's political cycle and sector development plans, and there is a "champion" to coordinate institutional strengthening programs\. It is also necessary to gradually build consensus for institutional reforms through a phased-approach that limits the scope of policy reforms to a few but essential issues\. Multimodal Project Design\. Optimizing the transportation system is the main rationale for a multimodal approach\. Elimination of the railways component at project appraisal deprived the project from addressing  viii issues common to all transport subsectors, while the multimodal approach adopted brought unnecessary complexities to project management, implementation, and supervision\. Before entering into a complex multimodal project, the merits of such approach should be carefully assessed against the risk of having certain components lag due to ineffective modal coordination\. There are situations, however where a multimodal approach may be warranted e\.g\. limited project objectives, policy coordination, or the movement of major commodities through the transport chain\. Technical Support for the Executing Agency\. Although these activities are now all standard practice, the following elements would have facilitated project implementation: (i) a project launch exercise to build consensus in the early stages of implementation; (ii) an operational manual to guide the executing agency; (iii) performance indicators; (iii) training of Borrower staff in e Bank's procurement, audit, and disbursement policies and procedures, and (iv) incorporating stakeholder participation in project design\.  IMPLEMENTATION COMPLETION REPORT URUGUAY LOAN 3021-UR PART I\. PROJECT IMPLEMENTATION ASSESSMENT A\. STATEMENT OF OBJECTIVES 1\. The project was designed as a sector operation with strong policy-based objectives to be achieved through institutional development Action Plans for the Ministry of Transport and Public Works (MTOP)l and the National Port Administration (ANP), and the financing of high priority investments in roads and ports\. The project specific objectives were to: (i) reorganize the ports subsector, including the redefinition of functions and responsibilities for planning, construction, maintenance and operation of the ports; (ii) stimulate private sector involvement and competition in the ports subsector; (iii) improve transport regulations and cost recovery in ports and roads; (iv) strengthen managerial and planning capabilities throughout the road subsector, including departmental roads; and (v) support the rehabilitation, capacity expansion and maintenance of road and port infrastructure\. 2\. These objectives were consistent with G3overnment's and Bank's objectives in the transport sector\. Project design, however, proved difficult to implement in the environment created by the changeover of administrations and the deterioration of macroeconomic conditions in Uruguay\. The multimodal approach in project design involved several implementing agencies, which created problems in coordination, and relied on action plans that were too broad and aunbitious for the conditions at implementation\.2 Additional coordination difficulties were in connection with the Japan Eximbank (JEXIM), which cofinanced the project\. Despite these difficulties, the project completed nearly all of its revised investment and institutional strengthening objectives, thereby confinning the assessment made in the latest CAS that Uruguay has traditionally been a steady but slow executor o±i Bank projects\. B\. ACHIEVEMENT OF OBJECTIVES 3\. General project objectives remained unchanged and relevant throughout the long implementation period\. Project scope was restructured to reduce the burden on government counterpart funds and better respond to changes in government priorities, sector policies, and the specific needs of the institutional reforms in the transport sector\. Although the project was amended three times and closed 28 months later than anticipated at appraisal, the project completed nearly all of the revised works and technical assistance programs despite the transitional and coordination difficulties experienced during implementation\. Amendments to the project eliminated small-scale port projects, reduced construction of Route 1, added construction of 7 bridges and maintenance of 470 km of the national roads\. The completion of planned I Including the Directorates of Highways (DNV) and Hydrography (DNH)\. 2 The following Bank Loan is the ongoing Forest Products Transport Project (Loan 4204-UR) which is a intermodal as it includes roads, ports and railways\. This project was conceived as a transport system for one conmmodity forest products, and as such is essential to consider all relevant modes, concurrently\. This approach differs from the methodology used in the Transport I Project (Loan 3021 -UR) where the goals in the various subsectors were not interconmected\.  2 construction works for Route 1 is expected to be undertaken by the private sector, which should provide increased efficiencies\. 4\. With project funds, the following physical targets were achieved: (a) construction of about 70 km of primary roads (reduced from 149 km as a result of the first project Amendment) (b) construction of 7 bridges; (c) rehabilitation and maintenance of 470 km of primary roads; (d) maintenance of about 10,000 km of selected gravel roads in participating departments, as contemplated at appraisal; (e) remodeled loading and container terminal areas in Dock No\. 8 in the Montevideo Port, consistent with appraisal; and (f) two small craft berths at the Punta del Este port, and capacity increases at Piriapolis port\. Investment in infrastructure facilities and the renewed focus on road rehabilitation and maintenance, sustained by the introduction of private sector participation, has contributed to a reduction in transport costs\. Road conditions in the departments have also improved substantially due to the development and continuation of a maintenance program for the core gravel road network\. 5\. The project was also able to complete nearly all of the institutional strengthening initiatives for ports, and undertake the roads technical assistance programs and studies\. Overall results of the institutional strengthening programs were satisfactory, although a number of initiatives were either completed too late to adequately measure their outcome, reduced in scope, or adjusted to reflect emerging priorities\. The institutional reforms for ANP was successful, and served as a major tool to facilitate the port reform program\. In particular, the cost and ship operation time in the Port of Montevideo have drastically improved\. The results of the MTOP Action Plan were acceptable for DNV, but within MTOP the results have been mixed as a number of consultants were contracted too late to fully measure the intended benefits from the technical assistance programs\. Programs considered to have been successful related to revising transport related laws and regulations, implementing road planning and maintenance management systems, designing traffic data collection and truck overloading control systems, and reviewing the system of road- user charges\. The project financed two studies not included at appraisal stage: (i) a logistics and economic study for the transport of forest products, which led to the preparation of the Forest Products Transport Project (Loan 4204-UR); and (ii) feasibility, risk analysis, and other preparatory studies to explore the financial feasibility of the Buenos Aires-Colonia Bridge through a concessioning arrangement\. Partial but important achievements were also attained in strengthening road maintenance capacity of the department\. 6\. Restructuring the Port of Montevideo\. The project supported major reforms in the Port of Montevideo, Uruguay's main gateway to the rest of the world, through key infrastructure improvements and a technical assistance program tailored to the specific needs of the reform program\. ANP reform started in 1992, three years into project implementation\. The purpose of the reform was to convert ANP from an inefficient port operator into a port owner, which would outsource all major operations to the private sector\. Major examples of private sector participation include container handling, operation of tugboat-services, loading, unloading, and internal movement of general cargo, passenger handling and equipment services\.3 One important indicator of the scope of this privatization effort is that ANP was able to reduce its staff from 4,400 employees in 1992 to 1,350 employees in 1998\. The results have been impressive as noted by the performance indicators listed in Table 1\. Since the port reform started in 1992, dock throughput measured as average cargo moved per hour in operation increased by 270%, and ship staying time was cut down by 34%\. As a result of these cost reductions, ANP reviewed the port tariff regime and applied an initial reduction of 16% in import tariff rates, further improving the competitive position of the Port of Montevideo\. Further reductions are currently being implemented\. Port traffic has increased by 120%, container traffic by 100%, and passenger volume by 300%\. This performance was 3 Dredging is an important activity that is in the process of being contracted out to the private sector\. This action would reduce annual expenditures by US$S5-7 million\.  3 achieved despite a 31% reduction of ANP personmel from 1988 levels, the year the project was appraised\. Moreover, labor strikes, which were frequent before the reform and had absorbed an average 20% of working time, have not occurred since March 19, 1992\. 7\. ANP reform was supported by two technical assistance packages supported by this project and by the Public Enterprise Reform Loan (3517-UR)\. The technical assistance program under Loan 3021-UR was adjusted during project implementation to address the evolving needs of the reform program\. Major contributions by the project to the port reform program included: (i) creating a Port Information and Studies Center; (ii) strengthening Port Financial Management Systems; (iii) improving cost recovery and operational efficiency; (iv) strengthening investment planning; (v) establishing resource inventories; and (vi) supporting management training programs\. The revised Port Master Plan, a major, on-going study to adapt the Port of Montevideo to the new policy of increased private sector participation, is being financed by ANP Consultants, which were not hired until July 1997 due to procurement delays\. Preliminary findings will become available by mid-1998\. Table 1\. Performance Indicators for the Port of Montevideo (1988-1996) INDICATORS 1988 1992 1994 1995 1996 Ship numbers 1\.00 0\.98 1\.30 1\.38 1\.41 Port traffic 1\.00 1\.21) 2\.10 2\.45 2\.59 Containers 1\.00 1\.95 3\.14 4\.34 3\.75 Passengers 1\.00 1\.1 4 4\.68 4\.56 4\.62 Dock occupancy 1\.00 0\.75 0\.62 0\.50 0\.48 Ship staying time 1\.00 0\.715 0\.49 0\.37 0\.34 ANP personnel 1\.00 0\.58 0\.43 0\.39 0\.31 Ave\. ANP cost 1\.00 1\.06 0\.55 0\.54 0\.59 Dock Throughput 1\.00 1\.46 3\.32 4\.88 5\.42 8\. The core of the reform process was completed in about five months, without significant social and union problems\. 4 This result is especially remarkable for a country where the population has typically opposed structural reform efforts\. A critical factor for success of the reform was frequent contact with all the main actors to test and eventually adjust the reform processes as needed\. This significant reduction in personnel was complemented with an in-depth reorganization of ANP, which facilitated communications among the different hierarchies of the agency\. Of the 160 managers who held positions in ANP prior to the restructuring, only 10 remained\.5 9\. The findings of two surveys performed by a specialized consultant firm in October 1997 confirmed the success of the reform\. The first survey assessed the social and occupational impacts of the program by measuring the use of incentives for encouraging personnel retirement\. The sample interview responses from 4 The Port Law, which was the basis for the reform, was approved on April 8, 1992, and became effective less than a month later, on May 4, 1992\. The port reform was launched on June 23, 1992, when 800 persons voluntary left ANP\. A few months later, another 700 resigned\. Finally, the Regulation ofthe Law of Port Operators was approved on September 7, 1992\. 5 The reduction of ANP's personnel was the most politically sensitive aspect ofthe whole process\. It was based on the Law of Reform ofthe State, number 16,197, passed in 1990\. It allowed the establishmenat of an incentive program to encourage public employees to leave their jobs\. ANP's program was based on a special compensation of 6 month salaries for its public employees which had the right of retirement, and 12 salaries for the rest\. The latter was later increased to 18 salaries to speed up the reduction in the personnel\. In particular, workers ofthe National Administration for Stevedore Services (ANSE) were offered 24 salaries and with the sole exception of one worker, they all left overnight on July 22, 1992, being replaced the following day by private operators\. The severance program was entirely financed by ANP\. A training program was used to prepare the retirees to handle the requirements of likely new assignments\.  4 120 ex-ANP employees revealed that 54 percent found themselves in better financial terms as compared to when they were with ANP, 12 percent were indifferent, and 34 percent felt worse off\.6 Overall, 67 percent indicated that they were satisfied with their current situation as when working with ANP\. The results are encouraging for future privatization efforts\. The second survey assessed port-user satisfaction with the services provided after the reform\. A sample of 120 responses obtained from maritime agencies, operators, importers/exporters, found that 67 percent of interviewees expressed satisfaction with the delivery of port services\.7 Privatization and concession of services were identified as the most important aspects of the reform\. It was also encouraging fact that 72% declared greater satisfaction with present port operations as compared to pre-reform conditions\. 10\. Improving Departmental Road Maintenance\. The project included a component to finance annual routine maintenance programs over the project period for a maximum of 10,000 km of selected gravel roads in participating departments, and annual periodic maintenance programs on about 2,000 km of gravel roads\. With the exception of Montevideo, all departments in the country participated in the program\. Before appraisal, MTOP purchased road maintenance equipment using a loan from Banco de la Repiiblica, and distributed this equipment to the departments\. In 1988, the total gravel road network of department roads in the country had an inventoried length of about 20,000 km, of which roughly 35 percent were in good condition\.8 As of December 1997, the total length of the gravel road network was about 32,000 km, of which about 79 percent was in good condition\. This amount represents an impressive improvement since project appraisal\. An economic analysis of the Departmental Road Maintenance Program yielded a net present value of US$211\.0 million\.9 The economic analysis suggested that a more flexible maintenance which varies program gradings and regravelling frequencies as a function of road class, would yield higher economic benefits without increases in funding\. This approach will be used in upcoming Bank operations\. 1° 11\. This component was originally conceived as a five-year program, but in view of its satisfactory results, the program was resumed in 1996 and will supported by future Bank projects in Uruguay\. The program introduced a maintenance culture in a subsector, which practically did not exist, at least in many of the departments\. The annual number of kilometers financed by the program in each department was determined by the size of the road network, population, and total area\. These initial allocations were revised up or down (or even canceled) in September of each year and the available funds were reassigned based on the achievement of performance targets for each department agreed under their respective programs\. Performance targets were raised in succeeding years-from a 60 percent average in 1989 to about 95 percent in 1997-which demonstrated that the Intendencias had responded well to the incentives built into the program and close monitoring by DNV\. Program results were uneven in the first years of the project but improved as implementation progressed\. Overall compliance increased, while the need to reallocate resources among departments diminished drastically\. DNV engineers supervised the quality of completed 6 About 75% ofthe employees interviewed had left the organization between 1992 - 1994, the peak ofthe restruectring programrL The majority of the interviewed retirees (63% of the sample) had received 18 salaries as incentive\. About 72% found new jobs; from the remaining 28% unemployed, 64% indicated that they had retired, so actual unemployment is about 10% ofthe sample roughly equivalent to the national unemployment rate)\. About 87% indicated they did not require further training to obtain a new job\. 7 The sample consisted of 44% of maritime agencies and operators and 56% of importers and exporters\. Interviewed users indicated the following reasons for their satisfaction: about 52% because services and operations have improved, 10% because services were privatized, 2% because infrastructure has been improved, and 3% other\. a Nevertheless, the SAR recognized that even this estimate appeared overly optimistic 9 The results of this econornic analysis were not incorporated in the overall analysis for the project cited in paragraph 19 and in Part IL Section 9\. 10 The ongoing Forestry Products Transport Project (Loan 4204-UR) continued support ofthe program in 1997, and the proposed Second Transport Project under preparation would extend Bank support between 1998-2000\.  5 works, mostly by force account but in some cases by contractors, and approved money transfers\. Some departments are applying similar measures in their own maintenance programs\. Program design has continued to improve throughout the years by building on the experience gained\. " 12\. The project also provided direct technical assistance to the departments\. The TA program successfully built up technical capabilities, estalblished road laboratories for systematic quality control of materials and works, and improved maintenance programming, execution and control\. However, the expected transfer of technology from DNV to thie departmental technical units was only partially achieved, because this ambitious program had to be scaled down due to constraints in counterpart funds and turnover in departmental staff hampered continuity\. Currently, the program is maintained by the direct supervision from a specialized unit in DNV comprising ten engineers\. In future operations, emphasis should be placed on the graduation of some departments, to free scarce human resources in DNV\. 13\. Strengthening Management and Planiing in DNV\. Although less dramatic than the reforms in the port subsector, with the induction of the new government, DNV embarked in 1995 on a gradual yet substantial restructuring of its organization and its business processes to become more oriented toward performance and results\. Previously, DNV's lowv-productivity workforce planned, executed and controlled all routine maintenance, and a significant portion of periodic maintenance activities\. Overstaffing overburdened DNV's maintenance budget as cklse to 70 percent was used to cover personnel and administrative costs\. This situation left DNV with little room to respond to periodic surges in maintenance and rehabilitation needs of an aging road network, which was compounded by the shortage of funds stemnming from tightened fiscal policies of the\. early 1990s\. These factors resulted in maintenance neglect and substantial deterioration of the national road network\. The percentage of roads in poor condition increased from 10 percent in 1990 to 44 percent: in 1996\. In recent years, MTOP halted this deterioration trend by increasing the level of funding for rehalbilitation and periodic maintenance, giving priority to heavy traffic roads\. The main tenets of DNV's reform agenda involve: (i) shifting the primary role of DNV from execution to planning and management of operations; (ii) reducing in-house operations through outsourcing of services; (iii) concessioning of roads to private operators to finance and manage new road investments; (iv) reviewing the system of road-user charges to explore the feasibility of more efficient, cost-recovery mechanisms for collection and allocation charges among administrative levels and vehicle types, and assuring stable funding; and (v) arresting deterioration of road infrastructure by increasing investments in rehabilitation and maintenance of the core road network\. 14\. This on-going reorganization has enabled DNV to increase the efficiency of maintenance operations carried out by force account that will\. gradually be replaced by private sector contracts\. In line with this agenda, DNV reduced its workforce from about 3,700 employees in 1995 to about 2,400 employees in late 1997, and is planning further reductions to about 1,800 employees by the end of the century\. 12 DNV began implementation of a pilot program to contract out maintenance activities\. Three microenterprises formed by ex-DNV staff were awarded contracts to carry out the routine maintenance for 285 km of national roads and 422 km of signs and lane markings\. The microenterprises operate primarily in the Northern part of the country with nine finns currently in operation-three in Durazno, two in Florida, and one in Rivera, Canelones, Paysandia and Lascano-and typically comprise 0 to 15 former Exarmples are the adjustments introduced to reflect local conditions in unit costs and construction of drainage structures to preserve road conditions\. 12 The legal framework for staff retrenchment is the Law for Reform of the State of 1990, already mentioned in connection with ANP's reformL The Law allows payment of an incentive (equivalent to about 24 salaries in the case of DNV) to induce voluntary retirements\. However anotha incentive, peculiar to DNV, was the option for former DNV staffto establish microenterprises to undertake maintenance contracts\.  6 DNV employees\. 13 The microenterprises procured basic equipment units taking advantage of special credit lines, and technical assistance from DNV engineers, as needed\. Direct contracting is permitted for two years, with an option to extend services for additional period, if performance is satisfactory\. After this initial grace period, microenterprises will compete directly for contracts in the same manner as other private contractors\. In a preliminary assessment, DNV concluded that microenterprise contracts were less expensive than average force account operations and road quality was better\. Interestingly, the former DNV employees are doing the same work, but performance has improved substantially under the strong financial incentives provided by the flexible private sector environment and competition for contracts 15\. The project contributed to improved operations within DNV through a variety of technical assistance programs\. First, the Maintenance Management System (MMS), has become a valuable tool for the systematic monitoring of performance standards and resource use by DNV's ten maintenance districts\. In addition to increased accountability, the program provides good examples of how field districts can improve works programming and resource use as well as raise productivity in road maintenance operations\. Second, the project financed a traffic management system study, resulting in the design of two innovative outsourcing schemes: (i) collection and processing of traffic data; and (ii) control of truck overloading on the national road network\. DNV awarded two long-term contracts for these services\. Third, the project is financing a Road Planning System study, which is evaluating DNV information systems and planning tools, in order to upgrade methodologies and develop an integrated "system" for supporting management decisions\. Due to long delays in recruiting consultants, this study is still under execution\. 16\. The project also supported the development of a study on Uruguay's road-user charges system, which delineated the critical elements for ensuring financial sustainability in the sector and increasing accountability among users, e\.g\. better connecting road usage with economic costs\. The study concluded that: (i) total revenue from user charges exceeds road maintenance expenditures by a factor of three; and (ii) each vehicle category contributes revenue in excess of its marginal contribution to maintenance needs\. This situation is rarely achieved\. In principle no subsidies are implied under the current structure of road- user charges, but imbalances among different vehicle categories, levels of government and the amount of excess revenues makes the road sector an important contributor to the government's general revenue fund and has raised concerns regarding the competitiveness of the Uruguayan road transport relative to the rest of Mercosur\. Lastly, databases and analytical tools, developed through the study and installed in the Transport and Infrastructure Planning Institute (IPTI), have analyzed the economic impact of reform, e\.g\. fiscal policies, sector contributions as part of government revenues, design of improved intergovernmental transfers, and impact of reform on the competitiveness of Uruguayan products and transport operators in relation to Mercosur\. 17\. The project funded a recently concluded economic impact and financial feasibility study in support of the development of a bridge crossing between Buenos Aires and Colonia, Uruguay\. An independent commission comprised of both governments is responsible for the development of the project (estimated total cost of US$0\.8 to US$1\.0 billion)\. The study assessed the economic and financial feasibility, demand and risk analyses, traffic forecasts, tariffs setting policies, and environmental impact of the proposed project\. The Buenos Aires-Colonia Bridge is expected to be financed, owned and operated by private sector through a long-term concession agreement\. Implementation and presentation of the final results was delayed as a result of the complexity of a project of this size, and the need to build consensus among the two governments regarding certain aspects of project design\. The Bank is assisting the binational commission in is At resignation, each employee received 24 salaries that represented roughly US$12,000 per employee, and a bonus, which increasedtotal severance per employee to about US$20,000\. Assuming former employees invest about half ofthat amount in the microenterprise, the total accumulated capital forthe enterprise would beonthe order of about US$150,000  7 the supervision of these studies\. In particular, the Bank established a special team of Bank staff with the appropriate skills needed for oversight of a study of this magnitude and complexity \.This effort has advanced the state of the art related to traffic demand estimation and economic/financial analysis of green field mega-projects with international and regional impacts\. 18\. DNV is expanding contract maintenance under an IDB-supported project and the proposed Second Transport Project with the Bank\. By the year 2000, the goal is to have at least 50% of the primary road network, basically the area south of the River Negro, maintained by private contractors\. This objective can be achieved by: (i) concessioning to private operaLtors a major corridor of about 500 km that stretches from Colonia to Chuy on the border with Brazil, along Routes 1 and 9; (ii) awarding five-year contracts for the rehabilitation and routine maintenance of specific; portions of the road network\. The contractor would be paid on the basis of compliance with performance standards specified in the contracts; and (iii) contracting maintenance of other specified roads to microenterprises, (run by former DNV personnel), who would also be paid based on compliance with stipulated service levels\. 19\. Economic Evaluation The Borrower conducted an ex-post economic evaluation of project components, including Route 1 improvements and works undertaken in Montevideo, rehabilitation and repaving of seven bridges and 646 km of primary' roads, and the Punta del Este and Piriapolis ports\. These works accounted for a total investment of US$214\.0 million at 1996 prices, or about 97% of the total project cost (Part II, Table 9), a project NPV of US$54\.2 million, and internal rates of return ranging from 14 percent (Route 1) to 28 percent (port of Montevideo)\. Although satisfactory, the economic indicators were lower than appraisal estimates due to the use of more conservative assumptions in the ex-post analysis and the longer construction periods\. Analytical difficulties arose due to: (i) the recent inauguration of the works in the port of Piriapolis, December 12, 1997, which provided limited information in respect to subproject benefits, and operating and maintenance costs; and (ii) the major port reforms in Montevideo drastically changed its modus operandi, and consequently, an ex-ante analysis presents a number of shortcomings\. For roads, the analysis was based on the application of the Bank's HDM-III model\. For the Piriapolis port component, due to the above-mentioned lack of actual information, relevant values actually registered in Punta del Este were conservatively extrapolated to provide a basis for the ex-post analysis\. With respect to the ANP component, the economiic analysis compared actual cost values with updated ex- post benefits\. C\. MAJOR FACTORS AFFECTING THIE PROJECT 20\. Several factors had a significant impact on project execution, causing severe and unnecessary implementation delays\. In the first three years after effectiveness, almost no progress had been achieved\. Despite this delay, the completed works fulfilled the overall objectives of the project and appear to be sustainable\. A number of external factors had a strong impact on the project implementation\. These factors include: (i) disruption in project implementation caused by the changeover in governments; (ii) deterioration of macroeconomic conditions, which led to tight liscal policies and held up counterpart funding; and (iii) delays in approving legal frameworks for privatization and reduction of the size of the State\. In addition to extending the life of the project by 28 months, project components were restructured to meet new priorities caused by these contingencies\. In addition, the following lessor factors relating to deficiencies in project design, and poor understanding of the Bank's operational guidelines created additional delays but did not impact on project scope: (i) the complexity of the multimodal approach; (ii) submission of preliminary engineering designs for port works during appraisal; (iii) insufficient coordination between the Bank and JEXIM, the project cofinancing institution; and (iv) differences in legal interpretations and practices between the Bank and the executing agency in undertaking the procurement of works and goods\. However,  8 once MTOP was able to allocate the necessary funds to complete the project, the pace of implementation increased dramatically after 1995\. 21\. Presidential Elections and New Administration\. The project became effective on October 19, 1989, and Presidential Elections were held the following month\. The results favored the opposition party, which led to the election of a new Administration and significant policy changes\. The winning party did not have a majority in Congress, further complicating the situation\. The project was appraised, negotiated and approved with one Government and implemented by another that was largely unaware of the details of the lending operation and was unfamiliar with Bank procedures\. The new administration delayed appointing key posts like the President of ANP and the Directors of DNV and DNH, until the end of 1990, over one year after project effectiveness\. Uncertainty and the lack of major decisions characterized this period\. 22\. Availability of Counterpart Funds\. Availability of local counterpart funds has been a difficulty in previous Bank projects in Uruguay, and was a major problem during the first half of implementation\. Government financing strategy for the sector was set in its Five-Year Investment Plan, prepared at the beginning of each administration and approved by Congress\. In 1990, the incoming Administration imposed severe investment ceilings to address a deterioration in macroeconomics conditions\. 14 This policy reduced MTOP 's budget to less than half of the amount requested\. At the time of project appraisal, a major fiscal crisis affected the Uruguayan Government, which stopped or slowed down road works financed under the previous loan 2238-UR\. The Five-Year Plan for 1991-1995 was scaled down in line with the deterioration of the fiscal situation, and the DNV was forced to abridge the capacity expansion program, which became too large for the fiscal crisis\. These factors impacted negatively on the response from international firms in tendering bids\. During this period, progress in project implementation was extremely slow\. Since 1995, the GOU assigned high priority in arresting the deterioration of the national road network\. The current administration has adhered to a five-year budget program, which reduced the volatility in the availability of funds for the sector, and counterpart funds to externally funded projects\. 23\. Institutional Reform in the Transport Sector\. Within this context, it is not surprising that the legal and administrative actions required to support major institutional reforms took longer than expected\. The approval of sensitive laws related to the reform and reduction of the role of the State, and, in particular, the privatization of the Port of Montevideo required endless Congressional discussions and long approval processes\. Institutional reforms in MTOP and delays in defining the planning unit in MTOP, while appropriate, in itself, caused further project delays\. 24\. The Govemment's policy, and one of the main project objectives, is to intensify private sector participation in DNV, through the execution of diversified activities such as detailed engineering, project supervision, supporting studies, controlling road related activities, such as traffic counts and axle-loading, and carrying out road rehabilitation, periodic and routine maintenance works\. The long-run goal is to maintain DNV as the administrator of the primary road network, while maintaining responsibility for: (i) general planning of the network and related procurement actions; (ii) acting as the principal counterpart for intemational credit organizations; (iii) conducting research studies; (iv) providing technical assistance support and transfer of technology to, inter alia, the departments; (v) executing emergency works; and (vi) executing jobs in areas whose peculiar characteristics do not attract enough interest from private contractors\. The objectives of the latter two items are to assure quick response to unexpected emergency demands, and maintaining market prices within reasonable limits, respectively 14 Inflation in 1988 had reached a 69%, and, as a result, the Government decided to reduce public spending\.  9 25\. Complex Multimodal Approach\. The project was originally designed to include roads, ports and railways\. At project appraisal, the Governmient of Uruguay was involved in major railways reform, especially the politically-sensitive decision to cancel passenger service\. To avoid the impression that this reform was imposed by the Bank and a likely political backlash, the Government decided to exclude railways from the project\. The original idea of including three transport modes in one project was sensible as several issues tend to overlap\. These considerations include tariff policy, cost minimization of surface transport, intermodal competition, coordinaltion of surface traffic arriving at ports and rail stations, and optimization of the transport system\. Without the participation of railways in the project, little benefit was achieved in keeping within one operation both ports and roads\. On the contrary, coordination, administrative and communications problems between the agencies, MTOP and ANP becarne evident\. Moreover, the first multimodal supervision :mission by the Bank, with simultaneous presence of both road and port experts did not take place until October 1991, more than two and a half years after the Loan was signed\.'6 In retrospect, it would have been better to design and implement two independent, separate projects, one for roads, and the other for ports\. 26\. Preliminary Engineering Plans for Ports\. The port components for ANP and for the port of Piriapolis under DNH did not have detailed engineering plans, ready to call for bids, at the time the loan was approved\. SAR cost estimates for ports were based on preliminary engineering studies for civil works on all items, except for port works at Punta del Este\. The preparation of completed engineering studies would have likely prevented delays\. The cornpletion of these studies could have been made condition for effectiveness\. In contrast, final design for road works were ready at negotiations\. 27\. Bank and JEXIM Cofinancing\. At the project closing date, the JEXIMBANK loan was 91\.7 percent or (US$67\.8 million) disbursed of the dollar equivalent estimated at appraisal (US$73\.9 million)\. As the loan was being disbursed, fluctuations in the yen/dollar exchange rate led to an appreciation of the loan amount by close to 30 percent, and consequently, only 68\.4 percent of the appreciated amount was disbursed\. In addition, there were delays were due to coordination and communication problems between the two international credit agencies\. For example, when the project was approaching the project closing date, the rules of both institutions varied with respect to replenishment of special accounts\. The Bank started with a partial replenishment, which JEXIM did not accept\. As a result, JEXIM disbursements were suspended and delayed for about 9 months, causing penalties to the Borrower\. 28\. Procurement Delays\. Differences in interpretation between the Bank's procurement practices and the legal code for undertaking civil works and hiring consultants in Uruguay led to significant delays in project implementation\. Although now standard practice as part of the Bank's lending operations, training workshops for counterpart staff would have likely minimized delays of this type and improved coordination between the Bank and the GOU\. In addition, the accepted practice of using standard bidding documentation would have likely avoided delays stemming from protracted reviews of procurement documents and decisions\. The project provided technical assistance to improve general management and oversight of goods procurement and consultant contracts and supported the installation of new computer systems\. The latter permitted improvements in goods procurement, warehousing, inventory management, and related administrative procedures\. l For example, the construction of a shallow-water, clositng dike in the port of Montevideo, originally included in the project, was excluded based on environmental considerations without ANP consultation, which supported its construction\. 16 In September 1993, Bank missions even started preparing separate aide-memoires for MTOP and ANP, followed by separate Bank confirmation letters\. However, this approach was not followed afterwards\.  10 D\. PROJECT SUSTAINABILITY 29\. The institutional reform introduced in the transport sector is leading to greater efficiency in the sector\. The Borrower has shown continued commitment to them, and all interested parties are supporting the reforms\. Consequently, the process seems to be irreversible, and sustainability can be categorized as highly likely, especially in regard to the port reform and the private sector participation in DNV\. Although accepted as a major success by all parties, road maintenance activities undertaken by the departmental are in the peculiar position of being more vulnerable to political pressures\. With some notable exceptions, a number of the departments and local governments still need to strengthen capacity for road maintenance and to develop a culture of "continuous" maintenance\. In some cases, admittedly a minority, the opinion exists that maintenance resources should support other investment priorities as long as the road is passable\. Therefore, it is considered essential for the Bank to continue to support road maintenance at the local level through future operations and maintain DNV leadership in this area\. The proposed follow-up Second Transport Project would address road sector sustainability from three perspectives: (i) continuing the implementation of key institutional reforms in DNV and the departments, and instituting accountable and service-oriented management practices, (ii) reducing future agency costs by arresting deterioration of the road network, (iii) exploring new mechanisms to enhance road sector funding, and (iv) ensuring efficiency and transparency in program fund allocations and strengthening accountability for results\. 30\. The sustainability of the investment components of the project is also likely because adequate provisions were taken to assure their sound operation and maintenance\. The probability of maintaining the achievements generated in relation to the major objectives of the technical assistance program of the project is also high\. Appendix B gives details of actions taken or to be taken for all project components to sustain project objectives\. 31\. Due to built-in safeguards in highway funding allocations and recent reforms, the prospects for sustainable road maintenance are good\. Uruguay has strict ex-ante and ex-post controls on the allocation and use of tax revenues\. Funds are allocated by the Ministry of Finance on the basis of agreed Programs that comprise the relevant Five Year Plan\. Line ministries cannot allocate funds to items not included in the Plan and cannot exceed the amount allocated for each program\. Discretion does exist in the amounts allocated by the Minister of Transport within a specific program\. It is therefore possible to reallocate funds between highway maintenance and construction as long as the total Highway Program budget is not exceeded\. Nevertheless, Uruguay already has a well-developed domestic road network that provides all weather accessibility to nearly the entire country\. Capacity increases for the few congested highways are currently being provided through concessions, which do not involve public funding\. In addition, an increasing proportion of maintenance activities are being carried out through outsourcing arrangements, which has built a secure "firewall" against the diversion of maintenance funds to new construction\. Thus, limited scope exists for allocating funds intended for road maintenance to other activities\. E\. BANK PERFORMANCE 32\. Project identification and preparation\. Satisfactory\. The project rightly addressed the major investment needs in the transport sector, identified in the sector work "Uruguay Transport Sector Strategy Paper" of May 11, 1987\. It followed two previous successful transport operations: Modernization of the Port of Montevideo (Loan 1798-UR) and Third Road Project (Loan 2238-UR), and it was concurrently carried out with Public Enterprise Reform Loan (PERL) (Loan 3517-UR), whose main objectives included reducing the size of the State as well as reform and privatization of public enterprises, e\.g\. ANP\.  I1 33\. Project appraisal\. Marginally Satisfactory\. The SAR was a comprehensive document with strong policy and investment objectives aimed at refiorming the sector, strengthening its managerial and planning capabilities and stimulating competition and private sector involvement\. The investment program was composed by high-priority, clearly feasible projects and the SAR was well received by the Borrower\. 34\. However, some aspects of the SAR could have been improved to make project implementation easier\. Although the severity of the fiscal crisis on the project could not have been anticipated, projections for the coming Five-Year Plan were too optimistic given the problems observed during appraisal\. The SAR correctly identified project risks, namely the number of agencies involved, and the imminent change in governments, but the recommended mitigation solutions, e\.g\. establishment of a Project Coordination Unit (UCP) and conducting joint annual reviews proved to be insufficient\. More importantly, no performance indicators were included in the SAR for monitoring progress toward achievement of project objectives\. Detailed performance indicators would have assisted the GOU in defining priorities sooner and would have prevented numerous delays in project implementation, especially for a complex, multimodal project in a country undergoing broad political, macroeconiomic, and sector changes\. 35\. Project supervision\. Satisfactorv\. Strong supervision was critical in overcoming the changes in governments and the effects of the reform program and supporting the GOU during the implementation and completion of the investment and institutional strengthening components\. Bank supervision also played a key role in anchoring reform initiatives\. Supervision utilized 198\.1 staff weeks, of which 46 were spent in the field\. Twenty-two supervision missions visited Uruguay\. Considering that the project took 8 years to implement, the previous numbers provide a high average of 2\.75 missions per year (roughly one mission every 4\.3 months), and 2\.1 staff weeks per mission\. Supervision missions, typically, took place with frequency, were small in staff, and lasted for a short duration\. Bank staff tended to combine supervision missions with other missions to the region, which proved to be a cost effective way of supervising\. The Back-to-Office reports provide for an easy follow-up of project implementation\. 36\. The decision to amend the project andi extend closing date an additional 28 months, unusual for Bank standards, proved to be appropriate\. During the last three years of the project, the pace in project implementation improved dramatically in terms of completing physical investments, and launching or consolidating the reforms in the road and port sectors, respectively\. F\. BORROWER PERFORMANCE 37\. As evidenced by this project, Uruguay has traditionally been a steady, if somewhat slow executor of Bank projects\. Although initial delays were manifested during the establishment of the legal framework for transport, once this structure was in place, the GOU showed strong commitment to complete the reform process\. The project supported the major refo:rms affecting ANP and DNV\. Through the reforms, the GOU demonstrated diligence in assessing essential implementation details and personnel management needs\. The ANP reform, implemented in 1992, impressively achieved in short time significant improvements in port operations without major union disturbances\. The Borrower managed the reform in the port subsector in an efficient and prudent way\. The DNV reform, which was begun in 1995, was undertaken in a quieter and more gradual manner, and has allowed increased participation of the private sector in roads\. Early results are very positive and is likely to ensure a good outcome\. Borrower performance in the reform of the roads subsector was also entirely satisfactory\. 38\. Project preparation and appraisal\. Satisfactory\. The Government carried out all kinds of project preparation activities in a timely and efficient manner\. The screening and the economic and  12 environmental evaluations of project components used methodologies previously designed and tested during preceding Bank projects\. In particular, good use was made of the HDM III model, and its inputs are periodically updated\. However, the port components for ANP and the port of Piriapolis under DNH did not have completed and detailed engineering plans, ready to call for bids, at the time the loan was approved\. The submission of preliminary engineering plans during appraisal led to delays in project implementation\. 39\. Project implementation\. Satisfactory\. During the first half of project implementation, progress was slow, with major delays taking place in the execution of all components, except the department road maintenance program and the Port of Punta del Este works\. The main factor contributing to these delays was the lack of counterpart funds\. In this respect, perhaps project timing was not appropriate given the macroeconomics conditions prevailing, and the induction of a new Administration right at the beginning of the project\. Monitoring indicators for project implementation in back-to-office reports were repeatedly rated as unsatisfactory until 1995-96, when implementation clearly improved during the second half of the project\. Implementation of the technical assistance component demonstrated mixed results; it can be considered satisfactory for the ANP, but only partially complete for MTOP after various major changes and reductions in the original plan\. 40\. Project coordination presented some problems, mainly due to jurisdictional conflicts in areas of common interest between Government agencies, and in their communications with the Bank\. The UCP fulfilled its function, but perhaps it could have been advantageous to strengthen its role vis-a-vis other agencies\. Sometimes, ANP communicated directly with the Bank, creating some confusion and weakening the important control role of UCP\. Compliance with loan covenants was generally satisfactory, with the exception of planning covenants for which compliance was partly complete\. The project initially advocated strengthening of the Technical Economic Evaluation Unit (AETE) and Economic and Financial Advisory Unit (EFAU) to administer highway planning and implementation of project Action Plans, respectively\. However, the loss of experienced staff weakened both units\. With Bank agreement, the GOU replaced these entities with the Transport and Infrastructure Planning Institute (IPTI), created in November 1992 and staffed one year later, and UCP\. This scheme partly achieved project objectives\. MTOP now plans to transfer planning responsibilities to a new Directorate of Planning, which would be integrated with most of IPTI personnel\. Audit and progress reports were adequately prepared, although generally presented after set deadlines\. G\. ASSESSMENT OF OUTCOME 41\. Satisfactory\. Overall project outcome is considered to be satisfactory as the majority of the sector policy objectives were achieved in an adequate manner\. It is worth noting that the physical works were executed during difficult macroeconomics conditions, which prevailed for about half the project execution period\. The project contributed to the definition and implementation of successful reforms in two key areas of the project managed by MTOP and ANP\. For the former, the reforms involved reformulating its internal structure and improving resource allocations, identifying and consolidating key activities, privatizing activities, which can be better performed by the private sector, and reducing personnel\. In regard to ANP, the passage of the Port Law No\. 16,246 of April 8, 1992 represented a major change in managing port activities, especially in the Port of Montevideo\. ANP reform was supported by two technical assistance packages, one included in the 302 1-UR and another financed by Bank Loan 3517-UR\. The technical assistance program for MTOP was only partly implemented, but the technical assistance program for DNV was successful\. Finally, the Routine and Periodic Maintenance Program for the departments was successful, although it still requires active support by DNV to continue functioning\.  13 H\. FUTURE OPERATIONS 42\. Government is taking actions that will\. eventually contribute to improving project sustainability and maximnizing project benefits\. These activities include: (a) strengthening the role of MTOP in planning and managemnent of construction, rehabilitation and maintenance of the primary road network; (b) increasing road sector funding, which is based on the concept that roads are public services to be funded by users; (c) increasing the efficiency and effectiveness of road operations; (d) bringing in the private sector to finance, build, maintain and operate substantial portions of the prinary road network, and contracting out periodic and routine maintenance to private contractors and microenterprises; (e) concessioning of the construction, rehabilitation, operation and maintenance of transport infrastructure, e\.g\. the Port of La Paloma and the Carrasco and Punta del Este airports; (e) continuing institutional building programs and supporting the transfer of technology to departmental govermnents; (f) maintaining support for Port reform, aimed at improving port planning, maximizing productivity and efficiency, reducing costs, and increasing port traffic with a sustained private sector participation; and (g) facilitating operations in the Port of Piriapolis\. 43\. The enhancement of intermodal transport coordination is supported by the ongoing Forestry Products Transport Project (Loan 4204-UR), which is using an integrated approach for the transport of forest products and incorporating the intrinsic advantages and disadvantages of each mode\. The same project supports the continuation of the departmental road maintenance program started under 302 1-UR\. A proposed follow-up Second Transport Project, scheduled for FY99, would deepen the reforms in the road sector\. The project intends to: (i) support the rehabilitation and maintenance of national roads and restoration of bridges whose physical and structural characteristics do not meet Mercosur standards to pennit the use of larger and heavier vehicles for international and domestic traffic; (ii) increase private sector participation in road maintenance through the use of performance-based contracts for the maintenance and/or rehabilitation of roads; and (iii) strengthen road sector management at DNV through an internal restructuring its organization and work processes; and (iv) technology transfer to the departments to support sustainable maintenance of their gravel road networks\. I\. KEY LESSONS LEARNED 44\. Several lessons can be derived from the implementation of this project and the major institutional reforms that took place between 1992-1995\. I)ue to relevance for designing future projects in Uruguay, and perhaps other countries, the following are the main lessons learned that emerged: (i) key elements for mobilizing support for institutional reforms; (ii) need for gradually implementing institutional programs; (iii) merits of "multimodal" approach in the clesign of transport projects; (iv) and the provision of technical assistance to the executing agency at the early stages of project implementation\. 45\. Mobilizing Support for Reform\. Alithough an attempt to accelerate privatization of major public companies was forestalled by a plebiscite in 1992, MTOP was able to launch reforms in both the port and road subsectors, which aimed at improving sector operation and increasing private sector participation\. In five months from April-September 1992, MTOP prepared the legal framework needed for the reform of ANP\. Throughout the process, MTOP and A1NP showed strong commitment to carrying out the reforms throughout the organization, by restructuring management, maintaining frequent contact with key actors to obtain timely feedback, and producing early results\. The retrenchment program reduced ANP staff from about 4,400 to about 1,350\. Personnel comp:laints were avoided through well-designed compensation packages\. The early success in the port reforrn was essential in gaining commitment for the on-going reform in the road subsector\.  14 46\. A sound ongoing retrenchment program is allowing DNV to reduce its own staff (so far from about 3,700 employees in 1995 to about 2,400) in coordination with its strategy of outsourcing road maintenance activities to microenterprises started by former staff\. Preliminary evidence has shown that the quality of maintenance done by the microenterprises is better than average force account work at a cost savings of 20 percent\. Former DNV staff have adjusted well to operating under a commercial environment as performance is now directly linked to financial incentives and contract award\. 47\. Phasing-In Institutional Development Programs\. The institutional restructuring components of projects and reform programs have often fallen short of achieving their objectives due to several common underlying factors confirmed by this project\. These factors include: (i) changes in administration or top sector management can leave reform programs without the requisite leadership to implement the reforms, or may shift priorities away from reform; (ii) the scope and timetable for implementation may be overly ambitious and not commensurate with the existing political environment; and (iii) the reform package exceeds the absorptive capacity of affected institutions\. The project was designed under one administration and carried out under two different administrations, creating difficulties in project execution, coordination, and numerous delays\. These risks can be minimized when project implementation is aligned with the political cycle and long-term investment plans, e\.g\. the Five Year Plan in Uruguay\. Furthermore, a "champion" should be designated at the beginning of project implementation to coordinate institutional strengthening programs\. It also is necessary to gradually build consensus for institutional reforms, which can be achieved through a phased-approach to institutional building and limiting the number of activities to a few but essential issues\. Case in point, the initial institutional strengthening program for departments contained too many parameters and technologies that exceeded the capacity to implement the program\. This program was later adjusted to correspond to the institutional capacity of departmental entities\. In this manner, subsequent operations can build or expand these programs as needed\. 48\. Multimodal Approaches in Project Design \. Optimization of the transportation system is the primary rationale for a multimodal approach\. The elimination of a proposed railways component at appraisal, which was initially part of the project design, deprived the project from addressing issues inherent across transport subsectors, which include: (i) coordinating of surface transport arriving at ports; (ii) establishing tariff policies and regulation; (iii) minimizing demand distortions; (iv) developing an integrated transport policy by eliminating unprofitable services, e\.g\. railway lines and stations\. Although the project successfully carried out comprehensive investment and institutional building action plans for both the port and road subsectors and addressed relevant institutional issues, this multimodal approach brought unnecessary complexities to project management, implementation, and supervision without the obvious advantage of a joint operation\. MTOP Project Implementation Unit manifested difficulties in coordinating between the independent modal agencies on aspects that went beyond policy\. The disconnect between subsectors in project implementation was also illustrated by the fact that the first Bank multimodal supervision mission (staffed with port and road specialists) did not occur until July 1992, more than three years into project implementation\. Keeping project design simple improves the likelihood of successful implementation\. Before designing complex multimodal projects, the merits of such approach should be carefully assessed against the increased risk of having components lag due to ineffective coordination\. There are situations where a multimodal approach is the very essence of a project, such as when the project has limited objectives, deals with policy elements requiring coordinated action, or addresses the transport needs of commodities entailing multiple transport modes (e\.g\. Uruguay Forest Products Transport Project)\. 49\. Bank Technical Support to Counterpart Agencies\. Although identified in previous ex-post project assessments and now considered standard practice in Bank operations, the following actions would have greatly facilitated project implementation and minimized delays: (i) a project launch exercise to build consensus in the early stages of implementation; (ii) an operational manual to guide the executing agency in  15 managing the project; (iii) performance indicators to assess the progress in meeting project objectives; (iii) training of counterpart staff in the Bank's procurement, audit, and disbursement policies and procedures to prevent delays and reduce the possibility of disagreements and potential conflicts between Bank practices and the legal norms in the country; and (iv) incorporating stakeholder participation in project design and supervision-- in the restructuring of the Port of Montevideo and the outsourcing of most of its operations, this approach served to ease the transition for affected workers, thus avoiding significant social and labor unrest\. (para\. 8)\.  16 PART II\. STATISTICAL TABLES Table 1: Summary of Assessments A\. Achievement of Objectives Substantial Partial Negligible Not Applicable Macro policies L _ l Sector policies Financial objectives l I l_l _l_l Institutional development ! [ / I l Physical objectives I / [ I _I Poverty reduction [ I / Gender issues [ Other social objectives r ! Environmental objectives _ I I / Public sector management / [ I I Private sector development B\. Project sustainability Likely Unlikely Uncertain C\. Bank performance Highly satisfactory Satisfactory Deficient Identification Preparation I / Appraisal | I Supervision j D\. Borrower performance Highly satisfactory Satisfactory Deficient Preparation / Implementation _ _ _ / Covenant compliance _ / Operation (if applicable) I / E\. Assessment of outcome Highly Satisfactory Unsatisfactory Highly satisfactory unsatisfactory  17 Tabtle 2: Related Bank Loans Loan Title Year Status I approved Preceding Operations _ Second 1689-UJR Improve road corridors between Uruguay and Brazil; 1979 Closed Highway 1986 Project Institutional Strengthening for Transport Sector entities, e\.g\. planning and programming in the road subsector and restructuring the railway subsector\. Port of 1798-UR 1980 Closed Montevideo Institutional Strengthening of ANP, which included the preparation of a 1990 Project Master Plan for the Port of Montevideo; Procurement of Equipment fior the Port of Montevideo; Civil Works to improve the existing infrastructure and install the purchased equipment\. Third 2238-UR 1983 Closed Highway Build, rehabilitate and maintain national roads under the jurisdiction of 1990 Project DNV, especially road corridors between Argentina-Brazil-Uruguay and departmental/rural roadLs administered by the Intendencias; Strengthen and consolidate planning duties and project implementation capacity within MTOP and DNV\. Public 3517-UR 1992 Closed Enterprise Support Govermnent efforts in improving the provision of public services 1997 Reform and reducing the size of the State in the teleconununications, transport Loan and energy sectors; (PERL) Develop and implement sector policies, regulatory frameworks, and privatization and restructuring programs for the telecommunications, transport and energy sectors\. Transport of 4204-UR 1997 Under Forestry Facilitate the cost-efficient transport of forestry products from forest to port- executio Products to-exit through the rehabilitation of transport infrastructure; n Project Increase productivity in the road and port sectors and improve efficiency while reducing subsidies to the national rail carrier (AFE) through private sector participation in the operations of forest products transport\. l Second N/A Planned for Under Transport Arrest road deterioration and enable Uruguay to handle the movement of FY1999 Prepara Project larger vehicles along international corridors and strategic feeder roads tion through rehabilitation md maintenance of national roads and restoration of bridges; Increase private sector participation in road maintenance through the use of performance-based contracts for the maintenance and/or rehabilitation of roads; Strengthen road sector management at DNV through an internal restructuring; Implementation of more commercial and user-oriented practices at the department levels through sustainable maintenance of their gravel road networks Includes projects in the same sector/subsector as this project\.  18 Table 3: Proiect Timetable Steps in project cycle Date Identification (Executive Project Summary) N/A Preparation November 1987 Appraisal J April 1988 Negotiations September 1988 Board presentation February 7, 1989 Signing April 6, 1989 Effectiveness October 19, 1989 Project completion | December 31, 1997 Loan closing December 31, 1997  19 Table 4: Loan Disbursements: Cumulative Estimated and Actual (US$ Millions) World Bank (*) FY 1989 1990 1991 1992 1993 1994 1995 1996 1997 Appraisal Estimate 8\.0 18\.0 36\.0 57\.0 72\.0 79\.0 80\.8 N/A N/A Revised Appraisal N/A N/A N/A N/A N/A N/A N/A N/A 80\.8 Estimate Actual 8\.0 [ 9\.2 | 12\.5 18\.0 J 28\.5 41\.1 53\.8 [ 70\.0 j 80\.3 |Actual as %of1Estimate 100 [ 51 | 35 32 J 40 52 68 [ N/A N/A Actual as %ofRevised N/A N/A N/A /A N/A N/A NA N/A 99\.4 Estimate _ _ _ N J N Date of Final Disbursement N/A [N/A JN/A N/A | N/A ] N/A [ N/A [ N/A [ 8/31/97 EXIMEANK (*)(US$ Millions) FY 1990 1991 1992 1993 1994 1995 1996 19971 19981 Appraisal Estimate j 7\.4 16\.5 32\.9 f 52\.1 65\.9 72\.2 73\.9 73\.9 73\.9 Revised Appraisal Estimate |_N/A N/A | / a N/A N/A N/A N/A N/A N/A Actual 7\.4 8\.5 F11\.7 16\.5 [ 27\.9 j 36\.4 40\.3 64\.3 67\.8 Actual as % of estimate j 100 51\.5 35\.6 31\.7 [ 42\.3 49\.3 54\.5 j 87\.0 91\.7 Actual as % of revised [ N/A N/A N/A N/A N/A N/A N/A N/A I N/A Date of final disbursement N/A IN/A N/A N/A [N/A N/A TN/A N/A 1 5/14/98 (*) As of January 31, 1998 1\. Disbursements were not expected for FY1997 and FY1998 as the original project closing date June 31, 1995  20 Table 5: Key Indicators for Proiect Implementation I\. KEY IMPLEMENTATION APPRAISAL ACTUAL INDICATORS IN SAR ESTIMATE l CIVIL WORKS DNV Construction of Route 1 149 Km 70 Km Bridge Construction Not specified 7 bridges Rehabilitation and Maintenance of Not specified 470 Km Road Corridors l Maintenance of Rural Roads 10,000 Km 10,000 Km ANP (Port of Montevideo) Construction of a closing dike Not specified Canceled Remodeling the General Cargo Areas Not specified Demolition of cargo warehouses, construction of 10 ha\. of pavement\. Power generation facilities and construction of a 1,000 m3 water tank Remodeling pier 8 Not specified Demolition of cargo warehouses and installation of 1 ha\. of pavement DNH Remodeling of La Paloma port Not specified Canceled Construction of small craft berths in 340 m 340 m the Port of Punta del Este Expand Port of Piriapolis Not specified Construction of 280m of barriers, 8100 m2 of sloped barriers, 186m of small craft berths, and a Travelift structure GOODS DNV Computers Not specified 15 units Laboratory equipment Not specified 18 units for soil and granular base tests and 18 units for grading tests, with ancillary equipment Light vehicles Not specified Canceled Survey equipment Not specified Canceled Scales Not specified Canceled ANP Computers Not specified Canceled Equipment for moving cargo and Not specified 16 semitrailers, 9 trucks, and medium and low voltage containers, maintenance equipment, equipment machinery and tools Training equipment and materials Not specified Canceled Treatment plant |Not specified |Canceled  21 Table 5: Kev Indicators for Proiect Implementation L KEY IMPLEMENTATION INDICATORS SAR STATUS TECHNICAL ASSISTANCE MTOP Marina Study Yes Canceled Dredging Services study Yes Canceled Transport Planning Study Yes Canceled AFE Restructuring No Completed Transport Legal and Regulatory Framework and Institutional No Completed Structure Study l Soil Tests for Port of Punta del Este No Completed Road User Charges Study No Completed DA1 Road Planning System Study (SIPLA) Yes Underway Soil and Material Tests Study Yes Completed Traffic Management System (SAT) Yes Completed Road Maintenance and Management System (SAM) Study Yes Completed Equipment Utilization System Yes Completed Forest Products Transport Study No Completed Suburban Roads Study No Completed Institutional Strengthening for Municipalities (PRAIM) Yes Completed ANP Port Management Yes Increased Managerial Capacity Completed Strengthen Commercial Division Completed Improvement of Supply and Procurement Systems Completed Port Operations Yes Completed Improved Costing System Port Maintenance Yes Canceled Port Information Management Yes Port Information and Studies Center Completed Document and Information Flows Database Completed Equipment Inventory Completed Human Resource Capacity Building Marketing\. Yes Strengthen of Commercial Division Completed Engineering Studies Yes Canceled Revised Master Plan for Montevideo Port No Underway Institutional Strengthening and Staff Training Yes Completed Table 6: Key Indicators for Project Operation (Not applicable)  22 Table 7: Studies Included in Proiect Study Purpose as dermed at appraisal/redefined Status Impact of study ANP_ Human Resource Capacity (G-1) General inventory of human resources within ANP with all necessary data for its | Completed By updating personnel data, the consultant study served as a valuable optimal utDization, and the implementation of a human resources database\. tool for determining the potential use of ANP Human Resources\. Equipment Inventory (G-2) General inventory of land and port-based operational and maintenance equipment Completed Information has served as a powerful management tool for port and including a registry of technical specifications and cost and a proposal about their shop equipment and is one of the more up-to-date inventories in the l____________________________ respective utilization, recycling or abandorment\. Latin America Region\. _ ___ ________ I _ _ I _______ ANP Document and Information Flows Collect documents in use, develop related indices and information flow charts of Completed Provides a clear and well-structured base of information, which could be Database (G-3) within the database to permit its management and administration easily updated through special programs available in the system\. Improved of Costing System - (G4) Develop and maintain port tariff regime and levels based on actual costs\. Completed Costing and Management Information Systems records ANP costs and revenues within each Business Center\. This infonnation has improved data disaggregation, has led to the creation of increased performance indicators and has given Business Center Managers have improved managerial autonomy\. Institutional Strengthening and Staff Improve managerial capacity, incorporate updated procedures, and optimize available Completed General training: Results have been satisfactory\. Managerial capacity Training (G-5) resources\. and moIle has improved\. Specifc Training: General instiutonal and _ p~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~roject management capacity was not achievedl Post Information and Studies Center (G- Establish information system for the management, operations, research and Completed Creation of the ftrst technology center in the Region with the active and 6) development of port and transport activities to facilitate modernization of Uruguayan integrated participation of the main private and public actors in ports ports\. sector\. The center will operate a database and information system for ships and commodities (not implemented yet)\. Major benefit include significant cost reduction for public and private operators\. Improved Supply and Procurement Improve management and oversight of goods procurement and contracts, and obtain Completed Computer systems were installed, which permitted improvements in Systems (S-l) more accurate representation of the fmancial costs of these activities\. goods procurement, warehousing, inventory, and related administrative procedures\. The system includes a user-friendly interface to the Central Accounting and Budgetary Systems in ANP Strengthen Commercial Division (S- Strengthen marketing of ANP port services to facilitate foreign trade and improve the Completed A working methodology, new market strategy, and various managerial 2) competitive position of Uruguayan ports\. mechanisms were introduced to strengthen managerial capacity, commercialize port activities, and promote ANP commercial ports\.  23 Table 7: Studies Induded in Project Study Purpose as defined at appraisal/redermed Status Impact of study Port Tariffs Study (S-3) Develop a planning and calculation tool to evaluate tariff structures and levels under Completed Based on the study recommendations, the following decree were different port institutional and management scenarios\. developed and enacted on December 10, 1993: (i) General Tariff Norms for all commercial ports in Uruguay (534/993) and; (ii) Tariff structure and levels for ANP ports (533/933)\. The revised legal framework simplified the ANP tariff regime from a complex and voluminous book to an eight-page brochure Revised Master Plan for the Port of Prepare an updated 20- year Master Plan, that is consistent with the drastic changes - The study began on July 7, 1997, and will take 12 months to complete\. Montevideo outlined in the Port Law enacted on April 8, 1992\. Complete Project Supervision Unit (UDP) UDP The objectives of the unit were to manage, supervise, and coordinate ANP of Completed technical assistance and institutional strengthening programs\. The unit evaluated progress, implementation, quality, effectiveness and of the TA program\. _ MTOP Forest Products Transport Study | Study the feasibility and options for transport of forestry products designated for | Completed |The results of the study formed the basis for the development of Bank export\. = [Loan 4204-UR approved in June 1997\. Transport Legal and Regulatory Identify and evaluate the role and effectiveness of public and private entities involved Partly N/A Framework and Institutional Structure in passenger and freight transport\. Complete Study Road User Charge Study\. Evaluate the cost to the primary road network of roads users by vehicle category\. Partly Study will be completed by mid-1998\. Approved recommendations will Develop mechanisms for improving cost-recovery\. Complete presented to Economic Authorities by end of 1998\. _ __ _ l _______ 1 Buenos-Aires Colonia Bridge Project Study the financial and economic feasibility for the Buenos Aires - Colonia Bridge Completed The study evaluated the economic impact on the Uruguay and Argentine linking Argentina and Uruguay\. economies and examined the fuiancial feasibility (e\.g\. traffic projection and composition, tariff structures, etc\.) for the project\. This report , will form the framework for the development of the 41-km Buenos Aires - Colonia Bridge through a concession arrangement with the private sector who will own and operate the project\. Road Maintenance and Management Establish a system of data collection, processing and analysis to permit planning, Completed The installation of the SAM system has created a more reliable system System (SAM) Study coordination, supervision and management of road maintenance activities to maximize for tracking road maintenance activities and costs\. The SAM system efficient utilization of existing resources\. allows DNV to better assess the financial costs and road pavement l lrconditions,, improve planning and project implementation, and utilize __________________________ _______________________________________________________road_maintenroadceintenncerresurees eorefeffcientl  24 Table 7: Studies Included in Project Study Purpose as dermed at appraisal/redefined Status Impact of study Road Planning System Study (SIPLA) Introduce a guiding methodology for the development of the primary network, and to Pardy prioritize road investments\. Complete ________ 11 _________________ ___~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 Suburban Roads Study Develop a methodology for the development and location of primary roads in Completed The study represents a valuable planning tool for the development of suburban areas taking into account the existing road network, traffic conditions, and new roads in urban and suburban areas and is being implemented in the growth patterns\. town of Ecilda Paulier\. Traffic Management System (SAT) Improve collection and processing of traffic data\. Improve the quality of traffic Completed The study outcome supported the development of the following studies: studies and road design\. (i) axle load system, to detect, inter alia, the potential damage of truck and buses on road pavement; and (ii) traffic\. Soil and Material Tests Study Rationalize and modernize investigative techniques, implementation of soil and Completed The report recommended establishing a Research Institute to study material tests\. applied topics in road construction and quality control\. Although this idea has proven to be ambitious, a consultant has been contracted to undertake research studies regarding road over-utilization and norms for bituminous emulsions\. Additional recommendation include the purchase of new equipment and implementation of ISO 9000 norms\. ___I _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ DNV - Municipal Institutional Support Technical assistance to improve municipal road maintenance on department gravel Pardy The improvement of department gravel road maintenance has been (PRAIM) roads\. Completed impressive\. However, the technical assistance program was interrupted, but will be resumed by the proposed Second Transport Project\. D\.N\.H\. Boring and soil tests in small craft berth Investigation of causes, consequences and solutions for a detected failure i a Completed in the port of Ptnta del Este localized berth area\. Also, suggestions on type of tests to receive the structure\.  25 Table 8A: Proiect Costs Category j Appraisal Estimate Revised Estimate Actual Estimate (US$]W) (US$ M) (US$ M) L Local Foreign Total Local Foreign Total [ Local i Foreign Total Civil Works I I I I _ I _ [ _ Highway Component 1 76\.5 76\.5]j 153\.01 N/A N/ N/A] N/A[ 57\.41 108\.11 165\.5 PortComponent | 18\.0[ 22\.11 40\.11 N/A[ N/A] N/A[ 12\.81 30\.3 1 43\.1 I ~ ~~ ~ ~ ~~~I ___ [ jI j___ j j___ [ _____]___ ___I_ _i Equipment I [ I I [ ] [I I Ports ] 2\.2 r 5\.3 1 7\.51 N/A [ N/A ] N/A I -- I 2\.21 2\.2 Institutional Development Hwys\. ] 0\.5 [ 1\.31 1\.81 N/A [ N/A ] N/A [ -- | 0\.51 0\.5 Institutional DeveloPment Ports -- 0\.4 0\.41 N/A [ N/A ] N/A I -- 0\.31 0\.3 Technical Assistance i _ [ I _ I _ I I Highways I 0\.1 | 0\.41 0\.51 N/A I N/A ] N/A| -- I 3\.91 3\.9 Ports ] 0\.5s 2\.1 1 2\.61 N/A [ N/A ] N/A [ 0\.51 2\.51 3\.0 IMTOP I 0\.1i 0\.5] 0\.61 N/A [ N/A ] N/A [ 0\.5[ 2\.41 2\.9 I _ _ _ _ 1 1 1___ I _ __ _ _ [ _ _ __ _ _ ] _ _ _ _ I _ __ _ _ I _ _ _ _ _ Training 1 -- ()\.61 0\.61 N/A N/A N/A| -- | -- | -- Highways 1 0\.21 1\.1 ] 1\.31 N/A N/A] N/A[ -- T -- I -- Ports | [ (\.1 \.1| I N] /A| 0\.1 1 0\.41 0\.5 MTOP I I I [ I I_____ TotalBaseCost 1 98\.11 11(041 208\.51 N/A| N/AI N/A[ 71\.3[ 150\.61 221\.9 I 1 I I I I I Physical Contingency 1 10\.3 1 11\.41 21\.71 1 1 I -- [ -- I -- Price Contingency I 12\.71 14\.21 26\.9 1 1 I Cofinancing Fee 0\.3 (131 0\.31 1 Total | 121\.71 136\.31 257\.41 1 _ 1 71\.31 150\.61 221\.9 Table 8B: Proiect Financing Appraisal estimate (U$S) Actual/latest estimate (U$S) (*) Source Local Foreign Total Local Foreign Total I Costs Costs Costs Costs IBRD 80\.8 80\.8 | 80\.8 80\.8 EXIMBANK [ 19\.7 54\.2 73\.9 -- 69\.8 69\.8 Counterpart financing j 101\.4 1\.3 102\.7 j 71\.3 -- 71\.3 TOTAL 121\.1 136\.3 257\.4 71\.3 150\.6 221\.9 (*) As of January 31, 1998  26 Table 9A: Economic Cost and Benefits (Roads and Ports) Subproject Type of Work Execution Subproject NPV (@12%) IIRR Time Cost (1996 (US$M) (%) (years) US$M) \._\. Route 1 (see table 9B) Widen to four lanes a 70 km road 5 60 6\.2 14 section and related bridges\. (4) (88)* (26) All Other Routes (see Rehabilitation, repaving, resealing (5) 102 29\.5 17% table (9B) works for 20 segments totaling 646 (N/A) (N/A) (N/A) Port of Punta del Este Develop 340 meters of two new\.small 3 24 1\.3 16 craft berths\. (2) (26) (43) Port of Piriapolis Extend existing breakwater, construct 4 6 3\.5 14 new berths and boatrpi failities\. (3) (7) |(22) Port of Montevideo Demolish warehouses, surface paving, 5 22 13\.7 28 and port accesses, remodel berth 8, (4) (37) (50) add power generation facilities, and a water tank of 1,000 m3\. l TOTAL: l l I 214 5 S4\.2 [ Values in parenthesis are SAR estimates\. Due to the project amendment, the km completed forthe Route 1 subproject was about halfthe SAR estimates\. Subproject cost is the value at SAR was prorated to the number of km planned and completed\.  27 Table 9B: Economic Cost and Benefits (Roads only) Road Segment Length Traffic Works 1Subproject |Subproject |NPVat ERR I I I JCost [Cost j 12% (k) (ADT)|(text) 1 (M$)[ (000$/km)| (M$)| (% ____[IIll1~~~~~I I_]IIZIZ~I Route 1: Santiago Vazquez - Rincon del Pino | 65 6048 Widening to 4 | 50\.981 780] 6\.2 14% ! __ !J lanes ! I_! _ ! Ruta 3: 288 km - 308 km 100 (A\. Grande) [ 20 78410verlay ! 3\.321 1661 0\.8116% Ruta 3: Constancia - Empalme Ruta 26 201 1655 Reconstruction AC 4\.691 2341 5\.1 31%, Ruta 5: 181 km - 224 km (Durazno - Carlos Reyes) 1431 1201 Overlay 1 7\.171 167 4 24% Ruta 5: 336 km -361 km [ 251 1135IReconstruction STI 2\.961 1181 0\.9 17% Ruta 5: 361 kn-379 mn 1 181 1135 Reconstruction AC 2\.691 150T 2\.0 25% Ruta 5:479km 000-497 km 062\.49 ! 183 994\.ReconstrucfiZ AC 3951 219 1\.8 21% Ruta 6: 206 km 900-240 km 750 1 341 534|Regravelling | 0\.521 15 0\.5120% Ruta 8: 299 km - 321 km 1_2 335 Reseal 1\.05[ 481 0\.7120% Ruta 14: 258 km 500-298km 500 (Jose Pedro 40 240|Reseal 1 \.111 281 0\.1|13% Varela) I J ___ ___ __ Ruta 19: 0 kmO00 - 25 km 500 (Ruta 14 - Ruta 42) | 251 119IRegravelling 0\.211 9| 0\.3119°M Ruta 19: 25 km 500 -26 km 700 (Ruta 42 - Ruta 6) 1 131 83IRegravelling | 0\.13] 10 0\.1 18[ Ruta 19: 36 km 700 - 38 km 900 (Ruta 6 - Cerro 4101 85[Regravelling j 0\.481 12 0\.3 17% Chato) I \. I i Ruta 26: 95km - 122 km 1 271 174|Reseal 0\.471 17 0\.2 15% Ruta 26: 125 km - 232 km 200 T -1071 174 Reseal [ 0\.871 8 1\.4 20% Ruta 26: Accesos a Rio Branco 91 695|0verlay 1\.031 1141 0\.2115% Ruta 36: Ao\. Las Piedras - Cerrillos 1!8| 1275|Reconstruction ST 1 1\.701 941 1\.21 23% Ruta 54: 7 km 200 - 62 km 500 (Ruta 1 - Ruta 12) T -551 104|Reseal [ 3\.021 551 0\.7 150/ Ruta 56: Florida - Ruta 6 | ll1 613 Reconstruction ST [ 4\.561 149 2\.0 209' Ruta 97: 0 km 800 - 16 km 500 (Carmelo - Ruta 12 ] 161 122[Regravelling 0\.20 12 0\.1 179' Other Routes Total 1 5811 N/A I N/A 40\.111 N/A [ 23\.3121% Total 7 Bridges I N/AL N/A N N/A 21\.74 N/A I N/A I Nr _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ I 1 -1 I mI m I [ I I All Routes Total 1 641 N/A N/A 152\.951 N/A | 29\.5117  28 \.______ ____Table 10: Status of Legal Covenants Agreement Text Covenant Status Original Revised Description of Covenant Comments Reference Type Fulfillment Fulfillment l OAN 2\.02 (b) 01 Date ! Date LOAN _ 2\.02 (b) _ _01 |C [10/19/1989 | 10/19/1989 | OPENING OF SPECIAL ACCOUNT l 3\.01 (a) 05 CP | 6/30/1995 |12/31/1997 CARRY OUT THE PROJECT WITH DUE DILIGENCE | 3\.01 (b) | 02 C [12/13/1989 8/21/1990 |BORROWER'SEQUITYCONTRIBUTIONTOANP l 3\.02 05 C 6/30/1995 |12/31/1997 1BORROWER'S CONTRACTUAL ARRANGEMENTS l | | W I~~~~~~~~~11T H IN TEN,DEN- CLA Sl 3\.04 05 C 6/30/1995 12/31/1997 COMPLIANCE WITH PROCUREMENT REGULATIONS 1 3\.05 05 C 6/30/1995 12/31/1997 1MAINTAIN PROJECT COORDINATION UNIT The PCU has in addition has been strengthened to assume l ________ I _______ j ______ [ _________ j _________ j ___________________________________________ functions proposed for EFUA in Section 4\.07b 3\.06 02 c 12/31/1989 10/31/1997 COMPLETE ROAD-USER CHARGE STUDY AND The final report was presented during the last week of TAKE ALL ACTION TO ADJUST CHARGES TO October 1997 30 02 C REFLECT SHORT-TERM MARGINAL COST OF MAINTAINING HIGHWAYS \. 3\.07 09 C 6/15/1990 6/15/1990 BIANNUAL MEETINGS AND DISCUSSIONS WITH It was complied with at dates corresponding to the timing I I I I I BANK REPRESENTATIVES ! of Bank missions\. 4\.01 01 NYD 6/30/1991 6/30/1991 AUDIT REPORTS On October 1997, the Bank received the 1996 audit l______l______l_____l______l_____|______ |____ reports due to delays within the "Tribunal de Cuentas\." 4\.02 (b) 02 C 12/31/1989 12/31/1989 PROVIDE RESOURCES FOR ROAD MAINTENANCE AND AT LEAST EQUIVALENT OF 1988 US$30\.0 l_____ l___ l_l_l _ | MILLION FOR NATIONAL HIGHWAY MAINTENANCE |_l 4\.04 05 SOON 6/30/1995 12/31/1997 BORROWER TO ENFORCE CONTROL OF VEHICLE The study was completed and the Borrower is in the l_l_l_l_l__ WEIGHTS AND DIMENSIONS implementation stage 4\.05 05 C 6/30/1995 3/28/1998 MTOP'S ASESORIA DE EVALUATION TECNICA Y AETE was weakened by loss of experienced staff\. Its ECONOMIA (AETE) WITH DNV TO COLLECT, functions were absorbed by the new Transport and RECORD, AND ANALYZE DATA REQUIRED FOR Infrastructure Planning Institute, and now its functions HIGHWAY PLANNING will be absorbed by the Directorate of Plaming (DP)\. The DP was created within the budget but it is not in place l_ _ _ _ _ _ _ _ _ l_ _ _ _ _ _ _ __l_ _ _ _ _ _ __l_ _ _ _ _ _ __l_ _ _ _ _ _ __l_ _ _ _ _ _ _ _ _ _ _ _ y et\. 4\.06 05 C 6/30/1995 7/31/1997 BORROWER TO INFORM BANK FROM TIME TO The GOU sent the budget for the period 1995-1999 TIME ON UPDATINGS OF THE TRANSPORT EXPENDITURE PROGRAM 4\.07 05 C 6/30/1995 10/01997 BORROWER TO ENSURE THAT MTOP AND ANP EFAU was integrated into the PCU ACTION PLANS ARE EFFECTIVELY CARRIED OUT UNDER THE ECONOMIC AND FINANCIAL l_________ _ l _ l l | |ADVISORY UNIT (EFAU)\. Status C - Complied with SOON - Compliance Expected in Reasonably Short Time CD - Compliance after Delay CP - Complied with Partially NC - Not Complied with NYD - Not Yet Due  29 Table 10: Status of Legal Covenants Agreement Text Covenant Status Original Revised Description of Covenant Comments Section Type Fulfillment Fulfillment Date Date LOAN 6\.01 05 C 6/30/1995 12/31/1997 STRENGTBEN THE ECONOMIC AND FINANCIAL The PCU has been assigned the coordination l______ ________ ADVISORY UNIT (EFAU) functions stipulated for the EFAU Schedule 5 05 C 6/30/1995 12/31/1997 COMPLIANCE WITH PROCURMEENT REGULATIONS PROJECT 2\.06 (a) 05 C 6/30/1989 6/30/1989 ANP TO ENTER INTO AN AGREEMENT WITH TECHNICAL ASSISTANCE INSTITUTION(S) TO COOOPERATE IN l_____ _____ ____ _______ RUNNING TRAIN1NG PROGRAMS 2\.06 (bXc) 05 C 10/19/1989 10/19/1989 ANP TO ESTABLISH A TECHNICAL UNIT TO CARRY OUT The Technical Unit is in place l_____ ______ ____ _______ PARTS B1 AND C4 OF TBE PROJECT 3\.01 (b) 02 C 12/31/1995 12/31/1997 ANP TO ACHIEVE THE OPERATIONAL PERFORMANCE l_____ _____ _______ TARGETS SET FORTH IN THE SCHEDULE 4\.03 02 C 9/30/1989 9/30/1989 ANP TO MAINTAIN DETERMINED RATIOS OF TOTAL Targets were modified\. Covenant ratio for the OPERATING EXPENSES TO TOTAL OPERATING REVENUES first semester of 1997 is 84\.5 FOR YEAR 1990 TO 1995 OR ADJUST TARIFF RATES TO MEET THESE REQUIREMENTS 4\.04 02 |C N/A N/A |ANP IS NOT TO INCUR ANY DEBT UNLESS CERTAIN 1 ANP has not incurred new debt\. Itus l l l||REVENUE TARGETS ARE MET lI-_ \._, __ __l Status C - Complied with SOON - Compliance Expected in Reasonably Short Time CD - Compliance after Delay CP - Complied with Partially NC - Not Complied with NYD - Not Yet Due Covenant Type: I = Accounts/audits 2 = Financial perfonnance revenue generation from beneficiaries 3 = Flow and utilization of project funds 4 = Counterpart funding 5 = Management aspects of the project or executing agency 6 = Environmental covenants 7 = Involuntary resettlement 8 = idigenous people 9 = Monitoring, review, and reporting 10 = Preject implementation not covered by categories 1 -9 11 = Sectoral or cross-sectoral budgetary or other resource allocations 12 = Sectoral or cross-sectoral policy/budgetary/institutional action 13 = Other  30 Table 11: Compliance with Operational Statements (Not applicable) Table 12: Bank Resources: Staff Inputs Stage of Project Cycle Planned Revised A Actual r___________ Weeks US$ Weeks US$ Weeks USS 000 ThroughAppraisal N/A N/A N/A N/A 112\.6 212\.6 Appraisal-Board N/A N/A N/A N/A 19\.5 39\.2 Board-Effectiveness N/A N/A N/A N/A 25\.4 55\.1 Supervision N/A N/A N/A N/A 198\.1 645\.7 Completion N/A N/A N/A N/A 4\.8 12\.8 Total N/A N/A N/A N/A 360\.4 965\.4  31 Table 13: Bank Resources and Missions Stage of Project Month/ Number of Days in Specialized Performance Rating Types of Problems Cycle Year Persons field Staff Skills rpresented Implementation Development Progress 1IP) Objectives (DO) Through Appraisal _ 5/87 1 15 _ 11/87 6 53 HE,PE,TE, _ TEC, FA N/A N/A N/A _ Appraisal Through Board Approval _ N/A N/A N/A _ N/A N/A N/A _ Board Approval Through Effectiveness _ N/A N/A N/A _ __________ N/A N/A N/A _ Supervision _ r _______________ 4/89 1 10 HE 2 1 __ 8/89 1 10 PE 2 1 PP 2/90 2 12 HE, TEC 2 1 AP, PP 4/90 2 2 PE, TS 2 1 PP \.____________ :10/90 3 15 PE, TEC,FA 2 1 PMP, PP 5/91 1 5 HE 1 1 PP 10/91 2 10 HE,PE 2 2 AP, PP 3/92 2 10 PE, TEC 2 2 PP ______________ 11/92 3 15 HE7,TEC,PE 2 2 PP 5/93 3 36 TE, HE 2 2 PP ______________ 7/93 1 2 TE 2 2 AP, PP 10/93 4 40 TE, TEC, FA 2 2 AP, PMP, PP 7/94 2 10 TE,C U S AP, PMPPP 10/94 1 2 TE U U AP, PMP, PP 5/95 2 16 - TE, FA U U AP, PMP, PP, 12/95 1 2 TE U S PMP,PP,CLC,SP ______________ 4/96 2 10 IrE, TEC U S PMP, PP, CLC, SP L____________ 10/96 2 4 _ TE,TP U S PMP,PP,CLC,SP _____________ 12/96 1 1 TE S S AP, PMP, CLC,SP r_______________ 2/97 1 2 TE S S PMP 7/97 1 5 TE S S PMP ________________ 10/97 2 10 TE S S Completion _ _____________ 10/97 1 1 _TEG, HE S S Total N/A N/A 298 N/A N/A N/A N/A Staff Skills: TEG = Tramsport Engineer; TEC = Trainsport Economist; Transport Planner; TS = Transport Specialist;C = Consultant; HE = Highway Engineer; FA =Financial Analyst, PE = Port Engineer Problems: CLC: Compliance with covenants; FP: Financial Performance; AP: Technical Assistance Progress; PMP: Project Mgt\. Progress PP: Procurement Progress; SP: Studies Progress  32 Appendix A AYUDA MEMORIA URUGUAY Proyecto de Transporte I (Pr6stamo 3021 - UR) 1\. Una misi6n del Banco Mundial integrada por la Sm\. Maria Lucy Giraldo y el Sr\. Jose Luis Irigoyen, visit6 la Republica Oriental del Uruguay del 7 al 16 de octubre de 1997, con el fin de (i) supervisar la implementaci6n del Proyecto Transporte I (Pr6stamo 3021-UR), y (ii) acordar los pasos a seguir para preparar el Informe de Terminaci6n del Proyecto\. La misi6n agradece la colaboracion que recibi6 de las autoridades del Ministerio de Transporte y Obras Puiblicas (MTOP), la Administraci6n Nacional de Puertos (ANP) y la Unidad Coordinadora del Proyecto (UCP)\. 2\. Las recomendaciones y acuerdos alcanzados con el MTOP y ANP se resumen en esta Ayuda Memoria y estan sujetos a ser ratificados por las autoridades del Banco Mundial en Washington y por el Sr\. Ministro de Transporte y Obras Publicas\. Situaci6n actual del Proyecto 3\. Situacion Fmanciera - Desembolsos\. La misi6n\. revis6 con funcionarios de la UCP el progreso en la ejecuci6n de los distintos componentes del Proyecto\. El Anexo 1 resume la ejecuci6n financiera y los desembolsos del pr6stamo al 30 de septiembre de 1997\. Los desembolsos tramimados hasta la fecha suman US$76\.3 millones que corresponden al 94\.43% del monto total del prestamo y el saldo de la Cuenta Especial es de US$5\.2 millones, los desembolsos correspondientes al EXIMBANK ascienden a la suma de US$66\.7 millones que corresponden al 90\.36% y el saldo de la cuenta especial es de US$4\.4 millones\. El remanente se encuentra comprometido y se espera que se desembolse el 100% de los fondos antes del 31 de diciembre de 1997, fecha de cierre del prestamo\. 4\. El MTOP no ha presentado los Estados Auditados del Proyecto, por demoras imputables al Tribunal de Cuentas\. Obras Civiles (Cats\. 1, 2, 3 y 4) 5\. Direccion Nacional de Vialidad (DNV) El estado de las obras contratadas en 1992/93 es: Rta I Tramo I (readjudicado) terminada Tramo II terminada Tramo III terminada Tramo IV terminada Tramo V avance 88\.95%  33 Puente Pereira terminado Ptes\. Pav6n y la Boyada terminado Accesos Pte\. Pavon y Boyada terminados Puente Pan de Aziucar terminado Puente Chamizo fue retirado La situaci6n de las obras incluidas en el anio 1995 para el financiamiento bajo el Proyecto es la siguiente: Puente Chapicuy terminado Rta\.56 terminado Rta\.36 terminado Pte\. Carnpanero Gde\. avance 80\.97% Rta\. 12 Pasaje Superior terminado Rta\.5 termiinado Rta\.3 terminado Rta\.3/14 se retir6 del financiamiento del pr6stamo Rta\.26 Acso\.Rio Brco\. avance 85\.98% 6\. Programa de Mantenimiento Vial Departamental\. El programa del Mantenimniento Vial Departamental incluido dentro del prestamo termin6 el 31 de diciembre de 1996\. La ejecuci6n del ado 1996, iultimo del programa, fue de US$9,896,947 y la inversi6n en Obras de Arte de US$987,755\. Con este componente se logr6 la sostenibilidad de la estrategia de mantenimiento en las Intendencias Municipales\. Dada la importancia de esta experiencia, la misi6n solicita a la Direcci6n de Mantenimiento que elabore para el Informe de Terminaci6n del Proyecto (ver mas adelante) una evaluaci6n del mantenimiento peri6dico, rutinario y del componente de obras de arte desde el punto de vista de efectividad y eficiencia en costo, evaluaci6n que facilitari la consolidaci6n de la estrategia de mantenimiento\. 7\. Direcci6n Nacional de hiclrografia (DNH) Ampliaci6n del puerto de Piriapolis: la obra se encuentra en la etapa de montajes de instalaciones electricas e iluminaci6n, agua potable y sistema contra incendio, la fecha de terminaci6n de la obra es el 15 de noviembre de 1997\. La situaci6n a la entrega de la obra sera Area: 5\.5 hectareas Capacidad de agua 100 embarcaciones Capacidad en tierra 120 embarcaciones Servicios agua, energia, combustible y telefono La DNH contrat6 un consultor para la preparaci6n de los documentos de licitaci6n que contemplan 1a administraci6n, explotaci6n, operaci6n y mantenimiento del puerto\. Los documentos se encuentran en proceso de revisi6n\.  34 8\. Administraci6n Nacional de Puertos (ANP) La situaci6n de las obras es la siguiente: Accesos al Puerto terrninado Demolici6n Dep6sito 10 terminado Pavimentaci6n muelles terminado Construcci6n Tanque de agua avance 86\.71% Instalaciones el6ctricas terminado Reforma y refuerzo muelle 8 y 9 avance 30\.590/o 9\. Resumen Obras en ejecuci6n La inversion acumulada y metas fisicas alcanzadas al 30 de septiembre de 1997 bajo los componentes de obras civiles a cargo de DNV, ANP y DNH se resume en el Anexo 2 y el Mantenimiento de las Intendencias Departanmentales en el Anexo 3\. Las obras que se encuentran en la etapa final de ejecuci6n son: (i) el Tramo V: Libertad - Rinc6n del Pino, de la Ruta 1, el puente y accesos Ao\. Campanero Grande y Ruta 26: Acceso Rio Branco correspondientes a la DNV; (ii) la construcci6n del Tanque de Agua Potable y del refuexzo estructural de los Muelles 8 y 9 de la ANP y, (iii) la ampliaci6n del puerto de Piriapolis de la DNR 10\. Equipos\. Todos los equipos adquiridos con cargo a fondos del Proyecto han sido entregados a satisfacci6n de DNV (laboratorios, inspeccion de puentes, computadoras y grua hidraulica) y de ANP (camiones, semiremolques y equipos para estaciones de media y baja tensi6n), Anexo 4\. 11\. Programa de Estudios y Asistencia Tecnica\. El Anexo 5 resume los estudios fianciados con cargo al componente institucional y la asistencia tecnica MTOP/EM A) Estudio y Relevani-ento de las Organizaciones Publicas del Transporte del Pais y de las Leyes, Decretos y Reglamentos que regulan su actuaci6n, el consultor esti trabajando en la Base de Datos, el criterio de diseflo y de operaci6n\. El texto de la encuesta para el Relevamiento de las Entidades PWblicas se encuentra listo para ser utilizado\. La termninaci6n del estudio esta prevista para el 15 de diciembre de 1997;  35 B) Analisis de la probleematica de Accidentes de Transito\. El estudio fue transformado en un "Analisis de la Adecuaci6n de Rutas en Pasajes por Areas Urbanas" y fue transferidlo a la DNV quien contrat6 el estudio para el tramo Punta de Rieles - Pando, de la Ruta 8\. El consultor esta trabajando en la preparacion del pliego de licitaci6n y en el Proyecto Ejecutivo\. La ejecuci6n de este estudio cumple parcialmente el objetivo de lograr identificar las medidas a tomar en las rutas mis congestionadas y de establecer una politica para mantener una base de datos\. La soluci6n tecnica prersentada tiene un costo de US$6\.0 millones\. C) Estudio del Sistema de Cargas a los Usuarios de la Red Vial, el estudio esta pr6ximo a terminarse y el consultor presentara el informe final el 31 de octubre de 1997\. De acuerdo con el Informe de Progreso DI, el diagn6stico del sistema de cargas a los usuarios y gastos publicos viales concluye que la recaudaci6n de tributos y peajes de los usuarios de las vias excede en mucho a los gastos viales y ademas plantea varios sistemas alternativos de financiamiento vial en cuanto a: tributaci6n, asignaci6n de recursos, politicas de conservaci6n vial, afectaci6n y manejo de fondos y aspectos administrativos y juridicos\. Una vez revisado el Informe Funal, el MTOP presentara al Banco el plan de acci6n para la implementaci6n de las recomendaciones\. DNV D) Estudio de la Administraci6n del Trafico Vial, el estudio esta terninado y esti pendiente la implementaci6n de las recomendacioaes presentadas por el consultor sobre el manejo del sistema de conteo de transito y del sistema de pesae de vehiculos\. Con el fin de proseguir con la implementaci6n DNV realiz6 un llamado a preselecci6n de empresas interesadas en la instalaci6n de Puestos de Conteo de Trinsito en las Rutas Nacionales y la licitaci6n para el sistema de pesaje se encuentra en proceso de adjudicaci6n; E) Estudio del Sistema de Administraci6n del Mantenimiento Vial el informe final del estudio seri entregado el 15 de octubre de 1997, cumpli6ndose el objetivo previsto\. El lo\. de Enero de 1997 se empez6 a cargar el sistema con la informaci6n de las tareas realizadas, porque solo se tenia la informacion relacionada coIn las previstas\. Durante el desarrollo de los trabajos DNV pudo apreciar que el sistema propuesto va a significar un gran avance para la Adniinistraci6n del Mantenimiento y con el fin de abarcar todas las etapas, el contrato esti en traniite de ampliaci6n por un anlo para que el consultor preste asistencia duranto el mantenimiento del sistema\. Ademis DNV esti en el proceso de adquisic'ion de los equipos para el apoyo de las Zonas y en la mejora del sistema de telecomunicaciones\. DNV informari al  36 Banco oportunamente cuando el sistema de gesti6n se encuentre totalmente operativo; F) Estudio del Sistema de Planificaci6n Vial, el estudio adicionalmente a las carreteras abarca puentes y soluciones de seguridad para las intersecciones y cruces peligrosos y definira los estandares de diseflo y las proyecciones de trifico y de estado\. El sistema esti programado para calcular el presupuesto quinquenal y proporcionar herramientas para obtener el costo que representa postergar la ejecuci6n de una obra\. El estudio terminara el 31 de diciembre de 1997 y durante el primer semestre de 1998 se trabajari en el procesamiento de la informacion\. ANP G) El estudio Sistema de Abastecimientos se encuentra terminado; H) El estudio Centro de Informaci6n y Estudios Portiarios, coa base en el estudio se cre6 el Centro de Informacion de Estudios Portuarios (CIEP), este ambicioso proyecto pretende formar el nicleo de un centro telematico portuario del Cono Sur, en la etapa final el consultor esti trabajando en el m6dulo de mercaderias\. 1) Estudio Revisi6n Plan Maestro del Puerto de Montevideo: el consultor se encuentra en la etapa de: (i) analisis y entrevistas con los usuarios y autoridades principales, incluyendo pesca e industria forestal, y (T) en la formulaci6n del marco para el analisis de la relaci6n ciudad-puerto\. El primer informe sera presentado en el mes de noviembre\. J) Estudios basicos Puente Buenos Aires - Colonia la presentaci6n del Informe Fmal esti prevista para el 15 de diciembre de 1997\. 12\. Resumen de estudios en ejecuci6n Los estudios que se encuentran en diferentes etapas de ejecuci6n son: a) Estudio y Relevamiento de las Organizaciones Puiblicas del Transporte del Pais y de las Leyes, Decretos y Reglamentos que regulan su actuaci6n; b) Estudio del Sistema de Cargas a los Usuarios de la Red Vial; c) Estudio del Sistema de Administraci6n del Mantenimiento Vial; d) Estudio del Sistema de Planificaci6n Vial; e) Estudio Revisi6n del Plan Maestro del Puerto de Montevideo, f) Centro de Informacion y Estudios Portuarios, y g) Estudios Basicos Puente Buenos Aires - Colonia\.  37 Preparaci6n Informe Final del Prestamo 12\. La misi6n se reuni6 con funcionarios de la Unidad Coordinadora del Proyecto (UCP), para analizar los procedimnientos establecidos en el documento "Implementation Completion Reporting (OP 13\.55)" de abril de 1994, relacionado con la confecci6n diel Informe Final del Pr6starno\. La fecha de cierre del prestamo es el 31 de diciembre de 1997, por lo que todas las obras y servicios financiados con cargo al rnismo deberin estar concluidos para tal fecha (los desembolsos pendientes podrin continuar hasta el 30 de abril de 1998)\. La evaluaci6n retrospectiva de la implementaci6n del proyecto y un plan para la futura operacion de las obras financiadas con cargo al pr6stamo formaran parte del Informe de Terminaci6n de la Implementaci6n del Proyecto que elaborari el Banco\. 13\. Con el fin de preparar la contribuci6n del MTOP y ANP al Informe de Terminaci6n del Proyecto, se acord6 completar las tareas que se detallan a continuaci6n en las fechas indicadas, de manera de contar con un borrador del Informe no mis tarde del 30 de marzo de 1998\. La misi6n ayud6 a identificar los temas que deben ser elaborados por el Prestatario en su informe, asi como tambi6n la informaci6n que debe proporcionar para que el Banco prepare el suyo\. La UCP del MTOP coordinari la consolidaci6n de la informaci6n y evaluaci6n de los resultados relacionados con los componentes de inversi6n y fortalecimiento institucional, obteniendo los aportes de las diferentes entidades involucradas\. El Sr\. Rail Auzmnendi (Consultor) asistira al Banco y en la medida de lo requendo al MTOP y ANP, en el procesarniento de la informaci6n, evaluacion de los subproyectos, las metas fisicas alcanzadas, los costos resultantes y preparaci6n del Informe\. En particular a) con apoyo del grupo HDM-MI de la Divisi6n Mantenimiento, llevara a cabo antes del 31 de enero de 1998, la evaluaci6n econ6mica del sub-proyecto terminado con financiamiento del proyecto\. b) preparari y enviari al Banco antes del 28 de febrero (i) un informe resumen (alrededor de 10 - 15 piginas) con su evaluaci6n retrospectiva sobre el logro de los objetivos del proyecto, la sostenibilidad de los mnismos, el desempeno del MTOP/DNV/ANP/DNH y del Banco durante la implementaci6n del proyecto, la efectividad de las relaciones entre ambos, el desempeflo ambiental a lo largo del proyecto, las principales lecciones derivadas de la reforma del sector portuario; y (ii) un plan operativo coni las acciones previstas para continuar con la operaci6n y mantenimiento de las inversiones realizadas y con el fortalecirniento institucional del MTOP/DNV/ANP/DNR Para aquellos sub- proyectos con metas aun pendientes, las previsiones para la terminaci6n de los tnismos y la fuente de los recursos\. 14\. El proyecto fu6 diseflado con el fin de reducir los costos de transporte, fortalecer la integraci6n regional y eliminar el d6ficit de ANP, apoyando la  38 politica de reforrna institucional del gobierno\. El proyecto tiene objetivos institucionales y fisicos\. Ambos objetivos estaban enfocados a cuatro entidades, MTOP, DNV, DNH, ANP y un apoyo a las Intendencias Municipales\. 15\. El objetivo institucional estaba dirigido a: (i) la reforma del sector transporte; (ii) el fortalecimiento de la capacidad administrativa y de planeaniento del mismo; (iii) el estimulo a la competencia; y (iv) al incremento de la participacion del sector privado\. El objetivo fisico a: (i) la rehabilitaci6n y mantenimiento de carreteras; (ii) al mantenimniento de los caminos Departamentales; (iii) la rehabilitaci6n de la infraestructura portuaria; (iv) la expansi6n de los puertos menores; y (v) un componente de asistencia t6cnica\. 16\. La misi6n considera que el proyecto no obstante su complejidad logr6 cumplir con una parte sustancial de los objetivos previstos aunque con tres extensiones de la fecha de cierre, cancelaci6n de algunos componentes y adici6n de otros\. El proyecto esti contribuyendo a reducir costos de transporte terrestre por medio de la rehabilitacion y mantenimiento promoviendo la sostenibilidad de estos con su apoyo a la introducci6n de la participaci6n del sector privado\. La transitabilidad de los caminos departmentales ha mejorado sustancialmente debido a la transferencia de responsabilidad, recursos y capacitaci6n a las Intendencias Municipales para el mantenimiento\. Los costos portuarios fueron reducidos debido a las reformas laborales instituidas por la admninistraci6n, la reforma de ANP, la participaci6n del sector privado apoyada por el proyecto y la rehabilitacion de la infraestructura\. La expansion de los puertos menores reporta un 6xito parciaL 17\. La reforma de las instituciones no esti totalmente en linea con los objetivos, puesto que algunos componentes fueron cancelados a solicitud del Gobierno, debido principalmente a cambios en las prioridades de las administraciones y a la falta de recursos de contrapartida en la fase inicial, raz6n que oblig6 tambien a postergar la contrataci6n de las obras\. En relaci6n con los componentes institucionales cancelados, varios de ellos han sido incluidos en operaciones mas recientes con el Banco y el Banco Interamericano de Desarrollo (BID)\. La misi6n recornienda seguir con una etapa de transici6n con el fin de consolidar la implementaci6n, recomendaciones y medidas a tomnar resultado de los estudios que estan pr6ximos a finalizar\. 18\. Los pasos a seguir para la sostenibilidad del proceso de reforma incluyen: Corto plazo continuar con el programa de racionalizaci6n de personal en DNV y DNH el cual esti apoyado por los Decretos 67 y 90197 y en ANP,  39 * concesionar los puertos menores: Piriapolis y Punta del Este, * terminar el estudio pam la Revisi6n del Plan Maestro del Puerto de Montevideo, coordinando sus resultados con el Proyecto de Transporte de Productos Forestales\. Mediano plazo * revision de las recomendaciones dadas por el estudio de Cargas a los Usuarios de la Red Vial y toma de decisiones, establecimiento de un mecanismo vial para canalizar contribuciones parfiscales para manteniniiento y rehabilitaci6n a nivel nacional y departamental, y * preparaci6n del texto ordenado e implementaci6n de las recomendaciones del estudio Relevamiento de las Oraizacionos Publicas del Transporte del Pais y de las Leyes, Decretos y Regiamentos que regulan su actuaci6n (Anilisis Jundico e Institucional del Sector)\. 19\. Por las lecciones que se pueden derivar de la ejecuci6n de este proyecto y del Plan Operativo cle las Acciones fuiuras que debe incluir la consolidaci6n de las recomendaciones de los estudios que no alcanzan a implementarse antes del 31 de diciiembre de 1997, el Baaco ve con gran interes la preparacion del Informe de Terninaci6n del Proyecto\. En Montevideo, el 16 de octubre de 1997\. Por el MTOP Por el Banco Mundial  ** ii { 2\. I'd I  41 Appendix B Contribucion clel Prestatario al ICR PROYECTO DE TRANSPORTE I Prestamo 3021-UR Prestamo para el Sector l'ransporte del JEXIM a Uruguay lruguay 1\. INTRODUCCION 1\.1\. El Proyecto de Transporte I, por un monto de U$S 230:620\.000, ha sido cofinanciado por el Banco Internacional de Reconstrucci6n y Fomento (Banco Mundial) a trav6s del Prdstamo 3021-UR por un monto de U$S 80:800\.000, por el Export - Import Bank of Japan (Exim Bank) a traves del Pr6stamo para el Sector Transporte de JEXIM a Uruguay por un monto de U$S 73:900\.000 y por el aporte del Gobierno en el Proyecto por un monto de U$S 75:920\.000\. 1\.2\. Originalmente el costo total del Proyecto era de U$S 257:420\.000, con una participaci6n del aporte del Gobierno de U$S 102:720\.000, pero debido a las restricciones presupuestales y a los problemas de implementaci6n que se presentaron en las etapas iniciales, se acord6 reducir el monto total del mismo ajustandolo a las posibilidades de ejecuci6n, manteniendo el monto de los creditos obtenidos por los organismos cofinanciadores, de forma tal que el aporte del Gobierno se viera reducido\. 1\.3\. La fecha de cierre del Proyecto fue el 31 de diciembre de 1997, habiendo sido establecido en los Convenios como fecha de finalizaci6n el 31 de diciembre de 1994, fecha que fue modificada por sucesivas enmiendas a los Contratos\. 1\.4\. No se cuenta aun con los datos conciliados al cierre del Proyecto, pero, hasta el 30 de abril de 1998 se han desembolsaron U$S 80,8 millones del Prestamo del Banco Mundial y U$S 72,5 millones del Prestamo del EximBank\. El aporte local a la misma fecha ha sido de U$S 71,3 millones\. 1\.5\. Este Informe de Finalizaci6n del Proyecto ha sido preparado por la Unidad Coordinadora de Proyectos con el Banco Mundial (UCP) del Ministerio de Transporte y Obras PCiblicas (MTOP), contando con la cooperaci6n del Instituto de Planificaci6n del Transporte (IPTI) del MTOP y de la A\.dministraci6n Nacional de Puertos (ANP) para la preparaci6n de las Evaluaciones Econ6micas Ex-Post correspondientes\.1 'El presente Inforine no incluye las Evaluaciones Econ6micas de las obras a cargo de la Adniinistracion Nacional de Puertos, por no haber sido recibidas estas a la fecha de ernisi6n del mismo\.  42 2\. OBJETIVOS Y DESCRIPCION DEL PROYECTO 2\.1\. El Proyecto fue desarrollado como un Proyecto Sectorial con el objetivo de reformar los subsectores vial y portuario del Sector Transporte del Pais, fortalecer la capacidad gerencial y de planificaci6n del prestatario, y estimular la competitividad y la participacion del sector privado en cada uno de los subsectores mencionados\. Incluy6 Planes de Acci6n de desarrollo institucional para MTOP y ANP y otorg6 alta prioridad a las inversiones en los subsectores vial y portuario: rehabilitaci6n y mantenimiento de carreteras y puentes, mantenimiento de caminos departamentales, rehabilitacion de la infraestructura portuaria, expansi6n de los puertos menores\. 2\.2\. El Proyecto comprendi6 las siguientes partes: Parte A: Subsector vial 1\. Obras de reconstrucci6n, rehabilitaci6n y mantenimiento de Rutas Nacionales 2\. Ejecuci6n de Subproyectos de acuerdo con el Programa de Mantenimiento Rutinario y Peri6dico de las Intendencias Parte B: Subsector Portuario 1\. Mejoramiento de la infraestructura y del equipo operativo en el Puerto de Montevideo 2\. Construcci6n de atracaderos adicionales para embarcaciones deportivas en el Puerto de Punta del Este 3\. Mejoramiento de la infraestructura en el Puerto de Piriapolis Parte C: Fortalecimiento Institucional 1\. Fortalecimiento Institucional del MTOP 2\. Fortalecimiento Institucional de la Direccion Nacional de Vialidad (DNV) 3\. Fortalecimiento Institucional de las Intendencias 4\. Fortalecimiento Institucional de la ANP 5\. Fortalecimiento Institucional de la Direcci6n Nacional de Hidrografia (DNH) Parte D: Estudios 1\. Estudios de las opciones de alternativa del Puente propuesto entre Argentina y Uruguay\. 2\.3\. Algunas de las Partes descriptas sufrieron modificaciones o fueron incorporadas al Proyecto por medio de enmiendas durante la ejecucion\.  43 2\.4\. En el Anexo 1 se hace una enumeraci6n de todos los componentes de cada una de las Categorias del Proyecto, mostrando la irversi6n final de cada una de estos\. 3\. IMPLEMENTACION, EXPERIENCIA Y RESULTADOS 3\.1\. Existieron retrasos en la imnplementaci6n del Proyecto, lo que llev6 a que resultaran necesarias sucesivas revisiones y enmiendas de los Contratos de Prestamo y, en definitiva, llevaron a que la fecha de cierre fuera posterior a la prevista originalmente\. 3\.2\. El Prestamo 3021-UR se declar6 efectivo el 19 de octubre de 1989 y el progreso alcanzado en sus diversos componentes durante los primeros 3 afios, fue relativamente escaso si se lo compara con el cronograma de implementaci6n acordado en las etapas de preparaci6n del Proyecto\. 3\.3\. Distintos hechos pudieron haber incidido en esa situaci6n, a saber: (i) cambio Constitucional del Gobierno Nacional a pocos meses de declararse efectivo el Prestamo (marzo de 1990); (ii) demora en la designaci6n de autoridades en los distintos sectores vinculados al Proyecto; (iii) severas limitaciones (le inversi6n impuestas en el Pais por razones macroecon6micas; (iv) proceso de reforma portuaria y promulgaci6n de la nueva ley (abril de 1992); (v) cambios en la politica econ6mica del Pais, con enfasis en privatizaciones y reducci6n del tamanlo del Estado\. 3\.4\. Las limitaciones de inversicn impuestas en el Pais con el objetivo de mejorar el marco macroecon6mico imperante en el mismo motivaron que se entendiera pertinente estudiar la posibilidad de reducir los componentes del Proyecto dentro de la nueva realidad financiera del Pais, pero manteniendo los objetivos originales del mismo\. Esta reformulaci6n redujo y/o reprogram6 los gastos de inversi6n de ciertos componentes, y posterg6 y cancel6 aquelloc componentes que presentaban una prioridad de realizaci6n menor, o ciertas incertidumbres propias en su preparaci6n\. 3\.5\. Con el cambio del actual Gobierno Nacional (marzo 1995), el Proyecto cobr6 nuevo impulso\. Se elabor6 el ntLevo Plan de Obras Publicas para el quinquenio 1995 - 1999, el cual le otorg6 alta prioridad a las inversiones previstas en el Proyecto de Transporte I\. A su vez, se realizaron una serie de incorporaciones, sobre todo en el componente vial\. Se confecciono un nuevo cronograma de inversiones y este fue cumplido en todos sus terminos desde su implementaci6n\.  44 3\.6\. En general, el analisis retrospectivo acerca de si la identificaci6n, preparacion e implementaci6n del Proyecto se concentraron en los verdaderos problemas y necesidades del Pais, muestra que asi fue, puesto que los objetivos basicos, a pesar de los afios transcurridos y de los camtios institucionales se mantuvieron, verificandose algunas variaciones en los componentes de obras, tanto viales como portuarias, y en la consideracion acerca de la conveniencia o no de la inclusi6n de determinadas Asistencias Tecnicas\. 3\.7\. La coordinaci6n entre las agencias interrelacionadas, si bien fue dificultosa, fue lograda de buena forma\. La UCP fue la encargada de lograr tal relacionamiento, a la vez, que fue la interlocutora ante el Banco Mundial para cualquier aspecto relacionado con el Proyecto\. 4\. DESEMPENO DE LOS BANCOS 4\.1\. El relacionamiento con el Banco Mundial ha brindado al Pais importantes resultados en el desarrollo de su Politica de Transporte\. 4\.2\. En lo que tiene relaci6n con este Proyecto en particular, la participaci6n del Banco Mundial, aportando su vasta experiencia, mostr6 en todo momento gran receptividad y proporcion6 un apoyo importante, sobre todo en los momentos en que se requirieron cambios o ajustes en el Proyecto a efectos de poder mantener los objetivos establecidos en el mismo,- e incluso, en los momentos que fue necesario asegurar la continuidad de este\. 4\.3\. En cuanto al desempefio del Eximbank, al no haber realizado este una supervisi6n directa del Proyecto, no se esta en condiciones de dar un juicio al respecto\. Si corresponde destacar que, problemas de comunicaci6n o envio de informaci6n entre el Banco Mundial y el Eximbank de Jap6n motivaron demoras innecesarias en cuanto a la liberaci6n de fondos del Prestamo en varias ocasiones\. 5\. DESEMPENO DEL PRESTATARIO 5\.1\. El desempefio del prestatario se vio afectado por los cambios de Gobierno y de las politicas de los mismos, ocurridos durante la ejecuci6n del Proyecto, a la vez, que por las muy estrictas politicas macroecon6micas tomadas a efectos de enfrentar la situacion econ6mica internacional y particular del Pais\. Esto determin6 cambios en las prioridades respecto de alguno de los componentes y produjo, en muchos casos, atrasos en la toma de decisiones para el inicio de la ejecuci6n, asi como tambi6n dificultades para la obtencion de recursos presupuestales suficientes para hacer frente  45 a los compromisos que habian sido establecidos, esto uiltimo, materializado a traves del establecimiento de topes de inversion sin perjuicio de los creditos presupuestales previamente aprobados\. 6\. EVALUACION DE LOS RESULTADOS 6\.1\. La Administracion Publica en general, y particularmente la DNV y la DNH del MTOP, y la ANP, han operado, durante la vigencia del Proyecto un intenso proceso de transformaciones estructurales\. 6\.2\. En cuanto al MTOP, la primera etapa de la Reforma del Estado, tuvo como principal objetivo la reformulaci6n de su estructura interna y el mejoramiento de la asignaci6n de recursos\. Se procur6 de esta forma defmir la estructura adecuada de la organizaci6n, identificar las actividades sustantivas y aquellas no esenciales, determinar areas de actuaci6n del sector privado en tareas tradicionalmente desarrolladas por el Estado, y reducir el personal\. 6\.3\. Las acciones de Reforma en el ambito Portuario estuvieron apoyadas en 2 paquetes de Asistencia Tecnica: (ii) el Programa de Asistencia Tecnica y Capacitaci6n para la adecuaci6n de la ANP en el proceso de la Reforma Portuaria fmanciado por el Proyecto de Transporte I; (ii) el Plan de Accion para la Reforma Portuaria financiado por el Prestamo 3517-UR tambien del Banco Mundial, dirigido a la implementaci6n de la Reforma y cuya cobertura involucr6 a las diversas entidades que participaron directamente en ella\. 6\.4\. La promulgaci6n de la Ley de Servicios Portuarios (Ley 16\.246 del 8 de abril de 1992) y sus decretos reglamentarios han representado un cambio radical en el rol de la participacion del Estado en la actividad portuaria, basicamente en el Puerto de Montevideo\. 6\.5\. El Proyecto de Transporte I fue muy provechoso para el Pais debido a que a traves de el se pudo fmanciar parcialmente, durante varios afios, una parte importante del Plan Nacional de Obras Puiblicas a la vez que constituy6 un importante instrumento de apoyo para poder llevar a cabo los procesos de transformaci6n mencionado en los puntos anteriores\. 6\.6\. Si bien debemos concluir que las previsiones en cuanto a los tiempos de ejecuci6n del Proyecto no se pudieron cumplir, no debemos dejar de mencionar, como ya lo destacamos, que esto se Cebi6, fundamentalmente a motivos coyunturales y no a ineficiencias de las distintas Administraciones en cuanto a su capacidad para preparar y Ilevar a cabo el Proyecto\.  46 6\.7\. El mejoramiento fisico en obras de infraestructura, tanto vial como portuarias, fue sumamente importante\. 6\.8\. El Programa de Mantenimiento Ruiinario y Peri6dico brindado como apoyo a las Intendencias del interior del Pais tuvo un alto impacto en las distintas regiones productivas, pudiendose concluir que el mismo fue sumamente provechoso\. Debido a esto, es que en las siguientes operaciones crediticias con el Banco Mundial (Proyecto de Transporte de Productos Forestales, en ejecuci6n y Proyecto de Transporte II, en negociaci6n), se ha solicitado la inclusi6n de este componente a efectos de darle continuidad y poder alcanzar de una forma mas deflnitiva los objetivos previstos en el momento de su inclusi6n en el Proyecto\. 6\.9\. En cuanto a la utilizacion de recursos del Proyecto para el Fortalecimiento Institucional de los organismos involucrados, si bien su desarrollo fue lento y debi6 ser reducido en cuanto a los alcances establecidos originalmente adaptandolo a las nuevas poifticas del Gobiemo y realidades del Pais, tuvo igualmente un efecto positivo, en cuanto permiti6 el fortalecimiento de las capacidades tecnicas del MTOP y ANP, permitiendose la transferencia de tecnologia en las areas previstas\. 7\. PLAN DE ACCION 7\.1\. Las principales acciones a tomar fueron identificadas por el Banco Mundial junto con el Gobierno en oportunidad de la preparaci6n por parte del primero del documento que resume las Estrategias para el Sector Transporte en el Uruguay (Informe 6747-UR del 11/5/1987)\. Tales acciones se confirmaron en el momento de las negociaciones\. 7\.2\. Desde el punto de vista del Sector Transporte, se estableci6 que las reformas apuntarian al fortalecimiento de la capacidad gerencial y de planificaci6n del MTOP, asegurando la recuperaci6n de los costos de parte de los usuarios de las carreteras\. 7\.2\.1\. Al respecto, fue realizado un estudio de Cargas a los Usuarios cuyo objetivo principal fue proponer alternativas autosostenibles de tributaci6n y financiamiento del sistema, basados en principios de consenso con relaci6n a las fuentes de financiamiento\. El consultor present6 propuestas en cuanto a tributaci6n, conservacion vial, manejo de recursos, afectacion de tributos, fondo de mantenimiento vial y administraci6n del fondo, las que estan siendo analizadas por tecnicos del MTOP\. 7\.2\.2\. Otro producto muy importante del Proyecto, fue la elaboraci6n del Programa de Infraestructura del Transporte de Productos Forestales, cuyas conclusiones  47 constituyeron la base fundamental para la confecci6n del Proyecto que dio origen a un nuevo Prestamo con el Banco Mundial 7\.2\.3\.La Parte D del Proyecto "Estudios de las opciones de alternativa del Puente propuesto entre Argentina y Uruguay" fue incorporada con posterioridad a la firma de los Prestamos, y ha constituido un factor muy importante y dinamizador en lo que tiene relaci6n con la preparacion del Proyecto del mismo\. 7\.2\.4\. El Puente Buenos Aires - Colonia supondra una inversi6n de 800 millones de d6lares y se traducira en un puente de 41,5 kil6metros de largo en linea recta con 4 vias y secciones elevadas para canales de navegaci6n\. Los pilotes tendran una altura de 29 a 45 metros, libres de riesgo de movimi snto de tierra, y las cabeceras de este puente han sido fijadas en Punta Lara, 40 km\. al sudeste de Buenos Aires, y en Punta de los Patos, 8 km\. al este de Colonia\. Durante 1997 se ha realizado el ilamado a empresas interesadas en la precalificaci6n, incorporaci6n al registro de participantes y acceso al Data Room, y se espera que durante 1998 se realice el llamado para la Licitaci6n Piblica Internacional que implicara para el concesionario el disefio, la construcci6n y la operaci6n del puente durante 35 aihos, incluidos los de la construcci6n\. 7\.3\. En el Subsector Vial las reformas llevarian al fortalecimiento de la capacidad de planificaci6n de la DNV; actualizaci6n de los tecnicos y de los controles de calidad realizados por DNV y por las Intendencias Departamentales; mejoramiento de la operaci6n en la red de carreteras y mejoramiento de la planificacion y organizaci6n del mantenimiento de las carreteras\. 7\.3\.1\. En las condiciones en que la presente Administracion inicia su gesti6n en 1995, y dada la perdida de patrimonio vial arrastrada desde lustros anteriores, la DNV expuso en la Ley de Presupuesto sus objetivos, involucrando al sector privado en la consecucion de los mismos\. Entre ellos defini6: (i) integraci6n efectiva del Pais al MERCOSUR; (ii) mejora de la competitividad de los productos uruguayos; (iii) potenciaci6n de las ventajas comparativas de cada regi6n del Pais; (iv) optimizaci6n de la infraestructura existente en el Pais\. 7\.3\.2\. Hist6ricamente las tareas de conservaci6n se llevaron a cabo por la via de contratos de obra pTublica para los casos de construccion de obra nueva, rehabilitaci6n y tareas extraordinarias de mantenimiento, y por administracion, con personal y maquinaria propios, en los casos de mantenimiento rutinario\. Dadas las limitaciones que conlleva el marco juridico puiblico, se consider6 conveniente iniciar nuevas formas de gesti6n que permitieran realizar en forma mas eficaz y eficiente el mantenimiento rutinario de la red\. 7\.3\.3\. La DNV se aboc6 a estudiar los mecanismos contractuales, las formas de garantizar el funcionamiento del sistema y su implantacion\. Se requeriria el  48 redimensionamiento del sector privado, pues la tarea de conservaci6n rutinaria difiere sustancialmente de las de producci6n masiva que hoy ejecutan\. Los funcionarios viales se replantearon el sentido de su trabajo, y analizaron la posibilidad de desarrollar las tareas en un nuevo marco, o incluso, se transformaron en contratistas, experiencia que en forma exitosa vienen desarrollando varias microempresas conformadas por ex funcionarios de la DNV, tanto para el mantenimiento como para sefializacion e iluminaci6n de rutas nacionales\. 7\.3\.4\. En nuimero de funcionarios de la DNV, de un total aproximado de 3\.700 en marzo de 1995, se redujo, en la actualidad a 2\.500\. Esta reducci6n oper6 por 3 vias: (i) no renovaci6n de contratos; (ii) incentivos para el retiro; (iii) formaci6n de microempresas\. 7\.3\.5\. A efectos de definir una "visi6n" del mantenimiento vial a largo plazo, se comenz6 por definir la red vial como un servicio puiblico a disposici6n, en principio, de todas las personas que deseen utilizarlo\. De ese modo, los caminos alcanzarian una condici6n similar a la de los demas servicios pudblicos como los de electricidad y telefono\. Se trat6 de acabar con la idea prevaleciente en diversos sectores de la poblaci6n, segun la cual los caminos son un servicio que el Estado debe brindar en forma gratuita\. De hecho no lo son, e implican una elevada carga para la sociedad, que invierte sus recursos en un organismo como la DNV que tiene, aunque en proporciones decrecientes, un alto costo de intermediacion\. La definici6n de los caminos como servicio puiblico es tambien un paso decisivo para dar transparencia al fmanciamiento de estos, independizandolo de la asignaci6n de recursos provenientes de los impuestos generales\. 7\.3\.6\. Las actividades de la gesti6n y manejo fisico de la red se trata de que sean ilevadas a cabo por empresas de gesti6n vial, dado que dstas pueden reunir las condiciones de autonomia y flexibilidad que la gesti6n y los procesos productivos requieren, entre otras la agilidad para decidir, contratar, premiar y sancionar\. La funci6n de cautelar los intereses de la comunidad permanecera en el ambito de la administracion puiblica\. BAsicamente, se con\.ideran 3 funciones indelegables: (i) atenci6n de todas las zonas del Pais; (ii) atenci6n de emergencias; (iii) moderador del mercado 7\.3\.7\. En funci6n de todo lo expuesto, se han comenzado a tercerizar las tareas de conservacion de las rutas nacionales a trav6s de contratos de mantenimiento con empresas del mercado y micorempresas, asi como mediante la concesi6n de obras publicas viales\. 7\.3\.8\. En relaci6n a la concesi6n de obras, en el presente afio se ha adjudicado la construcci6n de la doble via de la Ruta 1 entre Montevideo y Libertad, y el nuevo puente de 4 vias sobre el Rio Santa Lucia, concesi6n que tendra una duraci6n de 17  49 afios\. Originalmente estaba prevista la ejecuci6n de estas obras en el marco de este Proyecto\. 7\.3\.9\. La meta de la DNV es continuar con este proceso iniciado con el apoyo del Proyecto de Transporte I, y llegar a tercerizar la conservaci6n de alrededor del 50% del total de la red vial que administra, siendo la zona sur del Pais, por razones de densidad de red y transito, la que mejor se presta en este esquema\. 7\.4\. En el Subsector Portuario, las reiFormas tenderian a mejorar la eficiencia en la provisi6n de los servicios portuarios, a mejorar la planificaci6n de las inversiones y la eficiencia operacional y la administraci6n del equipo de mantenimiento; asi como tambien, promover una mayor participacion del sector privado en aquellas actividades portuarias que lo permitieran\. 7\.4\.1\. La Reforma Portuaria tuvo una considerable importancia para el Pais en mas de un aspecto\. La misma desarrolla um amplio y detallado marco juridico para la actividad portuaria, el cual ha sido complementado por un conjunto de normas reglamentarias adoptadas en los afios siguientes\. Toda esa estructura se funda en varios principios basicos, el primero de los cuales lo constituye el hecho de que el desarrollo econ6mico del pais depende en gran medida de la existencia de servicios portuarios eficientes y competitivos\. A partir de esto surgen un conjunto de lineas rectoras, incluyendo la continuidad de los servicios, la seguridad de la prestaci6n, la regularidad de la misma, el logro de la maxima productividad y eficiencia, y la mejor coordinaci6n y ejecuci6n de los servicios\. 7\.4\.2\. En cuanto a las obras realizadas por la DNH, la de mayor envergadura, la que marc6 una nueva etapa en Piriapolis, con un puerto de yates y un puerto de pasajeros, ha sido la Remodelaci6n del Puerto, que ha llevado a que su actual capacidad sea de: (i) 120 embarcaciones deportivas, con 70 en amarre y 50 en explanada; (ii) posibilidad de operar en Travellift, p6rtico elevador para botadas y varadas de embarcaciones de hasta 100 toneladas de peso; (iii) capacidad de operar ferries con transporte de autos y pasajeros; (iv) posibilidad de atraque de embarcaciones de turismo de hasta 6 metros de calado\. 7\.4\.3\. La empresa Buquebus se encuentra operando en este puerto desde inicio del presente aiio, realizando el servicio Buenos Aires - Piriapolis, con embarcaciones con capacidad para 600 pasajeros y 108 autos, en forna directa\. Se realizan 2 frecuencias diarias, estimandose que ingresan por mes, en temporada alta, a Piriapolis 30\.000 personas y unos 9\.000 autom6viles\. 7\.4\.4\. En relaci6n al Puerto de La Plaloma, cuya ejecuci6n estaba prevista en el marco del Proyecto y fue sacado debico a que su construccion estaba supeditada a la instalaci6n de una planta pesquera en la zona, se piensa dar en concesi6n durante el presente afio, con una inversi6n que podria alcanzar los U$S 140 millones,  50 incluyendo eq!ipamiento, dependiendo de la cantidad y caracteristicas de las terminales portuarias que se propongan\. El Puerto de La Paloma fue originalmente disefiado como puerto pesquero y deportivo, y posee condiciones favorables para su utilizaci6n como puerto comercial, con ventajas significativas sobre otros puex os d ella region\. Las condiciones naturales, permiten operaciones con buques de 15 pies de calado y, potencialmente, podria alcanzarse los 40 pies de calado, con la construccifn de una escollera de cierre y un canal de acceso de aproximadamente 2 km\. de longitud\.  PLAN DE ACCION MTOP COMPONENTE ACCIONES PLAZO OBSERVACIONES Estudio y Relevamiento de las - Aprobaci6n por el Poder - Diciembre 1998\. - Requiere Decreto\. Organizaciones Publicas y Ejecutivo del Texto Ordenado\. Privadas de Transporte del PaLs y de las Leyes, Decretos y - Asignaci6n de responsabilidades - Julio 1998\. Regdamentos que regulan su en el ambito del MTOP a efctlos de actuacion la actualizaci6n de Is Base de Datos normativa y del marco institucional del sector\. - Disefio e implementaci6n de la - Enero 1999\. \.-ed Inforn5teIa a de perr\.^\.tr e! acceso a la Base de Datos\. - Anaiisis de recomendaciones de - Julio 1999\. - Depende de recursos\. indole institucional y eventual implementaci6n de las mismas\. Estudio del Sistema de Cargas a - Divulgaci6n de los resultados del - Julio 1998\. los Usuarios de la Red Vial estudio\. - Asignaci6n de recursos humanos - Julio 1998\. - Requiere asignaci6n de RR\.HH a fin del sosteniminento de las bases de datos y modelo de analisis desarrollado\. - Analisis de las medidas tributarias - Diciembre 1998\. - Requiere acuerdos con la recomendadas por cl Consullor y Autoridad Econ6mica y, preparaci6n de las correspondienles evonilitalinente, leyes\. recomendaciones a ser lormuladas a __la Autoridad Econ6mica\.  DNV COMPONENTE ACCIONES PLAZO OBSERVACIONES Ruta I Concesionar la construcci6n, 2 ahios El tramo de Ruta I entre conservaci6n y explotaci6n de la Montevideo y Libertad (parte del ruta entre Montevideo y Colonia mismo financiado por el Proyecto de Transporte I) ya esta adjudicado\. So espera que la concesi6n comience en el pr6ximo mes de setiembre por un periodo de 17 aflos\. En csto tramo el concesionario debera construir tramos parciales de carretera a los efectos de habilitar completamente la doble via\. lncluye ademas la construcci6n del Puente sobre el rio Santa Lucia\. El resto de la ruta esta siendo objeto de un estudio de prefactibilidad\. Otras rutas Imnplementar una politica de 2 ahios En varias regiones del Pais ya so mantenimiento que implique la esta aplicando esta politica\. participaci6n del sector privado en Se espera que el 50% de ia red vial las tareas del mantenimiento nacional el mantenimiento este a rutinario y extraordinario\. cargo del sector privado\. Se estA gestionando ante el BIRP una nueva operaci6n de pr6stamo (Segundo Proyecto de Transporte) del cual una comnonente seria el mantenimiento contratado\. Adecuacd6n de carreteras en Implementar las recomendaciones En ejecuci6n Actualnente so estan implantando zonas suburbanas del estudio\. las recomendaciones en la localidad de Ecilda Paulier (San Jos6)\. Se espera continuar con estas recomendaciones en otras localidades\. El Segundo Proyecto de Transporte prev6 una comp_onentfe con lal finalidad\.  DNV COMPONENTE ACCIONES PLAZO OBSERVACIONES Implementaci6n de un sistema de Implementar las recomendaciones En ejecuci6n Se han efectuado dos llamados a administraci6n del trifico\. del estudio\. licitaci6n producto de las recomendaciones del consultor: - Sistema de pesaje en rutas nacionales (Se firm6 contrato en el mes de febrero del presente aho y se espera que el sisletna est6 funcionando a mediados del 1998) (Financiamienwo local)\. - Relevamiento estadistico para conteos del transito (Se efectu6 llamado a licitaci6n) \.__ _ _ _ _ _ _ _ (F in a n c ia m ie n to B ID )\. Implementaci6n de un Sistema de Implementar las recomendaciones En ejecuci6n Actualmente la Divisi6n Administraci6n del del estudio\. Mantenimiento de la DNV del Mantenimiento (SAM) MTOP est" i*-p:eeIr'tando el w sistenia\. Se espera ampliar el contrato de la firma consultora que desarroll6 el sistema a los efectos de la recolecci6n de los datos que lo alimentan , lo que tambien seria financiado por el BIRP a traves del _ _ __________________________ ______________________________ ______________________________ Segundo Proyecto de Transporto\. Implementaci6n de un Sistema de Finalizar , estudio\. Este aiio Se in\.plementarian las Planiflcaci6n de Carreteras recomendaciones del estudio a (SIPLA) frav6s de la Divisi6n Inversiones de la DNV del MTOP\. Racionalizacidn y reorganizaci6n Implementar las recomendaciones En ejecuci6n Crear un Instituto de de las tareas de investigaci6a y del estudio\. investigaciones\. Se ha comeinzado ensayos de suelos y materlales\. con algunos proycctos concretos de investigaci6n\.  54 ANEXO 1: INVERSION TOTAL POR CATEGORIA (Datos al 31/12/1997) (Miles de U$S) COSTO FINAL ENDEUDAMIENTO APORTE B\. M\. IXANBX LOCAL TOTAL CATEGORIA 1 A 35\.802 34\.761 31\.402 101\.966 Ruta I - Santiago Vazquez - Rinc6n del Pino - Tr\. I, II, III, LPI 17\.732 17\.193 16\.058 50\.984 Ruta S - 336km - 361km LPN 1\.090 1\.044 823 2\.957 Ruta 7 - 396km600 - Puente s/Ao\. Laguna del Negro LPN 74 56 61 191 Cluta 14 - 285km5OO - 298km500 (Jose Pedro Varela) LPN 426 399 288 1\.113 Ruta 54 - 7km200 - 62km500 (Ruta 1 - Ruta 12) LPN 1\.088 1\.037 894 3\.019 Ruta 26 - 125km - 232km200 LPN 323 298 247 868 Ruta 5 - 181km - 224km (Durazno - Carlos Reyles) LPN 2\.401 2\.318 2\.450 7\.169 Ruta 3 - 288km - 308km100 (Ao\. Grande) LPN 1\.207 1\.175 937 3\.319 Ruta 26 - 9Skm - 122km LPN 26 235 206 468 Ruta 19 - OkmOOO - 23km5OO (Ruta 14 - Ruta 42) LPN 83 71 59 213 Ruta 19 - 23km500 - 36km700 (Ruta 42 - Ruta 6) LPN 54 36 36 127 Ruta 8 - 299km - 321km LPN 462 443 146 1\.051 Ruta 19 - 36km700 - 38km900 (Ruta 6 - Cerro Chato) LPN 178 157 140 475 Ruta S - 361km - 379km LPN 943 901 848 2\.692 Ruta 6 - 206km900 - 240km750 LPN 193 160 171 524 Ruta 97 - Okm8OO - l6km500 (Carmelo - Ruta 12) LPN 75 57 67 199 Ruta 3 - Ao\. Las Piedras - Cerrillos LPI 579 602 520 1\.700 Ruta S - 479kmOOO - 497km062\.49 LPI 1\.427 1\.371 1\.149 3\.946 Ruta 12 - Ismael Cortinas - Pasaje Superior LPN 118 99 95 312 Ruta 3 - Contancia - Empalme Ruta 26 LPI 1\.693 1\.674 1\.318 4\.685 Fum 56 - Florida - Ruta 6 LPI 1\.646 1\.585 1\.326 4\.557 iuta 26 - Accesos a Rio Branco LPN 376 350 303 1\.029 Puente y Accesos s/Ao\. Pereira LPI(PR) 506 477 507 1\.491 Puente s/Ao\. Cufre LPI(PR) 698 814 817 2\.329 Puente y Accesos s/Ao\. Pav6n y La Boyada LPI(PR) 764 728 684 2\.177 Puente s/Ao\. La Boyada LPI(PR) 147 128 122 396 Puente s/Ao\. Pan de Azdcar LPI(PR) 425 343 276 1\.044 Puente y Accesos slAo\. Chapicuy Chico LPI 672 650 529 1\.851 Puente y Accesos s/Ao\. Campanero Grande LPI 394 359 328 1\.081 CATEGORIA 1 B 1\.998 0 1\.331 3\.329 Saldo Obras Prestamo 2238-UR 1\.998 0 1\.331 3\.329  55 L t ,,,- -\. - \. \.m i-- CATEGORIA 2 6\.758 6\.558 S\.448 18\.764 Demolicion Dep6sito 304 293 245 842 Cabecera Muelle B 92 89 74 255 Tendido Cables Subterrineos 166 160 134 460 Edificio para Estaciones 230 222 186 638 Pavimentaci6n Muelles 3\.251 3\.162 2\.620 9\.033 Montaje Sub Estaciones Electricas 185 178 149 512 Accesos al Puerto 1\.774 1\.724 1\.430 4\.928 Demolici6n Dep6sito 10 100 97 81 278 Construccion Tanque Agua Potable 152 145 122 419 Montaje Instal\. Electricas Baja Tensi6n 116 112 93 321 Refuerzo Muelles 8 y 9 388 376 314 1\.078 CATEGORIA 3 8\.610 8\.329 7\.350 24\.289 Puerto de Punta del Este 802 750 1\.065 2\.617 Ampliaci6n Puerto de Piridpolis 7\.808 7\.579 6\.285 21\.672 CATEGORIA 4 18\.054 17\.454 24\.693 60\.201 Mantenimiento Caminos Departamentales - Canelones 1\.698 1\.642 2\.321 5\.661 Mantenimiento Camninos Departamentales - Cerro Largo 932 902 1\.276 3\.110 Mantenimiento Caminos Departmmentales - Colonia 970 937 1\.327 3\.234 Mantenimiento Caminos Departamentales - Durazno 1\.219 1\.178 1\.667 4\.064 Manteniniiento Caminos Departamentales - Artigas 1\.036 1\.001 1\.417 3\.454 Mantenimiento Caminos Departamentales - Florida 1\.134 1\.096 1\.551 3\.781 Mantenimiento Caminos Departamentales - Flores 553 535 756 1\.844 Mantenimiento Caminos Departamentales - Lavalleja 1\.232 1\.192 1\.685 4\.109 Mantenimiento Caminos Departamentales - Maldonado 767 743 1\.050 2\.560 Manteniniiento Caminos Departamentales - Paysandii 1\.162 1\.123 1\.589 3\.874 Mantenimiento Caninos Departamentales - Rfo Negro 971 938 1\.328 3\.237 Mantenimiento Caminos Departamentales - Rivera 645 623 881 2\.149 Manteiniiento Caninos Departamentales - Rocha 799 772 1\.093 2\.664 Mantenimiento Caminos Departamemntales - Salto 1\.638 1\.583 2\.240 5\.461 4antenimiento Caminos Departamentales - San Josd 1\.070 1\.034 1\.464 3\.568 Mantenimiento Caminos Departamentales - Soriano 549 531 751 1\.831 Mantenimiento Caminos Departarnentales - Tacuaremb6 910 881 1\.246 3\.037 Mantenimiento Caminos Departamentales - Treinta y Tres 769 743 1\.051 2\.563 CATEGORIA 5 A 1340 892 0 2\.232 Adquisici6n de Caniones 250 167 0 417 Adquisici6n de Semiremolques 165 110 0 275 Sub Estaciones Media/Baja Tensi6n 575 383 0 958 Suministro Instalaciones Electricas Baja Tensi6n 350 232 0 582  56 CATEGORA 5 B 165 110 0 275 Adquisici6n Equipos de Laboratorio 100 66 0 166 Adquisici6n de Hardware y Software 65 44 0 109 CATEGORUA 5 C 469 0 0 469 Equipo Inspecci6n de Puentes 313 0 0 313 Grda Hidraulica 156 0 0 156 CATEGORIA 6 A 1\.496 987 515 2\.999 Consultornas ANP 437 288 158 883 Base de Datos de Recursos Humanos - G\. 1 34 22 11 67 Inventario de Equipos, Maquinaria y Utilaje - G\. 2 37 25 12 75 Qlase de Datos de Flujo Documental - G\. 3 110 73 37 220 Mejoramiento del Sistema de Costos - G\.4 150 98 51 299 Centro de Informaci6n de Estudios Portuarios - G 6 399 263 135 797 Mejoramiento del Sistema de Compras y Abastecimiento - S\.1 88 58 30 176 Fortalecimiento de la Divisi6n Comercial- S\. 2 76 49 25 150 Tarifas - S\. 3 47 31 16 94 Revisi6n Plan Maestro Pueno de Montevideo 119 78 40 237 CATEGORIA 6 B 1\.420 939 505 2\.864 Consultorfas MTOP 65 43 22 130 P\.R\.A\.I\.M\. - Apoyo Intendencias 170 112 42 323 Consultorfas Puerto de Punta del Este 101 67 36 204 Direcci6n de obra Ruta 1 201 133 75 408 Consultorfa Puerto Pirilpolis 58 38 20 116 Asesoramiento Puente s/RIo Santa Lucia 110 74 37 221 Investigaci6n y Ensayo de Suelos 46 31 18 95 t )istema de Administraci6n del Mantenimiento 86 56 33 174 Fortalecimiento DNV 40 26 15 81 Proyecto de Infraestructura Transporte Productos Forestales 131 86 51 268 Adecuaci6n Carreteras en Zonas Suburbanas 160 105 61 326 Cargas a los Usuarios Red Vial 77 51 28 156 Planificaci6n de Carreteras 41 28 16 85 Estudio Juridico Institucional 118 77 45 240 Consultorfa para Transporte de Productos Forestales 17 11 7 35 CATEGORIA 6 C 3\.867 0 0 3\.867 Trabajos Preliminares Puente Colonia - Bs\. As\. 136 0 0 136 Puente Colonia - Bs\. As\. - U\.N\.D\.P\. 911 0 0 911 Consultorfa Puente Colonia - Bs\. As\. 2\.709 0 0 2\.709 Harvard Institute for Int\. Development III 0 0 111  57 CATEGORIA 7 A 222 122 49 393 Capacitaci6n - G\.5 222 122 49 393 CATEGORIA 7 B 57 38 0 95 8vo\. Seminario de Desembolsos en Washington 3 2 0 5 Congreso Ferroviario Mundial 4 2 0 6 Seminario sobre Ingenieria y Gesti6n Portuaria - Espania 11 7 0 18 Seminario sobre Anilisis y Negociaciones Proyectos COT y COP 9 6 0 15 Seminario regional de Desembolsos - Buenos Aires 1 1 0 2 ler\. Curso de Impacto Ambiental - Mejico 3 2 0 5 Ira\. Conferencia sobre Gestion de Carreteras - Espaffa 10 7 0 17 Curso sobre Conservacion de Carreteras 3 2 0 5 Programa de Intercambio Profesional IPC - Virginia 13 8 0 21 DIFERENCIA 541 3\.710 4\.626 8\.877 TOTAL 80\.800 73\.900 75\.920 230\.620

REVIEW

P105897

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) Report Number : ICRR0020318 1\. Project Data Project ID Project Name P105897 Reading Education Project Country Practice Area(Lead) Papua New Guinea Education L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) TF-98729 30-Jun-2014 19,200,000\.00 Bank Approval Date Closing Date (Actual) 02-Mar-2011 31-Dec-2015 IBRD/IDA (USD) Grants (USD) Original Commitment 19,200,000\.00 19,200,000\.00 Revised Commitment 19,200,000\.00 19,200,000\.00 Actual 19,200,000\.00 19,200,000\.00 Sector(s) Primary Education(79%):Public Administration - Education(21%) Theme(s) Education for all(100%) Prepared by Reviewed by ICR Review Coordinator Group Kimberly Kamlesh Parekh Judyth L\. Twigg Joy Behrens IEGHC (Unit 2) 2\. Project Objectives and Components a\. Objectives According to the original Grant Agreement and the Project Appraisal Document (PAD), the original project development objective was “to improve the reading skills of elementary and primary education students” and “to build the policy, monitoring, and evaluation capacity of the Curriculum Development Division (CDD) (formerly the Curriculum Development and Assessment Division (CDAD)) to select, procure, and distribute books and reading support materials and to undertake assessment of early grade reading together with provincial officials” (Grant Agreement 2011, PAD 2011)\. In a March 25, 2014 Level One Restructuring, the project development objective was revised “to promote better teaching and learning of reading skills of elementary and primary education,” and the second objective was explicitly removed, with procurement and assessment activities folded into the first objective (Grant Agreement Amendment 2014)\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) b\. Were the project objectives/key associated outcome targets revised during implementation? Yes Did the Board approve the revised objectives/key associated outcome targets? Yes Date of Board Approval 21-Mar-2014 c\. Components According to the Project Appraisal Document, the project had four components: (1) Increasing the Availability of Books and Learning Materials by Establishing Classroom Libraries in Elementary and Primary Schools (appraisal cost US$14\.3 million; actual cost US$13\.76 million)\. This component was to support the central selection and procurement of children’s early grade reading materials, including supplementary reading books and simple bookshelves, for classroom libraries\. (2) Promoting Reading through Professional Development, Professional Teacher Networks, and Public Reading Campaigns (appraisal cost US$1\.7 million; actual cost US$2\.79 million)\. This component was to support the professional development of teachers on use of classroom libraries to encourage children to read and to improve their reading habits, and on the creation of localized reading materials\. (3) Strengthening Early Grade Reading Assessment (EGRA) (appraisal cost US$2\.6 million; actual cost US$1\.49 million)\. This component was to support EGRA to: (i) produce a baseline of early grade reading performance by province during the project period (2011-2013); (ii) build local capacity for EGRA at the central and provincial levels and to monitor and report progress against the established baseline; (iii) analyze the implications of EGRA findings for instructional and curriculum improvements, policy directions, and future investment opportunities; and (iv) use EGRA findings as an input into a reading information campaign aimed at mobilizing parental support for reading\. (4) Project Management and Monitoring (appraisal cost US$0\.6 million; actual cost US$1\.17 million)\. This component was to support the management and coordination of the implementation of the project, including technical assistance, financial management, procurement, monitoring and evaluation\. During the March 2014 Level One Restructuring, the following component changes were made: Component 3 Strengthening Early Grade Reading Assessment was modified to: (i) reduce the number of provinces from 15 to four (one per region of the country) where the EGRA diagnostic surveys would be carried out, and (ii) introduce a post-EGRA intervention to improve teaching practice in a small number of selected provinces that would be used to monitor improvements in learning outcomes against the new PDO\. During a May 2015 Level Two Restructuring, the following component changes were made: Component 1 Increasing the Availability of Books and Learning Materials by Establishing Classroom Libraries was modified such that schools and villages, instead of the project, would finance bookshelves from their own budgets\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: The actual cost of the project was US$19\.2 million, or 100% of the original estimate of US$19\.2 million\. Spending on Components 2 and 4 was higher than expected (164\.12% and 195% respectively), while spending on Component 3 was lower than expected (64\.78%)\. Funds were reallocated because the project design initially underestimated costs\. PNG's isolated and remote nature and security issues contributed to increased costs for Component 2, and poor capacity in financial management and procurement contributed to increased costs for Component 4 (TTL Interview, 2016)\. Financing: This project was financed by the Education for All – Fast Track Initiative\. Project funds were targeted and disbursed at US$19\.2 million\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) Borrower Contribution: There was no planned Borrower contribution\. Dates: The project was approved on March 3, 2011 and became effective on November 31, 2011\. The project was expected to close on June 30, 2014 but actually closed on December 31, 2015\. A Level 1 Restructuring revised the project's objectives and extended the closing date to June 30, 2015 due to project start-up delays, particularly with procurement and additional time needed to demonstrate learning outcomes (March 2014 Restructuring Paper, p\. 9)\. A Level 2 Restructuring further extended the closing date to December 31, 2015 due to additional time needed to complete delivery of elementary learning and vernacular reading materials and ensure proper time needed for monitoring and evaluation (May 2015 Restructuring Paper, p\.8)\. The project required an additional closing date extension because the Government was ambitious in estimating the time that it would take to complete the project\. Long approval processes marked by significant turnover in senior management and leadership led to delays\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives Although the Government and World Bank’s strategic plans reflect significant quality needs at the start and close of the project, as reflected in the objectives, those strategic plans also contain an equal or greater emphasis on access that is missing from the project\. For that reason, the relevance of both the original and revised objectives is rated substantial rather than high\. The Government of Papua New Guinea’s Universal Basic Education (UBE) Plan (2010-2019) primarily focused on access and retention but also quality to a lesser extent\. UBE identified low gross enrollment rates of 78% and net enrollment rates of 45% for grades 1-6 with significant regional variation (PAD, p\. 2)\. It also noted significant barriers to access such as primary school fees, overage enrollment, remote and poor schooling facilities, etc\. (PAD, p\. 2)\. However, UBE also included the need for increased quality measures\. The Government has simultaneously supported various initiatives such as an outcomes-based curriculum, school learning improvement plan, centrally-funded provision of textbooks and other relevant learning materials, etc\. The World Bank’s Country Partnership Strategy in Papua New Guinea (2013-2016) second pillar on "gender equitable improvements in lives and livelihoods" includes support for education quality in order to bolster access to education\. It specifically suggests a World Bank focus on its niche areas of support, including better service delivery for reading support in early grades, improved reading results for both boys and girls, and strengthened evidence on education sector expenditures (World Bank Country Partnership Strategy, p\. 17)\. The World Bank Group's decision to support quality over access was due to increased attention towards access issues by the government (as demonstrated by tripling their budget for access in the past ten years) and other development partners such as UK Department for International Development, European Union, Japan International Cooperation Agency, and New Zealand\. Quality, as demonstrated by learning outcomes, was considered very poor\. For example, according to EGRA in 2010, only three out of ten students could read some sentences after three years of schooling\. Thus, the World Bank decided to focus on quality (TTL Interview, 2016)\. In general, the project objectives are substantially demonstrative of both government and World Bank education strategies\. The project’s first objective was to improve reading by increasing the availability of books and learning materials through the establishment of classroom libraries and promoting reading through professional development networks and public reading campaign components\. The project’s second objective was to build capacity of CDD to select and procure reading materials and undertake reading assessments by strengthening early grade reading assessment components\. The Level One Restructuring technically removed the secondary objective, but it is important to note that the secondary objective related to capacity building of officials, particularly in the procurement of materials and implementation of early grade reading, was subsequently included in the first objective after the restructuring\. Rating Revised Rating Substantial Substantial b\. Relevance of Design The relevance of design rating is substantial at the original project design and high after the 2014 restructuring\. At the time of the original project design, the project’s objectives were substantially linked with the project’s components and activities\. The project’s first objective of improved reading was appropriately linked with increasing the availability of books and learning materials by establishing classroom libraries and promoting reading through professional development networks and public reading campaigns\. The  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) project’s second objective of building capacity of CDD to select and procure reading materials and undertake reading assessments was linked to strengthening early grading reading assessment\. The project components, however, were not explicitly focused on building the capacity of the CDD, and this part of the objective was subsequently removed in the 2014 restructuring\. However, the procurement and early grade assessment activities remained and were merged into the first objective; therefore, the project after restructuring implicitly built the capacity of CDD and other government officials\. In general, the project activities supported the project components and objectives\. The 2014 restructuring added additional activities such as piloting of reading booster programs\. Some elements of the project's original scope were ambitious\. For example, the project initially targeted 15 provinces for early grade reading assessment, which is ambitious considering the remoteness of Papua New Guinea\. The March 2014 restructuring reduced the number of provinces from 15 to 4, which was more doable\. Rating Revised Rating Substantial High 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective To improve the reading skills of elementary and primary education students\. Rationale PHORIGINALNARRATIVE Rating Substantial Revised Objective To promote better teaching and learning of reading skills of elementary and primary education\. Revised Rationale The original and revised objectives are essentially the same in content\. As the objective was not materially revised, the above discussion applies\. Revised Rating Substantial PHEFFICACYTBL Objective 2 Objective To build the policy, monitoring, and evaluation capacity of the Curriculum Development Division (CDD) (formerly the Curriculum Development and Assessment Division (CDAD)) to select, procure, and distribute books and reading support materials and to undertake assessment of early grade reading together with provincial officials\. Rationale  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) Outputs In addition to the information presented in the discussion of the first objective, where provision of materials/libraries significantly exceeded targets: • 3 national reading events were conducted, exceeding 1 targeted national reading event\. • 4 early grade reading assessment baselines and endlines were conducted, meeting restructured targets\. • 4 early grade reading assessment results were disseminated to National Department of Education and other stakeholders, meeting targets\. Outcomes • 2 provinces piloted Booster Reading programs, meeting targets\. Rating High Revised Objective N/A Revised Rationale The 2014 Restructuring removed Objective 2 and inserted the EGRA baseline into Objective 1\. Revised Rating Not Rated/Not Applicable 5\. Efficiency The project rating for efficiency is modest\. The Project Appraisal Document (Annex 9) discuses social returns to education in Papua New Guinea but does not provide an economic analysis specifically for the project\. All project activities were implemented within the restructured closing date of December 31, 2015 (18 months extension from the original closing date)\. Project benefits related to quality in elementary and primary education are considered likely to be achieved\. Project staff consider unit costs for project interventions like the provision of materials or training of teachers to have been reasonable due to the remote nature of Papua New Guinea, but comparison costs for similar projects were not provided\. According to the ICR, the costs for major project interventions were as follows: • Classroom Libraries - $21/student • Elementary Literacy Materials - $7/student • Elementary Vernacular Language Books - $8/student • Professional Development by Teacher - $9/student • Professional Development by Classroom Libraries - $30/student • Reading Booster Pilot Program - $186/student  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) There were moderate implementation shortcomings\. Financial management challenges and procurement delays were persistent before the first restructuring\. Financial management was challenging because interim financial reports were not submitted; monthly reports for the designated account were not submitted; and reporting and accounting systems, processes, and procedures were not in place\. Procurement was challenging because procurement staff could not provide updates on the status of preliminary procurement actions\. There was also a lack of capacity among key personnel and changes in the results framework before the restructuring (ICR, pp\. 10, 46, 47)\. Post-restructuring, there continued to be some financial management and procurement challenges\. For example, procurement delays continued as some materials needed clarification of copyright-related issues before disbursement (ICR, p\.11)\. Efficiency Rating Modest a\. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) 0 Appraisal 0 Not Applicable 0 ICR Estimate 0 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome Outcome under the original objectives – Moderately Satisfactory Relevance of the project's objectives is rated substantial, as government strategic plans focused primarily on access, in contrast to the project's focus on quality\. The relevance of project design is rated substantial, as there was coherence between the project's planned activities and its intended outcomes\. Achievement of the objective to improve reading skills is rated substantial, with evidence of measurable learning gains that are reasonably attributable to project interventions\. Achievement of the objective to build capacity of the CDD to procure/distribute materials and undertake assessments is rated high, as the project significantly exceeded targets for procuring and distributing reading materials and libraries, and because early grade reading assessments were successfully implemented\. Efficiency is rated modest due to financial management challenges and procurement delays\. Outcome under the revised objectives – Moderately Satisfactory The ratings are the same as above, with activities under the first objective folded into the second\. Only the first objective (improve teaching and learning of reading skills) remained after the restructuring, with substantial achievement\. Taken together, these ratings are indicative of moderate shortcomings in the project's preparation and implementation, and therefore an overall Outcome rating of Moderately Satisfactory\. a\. Outcome Rating Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating While key project activities were completed and targets were met, the sustainability of outcomes is uncertain\. The Government of Papua New Guinea has not allocated funding for READ PNG activities to continue in 2016\. However, there is a strong commitment by the National  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) Department of Education (NDoE) to sustain successful components of READ PNG such as the classroom library program\. As such, NDoE has submitted paperwork to the Department of Planning for a follow-on READ PNG project (TTL Interview, 2016)\. The CDD has also allocated funds for project activities (ICR, Annex 7)\. For example, the government has budgeted for maintaining and expanding classroom libraries (TTL Interview, 2016)\. The project also built the capacity of NDoE and provincial education staff in areas like distribution of materials and training of teachers\. In general, institutional risk is lessened due to increased familiarity with World Bank policies and procedures\. While there has been improved transparency and accountability, procurement and financial management is still considered to be a substantial risk (ICR, p\.21)\. Finally, the project promoted communities to take over some aspects of financing and managing the project\. The 2015 Level Two Restructuring modified Component 1 Increasing the Availability of Books and Learning Materials by Establishing Classroom Libraries such that schools and villages, instead of the project, would finance bookshelves from their own budgets\. a\. Risk to Development Outcome Rating Substantial 8\. Assessment of Bank Performance a\. Quality-at-Entry The project drew upon lessons learned from a previous education project (Education Development Project) which had a small libraries component\. The libraries component of the previous project monitored education inputs, instead of outputs and outcomes, particularly around teaching and learning\. READ-PNG therefore included teaching and learning output and outcome indicators\. The results framework was relatively coherent with defined objectives, activities, and indicators\. The output and outcome indicators sufficiently measured achievement of the project's objectives\. However, there were moderate shortcomings, as some of the targets were seen as overly ambitious, and costing for EGRA activities was underestimated (ICR, pp\. 21-22)\. Institutional and implementation frameworks with the National Department of Education and Curriculum Development Division (CDD) were appropriate, relevant, and accurate, as CDD is the relevant government agency with responsibility for educational materials and assessment\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision The project actively engaged the Government at both national and provincial levels\. The project helped build the capacity of National Department of Education teams in problem areas such as financial management and procurement, and progress was systematically documented\. The Bank team conducted 11 implementation support missions, including a mid-term review\. It was able to identify that the project would need restructuring, though the first restructuring took place three years after the start of the project in 2014, and the second restructuring took place four years after the start of the project in 2015\. The project notes that the first restructuring delay was due to: (1) problems associated with letters of credit; (2) an October 2013 financial management review documenting ineligible expenditures and unaccounted funds that had to be addressed before restructuring was allowed; and (3) changes in the organizational structure of GPE that delayed GPE secretariat approval of restructuring\. The Level One Restructuring further clarified and removed the secondary objective and one outcome indicator\. However, it is important to note that activities related to the secondary objective, for capacity building of officials on procurement of materials and implementation of early grade reading, were subsequently folded into the first objective after the restructuring\. The restructuring also set more realistic expectations by extending the deadline twice because of procurement delays, and limiting EGRA surveys to four provinces (instead of 15 provinces) due to the remote and isolated nature of Papua New Guinea\. Quality of Supervision Rating Satisfactory Overall Bank Performance Rating  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) Moderately Satisfactory 9\. Assessment of Borrower Performance a\. Government Performance The Government of Papua New Guinea demonstrated full support for the project through the EFA/FTI Catalytic Fund\. It committed national and provincial staff members in implementing the project\. However, there were significant challenges (ICR, p\. 22)\. The government's centralized and hierarchical system required approval at senior levels\. The National Executive Committee had to approve all projects, and high turnover in the secretary's office led to continuous delays\. This turnover was set in a context of insecurity, instability, and volatility\. The project in particular had long delays related to procurement and cumbersome tax processes for materials (TTL Interview, 2016)\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance The Government of Papua New Guinea’s CDD was the implementing agency\. The project served to build CDD's capacity on activities related to early grade reading assessments, including administration of baselines, surveys, and analysis of data\. It also helped CDD to use data to inform curriculum development\. There was poor capacity among CDD officials related to financial management and procurement, which significantly delayed implementation (see Section 11b, and ICR, p\. 23)\. These challenges with financial management and procurement reduced project efficiency to modest\. However, capacity building efforts of the CDD in the areas of procurement and early grade reading assessment later in the project period were significant, justifying a moderately satisfactory rating for implementing agency performance\. Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The original design of the project intended to use: (1) EGRA as the primary evaluation tool to determine impact, (2) CDD to monitor and report data, and (3) beneficiary classrooms to report directly to provincial education offices when they received books and other materials\. The M&E framework’s output and outcome indicators adequately measured the project objectives, though some targets were initially seen as ambitious\. The M&E framework was slightly modified in the March 2014 Level One restructuring, including: (1) clarification of project objectives; (2) restating and modifying project objectives and outcome/intermediate indicators; (3) reduction of the number of EGRA provinces; and (4) project extension (ICR, p\. 10)\. b\. M&E Implementation Early challenges with reporting were due to: (1) limited availability of data due to slow implementation of inputs; (2) limited capacity of national and provincial staff in understanding indicators; and (3) limited capacity to collect data\. There were a few changes to the indicators during the 2014 restructuring\. The "Classroom Teaching Practices Reflect Enhanced Knowledge in Reading Instruction and Use of Learning Materials" indicator and "Students in Elementary and Primary School Will Demonstrate Improvements in Their Literacy Skills as Defined by EGRA" indicators were dropped\. These are appropriate changes, as the former indicator would have been difficult to measure, and the latter indicator was already demonstrated through other existing indicators\. The early grade reading assessment with baseline and endline results for both  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) treatment and control groups proved to be of great value in assessing project outcomes\. c\. M&E Utilization The Pilot Program impact evaluation assessed achievement of results\. It was also used to further develop a new standards-based curriculum and relevant teacher training activities\. M&E Quality Rating Substantial 11\. Other Issues a\. Safeguards The project was identified as a Category C operation\. The OP 4\.10 Indigenous People’s Plan was considered but not required because all project beneficiaries were regarded as indigenous\. Compliance with project safeguards was consistently rated satisfactory throughout implementation\. The ICR's Annex 7 notes attention towards gender through the disaggregation of data, indigenous people by conducting EGRA surveys in vernacular language and providing vernacular language elementary materials, and environment through inclusion of environment-specific criteria when considering classroom library books\. b\. Fiduciary Compliance Procurement: Under the project, the original procurement process required the Government (CDD) to implement large-scale international competitive bidding procurement processes for the first time\. The initial procurement design included an inadequate number of dedicated staff and mission support\. In 2013, the Bank modified processes to directly purchase materials from suppliers\. It also increased technical support to CDD national and provincial staff for procurement\. These changes significantly reduced procurement delays\. The ICR notes moderately satisfactory ratings throughout implementation\. Financial Management: Challenges in financial management were attributed to a lack of capacity of CDD financial management staff and limited knowledge of Bank requirements\. This led to challenges with timeliness of withdrawal applications and submission of interim financial reports, and reporting and accounting systems, policies, and procedures\. The Bank created several training programs with the Government on financial management and other issues\. The project conducted and complied with annual, external, unqualified, legally-binded audits throughout the project and at the end of the project\. The ICR notes moderately satisfactory ratings throughout implementation\. Challenges with financial management and procurement and resulting delays reduced project efficiency to modest\. However, capacity building efforts of the CDD in areas of procurement and early grade reading assessment were significant, resulting in improvements later in the project period\. c\. Unintended impacts (Positive or Negative) None reported\. d\. Other ---  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Moderately Satisfactory Moderately Satisfactory --- Risk to Development Outcome Substantial Substantial --- Bank Performance Moderately Satisfactory Moderately Satisfactory --- Borrower Performance Moderately Satisfactory Moderately Satisfactory --- Quality of ICR Substantial --- Note When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons The ICR identifies the following lessons (ICR, p\. 23): 1 \. EGRA education projects with strong links between objectives and activities can measure learning outcomes with strong evaluation processes\. Strong results frameworks, including EGRA surveys, can be used to demonstrate learning outcomes\. 2 \. EGRA activities can have a substantial impact on informing education policy\. The EGRA pilot program results were used to inform the new standards- based curriculum and create relevant teacher training activities\. 3 \. EGRA surveys are useful in measuring impact\. The EGRA survey in this case demonstrated specific reading outcomes for students\. Specifically, the baseline and endline surveys revealed that girls and boys had significant improvement in phonemic awareness, letter sound identification, and familiar word reading in two pilot provinces as a result of the project\. 4 \. Education procurement processes need established and proven capacity in order to ensure on-time delivery of materials\. Procurement staff must be familiar with World Bank Group policies and procedures, and the Bank must allocate staff to build capacity on basic procedures like international competitive bidding in order ensure timely delivery of materials\. 14\. Assessment Recommended? Yes Please explain Yes\. This project marks GPE's shift from access to quality and the WBG's priority in early grade reading assessments\. It had significant output and outcome achievements, including student-level improvements in reading and policy-level reform in curriculum development, that could be usefully studied and verified\. 15\. Comments on Quality of ICR The ICR is clear, candid, and concise\. It articulates the results framework effectively, highlighting the linkages between project outputs and outcomes\. It also clearly explains the changes that took place during project restructurings\. Further detail on fiduciary management of the  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Reading Education Project (P105897) project, including procurement and financial management, could have been included\. a\. Quality of ICR Rating Substantial

REVIEW

P082523

Document of The World Bank Report No: ICR00001539 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-73470) ON A LOAN IN THE AMOUNT OF US$8 MILLION TO THE FEDERATIVE REPUBLIC OF BRAZIL FOR A HUMAN DEVELOPMENT TECHNICAL ASSISTANCE PROJECT June 10, 2010 Human Development Sector Management Unit Brazil Country Management Unit Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective May 4, 2010) Currency Unit = Brazilian Real (R$) R$1\.00 = US$0\.56993 US$ 1\.00 = R$1\.75459 FISCAL YEAR January 1- December 31 ABBREVIATIONS AND ACRONYMS AIDS Acquired Immune Deficiency Syndrome ANS National Health Insurance Agency ENC/PROVAO National University Major Exam ENEM Upper-Secondary National Exam FIES Higher Education Loan Program FMR Financial Management Report FUNDEB Fund for the Development and Maintenance of Fundamental Education and Teacher Valorization FUNDEF Fund for the Development and Maintenance of Basic Education and Teacher Valorization HD PSRL Human Development Public Sector Reform Loan HIV Human Immunodeficiency Virus IA Implementing Agencies IBGE Brazilian Institute of Geography and Statistics IDEB Index of Development of Basic Education INEP National Institute for Education Research ISDS Integrated Safeguards Data Sheet M&E Monitoring and Evaluation MEC Ministry of Education and Culture MOH Ministry of Health PDE Plan for Education Development PDO Project Development Objective PIU Project Implementation Unit PME Monthly Employment Survey PNAD National Household Survey POF Household Expenditure Survey SAEB National System for Basic Education Evaluation SFC Federal Internal Control Secretariat SIAFI Integrated Federal Financial Administration System SIP School Improvement Plan STN National Treasury Secretariat SWAp Sector Wide Approach TAL Technical Assistance Loan UGP Unidade Gestora do Projeto - Unit responsible and with authority to spend funds allocated by the Federal Budget  Vice President: Pamela Cox Country Director: Makhtar Diop Sector Manager: Chingboon Lee Project Team Leader: Michele Gragnolati ICR Team Leader/Primary Author: Michele Gragnolatti/Suzana de Campos Abbott  BRAZIL Human Development Technical Assistance Project CONTENT Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design\. 1 2\. Key Factors Affecting Implementation and Outcomes \. 8 3\. Assessment of Outcomes \. 13 4\. Assessment of Risk to Development Outcome\. 20 5\. Assessment of Bank and Borrower Performance \. 20 6\. Lessons Learned\. 24 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\. 26 Annex 1\. Project Costs and Financing\. 27 Annex 2\. Outputs by Component\. 28 Annex 3\. Economic and Financial Analysis \. 29 Annex 4\. Bank Lending and Implementation Support/Supervision Processes\. 30 Annex 5\. Beneficiary Survey Results \. 32 Annex 6\. Stakeholder Workshop Report and Results\. 33 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 34 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 42 Annex 9\. List of Supporting Documents \. 43 MAP A\. Basic Information Brazil: Human Country: Brazil Project Name: Development Technical Assistance Loan (TAL) Project ID: P082523 L/C/TF Number(s): IBRD-73240 ICR Date: 06/23/2010 ICR Type: Core ICR GOVERMENT OF Lending Instrument: TAL Borrower: BRAZIL Original Total USD 8\.0M Disbursed Amount: USD 5\.9M Commitment: Revised Amount: USD 5\.9M Environmental Category: C Implementing Agencies: Ministry of Education Ministerio da Saude IBGE Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/26/2003 Effectiveness: 12/14/2006 12/14/2006 Appraisal: 06/11/2004 Restructuring(s): Approval: 07/28/2005 Mid-term Review: 03/05/2008 04/15/2009 Closing: 12/31/2009 12/31/2009 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Moderately Satisfactory Borrower Performance: Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Satisfactory Performance: Performance: i C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 85 100 Health 5 Sub-national government administration 10 Theme Code (as % of total Bank financing) Administrative and civil service reform 17 Health system performance 17 Managing for development results 33 50 Poverty strategy, analysis and monitoring 33 50 E\. Bank Staff Positions At ICR At Approval Vice President: Pamela Cox Pamela Cox Country Director: Makhtar Diop Vinod Thomas Sector Manager: Chingboon Lee Evangeline Javier Project Team Leader: Michele Gragnolati Alberto Rodriguez ICR Team Leader: Suzana Nagele de Campos Abbott ICR Primary Author: F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The development objective of the HD TAL is to assist the government in developing institutional capacity to monitor the progress and impact of its social policies, a critical step towards institutionalizing performance-based management\. Developing a culture of monitoring, evaluation, and informed policy-making is in the interest of both policy ii makers (who will make better informed decisions) and stakeholders (who will be assured of better targeted and more efficient social programs)\. This requires improving the quality and depth of available information, increasing accountability, and improving governance systems in the social sectors by creating a feedback mechanism under which monitoring, evaluation and research programs are used to formulate policies\. This objective is a deliberate choice among several options, and is the result of identifying the most effective medium-term activity for achieving more equitable, efficient and quality social programs\. The specific development objectives of the TAL are to: # Enhance monitoring processes and systems, including the systematic collection of thorough data on social indicators, to permit: (i) stronger, more integrated and continuous assessment of progress on social programs and policies, and (ii) use of performance information in resource allocation decision-making\. # Support the development o f systematic research and evaluation of the impact of health, education and social protection policies and reforms as a means toward institutionalizing a results-oriented culture of accountability in public organizations responsible for social sector service delivery\. # Support the institutional reform agenda as specified by the HD PSRL Revised Project Development Objectives (as approved by original approving authority) The Project#s Development Objectives were not revised\. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Benchmarks for second HD PSRL met and documented using improved Indicator 1 : monitoring and evaluation systems and data\. (Text Description) Achieved\. A table that describes progress for second HD PSRL benchmarks indicators has been included in Annex Value Values specified in the 10 of this ICR\. It quantitative or 100% HD PSRL document shows the large Qualitative) majority of PDO indicator s (20/23) have been fully achieved\. Only a very few (3/23) have been partially met Date achieved 12/14/2006 12/31/2009 12/31/2009 iii Comments (incl\. % 95% achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years 1\.1 Social Statistics Committee holding regular meetings (Text Description) Indicator 1 : Achieved\. The Committee has Value Social Statistics 100% been formed and (quantitative Committee not in place meetings are or Qualitative) (Text Description) happening regularly\. Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 100% achievement) Indicator 2 : 1\.2 Second Household Budget Survey Conducted (Text Description) Achieved: The survey has been Value 100% completed\. Data are (quantitative Survey not conducted being cleaned up or Qualitative) and will be released in April 2010\. Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 100% achievement) 1\.3 Support for planning the improvement of existing national surveys including Indicator 3 : the merging with the current employment ho usehol survey (Text Description) Achieved\. A first pilot of merged surveys was carried out in November 2008\. The results Value Two surveys are have been (quantitative 100% independent evaluated\. The next or Qualitative) tests have been planned and are being impl emented (starting in the State of Rio de Janeiro) iv Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 100% achievement) Indicator 4 : 1\.4 PNAD improved and North Region included in the survey (Text Description) Value Achieved\. North (quantitative PNAD is done as always 100% Region is part of or Qualitative) PNAD\. Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 100% achievement) Indicator 5 : 1\.5 Poverty maps developed (Text Description) Achieved: Poverty Value maps completed (quantitative No poverty maps 100% and disseminated in or Qualitative) December 2008 Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 100% achievement) 1\.6 Policy modules for traking indicators in social sectors developed (Text Indicator 6 : Description) Achieved\. After consultation with Value sectoral No policy modules (quantitative 100% departments, available or Qualitative) supplemental modules hav e been added to PNAD\. Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 100% achievement) Indicator 7 : 1\.7 Analytical research using POF 2002/03 data financed (Text Description) Achieved\. Research Value Analytical research is not was financed by (quantitative 100% financed IBGE and was or Qualitative) completed\. Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 100% achievement) 2\.1 Education Ministry-wide information system to track and monitor these and Indicator 8 : other programs developed (Text Description) Value Achieved\. SIMEC Information system in (quantitative 100% (Integrated System MEC needs improvement or Qualitative) of Planning, Budget v  and Finance of the Minist ry of Education) developed and implemented to monitor the actions and the resources transferred to states and municipalities Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 100% achievement) 3\.1 Institutional framework and organizational unit established for consolidating Indicator 9 : and coordinating M&E activities in the MOH (Text Description) Partially Achieved\. Datasus has been strengthened\. Many units in the MOH, including a Value department of (quantitative Unit in MS not available 100% health economics, or Qualitative) are using its data to monitor the performance o f different segments of SUS Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 70% achievement) 3\.2 Network of M&E practitioners, stakeholders and academics established (Text Indicator 10 : Description) Partially Achieved\. There is a lot Value Information on M&E not variation across the (quantitative 100% available 26 States and more or Qualitative) than 5000 municipalities\. Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 50% achievement) Indicator 11 : 3\.3 Evaluation research on system performance financed (Text Description) Some progress\. Value Although no formal (quantitative Network not in place 100% network has been or Qualitative) established, the performance if SUS vi  is receiving more and more attention by practitioners, government officia ls and many academic departments Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 30% achievement) Indicator 12 : 3\.4 Evaluation research on system performance financed (Text Description) Value Evaluation research is not (quantitative 100% Not achieved financed or Qualitative) Date achieved 12/14/2006 12/31/2009 12/31/2009 Comments (incl\. % 0% achievement) G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 12/20/2005 Satisfactory Satisfactory 0\.00 2 05/23/2006 Satisfactory Satisfactory 0\.00 3 12/27/2006 Satisfactory Moderately Satisfactory 0\.02 4 05/12/2007 Satisfactory Moderately Satisfactory 0\.02 5 12/07/2007 Moderately Satisfactory Moderately Satisfactory 0\.02 6 06/17/2008 Moderately Satisfactory Moderately Satisfactory 1\.22 7 12/20/2008 Moderately Satisfactory Moderately Satisfactory 3\.62 8 01/24/2009 Moderately Satisfactory Moderately Satisfactory 4\.12 9 03/28/2009 Moderately Satisfactory Moderately Satisfactory 4\.51 10 10/09/2009 Moderately Satisfactory Moderately Satisfactory 5\.70 11 12/13/2009 Satisfactory Moderately Satisfactory 5\.77 H\. Restructuring (if any) Not Applicable vii I\. Disbursement Profile viii 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal In the decade preceding appraisal of the Human Development Technical Assistance Project (HD TAL, the Project), Brazil had carried out a number of significant reforms aimed at improving the coverage, quality and efficiency of its education and health systems, and had strengthened its safety net program\. As a result of these reforms, more children were in school, parents and communities were gaining greater influence over the education system, more resources were being made available to disadvantaged groups, and more adults were able to acquire new skills for a changing labor market\. The overall health status of the population had improved markedly: infant and maternal mortality rates had lowered significantly, the rate of child mortality from vaccine-preventable diseases was very small and there had been a steady decline in mortality from infectious diseases and parasites for the population as a whole\. Brazil had expanded and improved its social assistance programs through the introduction of successful conditional cash transfer programs targeted to poor children and youth\. The major social reforms the government had enacted provided a solid basis from which the government could proceed further to develop its social reform agenda, strengthening and expanding the positive human development outcomes it had recorded\. The challenge that lied ahead was no longer necessarily one of access, but rather of equity, quality and efficiency in social service delivery, through a system that was both accountable to the population it served and directed by a governance structure that was informed by up-to-date, comprehensive information\. The First Programmatic Human Development Sector Reform Loan, signed in January 2003 had supported the government in tackling the core sectoral issues of targeting, resource allocation and efficiency of spending, by promoting stronger accountability and governance, enhancement of equity-oriented policies, and improvement in the efficiency and quality of social service delivery1\. Specific benefits of the HD PSRL included: (a) broader access by the poor and disadvantaged groups to basic education, health and social assistance services through improved targeting and program expansion; (b) sounder operation of public programs, through increased accountability, inter-governmental policy coordination, transparent budgetary planning and consumer voice; and (c) enhanced quality and efficiency of service delivery through the provision of incentives to reduce disparities between high and low performing providers of public social services\. The HD PSRL program had already demonstrated innovative practices and had made significant progress toward achieving its development objectives\.2 It had also 1 A US$505\.05 million loan for the First Programmatic Human Development Sector Reform Loan was approved by the Bank's Board on February 25, 2003 (Report No\. 25351-BR)\. When it was approved, it was expected to be the first of possibly two additional loans for a total amount of US$1\.5 billion in support of Brazil's program of human development reforms\. 2 The Simplified Implementation Completion Report for the HD PSRL dated June 23, 2004 rated the program's Outcome as Satisfactory, Sustainability as Likely, Institutional Development Impact as Substantial, and both Bank and Borrower Performance as Highly Satisfactory (Report No\. 29158)\. 1 demonstrated innovative practices, including: protection of successful programs in the social sectors, a significant increase in the minimum FUNDEF (Fundo de Manutenção e Desenvolvimento do Ensino Fundamental e de Valorização do Magistério, Fund for the Development and Maintenance of Basic Education and Teacher Valorization) allocation for education, the unification of the roster of recipients of federal financial subsidies (Cadastro Único) and the approva of a law in January 2004 to unite most of these programs into a single family assistance program, and expansion of the Family Health Program (Programa Saúde da Família)\. The HD TAL was prepared to accompany the HD PSRL series of loans, specifically to provide the tools for helping Brazil to achieve the PSRL's goals\. The HD PSRL provided the roadmap for sectoral reform that would lead toward a stronger culture of performance-based management, while the HD TAL would provide the immediate tools to assist the government in improving and developing monitoring systems and policy impact research\. To accomplish this, the Government required support along three dimensions: (a) additional data needed to be collected to meet the needs of diverse agencies in the social sectors; (b) new and then-existing information needed to be used to monitor program progress, providing a continuous feedback loop that allowed for adjustments during implementation, and (c) a culture of evaluation needed to be fostered, encouraging the use of technical data-driven decision making rather than political criteria for policy formulation\. The Government sought to institutionalize a culture of performance-based management under which decision-making was heavily informed by up-to-date reports and information on program progress and impact\. Brazil at the time was not using the wide range of data that it collected across the social sectors to inform policy decisions, and sought to develop an institutional feedback mechanism under which recurrent and robust data was collected, processed, analyzed, disseminated and utilized in the policy decision-making process\. After the first year of President Lula's administration, during which important benchmarks had been achieved on macro-economic stability, the Government's attention focused on the social agenda\. Demonstrating progress and impact had become a priority for the Brazilian Government\. The Bank's assistance under the HD TAL built upon several years of support to Brazil's social sectors that had supported policy reform through innovative investments in health, education and social protection accompanied by strong policy dialogue, analytical and advisory services and technical assistance under the umbrella of the HD PSRL series that provided the overall framework for reform\. Support for the HD TAL was part and parcel of Bank support to the HD PSRL, and was seen as contributing to building of the knowledge base required for the advancement of the reform agenda and the improvement of basic social program and outcomes\. It also entailed strong synergies with other projects in the Bank's social sector portfolio, such as for example the Bolsa Família Project that supported the Government's flagship social program\. The Bolsa Família Project supported the design and implementation of a comprehensive monitoring and evaluation system for the program\. Activities to strengthen the Instituto Brasileiro de Geografía e Estatística (IBGE, the Brazilian Institute of Geography and Statistics) 2 in its overall household survey system under the HD TAL would provide important inputs into Bolsa Família's monitoring and evaluation system\. Assistance for Brazil's social reforms was at the center of the Bank's Country Assistance Strategy (CAS) that envisaged the Bank's role as one of supporting vital policy reforms and innovative, well-performing investments, helping to lift the welfare of Brazilians, particularly the poorest3\. The HD TAL complemented the CAS' results-based approach, providing additional support for meeting benchmarks for 2007 and 2015 Millenium Development Goals relating to human welfare gains, and social and cultural sustainability\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The development objective of the HD TAL was to assist the Government in developing institutional capacity to monitor progress and impact of its social policies\. This was seen as a critical step towards institutionalizing performance-based management\. The specific objectives of the HD TAL were to: (a) enhance monitoring processes and systems, including the systematic collection of thorough data on social indicators, to permit: (i) stronger, more integrated and continuous assessment of progress on social programs and policies, and (ii) use of performance information in resource allocation decision-making; (b) support the development of systematic research and evaluation of the impact of health, education and social protection policies and reforms as a means toward institutionalizing a results-oriented culture of accountability in public organizations responsible for social sector service delivery; and (c) support the institutional reform agenda as specified by the HD PSRL\. As a technical assistance project, the key indicators that were to be used to evaluate the Project's achievement of its Development Objectives included one outcome indicator and mostly output indicators, as follows: Outcome Indicator: Benchmarks for Second HD PSRL met and documented using improved monitoring and evaluation systems and data\. Output Indicators, by Component: Component One: Collection of Monitoring and Evaluation Data for the Social Sectors Strengthened Social Statistics Committee holding regular meetings Second Household Expenditure Survey (POF, Pesquisa de Orçamentos Familiares) conducted 3 World Bank Country Assistance Strategy for Brazil, Report No\. 27043 dated Nov\. 10, 2003\. 3  Support for planning the improvement of existing national survey including the merging with the current employment household surveys National Household Survey (PNAD, Pesquisa Nacional por Amostragem Domiciliar) improved and North region included in survey Poverty maps developed Policy modules for tracking indicators in social sectors developed Analytical research using POF 2002/03 data financed Component Two: Monitoring and Evaluation in the Education Sector is Improved Ministry-wide information system to track and monitor education programs developed Component Three: Strengthening and Consolidation of Monitoring and Evaluation Functions in the Health Sector Institutional framework and organizational unit established for consolidating and coordinating M&E activities in the Ministry of Health Capacity of federal, state and municipal levels to monitor and evaluate the performance of publicly-financed services assessed and report disseminated Network of among M&E practitioners, stakeholders and academics established Evaluation research on system performance financed\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The Project's Development Objectives were not revised\. 1\.4 Main Beneficiaries As a technical assistance operation, the Project's main beneficiaries were expected to be IBGE, the MEC and the MOH\. Indirectly, over the longer term, the Project's beneficiaries would be the beneficiaries of the Government's social programs (not limited to those implemented by MEC and MOH), especially the poor, who could be expected to count on better targeted and more efficient, equitable and quality social services that would be made available based on the improved information (including poverty maps), monitoring and evaluation supported by activities under the Project\. 1\.5 Original Components (as approved) The HD TAL (the Project) comprised three components that were to be implemented by: (a) the Instituto Brasileiro de Geografía e Estatística (IBGE, Brazilian Institute of Geography and Statistics), a legally autonomous agency of the Federative Republic of Brazil that was the Government's principal provider of statistical data and demographic information; (b) the Ministry of Education and Culture (MEC), and (c) the Ministry of Health\. The components were designed as follow\. Component 1: Strengthening Collection of Monitoring and Evaluation Data for the Social Sectors (US$9\.151 million total project costs; US$6\.0 million of loan amount) 4 Because of its institutional mandate, IBGE played a crucial role in developing a culture of performance-based management in Brazil\. The Project sought to strengthen IBGE's technical capacity as a provider of social sector monitoring, evaluation and living condition data\. The data collected and published by IBGE were considered to be a public good, to be used by all social sector agencies and diverse government and non-government agencies in the creation and evaluation of policies and programs\. The Project was to provide technical assistance to IBGE for enhancing national household and employment surveys (PNAD, PME and POF) to provide strategic, comprehensive and integrated information for monitoring and evaluating the impact of key social sector reforms and living conditions of the Brazilian population\. The key activities to be financed were: (a) Creation of and support for a Social Statistics Committee that would monitor and evaluate the statistical information demands of various government agencies\. The Committee would act as the interlocutor between implementing agencies (e\.g\., ministries) and the IBGE instrument design and implementation teams in order to ensure that implementing agencies had the data to meet their monitoring and evaluation needs, while balancing the priorities of the data needs of the social sector as a whole; (b) Technical assistance for the implementation of a second Household Expenditure Survey (POF, Pesquisa de Orçamentos Familiares)\. This activity was to (i) conduct a follow-up to the POF 2002-03, which provided a solid baseline for evaluation of the administration's social policy, and (ii) test and deploy an annual micro-POF survey\. The 2002-03 POF provided information for measuring family spending and poverty in both general (e\.g\., inequality, malnutrition) and specific (e\.g\., pension distribution, Bolsa Família) terms\. To maintain comparability, the follow-up survey was to mirror the 2002-03 versions, and was to be applied every three to five years\. An annual, reduced version of the POF would also be developed to provide a more frequent and flexible measure of household well being; (c) Support for improvement of existing national surveys including the merging of the PNAD (Pesquisa Nacional por Amostra de Domicilios) and PME (Pesquisa Mensal de Emprego) data collection into one single, continuous and nationally representative survey\. The PNAD was a national representative sample used by researchers and policy makers to understand poverty analysis and income distribution\. The PME was a monthly employment survey applied in the six largest metropolitan areas\. The new survey would not only be an important measurement tool but would also increase efficiency by reducing overlapping questions and topics in the two then- existing surveys; (d) Expansion of the PNAD to include the North Region\. The PNAD had never included the states of Acre, Amapá, Amazonas, Pará, Rôndonia and Roraima\. This activity would provide for the expansion of the PNAD to these states, resulting in a survey that was more representative of the population given the rapid demographic changes that had taken place in the North region; (e) Development of Poverty Maps\. The Project was to support the development of highly disaggregated inequality and poverty maps using pioneering methods developed by the Bank for incorporating a combination of census and household survey information\. It would support the 5 construction of the initial maps so that they could later be updated with information as data became available; (f) Technical support for the development of occasional policy modules and research for tracking indicators in social sectors\. Many social programs required specific monitoring and evaluation data (e\.g\., program-specific samples, questionnaires, and methods) that could not be otherwise included in the existing surveys\. The Project would support IBGE in strengthening its capacity to respond to the increasingly frequent and diverse demands from Government and other agencies interested in specialized monitoring and evaluation activities and data collection; and (g) Support for Analytical Research based on the 2002-03 POF results\. The Project was to support several studies using the 2002-03 POF data, as well as dissemination of its results through national workshops\. Component 2: Strengthening monitoring and evaluation in the Education Sector (US$2\.054 million total project costs; financed by counterpart funds only) With nearly 50 million students enrolled in more than 200 thousand educational institutions at all levels of education, monitoring and evaluation of Brazil's education system was particularly complex\. The existing diverse databases and information systems, managed by the Ministry of Education (MEC) through its Institute for Education Research (INEP, Instituto Nacional de Estudos e Pesquisas Educacionais), provided a profile of Brazil's education system\. This component was to assist the MEC in meeting the then growing demand for program specific information and state level evaluation, and improve MEC's capacity for targeting and monitoring or program progress\. For MEC, the technical assistance was to focus on designing and developing a ministry-wide information system to track and monitor key programs that could assist sub-national governments in their effort to launch quality educational assessment instruments\. The ministry- wide information system was to be closely coordinated with IBGE's data collection, as the latter was to provide the principal data inputs to MEC's information system, complementing data collected through INEP in the education sector\. INEP's continued involvement in improving student learning assessments and program evaluation was centered on the task of improving then-existing instruments, attending to the demand of states in developing their own universal systems (which were expected to be compatible with the federal-level, sample-based assessments), and improving the dissemination and use of existing evaluation systems\. The Project was to complement this effort by creating mechanisms through which INEP's and IBGE's data could be used in decision-making and policy-design processes in MEC\. MEC sought to create four decentralized nuclei of monitoring and evaluation activities in each of four areas: (a) Professional Education; (b) Basic Education; (c) Higher Education; and (d) Continued Education\. These were to be created under the coordination of a Monitoring and Evaluation Unit located in the Executive Secretariat in order to permit constant, real-time 6 monitoring of program and policy impact\. This vision was to be tested through implementation of the Project and the creation of the four nuclei that foresaw the continuous monitoring of MEC's key programs that accounted for nearly 80 percent of the education budget\. Component 3: Strengthening and consolidation of Monitoring and Evaluation Function in the Health Sector (US$2\.044 million total project costs; US$2\.0 million of loan amount) Starting in the late 1980s, Brazil had carried out a major health reform program that provided for the decentralization of service provision from the federal government to municipalities and, to a lesser extent, state governments\. The reform included new mechanisms to foster social participation in the definition of priorities and in oversight of service provision through councils established at municipal, state and federal levels, as well as consumer feedback instruments to gauge technical quality and patient satisfaction with publicly-financed hospitals\. The reform transformed how the federal government financed health services provide by states and municipalities\. The Project was to support the Ministry of Health's (MOH) reform effort by strengthening its capacity to monitor and evaluate service delivery, public health programs and reform progress, and to assist the MOH in achieving the benchmarks for the then proposed Second HD PSRL\. The MOH sought to develop sustainable capacity at federal, state and municipal levels to monitor and evaluate system performance (equity, efficiency and quality) and impact (health status)\. The Project was to support the introduction of results-based management mechanisms to foster evidence-based policy formation, program design and decision- making\. A major focus was to be on the institutionalization of monitoring and evaluation at least at the federal level while strengthening that capacity in states and large municipalities\. Specific activities were to include: (a) Strengthening monitoring and evaluation capacity at the federal level\. The Project was to support the creation of an institutional framework, the definition of instruments, the distribution of responsibilities among practitioners and stakeholders, and the introduction of performance-based management strategies\. In addition, the Project was to provide technical assistance and training to consolidate and link monitoring and evaluation functions in the MOH, define performance indicators, identify sources, methodologies, frequency and schedule of data collection, establish a mechanism for data analysis, reporting and review, and institutionalize feedback and dissemination channels to foster evidence-based policy formation and program design; (b) Strengthening monitoring and evaluation capacity at the state and municipal levels\. Under the MOH's plans, the states were to have a major role in monitoring and evaluation for small and low capacity municipalities, while large municipalities would develop their own in-house capabilities\. The Project was to develop tools for enhancing the capacity of states and municipalities to monitor and evaluate system performance, including access, stewardship and overall effectiveness\. Activities under the Project were to include: (i) assessing capacity of states and municipalities to perform monitoring and evaluation of publicly-financed health activities; (ii) design of monitoring and evaluation programs in selected states and municipalities; (iii) training in monitoring and evaluation 7  methods; (iv) assessment of the quality of databases; (v) development of performance indicators and data collection instruments and methods, and (vi) establishment of core group or network of professional staff in states to provide monitoring and evaluation support to municipalities; and (c) Support for evaluation research studies\. The Project was to support targeted evaluation studies of system performance the were not then being assesses through monitoring systems, including research studies on costs, quality and patient satisfaction in both ambulatory and hospital settings\. These studies were to be part and parcel of the overall monitoring and evaluation institutionalization effort directed to the federal, state and municipal levels\. 1\.6 Revised Components The Project's components were not revised formally\. However, MEC eventually carried out its component without financing under the Project (as planned), and asked to be formally excluded from the Project a few months before the closing date of the Project\. The MOH, after initial institutional issues, decided to carry out activities also with its own resources, and eventually requested that the amounts allocated to the Project's third component that it was to implement be allocated to The National Health Insurance Agency (Agência Nacional de Saúde Suplementaria-- ANS)\. This change in the Project's description was never processed though because of institutional constraints in transferring the authority of using IBRD funds to an autonomous agency like the ANS\. 1\.7 Other significant changes In October 2009, the Bank received a request from the Treasury of Brazil to drop formally Components 2 and 3 from the Project\. However, in view of the then proximity to the loan's December 31, 2009 Closing Date, the Bank responded by approving the cancellation of US$2 million originally allocated to Component 3, but without a formal restructuring to eliminate those components\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry Assessment of the Project's Design\. The Project's design was sound\. It was designed as a Technical Assistance Loan to accompany the implementation of the HD PSRL, yet it is not clear why it was only approved in mid-2005, more than two years after the HD PSRL had disbursed since it was to facilitate progress from the first HD PSRL to the second HD PSRL\. It was to be implemented by three different agencies (IBGE, MEC and MOH), each relating directly with the Bank, which was considered useful because: (i) budgets were allocated to each corresponding agency; (ii) each implementing agency could have independent access to their allocated resources, and (iii) it responded to the multi-sectoral nature of the Project\. While the Project was 8 to address issues that were by definition multi-sectoral in nature, it perhaps under-estimated the support for addressing these very same issues in the context of several then closed and ongoing lending operations, especially in the health sector, and hands-on analytical and advisory services in the education sector\. Although activities related to the education sector that were to be implemented by MEC were included in the Project, there was no allocation for loan funding to finance those activities\. This in the end created a somewhat awkward situation in terms of supervision, which was not provided under the framework of the Project but through the Bank's overall sectoral policy dialogue, and led to the last minute request to eliminate the MEC's component from the Project\. Soundness of Background Analysis and Lessons of Experience\. The background analysis that went into the Project's design was extensive in that it was the same analysis that had guided the design of the HD PSRL\. It included an extensive number of analytical and advisory tasks (AAA), including Policy Options Notes that had been prepared for the then incoming administration, and experience gained through support for preparation and supervision of a large number of lending operations in education, health and social protection (in addition to multi- sectoral operations) implemented at both the federal and state levels, that had provided an important instrument to support policy reform in the social sectors\. A list of these is provided in Annex 12\. Adequacy of Government's Commitment\. The Government's commitment to the Project was extremely high in terms of its content, since it supported the activities needed to carry out the centerpiece of its electoral platform--its social agenda of poverty reduction with increased equity and efficiency, within a framework of macroeconomic stability\. What is not so clear is whether the Government, especially two of its implementing agencies (MEC and MOH) actually desired--or came to need--Bank financing in the form of a separate technical assistance loan, or whether it desired only the Bank's continued technical assistance that had been provided almost routinely through AAA and in the context of individual lending operations\. Assessment of Risks\. The Project's assessment of risks was somewhat superficial, but in retrospect, few if any projects prepared at the time provided the type of risk analysis that has today become standard in the appraisal of projects to be financed by the Bank\. The underlying concern in the Project's risk assessment centered on the premise that the Government would require external funding not only for the implementation of project activities, but as an incentive to carry them out\. It envisaged that a second HD PSRL (and the expectation of associated funding) would provide for mitigation of the risk that even with quality data, key policy decision makers would not make use of the improved technical inputs that the Project would make available\. Both this risk, and that of possible fiscal constraints limiting the Project implementing agencies' budgets were both rated Substantial\. Along the same lines, the risk that financing of activities by MEC with counterpart funds only could diminish the incentive for prompt implementation in retrospect seemed to imply that the incentive for implementation was mainly financial\. In this sense, the risk assessment overestimated the risks related to possible financial constraints, and underestimated the Government's commitment to the specific activities that the Project would support, with or without external funding\. 9 The risk assessment did not address possible risks that did in fact materialize, such as those related to implementation delays due to staffing or other factors such as the signing of an interagency agreement with IBGE, that of MEC and MOH eventually carrying out project activities outside the framework of the Project, or, more importantly, that a second HD PSRL would never materialize as the Government no longer required the financing that would have been associated with the planned follow-on operation\. 2\.2 Implementation Project Objectives\. Because they remained so fully congruent with its own policies, plans and programs, the Government remained fully committed to the Project's objectives throughout its implementation period\. In fact, the Project's objectives responded to not only strengthen and provide inputs to programs carried out by its implementing agencies, but also as input into the design and implementation of other priority Government programs, such as its flagship Bolsa Familia Program4\. Project Components\. The Project's design envisaged three implementing agencies, without a coordinating unit through which communications with the Bank under the loan would be channeled\. Each agency financed by the loan (MOH and IBGE) was to carry out its activities under an implementation agreement that specified the activities for which it was responsible\. This institutional framework complicated supervision somewhat, especially since the Bank had to deal directly with each of three agencies, without any overall coordination\. In the end, as both the MEC and the MOH carried out project activities mainly through other vehicles, the Bank's relationship with each of the two ministries in the context of the Project suffered\. Component 1, implemented by IBGE, was by far the largest accounting for three quarter of loan proceeds as approved, and perhaps the most successful under the Project's framework (see Section 3\.2 below)\. IBGE, a legally autonomous agency of the Federative Republic of Brazil has a key and catalytic role in terms of providing strategic, comprehensive and integrated information for monitoring and evaluating the impact of key social sector reforms and living conditions\. Although this was IBGE's first experience with Bank lending, by-and-large implementation went smoothly despite some initial delays in formalizing the implementation agreement with the Government and issues with procurement and financial management\. IBGE achieved all of the benchmarks for moving ahead with the second HD PSRL for which it was responsible (Annex 10)\. 4 Project Appraisal Document for the Bolsa Familia Project in support of the First Phase of the Bolsa Familia Program, Report no\. 28544-BR , dated May 25, 2004\. 10 Component 2, implemented by MEC, was to be financed entirely with counterpart resources\. MEC implemented the activities under the Project, and received initial supervision from the Bank\. As a result of the studies financed under the framework of the Project, MEC selected 14 programs that were to be monitored and evaluated\. But in 2008, in view of the establishment of the Plan for Education Development (PDE)5, it found that its participation under the Project (even without financing) was no longer justified and notified the Bank accordingly\. Despite this, MEC carried out all of the activities it was expected to implement under the Project, and complied with the benchmarks for moving ahead with the second HD PSRL\. Component 3, implemented by MOH, was perhaps the most difficult in the context of the Project, although in the end, several of its activities were carried out and the activities included as benchmarks for the second HD PSRL were either achieved fully or are well advanced\. However, this did not occur within the context of the Project\. Initial implementation was affected by staffing changes in the Department responsible for this component in the MOH, which in turn delayed procurement of consultants' services for studies that had been defined\. Following continued delays, the MOH made progress on several Project activities (such as the development of systems to monitor system performance and impact, introduction of results- based management mechanisms, introducing mechanisms to support strengthening the capacity for monitoring at the state and municipal level) through its operational departments and in many programs with the Bank's assistance under other Bank-financed projects\. Annex ___ presents a summary of results-based financing mechanisms under health projects financed by the Bank in Brazil that rely on adequate monitoring systems, and federal support, strengthening and supervision by the MOH\. With activities progressing on that side, the MOH requested that the Project instead provide technical assistance and financing to the National Health Regulatory Agency (ANS) to establish an accreditation system for private health insurance plans\. In the end, this component was not restructured since the Government faced problems in transferring the funds to ANS, and the US$2 million (more exactly US$1,98) originally allocated to the MOH were cancelled as of December 3, 2009\. Mid-term Review\. The Project's Mid-Term Review was carried out in April 2009, somewhat late in implementation, but served to provide a forum for reviewing in detail its progress towards the achievement of its Development Objectives, and updating its results framework\. Factors that Affected Project Implementation\. The Project was very much a part of the Government's program and agenda, and implementation progressed with some delays and adjustments, but generally in accordance with the Government's originally defined schedule that had been built into the HD PSRL and consequently into the Project's original timetable\. What had not been envisaged was that the Government would move forward with its agenda in large 5 The PDE is the central policy tool that forms part of a series of measures to improve the quality of education in Brazil\. The PDE includes performance contracts of sub-national governments with the Federal government, with the initial focus being on municipalities\. An important focus of the PDE is the emphasis on promoting performance­ based policy levers to improve quality in Brazil's decentralized context\. As part of the contract, the municipality (and subsequently the school) undertakes a commitment to improve the "Index of Development of Basic Education (IDEB)"\. 11 part with its own or alternative resources in the context of its sectoral development programs and projects, some of which counted on financing from then ongoing or planned investment loans from the World Bank\. Several factors affected this\. First, Brazil's macroeconomic situation had improved considerably from the time that the first HD PSRL was approved\. As a result, it no longer required the important balance of payments support that a second HD PSRL was to provide\. Still, the Government assigned high priority to the Project's objectives since they were central and fundamental for its social agenda, so much so, that it moved forward with activities and met the benchmarks for the second HD PSRL even though it no looked to financing from that loan\. Similarly, the Government began to embrace a results orientation in most of its social programs, albeit outside of the context of the Project, for which monitoring and evaluation was fundamental\. In the MEC and the MOH, this results orientation and the support the ministry provided to states and municipalities to embrace it was built into the design and financing of different important federal and other programs implemented by states and municipalities\. Planned Versus Actual Costs and Financing\. The US$8 million loan for the Project was approved on July 28, 2005, signed on October 26, 2006 and declared effective on December 14, 2006\. Initial delays related mostly to delays in Congressional approval of the loan\. Of the original amount of the loan, US$5\.93 was actually disbursed, all of it to IBGE under Component 1\. As a result, "implementation" in the sense of providing finance for activities under a project, was limited to Component 1\. The loan closed on schedule, on December 31, 2009\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design6\. As the focus of the Technical Assistance Project was at the federal level, monitoring and evaluation of outcomes and results was to be collected directly from IBGE and the MEC and MOH through project progress reports and supervision mission\. In addition, each of the three implementing agencies was to be required to submit regular updates of their progress towards achieving: (i) the Project's specific outcomes and objectives (Section 1\.2), and (ii) the HD PSRL benchmarks\. M&E Implementation\. The Project's monitoring framework was relatively simple, comprised of mostly outputs for which it was a question of tracking progress and eventual completion of tasks that did not require sophisticated systems to track progress towards a pre-defined numeric target\. Information on the activities and progress by MEC and MOH was not provided routinely in the context of the Project, but rather through other vehicles and operations, including a strong policy dialogue with those ministries\. M&E Utilization\. Although supervision missions followed up on the Project's progress towards its expected targets (especially for Component 1), Bank supervision only began reporting progress towards those targets in late 2008, and then routinely used this framework as a basis for monitoring the Project's progress towards its development objectives\. 6 This section describes the Monitoring and Evaluation Design, Implementation and Utilization of the HD Technical Assistance Project, and not the progress with the design, implementation and utilization of monitoring and evaluation systems in the Government's social programs that were central objectives of the Project and are described in Section 3\.2\. 12 2\.4 Safeguard and Fiduciary Compliance Safeguards\. None of the Bank's Safeguard Policies were triggered by the Project\. Procurement\. With no previous experience with Bank-financed operations, IBGE initially ran into some difficulties with handling procurement under the Project, although a procurement agent had been contracted to assist in this process and IBGE had initially been using this agent for the selection of consultants and the preparation of ICB and NCB bidding documents\. Subsequent supervision revealed that IBGE began assuming a greater responsibility for procurement processes and decisions, with the benefit that its internal procurement function came out strengthened in the process\. Financial Management\. Financial management went generally smoothly, although there were issues with the auditors' opinion on the July 8, 2008 audit report of Component 1, which IBGE rapidly addressed to comply with the Bank's financial management requirements\. 2\.5 Post-completion Operation/Next Phase The Project financed, or better supported, the development of systems, data collection instruments and processes that either are or have very much become ingrained in its way of doing business\. These have either improved or made more efficient existing processes and surveys, introduced new mechanisms of monitoring and evaluation and results-based financing or supported the establishment of mechanisms, such as the Social Statistics Committee that bring greater coordination, responsiveness and relevance into the design, monitoring and evaluation of the Government's social programs\. These outcomes have been internalized into the implementing agencies' structure and programs and they have absorbed the corresponding budgetary, staffing and managerial responsibilities\. A stand-alone follow-up to the Project is not planned, as had been contemplated in the Project Appraisal Document\. Yet, the Bank has a very active program in Brazil that includes several ongoing and planned lending operations and AAA, to support programs at the federal and state levels\. As the Project's objectives are fully compatible with the Government's, the Bank will undoubtedly continue providing technical and financial assistance under its assistance program to the Project's implementing agencies, and other agencies at all levels, towards further progress with those objectives\. As to next steps, IBGE is analyzing the test POF Simplificada, and the results of this analysis will guide the design of the new, annual survey\. It continues to collect data on the pilot tests of the PNAD Continua, that will continue until October 2010, which will feed into the planning and design of that survey to be rolled out in 2011\. The Social Statistics Committee is fully recognized by all of the agencies that are represented in it, including now the Ministries of Labor and of Social Security, as well\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 13 Project Objectives\. The relevance of the Project's objectives was extremely high\. Its development objectives were at the time it was designed and still are at present unquestionably consistent with Brazil's development priorities, with Bank country and sector assistance strategies, and with corporate goals\. The Project's objectives are consistent with the Brazilian Government's strategy to reduce poverty and inequality while fostering economic development, which continues to be the centerpiece of its economic and social development priorities\. During its first term, President Lula's administration maintained a dual strategy of both promoting and maintaining economic growth, and also stimulating social progress to tackle the challenges of inequality\. In its second term, which began in early 2007, the current administration launched a renewed push for economic development and faster growth, as well as actions to further strengthen social policy and ensure that the recent gains in equity are sustainable, especially to weather the current economic slowdown\. Better informed policy decisions and program design, which is made available by activities supported under the Project, is important for improving equity and efficiency of the Government's social programs, and hence key for improving the availability and delivery of social services to the country's population\. The Project's objectives are also at the center of one of the core pillars of the Bank's current CPS, namely, Achieving a More Equitable Brazil\. The Bank's strategy mirrors the Brazilian Government's objective of reducing inequality by combining social progress with economic stability\. The CPS states that the Bank's support focuses on reaching the poorest and achieving higher levels of quality and efficiency in social services, which was an important focus of the Project\. The Project was complemented during implementation, by a strong program of programmatic Analytical and Advisory Services (AAA) that focused on building capacity for monitoring and evaluation and by ongoing operations in the education, health and social protection sectors\. The Project's objectives were also closely aligned with corporate priorities of achieving the Millennium Development Goals in particular, MDG1, the reduction of poverty, hunger and malnutrition, and achieving universal primary education (MDG2) and reducing child mortality (MDG4) and maternal mortality (MDG5)\. Project Design\. The Project's design was also relevant, in that it was designed to provide needed technical and financial support for advancing with the institutional activities that would be required for complying with the benchmarks for an originally planned second HD PSRL\. Perhaps one question regarding the Project's design that, in retrospect, could be questioned-- although it did not impact the eventual accomplishment of most of its development objectives--- was whether it made sense to include a component for the MEC, without external funding, and another for the MOH that already counted on several and expected to count on new Bank loans that were supporting/would support similar institutional objectives\. Project Implementation\. Due to an improved macroeconomic situation at the time, the Government decided that it did not require the Bank's financing for implementing the policy actions under a planned second PSRL\. Still, the actions and activities that would have been supported under the then proposed second PSRL remained very much at the center of the Government's social policy agenda, and hence the Project's design, as a vehicle for financing international expertise and providing hands-on technical support through supervision, remained 14 very relevant\. During implementation, it became clear that without a need for additional external funding, and with the capacity to implement their planned activities either with internal capabilities or with Bank assistance under other operations, Components 2 and 3 that were to support MEC and MOH, respectively, lost their relevance but only in terms of financing and assistance to be provided under the framework of the Project and not in terms of their overall relevance to the Government\. 3\.2 Achievement of Project Development Objectives The Project was structured around three components, each to be implemented by three different implementing agencies, and the monitoring indicators were structured following these components\. The Project's achievement of its objectives, as evidenced by progress towards originally defined targets, is presented below by each of the three objectives, with corresponding indicators and targets mapped to the corresponding objective (i\.e\., instead of presenting a discussion of the indicators/targets/achievements by project component)\. Objective 1: to enhance monitoring processes and systems, including the systematic collection of thorough data on social indicators, to permit: (i) stronger, more integrated and continuous assessment of progress on social programs and policies, and (ii) use of performance information in resource allocation decision-making Achievement of objective 1 is assessed using intermediate outcome indicators\. The Project made considerable progress in improving and streamlining the systems for the collection of data on social indicators, and in institutionalizing a structure not only for consolidating this information, but using it effectively for making informed policy decisions\. In addition, both under and in parallel to the activities financed by the Project, the Ministries of Education and Health (and other ministries not included under the Project such as the Ministry of Social Development), began to rely on coordinated data sources, and improved and institutionalized not only important systems for data collection and monitoring that are used to guide resource allocations and formulate policies, but also performance-based financing mechanisms into their programs\. Specific accomplishments include: Social Statistics Committee holding regular meetings\. Achieved\. The Social Statistics Committee was established through an Inter-ministerial Ordinance on December 6, 2007\. As established, the Committee included representatives of the Ministries of Planning, Health, Education, Strategic Affairs, and Social Development\. The Ministries of Labor and of Social Security were later invited to participate in the Committee given the high relevance of the statistical information for which they are responsible to the Government's social agenda and priorities\. The Committee is comprised of two units: the Management Group, responsible for defining the Committee's guidelines and action plans and the Executive Group, responsible for implementing the action plans put in place by the former\. The Committee first met on December 16, 2008, and since then has been meeting regularly, either as a whole or as sub- groups, to establish an inventory of statistical information produced by IBGE and by the various Government ministries, evaluate their demands for this information and improve and streamline their access to the various statistical information systems\. The Committee has to date has identified and documented, under a framework prepared by IBGE, all existing 15  statistical data bases maintained by IBGE, the Ministries of Health, Education, Labor, Social Development and Social Security, and is currently identifying possible information gaps\. IBGE has designed a web-based system to provide access to the Committee's activities, which is already online\. Second Household Expenditure Survey (POF, Pesquisa de Orçamentos Familiares) conducted\. Achieved\. The Project supported IBGE in design and carrying out of the second POF, which comprised the survey of about 65,000 households throughout the country between 2008 and 2009\. The data is currently being processed and the survey's results are expected to be released in April 2010, with updated information on family spending and poverty in general and the impact of specific social programs\. This full update of the POF will permit the evaluation of the Government's social programs against the baseline 2002- 2003 POF\. At the same time as the second POF was being conducted, IBGE developed and tested several questionnaires for a Simplified POF (POF Simplificada), and conducted this simplified survey of about 5,000 households in the all states in Brazil's South Region and four states in the Northeast Region\. The pilot testing of the Simplified POF was carried out at the same time as the second POF to permit the eventual comparison of data to validate the simplified version, which is to be conducted on an annual basis\. Support for planning the improvement of existing national survey including the merging with the current employment household surveys\. Achieved\. A first pilot test of the PNAD Continua, the new national survey that will merge information from the two existing PNAD and Pesquisa Nacional de Emprego (Monthly Employment Survey, PMR) was carried out in November 2008, on the basis of a new questionnaire and design\. This pilot test aimed at validating the new questionnaire was developed on the basis of background documents prepared and inputs received from users of the survey information, including policy makers, during a series of seminars that IBGE conducted, including those under the framework of several forums of the Sistema Integrado de Pesquisas Domicialiares (SIPD)\.7 After evaluating the initial results, the pilot test was rolled out in 2009 to about 45,000 households in five large states and the Federal District\. The pilot test is proving useful for validating input related to labor, earning, migration, housing, for evaluating the process for collecting information and for comparing the data of the pilot PNAD Continua with that of the PNAD and the PME\. National Household Survey (PNAD, Pesquisa Nacional por Amostragem Domiciliar) improved and North region included in survey\. Achieved\. Given delays in loan signing, this indicator was achieved in 2004 with counterpart funding\. The PNAD today covers the entire country, including rural areas of the North region\. Since that time, PNAD data covering the country as a whole is available on IBGE's web site\. Poverty maps developed\. Achieved\. After a process of preparing data, adjusting the model and establishing measures of poverty and inequality in small locations, poverty maps were prepared on the basis of social, economic and demographic information from the POF 2002/2003 and the Demographic Census 2000\. A DVD, Mapa de Pobreza e Desigualdade: Municipios Brasileiros 2003 (Map of Poverty and Inequality), with maps of the main poverty and inequality indicators disaggregated by municipality, and complementary maps on indicators associated with poverty and inequality was launched in December 2008\. The 7 The SIPD fora are twice-yearly meetings of external users, promoted by IBGE, to promote discussion and receive input to guide the design of the system of household surveys\. 16  complementary maps include information grouped in twelve categories: economy, population, education, health, housing and basic sanitation, physical, political, natural resources and environment, industry and services, agriculture, urbanization and infrastructure\. Policy modules for tracking indicators in social sectors developed\. Achieved\. In coordination with the respective sector ministries, IBGE developed and added several supplemental modules to the PNAD\. These include supplements on: income transfers from social programs (PNAD 2004 and 2006), which were later incorporated in the PNAD itself from 2007 onwards; child labor by age bracket (PNAD 2006); adolescent and adult education (PNAD 2007), and a third supplement on health (PNAD 2008)\. Ministry-wide information system to track and monitor education programs developed\. Achieved\. The Ministry of Education has established a web-based information system, accessible by all states and municipalities, to track and monitor education programs across the country\. The Sistema Integrado de Planejamento Orçamento e Finanças (Integrated System of Planning, Budget and Finance, SIMEC), contains several modules through which multi-year plans, education programs and projects with states and municipalities, their budgets, financial management and project management are developed, monitored and evaluated\. Institutional framework and organizational unit established for consolidating and coordinating M&E activities in the Ministry of Health\. Partially Achieved\. The MOH has not formally established a single, centralized organizational unit for consolidating and coordinating its monitoring and evaluation activities throughout the ministry, per se\. Rather, the ministry as a whole has adopted a performance-based financing mechanism through its budgetary process, that by definition required the development and strengthening of its capacity for monitoring and evaluation\. The MOH's Executive Secretariat has overall responsibility for establishing targets, monitoring and evaluating the various programs and projects it finances\. It is supported in this effort with a comprehensive web-based database, DATASUS that contains countrywide information, by jurisdiction, on health indicators, budgets and financing through states and municipalities under the Sistema Único de Saúde (SUS), and utilization of health services\. Most of MOH's units, such as the Secretaría de Atenção à Saúde, which is directly responsible for implementing instruments and processes to strengthen the SUS, have departments or units specifically charged with designing and implementing monitoring and evaluation of their programs\. The Bank has been supporting the design and implementation of performance-based financing of federal health programs implemented by states and municipalities under several health sector projects it is financing (or has financed)\. Annex 11 contains a description of the performance-based mechanisms that have been incorporated in the federal budgetary and funding process under these programs\. Objective 2: to support the development of systematic research and evaluation of the impact of health, education and social protection policies and reforms as a means toward institutionalizing a results-oriented culture of accountability in public organizations responsible for social sector service delivery Achievement of objective 2 is assessed using intermediate outcome indicators\. 17 The Project made good progress towards the accomplishment of this objective, although the institutionalizing of a results-oriented culture of accountability the public sector is still very much a work in progress, that will be advanced through the implementation of several ongoing efforts and programs that are supporting its advancement under those individual programs\. Specific accomplishments include: Analytical research using POF 2002/03 data financed\. Achieved\. IBGE developed and published the Pesquisa de Orçamentos Familiares 2002-2003: Indicadores de Despesas: Brasil e Grandes Regiões in 2007\. Given the delays in loan signing, this activity was financed with counterpart funding\. Capacity of federal, state and municipal levels to monitor and evaluate the performance of publicly financed (health) services assessed and report disseminated\. Partially Achieved\. Progress towards this indicator, again, was not achieved through a separate activity under the Project\. Rather, the health reform program that was implemented starting in the 1980s provided for the decentralization of service provision to state and municipal governments, and transformed the mechanism for federal financing to states and municipalities through the SUS\. Through the development and implementation of performance-based financing mechanisms in the part federally funded programs, the MOH has been working with states in municipalities to strengthen their abilities to monitor programs' and projects' planning, budgeting, financial execution all against results\. Still, the states' and municipalities' capacity to monitor and evaluate varies greatly\. As a result, most performance-based financing programs include specific activities to work with the weaker states and municipalities to strengthen their capacities in this area\. Network of among M&E practitioners, stakeholders and academics established (health)\. Some Progress\. Although a "formal" network has not been established, the performance of the SUS, and in reality of all social programs, has received ever increasing attention not only by the staff of federal, state and municipal government officials, but also by practitioners, academic institutions and think-tanks\. Evaluation research on system performance financed (health)\. Not Achieved\. Objective 3: to support the institutional reform agenda as specified by the HD PSRL\. Achievement of objective 3 is assessed using outcome indicators\. The Project was expected, through the activities it would finance and the specific outputs it would achieve, to assist the Government in achieving the institutional reform agenda specified in the HD PSRL that would enable it to meet the benchmarks specified for the then proposed second PSRL\. By 2007, the Government had achieved all of the specified benchmarks, as presented in Annex 10\. 3\.3 Efficiency As the Project was a technical assistance operation, an economic analysis was not prepared during preparation against which its efficiency can be measured\. Still, the Project's efficiency can be inferred on the basis of the expected impacts of the activities it supported, and the efficiency with which it was implemented\. 18 First, the Project is expected to lead to increased efficiency in and effectiveness and quality of its data collection\. The pilot testing of the PNAD Continua, to replace eventually the PNAD and PME will increase efficiency in data collection\. The expansion of the PNAD to the entire country, and its supplementary modules, together with the poverty maps improved the quality of available data\. By improving the quality of information available, through data collection, and an increased focus on monitoring and evaluation, the Government is able to make better- informed decisions regarding the design and targeting of its social sector programs, and beneficiaries of those programs will eventually count on better targeted and more efficient services\. The introduction of performance-based financing mechanisms into Government programs introduces greater efficiency into the allocation and use of Government resources, while identifying issues with respect to institutional capacity constraints among certain states and municipalities that can be and is being addressed through strengthened implementation support aimed at building needed capacity\. These efforts are expected strengthen the effectiveness of social programs, both through improved equity and improved quality and efficiency in their delivery\. The Project as prepared included funding distributed among its three components for activities to be implemented by IBGE, by the Ministry of Education and by the MOH\. Activities to be implemented by MEC were from the start to be financed with counterpart funding\. Because of delays in signing, three main activities implemented by IBGE were carried out with counterpart funding, outside the scope of project financing\. Finally, MOH in the end received no funding under the Project for the activities that it implemented which in several cases counted on Bank financing under other operations in the health sector\. As a result, the Project's objectives were achieved with only US$5\.93 in Bank financing from the US$8\.0 loan that supported it\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory The Project's Overall Outcome Rating is rated Moderately Satisfactory, based on: (i) its continued high relevance in terms of the activities it supported (although financing under the loan was not required to carry out some parts of the Project); (ii) its substantial achievement of its Development Objectives, with moderate shortcomings in the achievement of objectives by the MOH, but only minor shortcomings in the achievement of objectives by IBGE which was responsible for the largest share of the Project; and (iii) the efficiency with which it was carried out, and that it will support in terms of strengthening, coordinating and streamlining data collection and monitoring and evaluation to inform better the Government's social sector policies and programs\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development By definition, the Project had a strong social and poverty focus, although it was not expected to have a direct impact on poverty\. Its implementation will result not only in better information to analyze the existence and determinants of poverty, but also to design and target better 19 Government policies and programs to maximize their impact on reducing inequities and alleviating poverty\. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) The Project basically supported institutional development activities that, as described in Section 2\.5, have been internalized in the implementing agencies', or better, the Government's structure, its policies and the programs it finances\. Beyond this, the Project's main institutional impact was in the formation and now regular operation of the Social Statistics Committee that is established and recognized formally by all of the ministries that comprise it as responsible for analyzing information needs and demands of the social sector ministries with IBGE, making compatible those demands and prioritizing them, and proposing the implementation of any needed special surveys aimed at measuring emerging social issues\. The Committee provides for structured coordination of the social sector ministries with IBGE with the goal of bringing greater effectiveness in the quality of social information data bases, and permitting greater information sharing, cooperation and dissemination of available data\. (c) Other Unintended Outcomes and Impacts (positive or negative) 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A 4\. Assessment of Risk to Development Outcome Rating: Negligible The Risk to the Project's Development Outcome is considered Negligible\. As described earlier, government ownership of the Project's objectives is extremely high\. The activities, policies and processes that the Project supported have been internalized by the Government, and institutionalized technically, managerially, and financially\. They will undoubtedly continue, with a continuous search for expansion, adjustment and improvement in support of their objectives\. With an obvious social objective, stakeholder support is also high\. In looking to the future, perhaps the main risk would center on the forthcoming electoral process that will result in a change of Presidential administration in early 2011\. However, with a strong social equity and efficiency focus, it is hard to imagine that any incoming administration would reverse the progress made towards the Project's objectives\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 20 Bank Performance in Ensuring Quality at Entry is rated Moderately Satisfactory\. The Project was strategically relevant to the Government and to the Bank's country assistance program, especially to the HD PSRL and other social sector operations\. It was a central element in an integrated program of assistance in support of possibly the Government's highest priority-- achieving equity and efficiency in the deliver of social services, and its preparation was based on a wealth of knowledge acquired through AAA and lending operations\. The Project's design incorporated lessons learned in earlier assistance, especially in recognizing IBGE's activities as a key public good, providing valuable household information to complement ministry-collected data, and incorporating them in the Project along with the MEC and MOH to address information needs and availability from demand and supply sources\. Fiduciary aspects were rather straightforward, as were the Project's monitoring and evaluation arrangements\. Two aspects of Quality at Entry that eventually affected the Bank's supervision of activities that the Project supported within the framework of Bank financing and project supervision deserve highlighting\. Although the factors described below did not affect eventual accomplishment of the Project's objectives, they do bring into question whether with the exception of the IBGE component\. Bank lending was the most appropriate assistance vehicle through which to support the MEC and the MOH\. Implementation Arrangements\. The Project's implementation arrangements were somewhat unique in that each of its implementing agencies was to be responsible for procurement, disbursement and financial management arrangements and reporting project progress directly to the Bank (i\.e\., without an overall coordinating unit)\. The PAD reported that this type of arrangement had been tested with relative success in other projects financed by the Bank\. An advisory committee was to be established at the Ministry of Planning to ensure coordination of the different ministries and IBGE in the implementation of the loan\. The downside of this arrangement was that the Bank did not have one, but several, interlocutors\. When MEC decided to "withdraw" from the Project, and MOH to carry out activities on its own, the Bank's main counterpart became IBGE\. Information regarding activities in education and health were provided based on the Bank's solid policy dialogue with both of those ministries\. Somewhat related to this issue, is the question of why the Project's original design included a component to be implemented by MEC, when no loan financing was to be provided\. Also, as mentioned in Section 2\.1, the Project's risk assessment was relatively thin, failed to identify risks that emerged that had an impact on the need for project financing, but not on the eventual accomplishment of its objectives\. Bank Inputs and Processes\. The Bank's inputs to support the Borrower's preparation were solid, and counted on experienced Task Managers in each of the three human development sectors--education, health and social protection\. There was complete continuity in the Task Managers that supported preparation of the Project and that had earlier supported preparation of the HD PSRL\. Yet, it is not clear why the loan for this Project was only taken to the Board more than two years after approval and disbursement of the first HD PSRL, when there were already indications that a second HD PSRL would never materialize\. (b) Quality of Supervision 21 Rating: Moderately Satisfactory Bank Performance in the Quality of Supervision was Moderately Satisfactory\. The Bank continued to provide support during supervision through multi-sectoral specialists under the coordination of the Task Manager\. Supervision of fiduciary aspects, when issues emerged became proactive, and supervision reporting made due note of the issues, adjusting the Project's implementation ratings accordingly\. In retrospect, it seems that the dynamics of Bank supervision changed once it became clear that the Government did not want to move forward with financing under a second HD PSRL, which happened relatively early in implementation\. Bank Task Management changed almost immediately after loan effectiveness (due to internal rotation), by which time it had become clear that there would not be a second phase\. Supervision took on a more routine investment lending- type project management emphasis, as opposed to one driven by making rapid progress towards benchmarks in a policy matrix supported by a team of specialists\. Concurrently, the Bank provided specialized sectoral assistance towards accomplishment of the Project's objectives through separate just-in-time advisory support (education), programmatic AAA (social protection), and supervision of other projects under implementation and preparation (health)\. Given the delays in project start-up, implementation was delayed and the Project's Mid-Term Review was conducted when the Bank's loan was near closing, and when a new Task Manager with a broad social policy focus assumed responsibility\. The Mid-Term Review did serve to focus on the Project's accomplishments, and to review progress towards the eventual achievement of its objectives, including progress towards the benchmarks for a second HD PSRL\. What is not clear is why the Bank did not recommend dropping Components 2 and 3 early on, when the Bank became appraised that the MEC and MOH were implementing activities outside of the Project's framework\. As explained repeatedly, this did not impact progress towards the accomplishment of the Project's objectives\. But did create a somewhat strange situation in which a project's implementing agencies (i\.e\., MEC and MOH) moved in parallel to a project for which they were responsible with Bank technical and advisory support and assistance, but outside of that project's framework\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory Overall Bank Performance is rated Moderately Satisfactory, based on the factors described above, but mostly on the very high strategic relevance, timeliness and the high quality technical analysis of the Project, its objectives, and its components that were so very congruent with those of the Government\. Even though MEC and MOH implemented most of the activities outside of the Project's framework, the quality of the Project's technical design and inputs undoubtedly provided strong input for those institutions' agenda in support of its objectives\. Yet, with the benefit of hindsight, perhaps a lending instrument was not the most vehicle through which the Bank's assistance in support of the MEC's and the MOH's objectives could be provided\. 22 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory The Government's Performance is rated Satisfactory8\. Its ownership and commitment to achieving the Project's development objectives was extremely high---they were the Government's objectives that it supported through the implementation of its many ongoing and design of its many planned programs\. Through establishment and continued operation of the Social Statistics Committee, it created a forum for coordinating and furthering the objectives supported by the Project, not only among its implementing agencies, but by all agencies with responsibility for formulating, implementing, monitoring and evaluating social policies and programs\. The one main factor under the Government's control that impacted the Project was somewhat contrary to what is normally observed\. The Project had originally been designed to support implementation of the series of HD PSRLs, and, specifically, the transition from the first to the second phase\. With a rapidly improving macroeconomic environment since the first HD PSRL was approved, the Project's dynamics shifted, especially in terms of requiring external finance to maintain, support, expand and improve its social programs\. This affected the "raison d'etre" of the Project, with the result that loan financing became limited to Component 1, implemented by IBGE, an autonomous agency\. Transition arrangements are in place, and all of the Project's implementing agencies have internalized the policies and activities that the Project supported\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory The Implementing Agencies' Performance is rated as Moderately Satisfactory9\. It is difficult to rate the performance of the MEC and MOH, since they had relatively little direct participation in the Project after preparation and early implementation\. MOH, in early implementation, encountered frequent delays in contracting, and preparing implementation plans, mostly due to staffing issues that were eventually resolved\. But this does not provide sufficient basis to form an informed judgment as to the ministries' performance under the Project\. They both remained committed to the Project's objectives, and remained very much involved in the Social Statistics Committee as beneficiaries, users and providers of information from and to government databases, and with the Bank in the context of other assistance vehicles\. 8 Government is taken to mean the whole of the Federal Government and its policies\. 9 Implementing Agencies is taken to mean IBGE, MEC and MOH\. 23 IBGE, on the other hand, remained not only committed to the Project's objectives from preparation onwards, but also fully engaged with the Bank throughout project implementation\. It addressed fiduciary issues as they arose in a timely manner, and established monitoring systems to follow the Project's progress\. It assumed fully its catalytic role in reaching out to other government agencies to coordinate the needs, availability, quality, and analysis of social data\. Finally, it implemented all of its programmed activities--by far the Project's largest component- -in a timely fashion, with only minor and justifiable delays, within the Project's original implementation schedule and with impeccable commitment to quality and results\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory The Overall Borrower Performance is rated Satisfactory for the reasons described above, but also in view of the Borrower's commitment as a whole to the Project's objectives and their continued implementation and sustainability\. 6\. Lessons Learned Nothing substitutes a Borrower's commitment to project objectives\. This project is a prime example of the fact that nothing substitutes for a Borrower's commitment to project objectives\. IBGE required the funding to carry out the programmed activities, and did so impeccably\. Both the MEC and MOH did not require loan funding, but carried out the vast majority of activities without loan funding, basically because the Project's objectives were the Government's own\. Technical Assistance in the context of development policy lending, including programmatic development policy lending--realities and needs\. There is a wide array of experience within the Bank with technical assistance loans that accompany development policy loans (DPLs) in support of the development and design of reforms that count on financial support under the associated DPL(s)\. Invariably, this experience has been mixed, and generally, the implementation of technical assistance often moves along a slower timetable, given not only the time required to design and implement institutional reforms, but also the very nature of technical assistance lending that requires compliance with more hands-on, day-to-day involvement with fiduciary issues, including the preparation of terms- of-reference, adherence to Bank procurement policies and procedures, etc\. In the case of the Project, this never really became an issue since the second in the series of programmed PSRLs never materialized, and the Borrower in any event complied with the benchmarks for a second PSRL by 2007\. In any event, it is not clear that the envisaged timetable for moving ahead with a second PSRL would have been compatible with what turned out to be the schedule for implementation of the technical assistance activities under the Project\. Incorporating various agencies without a coordinating agency\. The Project's design was such that each of three implementing agencies was to be responsible for procurement, disbursement and financial management arrangements and reporting project progress directly to the Bank (i\.e\., without an overall coordinating unit)\. There was an advantage to this arrangement, namely, that each of the implementing agencies could communicate and report 24  routine project activities directly to the Bank, without the additional layer of a coordinating unit\. On the downside, this placed somewhat of an additional burden on the Bank's supervision effort that needed to relate to each of the three agencies individually\. In the end, the additional effort was eased somewhat by the fact that both the MEC and the MOH implemented most of the Project's activities on their own, outside of the framework of the Project, and the focus of the Bank's supervision, in the context of the Project, was on IBGE, but created a difficult situation in hands-on supervision assistance to those agencies was provided outside the framework of the Project\. Support within a coherent framework of overall support to a sector\. The Project provided assistance to the Government within a coherent and coordinated framework of overall support to Brazil's social sectors that included a comprehensive program of lending and non- lending assistance, including short-term, hands-on advisory services\. It may sound redundant to say this, but this assistance framework, coupled with the Government's commitment to the overall objectives that it supported (and continues to support) provided an environment conducive to the accomplishment of this (and other) Project's objectives\. This is all the more apparent in view of the fact that some of the Project's objectives were met without loan financing but with Bank assistance under other Bank-financed projects or through its extensive program of analytical and advisory services\. Issues with relation to an implementing agency "withdrawing" from a Project (but supporting its objectives)--need for guidance on how to address and evaluate\. The Project had three implementing agencies, with very different realities\. First, was IBGE, an autonomous agency of the Government that utilized project-related funding and corresponding technical assistance to carry out the Project's activities\. The MEC was included under the Project, but from the start was to implement its activities under the Project with counterpart resources, through routine budgetary allocations to the Ministry\. The MOH was included under the Project, with incremental funding from the Bank's loan that would allow it to carry out its planned activities\. Including these three agencies within the Project's framework made sense, especially since the activities that they were to carry out, and the objectives that they were to pursue were complementary and part and parcel of the Government's objectives for institutionalizing a culture of results-based accountability in the social sectors based on reliable data, and each of these had a special role in moving towards compliance with benchmarks that would trigger the second phase of the HD PSRL\. Still, the implementing agencies' realities were very different, and yet both the MEC and the MOH were able to pursue the Government's objectives outside of the framework of the Project\. The analysis of evaluating the Project's accomplishment of development objectives in this report was based on just that, regardless of source of financing\. In accordance with the Bank's procedures for project restructuring, it might have been preferable to exclude both the MEC and the MOH from the Project at some early point\. But there is something twisted about this line of reasoning, since MEC really never counted on Bank financing to begin with\. Perhaps the question should be whether it made sense to include the MEC in the Project from the start, realizing that its relation with the Bank would be one based on technical, and not financial, assistance\. In retrospect, the response is probably yes it did make sense, since the MEC was able to move ahead with its activities under a framework of 25  the Government's objectives, and that when the Project was designed, it was to support actions towards compliance with benchmarks, including ones that MEC needed to achieve\. Then, the question is whether it would have made sense to exclude the MOH from the Project at some point\. With the MOH implementing the Project's activities, in pursuit of its objectives, the MOH's position became exactly like that of the MEC--an agency that implemented important activities under the Project with its own (or alternative) resources, and with the Bank's technical assistance through other vehicles\. Perhaps, in the end, the issue is one of attribution: to what extent is the accomplishment of the Project's objectives attributable (exclusively) to the Project\. Guidance on this issue of incorporating components/agencies under a project that get implemented but not necessarily with loan financing would be welcome\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies A Project Completion Report prepared by IBGE was received by the Bank on March 26, 2010, and served as input into the preparation of this ICR\. A copy is available in the Project Files\. A draft of this ICR was sent to MEC, MS and IBGE on May 20, 2010 IBGE sent comments to the Bank by email on May 31, 2010 The comments were few, and concerned only precision of dates, and clarification of certain activities carried out by them under the Project\. IBGE's comments have been incorporated in this ICR\. No comments were received from either MEC or MS\. (b) Co-financiers N/A (c) Other partners and stakeholders N/A 26 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Thousand equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Component 1: Strengthening Collection of 9\.151 8\.927 100 Monitoring and Evaluation Data in the Social Sectors Component 2: Strengthening Monitoring and 2\.054 0 0 Evaluation in the Education Sector Component 3: Strengthening and Consolidation of 2\.044 0 0 Health System Total Baseline Cost 13\.259 8\.927 Physical Contingencies 0\.768 Price Contingencies -1\.107 Total Project Costs 12\.920 Front-end fee IBRD 0\.080 Total Financing Required 13\.0 (b) Financing Appraisal Actual/Latest Estimate Estimate Percentage of Source of Funds (USD (USD Appraisal thousands) thousands) Borrower 5\.0 0\.00 \.00 International Bank for Reconstruction 13\.0 0\.00 \.00 and Development 27 Annex 2\. Outputs by Component See Section 3\.2 28 Annex 3\. Economic and Financial Analysis (Including assumptions in the analysis) N/A 29 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Ademildes Dantas Operations Officer LCSHE Fiduciary/Operational Alberto Rodriguez Sr\. Education Economist LCSHE Task Team Leader Anemarie Proite Procurement Specialist LCSFP Procurement Aspects Claudio Mittelstaedt Financial Management Specialist LCSFM Financial Management Daniela Pena de Lima Operations Officer LCSHH Fiduciary/Operational Kathy Lindert Social Development Economist LCSHS Technical /Operational Supervision/ICR Ademildes Dantas Operations Officer LCSHE Fiduciary/Operational Adriana Paula Sales Correia Team Assistant LCSHD Operational Support André Médici Health Senior Economist Technical Barbara Bruns Education Specialist Technical Cassia Castro de Miranda Team Assistant LCSHD Operational Support Chingboon Lee Sector Manager Education Manager Daniela Pena de Lima Operations Officer Fiduciary/Operational Danilo Pisani de Souza Financial Management Specialist Financial Management Frederico Rabello Costa Procurement Specialist LCSPT Procurement Aspects Jason Hobbs Social Development Research Technical Research João Vicente Novaes Campos Procurement Specialist Procurement Aspects Katherine Scott Senior Economist DECPI Technical Kathy Lindert Social Development Economist LCSHD Task Team Leader Luis Prada Senior Procurement Specialist LCSPT Procurement Aspects Marize de Fátima Santos Team Assistant LCSHD Operational Support Michele Gragnolati Sector Leader Task Team Leader Nicolas Drossos Financial Management Specialist Financial Management Peter Lanjouw Research Manager DECPI Phillippe George Pereira Guimarães Economist HDNSP Tecnhical Leite Romero Barreto Rocha Economist Economist Suzana Amaral Financial Management Specialist LCSFM Financial Management Suzana Nagele de C\. Abbott Senior Operations Officer Operational Tatiana Proskuryakova Seniro Operational Officer Operational 30 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including travel No\. of staff weeks and consultant costs) Lending FY05 21\.32 74,206\.19 FY06 0\.00 2,296\.00 Total: 21\.32 76,502\.19 Supervision/ICR FY06 6\.15 17,103\.93 FY07 11\.35 41,816\.66 FY08 15\.50 62,784\.34 FY09 22\.81 116,827\.52 FY10 14\.62 87,756\.19 Total: 70\.43 326,288\.64 31 Annex 5\. Beneficiary Survey Results (if any) N/A 32 Annex 6\. Stakeholder Workshop Report and Results (if any) N/A 33 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR See comments in Section 7(a)\. A copy of IBGE's Project Completion Report is in the Project Files\. IBGE's comments on this ICR have been incorporated in this document\. 1\. Project Evaluation: design, execution, results and operating experience (a) Design Component 1, "Strengthening Data Collection for Monitoring and Evaluation in Social Areas", under the aegis of IBGE, was divided into seven sub-components: 1\. Social Statistics Committee (SSC) 2\. Strategy for the Family Budget Survey Program (POF) 3\. Improvement of existing national surveys, including the merger of PME (Monthly Employment Survey) and the PNAD within the National Continuous Household Survey 4\. Expansion of the coverage of the PNAD to include the North Region rural area 5\. Preparation of Poverty Maps 6\. Technical training for monitoring and evaluating social policies 7\. Analytical studies of the results of POF 2002/2003\. The project design focused on two key objectives: (i) to improve existing surveys; and (ii) to provide technical training for IBGE staff to undertake special monitoring and evaluation surveys on social policies (requiring specialized methodology)\. (b) Execution 1\. The Social Statistics Committee The Social Statistics Committee (SSC) was established on 06/12/2007\. This consists of two bodies: (i) a Steering Committee, responsible for setting guidelines for SSC work; and (ii) an Executive Group, responsible for implementation of tasks in accordance with Steering Committee guidelines\. The Committee consists of representatives of the Ministries of Planning, Budget and Management, Health, Education, Social Development and Hunger Alleviation, as well as of the Special Ministry for Strategic Affairs\. The first meeting of the SSC was held on 16 December 2008 at the Ministry of Planning, Budget and Management (MPOG) in Brasilia\. The discussion covered: (i) the Committee´s expanded goals, namely the diagnosis of social statistics based on administrative records and surveys conducted by IBGE and the various ministries with responsibilities in the social area; (ii) an 34 appraisal of statistical requests and requirements i\.e\. "demand evaluation"; and finally (iii) measures for improving access to available databases\. In March 2009, the Steering Committee established the following guidelines for the SSC: x To maintain, enhance and regularly update the social statistics inventory, with particular attention to official statistical inputs; x To ensure the consolidation, improvement and comparability of information, and to provide easy access to the same; x To encourage the adoption of concepts, classifications and methods for processing, storing and presenting official statistical information to enable the above goals to be achieved; x To work towards covering information gaps and to gradually incorporate a wider range of statistical sources; x To systematize information demand and to ensure optimum production and use of available data through improved coordination; x To regulate and facilitate access by different government agencies to existing databases, ensuring transparency, visibility, legibility and comprehensibility; x To undertake actions aimed at promoting the profile of SSC work; and x To adopt the Fundamental Principles of Official Statistics of the UN Statistical Commission, 1994 (http://unstats\.un\.org/unsd/methods/statorg/default\.htm)\. On the same occasion it was decided to formally invite the Ministries of Labor and Social Welfare to be represented on the SSC, in view of the important databases produced by both ministries and the two ministries ´strong connections with the social area\. It was also decided that the SSC Executive Group would produce a work-plan covering the following: o To inventory social statistics production with a view to identifying gaps, evaluating progress and highlighting opportunities for incorporating new statistical sources; o To evaluate and implement the Metadata Project for administrative records; o In accordance with its remit, to organize the information demand flow which will be the responsibility of the Household Surveys System (SIPD); o To organize and optimize information demand flow and to propose measures for facilitating access to databases held by SSC member agencies, integrating such data wherever possible; o To create, maintain and make full use of the IBGE website to disseminate SSC documents, including summary records of its meetings\. The SSC Executive Group met four times in 2009 to progress the above work-plan\. Members of the Group also participated in the 6th and 7th Forums of the Integrated Household Surveys System (SIPD)\. The main objective of the SIPD forums, sponsored by the IBGE on a twice- yearly basis, and attended by internal and external users, is to provide an opportunity for 35 delivering information on the Project and encouraging further discussion by interested parties\. Among the main achievements of the Group were: Identification of the databases to be inventoried; Drawing up inventories of institutional databases, using the same standard form as that used for the IBGE Metadata Bank Project; The following two main sets of databases were duly documented: IBGE databases and those produced by, or under the control of, the Ministries of Education, Health, Labor and Social Development\. The Ministry of Pensions and Welfare is currently in the process of deciding which material would make a suitable contribution to this exercise; A comparative table was drawn up on the basis of the above evidence to facilitate discussion about possible gaps in the social data; Information about the work and other aspects of the Social Statistics Committee is being prepared for the IBGE website\. 2\. Strategy for the Family Budget Survey Program (POF) Planning went ahead in 2007 on the "Complete POF"\. This included making decisions about the content of the POF, designing data-collection and training tools, field-testing and developing a suitable data entry system and, finally, the purchase of appropriate equipment for data collection\. As for the "Simplified POF", a start was made on defining the design and content of the model questionnaire which would eventually (with the Complete POFs) form the basis of the Continuous Family Budget Survey scheme\. In 2008, the POF 2008-2009 was implemented throughout Brazil, based on a sample of around 65,000 previously-selected households\. Interviews were conducted from May onwards, and by December data collection had been completed in 60% of the selected households\. In the context of the Simplified POF, the questionnaires were completed and the pilot trial operational model and sample were defined\. The sample was designed to allow the results generated from the pilot trial to be estimated and potentially used for comparing with the POF 2008-2009 results\. The methodological model of the pilot project was discussed and defined together with IBGE experts in national accounts, employment, prices and incomes, poverty and living conditions\. The test model was also presented to external users during the SIPD discussion forums\. In 2009, the information collection stage of the 2008-2009 Family Budget Survey covering the entire national territory was finalized\. After information collection was completed in the field (in May 2009), the resulting data was duly analyzed and processed\. A set of analytical procedures was used to assess the consistency of the information and the quality of execution of the collection processes\. The training and pilot trial stages were undertaken under the Simplified POF regime, as provided for in the work program\. The pilot trial, conducted between February and June, involved evaluating different types of questionnaire models\. The results of these will be compared with data from the POF 2008-2009, with a view to defining a simplified family budget survey model which could be utilized annually\. In the test sample, approximately 5,000 36 households in the South Region and in four Northeastern states (Ceará, Rio Grande do Norte, Paraiba and Pernambuco) were selected\. During the last six months of 2009 the final test statistics were generated and the calculation, critical analysis and imputation steps commenced at the core level\. 3\. Improvement of existing national surveys, including the merger of the PNAD and PNE into the National Household Survey Year 2007 was spent planning the `Continuous PNAD'\. Workshops were organized and documents published in the IBGE discussion series with a view to ensuring that information would be readily available on the planning aspects of the survey, and also to involve as many users as possible\. Preparation of the questionnaire and design of the sample (based on the `Master Sample' approach proposed for this survey) went ahead\. In 2008, a number of initiatives were taken which, based on the initial proposal for a questionnaire incorporating the `labor' and `income' themes in the Continuous PNAD, resulted in a proposed new version of the questionnaire to be used for trials\. The various initiatives involved making contact with international consultants, discussions with external users (in the SIPD forums), updating international recommendations with regard to planning the 2010 Census, etc\. The new version of the questionnaire was also the outcome of wide-ranging discussions in two major events: the XVI National Meeting of Population Studies and the XVIII International Conference of Labor Statisticians (ILO, Geneva)\. IBGE was invited to present discussion documents at these events, following which the first trial, undertaken in November, served to validate a substantial number of questions regarding labor and income, as well as confirm the value of the system developed for laptop computers\. 2009 saw the planning and execution of a major trial involving around 45,000 households in Pará, Pernambuco, Brasília, São Paulo, Rio Grande do Sul and Rio de Janeiro\. The scope and design of the sample were based on the Master Sample to be applied within the Integrated Household Surveys System\. The field trial was conducted between October 2009 and February 2010 in all the above areas, except for Rio de Janeiro, where it is due to be completed in October 2010\. This test exercise will provide an opportunity to evaluate the routine sample rotation procedures, the alternation of supplementary themes and enable a comparison with the results of the PME\. Note that in Rio de Janeiro the trial covers the sectors of the Master Sample which refer to Metropolitan Regions, whereas in the other states it encompassed the respective territories in their entirety\. The trial aimed at the following: (i) to validate the labor, income, time-use, migration and housing questionnaires; (ii) to appraise the logistical aspects of data management, collection and computer-generated information required for the Continuous PNAD; and (iii) to produce statistically-accurate results in order to enable a reliable comparison to be made with the PNAD and PME ­ both of which will be replaced by the Continuous PNAD\. 37 4\. Expansion of PNAD coverage ­ Rural North Due to procedural delays experienced in signing the Loan Agreement for the HD TAL Project, IBGE own resources were used to achieve the goals of this subcomponent\. The PNAD currently covers all the national territory, including the rural part of the North Region\. All the National Household Survey results from 2004 onwards, including data on this region, are available for consultation on the IBGE website\. 5\. Poverty Maps The work undertaken by IBGE in 2007 basically revolved around database integration, i\.e\. assembling data from different surveys and censuses to form the basis of a methodology to be used in poverty studies - specifically the concept of the "Poverty Map"\. Constructing Poverty Maps involved applying a variety of statistical methods for fine-tuning estimation models in small areas or "dominions"\. Once data had been assembled, the consumption model adjusted and "small area" poverty and inequality figures calculated, it was possible to construct maps showing the levels of poverty, "subjective" poverty and inequality in Brazil´s municipalities\. In order to contribute to a better understanding of the determinants of poverty, the team supplemented the Poverty Maps with municipal maps showing useful local social, economic and demographic information\. The indicators for the Poverty and Inequality Maps were completed in 2008, based on small-area estimates calculated by the method developed by the World Bank, drawing on data from the POF 2002/2003 and the 2000 Population Census\. The methodological texts and maps were edited prior to insertion in the final product\. 18 December 2008 saw the official launch of the DVD version of the Poverty and Inequality Map: Brazilian municipalities - 2003, containing maps showing the main poverty and inequality indicators\. The DVD also displayed a series of maps with useful supplementary data, under 12 main headings: Economy, Population, Education, Health, Housing, Basic Sanitation, Physical Aspects, Political Aspects, Natural Resources and the Environment, Industry and Services, Agriculture, Urbanization and Infrastructure\. 6\. Technical training for monitoring and evaluating social policies As the result of close interaction with senior management dealing with a wide range of public policy issues and an ongoing dialogue with users and World Bank staff, the IBGE teams learnt a great deal about the importance of conducting systematic surveys for monitoring public policies\. Examples of this enhanced systematic approach were: (i) the supplements to PNADs 2004 and 2006 referring to income transfer programs; (ii) the inclusion in the PNAD basic questionnaire (from 2007) of questions asking for details of income arising from transfers; (iii) dissemination of the PNAD 2006 supplement on child labor according to the age groups defined by national 38 child labor legislation; and, finally, (iv) the PNAD supplements on professional and adult/youth education (2007) and health (2008)\. The Social Statistics Committee played a key role in upgrading technical training for evaluating and monitoring social policies, by collaborating with IBGE (data requests and requirements etc), maintaining the SSC inventory of social statistics and filling gaps in existing information\. 7\. Analyzing the results of POF 2002/2003 As was the case of Subcomponents 4 and 6, implementation of Subcomponent 7 activities did not involve the use of IBRD funds\. The "Family Budget Survey 2002-2003: Expenditure indicators: Brazil and Major Regions" (1st Edition -Rio de Janeiro: IBGE, 2007) was published\. Overall Outcomes Of the seven subcomponents of Component 1 of the HD TAL Project for which IBGE shouldered responsibility, the Institute worked on three of them using its own resources: (i) expanded coverage of the PNAD to include the North Region rural area; (ii) analytical studies on the results of the POF 2002 / 2003; and (iii) staff capacity-building for monitoring and evaluating social policies\. In (i) and (ii) above, procedural delays in the run-up to the signing of the Loan Agreement for the HD TAL Project obliged IBGE to use its own resources in view of the pressing need to obtain key spatial and thematic information on Brazil´s socio-demographic situation\. In the case of (iii) above, the objectives of the technical training initiative were achieved in the course of the HD TAL Project as the result of our staff interacting closely with key public policy practitioners, engaging in an ongoing fruitful dialogue with users and World Bank staff and liaising with the SSC\. This subcomponent had no financial resource implications\. The subcomponents funded with HD TAL Project resources attained the objectives set forth in the Project Consultative Charter (May 2004)\. The Social Statistics Committee was duly established and began work on its predetermined Action Agenda\. The 2008-2009 Family Budget Survey was undertaken in the context of the Family Budgets Survey (POF), with the publication of the results forecast for June 2010\. A pilot trial of the Simplified POF was also conducted\. This consisted of evaluating different types of questionnaires with a view to producing a simplified family budgets survey which could be applied annually (in accordance with the targets established for this subcomponent)\. As for the subcomponent dealing with improving existing nationwide surveys, including the merger of PME and PNAD in the Continuous National Household Survey (the "Continuous PNAD"), the size significance test was carried out, involving some 45,000 households in Pará, Pernambuco, Brasília, São Paulo, Rio Grande do Sul and Rio de Janeiro\. This test is the key to the future successful deployment of the Continuous PNAD, which will represent a significant step forward in the social statistics area\. Finally, the Poverty Maps component reached its planned target with the launching in 2008 of the DVD 39 version of the Poverty and Inequality Map: Brazilian municipalities - 2003\. This subcomponent involved training a technical team in the use of specific World Bank methodology for constructing maps of this type\. Operational experience Executor Performance IBGE possessed virtually no experience of World Bank operations at the start of the HD TAL Project, although many IBGE operations at the time were based on funded projects\. IBGE nevertheless decided to implement the Project using its own technical and administrative staff\. The World Bank agreed to this approach in view of IBGE´s efficient administrative structure and the centralized nature of the activities to be undertaken under the HD TAL - all of which were to be controlled by the IBGE Research Directorate\. Once the initial problems had been overcome, especially regarding the correct understanding and use of World Bank instruments, IBGE was able to satisfactorily assimilate the required concepts and practices, as was confirmed by the Bank´s own supervisory missions\. World Bank The accessibility and availability of World Bank interlocutors was essential for assisting IBGE in its role as the executor of a project which needed to conform to Bank standards\. UNDP At an early stage in the negotiations on the HD TAL Project Loan Agreement, IBGE (aware of its own shortcomings in the procurements and consultancy-hiring areas) identified the need for UNDP assistance in this area and an IBGE/UNDP contract was duly signed for this purpose\. Although this arrangement made a useful contribution to IBGE´s work, it generated a number of problems during project implementation, particularly with regard to the rules applied by UNDP (which occasionally differed from World Bank rules)\. One of the more positive outcomes of the experience with UNDP is that IBGE is now determined to overhaul its procurements division so that it can deal effectively with contacts and purchases in accordance with World Bank rules\. 2\. Appraising the project vis-à-vis the objectives specified in the Project Appraisal Document (PAD) The Loan for Human Development Sector Reform (HD PSRL), signed by the Brazilian Government and the World Bank in 2003, focused on the adoption of a culture of project management based on results\. The HD TAL Project thus seeks to provide, as a necessary preliminary step, the tools to assist the Government to improve and develop monitoring systems and surveys to measure the impact of the Government´s public policies\. 40 While a wide range of social data is collected in Brazil, produced by IBGE and other agencies, such information is not widely employed in public policy decision-making\. The main thrust of the HD TAL Project was, and is, to provide an institutional framework for building a mechanism for developing a reliable database containing information that can be analyzed, disseminated and used to benefit the decision-making process\. Creating a more robust strategic information system, which enables more precise monitoring of the living conditions of the Brazilian population, referencing social policies and obtaining more accurate evaluations of the respective impacts, has generated an environment that is more disposed to development-oriented political dialogue\. A highlight of the HD TAL Project has been the creation of the Social Statistics Committee\. The remit of the SSC is to assess the requirements for social policy-related statistical information submitted to IBGE by government agencies, to harmonize the many requests, to set priorities and to suggest the commissioning of special research studies and surveys for measuring new social phenomena\. Consisting of representatives from IBGE and government departments directly linked to the social area, the SSC aims to provide a space for improved dialogue between IBGE and government agencies to ensure that statistical requirements are fully dealt with\. The SSC also aims to streamline the information system focused on social development policies, through enhanced information exchange, closer inter-agency cooperation and wider dissemination of available information\. 3\. Project follow-up The following are some of the projects developed under the HD TAL Project that are being followed up as part of the IBGE Research Directorate work program: Simplified POF The analysis of the results (scheduled for 2010) of the pilot trial will be essential for deciding on the type of Annual Survey to be conducted in future\. Continuous PNAD The results of the trials conducted in 2009 (to continue in Rio de Janeiro until October 2010) will form the basis for the next steps for planning deployment of the Continuous PNAD in 2011\. Social Statistics Committee The SSC is now fully acknowledged by all its members as a valuable institutional body\. The Executive Group has already selected the main action targets for the SSC 2010 work-plan, based on Steering Committee guidelines\. 41 Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders N/A 42 Annex 9\. List of Supporting Documents Background documents: Fundescola I, Project Appraisal Document, March 16, 1998 Fundescola IIIa, Project Appraisal Document, May 17,2002 First Programmatic Human Development Sector Reform Loan (PSRL) Project Appraisal Document, January 27,2003 Bolsa Família, Project Appraisal Document, March 2004 Project Documents / Supervision document: HD PSRL program update, with Review of Triggers Table, March 8, 2004 Human Development Technical Assistance Project Appraisal Document , July 1, 2005 Bank Assessments: Environmental and Social Comments on PCN FMA Report and FM arrangements 43 Annex 10\. Progress towards HD PSRL Performance Triggers A\. Accountability and Integrated Governance Issue Selected benchmarks Status Establish evaluation and consumer Strengthen evaluation culture in the Achieved: Although quality throughout the feedback mechanisms for education and education sector by: (i) participation in education system continues to be a health programs, provide for increased PISA/OECD international learning concern, the federal and state governments involvement of community in decision- assessments; and (ii) providing technical place appropriate emphasis on measuring making and promote effective social support to sub-national government for learning outcomes (Brazil participates in mobilization evaluation in the education system PISA and maintains a network of national and state level learning assessments: Índice de Desenvolvimento da Educação Básica (IDEB), Provinha Brasil, Prova Brasil and Sistema Nacional de Avaliação da Educação (SAEB) and a growing number of states are experimenting with school-level incentives, such as bonus pay, linked to learning outcomes\. Allocate at least the same budget than the Achieved: Allocation for 2005 budget is previous year (in real terms) for a school equivalent from that of the 2004 budget\. autonomy program that transfers resources directly to schools\. Systematically track and respond to client Achieved: The Ministry of Health (MOH) contacts and grievance in SUS-financed has implemented a revised PNASH system health facilities by creating an integrated that includes measuring patient database drawing in information from satisfaction, a general strategy to integrate Serviço de Atendimento de Demanda a number of heretofore separate Espontânea-Sistema Único de Saúde information systems\. (SADE-SUS), Sistema de Cartas and Programa Nacional de Avaliação dos Serviços Hospitalares (PNASH) programs\. 44 Create effective and transparent federal Prepare legislation to maintain and Achieved: Fundo de Manutenção e financing framework enhance effective financing framework with Desenvolvimento da Educação Básica incentives for improved delivery of (FUNDEB) legislation passed in 2006 has education services, with special extended and expanded the successful consideration of preschool and upper Fundo de Manutenção e Desenvolvimento secondary education\. da Educação Fundamental (FUNDEF) model to its successor, FUNDEB\. FUNDEB directs a greater share of earmarked sub- national government resources to education, expanding it to include Early Childhood Development (ECD), secondary and adult education, in addition to primary education\. The new FUNDEB recognizes the need for re-focus of education resources to - preschoolers and youth, and to increase Brazil's levels of secondary education participation\. Review FUNDEF's minimum acceptable Achieved: The minimum allocation was allocation per student\. reviewed and received the largest increase in FUNDEF's history through Decreto 4,966 of January 30, 2004\. On February 2, 2005, the minimum allocation was again reviewed, and increased in 9\.97% with an additional differential treatment for rural and urban schools\. In urban schools, 1-4 series, the allocation is R$620\.56, and for 5-8 series it is R$ 651\.59\. In 2007, the minimum allocation was again increased with the approval of FUNDEB law 11\.494 of June 2007\. FUNDEB increased the minimum floor from R$682,60 per student to R$946,29 (series 1-8), maintaining the differential treatment for rural and urban schools\. FUNDEB also included financing for nursery and pre-school education, secondary schooling, secondary schooling integrated with professional education, special education, indigenous and Quilombola education, and schooling for youth and adults (EJA/AJA)\. Strengthen federal resource transfer Achieved: MOH has increased the system in the health sector through percentage of resources transferred developing a strategy to: (i) establish a through grant system to 80% (up from 70% system to track and monitor the use of in 2002)\. Implemented pilot program in six federal resources transferred to states and states to track use of federal resources municipalities; (ii) increase the percentage transferred for disease surveillance\. MOH of resources transferred through the grant plans to scale-up tracking system\. A system; (iii) gradually consolidate the "forum" was held to prepare proposal to number of grants through a block grant consolidate the number of transfers\. scheme; and (iv) condition federal transfers for investments on the approval of the PDIs 45 Establish National Standards and Test in at least five (5) sub-national Achieved: Brazil has made major strengthen federal government monitoring governments the educational assessment advancements in establishing national function kit for sub-national governments standards with the introduction or improvement of several testing mechanisms, including: IDEB, Provinha Brasil, Prova Brasil and SAEB\. Introduce results-based management tools Partially achieved: Programa de in the health sector through: (i) Expansão e Consolidação da Saúde da implementation of performance Família (PROESF) 2 includes establishing agreements between municipal/state performance-based agreements with managers and PSF teams, ambulatory Programa Saúde da Família (PSF) teams\. units and hospitals; and (ii) development The Department of Health Care is starting and testing of federal performance-based the internal processes to establish financing scheme for basic care that is performance agreements with ambulatory linked to Basic Health Agreements units and hospitals\. A seminar on results-based management for primary health care is under preparation for this FY\. Expand technical support for and promoted Support separation of financing/regulation Achieved: MOH has established a transfer coordination among sub-national and provision functions in publicly-financed to provide an incentive to states and governments health services through developing models municipalities to establish regionalized for: (i) autonomous management of state- delivery system\. Autonomous models for operated hospitals and (ii) integrated hospital governance and management are delivery systems on the MOH agenda\. Expand the number of schools and Achieved: Articulated Action Plans (Plano municipalities benefiting from de Ações Articuladas, PAR) are part of the FUNDESCOLA Brazilian "Everyone for Education" plan, instituted by Decree nº 6\.094 of April 24, 2007\. This plan greatly expands the amount of technical support for sub- national governments\. Under the plan, consultants and technicians from the Ministry of Education (MEC) work with local educational entities to develop action plans for improvement that will be financed by Fundo Nacional de Desenvolvimento da Educação (FNDE)/MEC\. These plans (PARs) are then monitored by MEC and evaluated by a joint committee of municipal, state and federal actors\. 46 B\. Compensatory and Equity Enhancing Policies Provide effective transfers for Revise the targeting to strengthen mean- Achieved: Under the HD-TAL IBGE has disadvantaged families tested conditional cash transfers\. developed an Integrated Survey System\. In 2010, IBGE will launch the new household survey that merges PNAD and PME\. Under Bolsa Familia, the Ministry of Social Development (MDS) and IBGE have developed Poverty Maps based on 2003 POF and 2000 census, which is scheduled to be updated with 2008/09 POF and Census 2010\. MDS has also strengthened the existing Cadastro Único systems and redesigned the questionnaire\. Prepare legislation with provisions for Achieved: Pro-Infant (Pró-Infância), federal incentives to municipal created by resolution nº6 of April 2007, is governments to expand the provision of part of the Programa de Desenvolvimento subsidized preschool programs for the da Educação (Brazilian Plans for poorest families, including children and Educational Development, PDE)\. Pró-Infant mother nutrition\. provides resources from the federal government to municipalities and the Federal District for the construction of educational facilities for children with less than six years of age\. The goal is that between 2007 and 2010 the volume invested in Pro-Infant reaches R$800 million\. In 2007, more than 4300 municipalities requested financial and technical assistance\. Of those, 499 municipalities were selected resulting in the financing of 515 units at a cost of R$361 million\. The prevision for 2008 is that Pro- Infant finances the construction of more than 500 units in 500 municipalities\. Devise a formula for differentiated PSF Achieved: Differentiated payment system federal transfers for low-density rural areas already established for high-density urban and high-density urban centers\. areas\. A proposal is under study to do the same for low-density rural areas\. Consolidate effective subsidy programs for Evaluate impact and quality of school Achieved: Impact evaluation of Bolsa poor schools feeding programs using improved Alimentação completed\. Evaluation applied household surveys and nutritional gains Household survey and nutritional gain analysis analysis\. Merenda Escolar is under evaluation by MEC\. Establish effective subsidy programs for Prepare the implementation plan of the Achieved: MEC is already implementing a disadvantaged children national policy dealing with education for Federal Program of Inclusive Education in children with disabilities and a design a partnership with municipalities\. It is notable mechanism to monitor compliance and and positive that the emphasis of the outcomes\. present policy is one of inclusive education, rather than special education Redistribute resources benefiting poorer Monitor resource allocation mandated by Achieved: EC-29 monitoring system communities and populations EC-29 to further reduce health financing established\. gap between rich and poor regions by developing parameters for setting needs- adjusted per capita spending floor for basic care Allocate at least the same budget as the Achieved\. previous year (in real terms) for a program that provides additional resources to municipalities for purchase of basic drugs\. 47 C\. Enhanced Quality and Efficiency Improve internal efficiency in the social Strengthen hospital reimbursement and Partially achieved: Introducing sectors accounting system by revising Autorização standardized cost systems in hospitals is de Internação Hospitalar (AIH) to reflect on the QUALISUS policy agenda, and may actual costs of services rendered and be included in the proposed QUALISUS provide disincentives for unnecessary lending operation\. MOH is currently hospital admissions by developing a plan to revising the AIH and has implemented a introduce cost accounting systems in SUS- system to reduce fraudulent claims\. financed hospitals Establishment of a federal program to Partially achieved: A decision has been promote school acceleration programs made that Federal Government will not finance acceleration programs (states and large municipalities to do it), but instead monitor repetition rates\. Improved utilization of available physical Continue offering distance education Achieved: TV Escola is still under resources programs operation\. Define referral and counter-referral system Achieved: All municipalities defined referral in which PSF teams serve as gate keepers systems in "Conversion Plans" required for to upper-level services financing through the PROESF1\. Under PROESF 2, these referral systems will be checked on a sample of municipalities\. Improve utilization of available human Define methodology and instrument for On track: MOH is establishing criteria for resources accreditation of PSF teams accreditation of PSF TEAMS\. A MOH Decree on this subject should be published this fiscal year\. Explore alternative policies to guide Partially achieved: Teacher re-training teacher deployment and re-training through activities completed, however, there is no a study of experiences work regarding teacher deployment\. Federal Transfer Mechanisms in Health Programs Federal Transfer Mechanisms in Health Programs AIDS/ STI VIGISUS II FAMILY HEALTH I FAMILY HEALTH II QUALISUS I CONTROL III June 2003* April 2004 February 2002 March 2008 December 2008 PROJECT FOCUS HIV incidence, quality Health surveillance and Primary Health Care\. Primary Health Care\. Efficiency, quality, of life for people living indigenous health\. governance of health with HIV\. care\. PROJECT DEVELOPMENT OBJECTIVES Reduce incidence of Reduce mortality / Increase access to Increase access to Improve quality, STI & HIV by morbidity from Family Primary Health Family Primary Health efficiency, strengthening national communicable and care in large, urban care in large, urban effectiveness of SUS- response & ensuring non-communicable municipalities\. municipalities\. financed delivery its sustainability\. dieases and exposure to system via integrated risk factors associated regional healthcare with ill health\. networks\. Improve the quality of Improve health Raise the technical Contribute to life of people living outcomes of groups quality of, and patient improving continuity with HIV/AIDS by most at risk including satisfaction with, of care by strengthening national indigenous populations primary health care\. strengthening the response & ensuring and Quilombo prevention, detection, its sustainability\. (descendents of slaves) and treatment of communities\. diseases and conditions with the greatest impact on the country's disease * Date of PAD publication 48  AIDS/ STI VIGISUS II FAMILY HEALTH I FAMILY HEALTH II QUALISUS I CONTROL III burden\. Improve the efficiency Improve overall and effectiveness of effectiveness of the Family Health service delivery system to providers as well as the prevent, detect, treat broader delivery priority chronic and system\. non-communicable conditions\. Improve the quality and efficiency of services w/ emphasis on secondary-level hospitals, specialty, diagnostic, and emergency centers, logistical systems\. BENEFICIAIRIES 438 200 187 municipalities 187 Municipalities 15 Regional health 27 states + DF 27 states + DF networks 411 municipalities 25 state capital cities 144 satellite cities TRANSFER MECHANISM Fund to fund transfer - Fund to fund transfer - Two pilot bonus Management Contracts Subproject Plans resources flow from resources flow from systems that were between first technically National Health Fund National Health Fund announced in 2005 and MOH and states; qualified by (FNS) to State and (FNS) to State and implemented in 2006\. MOH and independent panel Municipal funds\. Municipal funds\. municipalities\. MOH selects up to 15 PAM: Results-based PLANVIGI: plans\. Action Plans for states Surveillance and municipalities\. development plan MOH confirms prepared by state / management capacity\. municipality and approved by MOH\. DISBURSEMENT V\. INDICATORS Each state / States have 14 A lump-sum bonus was Performance level at Implementation divided municipality agrees on indicators given to municipalities mid-term will into two phases\. Level a set of indicators / Capital cities 12 that met 3 performance determine financing of funding for 2nd targets indicators indicators\. levels for the phase depends on Municipalities 10 subsequent 18 months performance in 1st indicators of execution\. phase\. Agreements were Outputs & intermediate Additionally, a Municipalities agree to Compliance with subset evaluated in month 10 outcomes benchmarked performance prize meet targets for 12 of 17 mandatory of implementation and for each phase\. bonus was established mandatory indicators\. indicators\. revised or continued for based on coverage and the following year fiduciary objectives\. Weighted grading Municipalities select Elective indicators system determines level elective indicators to be eligible for bonus of performance eligible for bonus financing\. financing\. PLANVIGI divided Variable targets set Variable targets set into two phases\. Level according to specific according to specific of funding for 2nd municipality plans and subproject plans and phase depends on baseline data\. baseline data\. performance in 1st phase MONITORING AND EVALUATION 6 months (targets) and 2 years One-time assessment at 18 months by MOH\. 6 months (data entry) 49  AIDS/ STI VIGISUS II FAMILY HEALTH I FAMILY HEALTH II QUALISUS I CONTROL III 12 months (PAM) SVS certifies end of project by MOH\. and 2 years (in-depth Municipalities assessed compliance with assessment) by by state M&E staff; and indicators\. MOH\. states by federal M&E SFC carries out staff administrative and Inception of federal, financial audits\. state and municipal M&E units\. Subset of participating states serve as pilot M&E sites\. CATEGORIES OF PERFORMANCE RATING Technical & financial Technical & financial One: requirements for Nine: matrix plots Excellent execution execution bonus were met\. coverage goals against Satisfactory Above 75% = Good Above 75% technical performance Unsatisfactory Between 50-75% = Between 50-75% & financial execution\. Satisfactory Below 50% Below 50% = Unsatisfactory HIGH PERFORMANCE Score of 75% or above Score of 75% or above Not defined\. Not defined\. Not defined\. on weighted grading on weighted grading system\. system\. LOW PERFORMANCE Score of 50 or below on Score of 50 or below on Not defined\. Low execution\. No financial execution weighted grading weighted grading 6 months after receiving system\. system\. MOH allocation\. REWARDS Not defined\. 10% increase in For performance bonus, Up to 2\.5 times original 10% increase in funding funding to be used 50% of original grant financing for meeting to be used during during second phase of was transferred as a agreed targets on second phase of implementation to fund lump sum payment\. mandatory indicators; implementation\. predefined bonus plan\. For performance prize, additional 15% of 12 municipalities split financing available as a R $6 million\. bonus if elective indicators are met\. PENALTIES Possible cessation of 10% decrease in Funding reduced or Not defined\. Funding reduced or funding\. funding; implement delayed\. delayed\. predefined emergency plan during second phase \. REMEDIES Municipalities must Increased monitoring, Targeted TA\. Not defined\. Low performers receive present corrective supervision, training additional TA\. action plans to and TA\. Municipal Health Council; remedies for States not defined\. TA includes capacity building for states/ municipalities to qualify for transfers\. EXIT STRATEGY Cessation of funding Transfers may be Not defined\. Exclusion from project Persistent low can be recommended blocked\. financing\. performance results in by supervising inter- exclusion from further managerial committees\. financing\. 50  AIDS/ STI VIGISUS II FAMILY HEALTH I FAMILY HEALTH II QUALISUS I CONTROL III IMPACT In 2007, 75% of In 2008, 75% of The modest results- Project not yet Project not yet municipalities reached municipalities reached based financing scheme effective\. effective\. at least 75% of targets at least 75% of targets represented the first and financial execution\. and financial execution\. time MOH had used such mechanisms\. Despite initial resistance, the response was so positive that MOH introduced a modified version into its Pactos de Saude policy in 2006\. 51  To Ciudad Guayana 70°W 60°W 50°W 40°W R\.B\. DE GUYANA VENEZUELA SURINAME French Guiana B RA ZIL (Fr\.) ATLANTIC Or i n oco COLOMBIA Vista Boa Vista OCEAN AMAPÁ AMAPÁ STATE CAPITALS RORAIMA NATIONAL CAPITAL Macapá Macapá 0° 0° RIVERS Ne gro zon Ama MAIN ROADS A m a z o n Belém Belé Belém São Luís ma Manaus RAILROADS A zo jó s n Fortaleza ra pa STATE BOUNDARIES ei Ta ad B a s i n M MARANHÃO MARANHÃ MARANHÃO Teresina Teresina CEARÁ CEARÁ RIO GRANDE INTERNATIONAL BOUNDARIES AMAZONAS PA R Á NORTE DO NORTE Natal us Tele Pu r u PARAÍBA ARAÍ PARAÍBA Xing João s PIAUI Pi re Pessoa Porto Velho Porto Velho PERNA Tocantins s MBUC Recife ACRE O Maceió ia Rio Branco o Palma sc Aragua 10°S RONDÔNIA RONDÔ RONDÔNIA Juruena ci ALAGOAS n TOCANTINS São Fra Aracaju MATO BAHIA SERGIPE PERU GROSSO Mato Grosso B r a z i l i a n Salvador Plateau Cuiabá Cuiabá F\.D\. F\.D\. BRASÍ BRASÍLIA BRASÍLIA BOLIVIA GOIAS Goiânia Goiâ Goiânia MINAS GERAIS PACIFIC To H i g h l a n d s Santa Cruz MATO MATO GROSSO Belo ESPÍ ESPÍRITO ESPÍRITO OCEAN CHILE DO SUL Grande Horizonte SANTO Parag y 20°S Campo 20°S Grande itó Vitória Vitória ua To SÃO PAULO SÃO PAULO Santa Cruz ná ra RIO DE Pa PARAGUAY São São Paulo Rio de JANEIRO Janeiro PARANÁ ARANÁ PARANÁ ATLANTIC Curitaba BRAZIL OCEAN STA CAT CATARINA STA CATARINA Florianópolis RIO GRANDE DO SUL Porto Porto Alegre 0 200 400 600 Kilometers 30°S 30°S ARGE N TI N A SEPTEMBER 2004 IBRD 33377 This map was produced by the Map Design Unit of The World Bank\. To Buenos The boundaries, colors, denominations and any other information Aires URUGUAY 0 200 400 Miles shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries\. 70°W 60°W 50°W 40°W To Montevideo

REVIEW

P130157

ICRR 14951 Report Number : ICRR14951 IEG ICR Review Independent Evaluation Group 1\. Project Data : Date Posted : 06/30/2016 Country : Montenegro Is this Review for a Programmatic Series ? Yes No Series ID : First Project ID : P130157 Appraisal Actual Project Name : Montenegro Financial US$M): Project Costs (US$ 79\.2 79\.2 Sector Policy Based Guarantee L/C Number : Loan/ US$M): Loan /Credit (US$ 79\.2 79\.2 Sector Board : Financial Systems US$M): Cofinancing (US$ Practice Cofinanciers : Board Approval Date : 06/22/2012 Closing Date : 07/27/2013 07/27/2013 Sector (s): Banking (100%) Theme (s): Regulation and competition policy (50%); Other Financial Sector Development (30%); Financial Consumer Protection and Financial Literacy (20%) Evaluator : Panel Reviewer : ICR Review Group : Coordinator : Aghassi Mkrtchyan Chad Leechor Lourdes N\. Pagaran IEGPS2 2\. Project Objectives and Components: a\. Objectives: The program document states that the overarching goal of the program was to strengthen the banking sector , a critical precondition for sustainable economic recovery and balanced private sector -led growth (Program Document, Guarantee and Program summary, page v)\. IEG is using this stated objective for the purpose of this review\. b\. If this is a single DPL operation (not part of a series), were the project objectives/ key associated outcome targets revised during implementation? No c\. Policy Areas: Systemic Risk Monitoring and the Crisis Management Framework : The program’s focus was on developing systemic risk assessment methodology and contingency crisis plans including draft legislation that would grant extraordinary powers to the Central Bank and the government to provide emergency liquidity and capital during a declared financial crisis (a prior action)\. The program also included more institutionalization of the risk-monitoring framework by supporting FSC’s periodic monitoring and macroprudential decisions (a prior action)\. As a result of these actions , the macroprudential oversight and crisis management framework were expected to be enhanced in line with international good practice , as appraised by the next financial FSAP update\. Banking Sector Vulnerabilities : The program's focus under this policy areas was to help the the authorities supervise major banks and develop supervisory action plans for troubled banks based on the results of on -site examinations, off-site monitoring, and stress-test results (a prior action)\. An improvement was expected in the asset quality as evidenced by a decline in the ratio of NPLs from 20 percent in 2011 to 12 percent by the end of  2013\. It was also expected that the capital adequacy ratio of the banking system would remain at 15 percent or higher\. Restructuring Prva Banka : Under this policy area the Bank helped the Central Bank to develop a supervisory action plan whereby the central government was expected to gradually remove its deposits from Prva Banka and maintain a capital adequacy ratio of at least 12 percent (prior actions)\. Depositor Protection : The operation was focused on improving the standards of communication of the Deposit Protection Fund (DPF) and developing detailed regulatory framework for deposit insurance , including the coverage and payment mechanisms of guaranteed deposit payouts (prior actions)\. It was expected that strengthening of the deposit protection scheme would further contribute to market confidence in the banking system as measured by positive growth in deposits and their return to a precrisis level \. Regulatory Framework for Banks : The focus here was to further implement the Standardized Basel II Approach by adopting regulations on capital adequacy , the calculation of bank exposures , public disclosure of information and data by banks, and on minimum standards for credit risk to implement international financial reporting standards for the banking system (prior actions)\. As a result of these measures , all banks were expected to produce financial statements in line with international accounting standards as of 2014 and the supervision of the banking system would be fully in line with Basel Core Principles \. Adequate liquidity in the banking system also was expected\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The program provided a policy based guarantee of US $ 79\.2 million (equivalent to Euro 60\.0 million) to the Government of Montenegro to support a 5-year loan from Credit Suisse contracted in July 2012 in the amount of Euro 100\.0 million\. The operation was approved by the Board on June 28, 2012 and became effective on July 27, 2012\. The operation closed as scheduled on July 27, 2013\. The IBRD guarantee is effective until July 2017, the date of expiration of the commercial loan \. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Note : This loan is the subject of an IEG Project Performance Assessment Report (PPAR) Note: PPAR ) done in parallel \. Detailed evidence and references are provided in that report , including information gathered during a field visit to Montenegro \. Please see the PPAR here : MONTENEGRO - Financial Sector Policy Based Guarantee - PPAR - 06-21-16\.pdf \. The relevance of objectives is rated Substantial\. b\. Relevance of Design: The relevance of objectives is rated Modest\. 4\. Achievement of Objectives (Efficacy): Achievement of Objective is rated Modest\. Please see PPAR for more information \. 5\. Efficiency (not applicable to DPLs): 6\. Outcome:  Please see the detailed PPAR evaluation for more information \. a\. Outcome Rating : Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: Please see the detailed PPAR evaluation for more information \. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry: Please see the detailed PPAR evaluation for more information \. at -Entry Rating : Quality -at- Moderately Unsatisfactory b\. Quality of supervision: Please see the detailed PPAR evaluation for more information \. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: Please see the detailed PPAR evaluation being done for more information \. Government Performance Rating : Moderately Unsatisfactory b\. Implementing Agency Performance: Please see the detailed PPAR evaluation being done for more information \. Implementing Agency Performance Rating : Moderately Unsatisfactory Overall Borrower Performance Rating : Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: Please see the detailed PPAR evaluation for more information \. b\. M&E Implementation: Please see the detailed PPAR evaluation for more information \. c\. M&E Utilization: Please see the detailed PPAR evaluation for more information \. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: The ICR does not report safeguard issues \. b\. Fiduciary Compliance: The ICR does not report fiduciary issues \. c\. Unintended Impacts (positive or negative): None d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Please see the detailed PPAR for Unsatisfactory more information \. Risk to Development Significant Significant Outcome : Bank Performance : Satisfactory Moderately Please see the detailed PPAR Unsatisfactory evaluation for more information \. Borrower Performance : Satisfactory Moderately Please see the detailed PPAR Unsatisfactory evaluation for more information \. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: Please see the detailed PPAR evaluation for more information \. 14\. Assessment Recommended? Yes No Why? Why ? Please see the detailed PPAR evaluation for more information \. 15\. Comments on Quality of ICR: The ICR provides detailed accounts and analysis on many important aspects of the program with respect to the development in the banking system \. The ICR could have provided more information about the macroeconomic and fiscal situation during program implementation and at preparation of the ICR , including heightened risks to fiscal sustainability and deterioration of Montenegro 's public and external debt sustainability profile asa result of policy choices\. The ICR does not provide sufficient information about the terms of the commercial loan supported by the guarantee \. Having said that, this shortcoming is a result of lack of specific guidance on ICRs for policy based guarantees (PBGs), a relatively new instrument in the Bank that has been gaining traction in recent years\. This ICR highlights the need for specific guidance on reporting at PBGs ' completion\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P100657

Document of The World Bank Report No: ICR00003724 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD- 76120) ON A LOAN IN THE AMOUNT OF EURO 40 MILLION (US$59 MILLION EQUIVALENT) TO THE REPUBLIC OF BULGARIA FOR A SOCIAL INCLUSION PROJECT June 22, 2016 Education Global Practice Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective June 22, 2016) Currency Unit = EURO 1\.00 EURO = US$ 1\.13 0\.89 EURO = US$ 1\.00 1\.00 BGN = US$ 0\.57 1\.74 BGN = US$1\.00 1\.00 BGN = EURO 0\.51 1\.96 BGN = EURO 1\.00 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS BALMI Bulgarian Active Labor Market Initiative BGN Bulgarian Lev CBOs Community-Based Organizations CCT Conditional Cash Transfer CIDI Community Infrastructure for Development Initiative CPS Country Partnership Strategy CWP Child Welfare Reform Project EA Employment Agency EAA European Accession Agreement EC European Commission ECD Early Childhood Development EEC Ecological Expert Council EIA Environmental Impact Assessment EPA Environmental Protection Act ERDF European Regional Development Fund ESF European Social Fund ETA Evaluation Tools and Approaches EU European Union EU8 EU New Member States GDP Gross Domestic Product GMI Guaranteed Minimum Income GOB Government of Bulgaria GP General Practitioner ICB International Competitive Bidding ICM Implementation Completion Memorandum ICR Implementation Completion Report IFRs Interim Unaudited Financial Reports IRR Internal Rate of Return ISDS Integrated Safeguards Data Sheet JSDF Japanese Social Development Fund MAF Ministry of Agriculture and Forest MES Ministry of Education and Science MEW Ministry of Environment and Water MIC Middle Income Countries MLSP Ministry of Labor and Social Policy MOF Ministry of Finance MOH Ministry of Health MRDPW Ministry of Regional Development and Public Works MTHS Multi-topic Household Survey NCEDI National Council on Ethnic and Demographic Issues NCEDS National Catalogue on Environmental Data Sources NGO Non-Governmental Organization NPAA National Program for Adoption of the Acquis NSI National Statistics Institute NSRF National Strategic Reference Framework OMC Open Method of Communication OSI Open Society Institute PAD Project Appraisal Document PDO Project Development Objective PIRLS Progress in International Reading Literacy Status RAMO Intercultural Roma Education Program REEC Regional Expert Environmental Council REWI Regional Environment and Water Inspectorates SAA Social Assistance Agency SACP State Agency for Child Protection SBD Standard Bidding Documents SEED Supreme Expert Environmental Council SEN Special Education Needs SIEP Social Investment and Employment Promotion Project SIF Social Investment Fund SIP Social Inclusion Project, the Project SIR DPL Social Sectors Institutions Reform Development Policy Lending Senior Global Practice Director: Claudia Maria Costin Practice Manager: Cristian Aedo Project Team Leader: Plamen Nikolov Danchev ICR Team Leader: Plamen Nikolov Danchev  BULGARIA Social Inclusion Project CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph B\. Key Dates \. i C\. Ratings Summary \. i D\. Sector and Theme Codes \. ii E\. Bank Staff \. ii F\. Results Framework Analysis \. ii G\. Ratings of Project Performance in ISRs \. v H\. Restructuring (if any) \. vi I\. Disbursement Profile \. vii 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 8 3\. Assessment of Outcomes \. 16 4\. Assessment of Risk to Development Outcome\. 23 5\. Assessment of Bank and Borrower Performance \. 24 6\. Lessons Learned \. 26 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 27 Annex 1\. Project Costs and Financing \. 28 Annex 2\. Outputs by Component \. 29 Annex 3\. Economic and Financial Analysis \. 31 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 35 Annex 5\. Targeting \. 36 Annex 6\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 39 Annex 7\. List of Supporting Documents \. 41 MAP A\. Basic Information Country: Bulgaria Project Name: Social Inclusion Project Project ID: P100657 L/C/TF Number(s): IBRD-76120 ICR Date: 06/22/2016 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: BULGARIA Original Total USD 59\.00M Disbursed Amount: USD 30\.68M* Commitment: Revised Amount: USD 46\.30M Environmental Category: F Implementing Agencies: Ministry of Labor and Social Policy Cofinanciers and Other External Partners: *USD amount subject to historical exchange rate variations B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 10/19/2006 Effectiveness: 04/16/2009 04/16/2009 05/28/2010 05/16/2011 Appraisal: 02/20/2007 Restructuring(s): 12/14/2012 09/30/2013 09/28/2015 Approval: 11/04/2008 Mid-term Review: 12/10/2012 06/22/2012 Closing: 10/31/2013 12/31/2015 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: i C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Health 6 6 Other social services 62 62 Pre-primary education 25 25 Public administration- Other social services 7 7 Theme Code (as % of total Bank financing) Child health 6 6 Education for all 25 25 Social Safety Nets/Social Assistance & Social Care 69 69 Services E\. Bank Staff Positions At ICR At Approval Vice President: Cyril E Muller Shigeo Katsu Country Director: Arup Banerji Orsalia Kalantzopoulos Practice Mario Cristian Aedo Inostroza Arup Banerji Manager/Manager: Project Team Leader: Plamen Nikolov Danchev Christian Bodewig ICR Team Leader: Plamen Nikolov Danchev ICR Primary Author: Suzana Nagele de Campos Abbott F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project development objective for the Social Inclusion Project is to promote social inclusion through increasing the school readiness of children below the age of 7, targeting low-income and marginalized families (including children with a disability and other special needs)\. ii Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s)1 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Share of vulnerable children aged 6 who pass the school readiness diagnostic test Value quantitative or 36% NA 40% 80% Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Exceeded\. New indicator introduced in the December 2012 restructuring\. achievement) Number of children aged 3-7 newly enrolled in kindergartens and preschool Indicator 2 : groups through the Project Value quantitative or 0 NA 3000 4420 Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Exceeded\. New indicator introduced in the December 2012 restructuring\. achievement) Number of children with disabilities and other special needs enrolled in Indicator 3 : mainstream kindergartens and preschool groups through the Project Value quantitative or 0 NA 150 471 Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments Exceeded\. Indicator revised (replacing "rate of enrolment" with "number") in the (incl\. % December 2012 restructuring\. achievement) Indicator 4 : Number of beneficiaries of the "Early Intervention of Disabilities" service Value quantitative or 0 NA 1500 4311 Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Exceeded\. New indicator introduced in the December 2012 restructuring\. achievement) 1 The PDO and Intermediate Outcome Indicators presented in this Section are those following the December 2012 restructuring, as further adjusted in the September 2013 restructuring to reflect the revised timing of target values, the extension of the project completion and loan closing dates\. The September 2013 restructuring also eliminated the following indicator that had been introduced in September 2012: Baseline and final project impact evaluation surveys conducted\. The original indicators as presented in the Results Framework in the Project Appraisal Document (PAD) have not been presented here, as the Results Framework contained neither baseline data nor targets for the indicators, nor was progress towards those indicators monitored\. iii (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Number of newly created places in kindergarten and preschool groups through the Indicator 1 : Project Value (quantitative 0 NA 1600 2357 or Qualitative) Date achieved 06/22/2012 06/30/2009 09/19/2013 12/31/2015 Comments Exceeded\. Indicator revised in the December 2012 restructuring\. Original (incl\. % indicator: "Number of new child care places created through the project" achievement) Number of newly created facilities for delivery of integrated social inclusion Indicator 2 : services through the Project Value (quantitative 0 NA 68 113 or Qualitative) Date achieved 06/22/2012 09/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Exceeded\. New indicator introduced in the December 2012 restructuring\. achievement) Indicator 3 : Number of parents of children aged 0-3 who received parenting skills counseling Value (quantitative 0 NA 10000 12964 or Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Exceeded\. Indicator revised in the December 2012 and restructuring\. achievement) Number of children aged 0-7who benefitted from the "Health Consultation" Indicator 4 : services Value (quantitative 0 NA 10000 39993 or Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Exceeded\. New indicator introduced in the December 2012 restructuring\. achievement) Number of municipal staff trained in public procurement rules and procedures Indicator 5 : under the Project Value (quantitative 0 NA 120 120 or Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Achieved\. New indicator introduced in the December 2012 restructuring\. achievement) iv  SIP Project Management Information System (PMIS) developed and Indicator 6 : operationalized Value PMIS not (quantitative not due NA PMIS in use available or Qualitative) Date achieved 11/04/2008 12/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Achieved\. New indicator introduced in the December 2012 restructuring\. achievement) Number of municipal staff trained in project reporting and monitoring and Indicator 7 : evaluation Value (quantitative 0 NA 120 144 or Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments (incl\. % Exceeded\. New indicator introduced in the December 2012 restructuring\. achievement) Indicator 8 : Number of kindergartens and crèches' staff trained under the Project Value (quantitative 0 NA 700 1100 or Qualitative) Date achieved 06/22/2012 12/19/2009 09/19/2013 12/31/2015 Comments Exceeded\. Indicator revised in the December 2012 restructuring\. This activity was (incl\. % financed under the EU-funded Operational Program "Education and Science for achievement) Smart Growth"\. G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions)* 1 03/20/2009 Satisfactory Moderately Satisfactory 0\.00 2 12/16/2009 Satisfactory Moderately Satisfactory 0\.00 3 04/30/2010 Satisfactory Moderately Unsatisfactory 0\.00 4 10/18/2010 Satisfactory Moderately Satisfactory 0\.00 5 06/08/2011 Satisfactory Moderately Satisfactory 0\.06 6 01/02/2012 Moderately Satisfactory Satisfactory 4\.12 7 11/21/2012 Moderately Unsatisfactory Moderately Unsatisfactory 13\.05 8 05/17/2013 Moderately Unsatisfactory Moderately Unsatisfactory 16\.60 9 12/08/2013 Moderately Unsatisfactory Moderately Satisfactory 22\.44 10 05/24/2014 Moderately Satisfactory Satisfactory 22\.44 11 12/18/2014 Moderately Satisfactory Moderately Satisfactory 29\.19 12 04/23/2015 Moderately Unsatisfactory Moderately Unsatisfactory 31\.36 13 09/13/2015 Moderately Satisfactory Moderately Satisfactory 31\.36 14 12/29/2015 Moderately Satisfactory Moderately Satisfactory 31\.36** * USD amounts subject to historical exchange rate variations\. ** Total disbursement after reconciliation of expenditures at the end of the four month grace period was USD 30\.68 million equivalent\. v  H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Key Approved Restructuring Date(s) Changes Made PDO Change DO IP in USD millions* Level 2: To amend the legal agreement to reflect a change in implementation moving responsibility from one unit under the auspices of the Ministry of Labor and Social Policy to another 05/28/2010 S MU 0\.00 under the same ministry\. This was needed to reflect the closure of the originally planned implementing agency, the Social Investment Fund, on March 2010\. Level 2: To reflect modification of the Project Appraisal Document (PAD) and the Project Operational Manual (POM)as follows: (i) to change the requirement in the POM, obligating municipalities to preserve the services under the project from 10 years to 5 years after completion for infrastructure improvements and from 05/16/2011 N S MS 0\.06 5 years to 3 years after completion for projects that include services only, and (ii) to modify the Accounting of Subprojects section of the POM, to allow advance payments to municipalities for the payment of small service providers only (advances were not previously allowed)\. This restructuring did not require an amendment to the Loan Agreement\. Level 2: To revise the Project’s Results Framework (RF) and reflect the updated RF in a Supplemental Letter and to reallocate a portion of loan proceeds under the category Consultancy Services and Training, Audit of Part II to the category Grants of Part I\. The World Bank processed 12/14/2012 N MU MU 13\.05 this restructuring without the requested extension of the closing date, which was conditioned on the Government’s provision of sufficient resources for implementation of the outstanding project activities\. This condition was not met, and the Government did not countersign the amendment letter\. vi  ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Key Approved Restructuring Date(s) Changes Made PDO Change DO IP in USD millions* Level 2: To reflect the: (i) shortening of the implementation period of the services under the Project from the original 18-24 months to about 12 months; (ii) reduction and/or elimination of selected activities not directly related to the achievement of 09/30/2013 N MU MU 20\.62 the PDO; (iii) partial cancellation of the loan amount to reflect reduction/elimination of activities, (iv) revision of the Project’s RF and finalization of Supplemental Letter No\. 2, and (v) extension of the loan closing date by 23 months, from October 31, 2013 to September 30, 2015\. Level 2: To extend the loan Closing 09/28/2015 MS MS 31\.36** Date by three months from September 30, 2015 to December 31\.2015\. * USD amounts subject to historical exchange rate variations\. ** Total disbursement after reconciliation of expenditures at the end of the four month grace period was USD 30\.68 million equivalent\. I\. Disbursement Profile USD amount subject to historical exchange rate variations\. vii 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. At the time of Appraisal of the Social Inclusion Project (SIP, the Project), Bulgaria had made impressive progress towards long-term stability and sustained growth\. Stabilization policies and structural reforms had resulted in five to six percent growth from 2000 onwards, inflation had declined from hyperinflation levels, and unemployment had been more than halved\. Still, despite rising living standards, Bulgaria labor market participation was low, and the country continued to face deep pockets of poverty and social exclusion\. 2\. Poverty and exclusion were associated with low levels of education, large household size and were heavily concentrated among ethnic minorities, in particular Roma\. Children from poor households and ethnic minorities received fewer years of schooling, not benefitting from education as a way out of exclusion\. The poverty headcount for households where the head had not finished initial education was estimated at 59\.2 percent in 2007, compared to 19\.3 percent for those with basic education, 3\.4 for those with secondary education, and 0\.9 percent for those with tertiary education\. Yet, children from poor households and ethnic minorities had low educational attainment and high-dropout rates, often linked to insufficient preparation at the time of entering primary school\. Investments in early childhood development (ECD) were seen as a means of providing opportunities for social mobility to the excluded by counterbalancing disadvantages created by family background\. Starting in the early years, from 0-6, these investments could ensure access to health and education, permitting the most effective leverage to policies aimed at social exclusion, and impacting subsequent educational outcomes in primary and secondary schooling\. 3\. The Government of Bulgaria (GOB) had approved several strategic documents acknowledging the key role of pre-primary education in social exclusion and human capital development, calling for measures to expand preschool education\.2 Bulgaria had introduced a compulsory year of preschool in 2003/2004 that had led to an increase in enrollment for children aged 6 to above 85 percent\. Nevertheless, 2003 data indicated that there could be substantial underutilization of preschool and kindergarten education among children from poor households, national minorities, in particular Roma, and the population in rural areas, possibly due to economic constraints (kindergartens required co-financing by the parents with rates decided by the municipal councils), geographical distances, insufficient kindergarten places and low parental understanding or motivation\. Available data suggested that almost all municipalities (except the highly urbanized ones) had some under-utilized capacity in municipal kindergartens that could be made available to some of the children that were currently not in kindergarten\. But, only about two-thirds of all municipalities had sufficient capacity to absorb children aged 3-6 years that were then currently enrolled plus children of parents that received the Guaranteed Minimum Income 2 The then recently approved National Program for the Development of School Education and Preschool Education and Preparation 2006-2015\. 1 (GMI)3\. About 80 municipalities (out of 265) were not considered to be able to accommodate additional low income children, and about 30 had deficits of up to 30 places\. Activities to promote coordination in kindergarten places at the municipal and sub-municipal levels, together with alternative provision of kindergarten and child care services and the expansion of supply through new kindergartens and child care infrastructure were needed to meet demand, and the SIP was designed to address these\. 4\. The Project was consistent with the GOB strategic social inclusion agenda, tying together its various elements into an effective, comprehensive and long-term effort to tackle persistent and intergenerational poverty and exclusion\. It built upon the GOB’s agenda set forth in: (i) the Joint Inclusion Memorandum 2005; (ii) the National Report on the Strategies for Social Protection and Social Inclusion of the Republic of Bulgaria 2006-2008; (iii) the National Program for the Development of School Education and Preschool Education and Preparation 2006-2015, and (iv) Decade of Roma Inclusion Action Plans\. 5\. The Rationale for World Bank involvement was strong\. Social inclusion of marginalized groups, in particular Roma, and support in absorbing European Social Fund financing were areas where the GOB desired strategic World Bank involvement\. The World Bank had partnered with the GOB in addressing social exclusion of Roma through a range of lending and grant facilities, as well as through the Decade of Roma Inclusion Initiative, and the Project would complement several ongoing World Bank-financed operations\. 4 Further, the Bulgaria Country Partnership Strategy (CPS), considered by the World Bank’s Board of Directors on June 13, 2006, identified three strategic priorities, and the SIP addressed all of these: (i) productivity and employment; (ii) fiscal sustainability and absorption of European Union (EU) funds, and (iii) social inclusion\. Bulgaria had acceded to the EU on January 1, 2007, and the Project was considered a strategic instrument for the World Bank to provide initial financing to support the GOB in absorbing European Social Fund financing for social inclusion purposes\. At the same time, social inclusion policies were considered a key tool in poverty reduction in Middle Income Countries like Bulgaria, where multiple forms of exclusion explained persistent pockets of poverty\. 6\. The Project was also fully consistent with, and would support initial financing of, the Operational Program “Human Resources Development 2007-2013” (the Program), the programming document for the European Social Fund (ESF) for Bulgaria agreed between the 3 Guaranteed Minimum Income (GMI) is the minimum income considered sufficient to satisfy basic needs (i\.e\. for staying above the poverty line)\.For 2016, the guaranteed minimum income (GMI) is BGN 65 per month (approximately USD 40)\. Targeted or monthly social benefits are paid to people whose income is under or around the minimum\. Based on the GMI, differentiated minimum income (DMI) is determined on the basis of the number of family members and the number of people living in one residence\. DMI is also linked to the age, family status, health and property of the people concerned\. 4 These included the then recently closed Child Welfare Reform Project (CWP) and a Japan Social Development Fund (JSDF) Grant on Preschool Education for Children in Disadvantaged Communities, for which the SIP would scale up pilot-tested child welfare and social service approaches\. The SIP also complemented the following ongoing World Bank-financed operations: (i) the Social Sectors Institutional Reform (SIR) Development Policy Loan series (SIR DPL 1) approved on March 21, 2007; (ii) SIR Development Policy Loan 2, that would be presented to the Board on November 4, 2008, and (iii) the Social Investment and Employment Promotion Project (SIEP) that promoted poverty targeting of community initiatives and social infrastructure\. 2 GOB and the European Commission\. The SIP aimed to support the design and national rollout of a school readiness program with the strategic use of European Social Fund financing\. Within the framework of the Program, the school readiness program would be rolled out across the country in different stages, to ensure fiscal sustainability, facilitate ESF financing and allow for evaluating impact\. The school readiness program would be rolled out in three phases: (i) in the first phase the SIP would finance the pilot phase of the program in a number of municipalities that would be selected according to a methodology which would be detailed in the Project’s Operational Manual (POM); (ii) non-selected municipalities would form the control group for testing the impact of interventions and would be able to opt in during the Program’s second stage; and (iii) the full transition to a national-level program would take place in the third stage\. The SIP was designed to support the: (i) design of a school readiness program consisting of ESF-eligible municipal projects, and (ii) financing of ESF-eligible projects as well as start-up costs in the first phase of implementation\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 7\. The Project Development Objective (PDO) was to promote social inclusion through increasing the school readiness of children below the age of 7, targeting low-income and marginalized families (including children with a disability and other special needs)\. 8\. Progress towards the Project’s PDO would be measured by the following Outcome Indicators: • Improvements in school readiness of children from low-income backgrounds and with a disability below the age of 7, measured through improvements in cognitive skills, including: (i) memory, verbal and visual-motor skills development; copying scores (age 3-5); (ii) fluency in Bulgarian (age 5-6); and (iii) achievement test results, including reading tests (age 6-8), and child nutrition in target population (as proxied by anthropometric measures)\. 9\. In addition, the Results Framework in Annex 3 of the Project Appraisal Document (PAD) presented the following indicators to measure progress towards Intermediate Outcomes: • Improvements in child welfare, measured by improvement in: (i) enrollment of children under age 7 from low income and marginalized households (including children with a disability) in mainstream preschool, kindergarten and child care centers in participating municipalities; (ii) parenting skills (as proxied by frequency and quality of parent-child interaction); and (iii) the number of children having received full set of immunizations; and • Expansion of coverage of child care services to low income children and children with a disability below the age of 7, measured by increases in: (i) the number of parents having completed parenting skills sessions; (ii) the number of children newly placed into kindergarten or child care facilities through the project interventions (including children with disabilities); (iii) the rate of inflow of children from poor and marginalized families into institutional care; (iv) the number of new child care places created through the Project; and (v) the number of kindergarten and child care facilities staff having received training\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 3 10\. The Project’s Development Objective was not revised\. The Project’s Results Framework was revised twice, first in a Level 2 restructuring on December 14, 2012, and later in a subsequent Level 2 restructuring on September 19, 2013 that also removed the impact evaluation to align the Project costs with the Government expenditure ceiling\. The removal of the impact evaluation costs meant that most original PDO level indicators depending on impact evaluation surveys would become immeasurable\. Therefore, the revision to the Results Framework in the first restructuring was required to: (i) include outcome and intermediate indicators to better capture the outputs and outcomes produced under the interventions supported under Part I and Part II of the Project (Section 1\.5); (ii) revise the outcome indicator related to cognitive development and school readiness scores by replacing the original sub-indicators with a single measure of school readiness reflecting the share of vulnerable children under the Project aged 6 passing the school readiness diagnostic test; (iii) drop the outcome indicator related to child nutrition because of methodological constraints, attribution issues (the Project did not finance nutrition interventions), and overly ambitious assumptions for behavioral changes related to nutrition and parenting practices among certain vulnerable communities taking hold during the Project’s lifetime; (iv) replace all intermediate outcome indicators measured through impact evaluation survey-based composite indices with indicators directly measuring project outputs and outcomes; (v) drop intermediate outcome indicators on both children inflow into institutional care and immunizations due to attribution issues, especially since the Project was not to finance vaccines; (vi) drop the intermediate result indicator on national enrollment rate of children from low income and marginalized households due to problems in measurement (lack of routinely collected data on children’s background characteristics that were required for this indicator); and (vii) drop the intermediate outcome indicator measuring the implementation of the Project Impact Evaluation, as it would be replaced by a simplified evaluation of SIP services and measurement of school readiness through the tool used in the baseline impact evaluation\. In the December 2012 restructuring the Bank conditioned an extension of the closing date on setting spending ceilings that would allow for project implementation\. The Borrower never countersigned the amendment that provided for this restructuring since this condition was only met by late 2013 with the adoption of the State Budget law for 2014\. 11\. Because of this, on September 19, 2013, the World Bank processed a subsequent restructuring with revisions to the Results Framework that included those introduced in the December 2012 restructuring (since the amendment letter was never countersigned) and further: (i) extended the target date for achievement of outcomes, intermediate outcomes and outputs to September 30, 2015 to reflect the project extension, and (ii) introduced minor modifications to the targets for one Outcome Indicator and three Intermediate Outcome Indicators to reflect the reduction of the implementation period of the social inclusion services (from the original 18-24 months to 12 months), and the slightly lower cumulative targets that could be achieved in the shorter implementation period\. 1\.4 Main Beneficiaries 12\. At approval, the potential beneficiaries targeted under the Project were defined broadly as among two main groups\. The first group included families who received Guaranteed Minimum Income (GMI)\. At the end of 2006, the GMI had about 150,000 beneficiaries with about 38,000 children between the ages of zero and six across Bulgaria\. The second included 4 families receiving Child Allowance (CA)5\. The threshold for CA was more generous and thus included a significant share of population who could not be qualified as vulnerable\. This category applied to about 670,000 families, including about 280,000 children under 7 of which 23,000 had a disability\. The Project was to target children aged 0-3 and their parents who were CA recipients through the parenting program, and children aged 3-6 and their parents who were GMI recipients through a menu of options for municipalities to enhance access to formal kindergarten or childcare services (Section 1\.5)\. As designed at approval, the Project was to rely on self-targeting by those parents that were in need of the program and its associated benefits\. The shortcomings related to the generosity of CA and problems in its use for identifying project beneficiaries and the reliance on self-targeting by vulnerable groups were addressed during project implementation\. This was done by introducing detailed criteria for establishing the project beneficiaries based on indicators capturing different types of vulnerabilities (low income, long term unemployment, belonging to underprivileged ethnic minorities, different forms of disabilities, etc\.)\. Details on targeting criteria are presented in Annex 5\. 13\. Financing for parenting and formal kindergarten and childcare services under the Project’s Component I would be made available to municipalities, conditional upon their agreement to implement the proposed programs\. The exact number or location of municipalities that would participate in each of three planned groups was not determined in advance, although it was expected that about 30 percent of all 265 Bulgarian municipalities would participate in the Group I\. Municipalities would: (i) apply for participation in SIP-financed activities; (ii) implement these activities with SIP financing; (iii) apply for European Social Fund (ESF) financing, and (iv) use ESF to finance the activities in a second stage, once SIP financing for their activities came to an end\. Project beneficiaries would also include service providers and kindergarten staff who would be provided with training under the Project’s Subcomponent I\.4, and staff and social workers at the municipal level who would be provided with training and capacity building under the Project’s Subcomponent II\.1\. 1\.5 Original Components 14\. The Project supported the design of the school readiness program and would integrate municipal, social, education and health service interventions eligible for ESF financing and contribute towards the start-up financing of activities in a select group of pilot municipalities\. This would be achieved through activities under two main components, as follows: Component I: Integrated social and childcare services (EUR 37\.39 million)\. This component would finance a menu of community subprojects, including services and infrastructure investments from which municipalities could choose according to needs\. It included provision of a set of integrated social and childcare services for parents and children from marginalized groups and children with disability\. Municipalities would subcontract third sector agencies with contracts involving performance targets and per-capita based remuneration\. Component I comprised four Subcomponents, as follows: Subcomponent I\.1, Programs for children aged 0-3 and their parents was designed to target parents from the moment of conception, and included parent and family-focused social services 5 The Child Allowance (CA) is a monthly child benefit the eligibility for which depends on family income compared to the GMI and DMI\. The child allowance is paid until the child finishes secondary education (maximum age 20)\. 5 by trained service providers sub-contracted by the municipalities\. The services consisted of an integrated parenting program with semi-formal orientations in small group settings, individualized counseling and mobile community outreach for the following activities: (i) orientation for marginalized parents of small children and parents of children with a disability on topics including pre- and post-natal parenting skills, nurturing parenting, cognitive skills development, preventative health care, hygiene and nutrition for children, and health and social services available for children and families; (ii) one-to-one parenting counseling for parents with more complex needs and those who had completed orientation; and (iii) mobile outreach in less accessible communities, e\.g\. Roma neighborhoods or remote villages\. Subcomponent I\.2, Programs for children aged 3-6 and their parents was designed to cover a menu of options for municipalities to enhance access to formal kindergarten or childcare services for children from marginalized backgrounds and special needs, including additional health services and measures to increase the number of childcare places\. It also included measures to support demand (low income parents to seek childcare) and supply (municipalities to promote access of low income children to child care)\. It included the following activities: (i) a kindergarten fee reduction to provide incentive for GMI-recipient parents to send their children to kindergarten, provided the parents enrolled in training and employment programs offered by the Employment Agency; (ii) family centers whereby either interested individuals could become child minders in their homes or available municipal buildings providing 4-5 childcare places, or interested community-based organizations (CBOs) could offer childcare services, all in compliance with existing standards for social services for children; (iii) transport services, whereby private minibus services subcontracted by municipalities and accompanied by kindergarten staff would provide transport to and from the nearest kindergarten; and (iv) enhanced health services, including examination of children in kindergarten by pediatricians and dentists several times a year\. Subcomponent I\.3, Infrastructure and material investments was designed to provide financing to participating municipalities, based on their needs and demands, for: (i) infrastructure rehabilitation in existing or transformed kindergarten or childcare service buildings, as well as educational materials; and (ii) the construction of new childcare centers in underserved areas, based on a set of identification and targeting criteria\. Infrastructure investments would not exceed 50 percent of the financing provided under the World Bank’s loan\. While the Project did not include strict guidance for the selection of sites for construction of new preschool and childcare infrastructure, the participating municipalities built the new facilities outside of the segregated, poverty-stricken neighborhoods making them attractive to both vulnerable children and children of higher socio-economic status to promote social inclusion\. Subcomponent I\.4, Training for service providers was to provide pre-service, refresher and handholding training to service providers and kindergarten staff in the following areas: (i) parenting program service provider training; (ii) kindergarten staff training on how to integrate marginalized children of poor, culturally segregated and disabled backgrounds, and on early disability detection,; and (iii) child minder training and training for CBO staff, including individuals such as unemployed mothers from marginalized communities\. Component II: Capacity-building (EUR 2\.51 million)\. Complementing expected ESF funding, this component was designed to finance capacity-building activities at the central and municipal levels to support the design and pilot launch of a national school readiness program, in order to ensure its quick start-up\. It comprised three subcomponents, as follows: 6 Subcomponent II\.1, Local project management capacity building was designed to provide training and capacity building to municipal staff and social workers at the municipal level in the following three major areas: (i) inter-agency work involving cross-sectoral cooperation (education, health, social services and social assistance, including the setting-up of cross-sectoral forums, also with the third sector, and joint agreement of referral maps and responsibilities; (ii) sub-contracting of services to and cooperation with non-governmental organizations (NGOs); and (iii) accessing European Structural and Cohesion Funds to capitalize on opportunities for financing social, employment, health and education service programs complementary to the SIP agenda through ESF and social infrastructure investments through the European Regional Development Fund (ERDF)\. Subcomponent II\.2, Impact evaluation was designed to support the development of a rigorous impact evaluation mechanism to inform program design and report on program effectiveness\. The Project would monitor specific outcomes such as parental behavior and identify the impact of the Project’s interventions on a wide range of child well-being measures such as children’s motor, cognitive and language skills, test scores, health services utilization and nutrition, and child nutritional status\. The impact evaluation was dropped shortly after completion of the baseline impact evaluation study as part of restructuring (see 1\.6, paragraph 15) that aimed and optimizing costs and ensuring the resources for delivery of the core project activity – the delivery of the integrated social and childcare services – could be matched with the significantly reduced spending ceiling imposed by the Government in the wake of the financial and economic crisis\. Subcomponent II\.3, Audit and implementation support was designed to finance Project and municipal subproject auditing and construction works inspection for municipal subprojects\. 1\.6 Revised Components 15\. The Level 2 project restructuring of September 19, 2013 was intended to match the project costs with the Government imposed spending ceilings of all externally financed projects, including the SIP, and adjusted the Project’s components by: (i) shortening the implementation period of SIP services under the Project from the original 18-24 months to about 12 months; (ii) reducing and/or eliminating selected activities not directly related to the achievement of the PDO (as described below); and (iii) partially cancelling EUR 8,608,356 of loan proceeds to reflect the reduction/elimination of activities\. The shortening of the implementation period resulted in a reduction in project costs under Category 1 of the Project, “Grants under Part I of the Project”\. The following activities were reduced or eliminated, resulting in a further reduction in project costs of both components: (i) under Subcomponent I\.4, national information and awareness campaigns, one training and optimized costs for other trainings, resulting in cost savings; (ii) under Subcomponent II\.1, cancellation of all envisioned trainings, except a training on the sustainable development of the Project; (iii) under Subcomponent II\.2, cancellation of the intermediate and final impact evaluation surveys and the impact evaluation reports; and (iv) under Subcomponent II\.3, reduction to reflect the optimized costs for regional coordinators and individual consultants\. This restructuring also extended the loan’s Closing Date to September 30, 2015 and introduced changes to the Project’s Results Framework as described in Section 1\.3\. 1\.7 Other significant changes 16\. In addition to the changes in the Project’s Results Framework, its scope, implementation period and funding arrangements described in Sections 1\.3 and 1\.6, several other aspects of the Project were reflected in restructurings\. The first of these, dated June 10, 2010, was processed to reflect a change in the implementing agency\. The Project was originally 7 to be implemented by the Social Investment Fund (SIF), an agency under the Ministry of Labor and Social Policy (MLSP)\. However, as part of its crisis response and planned cuts in overhead and administration, the GOB closed the SIF in March 2010\. The restructuring reflected the Project’s new implementation arrangements, entrusted to the Social Inclusion Directorate of the MLSP\. On May 19, 2011 the Project was again restructured to amend the Project Operational Manual (POM) to: (i) reduce the municipal obligation to preserve services under the Project from 10 years to 5 years for subprojects including infrastructure investments and from 5 years to 3 years for subprojects including services only (in response to municipal concerns regarding long commitment periods in their dynamically changing socio-economic and demographic situation), and (ii) allow municipalities to receive advances and pay small suppliers of services (in order to ensure continued, uninterrupted service provision)\. The December 2012 restructuring (Section 1\.3) also reallocated a portion of loan proceeds under the category “Consultancy Services, Training, Audit” of Part II (Capacity Building) to the category “Grants” under Part I (Integrated Social and Childcare Services) of the Project\. A final restructuring on September 18, 2015 extended the loan’s Closing Date one final time, from September 30, 2015 to December 31, 2015, resulting in a cumulative extension of 26 months\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 17\. Project preparation and its design responded directly to the Government’s strategic agenda and incorporated lessons of earlier, related projects\. The preparation process was highly participatory, and very long-two and one half years from Project Concept Note to Approval, resulting in a cohesive project\. Yet, the preparation process resulted in an overly complex and ambitious monitoring framework, and the assessment of risks during preparation failed to identify the main issues that affected its implementation through completion\. 18\. The Project responded to the Government’s strategic priorities\. The Project was seen to tie together various elements of Bulgaria’s strategic social inclusion agenda into an effective, comprehensive and long-term effort to tackle persistent and intergenerational poverty and exclusion\. Designed to ensure equal access to services aiming at prevention of social exclusion and overcoming its consequences, the Project’s activities supported policies set forth in several government strategies, including: (i) the National Report on the Strategies for Social Protection and Social Inclusion of the Republic of Bulgaria 2006-2008; (ii) the National Program for the Development of School Education and Preschool Education and Preparation 2006-2015; and (iii) the Decade of Roma Inclusion Action Plans\. The Project was linked to the Human Resources Development Operational Program 2007-2013, the programming framework for the European Social Fund (ESF) for Bulgaria\. Experience from the EU8 showed that absorption of EU funds during the first 24 months of membership was slow\. As Bulgaria had acceded to the EU on January 1, 2007, the Project would help Bulgaria avoid this type of delay by supporting the development of and providing initial financing for social inclusion programs eligible for subsequent ESF financing\. 19\. Preparation incorporated lessons of earlier operations, including the then recently closed Child Welfare Reform Project (CWP, P064536) and the two Japan Social Development Fund (JSDF) grants attached to it (Grant TF24743 and Grant TF-54221) that piloted preschool programs for children from marginalized backgrounds\. The parenting program approach that was to be supported under the SIP had been successfully piloted under the CWP in a number of sites, providing evidence of the value of sustained engagement of marginalized parents with small 8 children to raise parenting capacities\. The JSDF Grants that supported innovative approaches to promoting access to kindergartens and preschools for marginalized groups, confirmed that learning outcomes for children at pre-primary level were most pronounced when parents were also involved in the activities\. It also confirmed that pre-primary education for children from marginalized backgrounds involved a long-term process that required a long-term strategy and involvement\. Hence, triggering ESF financing was seen as an important element for ensuring sustained focus on activities developed under the Project\. 20\. The preparation process was highly participatory\. At the policy level, the SIP was linked to Bulgaria’s Operational Program Human Resources Development for the European Social Fund financing and agreed with the Government and the European Commission\. The Project’s agenda was reflected in the Operational Program “Human Resources Development” 2007-203 that guides the programming of ESF for Bulgaria\. The MLSP was (is) the Managing Authority for ESF in Bulgaria, ensuring complementarity of activities and funding sources\. At the stakeholder level several rounds of consultations were carried out during preparation among the Project’s potential beneficiaries, including low-income parents from both Roma and non- Roma backgrounds\. The preparation team also conducted informal discussions with community- based organizations and childcare service providers under the CWP to obtain feedback\. Six separate focus group discussions in three locations across Bulgaria, and interviews held with municipal officials, NGO representatives and kindergarten directors and staff, revealed widespread agreement on the need for priority investments in preschool education and upbringing\. Stakeholder consultations also revealed that tackling low enrollment of children from marginalized backgrounds required a multi-pronged approach, since their decision to send their children to school were often impacted negatively by several considerations, including: (i) the availability of someone to provide child care at home; (ii) the rigid routine of six hours in kindergarten; (iii) the cost of attendance; (iv) the fear of their child contracting illnesses; (v) actual and perceived discrimination and; in Sofia, (vi) physical distance and lack of available places\. To address these, the Project’s design opted to provide a broad policy mix providing positive incentives for parents’ decision to send their children to kindergarten\. 21\. The Project’s focus on inclusion was innovative and path-breaking at the time it was prepared\. Addressing issues related to inclusion was at the center of the agendas of the governments in Eastern Europe at the time\. But at that point, none of the countries had implemented large-scale projects that tackled the issue front and center by addressing social exclusion through innovative, one-stop-shop early childhood interventions for vulnerable children and their parents\. Moreover, well-documented lessons of experience were few, if any\. The prospects of EU funding for early childhood, and for inclusion especially, was seen to provide an opportunity for the Project to serve as leverage for Bulgaria to eventually tap EU structural funds for inclusion\. Because of this, the focus on impact evaluation of results was considered important not only to substantiate the Project’s investments in Bulgaria, but also to provide evidence of impact for other countries in the Region\. 22\. In part because of the above, the Project’s monitoring framework was tied almost entirely to the Project’s impact evaluation, thus making it too complex and ambitious, given the implementation timeframe and the time required for the project interventions to result in behavioral changes\. Most of the indicators were designed to capture childhood development outcomes resulting from mindset change and significant shifts in parenting practices and perceptions about the role of early childhood education, especially among the vulnerable communities targeted by the Project\. Related, the measurement of these indicators depended on 9 data collection from household surveys, and covered mainly PDO level results at the expense of intermediate results that were insufficiently represented\. The baseline data was not available at approval (Section 2\.3) and World Bank funding for collection of baseline data was not available either\. Hence, the baseline data had to be collected with project resources after loan effectiveness\. 23\. The Project’s risk assessment failed to identify the main risk that surfaced practically throughout implementation\. The assessment considered the risk of the Government not sustaining ownership of and commitment to the school readiness and social inclusion agenda, but failed to identify the possibility that despite its declared commitment, fiscal constraints could come to affect implementation\. In hindsight, the preparation team could well have considered this issue, as it had already impacted the preparation schedule--after Appraisal in February 2007, loan negotiations were delayed until September, 2008 at the request of the Government due to issues with fiscal programming of the Project that may have been due to the Government’s desire for a larger than planned share of expenditures for infrastructure, since ESF funding could not cover such investments\. In any event, the risk of funding constraints, along with corresponding mitigation measures should have been identified during preparation\. 2\.2 Implementation 24\. The EUR 40 million loan for the Project was approved by the World Bank’s Board of Directors on November 4, 2008 and declared effective on April 16, 2009\. This was a particularly difficult period for Bulgaria, and several inter-related factors affected the Project’s implementation, especially in its early years, as described below\. 25\. The global financial crisis of 2008-2009 had a negative impact on Bulgaria that directly affected the Project in several ways\. After a decade of sustained growth, Bulgaria entered into deep recession with GDP declining by 4\.9 percent in 2009\. The fiscal tightening that was put in place to contain the budget deficit involved cuts in central government and municipal spending, a freeze on pension and wages, and a continued optimization of public administration\. As a result of these, project start-up activities proceeded very slowly and implementation had to adjust with the significantly lower spending ceilings set for the Project\. The Government proposed to Parliament in December 2009 to close the Social Investment Fund (SIF), the Project’s Implementing Agency, as part of its crisis response and planned cuts in overhead and administration\. The SIF was officially closed in March 2010, and in June 2010 the World Bank approved a restructuring that transferred project administration to the Social Inclusion Directorate (SID) at the Ministry of Labor and Social Protection (MLSP)\. The SIF had been an autonomous unit reporting to the MLSP, and key staff responsible for project management was transferred to the SID\. Nevertheless, this modification, together with issues that were addressed in the May 2011 restructuring (Section 1\.7) resulted in an initial implementation delay of about two years, which shortened by about half the time available for implementation of core project activities, including the integrated social and childcare services\. 26\. By mid-2011, two years after approval, the MLSP had applied a transparent consultative process to design eligibility criteria for subprojects, carried out an information campaign with municipalities, invited them to submit subproject proposals, worked with them to finalize their subproject proposals, and provided training for preparation of their procurement plans\. As of May 2011, 63 subproject proposals had been approved (out of 106 initially submitted by municipalities), amounting to about EUR 33 million, or about 82 percent of the total loan commitment\. In carrying out this process, the MLSP and the World Bank identified issues with respect to the number of years that a municipality would be required to maintain the services 10 under the Project that resulted in a second project restructuring in May 2011 (Section 1\.7)\. Nevertheless, subproject agreements were signed, tender procedures for construction/rehabilitation works had begun or been completed, and the MLSP had begun selecting trainers for service providers\. Likewise, the contract for the project Management Information System (MIS) had been awarded, and the system was completed in November 2011; other project activities were well underway, albeit all with a delay\. 27\. With a compressed implementation schedule, the Project required increased spending levels over the remaining implementation period to implement the same activities in a shorter time frame\. However, adhering to a tight fiscal stance, the Government began to limit the externally financed projects’ spending ceilings, including the SIP, in part to promote greater efficiency of spending across the government sectors6\. For 2012, the Ministry of Finance (MOF) had approved only one-third of the Project’s expenditure estimates\. By mid-year, the Project had already reached its yearly spending limit, and as a result, project activities were put on hold\. The MOF was unable at the time to align the Project’s increased spending requirements with corresponding increases its annual budget expenditure limits, despite formal requests made by the MLSP\. 28\. The Project’s Mid-term Review (MTR) was carried out from June 16-22, 2012\. At the time, infrastructure investments that were to precede the actual provision of integrated social services were either under way or completed, but the actual delivery of services had yet to start\. The Project had contemplated delivery of services for 12 to 18 months in order for them to be effective and their outcomes adequately measured\. Given implementation delays, however, the MTR used the opportunity to review implementation and agree upon a comprehensive project restructuring strategy\. It concluded that, despite delays, it was still possible for the Project to achieve its PDO, but that would depend upon the provision of sufficient financing for the activities within a timeline that allowed a full implementation cycle of the integrated social inclusion services\. Although the Project was implementing well, both Implementation Progress and PDO ratings were downgraded to Moderately Unsatisfactory, mostly due to budget limits that curtailed the activities that could be implemented with available funding and within the remaining implementation period\. Still, based on the discussions and findings of the MTR, it proposed a project restructuring that would: (i) extend the Closing Date by 20 months; (ii) revise the indicators in the Results Framework; and (iii) reallocate loan proceeds among categories\. The World Bank approved this restructuring, with the exception of the Closing Date extension, in December 2012 (Sections 1\.3 and 1\.7) and agreed to consider the Closing Date extension once an adequate expenditure limit for the Project was allocated in the 2013 State Budget Act, as approved by the National Assembly\. 29\. Funding constraints continued to impact the Project throughout implementation\. By early 2013, the Government had been unable to ensure the resources required for project implementation over the requested extension period by increasing the spending limits for 2012 and 2013\. In the first quarter of 2013 the MLSP was making impressive progress in front-loading project implementation within the allocated expenditure limits (spending almost 40 percent of its annual spending limit by end-March)\. But, it was becoming increasingly clear that without guaranteed funding and a Closing Date extension, only the construction works could be completed 6 The Government of Bulgaria provides a “limit” for external and counterpart financing to each ministry\. 11 by the October 31, 2013 Closing Date—delivery of integrated social inclusion services could not begin before then\. The accomplishment of the PDO was only considered possible through provision of adequate financing within a time frame that would allow: (i) implementation of the SIP’s integrated social inclusion services, and (ii) its transition to EU-funded financing through the Operational Program “Development of Human Resources” (OPDHR) that would become available in the 2014-2020 programming period\. Amid continuous changes in government administrations (Bulgaria had five governments over 2013-2014), the World Bank team encouraged the MLSP to consider the possibility of re-planning SIP activities with a possible Closing Date extension of up to 23 months while reducing the Project’s spending needs and carrying out a careful review of project activities to identify room for optimizing these needs\. The outcome of this exercise was reflected in the September 2013 project restructuring (Sections 1\.3 and 1\.6) that involved a further revision to the Project’s Results Framework (mainly extending the dates by which targets would be achieved and replacing the planned Impact Evaluation with a well-designed evaluation of SIP services), a revision of the scope of activities under both parts of the Project, and a 23 month Closing Date extension that would accommodate a 12 month implementation period of the social inclusion services and their monitoring and evaluation\. The restructuring aligned the Project’s spending needs with the expenditure limits in the Government’s mid-term budget framework and the officially adopted 2013 State Budget Act\. 30\. By April 2014, implementation was on track, based on the agreements in the latest restructuring\. The Government had approved a spending limit consistent with the reprogramming of project activities, construction and civil works had been completed in all but one municipality, furniture and technical equipment for the kindergartens had been procured and delivered, more than 1,800 new kindergarten places had been created (greatly exceeding targets), and about 1,100 children were enrolled in project kindergartens and crèches at the beginning of the 2013/2014 school year\. It was clear that the Project was likely to achieve its PDO, and its PDO rating was upgraded to Moderately Satisfactory\. Further upgrading to Satisfactory would be considered when: (i) the monitoring of local compliance with the 30 percent enrollment quota for vulnerable children 7 proved that Roma children were adequately represented in project facilities, and (ii) the EU-funded operational programs were finalized and ensured the sustainability of the SIP services\. 31\. While lingering concerns remained about the Project’s budget spending limit, the Project confronted yet another problem as municipalities began more than 1,200 tender procedures for the selection of specialists to deliver SIP services\. Project municipalities were experiencing major difficulties in hiring qualified personnel for implementation of SIP services, due to a severe shortage of specialists (medical doctors, speech therapists, legal counselors, social workers, etc\.) in the labor market, especially since most of the qualified professionals were already employed as public servants by the major public service delivery units\. The World Bank team helped identify a solution that required amendment of the Project’s OM to allow for contracting of specialists by considering incremental operating costs as an eligible expenditure 7 The enrollment quota of 30 percent was established through a consultative process involving all concerned ministries, agencies and local governments that sought to reflect the experience and lessons learned from past projects and interventions for integrating vulnerable children into mainstream kindergartens and schools\. In order to ensure social inclusion (as opposed to establishing segregated kindergartens with only vulnerable children enrolled) and to provide sufficient exposure of vulnerable children to peer effects from children with better socio-economic background, the quota of 30 percent of vulnerable children per kindergarten group and across kindergartens was established\. 12 category under grants to SIP municipalities, and communicated it formally to the Government in a letter dated February 13, 2015\. Unfortunately, the delays in contracting staff for SIP services occurred in 2014, just when the Project had been allocated a budget ceiling that would allow full implementation of service delivery\. The significant un-utilized resources that accrued at end-2014 were transferred to project municipalities as advance payments for implementation in calendar 2015\. 32\. The Project’s PDO rating was again downgraded to Moderately Unsatisfactory as on January 16, 2015 the Government approved a budget decree not allowing any spending under the Project, potentially jeopardizing the carrying out of the Project’s evaluation and service delivery\. With a zero spending ceiling for 2015, the advance payments that had been made to municipalities in 2014 became the sole source of funding for service delivery and provided for sustaining only about six months’ delivery of SIP services\. In the end, to free up additional resources for service delivery, the World Bank supported the Government’s evaluation efforts by hiring a polling agency to process the children’s school readiness scores, conduct the required data analysis, and carry out random spot check to observe the test administration process\. As the transfer of SIP project financing to the EU-funded Operational Program “Development of the Human Resources” (OPDHR) was expected to become available in the beginning of 2016, the World Bank agreed to a final three month Closing Date extension to December 31, 2015 in order to allow additional time for utilization of loan funding (including the amounts advanced to municipalities) and minimize the Project’s funding gap\. 33\. There were fifteen World Bank review and implementation support visits, including a Project Launch Workshop, the MTR and a final visit for preparation of this Implementation Completion Report\. The World Bank’s Task Management changed twice during implementation\. All Task Managers were Country-Office based, and provided continuous on-the-ground implementation support to the SID\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization\. 34\. M&E Design\. Monitoring and Evaluation was to be an integral part of the Project’s design and management\. This was especially important since the Project would support interventions in pilot municipalities before a complete rollout to the entire country, financed by the EU-funded Operational Program “Development of the Human Resources” (OPDHR)\. An impact evaluation, that was to be financed under the Project’s Component II (together with required capacity building for monitoring and evaluation) was to provide a rigorous assessment of the casual impact of the Project’s different interventions on specific short-term and intermediate outcomes, as set out in the Results Framework that contained a small set of output, intermediate outcome and outcome indicators for the Project\. The results of the impact evaluation could then be used effectively as a managing-by-results tool to modify the SIP’s design and improve its effectiveness over time, as the rollout progressed\. The Project Appraisal Document described this impact evaluation as being one of the first exercises of its kind to be conducted in the new EU Member States and in transition countries, highlighting that it would be beneficial not only to project-related policymakers, but to others that might be considering this approach in different contexts\. As the impact evaluation was to be financed by the Project, baseline data (that relied heavily on surveys) could only be carried out after loan effectiveness\. As a result, during loan negotiations an agreement was reached that the Supplemental Letter containing the Project’s Result Framework would be delayed until baseline data became available\. Follow-up surveys were to be conducted during years two and four of implementation\. 13 35\. M&E Implementation and Utilization\. Due to delays in implementation (Section 2\.2), the Baseline Impact Evaluation Study was only completed in May 2012\. With this, and based on the findings of the MTR (Section 2\.2) the World Bank approved the December 2012 project restructuring that introduced revisions to the Results Framework (Section 1\.3), and included the baseline data that had by then been collected\. The restructuring did not include a Closing Date extension, however, but included as a condition that the Government commit to allocate sufficient funds for the Project by end-2012, as well as for the years to follow until closing\. The Borrower never countersigned the amendment to the Loan Agreement required as a result of the December 2012 restructuring and therefore the September 2013 project restructuring included again the revisions to the Results Framework approved in December 2012, and introduced a few additional, minor adjustments to the indicators (Section 1\.3)\. 36\. As mentioned in Section 1\.3, the Project’s original Results Framework presented several issues\. Most of the indicators depended on data from impact evaluation surveys, and covered mainly PDO level results at the expense of intermediate results that were insufficiently represented\. It included indicators that: (i) relied extensively on survey-based composite indices (e\.g\., indicator related to parenting skills); (ii) presented methodological problems to measure (e\.g\., the indicator related to multiple cognitive development and school readiness assessments); (iii) required data that was not routinely collected (e\.g\., the indicator on national enrollment rate of children from low income and marginalized households); (iv) presented issues of attribution to the Project (e\.g\., indicators related to children’s inflow into institutional care, nutrition and immunizations); and (v) involved methodological constraints, low reliability of measurement and limited country relevance (e\.g\., indicator related to child nutrition)\. As a result, the Project’s Implementation Status and Results Reports only began providing routinely updated monitoring data on the Project’s progress, utilizing the Project-financed MIS, after the December 2012 project restructuring that revised its Results Framework to one that included more reasonable and reliable indicators\. The Project’s results as reflected in the monitoring data (especially the impact of some of the services on early childhood education outcomes as measured by the school readiness diagnostic test—see below), have allowed the MLSP to make the case for and develop and launch an operation under the EU-funded 2014-2020 Human Resources Development Operational Program, aimed at continuing the provision of services for early childhood development created by the SIP\. 37\. The full-fledged impact evaluation was not implemented due to budget ceiling constraints (it was eliminated from the Project in the September 2013 restructuring)\. Instead, the MLSP organized the administration of school readiness diagnostic tests administered by project municipalities from mid-June to mid-July 20158\. The World Bank contracted consultants to: (i) validate the process of conducting the tests by observing it in up to 10 percent of testing 8 The test for 6-8 year olds was designed to measure whether a child met criteria for school readiness, on a three point scale, including the ability to: (i) ask questions and maintain conversation; (ii) make a story based on a picture; (iii) use compound and complex sentences; (iv) identify practically present, past and future tenses; (v) use words and phrases, taking into account the context; (vi) recognize and form singular and plural nouns; (vii) determine the sound at the beginning of a word; (viii) count form 1 to 10 in ascending and descending order; (ix) establish equality and inequality of multitudes/sets; (x) recognize and name the signs for quantitative relations and mathematical operations addition and subtraction; (xi) understand relationships more, less and equal; (xii) group, compare and arrange objects according to a certain sign; (xiii) reproduce curved line or elements according to a given pattern; (xiv) fulfill thematic expression for drawing, appliquéing and molding; and (xv) know the basic expressions for drawing molding and appliquéing: composition, color, shape and spatial location\. 14 sites, selected randomly; (ii) conduct logical and cross-check initial reviews of all conducted tests; and (iii) process and analyze the data from the tests\. Although the consultants identified some issues in their review (and eliminated tests presenting identified issues from the final sample), the testing met the compliance criteria in most of the locations that were analyzed and 757 tests were considered eligible for purposes of comparing data “before” and “after” SIP implementation\. 2\.4 Safeguard and Fiduciary Compliance 38\. Environment and Social Safeguards\. The activities supported by the Project were expected to have minimal or no environmental risks\. Hence, the Project was categorized as “Financial Intermediary - FI” with potential Category C and B subprojects\. Local environmental requirements were considered adequate, and where required by local legislation, local experts licensed by the Ministry of Environment and Waters (MEW) would carry out environmental assessments of activities involving construction that would later be reviewed by the Supreme Expert Environmental Council\. Guidelines for environmental analysis of subprojects were developed and included in the Project’s Operational Manual, and included, inter alia, a questionnaire for environmental screening of activities under subprojects\. The Project’s compliance was rated satisfactory throughout implementation\. At the time of the MTR, the World Bank hired two consultants specialized in construction standards to check the quality of works and compliance with environmental, safety-at-work and other applicable standards at ten selected sites where construction had started from the ground up\. Overall, the quality of works was found to be good, and local construction and safety standards had been observed\. However, some procedural issues were noted at several of the sites with regard to environmental prescreening\. According to local legislation, municipalities need to request a “review of the need for an environmental impact assessment” from the regional environmental authorities before works commence\. The consultants found that for at least four of the ten sites this review had not been requested, and that for another two sites the review had been requested after works were initiated\. To address this issue, the World Bank requested the MLSP to: (i) conduct a review of the documentation related to environmental assessments/reviews and clearances at all sites where new buildings were constructed and provide evidence that these were in order; (ii) hire environmental consultants to oversee the construction sites and provide bi-monthly supervision reports; and (iii) address the concerns identified in the sites visited during the MTR, liaising as needed with relevant national institutions (e\.g\., MEW) to seek assistance in reviewing the situation and setting a procedure for the future\. The procedural issues related to the four sites that were identified in the MTR were addressed satisfactorily, and the review of all other subprojects involving new construction were found to be in full compliance with local environmental legislation\. 39\. Financial Management\. Financial management (FM) remained satisfactory throughout the life of the Project\. The Project maintained high fiduciary standards—the FM arrangements were satisfactory and adequate control and procedures were in place throughout\. All interim financial reports and annual project audits were received on time, with clean opinions and no internal control issues\. The MTR carried out a detailed review of FM arrangements reviewing: project accounting and reporting arrangements, staffing, internal control procedures, planning and budgeting, counterpart funding, financial manual and audits\. It concluded that the Project’s FM arrangements were satisfactory, and that adequate controls were in place\. However, the Project’s counterpart funding ratings were generally unsatisfactory starting in 2012, reflecting the continuous underfunding of its expenditure ceilings that plagued the Project after this time\. 15 40\. Procurement\. Procurement remained either satisfactory or moderately satisfactory throughout the life of the Project\. On the occasions that procurement was rated moderately satisfactory, it reflected slow implementation of the procurement plans and modest progress resulting from the spending limits imposed on the project in 2012 and 2013, especially\. Throughout, the project team in MLSP provided efficient assistance to municipalities to conduct civil works and equipment procurement\. Further, to streamline and promote efficiency in procurement of vehicles, furniture and equipment, the SID packaged items and procured centrally large packages under International Competitive Bidding procedures\. The MTR carried out a procurement post review and determined that the procurement process had been followed properly, with procurement documents filed properly and retained\. It noted, however, that the limited budget allocation had resulted in the postponement of some selection procedures, and worked with the MLSP to prepare a revised and updated procurement plan, taking into account the eventual extension agreed as part of the project restructuring\. 2\.5 Post-completion Operation/Next Phase 41\. Continuity to services supported by the Project will be financed under the EU- funded “Early Childhood Development Services” that will provide resources for SIP services in Project-financed municipalities\. The EU project, in the amount of EUR 15,338,756 was approved in 2015, and will provide funding through December 31, 2018\. In addition, as provided in the Operational Manual and reflected in financing agreements, municipalities have committed to preserve services under the Project for 5 years for subprojects including infrastructure investments and for 3 years for subprojects including services only\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 42\. Objectives\. The Project’s objectives were relevant when it was approved, and remain highly relevant to this day\. After witnessing historically high growth rates and significant gains in poverty reduction between 2000 and 2008, Bulgaria’s growth since 2008 has remained sluggish, poverty has been on the rise and income gains of the bottom 40 have been weak\. Progress in increasing the income of the bottom 40 percent has been limited by their lack of human capital, employability and financial assets\. The human capital of the bottom 40 percent of the Bulgarian population suffers because their education attainment is less than that of the bottom 40 percent in any of the regional comparators\. The Roma are much more likely to be unemployed than ethnic Bulgarians, in part due to lower average educational attainment\. Inequality of education in Bulgaria starts early, with too few children from poor families enrolled in early childhood programs\. Despite recent reforms that made preschool education compulsory for all children aged 5 and 6, the most vulnerable groups are still largely excluded\. PISA 2012 results for Bulgaria show promising results for children attending at least a 2-year preprimary education program: PISA Math scores increased by an average of 7 points relative to children attending a 1-year program or none at all\. The effects were greatest for children of low socioeconomic status (10 points on average) and students like Roma who speak a different language at home (19 points)\. The Project’s objective, therefore, is fully consistent with the second policy area identified in the Systemic Country Diagnostic (SCD) Bulgaria’s Potential for Sustainable Growth and Shared Prosperity: boosting skills and employability of all Bulgarians\. Specifically the SCD recommends under this policy area the need to support policies that will “expand early childhood development programs to improve schooling outcomes, which is especially critical for the poor\.” 43\. The Project’s objectives are also embedded in Bulgaria’s national strategies that 16 promote ECD with a focus on vulnerable groups\. The National Strategy for Reducing the Share of Early Drop Outs 2013-2020 includes actions addressing linguistic and ethnic minorities and children of poor households and includes actions to increase exposure to mainstream ECD for vulnerable children of preschool age\. The National Strategy for Promotion of Literacy 2014- 2020 includes actions targeting specifically children aged 3-7, with supporting interventions to incentivize early literacy among linguistic minorities\. The National Strategy for Educational Integration of Children and Students from Ethnic Minorities 2015-2020 provides detailed account of specific educational interventions aimed at increasing attendance rates and learning outcomes of children and students belonging to linguistic and ethnic minorities, with special focus on Roma\. Finally, the National Child Development Strategy 2008-2018 provides the strategic framework for child development in Bulgaria including nutrition, maternal health, child health and development, parenting, deinstitutionalization, and combating child poverty\. 44\. Based on the above, financing for the implementation of the interventions and policies envisaged in the Government’s strategies is planned for the period 2014-2020 through the EU funded operational programs, including: (i) Operational Program Human Resource Development – includes the operation that continues SIP services through December 2018, as well as inclusive ECD interventions included in the National Child Development Strategy; (ii) Operational Program Science and Education for Smart Growth that includes operations with interventions envisaged in the first three government strategies listed above; and (iii) Operational Program Regional Development that supports investments in ECD infrastructure\. All of the above EU-funded operational programs were developed and enforced in line with the Europe 2020 targets and the specific recommendations of the European Commission for Bulgaria\. 45\. Design and Implementation\. The relevance of the Project’s design was also high, and appropriate for accomplishing its objective within the Bulgarian context and institutional framework\. The PDO was appropriate in its focus on social inclusion, inter alia, by targeting low- income and marginalized families (but not excluding others)\. The Government ensured enrollments of vulnerable children, including Roma, in adherence to the 30 percent enrollment quota for children from these groups\. The early restructurings (i\.e\., change in implementing agency, modifications to the municipal responsibilities for maintaining project investments) ensured continued relevance of the Project’s design\. Although the original Results Framework was overly ambitious, the later restructurings modified it to better align the indicators so that its progress would be measurable, routinely monitorable and limited to outputs, intermediate outcomes, and outcomes that could be attributable directly to the Project\. 46\. The relevance of the Project’s implementation was high, despite continuous budget ceiling constraints that were due to exogenous factors precipitated by the 2008 global financial crisis and its impact on Bulgaria’s macroeconomic reality\. While facing repeated challenges with budget constraints, especially starting in 2012 onwards, the MLSP, municipalities and the World Bank’s implementation support team worked together to find constructive approaches, including through the project restructurings, to streamline activities and implementation to ensure that those activities needed to achieve the Project’s PDO would be funded in amounts needed for their completion\. The adjustments to the Project’s scope and scale ensured that the Project matched the Government’s fiscal projections and projected annual budget ceilings\. Continuity in funding to the SIP program in project municipalities by the EU (Section 2\.5) provides a further indication of the relevance of the Project’s design and implementation\. 3\.2 Achievement of Project Development Objectives 17 47\. The Project Development Objective was to promote social inclusion through increasing the school readiness of children below the age of 7, targeting low-income and marginalized families (including children with a disability and other special needs)\. This section evaluates the Project’s outcomes and intermediate outcomes against the Results Framework that was adjusted in December 20129 and again in September 2013\. (Monitoring data is not available to evaluate performance against the Results Framework in the PAD\.) Progress towards the PDO was to be measured against four outcome indicators, all of which were overachieved\. Based on the achievements described below in this Section, efficacy is rated Substantial\. The Project was successful in developing a model for the delivery of integrated services targeting vulnerable children at the earliest age, and also, successfully leveraged World Bank financing to improve absorption of EU funds\. Detailed information on project outputs is presented in Annex 2\. 48\. Increasing the school readiness of children below the age of 6 was to be measured by the share of vulnerable children aged 6 who pass the school readiness diagnostic test\. (A description of the methodology used to measure progress on the School Readiness Test (SRT) is provided in Annex 5\.) Although the project impact evaluation was dropped through the partial cancellation included in the September 2013 restructuring, the 2012 baseline measurement of the main PDO indicator (the school readiness passing rate among vulnerable children in project municipalities) was used as a baseline for the indicator\. The same SRT was administered in 2015 to the 897 vulnerable children aged 6 who benefited from two years of mainstream, non- segregated kindergarten programs under the SIP\. These children were enrolled in kindergartens or in preschool preparatory groups attached to primary schools, and most of them benefitted from the SIP supported remedial education groups established as “summer preschools”\. This measurement allowed for a comparison between the passing rates before and after project implementation\. During the two measurements (2012 and 2015), the vulnerable children were also mapped according to the size of the municipality in which they live (small or large), allowing for further nuancing of the test results\. Out of the 897 tests, 757 were found to be compliant with the testing procedures, while the remaining 140 tests were eliminated from the analysis of the results due to issues with the testing procedure\. The results from the SRT concluded that there was a noticeable improvement in performance: 80 percent of the vulnerable children supported by the SIP passed the SRT in 2015, against 47 percent before the project interventions in 2012\. There was a statistically significant difference in the scores for overall performance of children from large municipalities (i\.e\., regional and municipal centers, towns with greater than 35,000 inhabitants), compared to those from small ones: 84 percent of the vulnerable children from large municipalities passed the SRT against 74 percent from small municipalities\. The analysis found a statistically significant increase in the score of aggregated indicators of performance, including: (i) use of compound and complex compound sentences; (ii) understanding the meaning of words; (iii) practically distinguishing present, past and future tenses; (iv) reproducing by memory words and sentences; and (v) logical and associative thinking, making interrelations\. Most notably, there was a statistically significant improvement in the ability to speak the Bulgarian language—an important indicator for the level of school readiness of children from vulnerable groups\. In 2012, 86 percent of children answered tests in Bulgarian, while 15 percent could speak only either Romani or Turkish\. In 2015, 99\.8 percent of all vulnerable children were able to speak Bulgarian 9 Although the amendment to the Loan Agreement to reflect the December 2012 project restructuring was never countersigned by the Government, the restructuring was approved by the World Bank on December 14, 2012 and this date therefore is used for purposes of evaluating the Project’s outcomes as a restructured project\. 18 during the testing\. This is an important indicator of the Project’s progress towards promoting social inclusion\. 49\. Promoting social inclusion (together with the improvements in school readiness) was achieved (as defined by key indicators) through the implementation of subprojects in 66 municipalities\. The Project helped address early childhood education infrastructure shortages and the need to strengthen the quality, scope and inclusiveness of these services by building new kindergartens and community centers to support the implementation of the Project’s concept— combining existing kindergarten and early childhood education services with a set of cross- sectoral child care and social inclusion services (such as health and nutrition interventions, improving parenting skills, early intervention of children with disabilities, remedial programs and cognitive stimulation for children from linguistic minority groups and from households living in poverty and deprivation, such as Roma children)\. Municipalities prepared and submitted subproject proposals by selecting services from a broader menu, thereby providing a mix of services that responded to their local context\. The key services elected by most municipalities were included in the Project’s Results Framework\. Through implementation of these subprojects, 2,357 new places were opened in kindergartens and preschool education groups (against an end target of 1,600), 4,420 children aged 3-7 were enrolled in kindergartens and preschool groups (against an end target of 3,000), 471 children with disabilities and other special needs enrolled in mainstream kindergartens and preschool groups (against an end target of 150), and 4,311 children benefitted from the “Early Intervention of Disabilities” service (against an end target of 1,500)\. The effective community mediators’ work and the “one-stop-shop” design of the integrated social and child care services generated spillover effects and stimulated the demand for all services, resulting in overachievement of the intermediate outcome indicators measuring the number of the individual service beneficiaries\. A description of the targeting mechanism applied under the Project to ensure it reached intended beneficiaries is included in Annex 5\. 50\. A total of 113 facilities were newly created for the delivery of integrated social inclusion services (against an end target of 68), and 12,964 parents of children aged 0-3 received parenting skills counseling (against an end target of 10,000)\. A total of 39,993 children aged 0-7 benefitted from “Health Consultation” services (against an end target of 10,000)\. Training of kindergarten and crèches staff was not carried out under the Project to avoid duplication with an EU-funded project for ECD disability and developmental screening of children implemented by the Ministry of Education and Science\. Under that EU-funded project, 1,100 staff was trained, including pre-school educators, resource teachers, psychologists and speech therapists for 25 pilot kindergartens and 85 primary schools (against the Project’s end target of 700 educators)\. This training program is continuing through the new EU-funded Operational Program, Education and Science for Smart Growth 2014-2020\. 51\. The above results were achieved in a relatively short time period10, in which the newly opened kindergartens under the Project began providing education services to children, of which 30 percent came from vulnerable families\. This allowed those children to be exposed to mainstream ECD for about two years before the supplemental SIP services were introduced\. The results obtained based solely on the provision of kindergarten services were impressive\. Had the social inclusion services also been operating for the same period, so that more 10 Two years of early childhood education services to vulnerable children and between 6 and 8 months of complementary social inclusion services 19 children aged one to three had been able to benefit from SIP services thereby improving their development potential by the time they entered kindergarten, no doubt outcomes would have been even more impressive\. 52\. Another objective of the Project, mentioned in the PAD but not incorporated in the Project’s original results framework was that of strengthening of prospects for absorption of EU financing\. This was achieved through several activities implemented under the Project’s Component II\. A total of 120 municipal staff (against an end target of 120), from the 66 municipalities, were trained in public procurement rules and procedures, an MIS was developed and operationalized for the Project, and 144 municipal staff received training in project reporting and monitoring and evaluation (against an end target of 120)\. The skills acquired by these staff will strengthen their capacity to continue to deliver SIP services under the follow-on EU-funded project\. As of January 29, 2016 (the deadline for submission of proposals), 63 of 66 SIP-supported municipalities had submitted to the MLSP proposals for continued funding under the Operational Program Services for Early Childhood Development\. Two additional municipalities requested an extension of the deadline and have since submitted their proposals\. 3\.3 Efficiency 53\. The Project’s economic analysis presented in the Project Appraisal Document was based largely on the assumptions of a nationwide program and impacts to GMI and CA beneficiaries\. Information on the Project’s beneficiaries, categorized as GMI and CA beneficiaries is not available since actual targeting was made on a much broader set of criteria capturing different forms of vulnerabilities; therefore, an ex-post economic analysis following the model in the PAD has not been prepared\. Rather, efficiency is evaluated based on the high overall returns to ECD, and especially to ECD programs targeted at minorities, the added value of vulnerable children’s exposure to the peer effects from children of higher socio-economic status, the positive impact of ECD on the performance of vulnerable students in Bulgaria in primary and secondary education (as evidenced from the latest PISA 2012 analysis for Bulgaria), the prospects for higher earnings linked to the improved educational attainment, the unit costs of construction of kindergartens and centers for SIP services, and the efficiency in implementation\. 54\. Returns to ECD\. Investments in ECD yield higher economic returns as a preventive measure as compared to remedial services later\. Long-term cost/benefit ratios can be as high as 1 to 17 and returns to investment are greatest for the poorest and more vulnerable children\. Returns on investment to ECD can be as high as 16 percent—much higher than rates of return from other levels of education\. Early interventions promote better school outcomes in later stages, reduce crime and increase productivity in the workforce\. Further, return to early investments are higher to the vulnerable where parenting resources are often poor (Heckman, 2008)\. The Project targeted specifically vulnerable children, and therefore, it can be assumed safely that the returns are high\. Further, PISA 2012 analysis showing that for linguistic minorities such as Turks and Roma one extra year of ECD/kindergarten attendance results in secondary education knowledge/performance gains equivalent to half a year of additional schooling\. As the kindergartens were opened earlier in project implementation than the services, the impact on the children enrolled is expected to be significant\. Based on the assumptions presented in Annex 3, the final individual life discounted benefits for a vulnerable child that was ready for school because of the Project are in the amount of BGN 1,597 per child\. Aggregating the benefits to 20 years’ life of the SIP investments for the 717 vulnerable children that passed the school readiness test, the total gains reach BGN 23 million, and total costs stand at BGN 10\.6 million\. Thus, the benefit-to-cost ratio for the Project is 2\.15\. 20 55\. Unit Costs\. The unit cost of preschool construction under the Project compares favorably with regional comparators\. The average cost per square meter of new construction under the Project amounted to EUR456\. For purposes of comparison, the cost of new construction in Romania amounted to EUR 530 per square meter, in Moldova to US$650 per square meter for new preschools (approximately EUR575), and in Serbia – between EUR260 to EUR500 per square meter\. It is difficult, however, to compare the unit cost of rehabilitation, since the rehabilitation or repair costs under the SIP varied widely (ranging from EUR135 to EUR403 per square meter), depending on the type of work involved, compared to an average cost of EUR 350 per square meter for kindergarten rehabilitation interventions in neighboring Romania\. 56\. Implementation Efficiency\. The Project was implemented efficiently, with minimal incremental operating costs\. First, project management was entrusted to staff of the MLSP’s SID, with only additional support contracted to handle and coordinate additional procurement, by both the Ministry and municipalities, respectively\. Also, consultants were contracted, but only during the initial phase of implementation, to help evaluate subproject proposals received by the municipalities\. Municipalities relied on the staff in their existing structures to develop and implement subproject proposals\. The remaining staff that was contracted by municipalities is additional staff required to deliver services during project implementation and beyond\. In this sense, there were minimal overhead costs for project administration, and the experience of implementation was internalized by the implementing agencies\. Second, in a budget constrained environment, and attempting to do more with less, the SID continuously sought for means to make investments more efficient\. For example, the procurement of vehicles, furniture and equipment for municipal subprojects were packaged to promote efficiency in procurement\. Similarly, municipalities sought innovative ways to secure needed staffing by developing part-time, on-call systems for specialist services, and promoting internships with university students to help deliver services in coordination with staff of the centers\. Table 1 presents the final allocation of loan resources by loan category\. Table 1: Allocation of Loan Resources by Category of Expenditure Allocation (in EUR) Category of Expenditure Disbursement at closing Original At closing Disbursed Undisbursed Grants Under Part I 35,390,000\.00 30,381,841\.00 22,822,017\.46 7,559,823\.54 Consulting Services, Training 4,510,000\.00 909,803\.00 673,072\.62 236,730\.38 and Audit Front End Fee 100,000\.00 100,000\.00 100,000\.00 0\.00 Cancellation 0\.00 8,608,356\.00 Total: 40,000,000\.00 31,391,664\.00 23,595,090\.08 7,796,553\.92 Source: Client Connections, data retrieved June 22, 2016 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 57\. As a restructured project, the Project’s Outcome Rating has been guided by the analysis in Table 2 below\. 21 Table 2: Project Rating Achievement of PDO Project Relevance Efficiency Overall Rating (Efficacy) Original Project – April 2009 – December 2012 Disbursements: EUR 10,182,101\.26 Moderately Substantial Modest Modest Unsatisfactory Restructured Project January 2013 – September 2013 Disbursements: EUR 6,338,963\.86 High Substantial High Satisfactory Restructured Project October 2013 – December 2015 Disbursements: EUR 7,800,731\.30 High Substantial High Satisfactory Overall Project Rating Moderately High Substantial High Satisfactory (0\.42 x 4) + (0\.26 x 5) + (0\.32 x 5) = 4\.58 58\. Overall Outcome is rated Moderately Satisfactory based on the Project’s High relevance, especially after the restructuring, its Substantial efficacy based on the Key Indicators defined for the restructured project, and its High efficiency based on the positive cost to benefit ratio as described above and in Annex 4, the reasonable unit costs of construction based of comparators, and the efficiency with which it was implemented, especially given the funding constraints and the implementing agencies’ constant pursuit of efficiency-seeking measures that permitted them to complete project investments with constrained resources\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 59\. The Project had a poverty focus in view of its target beneficiaries\. However, it would be premature and unrealistic to attribute any impact on poverty to the Project, especially since the complete package of services were delivered only for about six to eight months11\. However, the project experiences together with other analytical work is expected to inform ECD, education and training policy\. An explicit focus will be how to make Bulgaria’s education and training system more inclusive to opportunities for children and youth from poor and disfavored socio-economic background, including Roma\. 60\. The project’s monitoring system did not provide gender-disaggregated data\. Nor has there been a survey of SIP beneficiaries focusing on gender dimensions\. The Project supported the improvement of parenting practices within vulnerable groups, but since project monitoring tabulated the number of parents (as opposed to mothers and fathers/female or male primary care givers), beneficiary data were collected without gender differentiation\. A total of 11,580 caregivers received parenting counseling designed to improve parents’ interaction with their 11 The September 2013 Project restructuring allowed for 12 months of implementation of the full package of services\. The prolonged process of securing service specialists, however, reduced that period to between 6 to 8 months (the range reflects the most common implementation periods among Project municipalities)\. 22 children during the critically important first years of development\. The primary care givers, by social norms, and especially among the Roma and Turkish ethnic minority groups, are almost exclusively female\. 61\. Although the monitoring data reports on vulnerable children that benefitted from the Project, the Government’s legislation does not permit monitoring on the basis of ethnicity\. Therefore, there is no disaggregated data on Roma, Turkish, etc\. minorities that benefitted from the Project\. (b) Institutional Change/Strengthening 62\. ECD programs are institutionally complex in that they are multi-sectoral, and implemented at different levels of government (central, municipal)\. To address these complexities the Project’s design had envisaged the establishment of a Steering Committee to coordinate activities, but, reflecting in part this complexity, the Steering Committee only met twice during implementation\. The Project’s institutional impact was mostly on the 66 project municipalities that implemented subprojects\. It strengthened their ability to provide integrated services, provided targeted training in professional areas and project management and also in procedures to prepare and implement funding proposals for EU OP program financing\. (c) Other Unintended Outcomes and Impacts (positive or negative) N/A 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 63\. A Beneficiary Survey or Stakeholder Workshops have not been carried out thus far\. A World Bank-sponsored ECD conference is scheduled for June 15, 2016 in Sofia\. The conference will focus on lessons learned from the implementation of the SIP, and will share preliminary findings from an impact evaluation of kindergarten enrollment and attendance incentives for vulnerable children, mostly Roma, covering 200 kindergartens (a project funded by America for Bulgaria Foundation, for which the World Bank provided design for the impact evaluation)\. Participants will include the municipal teams that implemented the SIP (and will now provide for continuation of services with EU financing), providers/specialists of SIP services, international and local organizations engaged in similar projects, representatives of responsible ministries, including MLSP, the Ministry of Education and Ministry of Health\. 4\. Assessment of Risk to Development Outcome Rating: Negligible 64\. Overall, the Risk to Development Outcome is considered Negligible\. Risk to Development Outcome is evaluated according to the risk that investments financed by the Project will not be maintained\. Municipalities have bought in to the model supported by the Project and have enthusiastically supported it, despite funding constraints\. They have sought innovative methods for financing staff during the interim period until EU funding becomes available, such as offering higher-level students the opportunity for internships working alongside municipal staff\. The beneficiary response has been most positive, and will undoubtedly put pressure on municipal authorities to continue to provide and possibly expand available services\. The EU-funded project will provide continued funding, until December 2018, for the 66 municipalities (covering slightly 23 more than 50 percent of the national population) that received funding under the Project\. Finally, municipalities have committed to maintain project services for five years for subprojects including infrastructure investments and for three years for subprojects including services only\. The Government is intent on moving forward with ECD, and is in the process of preparing a new ECD Strategy that will likely incorporate experience with the delivery model supported by the SIP\. This may have positive impact on a possible rollout of project-supported services to Bulgaria’s remaining 199 municipalities\. The forthcoming ECD conference will present a good opportunity to continue to pursue opportunities to support the Government in its efforts\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 65\. The Bank’s Performance in Ensuring Quality at Entry is considered Moderately Satisfactory\. The team prepared an innovative project that was responsive to the Borrower’s needs and priorities, that incorporated lessons of previous experience, that incorporated recommendations and finding from extensive stakeholder consultations\. The Project’s design was relatively simple, its institutional arrangements streamlined, and it was, in general terms, ready for implementation\. However, the Project’s original Results Framework was overly ambitious and complex, difficult to monitor given the reliance on surveys, and not entirely corresponding to the activities supported by the Project\. More importantly, the preparation team failed to identify the risk of funding constraints—even though it would have been difficult to define mitigating factors to address these in advance\. (b) Quality of Supervision Rating: Satisfactory 66\. Quality of Supervision is rated Satisfactory\. The World Bank’s Country Office-based implementation support team provided hands-on, high quality support that was acknowledged by both representative of the MLSP/SID and of municipalities visited during the ICR mission\. There was remarkable continuity in task management, with three task managers throughout preparation and implementation, one of which had worked also on project preparation\. The team was driven, consistently working with the SID in helping identify proactive, somewhat innovative, ways of addressing budget constraints while keeping implementation moving forward\. Support was results driven, which helped to identify issues with the Project’s Results Framework\. The Project restructurings were timely, well focused on amending Key Indicators and scaling down project activities to what could reasonably be accomplished during the remaining period while at the same time producing results towards achievement of the PDO\. Implementation Status Reports were timely, informative and results-focused, and project ratings therein appropriate to reflect issues incurred throughout implementation\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 67\. Overall Bank Performance is rated Moderately Satisfactory, accounting for some shortcomings during preparation, but recognizing supervision as highly proactive, hands-on and 24 determined to work continuously with implementing agencies to help address funding constraints, and adjust the Project and its Results Framework to allow it to make significant progress towards its PDO, and to monitor that progress through realistic indicators\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 68\. Government Performance is rated Moderately Satisfactory, based on the performance of both the MLSP (with respect to overall policy and enabling environment for implementation) and the Ministry of Finance\. The MLSP ensured continuous commitment to the program, assigning staff of its SID to coordinate and implement project activities\. It also continued to pursue the ECD policy agenda, with the preparation of a draft ECD strategy, in coordination with other Government ministries\. Further, the MLSP has been proactive in securing ESF funding for continuation of the SIP\. The OP for Human Resource Development was the first OP program approved for the new funding period, and the operation that provides for continuation of the SIP was approved in October 2015\. Although it never lacked commitment to the Project and its objectives, given a difficult fiscal situation the Government curtailed its budgetary allocations to push consistently for greater efficiency at the municipal level\. The main shortcoming to Government performance relates to the continuous issues with the Project’s budget ceiling that impacted the Project throughout implementation\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 69\. Implementing Agencies’ Performance is rated Satisfactory\. The Project’s Implementing Agencies are the SID of MLSP and the 66 municipalities that implemented project-funded subprojects\. The SID implemented the Project within its existing structure, contracting only one additional staff to work with project procurement\. It used its existing systems and procedures, supported by a management information system put in place with project financing\. They sought innovative mechanisms for doing more with less—packaging equipment and vehicle purchases to obtain greater efficiency, and working with municipalities to adjust subprojects to funding availability, including out-of-the-box proposals (e\.g\., allowing municipalities to retain unutilized amounts advanced in 2014 to cover expenses in 2015 when no funding was allocated)\. Towards the end of implementation, the SID worked closely with municipalities to ensure they submit proposals for continued funding under OP—a call for proposals from municipalities was launched in December 2015, and by April 2016 all 66 had submitted applications that are now being reviewed by MLSP\. Municipalities also performed very well, selecting carefully the construction sites for the new kindergartens and childcare centers to ensure non-segregated, mainstream delivery of early childhood education, maintaining construction and other project activities on schedule, and adjusting what they could implement to available funding, often complemented by municipal funding\. Finally, municipalities have also found innovative ways of providing continuation to SIP services, despite funding shortfalls, by, for example, hiring university students under apprenticeship programs, maintaining staff on call, etc\. They have also explored different modalities of fees and enrollment, e\.g\., discounted fees for enrollment of multiple children, sibling priorities, etc\. (c) Justification of Rating for Overall Borrower Performance 25 Rating: Moderately Satisfactory 70\. Overall Borrower Performance is rated Moderately Satisfactory, in view of shortcomings in allocating continuously the needed budget ceilings for the Project, but which was compensated by exceptional efforts by the Implementing Agencies to continuously adjust to funding shortfalls as described above, that in the end allowed the Project to produce important outcomes\. 6\. Lessons Learned 71\. The Project offered several lessons as follows: • Results frameworks need to be defined carefully, to keep design simple and commensurate with the nature of the Project and data availability and systems capacity for monitoring\. The Project’s original Results Framework was unduly ambitious given the time frame of the Project, difficult to monitor, costly to measure and it is not clear that all of the outcomes defined could or would be attributable to the Project\. There were issues of eventual attribution and data measurement\. Realism in defining indicators is important\. Finally, if costly collection of baseline data for impact evaluations is required, it should be adequately funded through trust funds during project preparation\. • Risk analysis during preparation should be comprehensive, and not assume that some risks are inherent and implicit\. Obviously the risk of funding constraints is one that applies to all projects, financed by the World Bank and otherwise\. Nevertheless, this risk should still always be carefully analyzed in view of existing realities and rated realistically in order to weigh risks and, if possible, define mitigating measures\. • Projects working with vulnerable and minority groups should have mediators from those groups to help promote services\. Under the Project, mediators—that the communities recognized and trusted because they were from among their members—intervened to promote the Project’s services among community families\. This was very effective in ensuring the Project could reach the targeted population\. • The SIP model of a “one stop shop” successfully leveraged kindergartens as platforms to provide cross-sectoral child care and social inclusion services\. The “one stop shop” design of SIP services attached to a kindergarten is a key design feature that stimulated demand for services beyond what the client had initially chosen\. There was a clear spillover effect, which would not have happened if these services were dispersed around the town or village\. • The location of subprojects that aim to achieve social integration of vulnerable groups should be selected carefully\. In this manner, social integration of the minority groups is promoted\. If new centers had been established in areas where exclusively vulnerable groups were located, service provision may have been increased for these beneficiaries, but chances of achieving the goal of inclusion and integration would have been questionable\. Localities selected for ECD and service centers were appropriate, given the Project’s goal of achieving integration of vulnerable people\. • Inclusive education for children from vulnerable families and children with special needs yields improved school readiness\. The kindergarten spaces created with SIP support were not exclusively for vulnerable children; approximately 30 percent of the places were 26  reserved for children of disfavored backgrounds\. This was by design, to ensure that there were children from a mix of backgrounds to allow for positive peer effects and reduce social isolation and exclusion of marginalized children\. Mainstreaming vulnerable children in inclusive school settings resulted in increased school readiness\. • The need for multi-sectoral coordination (education, health, social protection) makes ECD projects complex, but projects can still make progress in the absence of a formal framework for coordination\. If investments are delayed in the absence of a formal framework at the central level, the risk is that little progress can be made\. The Project attempted to achieve multi-sectoral coordination through the establishment of a Steering Committee, but this did not function as expected, and only met twice\. Nevertheless, this was compensated by very strong inter-sectoral coordination at the municipal level\. The model developed by the Project, the activities and services it financed, put in place a very promising model for delivering multi-sectoral service, albeit in the absence of a formal inter-sectoral coordination at the central level\. Nevertheless, it represents a first important step towards hopefully developing full coordination in the future\. • Leaving the decisions with respect to subproject design to municipalities (or other local level implementing agencies) makes sense\. Not only do municipalities know their realities, needs, staffing issues, financing, etc\. more than other levels or agencies, their involvement in the process of defining, designing and implementing investments and services results in projects responsive to their particular needs and realities\. More importantly, it helps build ownership of the investments and their implementation\. • Projects that involve multiple subprojects implemented in different localities should have a mechanism for periodically sharing best practices\. In the last eight months of the Project, when the implementation of the integrated childcare services gained a momentum, several municipalities under the Project adopted interesting, innovative and very relevant practices towards service delivery, staffing, etc\. However, there was no common information exchange platform for dissemination of good practices\. Going forward, the positive results municipalities achieve during the period of EU financing of the services, a mechanism for sharing of best practices (and issues) should be established and promoted\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (b) Co-financiers (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 27  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in EUR Million) Actual/Latest Appraisal Estimate Percentage of Components Estimate (EUR (EUR millions) Appraisal millions) Total Baseline Cost Component I: Integrated social and childcare services 37\.39 22\.82 61% Component II: Capacity-building 2\.51 0\.67 27% Total Project Costs 39\.90 23\.49 59% Front-end fee PPF 0\.00 0\.00 Front-end fee IBRD 0\.10 0\.10 100% Total Financing Required 40\.00 23\.59 59% Source: Client Connections, data retrieved June 22, 2016 (b) Financing Appraisal Actual/Latest Type of Co- Estimate Estimate Percentage of Source of Funds financing (EUR (EUR Appraisal millions) millions) Borrower 96\.73 2\.47 2\.55% International Bank for Reconstruction 40\.00 23\.59 58\.97% and Development Source: Client Connections, data retrieved June 22, 2016 28  Annex 2\. Outputs by Component The Project’s Outputs, by Component, are presented below: 1\. Component I: Integrated social and childcare services (EUR 37\.39m)\. This component would finance a menu of community subprojects, including services and infrastructure investments from which municipalities could choose according to needs\. It included provision of a set of integrated social and childcare services for parents and children from marginalized groups and children with disability\. Municipalities would subcontract third sector agencies with contracts involving performance targets and per-capita based remuneration\. The activities financed under Component I are described below\. 2\. Financing Agreements – A total of 66 municipalities signed Financing Agreements for community subprojects, for a total value of BGN 66,733,925\.74, of which BGN 59,421,715\.87 was loan financed and the respective municipalities financed BGN 7,312,209\.87\. Under these Financing Agreements, the following was financed: • Information campaign to promote the SIP (initial); • Construction and/or rehabilitation of centers in 31 municipalities that have resulted in a total of 1,867 new places in crèches and kindergartens (184 in crèches and 1,683 in kindergartens); • Furniture and technical equipment for centers; • Specialized buses (44) with wheel-chair platforms, specially equipped for transporting children and people with disabilities; • Specialized equipment for the Early Intervention of Disabilities Services, including specialized sensory therapy equipment, specialized medical and sports equipment; • Training of specialist teams (36 trainings for medical specialists working in maternity wards directly with children with disabilities) and 46 trainings for suppliers of services) for services: “Early Intervention of Disabilities” and “Individual Pedagogical Support to Children with Disabilities”’ • Development of Methodological Guidelines for the supply of Early Intervention of Disabilities; • Training of specialist teams (66 trainings) for the provision of services “Formation and Development of Parenting Skills” and “Family Counseling and Support”; • Development of Methodological Guidelines for the supply of “Formation and Development of Parenting Skills” and “Family Counseling and Support”; • Contracting 1,400 specialists for the supply of SIP services, as follows: o Health Counseling for Children: Pediatricians (77) Nurses (82) Mediators (97) Dentists (33) o Equal Start in School service (summer schools): Pedagogues (126) Mediators (114) o Early Intervention of Disabilities: Pediatricians (40) Physiatrists/rehabilitation specialists (40) Psychologists (44) Speech therapists (37) 29  Social workers (42) Mediators (34) o Individual pedagogical support to children with disabilities: Special pedagogues (47) o Formation and development of parenting skills and Family counseling and support services: Pediatricians (50) Gynecologists (44) Midwives (52) Nurses (60) Psychologists (54) Legal experts (51) Mediators (106) Social workers, 0-3 years (53) Social workers, 3-7 years (55) o Integration of Children in Kindergartens: Social workers/social pedagogues (12) Mediators (17) o Social worker-coordinators (42) 3\. Component II: Capacity-building (EUR 2\.51m)\. Complementing expected ESF funding, this component was designed to finance capacity-building activities at the central and municipal level to support the design and pilot launch of a national school readiness program, in order to ensure its quick start-up\. Component II financed: • Training of 144 municipal employees on monitoring and evaluation, and reporting of SIP projects; • Development of criteria for a continuation of financing under 2014-2020 Human Resources Development Operational Program (2014-2020 HRDOP); • Preparation of guidelines for application of funding under 2014-2020 HRDOP; • Consultant for public procurement; • Consultants for evaluating municipal subproject proposals (6); • Consultant, Early Childhood Development; • External Auditor for Project Auditing; • Consultant, to organize one-day workshop to train municipal representatives on submission of subproject proposals (delivered April, 2011); • Consultant, to develop management information system for SIP (system is installed and in routine use); • Consultant, to organize training on “Strengthening the Capacity of the SIP Staff” (delivered, August 31-September 2, 2011); • Inspection Companies to Supervise construction/rehabilitation in subproject municipalities (6, grouped by region); • Consultant, Baseline Data (collected); • Consultants, to organize one-day trainings on Selection of Consultants, as per WB Guidelines (5 contracts, trained 133 representatives of 67 municipalities); 30  Annex 3\. Economic and Financial Analysis Background: 1\. The social and childcare services supported by the SIP commenced 8 - 6 months before the Project’s closing date, therefore, assessing their impact on the early childhood development outcomes as a result of changes in behavior, parenting practices and perceptions in the vulnerable communities is premature\. The SIP services complemented the mainstream kindergarten programs offered by the Government and were packaged together as integrated social and childcare services, using a “one-stop-shop” approach that tackled simultaneously multiple barriers to participation in early childhood education while offering early childhood education to children from vulnerable households\. However, the SIP supported the construction of kindergartens, the enrollment of vulnerable children in them through community mediators and offered remedial education programs in summer preschools (without the additional benefit of the social services) for 2 years before the Project was closed\. The cost-benefit analysis is therefore based solely on the project contributions to non- segregated delivery of early childhood education to vulnerable children\. 2\. The Project invested significant resources (approximately 50 percent of the project budget, totaling BGN 35,463,440\.25, of which BGN 31,267,062\.91 financed through SIP loan proceeds) into kindergarten infrastructure and premises (attached to these kindergartens, or as standalone centers) for delivery of the supplemental social and childcare services\. The construction of the kindergartens was completed in late 2013 and in the 2013/2014 academic year children from SIP municipalities were able to enroll in kindergarten programs, of which 30 percent were vulnerable children\. 3\. The SIP offered two years of early childhood education to 897 vulnerable children, including Roma, by the closing date\. Eighty percent of them passed the school readiness tests administered at the end of the Project\. 4\. While returns to investments in ECD is a heavily researched topic internationally, with long- term returns on investment estimated as high as 16 percent, the economic and financial analysis for the SIP takes advantage of recently completed studies on Bulgaria that allow for more precise monetizing of the benefits, taking into account Bulgaria specific circumstances\. 5\. The estimated benefits are based mostly on the PISA 2012 research on Bulgaria and Program for the International Assessment of Adult Competencies (PIAAC)\. PISA 2012 data for Bulgaria allows to assess the impact of early cognitive stimulation of vulnerable children through ECD programs on their academic performance in subsequent educational stages\. Results from the PISA 2012 data for Bulgaria show that having attended at least a two year pre-primary education program increases PISA math scores by an average of 7 points relative to having attended one year or none at all\. The effect of ECD is greatest for low achievers (10 points on average) and students who speak a different language at home (19 points on average), while its effect on high achievers is not significant\. 6\. The PISA 2012 study also provides an assessment of the peer effects in secondary education, which allows factoring in the positive peer effects from provision of ECD services in a non- segregated setting\. The PISA 2012 data for Bulgaria reveals that peer effects (concentration of similarly advantaged or vulnerable students within a same school) could explain a 31  significant part of the variability, much more than in any other country that has participated in PISA\. The analysis shows that the peer effects in Bulgarian education system are even more important than purely individual effects, and that the correlation between individual and peer background in Bulgaria is very high (the so called “Segregation” index)\. Segregation in Bulgaria is closely associated with the mechanisms for tracking students into profiled (“elite”), ordinary and vocational schools, based on abilities based testing\. Similar processes are observed in kindergartens through the intake/enrollment process for early childhood education establishments\. As described earlier in the ICR, the Project set a 30 percent enrollment quota for vulnerable children per kindergarten group and across SIP-supported kindergartens in a given municipality, thus ensuring social inclusion could take place by allowing interactions and positive influence of children with better socio-economic status on the vulnerable children targeted by the Project\. Summary of key assumptions for costs and benefits: Parameters BGN SIP Total 35,463,440\.3 SIP Loan 31,267,062\.9 Vulnerable kids 10,639,032\.1 Per-capita running costs 1,897\.0 Fees per Child 500\.0 PIAAC Yearly Returns to Skills age 20-30 (based on Hanushek et al) 0\.10 PIAAC Yearly Returns to Skills age 30-40 (based on Hanushek et al) 0\.16 PIAAC Yearly Returns to Skills age 40-65 (based on Hanushek et al) 0\.18 Costs: 7\. Assumptions: • The Project’s investment in construction of kindergartens was BGN 35,463,440\.25, of which BGN 31,267,062\.91 were financed through SIP loan proceeds; • 30 percent of the kindergarten places were reserved for vulnerable children, hence the investment costs for this group of beneficiaries was 30 percent of the total kindergarten construction costs; • The SIP did not spend loan funds for the educational costs of the children\. Once enrolled, their education is financed by the state through a per capita financing formula for staff and non-staff costs for tuition, meals and running costs\. The annual per capita cost of state support for a child in kindergarten aged 6 in 2015 was BGN 1897; • Kindergarten fees in 2015 were on average BGN 50 per child per month\. For the 10 months of school year this amounts to BGN 500 per child annually\. These kindergarten fees were covered by the project’s municipalities to eliminate cost barriers for vulnerable children\. SIP loan proceeds did not finance the waiver of kindergarten fees; • 897 vulnerable children benefited from two years of ECD under SIP, all of them were tested at the end of the Project\. However, 140 tests were considered not compliant to the test procedure and were eliminated\. Out of the remaining 757 children, 80 percent passed the test and were therefore considered ready to enroll primary education; • For the purposes of the cost benefit analysis, it is assumed that the passing rate will continue to be 80 percent, compliance with testing procedure will remain the same, and 32  that the affected future cohorts of 897 children will produce a total of 717 children passing the tests every year; • Life expectation (in years) of the investment is assumed to be 20 years lifespan of the kindergarten; and • This results into fixed investment per student of around 742 BGN\. Summary of costs assumptions: Costs Costs per Pupil Number of children affected yearly that pass the school readiness test 717\.00 Years of life of investment 20\.0 Children benefiting in a 20 year period 14,340 Fixed-cost expenditure per child 741\.91 BGN Running costs (2 years) 1,000\.00 BGN Total expenditure per child (from Project + Municipalities) 1,741\.91 BGN Benefits 8\. Assumptions: • The expected math skill gains at the end of compulsory education based on PISA 2012 analysis for Bulgaria ranges from 10 points (low-performing students) to 19 points (linguistic/ethnic minorities)\. The effect for all students with low socio economic status (SES) in Bulgaria is similar to the one observed for minorities but the SES model is better as it captures ethnic/linguistic minorities (51% of minorities are in the bottom 20% SES group), but this is only a third (51% of 12\.5%) of the lowest quintile, which includes other vulnerable students\. Thus, 20 points gain in performance is used as the baseline; • This is subsequently transformed into Standard Deviations in PISA and then, under the assumption that PISA and PIAAC measure the same skills for comparable populations, that translated standard deviation is taken into PIAAC equivalent-standard deviations; • While Bulgaria did not participate into PIAAC data, neighboring countries did (Czech Republic, Poland, Russia and Slovak Republic), so their estimates of returns to skills are averaged; • Returns to skills are not constant over the life cycle, they increase with age and remain stagnant after age 40 (with a very small decline at the end); • Thus, 10% wage gains per standard deviation are assumed for ages 20-30, 16% in ages 30-40 and 18% in ages 40-65%; • The expected yearly monetary gains are 2\.2% wage increase in ages 20-30, 3\.5% in ages 30-40, and 3\.9% in ages 40-65; and • The annual average earnings of individuals aged 18-64 belonging to bottom 30% was approximately BGN 4000 Summary of benefits assumptions: Benefits Benefits per Pupil PISA Effect (bottom 20% ESCS) in Math Points 20\.0 PISA Std Dev (Math) 92 PISA Effect in Std Deviations 0\.217391304 Increase probability of going to General Stream 33  PIAAC Std Dev\. 0\.217391304 PIAAC Yearly Returns to Skills age 20-30 2\.17% PIAAC Yearly Returns to Skills age 30-40 3\.48% PIAAC Yearly Returns to Skills age 40-65 3\.91% 9\. Based on the assumptions above, the final individual life discounted benefits are 1,597 BGN per vulnerable child\. Aggregating the benefits to 20 years for the 717 vulnerable children that passed the school readiness test under SIP, the total gains are nearly BGN 23 million, and total costs stand at BGN 10, 6 million\. Thus, the benefit-to-cost ratio for the Project is 2\.15\. Cost-Benefit Analysis: Expected Earnings 4,000\.00 BGN Life Benefits 1,597\.27 BGN Total Gains 22,904,814\.00 BGN Total Costs 10,639,032\.00 BGN Benefit-to-Cost Ratio 2\.153 34  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Christian Bodewig Program Leader ECCU5 Task Team Leader Blaga Djourdjin Procurement Specialist GGO03 Procurement Specialist Lire Ersado Senior Economist GSP05 Senior Economist Roberta V\. Gatti Lead Economist GSPDR Senior Economist Rebekka E\. Grun Asst\. to the President EXC Senior Economist Kari L\. Hurt Senior Operations Officer GHN02 Senior Operations Officer Financial Management Mirela Mart Financial Management Specialist ECADE Specialist Peter Ivanov Pojarski Consultant GSP03 Operations Officer Svetlana Georgieva Raykova Associate Operations Officer CASPM Operations Officer Albena Alexandrova Samsonova Program Assistant ECCBG Program Assistant Supervision/ICR Sr Financial Management Bogdan Constantin Constantinescu Sr Financial Management Specialist GGO21 Specialist Financial Management Anneliese Viorela Voinea Financial Management Specialist GGO21 Specialist Blaga Djourdjin Procurement Specialist GGO03 Procurement Specialist Valeria Nikolaeva Procurement Specialist GGO03 Procurement Specialist Peter Ivanov Pojarski Consultant GSP03 Task Team Leader Plamen Nikolov Danchev Senior Education Specialist GED02 Task Team Leader Albena Alexandrova Samsonova Program Assistant ECCBG Program Assistant Adela Delcheva Program Assistant ECCBG Program Assistant (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including travel and No\. of staff weeks consultant costs) Lending FY06 2\.30 10\.85 FY07 50\.95 252\.81 FY08 11\.77 60\.35 Total: 65\.02 324\.01 Supervision/ICR FY09 9\.57 71\.72 FY10 18\.81 54\.88 FY11 20\.18 58\.75 FY12 12\.55 38\.30 FY13 16\.58 31\.61 FY14 13\.53 35\.05 FY15 15\.48 20\.27 FY16 12\.77 29\.32 Total: 119\.47 339\.90 35  Annex 5\. Targeting 1\. Targeting was driven by the information on GMI benefits recipients as well as other aspects of the socio-economic status of the population in the participating municipalities (see Table 1)\. The collection of this information was required from municipalities at the stage of the needs assessment and situation analysis, which preceded the final selection of project municipalities\. Table 1 summarizes the estimated size of SIP target groups\. Table 1: Estimated size of the SIP target groups in participating municipalities12 Estimated size of the target group (overlaps SIP Target Groups: among categories exist) Children from vulnerable or potentially-vulnerable groups, including Roma ethnic group; 30,000 Children of unemployed parents 28,000 Children whose parents are social assistance recipients 37,000 Children without a General Practitioner or whose General Practitioner is not a pediatrician 21,000 Children from families without health insurance 22,000 Children not enrolled in kindergarten and not attending other child care facilities 23,000 Children from families of poor child-care record 11,000 Children with disabilities 5,000 Children with health problems 5,000 Parents from vulnerable groups – vulnerable ethnic groups, in particular Roma 44,000 Parents who are GMI recipients 33,000 Unemployed parents 27,000 Parents of 3 or more children 10,000 Single parents 14,000 First time parents from vulnerable groups 12,000 Parents (mostly mothers) in risk age; 6,000 Parents with poor educational level 37,000 Parents living in poor housing conditions 15,000 Parents of poor child-care record 4,000 Parents of children with disabilities 5,500 Parents of children with health problems 7,000 Parents without health insurance 24,000 Parents of children assessed as high-risk 3,000 Establishing the SIP RF indicators’ targets 2\. Based on the municipal needs assessment and situation analysis information, municipalities were required to estimate the potential beneficiaries for all services defined in the Project’s Operational Manual\. A summary of the results is presented in Table 2\. 12Data is provided by municipalities within the needs assessment and situation analysis completed before submission of the preliminary application forms\. 36  Table 2: Number of potential beneficiaries in participating municipalities, by type of SIP services, based on needs assessment and situational analysis Potential SIP services by project subcomponents beneficiaries Subcomponent 1\.1 Services for children aged 0-3 and their parents 1\.1\.1 Formation and development of parenting skills 22,000 1\.1\.2 Early intervention center 6,000 1\.1\.3 Family Counseling and Support 14,500 1\.1\.4 Health consultation for children 16,000 1\.1\.5 Child Minders 200 1\.1\.6 Family centers 500 1\.1\.7 Crèche fee reduction (full or partial) 1800 Subcomponent 1\.2 Services for children aged 3-6 and their parents 1\.2\.1 Integration of children in kindergartens and preschool groups 60,000 1\.2\.2 Screening of school readiness 28,500 1\.2\.3 Family counseling and support 19,000 1\.2\.4 Health consultation for children 24,000 1\.2\.5 Family Centers 1,000 1\.2\.6 Preparedness for equal start at school 7,000 1\.2\.7 Individual pedagogical support for children with disabilities 2,500 3\. Municipalities were requested to submit preliminary project proposals, taking into account the notional allocation of SIP resources across municipalities, based on a 50:50 percent distribution of requested funding between construction of ECD infrastructure and provision of services\. The information on the estimated beneficiaries (by main services and age groups) in the final project proposals is presented in Table 3\. It contains a shorter list of services to reflect the following: i\. Municipalities developed their projects selecting only those services from the full menu described in the POM, which best reflect the local circumstances and needs\. ii\. The short list of services includes those selected by the majority of the participating municipalities, also having highest share in the overall SIP budget\. iii\. This shortlist was used as a basis of identifying outcome and outputs indicators in the SIP results framework\. Table 3\. Number of estimated beneficiaries in participating municipalities, by type of SIP services, based on approved municipal projects, 2012 Potential SIP services by project subcomponents beneficiaries Subcomponent 1\.1 Services for children aged 0-3 and their parents 1\.1\.1 Formation and development of parenting skills 6,000 1\.1\.2 Early intervention of disabilities 1,500 1\.1\.3 Health consultation for children 7,000 1\.1\.4 Crèche fee reduction (full or partial) 1800 Subcomponent 1\.2 Services for children aged 3-6 and their parents 1\.2\.1 Integration of vulnerable children in kindergartens and preschool groups (with disabilities) 900 (150) 1\.2\.2 Kindergarten fee reduction (full or partial) 800 1\.2\.3 Formation and development of parenting skills 9,000 1\.2\.4 Health consultation for children 8,000 37  Table 4\. Targets in the SIP Results Framework Original Revised Revised Targets Targets targets 2013 2009 2012 Supplemental MTR letter 2 PDO Indicator One: Share of vulnerable children aged 6 who pass the school readiness diagnostic 0 40% 40% test PDO Indicator Two: Number of children aged 3-7 newly enrolled in kindergartens and preschool 0 3 000 3 000 groups through the Project PDO Indicator Three: Number of children with disabilities and other special needs enrolled in 0 150 150 mainstream kindergartens and preschool groups through the Project PDO Indicator Four: 0 1 500 1 500 Number of beneficiaries of the “Early Intervention of Disabilities” service Intermediate Result indicator One: Number of newly created places in 0 1 600 1 600 kindergarten and preschool groups through the Project Intermediate Result indicator Two: Number of newly created facilities for 0 68 68 delivery of integrated social inclusion services through the Project Intermediate Result indicator Three: Number of parents of children aged 0-3 0 15 000 10 000 who received parenting skills counseling Intermediate Result indicator Four: Number of children aged 0-7who benefitted 0 15 000 10 000 from the “Health Consultation” services Intermediate Result indicator One: Number of municipal staff trained in public 0 120 120 procurement rules and procedures under the Project Intermediate Result indicator Two: PMIS PMIS SIP Project Management Information System (PMIS) developed and 0 in use in use operationalized Intermediate Result indicator Three: Number of municipal staff trained in 0 120 120 project reporting and monitoring and evaluation Intermediate Result indicator Four: Number of kindergartens and crèches’ staff 0 1400 700 trained under the Project 4\. Project restructurings and partial cancellations required revisions to the financing agreements with municipalities, including changes to the scope and coverage of the services\. As a result, the end targets for the services with highest estimated beneficiaries were reduced to reflect lower budget and shorter implementation period for the services\. The original target of the last indicator reflected the number of staff in project municipalities to receive the training, while the revised target was established based on the target envisioned in the EU funded project of the Ministry of Education and Science that supported the same capacity building activity\. 5\. Exceeding the service related targets reflects (i) the outreach work of the community mediators recruited as part of the service delivery teams, (ii) the “one stop shop” design of the services (resulting in beneficiaries taking advantage of more services then initially intended to be used), (iii) the extent of the unmet demand for these services, delivered free of charge under the Project, with paid alternatives outside it (especially health consultations, dental checkups, counseling on labor market re-entry of young mothers, etc\.)\. 38  Annex 6\. Summary of Borrower's ICR and/or Comments on Draft ICR The summary below was taken verbatim from the Borrower’s Completion Report dated June 2016\. Summary The Social Inclusion Project (SIP) is funded with a loan from the International Bank for Reconstruction and Development (The World Bank) in the amount of EUR 31 391 644 (BGN 61 396 719)\. The loan agreement with the World Bank was signed in November 2008 but the implementation of the Project effectively started in August 2010\. The deadline for disbursement of the proceeds from the loan is December 31, 2015\. The Project consists of 2 components: Component 1\. Integrated social services and child care services, in the amount of EUR 30\.74 million, under which municipalities are funded for the supply of services for children 0-7 and their parents\. In addition to services, the component is also for financing of investment in infrastructure, as well as training of service suppliers and kindergarten/crèche staff\. Component 2\. Capacity building amounting to EUR 0\.55 million, for funding of activities for improvement of the capacity of local authorities for implementing integrated project for early childhood development through the provision of technical consultations, including for access to European Union Structural and Cohesion Funds, incl\. guaranteeing of sustainability of services\. Activities related to impact evaluation, audit, and support of implementation are also funded\. 66 municipalities are beneficiaries under the SIP\. Between the start of the project and 31\.12\.2015 a total of BGN 50 981 974\.02 have been absorbed, of which BGN 46 147 985\.04 in borrowing (75\.16 % of the loan), BGN 506 659\.65 state co-financing, and BGN 4 327 329\.33 municipal co- financing\. 44 specialized busses with wheel-chair platforms, as provided under the project, specially equipped for transporting children and people with disabilities, as well as specialized medical equipment and sensory therapy equipment for the Early Intervention of Disabilities services were supplied to beneficiary municipalities\. Equipment/technical equipment required for the supply of the services under the project was also provided\. Construction works under the SIP are completed\. In all SIP-beneficiary municipalities excellent conditions for the supply of the early childhood development services, constituting the essence of the SIP, are provided\. In 30 municipalities a total of 1889 new places in crèches and kindergartens are opened (184 places in crèche groups and 1705 in kindergarten groups)\. The numbers of opened places are on the basis of the capacity as per the project, and in practice many municipalities have exceeded the capacity as per the project\. Over 1400 specialists were hired for the supply of the services under the SIP (incl\. pediatricians, psychologists, speech therapists, social workers, special pedagogues, gynecologists, nurses, 39 midwives, pedagogues, legal experts, and mediators), as well as 20 contracts with 13 social services suppliers licensed to provide social services for children\. Based on reported data of beneficiary municipalities, the total number of users of services under the SIP exceeds 30 000, including children and their parents\. In the summer of 2015 beneficiary municipalities conducted tests for assessing the level of readiness for school of children from vulnerable groups enrolled in kindergartens, thanks to the Social Inclusion Project\. Test results are very good – success rate is 80%\. Methodological guidelines for the supply of the service “Early intervention of disabilities through the establishment of an Early Intervention of Disabilities Center”, as well as for the services “Formation and development of parenting skills” and “Family counseling and support” were prepared and made available to beneficiaries\. The following events took place: • 36 trainings of medical specialists working in maternity wards and working directly with babies and small children with disabilities, for the adoption of new approaches to informing parents about the disability of the child and encouraging raising the child in a family environment; • 46 trainings of suppliers of the services “Early intervention of disabilities through the establishment of an Early Intervention of Disabilities Center” and “Individual pedagogical support to children with disabilities”; • 66 trainings of specialist teams for the provision of the services “Formation and development of parenting skills” and “Family counseling and support”\. Training of 144 municipal employees took place in connection with the monitoring and reporting of projects under the SIP implemented by them\. Ensuring sustainability of services opened under the SIP was of extreme importance\. To this end, in 2015 the Loan Agreement for the SIP was amended to extend the deadline for the implementation of the projects of all the 66 beneficiary municipalities until 31\.12\.2015\. Thus, a smooth transition to funding of early childhood development services introduced under the SIP with proceeds from the 2014-2020 Human Resources Development Operational Program (2014- 2020 HRDOP) from the beginning of 2016 was conditioned\. Criteria for an operation under the 2014-2020 HRDOP were elaborated aiming at continuation of supply of early childhood development services created under the SIP, from the beginning of 2016\. Guidelines for application for funding under the Early Childhood Development Services operation under the 2014-2020 HRDOP were prepared\. The operation was announced on 04\.12\.2015, and thus the commitment to secure funding of the early childhood development services opened under the SIP after 31\.12\.2015 undertaken on the part of the MLSP was effectively fulfilled\. The operation under the 2014-2020 HRDOP allows all the 66 beneficiary municipalities under the SIP to obtain financing for continuation of the operation of the services opened under the SIP until 31\.12\.2018, the budget of the operation amounting to BGN 30 000 000\. The financing of the early childhood development services opened under the SIP with borrowed funds ended on 31\.12\.2015\. 40  Annex 7\. List of Supporting Documents World Bank, Project Appraisal Document for a Social Inclusion Project, Report No\. 38604-BG dated October 8, 2008\. World Bank, Social Inclusion Project, Implementation Status Reports Nos\. 1-15, preparation and implementation support mission Aide Memoires\. World Bank, Systemic Country Diagnostic (SCD) Bulgaria’s Potential for Sustainable Growth and Shared Prosperity dated July 29, 2015\. Ministry of Labor and Social Policy, Report on the Implementation of the Social Inclusion Project, May 2016\. World Bank, Social Inclusion Project in Bulgaria, School Readiness Test-Comparison 2012/2015, prepared by Market Links Research and Consulting\. 41 MAP 43

REVIEW

P154803

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00005491 IMPLEMENTATION COMPLETION AND RESULTS REPORT IDA 5636-MW, IDA D058-MW ON A CREDIT IN THE AMOUNT OF SDR 29 MILLION (US$40 MILLION EQUIVALENT) IN IDA CRISIS RESPONSE WINDOW RESOURCES AND A GRANT IN THE AMOUNT OF SDR 29 MILLION (US$40 MILLION EQUIVALENT) IN IDA CRISIS RESPONSE WINDOW RESOURCES TO THE REPUBLIC OF MALAWI FOR A MALAWI FLOODS EMERGENCY RECOVERY PROJECT July 27, 2021 Urban, Resilience and Land Global Practice Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective January 29, 2020) Currency Unit = Malawian Kwacha (MWK) MWK 791 = US$1 US$1\.44 = SDR 1 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy C-ESMP Contractor’s ESMP DoDMA Department of Disaster Management Affairs DRF Disaster Recovery Framework DRM Disaster Risk Management EFA Economic and Financial Analysis ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan GDP Gross Domestic Product GOM Government of Malawi GRC Grievance Redress Committee GRM Grievance Redress Mechanism IFA Input for Asset IRLADP Irrigation Rural Livelihoods and Agricultural Development Project IRR Internal Rate of Return MDAs Ministries, Departments, and Agencies M&E Monitoring and Evaluation MFERP Malawi Flood Emergency Recovery Project MGDS II Second Malawi Growth and Development Strategy MGDS III Third Malawi Growth and Development Strategy MTR Mid-term Review NPV Net Present Value OHS Occupational Health and Safety PDNA Post-Disaster Needs Assessment PDO Project Development Objective PIU Project Implementation Unit SEA/SH Sexual Exploitation and Abuse/Sexual Harassment SGR Strategic Grain Reserve UNDP United Nations Development Programme Regional Vice President: Hafez M\.H\. Ghanem Country Director: Mara K\. Warwick Regional Director: Mark Lundell Practice Manager: Meskerem Brhane Task Team Leader(s): Francis Samson Nkoka, Nicholas James Callender ICR Main Contributor: Francis Samson Nkoka  TABLE OF CONTENTS DATA SHEET \. 1 I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 6 A\. CONTEXT AT APPRAISAL \.6 B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) \.9 II\. OUTCOME \. 9 A\. RELEVANCE OF PDO \.9 B\. ACHIEVEMENT OF PDO (EFFICACY) \. 10 C\. EFFICIENCY \. 14 III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 17 A\. KEY FACTORS DURING PREPARATION \. 17 B\. KEY FACTORS DURING IMPLEMENTATION \. 18 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 20 A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 20 B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 22 C\. BANK PERFORMANCE \. 24 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 29 ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 39 ANNEX 3\. PROJECT COST BY COMPONENT \. 42 ANNEX 4\. EFFICIENCY ANALYSIS \. 43 ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 48 ANNEX 6\. THABWA-CHITSEKO-SEVEN ROAD - CHRONOLOGY OF CRITICAL INCIDENTS DURING IMPLEMENTATION \. 51 ANNEX 7\. DIRECT PROJECT BENEFICIARIES \. 55  The World Bank Malawi Floods Emergency Recovery (P154803) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P154803 Malawi Floods Emergency Recovery Country Financing Instrument Malawi Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency Ministry of Finance, Economic Planning and Government of Malawi Development Project Development Objective (PDO) Original PDO The Project Development Objective is to “sustainably restore agricultural livelihoods, reconstruct critical public infrastructure to improved standards in the flood-affected districts, and improve the Government of Malawi’s disaster response and recovery capacities”\. Page 1 of 58  The World Bank Malawi Floods Emergency Recovery (P154803) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 40,000,000 40,000,000 40,531,547 IDA-56360 40,000,000 40,000,000 38,871,162 IDA-D0580 Total 80,000,000 80,000,000 79,402,709 Non-World Bank Financing 0 0 0 Borrower/Recipient 0 0 0 Total 0 0 0 Total Project Cost 80,000,000 80,000,000 79,402,709 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 07-May-2015 20-Aug-2015 04-Sep-2017 31-Dec-2019 31-Jan-2021 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 20-Dec-2019 72\.50 Change in Loan Closing Date(s) 23-Sep-2020 73\.04 Change in Loan Closing Date(s) KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Moderate RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 07-Oct-2015 Satisfactory Satisfactory 18\.59 Page 2 of 58  The World Bank Malawi Floods Emergency Recovery (P154803) 02 16-Mar-2016 Satisfactory Satisfactory 18\.59 03 14-Jun-2016 Satisfactory Satisfactory 40\.07 04 28-Dec-2016 Satisfactory Satisfactory 40\.07 05 27-Jun-2017 Satisfactory Satisfactory 57\.16 06 21-Dec-2017 Satisfactory Satisfactory 60\.09 07 25-Jun-2018 Satisfactory Moderately Satisfactory 62\.84 08 14-Feb-2019 Satisfactory Moderately Satisfactory 69\.74 Moderately 09 25-Sep-2019 Unsatisfactory 72\.50 Unsatisfactory 10 09-Dec-2019 Moderately Satisfactory Moderately Satisfactory 72\.50 11 09-Jun-2020 Satisfactory Satisfactory 72\.76 12 14-Dec-2020 Satisfactory Satisfactory 78\.05 SECTORS AND THEMES Sectors Major Sector/Sector (%) Agriculture, Fishing and Forestry 40 Irrigation and Drainage 20 Other Agriculture, Fishing and Forestry 20 Education 20 Other Education 20 Transportation 20 Rural and Inter-Urban Roads 20 Water, Sanitation and Waste Management 20 Other Water Supply, Sanitation and Waste 20 Management Page 3 of 58  The World Bank Malawi Floods Emergency Recovery (P154803) Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Finance 4 Finance for Development 4 Disaster Risk Finance 4 Social Development and Protection 19 Social Protection 19 Social Safety Nets 19 Human Development and Gender 20 Nutrition and Food Security 20 Nutrition 10 Food Security 10 Urban and Rural Development 49 Rural Development 37 Rural Infrastructure and service delivery 37 Disaster Risk Management 12 Disaster Response and Recovery 4 Disaster Risk Reduction 4 Disaster Preparedness 4 Environment and Natural Resource Management 8 Water Resource Management 8 Water Institutions, Policies and Reform 8 ADM STAFF Role At Approval At ICR Regional Vice President: Makhtar Diop Hafez M\.H\. Ghanem Country Director: Kundhavi Kadiresan Mara K\. Warwick Director: Ede Jorge Ijjasz-Vasquez Mark Lundell Practice Manager: Sameh Naguib Wahba Meskerem Brhane Ayaz Parvez, Francis Samson Francis Samson Nkoka, Nicholas Task Team Leader(s): Nkoka James Callender Page 4 of 58  The World Bank Malawi Floods Emergency Recovery (P154803) ICR Contributing Author: Francis Samson Nkoka Page 5 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. CONTEXT AT APPRAISAL Context 1\. At the time of appraisal, Malawi’s population was estimated at 16\.74 million with over half of its total population living in poverty, ranking 174 out of 187 countries on the 2013 United Nations Human Development Report\.1 Between 2013 and 2015, gross domestic product (GDP) grew from 5\.5 to 6\.3 million after a two-year period of GDP decline, and the poverty head count ratio, percentage of the population living below the national poverty line(s), decreased from 65\.3 percent to 50\.7 percent from 2000 to 2010\. Around 84 percent of Malawi’s population lived in rural areas with the majority engaged in smallholder, rain-fed subsistence agriculture\. Infrastructure connecting the farmers to markets was not always reliable, with poor roads with limited resilience to natural hazards often preventing the marketing of surpluses, even in times of good production\. 2\. The January 2015 seasonal rainfall was the highest on record for Malawi at the time and caused significant flooding—predominantly in the southern region—exacerbating an already precarious situation for rural and urban households\. It is estimated that the floods affected 1,150,000 people, displaced 336,000, and killed 104\. As a result, on January 13, 2015, the President declared a state of disaster for the following 15 districts: Nsanje, Chikwawa, Phalombe, Zomba, Blantyre, Chiradzulu, Thyolo, Mulanje, Balaka, Machinga, Mangochi, Ntcheu, Salima, Rumphi, and Karonga\. Several of the affected districts represented the poorest areas of the country before the emergency\.2 The floods inflicted substantial damage and losses in the productive, public infrastructure and social service sectors, including private and community assets\. 3\. The Government of Malawi (GOM), with support from the World Bank, UNDP, and European Union, conducted a Flood Post-Disaster Needs Assessment (PDNA) in 2015\. The PDNA indicated total damage and loss attributed to the 2015 floods calculated at US$335 million and total recovery and reconstruction needs of around US$495 million\. The effects of the 2015 floods resulted in a projected negative impact on GDP growth, equivalent to a 0\.6 percent change in GDP, as per the PDNA\. As a result of the 2015 floods and prolonged dry spells, approximately 2\.86 million people became food insecure and required assistance\. Maize production fell by 2\.2 percent following the floods with a 1\.3 percent loss in national agricultural production\. Furthermore, the floods and storm damaged 523,347 houses, 22 health facilities, 461 schools, 2,991 boreholes, 17,515 m of water supply pipelines, 4 dams, 46,776 m of irrigation canals, 1,220 km of roads, and 185 bridges\.3 Rationale for World Bank Support 4\. The project was prepared in response to the 2015 floods, with the PDNA, Second Malawi Growth and Development Strategy (MGDS II) 2011–2016, World Bank’s Country Assistance Strategy (CAS) (2013–2016 – Report No\. 74159-MW), and National Disaster Recovery Framework (DRF) largely 1 Malawi Floods Emergency Project (MFERP), Project Appraisal Document PAD1431\. The World Bank, April 24, 2015\. 2 According to the Malawi Household Survey, the most highly affected districts—Nsanje, Chikwawa, Phalombe, and Zomba— had poverty incidences above the national average of 50\.7 percent, ranging from 55 to 80 percent\. 3 World Bank\. 2016\. Post-Disaster (Drought) Needs Assessment\. Page 6 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) informing the preparation\. The MFERP constituted a set of multisectoral interventions in response to the flooding’s wide-scale damage and loss\. The project prioritized restocking and provision of immediate food items and restoration of livelihoods for the affected households and key strategic assets including secondary roads, education and health facilities, riverbank protection, water supply systems, and irrigation schemes\. While opening up economic opportunities for affected communities, the project incentivized policy and strategic complementarities through the adoption of building back better and holistic resilient approaches\. Furthermore, the MFERP presented an opportunity for the GOM to implement its policy-based actions envisioned in MGDS II, the overarching medium-term development agenda\. The strategy recognized six broad thematic areas, including sustainable economic growth, social support and disaster risk management (DRM), and infrastructure development, and key priority areas (agriculture and food security, transport infrastructure, education, and public health)\. 5\. The World Bank’s experience in the post-disaster assessment and global recovery agenda and supporting the GOM to improve agriculture productivity and business environment were instrumental to design the MFERP\. By leveraging this experience, the GOM prepared a comprehensive and cohesive recovery and resilience building program in response to the floods that became effective six months after the emergency\. Moreover, the project objective strongly aligned its various interventions to the World Bank’s CAS (2013–2016) outcomes, such as (a) increased productivity and commercialization of agriculture and sustainable management of water resources for multiple users, (b) improved delivery of public services, and (c) lowered vulnerability and enhanced resilience\. Theory of Change (Results Chain) 6\. The Theory of Change is illustrated below and is implicit in the PAD as no Theory of Change was developed during project preparation\. Page 7 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) Project Development Objectives (PDOs) 7\. The PDO was to “sustainably restore agricultural livelihoods, reconstruct critical public infrastructure to improved standards in the flood-affected districts, and improve the Government of Malawi’s disaster response and recovery capacities\.” Key Expected Outcomes and Outcome Indicators 8\. The key expected outcomes for each of the three objectives in the compound PDO, were (a) sustainably restored agricultural production and livelihoods and enhanced food security for the flood- affected population; (b) reconstructed and improved roads, schools, health, irrigation, water resources, and water supply facilities to disaster-resilient standards; and (c) institutionalization and adoption of strengthened and improved disaster recovery and response systems\. 9\. Achievement of the outcomes were measured through the following indicators: (a) Number of people with sustainably restored agricultural livelihoods (b) Number of schools with services fully restored (c) Number of health facilities reconstructed with services fully restored (d) Number of kilometers of roads reconstructed to improved standards and with services restored (e) Direct project beneficiaries (f) Institutionalization/adoption of PDNA methodology and institutional and financing framework for recovery (g) institutionalization/adoption of disaster resilient designs for schools, health facilities, and roads\. 10\. The intermediate outcome indicators measured progress on physical infrastructure, livelihood support, and promoting disaster resilience (see annex 1)\. Components 11\. The project was designed with four components to support achievement of the PDO\. The first three components were directly linked to the PDO and the fourth component supported project management\. The project was implemented by a Project Implementation Unit (PIU) within the Ministry of Finance and the Roads Authority, which was responsible for the rehabilitation of roads, bridges, and drainage infrastructure under Component 2 of the project\. 12\. Component 1: Livelihoods Restoration and Food Security (IDA US$29 million)\. This component included the provision of (a) immediate livelihood support to the predominantly agricultural community and households in the flood-affected areas, and (b) food support to meet the critical needs of the affected populations by enhancing and restocking the Government’s Strategic Grain Reserve (SGR)\. 13\. Component 2: Infrastructure Rehabilitation and Reconstruction (IDA US$43 million)\. This component financed the reconstruction and rehabilitation of critical public infrastructure, including (a) Page 8 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) roads and bridges, (b) education and health facilities, and (c) irrigation and rural water supply infrastructure\. The component also financed flood mitigation works, including (a) localized embankment, repairing, and afforestation along flood-prone rivers; (b) creation and restoration of stormwater drainage; (c) restoration of riparian forests; and (d) construction of flood protection bunds around critical infrastructure\. 14\. Component 3: Promoting Disaster Resilience (IDA US$4 million)\. This component provided financing for (a) strengthening the Government’s post-disaster response and recovery systems and (b) developing and institutionalizing disaster-resilient design standards for future infrastructure construction across multiple sectors\. 15\. Component 4: Program Management (IDA US$4 million)\. This component provided resources for (a) operating costs for the PIU; (b) technical designs for the reconstruction and rehabilitation of infrastructure across various project components; (c) supervision quality control and contract management of reconstruction and rehabilitation activities; and (d) audits, studies, and assessments\. B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) 16\. The PDO, key associated outcome targets, PDO indicators, and components were not changed during the life of the project\. Other Changes 17\. The project’s closing date was extended twice from December 31, 2019, to September 30, 2020 (nine months), and then to January 31, 2021 (four months), through restructurings approved on December 20, 2019, and September 23, 2020, respectively\. The first extension was granted to allow for the completion of critical road works that were delayed following a contract cancellation of a noncompliant contractor and need for continued strengthening of the safeguards system\. The second extension was granted to allow for completion of road works that had suffered delays due to the COVID- 19 lockdown measures, gaps in overseas expert staff, supply chain delays, and material shortages\. Rationale for Changes and Their Implication on the Original Theory of Change 18\. The two restructurings allowed the project time to remain responsive to the changing working environment with COVID-19 and support the enhancement of the safeguards system, all which contributed to the completion of critical road works\. The adjustments had no implication on the original Theory of Change\. II\. OUTCOME A\. RELEVANCE OF PDO 19\. The relevance of the PDO is rated High\. The MFERP PDO adhered to the core principles championed by the World Bank Strategy and complementarity with other existing operations\. In the process, the project supported interventions that restored the livelihoods of affected communities through the input for asset (IFA) public works program to compensate poor rural households for their labor with inputs and enable the restoration of community infrastructure, for example, feeder roads and Page 9 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) small dykes; lowered the vulnerability of communities with the construction of more resilient infrastructure, including health facilities and schools; and improved the institutional capacity to respond to disaster risks\. Also, the MFERP linked its activities to the DRM and Climate Change Technical Assistance Program for the country, which focused on improving disaster preparedness by strengthening early warning systems and coordination of DRM activities through strengthening the institutional capacity of the GOM\. 20\. The MFERP informed the understanding of disaster risks and strengthened the community’s resilience to disasters by investing in disaster risk reduction activities, governance, preparedness for effective response, and building back better approaches in recovery, rehabilitation, and reconstruction\. Similarly, the project provided lessons and best practices for the preparation, implementation, and evaluation of the Malawi Resilience and DRM Project\. As such, the project supported achievement of the Third Malawi Growth and Development Strategy (MGDS III), the overarching medium-term strategy between 2017 and 2022\. Within the MGDS III, DRM was one of the development areas, which aimed at reducing vulnerability and enhancing the resilience of the population to disasters and shocks\. 21\. The MFERP PDO remains a priority for the Government and falls within the priorities identified by the 2018 World Bank Systematic Country Diagnostic (Report No\. 132785), particularly (a) increasing agriculture productivity, which includes interventions to promote commercialization; (b) diversifying the economy and creating jobs through addressing infrastructure deficit and increasing access to public services; (c) harnessing the demographic dividend and building human capital by improving learning outcomes and coverage and access to quality health services; and (d) building resilience to shocks and enhancing environmental sustainability\. The MFERP continues to be aligned with the World Bank's Country Partnership Framework (Report No\. 154505-MW) for the Republic of Malawi for FY21–FY25 in supporting micro, small, and medium enterprises, including agriculture businesses and access to finance and services and expanding markets; expanding access to services and markets and deepening regional integration through the provision of infrastructure; and increasing resilience in urban and rural hot spots\. B\. ACHIEVEMENT OF PDO (EFFICACY) Assessment of Achievement of Each Objective/Outcome 22\. The PDO is to “sustainably restore agricultural livelihoods, reconstruct critical public infrastructure to improved standards in the flood-affected districts, and improve the Government of Malawi’s disaster response and recovery capacities\.” As the PDO is composite, it will be broken down and assessed looking at each of its three compound elements\. 23\. To assess the Project’s results achievements, the M&E system captured information from the districts and centralized implementing agencies on a quarterly basis and validated and utilized by the Project Steering Committees\. For the infrastructural components, progress and achievements were captured from sector supervision reports and consulting engineer and firm progress reports\. A beneficiary survey was conducted for the Inputs for Assets Component\. On Project closure, the Bank team validated the final results framework with the individual sectors through a desk review\. 24\. The Project achieved its PDO, and the achievement of each of the three PDO elements is discussed in the following paragraphs\. Overall, the Project met or exceeded 6 of its 7 PDO indicators\. The project surpassed its overall target of 500,000 direct project beneficiaries, reaching 2,297,846 people (of which Page 10 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) 52\.4 percent female) through the totality of the project interventions\. At Project design, the PAD presented rough direct project beneficiary estimates, noting that there would be large variances across project components and sub-components, based on the uncertainties in targeting, given the post-disaster context and rapid preparation timeframe\. The final results for the direct project beneficiaries disaggregated by subcomponent and per district can be found in annex 7, to substantiate the results achieved given the large difference between the target and achievement\. Table 1\. Achievement of PDO Indicator 1 # PDO Indicators Target Achieved a 1 Direct Project Beneficiaries 500,000 2,297,846 • Female (%) 50 52\.4 Note: a\. Direct project beneficiaries are defined as people or groups who directly derive benefits from an intervention\. PDO Element 1\. Sustainably restore agricultural livelihoods 25\. Achievement of PDO indicators\. Achievement of indicator 2 according to table 2 exceeded target values\. Table 2\. Achievement of PDO Indicator 2 # PDO Indicator Target Achieved 2 Number of households with sustainably restored agricultural 180,000 208,753 livelihoods under the Inputs for Asset (IFA) program Baseline: 0 26\. Discussion\. The Project reached 208,753 flood-affected beneficiaries (against a target of 180,000) with immediate livelihood support and income-generating activities through community infrastructure programs, given their food, crop, and livelihood losses\. The beneficiaries were supported with cash and farm inputs to engage in agricultural production in the next growing season\. The sustainability was built into the Project design as the provision of farm inputs for work ensured livelihood restoration on a sustained and cyclical basis as the outputs from the first season, served as the inputs for the next\. The farmers were further supported by the restoration of productive community infrastructure\. 27\. Through this engagement, 2,888 community infrastructure subprojects, such as small feeder roads and dykes that were damaged by the floods, were repaired, thereby restoring basic community infrastructure\. The Project provided 7,946 metric tons of urea and NPK4 fertilizer, 1,334 metric tons of hybrid maize seed, and disbursed about MWK 1\.44 billion in cash\. The fertilizer was applied to a total of 50,062 ha of land that was planted with maize\. An estimated 130,184 metric tons of maize was produced by the beneficiaries of the project\. As a result, beneficiaries were assisted in meeting their food requirements and basic household needs as well as restoring their livelihoods\. 28\. Based on these results, the efficacy of PDO Element 1 is rated Substantial\. 4 NPK = nitrogen-phosphorus-potassium\. Page 11 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) PDO Element 2\. Reconstruct critical public infrastructure to improved standards in the flood-affected districts 29\. Achievement of PDO indicators\. PDO indicators 3 and 5 surpassed their targets, with PDO 4 falling short of the formal target\. Table 3\. Achievement of PDO Indicators 3, 4, and 5 # PDO Indicators Target Achieved 3 Number of kilometers of roads reconstructed to improved 90 97 standards and with services restored 4 Number of schools with services fully restored 82 42 5 Number of health facilities reconstructed with services 2 7 fully restored 30\. Discussion\. Under the project, 789,301 people benefited from the rehabilitation of roads and bridges\. The project surpassed its indicator target of 90 km, achieving 97 km\. This breakdown includes 37 km completed at the Thabwa-Chitseko-Seven East Bank Road – S152); Chiyenda Usiku- Nyamala and Balaka- Utale roads – 35km; Sorgin-Nyajidu road -15km; Mwanga-Chitekesa road – 5km; and the Luchenza section of Zalewa Road - 5Km\. The project also constructed 239m of single lane concrete bridges, 320m double lane bridges, and 749m of box and circular culverts\. The rehabilitation of the S152 road and other roads provided direct employment in civil works and improved access to socioeconomic services\. The achievements at the East Bank Road were made despite substantial delays in the procurement process and also implementation delays following safeguards noncompliance (see annex 6)\. The completion of the rehabilitation of the S152 road has led to a reduction in the traveling time (from four hours to one hour), which has also reduced transport costs, broadened access to markets, and minimized the incidences of floods due to dredged river channels and widened drainage structures\. The works followed the Build Back Better approach and improved durability and resilience of the bridges and drainage structures\. 31\. The project provided 42 schools with restored service, rehabilitating a total of 152 classrooms, 19 toilets, 11 staff houses, and 2 administration blocks and constructing 10 new boreholes at the 42 schools\. Two schools, Chingoli and Chikonde Primary Schools, were relocated to a less flood-prone site\. The PAD target was set at 82 schools; at midterm review (MTR), clarification was made that the target was 40 schools, given that 82 was the number of classrooms to be targeted according to the intermediate indicator\. From that point forward, the clarified target of 40 was tracked; however, this was never adjusted through a formal restructuring from the original incorrect PAD indicator target of 82\. As such, while the project has met its intended target, the project has fallen short of its formalized target, as it was not formally revised with the correction made —this is reflected in the monitoring and evaluation [M&E] design and quality of supervision sections)\. 32\. As a result of the project interventions, children were able to resume enrollment in school following the post-disaster interruption, and teachers saw a sharp rise in school attendance\. The total enrollment increased from 37,156 (18,564 boys and 18,592 girls) in 2016 to 40,868 (20,438 boys and 20,430 girls) in 2019, representing a 9\.1 percent increase over a three-year period\. More significantly, school dropouts reduced by 61\.7 percent between the 2017/18 and 2019/20 academic years, due to the increased learning spaces and improved WASH facilities\. Following better teaching facilities in 42 MFERP- Page 12 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) supported schools, the Ministry of Education increased teacher allocation by 29\.5 percent between the 2016/17 (447) and 2019/20 (634) academic years\. 33\. PDO indicator 5 exceeded its target through the rehabilitation of five health centers and provision of climate-resilient habitable facilities at the two newly constructed health centers (Osiyana and Thuchira) in Nsanje and Mulanje respectively, against a planned target of two\. Provision of specific rooms for health services have increased the number of women delivering babies at these facilities\. The newly built health centers are fully stocked with medical equipment and patient facilities to ensure increased access to essential health services, quality antenatal and postnatal services, and enhanced privacy of patients\. 34\. The project also financed additional critical public infrastructure, which informs the success of the PDO element, and tracked through the intermediate indicators (further discussed in the M&E design section)\. A total of 13 irrigation schemes were rehabilitated, and 4,460 treadle pumps were distributed, resulting in 3,635 ha of irrigable land, benefiting 21,338 households with increased crop production\. A total of 10 gravity-fed water supply schemes benefiting 260,520 people were rehabilitated along with 101 boreholes, which benefited 25,250 beneficiaries\. In the flood-affected districts, improving access to portable water significantly reduced the burden on women, who had to travel long distances to fetch water\. Women reported that more time was dedicated for productive work as the distance and time spent at water points was reduced\. Furthermore, due to improved water supply services in the flood-affected districts the health sector reported reduced waterborne and water-related diseases\. 35\. A total of 10 water harvesting structures for flood protection were constructed, benefiting 87,386 households with reduced flood risk and through dual utilization of water for irrigation\. In addition, 15 hydrological monitoring stations were also installed and functional, transmitting data to the hydro-data center at the Department of Water Resources, to inform the flood early warning system\. 36\. Based on these results, the efficacy of PDO Element 2 is assessed as High\. PDO Element 3\. Improve the Government of Malawi’s disaster response and recovery capacities 37\. Achievement of PDO Indicators\. As shown in table 4, PDO indicators 6 and 7 were met\. For PDO 6, the PDNA methodology was institutionalized and adopted, and a national disaster risk financing strategy was developed and adopted by the Government\. For PDO 7, safer schools and safer housing guidelines were developed and adopted by the Government, and the national building codes and standards were developed\. Table 4\. Achievement of PDO Indicators 6, and 7 # PDO Indicators Target Achieved 6• Institutionalization/adoption of PDNA methodology, and Yes Yes institutional and financing framework for recovery 7 Institutionalization/adoption of disaster resilient designs Yes Yes for schools, health facilities and roads 38\. Discussion\. PDO Indicator 6 was met by improving data preparedness and capacity development and institutionalization of the PDNA through trainings and orientations in all 15 affected districts, which strengthened the capacity of the District Civil Protection Committees in response\. The project also Page 13 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) financed the development and maintenance of the Malawi Spatial Data Platform,5 which is an open source platform to facilitate the sharing of risk and hazard information\. Recovery planning and implementation was strengthened through institutionalization and adoption of the DRF, which highlights the legal frameworks and the existing and potential financing instruments for disaster recovery in the country through a risk layering approach to disaster, providing a foundation for disaster risk financing in the country\. 39\. With respect to PDO indicator 7, the project financed the review and strengthening of construction guidelines for safer schools and safer housing, and development of an awareness raising strategy for the guidelines\. The safer school construction guidelines were developed and adopted by the Ministry of Education and the education infrastructure technical working group and were incorporated into the National Education Sector Plan to guide all education stakeholders in the construction of schools in Malawi\. Since its adoption, 83 government and donor-financed schools have been constructed in accordance with these guidelines at the time of writing\. The project also financed the development of national building codes, regulations, and standards for housing\. It was agreed that the safer housing construction guidelines will be an addendum to the building regulations once enacted as law that will guide all construction of private and public buildings in Malawi\. These building codes and regulations will also guide the construction of health facilities\.6 Finally, the project financed topographic, sedimentation, climate change, and hydrological studies to update the feasibility study for the rehabilitation of the railway, which was damaged by the flood\. These studies have informed the detailed designs for the rehabilitation of the railway, which is to be financed by the Government\. 40\. Based on the discussions above, the efficacy of PDO Element 3 is rated Substantial\. Justification of Overall Efficacy Rating 41\. As detailed above, it is clear that agricultural livelihoods were sustainably restored, critical public infrastructure was reconstructed to improved standards in flood-affected districts, and disaster response and recoveries of the GOM were enhanced\. Thus, the project, with the exception of one indicator, achieved or exceeded its PDO indicators and targets, and there is a strong and clear indication that the results recorded can be attributed fully to the project intervention\. Therefore, the PDO was achieved with some minor shortfalls\. 42\. Based on these outcomes, the overall efficacy is rated Substantial\. C\. EFFICIENCY 43\. Rating: The efficiency of the MFERP is rated Substantial\. 44\. Economic analysis\. The Post Disaster Needs Assessment conducted after the 2015 floods estimated preliminarily that 1,150,000 people were directly affected by the event\. Through the MFERP, an estimated 2,297,846 people directly benefited from various Project interventions (see Annex 7), through the food security interventions and livelihood support programs (about 36 percent of the project cost), and the rehabilitated and reconstructed public infrastructure, in the transport, health, 5http://www\.masdap\.mw/\. 6These aforementioned areas in turn were advanced substantially from a policy perspective through the Malawi Disaster Risk Management Development Policy Financing with Cat DDO (P165056), to further institutionalize these achievements\. Page 14 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) education, water and irrigation sectors (about 54 percent of the project cost)\. Further, all residents of Malawi benefited indirectly from project interventions that supported improvements in Government capacity to respond and recover from disaster events, including advancements in building regulation, availability and utilization of risk information and improved capacity at the national and district level for disaster assessments and response (about 10 percent of the project cost, including the project management costs)\. 45\. The economic analysis conducted during Project appraisal was limited in its approach, only assessing the irrigation sub-component to derive the Economic Rate of Return (ERR)\. This ICR economic analysis (see Annex 4) takes a corrective approach to expand the assessment scope and quantify the expected benefits arising from (i) restored and reconstructed irrigation infrastructure; (ii) rehabilitated water supply schemes; (iii) restored and improved road transportation networks; and (iv) reconstructed education facilities\. The analysis has compared these benefits to both the partial cost to deliver these interventions and the total cost of the project\. Together, these assessed areas cover 47 percent of the total Project cost\. Applying only the cost associated with the measured benefits results in an ERR of 32 percent for roads, 17 percent for irrigation, 20 percent for water supply and sanitation, and 39 percent for education investments, achieving an overall ERR of 31 percent with an NPV of USD 148 million\. Applying the total cost to the measured benefits above yields an ERR of 15 percent and an NPV of USD 105 million\. The analysis assumes a standard discounting rate of 12 percent for roads, bridges, and irrigation infrastructure, 6 percent for education and water supply services, and a 20-year longevity of assets (see Annex 4)\. 46\. Efficiency of implementation\. The project closing date was extended to allow for the completion of the subcomponent to reconstruct and improve roads and bridges by 13 months to accommodate extra efforts to strengthen the country's and the project's safeguard management system\. Close to a year was lost for subcomponent implementation due to the partial suspension of financing and the subsequent onboarding of a new contractor\. During this period significant attention was afforded to supporting the country's efforts toward improving the safeguard system of the current project and providing lessons for the future World Bank-financed projects in the country\. Thus, the additional outcomes achieved compensated for the potential negative impacts of project extension on the efficiency\. Additionally, the project improved the cost-efficiency in Component 1, livelihood and food security restoration, by 13 percent (that is, reducing unit cost from USD 22\.14 to USD19\.30 per capita), benefiting a total of 0\.8 million people from the project efforts\. D\. JUSTIFICATION OF OVERALL OUTCOME RATING 47\. The overall outcome rating is assessed as Satisfactory based on the combined ratings of relevance of the PDO (high), efficacy (substantial), and efficiency (substantial)\. While the project was extended by 13 months, it met all its objectives, remained relevant, and had viable economic and financial benefits\. E\. OTHER OUTCOMES AND IMPACTS Gender 48\. Positive impacts\. The project was not gender tagged but women were among the community members who benefited from the project\. The project had a strong focus on and succeeded in ensuring a balanced gender representation across its activities\. A total of 1,204,071 women representing 52\.4 Page 15 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) percent of the direct project beneficiaries benefitted from the project\. Women also played a prominent role in project implementation spanning participation in planning, decision-making process, and implementation of activities at the community level across all components of the project\. For instance, water supply interventions reduced the time women took to fetch water, thereby allowing women to be involved in other productive activities\. Participation of women in the IFA, construction and rehabilitation works in irrigation, flood mitigation, and roads subcomponents increased their employment opportunities and income earnings\. Literature on the impact of disasters shows that there are often gendered elements at play, which can harm men and women differently and disproportionately when disasters strike\. By benefiting women, the project contributed to an improvement with respect to reducing this gender gap\. 49\. Unintended negative impacts\. Sexual violence and gender-based violence (GBV) is prevalent in Malawi with 38 percent of women between ages 15 and 49 experiencing physical or sexual violence at least once\. During implementation, the World Bank team uncovered cases of contractor noncompliance with environmental and social safeguards (see annex 6) in the implementation of the East Bank Road works and cases of sexual harassment, sexual exploitation and abuse, labor issues, and GBV\. Institutional Strengthening 50\. Safeguards system strengthening\. In light of the incidents of GBV and contractor noncompliance at the East Bank Roads site, the team and Government developed a 28-point Safeguards Action Plan (see annex 6 for further details)\. Additional staff were hired by the Roads Authority to manage environmental and social safeguards, GBV third-party monitors and GBV service providers were hired for expanded support, grievance redress mechanisms (GRMs) were redesigned, and Grievance Redress Committees (GRCs) received refresher trainings\. This GRM revamping led to stronger reporting and capturing of incidents toward the end of implementation\. Additionally, contract procedures, policy terms, and codes of conduct were reviewed and ministries within the Government, such as the Ministry of Gender, Children, and Social Welfare, were more deeply integrated into project implementation\. Chikwawa District Council trauma counselors received refresher training in sexual exploitation and abuse/sexual harassment (SEA/SH) prevention and response and 17 female SEA/SH champions were identified, trained, and deployed to work with the GBV service provider\. Long-term policy action plans for the Roads Authority committed to by the Government included establishing an environmental and social unit and updating policy guidelines\. Poverty Reduction and Shared Prosperity 51\. The 2015 flood event disproportionally affected the poorest and most vulnerable, with 47 percent of Malawi’s poor population living in the most affected rural areas of the southern region\. The worst hit districts in which the project engaged (Nsanje, Chikwawa, Phalombe, and Zomba) had increasing poverty rates at the project design stage, with poverty incidences of 81\.2 percent, 81\.6 percent, 64\.5 percent, and 56\.6 percent, respectively\.7 There is no rigorous evaluation of poverty impacts from the project\. However, early project interventions supported agricultural livelihood restoration and food security, directly targeting the most vulnerable who have the least asset ownership and coping capacity, safeguarding households from selling their meager assets to cushion their consumption\. The project enhanced household disposable income with daily wages increasing from MWK 645 to MWK 1,481 among project- supported beneficiaries\. Furthermore, the rehabilitation and the reconstruction of the East Bank Road 7 The national poverty rate at the project design stage was 50\.7 percent\. Page 16 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) connects the two districts (Chikwawa and Nsanje), with the highest incidences of poverty and ultra- poverty in Malawi, allowing for the improved marketing and supply of agricultural inputs; facilitating access to markets and allowing easy travel to access health services, education centers, and other facilities; and reducing the time to traverse from four hours before project interventions to one hour at project completion\. 52\. Additionally, the restoration of boreholes and other rural water supply schemes helped reduce walking time for fetching water, allowing households allocate more time toward other productive activities\. Access to clean water reduced incidences of waterborne and water-related diseases\. Interventions on flood protecting structures and hydrological stations contributed to reduced poverty and shared prosperity of the communities through increased protection to future floods and enhanced preparedness\. III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A\. KEY FACTORS DURING PREPARATION 53\. Rapid preparation phase\. The project was rapidly prepared under exceptional circumstances with project initiation to Board approval spanning a three-month period\. The heavy rainfall-induced flood event occurred in January 2015, with a PDNA undertaken between February and March 2015\. The PDNA provided the guiding principles and road map prioritizing early-, medium-, and long-term needs\. The project was prepared and approved by the World Bank Board of Directors on May 7, 2015\. The Government demonstrated its commitment to the project with effectiveness declared in August 2015\. With the speed of preparation, execution challenges at the national and district levels were clarified and remedied during implementation\. 54\. Effective design and objectives\. The component design proved to be effective in balancing immediate early recovery support, channeling considerable resources through the Component 1 activities within four months from effectiveness, and longer-term reconstruction and resilience interventions\. The project focused on strategic investments under a ‘proportionality’ principle in the selection of interventions and resource allocation, addressing the most critical needs based on sectoral impacts quantified in the PDNA\. This helped appropriately orient the PDO, as well as the indicators and the targets, to maintain the flexibility required in a post-disaster recovery program\. 55\. Use of existing structures in project design\. Due to the condensed preparation period, the project design leveraged the existing structures within ongoing programs to good success\. The project adopted the IFA approach for livelihoods support and incorporated aspects of the cash-for-work schemes advanced under the Malawi Social Action Fund and Irrigation Rural Livelihoods and Agricultural Development Project (IRLADP) as the means of delivering post-disaster livelihood support\. Participants worked on a community asset in return for farm inputs and cash, supporting food insecurity and improving rural infrastructure and public assets\. Larger-scale infrastructure work under the project leveraged flood risk management work done under the Shire River Basin Management Project\. Moreover, the project created synergies and collaborated closely with the Education Program and the National Water Development Plan 2\. Page 17 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) 56\. Risk assessment and mitigation measures\. The project risk was rated Substantial, which was appropriate because of the condensed preparation timeline, the post-disaster environment, and macroeconomic risks\. Key risks, such as institutional coordination and implementation challenges at the district level, were identified and mitigation measures were put in place\. Measures were introduced to improve coordination and collaboration across sectors at the sectoral and district levels, but information sharing and inter-sector coordination remained a challenge throughout implementation\. Safeguards risk was assessed as Moderate and did not identify the GBV risk during construction at the preparation stage\. The project was GBV retrofitted in July 2019 and mitigation measures were put in place and further developed as issues of GBV surfaced throughout implementation\. B\. KEY FACTORS DURING IMPLEMENTATION Factors Subject to Government and/or Implementing Entities’ Control 57\. PIU efficiency\. The PIU was responsible for implementation of the project activities, with the exception of the road works, which were implemented by the Roads Authority\. Three PIU offices were in place with the primary office in Lilongwe, as well as other field offices in Zomba and Blantyre, to help facilitate implementation of Component 1 activities\. Project management expenditure was high during the first two years of the project due to purchase of project vehicles, construction and rehabilitation of office buildings, intensive project management costs involved with delivery of the livelihood support program and paying of high salaries and benefits to a large inherited PIU staff\. By the midterm of project close to 90 percent of the funds were used\. The PIU’s size was thereafter reduced, field offices were closed when the IFA activities concluded, and the 2016 Malawi Resilience and Disaster Risk Management Project (P161392 – at the time, termed the Malawi Drought Recovery and Resilience Project) was also implemented by this leaner PIU, contributing to further efficiency across the implementation of both programs\. Project management cost allocations from the Drought Recovery and Resilience Project supported the implementation of both Projects\. 58\. Implementation unit’s safeguard capacity\. The project had two fund managers, the PIU under the Ministry of Finance and the Roads Authority\. The PIU was responsible for implementation of all the components except Subcomponent 2\.1 (reconstruction and improvement of roads and bridges)\. At the onset of the project, the PIU, had only one specialist dealing with both environment and social safeguards issues\. This was compounded by the lack of participation of relevant government departments to ensure compliance to safeguards implementation and the number of subprojects requiring close supervision\. Similarly, the Roads Authority also had only one specialist covering both environmental and social safeguards for all road projects implemented in Malawi\. Therefore, safeguards oversight was weak during implementation of the project, leading to a number of noncompliance with safeguards requirements by the contractor and supervising engineer, and required substantial safeguards capacity improvement\. 59\. Environmental and social noncompliance\. In July 2019, during a supervision mission, the World Bank team uncovered severe breaches of safeguards compliance at the Thabwa-Chitseko-Seven Road site, due to contractor noncompliance and weak safeguards oversight from the Roads Authority\. These breaches included (a) several cases of SEA/SH; (b) lack of systems and protocols in place to address environmental and social risks; (c) absence of fully functioning community and occupational health and safety (OHS) guidelines; (c) contractor noncompliance with the code of conduct; (d) nonadherence to OHS standards; (e) weak capacity of contractors, consulting engineers, and the service provider in environmental and social management of the project; and (f) ineffectiveness of GRM and no sensitivity in Page 18 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) GBV reporting\. In close coordination with the World Bank teams, the GoM prepared and implemented a corrective Safeguards Action Plan\. A detailed account is presented in annex 6\. 60\. Partial suspension of financing\. Due to the gravity of the safeguard noncompliance at the Thabwa-Chitseko-Seven Road site, the World Bank issued a partial suspension of financing, until the situation was fully addressed and remedied and the Safeguards Action Plan implemented\. In order to resolve all safeguards noncompliance, the GOM took appropriate measures to terminate the contract with the noncompliant contractor, bolster safeguards capacity at the Roads Authority, change the reporting structures of the service providers, and enhance the overall capacity of the safeguards system through the Action Plan\. The partial suspension was in place for 6 months, from August 3, 2019 to February 21, 2020\. 61\. Local level engagement and capacity\. The PIU worked closely with the government ministries, departments, and agencies (MDAs), which had a presence in the District Council\. The MDAs appointed the desk officers responsible for coordinating, monitoring, and reporting sector activities between the central and local district councils\. However, the district councils had high staff turnover, which affected the institutional memory and progress in implementation of the project\. In addition, collaboration among the sectors at the District Council level was weak, where synergies among sectoral interventions could have been enhanced, for instance, improving coordination with the irrigation and crop production sectors to enhance early utilization under the irrigation schemes completed\. Finally, the financial management capacity at the council level was weak with poor record keeping and accountability as the major weaknesses\. 62\. Coordination of involved agencies and departments at national and district levels\. The MFERP could have benefited further from enhanced coordination among implementing agencies, through better communication and coordination across sectors that functioned often in a siloed approach (horizontal) and enhancing communication and collaboration between central-level and district-level agencies (vertical)\. Horizontally, there were missed opportunities for even greater impact through coordination of activities geographically during the project planning phases to maximize impact of sector interventions and enhance efficiencies during supervision where there was involvement of multiple agencies\. Vertically, decisions made at a central level were often communicated imperfectly to the district levels for supervision and information gathered at the district level did not properly flow back up to the central level\. 63\. Sector involvement at design and implementation stages\. There were changes in the government sector-level staff involved in the PDNA, design, and project implementation\. For some of the longer-term recovery interventions in health, water supply, and transport, the sector specialists changed, which led to additional delays and expenditures to reconfirm priorities and approaches\. While this did not affect the overall outcome that the project had, it did contribute to time delays and additional field time and costs at the sector level\. Factors Subject to World Bank Control 64\. Consistency in leadership\. The World Bank supervision team remained consistent through project implementation contributing to deeper client relations\. From approval to project closure, the project had three changes in internationally based task team leaders, but one locally based co-task team leader was involved throughout the entire project design and implementation period\. The initial task team leadership Page 19 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) responsible for project design, supported implementation of the project through its MTR\. The consistency allowed the task team leaders to build strong client relationships and gain a deeper understanding the project\. Having the locally based task team leader was imperative for the effective and informed handling of the safeguards and GBV issues that arose during implementation\. 65\. Intensive supervision support\. The World Bank supervision during the final two years of the project was heavily focused on the safeguard support and close implementation monitoring of works in the field, given that the project had fallen into a Moderately Unsatisfactory rating and was on the Corporate Risk list because of the safeguards challenges at the road works site (see annex 6)\. The heavy supervision support to the PIU, Roads Authority, both on technical advice to infrastructure completion and the safeguards strengthening, guided the project out of problem status and ensured full infrastructure completion, even with the delays and challenges experienced\. Close supervision support and exceptionally allowed in-person field visits continued during the COVID-19 pandemic\. Factors outside the Control of Government and/or Implementing Entities 66\. Natural disasters\. During the course of implementation, the project experienced low agricultural production due to drought in 2016, dry spells in 2017, a fall armyworm outbreak in 2018, and Tropical Cyclone Idai in 2019\. The drought and dry spell in 2016 and 2017, respectively, affected the productivity in irrigation schemes and the treadle pump schemes\. The fall armyworm outbreak affected rain-fed production in the project areas\. Furthermore, the 2019 Tropical Cyclone Idai damaged some of the flood protection infrastructures and irrigation schemes financed by the Project\. The floods were experienced at the time when some of the structures had just been completed with inadequate time for structure settling, concrete maturing and during the defect correction period\. The schemes in the Lower Shire were affected by Tropical Cyclone Idai as well\. The project rehabilitated the affected structures and irrigation schemes with added resilient measures thereby increasing costs\. 67\. Macroeconomic environment\. During implementation, Malawi’s economic growth was moderate, with real GDP growth rate averaging about 2 to 3 percent\. On the other hand, the Malawian kwacha depreciated against its trading currencies during project implementation by 69 percent, resulting in an upward adjustment of procurement commitments in some existing contracts\. The project was able to accommodate this and was also able to offset this challenge with resources gained through the appreciation of the US dollar against the Special Drawing Rights (SDR) during project implementation\. IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 68\. The Results Framework adequately reflected the initial project design\. The PDO indicators were suitable and directly measured progress toward the objective and outcomes outlined in the Theory of Change\. There were some weaknesses with the indicators as designed, whereby some indicators tracking infrastructure rehabilitation under PDO Element 2 did not capture all infrastructure interventions (irrigation and water and sanitation) at the PDO level\. However, the outcomes in terms of the people supported and benefiting from these infrastructure interventions were captured under direct project Page 20 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) beneficiaries, still allowing for a discussion on the outputs and outcomes\. One indicator target was found to be incorrect (target of 82 schools at the PDO level, which was 82 classrooms at the intermediate; the clarification was made during the MTR, but the project was not formally restructured to correct it)\. The PDO indicators for PDO Element 3—improvement of disaster response and recovery capacity—were composite and more output than outcome oriented but still allowed for sufficient assessment and discussion around the achievement of the intended objectives\. The baseline and final target values of the indicators were appropriate, and the results chain was clear\. M&E Implementation 69\. The PIU was responsible for managing the project M&E and ensuring that tracking of overall implementation progress across the 15 districts was done on a quarterly basis\. During the first year of implementation, the data collection and analysis of results was done manually, with an automated database system deployed in the second year of implementation to facilitate data gathering from the 15 districts\. While 195 district M&E officers (13 per district) were trained in M&E and 80 officers were fully equipped to enter quarterly data, as requested by the PIU, challenges were prevalent in the timeliness, consistency, and quality of reporting\. Challenges also existed centrally within the PIU, with inadequate systems for verification and validation of information being received—this led to several changes and adjustments in results tracking throughout implementation, which needed to be resolved through site visits, district council visits, and active engagement with sectors\. At project completion, the team had to verify and validate some results information within individual ministries and sectors\. M&E Utilization 70\. The M&E data collected under the project were used during implementation to inform quarterly project review meetings at the national and district levels and by the Project Steering Committees\. While the database system was established, it did not have the proper tools to generate information for narrative reports and the data analysis was still done manually by the PIU\. At the project management level, the quality and periodicity of information flows compromised the ability of the project to fully use the M&E data to make day-to-day project level decisions during implementation\. Yet, limited information was still used for Government decision-making and information on the post-disaster recovery and to inform enhanced coordination across sectors\. Justification of Overall Rating of Quality of M&E Rating: Modest 71\. Overall quality of M&E is rated Modest\. The system, as designed, was generally sufficient to assess the achievement of the objectives and test the links in the result chain to substantiate the project outcomes; however, there were shortcomings during implementation in the periodic updating and verification of results thus impacting the ability of the M&E system to effectively inform project-level decision-making\. There were also moderate shortcomings in the choices and definitions of certain indicators\. Page 21 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental Safeguards 72\. The project was classified as Category B and five policies were triggered: Environmental Assessment (OP/BP 4\.01), Natural Habitats (OP/BP 4\.04), Forests (OP/BP 4\.36), Pest Management (OP/BP 4\.09), and Projects on International Waterways (OP/BP 7\.50)\. The project was processed following the condensed procedures as outlined in instructions: Preparation of Investment Project Financing - Situations of Urgent Need of Assistance or Capacity Constraints\. The Environmental and Social Management Framework and Integrated Pest Management Plan were completed and disclosed in-country and on the World Bank’s external website in September 2015 after project approval but before activity implementation\. 73\. At the MTR stage, the project was in full compliance, with Satisfactory ratings for the environmental operations\. The MTR allowed for adjustments in the environmental screening processes for the labor-intensive works given the vast number of Environmental and Social Management Plans (ESMPs) being produced and the resources needed for their management\. Throughout implementation, however, there were instances of subprojects being started without the necessary World Bank approvals and confusion during implementation in the application of safeguard procedures; their timing; and the respective roles of the sectors, PIU, Environmental Affairs Department, and the World Bank\. The Government, however, sustained efforts in ensuring that the World Bank mission recommendations were addressed\. In September 2019, the overall safeguards rating was downgraded to Unsatisfactory due to the safeguard issues in the Thabwa-Chitseko-Seven Road (see annex 6)\. With intensive World Bank supervision support, the project returned to full compliance by June 2020 based on the progress on the Safeguards Action Plan, contractor performance, and improved safeguards management\. Social Safeguards 74\. Social safeguard policies triggered by the project were Physical Cultural Resources (OP/BP 4\.11) and Involuntary Resettlement (OP/BP 4\.12)\. A Resettlement Policy Framework was prepared and disclosed in-country and on the World Bank’s external website in May 2015 before project implementation\. 75\. Progress during preparation and implementation of subprojects had been continually improving, moving to satisfactory status by MTR\. A project GRM was in place with ongoing sensitization\. There was a focus on providing training, enhancing the capacity at the PIU for safeguards management, and enforcing contractual compliance on site\. There were several instances of irregular reporting to the World Bank on the status of safeguard instruments and associated challenges\. On one health center, construction was started before the safeguard instruments were fully approved, which had to be remedied, and site clearance at the Thabwa-Chitseko-Seven Road began before the necessary instruments were fully approved\. The social rating (and thus the overall safeguard rating) was downgraded to Moderately Unsatisfactory following the road fatality that occurred at the Thabwa construction site (see annex 6) based on the need for enhanced contractor supervision and implementation of the corrective action plan\. Compliance was downgraded to Unsatisfactory a few months later based on the serious noncompliance issues uncovered at the Thabwa construction site\. With intensive World Bank supervision support, the project returned to full compliance by June 2020 based on Page 22 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) the progress on the Safeguards Action Plan, contractor performance, and improved safeguards management\. Financial Management 76\. Throughout the project cycle, the project complied with the World Bank’s financial reporting requirements\. The project was in compliance with the financial reporting arrangements, with the quarterly interim financial reports and annual unqualified audit reports being submitted to the World Bank mostly within the stipulated timelines\. The PIU had adequate financial management capacity in place with a qualified full-time financial management specialist, an assistant financial management specialist, and an accountant\. The budgeting and accounting arrangements were assessed as adequate\. The project experienced challenges with staffing recruitment delays at the district level, which affected financial management support\. Project audits revealed control and accountability issues in most districts covered by the project\. At MTR, the World Bank assessed districts’ transactions and documented summary findings\. The World Bank reviews and an internal audit in August 2018, determined questionable expenses amounting to US$106,000 during IFA implementation, from the district councils at Thyolo, Mulanje, Chiradzulu, Blantyre, Karonga, Zomba, Rumphi, and Mangochi—these funds were refunded to the project by the councils, with support of the Ministry of Finance\. As a result of the identified weaknesses, it was recommended that the districts should only be provided funds for their incremental operating costs, with all other activities being managed from the project secretariat\. Procurement 77\. Procurement was rated Moderately Satisfactory during the project implementation period\. The project generally followed the procurement procedures as stipulated in the procurement guidelines, PAD, Financing Agreement, and Project Implementation Manual\. There was adequate oversight from the MoFEPD Internal Procurement and Disposal Committee, which assisted to fast-track procurement processes with due regard to agreed procedures, and during the project implementation, there was no declaration of any mis-procurement\. The project had a dedicated procurement team comprising a procurement specialist and two assistants, though given the number of contracts at the height of implementation, contract management was a challenge\. Weaknesses in contract management, including weak enforcement of environmental, social, health, and safety risks (SES/SH, rape, and assault); poor documentation; record keeping; and monitoring, were noted during project implementation, which led to time extension of contracts, contract lapses, delays in payment, and in some cases cost overruns and suspension of contract execution\. These challenges were compounded by inadequate diligence at the time of developing the terms of reference for some of the consultancies and inadequate communication of contract progress between the PIU and implementing departments\. Contract packaging and scheduling, especially for interdependent activities, was also a challenge whereby some works packages were awarded before the completion of safeguards instruments or equipment delivery schedule preceding completion of infrastructure construction\. The World Bank Systematic Tracking for Exchanges in Procurement was introduced during project implementation\. The World Bank team intensively monitored compliance with the project’s procurement procedures requiring borrowers to plan and track procurement activities in the online platform\. Page 23 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) C\. BANK PERFORMANCE Quality at Entry 78\. The project was designed based on a PDNA, which highlighted the extent of the damage and loss as well as critical needs\. MGDS II and the Word Bank Country Strategy also informed project preparation\. The project preparation process followed extensive consultations with the borrower and beneficiaries\. The project design leveraged existing structures within ongoing programs to good success, for example, the IFA approach for livelihoods support and aspects of the cash-for-work schemes advanced under the Malawi Social Action Fund and IRLADP\. With impacts during implementation, the World Bank safeguards risks assessment did not identify the GBV risk of infrastructure work at design with the GBV retrofitting occurring during implementation\. The institutional arrangements and setup underestimated the costs based on the size of the unit and the inefficiencies in adopting an established and oversized team, without making the necessary and needed adjustments to the composition\. This is partially explained by the post- disaster context and the need to leverage existing systems to allow for speed in financing provision\. The fiduciary risk was rated Substantial during appraisal due to increased risk of fraud and corruption with regard to the use of simplified procurement procedures due to the emergency nature of the project\. However, the procurement implementation arrangements were rated Satisfactory as the PIU was familiar with IDA guidelines and procedures given that the PIU had been implementing similar IDA-financed projects and the performance was satisfactory\. Quality of Supervision 79\. The World Bank undertook two missions with international team members and consultants per year and targeted missions led by the local task team leader, staff, and specialists in-between full-team missions for a total of four missions per year\. Additionally, in-between missions, the local team communicated with the PIU and followed up on the agreed actions\. Implementation missions and continuous interaction between the World Bank and implementing agencies provided the necessary platform for invaluable dialogue and on-the-spot checks that contributed to the management of the project\. Through such missions, some challenges were observed and recommendations were made to improve the quality of the work being done and promote community ownership of the interventions\. The missions had ongoing discussions with the PIU regarding effective utilization of the project management resources to enhance accountability and efficiency in the usage of project funds and adjusted the PIU’s size and composition during implementation to enhance efficiency\. Following the MTR, a formal restructuring process to adjust the M&E target of the PDO indicator related to schools was not carried out, which was considered a weakness in supervision quality\. 80\. MFERP covered several districts with varying capacity\. Therefore, the World Bank adjusted its implementation strategy from offering the same level and type of attention to all districts to prioritizing districts with more complex interventions and challenges, for example, Chikwawa, Nsanje, Mulanje, and Ntcheu, and targeting specific fiduciary or technical gaps\. The adaptive supervision and implementation support approach was complemented by clear and timely communication with national and local authorities where the team was able to raise identified issues early with the Ministry of Finance and government counterparts\. 81\. The World Bank implementation support missions uncovered the noncompliance at the Thabwa Road site, which resulted in a partial suspension of financing and the project having a Moderately Page 24 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) Unsatisfactory rating for PDO achievement and an Unsatisfactory rating for safeguards and implementation progress in September 2019\. The MFERP was one of seven projects at the time on the GGSVP FY20 Corporate Risk list\. The intensive safeguards and technical support that followed, and establishment of monthly supervision by the team, allowed for successful completion of the road (although also compounded by the COVID-19 challenges), improvement of the safeguards system capacity and a PDO rating of Satisfactory for implementation progress and safeguards at project closure\. Justification of Overall Rating of Bank Performance 82\. The overall rating for World Bank performance is satisfactory\. The quality at entry was considered to be strong, despite some shortcomings in the project design due to the accelerated preparation time frame\. The quality of supervision was considered to be strong despite some shortcomings, with commendable supervision efforts during the last two years of implementation to support a satisfactory project outcome at project closure\. D\. RISK TO DEVELOPMENT OUTCOME 83\. The project was successful in its objectives to improve the country’s disaster response and recovery systems, increasing the resilience of both public infrastructure and agricultural production to natural disasters\. The project’s technical assistance activities were designed to feed into institutionalized operating procedures and structures for recovery needs assessment, policy making, standard setting, implementation management, and financing in the future\. Despite the project’s success in building the capacity to manage climatic shocks and enhancing preparedness through improvement of institutional capacity at national (Department of Disaster Management Affairs [DoDMA]) and district levels, further work is needed for continued advancement of a holistic DRM program in Malawi that designs, plans, and delivers effective activities to safeguard livelihoods and appropriately respond and recover, post disaster\. Without continued support and focus, it is possible to lose the progress made on climate resilience institutional strengthening\. Achievements from the MFERP have been further advanced from the policy side in the Malawi Disaster Risk Management Policy Financing with Cat DDO (P165056), including building regulations, construction guidelines and policies as well as DRM financing strategies and legislation\. Continued technical capacity support and continuing to advance DODMA’s institutional and governance position within the country are key continued objectives of the Malawi Resilience and Disaster Risk Management Project\. 84\. To achieve the infrastructure objectives, particularly around road transport, the project had to focus on strengthening the safeguards system and GBV management and Malawi’s institutional capacity to identify such risks and both mitigate and manage them\. With the project closure, continued focus, attention, and institutional support could be lost, which could hinder the progress made\. It is important that the Roads Authority take decisive actions to create and staff an Environmental and Social Unit and update the current Environmental and Social Guidelines in place\. This involves policy-level decisions with the Ministry of Transport and appropriate recurrent resourcing and should be supported by the World Bank at a portfolio level\. It is imperative that the Government and World Bank remain vigilant to the risk, address the systematic and longer-term changes needed at the portfolio level, and strengthen the systems advanced through the MFERP to sustain this unexpected development outcome from the project\. Page 25 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) V\. LESSONS AND RECOMMENDATIONS 85\. Role of the Department Responsible for Disaster Risk Management\. It is important that the DoDMA have a more pronounced role in the project governance committees and to facilitate multisectoral coordination in post-disaster recovery projects\. Rather than DoDMA also implementing its activities in a siloed fashion, its position within the DRM country structure should be enhanced and supported to play a greater operational role in the planning and implementation of activities under a recovery and reconstruction project\. 86\. Monitoring and Evaluation\. Based on some of the limitations in the M&E system under the MFERP, it is important that the following lessons are taken forward: (a) implement additional tools and technology to support easy access, upload, and management of data, given that a lot of the data collection and analysis was done manually; (b) at the beginning of the project, establish the systems, protocols, and parameters for validation and vetting of M&E data and implement training programs at the beginning for those involved in data collection and enumeration; and (c) more closely link M&E data collection with recurrent sector field supervision, so there is a more predictable and continuous flow of M&E information—this can be facilitated by the use of a simple platform like the World Bank Geo-Enabling Initiative for Monitoring and Supervision (GEMS)\. 87\. Effective use of supervision resources\. Government systems in Malawi do not place limits on field supervision costs under projects, and close management and supervision on the use of project funds for this purpose is required\. It is critical that projects institute protocols and caps for supervision costs, to be adhered to, monitored, and enforced at the PIU and Steering Committee levels and appropriately considered and applied against annual workplans\. Additionally, projects need to ensure that there is a system of submitting field objectives before departure and that a short back-to-office report is prepared and filed, ensuring both a flow of information for M&E purposes and financial management and accountability\. 88\. Implementing agency coordination and project supervision\. The MFERP was implemented under the responsibility of the Ministry of Finance\. The project would have benefited from stronger oversight within a technical ministry and more effective functioning of the Project Steering Committee\. This would have provided more technical capacity to oversee supervision and inform implementation of the project and technical-level steering committees\. To improve coordination, having a PIU team comprised of both technical specialists (government counterparts) from participating agencies and competitively hired project management staff is important\. Multisectoral coordination is further enhanced with a hybrid team’s focus on shared objectives, where the team works across sectors and disciplines to achieve the objectives of the project rather than implementing siloed solutions by sector\. 89\. The abovementioned four lessons were taken on board in the design and development of the Additional Financing to the Malawi Drought Recovery and Resilience Project, now referred to as the Malawi Resilience and Disaster Risk Management Project\. 90\. Design of emergency engagement\. Carrying out the PDNA proved a very useful way of engaging critical sectors in Project design and being able rapidly prepare a Project, with an appropriate technical basis and orient critical emergency resources\. The MFERP demonstrated the impact and effectiveness of Page 26 of 58 The World Bank Malawi Floods Emergency Recovery (P154803) post-disaster interventions that focus on immediate livelihood support as well as medium- and longer- term recovery interventions\. The livelihood support activities (IFA) and any immediate/short term interventions should be clearly time-bound in the project design to facilitate management of supervision resources, better structure delivery mechanisms and minimize risk of resources not reaching the intended beneficiaries on time\. 91\. PIU implementation arrangements\. While an established PIU for the commencement of the project is a huge benefit to the early implementation of the project, there should be a clear assessment of needs to ensure efficiency\. During implementation of an emergency project it is more difficult to make course corrections once activities have commenced\. It is critical that at the beginning of the project, (a) there is a proper accounting of staff and resources needed for implementation to cover any gaps and cut back on extraneous capacity consistent with the new project; (b) there are proper performance evaluation protocols agreed upon and in place for all staff; and (c) an approach is agreed upon for staff to be rehired competitively after the first year, so adjustments can be easily made based on need and performance similar to the vetting and planning process when establishing a new PIU\. Specific Lessons and Recommendations Related to Safeguards (see annex 6 for further context and information which informs these lessons) 92\. Safeguards Steering Committee\. Related to the involvement of the appropriate government ministries, attention should be given to developing a safeguards-specific Steering Committee for the Roads Authority and other larger projects/sectors in rural areas in Malawi\. This would ensure a proper governance structure involving all relevant Government ministries (such as the Ministry of Gender, Community Development and Social Welfare (MoGSW) and the Ministry of Labor), appropriate oversight, and mechanisms for redress and would guarantee appropriate resourcing and ownership, coordinated from the Ministry of Transport and Public Works level\. 93\. Contractual arrangements with service providers\. Properly considered lines of reporting and accountability for project service providers are important\. The GBV service provider under the project was initially hired by the road works contractor, with the reports prepared not properly escalated and the overall work by the service provider compromised\. While the contract was restructured so the service provider reported to the Roads Authority, there were still gaps in terms of holding the Roads Authority accountable for the weaknesses\. It is important for any third-party monitor or service provider to report to the MoGSW for GBV issues or to the Environmental Affairs Department for safeguards implementation, to ensure proper and impartial supervision of all stakeholders involved in implementation\. 94\. Safeguards oversight\. For proper oversight of larger or higher risk subprojects, there should be independent safeguards oversight through a separate entity to the supervising consultant\. The incentive for the engineering supervisor is to monitor engineering progress, with safeguards application as a secondary consideration to the timely progress of works\. A separate entity would provide more appropriate accountability and monitoring of instrument enforcement and would be an appropriate extra consideration in Malawi, for larger, more complex, or higher-risk subprojects in rural and more vulnerable areas\. Specific Lessons Learned Related to GBV (see annex 6 for further context and information which informs these lessons) Page 27 of 58  The World Bank Malawi Floods Emergency Recovery (P154803) 95\. High-risk of ‘double-punishment’ for women who come forward\. Given the high poverty in rural Malawi, large works projects are highly valued and important to the community not only for the direct benefits of the project but also for the indirect benefits through employment income, jobs, and other peripheral economic activity generated\. Given the lopsided power dynamic, women are heavily punished for speaking out\. In this case, the project was halted for several months, and there was a risk of full contract cancellation\. The women who came forward were ostracized by their community and also suffered losses of employment and jobs\. This creates an enormous incentive for silence and collective community repression of known information, makes trust in GRM systems very difficult, and creates an even greater vulnerability and risk for GBV prevalence\. Projects could look to build and provide incentives and opportunities for stakeholder engagement rather than only disincentives (for example, through project cancellation for noncompliance) as this exacerbates the problem\. 96\. Integration of livelihood and Community Development Interventions with infrastructure programs as a GBV mitigation tool\. Given the high prevalence of GBV in Malawi and the high rates of ultra-poverty, particularly in rural areas, it is imperative to adopt a holistic approach to infrastructure projects\. It would be advisable to link infrastructure projects with a properly resourced livelihood intervention program, to empower communities and women in particular in these areas and minimize the occurrence of sex for work or other exploitative relationships that tend to develop\. Providing other economic and livelihood opportunities in the area would serve to empower the community including females and provide entrepreneurial opportunities\. 97\. Community trust and engagement of female leaders as a GBV mitigation approach\. Midway through the project, the GBV service provider engaged mothers in the community as volunteers and trained them on GBV issues\. This should be an approach that is scaled up, so that implementation of all projects moves in tandem with trained female volunteers embedded in the communities, both training others as well as talking with, empowering, supporting, and being the bridge of trust for those seeking support services and redress\. This is also a mechanism for the community to be empowered as a whole, for the understanding of rights, services available, and opportunities\. 98\. Early community engagement and awareness\. It is critical from project preparation that there is proper community engagement, so there is good understanding of tools available, services, redress mechanisms, and rights as community members\. There was emphasis placed under this project on correcting contractor performance (through improved codes of conduct with workers, translated in languages and disseminated/enforced), given the issues that arose\. However, it is also important to emphasize and continuously communicate rights, services, and options to communities\. Involving the aforementioned female volunteers and female leaders before the project has even begun is important for developing an empowered and aware community before the onset of a contract or influx of labor\. 99\. Confidentiality through phone access and conversations\. In some cases, during the project, the survivors were comfortable to ask the service provider to talk to them at the time of their convenience through cell phones\. It was noticed that sometimes the survivor could express herself more through the phone than in a physical meeting\. In cases where a virtual meeting was conducted, community stigma toward the survivor was minimized\. Through this experience, it was noted that use of technology can also improve in reducing stigma and reporting of incidents\. The GBV service provider publicized cell phone numbers for GBV/SEA/SH reporting toward completion of the project\. To enhance reporting of incidents, it is good for the project to have a toll-free number\. \. Page 28 of 58  The World Bank Malawi Floods Emergency Recovery (P154803) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Objective/Outcome: Sustainably restore agricultural livelihoods Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of people with Number 0\.00 180000\.00 208,753\.00 sustainably restored agricultural livelihoods under 24-Apr-2015 24-Apr-2015 31-Jan-2021 the IFA program Comments (achievements against targets): Objective/Outcome: Reconstruct critical public infrastructure to improved standards in flood-affected districts Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of schools with Number 0\.00 82\.00 42\.00 services fully restored 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Page 29 of 57  The World Bank Malawi Floods Emergency Recovery (P154803) At MTR, clarification was made that the target was 40 schools, given 82 was the number for the classrooms to be targeted as per the intermediate indicator, with the target of 40 being tracked therein; however, this was never adjusted through a formal restructuring from the original PAD indicator of 82\. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of health facilities Number 0\.00 2\.00 7\.00 reconstructed with services fully restored 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): The Project rehabilitated five (5) health centres and constructed two (2) new health centers (Osiyana and Thuchira) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of kilometers of Kilometers 0\.00 90\.00 97\.00 roads reconstructed to improved standards and with 24-Apr-2015 24-Apr-2015 31-Jan-2021 services restored Comments (achievements against targets): Page 30 of 57  The World Bank Malawi Floods Emergency Recovery (P154803) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Direct project beneficiaries Number 0\.00 500000\.00 2,297,846\.00 24-Apr-2015 24-Apr-2015 31-Jan-2021 Female beneficiaries Percentage 0\.00 50\.00 52\.40 Comments (achievements against targets): Objective/Outcome: Improve the Govt of Malawi's disaster response and recovery capacities Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Institutionalization/adoption Yes/No No Y Yes of PDNA methodology, and institutional and financing 24-Apr-2015 24-Apr-2015 31-Jan-2021 framework for recovery Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Institutionalization/adoption Yes/No No Y Yes Page 31 of 57  The World Bank Malawi Floods Emergency Recovery (P154803) of disaster resilient designs 24-Apr-2015 24-Apr-2015 31-Jan-2021 for schools, health facilities and roads Comments (achievements against targets): A\.2 Intermediate Results Indicators Component: Livelihoods Restoration and Food Security Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of individuals Number 0\.00 180000\.00 208,753\.00 receiving IFA vouchers 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Quantity of maize purchased Metric ton 0\.00 50000\.00 52,600\.00 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Page 32 of 57  The World Bank Malawi Floods Emergency Recovery (P154803) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Quantity of maize released Metric ton 0\.00 50000\.00 52,538\.00 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of SGR beneficiaries Number 0\.00 500000\.00 563,562\.00 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Component: Infrastructure Rehabilitation and Reconstruction Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads rehabilitated, Rural Kilometers 0\.00 90\.00 97\.00 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Page 33 of 57  The World Bank Malawi Floods Emergency Recovery (P154803) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of additional Number 0\.00 82\.00 152\.00 classrooms built or rehabilitated at the primary 24-Apr-2015 24-Apr-2015 31-Jan-2021 level resulting from project interventions\. Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Health facilities constructed, Number 0\.00 2\.00 7\.00 renovated, and/or equipped (number) 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Component: Promoting Disaster Resilience Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Improved Damage Yes/No No Y Yes Assessment Guidelines, Templates and SOPs for 24-Apr-2015 24-Apr-2015 19-Nov-2020 Page 34 of 57  The World Bank Malawi Floods Emergency Recovery (P154803) Damage Assessment Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion DoDMA and Civil Protection Number 0\.00 15\.00 15\.00 Committees trained in Emergency Response 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Disaster resilient designs for Yes/No No Y Yes the education, health and roads sectors 24-Apr-2015 24-Apr-2015 31-Jan-2021 Comments (achievements against targets): Page 35 of 57 The World Bank Malawi Floods Emergency Recovery (P154803) B\. KEY OUTPUTS BY COMPONENT PDO: All components 1\. Number of direct project beneficiaries Outcome Indicators 2\. Percentage of female beneficiaries 1\. Number of individuals receiving IFA vouchers 2\. Number of SGR beneficiaries 3\. Number of pupils benefitting from the rehabilitated schools 4\. Number of irrigation schemes rehabilitated Intermediate Results Indicators 5\. Number of km of bridges/roads (including drainage structures) reconstructed/ rehabilitated to improved standards 6\. Number of Health Centers Rehabilitated 7\. Number of water supply schemes rehabilitated Key Outputs by Component 1\. 2,260,701 direct project beneficiaries (linked to the achievement of the PDO) 2\. 52\.4 of beneficiaries are female Objective/Outcome 1 (Component 1): Livelihoods restoration and food security Outcome Indicators 1\. Number of households with sustainably restored agricultural livelihoods under the IFA Programme 1\. Number of individuals receiving IFA vouchers 2\. Percentage of female individuals who have received vouchers 3\. Quantity of maize purchased (Metric ton) Intermediate Results Indicators 4\. Quantity of maize released (Metric ton) 5\. Number of SGR beneficiaries 6\. Percentage of female SGR beneficiaries 1\. 208,753 with restored agricultural livelihoods sustainably under the IFA Programme Key Outputs by Component 2\. 208,753 receiving IFA vouchers (linked to the achievement of the 3\. 54% of the individuals receiving IFA vouchers are female Objective/Outcome 2) 4\. 52,600 MT of maize purchased Page 36 of 57 The World Bank Malawi Floods Emergency Recovery (P154803) 5\. 52,538 MT of maize released 6\. 563,562 are beneficiaries of the maize in the SGR 7\. 51% of SGR beneficiaries are female Objective/Outcome 2 (Component 2): Infrastructure rehabilitation and reconstruction 1\. Km of roads reconstructed to improved standards and with services fully restored 2\. Number of km of bridges/roads (including drainage structures) reconstructed/ rehabilitated to Outcome Indicators improved standards 3\. Number of schools with services fully restored 4\. Number of health facilities reconstructed with services fully restored 1\. Number of irrigation schemes rehabilitated 2\. Area under rehabilitated irrigation schemes 3\. Number of treadle pumps distributed 4\. Number of water supply schemes rehabilitated 5\. Number of boreholes and pumps rehabilitated 6\. Number of river banks protected Intermediate Results Indicators 7\. Number of hydrological monitoring stations rehabilitated and equipped 8\. Number of additional classrooms built or rehabilitated at the primary level resulting from the project interventions 9\.1\. Number of pupils benefitting from the rehabilitated schools 9\.2\. Number of pupils benefitting from the Teaching and Learning Materials (TLM) 10\. Number of Health Centre Rehabilitated 1\. 37 km of roads reconstructed to improved standards and with services fully restored 2\. 946 m of bridges/roads (including drainage structures) reconstructed/ rehabilitated to improved standards Key Outputs by Component 3\. 40 schools with services fully restored (linked to the achievement of the 4\. 2 health facilities reconstructed with services fully restored Objective/Outcome 2) 5\. 13 irrigation schemes rehabilitated 6\. 509 ha under rehabilitated irrigation schemes 7\. 4,460 treadle pumps distributed 8\. 10 water supply schemes rehabilitated Page 37 of 57 The World Bank Malawi Floods Emergency Recovery (P154803) 9\. 101 boreholes and pumps rehabilitated 10\. 13 river banks protected 11\. 15 hydrological monitoring stations rehabilitated and equipped 12\. 152 additional classrooms built or rehabilitated at the primary level resulting from the project interventions 13\.1\. 46,037 pupils benefitting from the rehabilitated schools 13\.2\. 120,000 pupils benefitting from the teaching and learning materials (TLM) 14\. 5 Health centers rehabilitated Objective/Outcome 3 (Component 3): Promoting disaster resilience 1\. Institutionalization /adoption of PDNA methodology Outcome Indicators 2\. Institutionalization of financing framework for recovery 1\. DoDMA and Civil Protection Committees trained in Emergency Response Intermediate Results Indicators 2\. Disaster resilient designs for education, health, and roads sectors 1\. Yes, PDNA methodology institutionalized/adopted Key Outputs by Component 2\. Yes, financing framework for recovery institutionalized (linked to the achievement of the 3\. 15 DoDMA and Civil Protection Committees trained in Emergency Response Objective/Outcome 3) 4\. Yes, Disaster resilient designs for education, health, and roads sectors in place Page 38 of 57 The World Bank Malawi Floods Emergency Recovery (P154803) ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A\. TASK TEAM MEMBERS Name Role Preparation Ayaz Parvez, Francis Samson Nkoka Task Team Leader(s) Steven Maclean Mhone Procurement Specialist(s) Trust Chamukuwa Chimaliro Financial Management Specialist Alexandra C\. Bezeredi Safeguards Advisor/ESSA Maria Angelica Sotomayor Araujo Team Member Robin Mearns Team Member Christoph Pusch Team Member Olivier Durand Team Member Cheikh A\. T\. Sagna Social Specialist Kisa Mfalila Social Specialist Maiada Mahmoud Abdel Fattah Kassem Team Member Time Hapana Fatch Team Member Marc C\. Neilson Team Member Stephen Mugendi Mukaindo Counsel Chalida Chararnsuk Team Member Pieter Waalewijn Team Member Hastings Solomon Mumba Social Specialist Jayna Kishor Desai Team Member Christopher Mazuwa Chiumia Team Member Page 39 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) Priscilla Flaness Kandoole Team Member Tamara Juvenile Mwafongo Team Member Allen Lee Baumgardner-Zuzik Team Member Chikondi Clara Nsusa-Chilipa Team Member Laurence Elodie Esther Fanny Chalude Team Member Supervision/ICR Francis Samson Nkoka, Nicholas James Callender Task Team Leader(s) Komana Rejoice Lubinda, Anthony Aggrey Procurement Specialist(s) Msendema Trust Chamukuwa Chimaliro Financial Management Specialist Natalia Romero Team Member Diana Chikondi Chanika Mataya Team Member Innocent Pangapanga-Phiri Team Member Patson Cleopus Nalivata Team Member Patsani Gregory Kumambala Team Member Michael Enoch Mainje Team Member Yolanda Tashinga Chiumbu Team Member Elita Thokozani Yobe Team Member Violette Mwikali Wambua Social Specialist Chikondi Clara Nsusa-Chilipa Team Member Tamara Juvenile Mwafongo Procurement Team Ian Munro Gray Environmental Specialist Deliwe Hazel Gama Procurement Team Odete Duarte Muximpua Team Member Blessings Nyanjagha Botha Team Member Time Hapana Fatch Team Member Mohammad Ilyas Butt Procurement Team Innocent Kibira Najjumba Mulindwa Team Member Margaret Png Team Member Page 40 of 55  The World Bank Malawi Floods Emergency Recovery (P154803) Lynette Doreen MacAdam Procurement Team B\. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No\. of staff weeks US$ (including travel and consultant costs) Preparation FY15 8\.280 38,594\.80 FY16 \.846 8,597\.40 Total 9\.13 47,192\.20 Supervision/ICR FY15 \.889 54,861\.74 FY16 35\.666 535,308\.35 FY17 36\.560 261,970\.64 FY18 25\.455 198,836\.03 FY19 41\.753 369,215\.25 FY20 33\.207 332,048\.89 Total 173\.53 1,752,240\.90 Page 41 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) ANNEX 3\. PROJECT COST BY COMPONENT Components Amount at Actual at Percentage Approval Project Closing of Approval (US$, millions) (US$, millions) Livelihoods Restoration and Food Security 29 29 0 Infrastructure Rehabilitation and Reconstruction 43 43 0 Promoting Disaster Resilience 4 4 0 Program Management 4 4 0 Total 80 80 0 Page 42 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) ANNEX 4\. EFFICIENCY ANALYSIS 1\. The Post Disaster Needs Assessment conducted after the 2015 floods estimated preliminarily that 1,150,000 people were directly affected by the event\. Through the MFERP, an estimated 2,297,846 people directly benefited from various Project interventions (see Annex 7), through food security interventions and livelihood support programs (about 36 percent of the project cost) as well as rehabilitated and reconstructed public infrastructure, in the transport, health, education, water and irrigation sectors (about 47 percent of the project cost)\. Further, all residents of Malawi benefited indirectly from project interventions that supported improvements in Government capacity to respond and recover from disaster events, including advancements in building regulation, availability and utilization of risk information and improved capacity at the national and district level for disaster assessments and response (about 10 percent of the project cost, including the project management costs)\. 2\. The economic analysis conducted during Project appraisal was limited in its approach, only assessing the irrigation sub-component to derive the Economic Rate of Return (ERR)\. This ICR analysis takes a corrective approach to expand the assessment scope and look more critically at the total costs against the measured economic benefits from: (i) restored and reconstructed irrigation and water supply systems; (ii) restored and improved road transportation networks; and (iii) reconstructed education facilities\. A financial analysis is included to measure the impacts emanating from the investments in crop and agricultural output\. Together, these areas cover 47 percent of the total Project cost\. Applying only the cost associated with the measured benefits results in an ERR of 32 percent for roads, 17 percent for irrigation, 20 percent for water supply and sanitation, and 39 percent for education investments, achieving an overall ERR of 31 percent with an NPV of USD 148 million\. Applying the total cost to the measured benefits above yields an ERR of 15 percent and an NPV of USD 105 million\. The analysis assumes a standard discounting rate of 12 percent for roads, bridges, and irrigation infrastructure, 6 percent for education and water supply services, and a 20-year longevity of assets\. 3\. The MFERP achieved significant direct benefits in the form of (i) 97 kilometers of roads restored and rehabilitated, leading to an average of 3 hours of time saved for a one way trip over the 37km Thabwa -Chitseko Seven East Bank Road; (ii) around 48 metric tons of additional crops produced as a result of the livelihood support programs and provision of agricultural inputs, both for exports and local consumption; (iii) 42 schools and 7 health facilities that were newly constructed or had service restored following the floods, serving 176,705 children and 190,299 patients, respectively; and (iv) reconstructed and rehabilitated rural water supply schemes, which benefited about 260,520 people\. 4\. Direct benefits not included in the benefit stream are related to the restoration of livelihoods and ensured food security by providing labor-intensive community infrastructure repair and restocking the Strategic Grain Reserve (SGR)\. Through an “Inputs for Assets (IFA) approach”, the Project delivered immediate benefits by: (i) contributing to job creation through the Public Works Program element; (ii) restoring incomes through livelihood supporting and income generating activities; (iv) increasing food security for affected households; (vi) contributing to the stabilization of food based inflation; and (v) easing the immediate fiscal burden for the Government\. In the medium term, the Project restored agricultural production by providing communities with inputs and enabling off-season planting\. Page 43 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) 5\. There are also many indirect benefits that emerged from MFERP that were not included in the computation of the ERR and NPV\. These are related to the welfare improvements of benefiting households due to higher agricultural yield, spilling over into various other business activities and social investments\. The 2015 flood event affected 1,150,000 and displaced approximately 336,000 persons with an estimated average income loss of MWK 208,846 (USD 469) per affected smallholder household (agriculture sector) and a total income loss of MWK3\.6 billion (USD 8\.1 million) for household enterprises (trade sector)8\. Agriculture and trade were the main livelihood income sources in the rural areas affected\. 6\. The total financial cost of MFERP was USD 80 million with a total economic cost of USD 60 million\. The economic cost was derived using a shadow price for local labor of 50 percent of the financial local labor cost, and correcting for all distortions associated with subsidies, taxation and trade distortions\. These financial and economic costs are outlined in Table EFA-1 as follows: Table EFA 1: Financial and Economic Project Costs Financial Goods- Labour- Labour- Economic costs Goods-Local International Local share International Costs (USD (USD share (%) share (%) (%) share (%) Million) Component /Sub-Component Million) Labour intensive community 14\.0 80% - 20% - 10\.75 infrastructure repair (USD14M) Restocking of the strategic grain 14\.99 100% - - - 12\.52 reserve (USD15M) C1: Livelihoods Restoration and 28\.99 Food Security Reconstruction and improvement of 24\.0 60% - 40% - 16\.82 roads and bridges (USD24M) Water Resources Management and 6\.0 58% - 15% 27% 4\.98 Flood Protection Structures (USD6M) Rehabilitation and reconstruction of irrigation (USD3\.5M) and water 5\.31 56% 14% 16% 13% 4\.24 supply (USD1\.81M) Rehabilitation and reconstruction of health (USD4M) and education 8\.46 77% 6% 17% - 6\.57 facilities (USD4\.46) C2: Infrastructure Rehabilitation and 43\.77 Reconstruction\. Institutional strengthening of 3\.23 10% - 68% 22% 2\.08 DoDMA (USD4M) C3: Promoting Disaster Resilience 3\.23 PIU Implementation, Construction 4\.0 19% - 75% 6% 2\.37 Supervision (USD 4M) C4: Program Management 4\.0 - Total 79\.99 60\.34 8 Government of Malawi\. 2015\. The Post Disaster Needs Assessment\. Lilongwe, Malawi Page 44 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) Assessed Benefits 7\. Restored Education Services\. 176,705 pupils were attending the schools whose services were disrupted due to the 2015 floods\. The project restored the school facilities and enabled students to return to their classrooms after 2 years to finalize their primary (PSLC) or secondary education (JCE and MSCE/GSCE)\. In order to assess the benefits from this intervention, a regression model was run using the 2019/2020 household survey data to understand the incremental values of different educational attainments versus none\. Controlling for age (hh_b05a), gender, location (rural or urban), workers with at least a PSLC earn 12 percent (or MWK 220 per day) more than people without any education\. Likewise, workers with at least a JCE earn, on average, 22 percent (or MWK 400 per day) more compared to those with no education, and likewise, a MSCE/GSCE is generating 35 percent higher earnings (or about MWK 640 per day) in comparison to those with no education\. These coefficients are statistically significant at the 1 percent level\. Table EFA 2: Explaining Future Earning Potential through a Standard Wage Regression Source SS df MS Number of obs = 12,316 F(12, 12303) = 120\.93 Model 1070\.80372 12 89\.2336434 Prob > F = 0\.0000 Residual 9078\.43495 12,303 \.737904166 R-squared = 0\.1055 Adj R-squared = 0\.1046 Total 10149\.2387 12,315 \.824136311 Root MSE = \.85901 log_daily_wage Coef\. Std\. Err\. t P>|t| [95% Conf\. Interval] hh_b21 PSLC \.120432 \.0405029 2\.97 0\.003 \.04104 \.199824 JCE \.2175135 \.0790107 2\.75 0\.006 \.0626401 \.3723869 MSCE/GCSE \.3466008 \.116501 2\.98 0\.003 \.1182406 \.574961 A-LEVEL \.1569376 \.3910379 0\.40 0\.688 -\.6095581 \.9234332 DIPLOMA 1\.489797 \.266415 5\.59 0\.000 \.967582 2\.012012 DEGREE 2\.603854 \.9622039 2\.71 0\.007 \.7177838 4\.489925 MASTERS 2\.806318 \.8656172 3\.24 0\.001 1\.109573 4\.503064 PhD -1\.062487 1\.172511 -0\.91 0\.365 -3\.360792 1\.235818 hh_b03 MALE \.28322 \.0155625 18\.20 0\.000 \.252715 \.313725 reside URBAN \.5132209 \.029125 17\.62 0\.000 \.4561314 \.5703104 hh_b05a \.055592 \.0024962 22\.27 0\.000 \.0506991 \.0604848 hh_b05a_squared -\.0005852 \.0000316 -18\.53 0\.000 -\.0006471 -\.0005233 _cons 5\.81419 \.0454277 127\.99 0\.000 5\.725144 5\.903235 8\. People’s earnings are estimated to increase by 5\.6 percent per year over their working life, with diminishing increases as they get older (age_squared)\. Taking this into consideration, incremental starting wages were computed for those completing PSLC (MWK 100 per day above those without education), JCE (MWK 85 per day above primary education) and MSCE/GCSE (MWK 190 per day above primary education) Page 45 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) and these were subjected to increases based on the regression analyses, so that average earning differentials would mirror the figures quoted in the previous paragraph above\. Using household survey estimates for rural areas further show that 6 percent of students that were attending primary school dropped out before completion, 1\.9 percent completed the JCE and 0\.9 percent finalized their education with a MSCE/GCSE in 2019/20\. 9\. Taking these statistics on board and assuming 20 years of work life and 150 annual days worked, yields a present value of almost USD 65 million in lifetime earning differential for these students that were enabled to complete their respective degrees with the help of the project’s investments\. Future earnings were discounted at 6 percent\. 10\. Agricultural Productivity: About 21,338 households benefitted from irrigation restorations and rehabilitation, supporting 4,958 small-scale and 16,430 large-scale farms\. Following irrigation investment, agricultural yield improved, on average, from 1000 kg/ha to 2300kg/ha among small-scale farmers and 1500kg/ha to 3900kg/ha among large-scale farmers\. Moreover, irrigation increased the frequency of cultivation from once to at least twice per year, thereby further boosting household income and yield reliability\. In the economic analysis, the yield, areas, production costs and number of farmers benefiting from the irrigation investments between with and without the project were considered\. 11\. Time Saving from Restored and Improved Roads: About 97 km roads were restored and rehabilitated by the project, with improved resilience against future disasters\. The project rehabilitated the 97 km into a gravel level, which enabled surrounding and passing households have access to the markets and other public services, at a significant time saving\. At the 37km of Thabwa Road users took about 3-4 hours to reach their destination after the damages done to the roads by the floods\. After the investments, the users took only 1 hour to reach their destination, leading to savings in the opportunity cost of time\. In the economic analysis, the opportunity costs of time taken to reach the destination, frequency of the return trip per week, investment costs, and incremental maintenance costs were considered\. 12\. Time saving from restored water supply: About 260,520 people benefited from the rehabilitated and reconstructed water supply schemes damaged during the 2015 floods\. The Project reduced time spent fetching water from at least 90 minutes after floods damaged water supply schemes to 30 minutes after restoration of the water services\. In the economic analysis for the water supply (WASH) sub- component, the ICR considered the time lost after the floods, fetching for water, frequency of the trip fetching water per week, rural wage rate of MWK158 per hour, and the time saved after the project investment\. 13\. Economic Efficiency Analysis Results: The quantification of assessed activities, whose investment costs amount to 47 percent of the total economic costs, yields an economic rate of return (ERR) of 15 percent and a net present value (NPV) of USD 105 million\. This result is achieved using the total economic costs and making the usual assumptions on the discount rate (6 percent social discount rate) and longevity of assets (20 years)\. If one were only considering the costs associated with the valued benefits, an ERR of 31 percent and an NPV of USD 148 million would be achieved, broken down as follows: 32 percent for roads and bridges, 17 percent for Irrigation investments, 20 percent for WASH and 39 percent for education (see Table EFA-3)\. Page 46 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) Table EFA 3: Estimated Economic Net Present Value and Rate of Returns for the ICR Total (Partial Total cost Roads Irrigation WASH Education cost) NPV 148 105 Million 4 Million 28 Million 2 Million 65 Million (USD) Million ERR (%) 31% 15% 32% 17% 20% 39% 14\. Financial Analysis: The ICR conducted a financial analysis for the irrigation sub-component because it has commodities which are tradable, locally and internationally\. The analysis established a financial internal rate of return of 10 percent, due to the fact that most of the crops cultivated under irrigation were staple food crops, namely, maize, rice, and sweet potatoes\. Staple food crops in Malawi are heavily controlled as they determine the national and household food security, and thus there is a fixed national price for these commodities\. Based on the financial analysis, the ICR noted an increased annual income by USD 174 and USD 276 percent for small-scale and emergent farming households, respectively as noted in Table EFA-4\. Table EFA-4: Estimated Financial Net Present Value and Rate of Returns for the ICR Small-scale Emergent smallholder farmers smallholder farmers Without the Project (USD/year) 124 228 With the Project (USD/year) 333 858 Difference (USD/year) 211 630 15\. Assumptions: The ICR EFA made the following assumptions: • Valuation of costs and benefits: based on market and shadow prices • Appraisal period: a 20-year appraisal period was selected • Discount rate: 12 percent was adopted for roads and irrigation interventions, while 6 percent was adopted for education and WASH investments • Annual operations and maintenance cost: equivalent to 5 percent of capital expenditures\. Page 47 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) ANNEX 5\. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS Government of Malawi The Government of Malawi being the borrower, co-financer, and implementer of the Malawi Flood Emergency and Recovery Project (MFERP) has the following comments on Designing, Planning and Implementation of the Project\. 1\. The Project had performed well with respect to the appraisal Development Objectives (PDO) indicators, where it had sustainably restored livelihoods and food security; reconstructed and rehabilitated critical infrastructure, namely, roads and bridges, flood protection structures, irrigation and water supply; health and education facilities; and strengthened the position of the DoDMA in disaster preparedness, response and risk reduction\. The Project exceptionally benefited 2\.3 million people instead of 500,000 appraisal targeted beneficiaries\. Furthermore, reconstruction of roads and bridges, and water supply systems resulted into saving travelling time for households to allocate to other productive activities\. Additionally, financed irrigation schemes enhanced household agricultural production by increasing the frequency of cultivation per year, whilst the flood protection structures have enhanced resilience of community from subsequent flood disasters after the project\. The education facilities also helped school going students return to schools and increased enrolment of addition children into schools, whilst the health facilities have helped improve and enhance healthcare services\. These achievements were due to the several factors, namely, (i) adopting an existing PIU, having past experience implementing the World Bank projects and strong linkages with Government Implementing Agencies (IAs); (ii) efficient and timely procurement processes; (iii) Consultative process and alignment to the PDNA recommendations; and (iv) effective World Bank technical support\. 2\. Being an Emergency Project, the World Bank adequately provided valuable technical expertise, including during designing, preparing, implementing, monitoring and evaluating, and overall coordinating of the Project\. The Project preparation process also extensively consulted the borrower and aligned itself to the PDNA recommendations and aspirations outlined in the second Malawi Growth and Development Strategy\. After complying with all preparation and appraisal procedures, the Project became effective on 20th August 2015, six months after the actual occurrence of the 2015 floods\. The borrower, thus, commended the exchange of notes between the World Bank and the IAs, and, the timely and sound decisions at entry stage\. Page 48 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) 3\. The World Bank implementation support missions (ISMs) were relevant to the monitoring of the Project implementation, monitoring and evaluation\. The ISMs provided, guided and reminded the implementer the PDO indicators in good time, through Announcement Letter and Aide Memoires (AMs), with detailed agreed action points\. However, in some instances, the ISMs did not immediately provide performance rating, making the IAs’ uncertain on the Project performance\. Additionally, some recommendations required more time and technical guidance for IAs to thoroughly understand\. Besides, the change of the some specialists, viz\., safeguards and communication, created a technical support gap as they were new and learning the Project procedures\. 4\. The Project adopted the multi-sectoral approach, which was essential to achieving the PDO indicators under the emergency recovery Project\. For instance, the Ministry Finance thoroughly provided policy and governance guidance through coordinating the ISMs, chairing the Project Steering Committee (PSC) and holding routine technical briefing meetings with the PIU\. Moreover, the IAs were central in planning, supervising, monitoring and ensuring local councils are effectively implementing and reporting the assigned project activities\. However, the Project did not adhere to some environmental and social safeguard, and procurement requirements, resulting into some sub-Projects’ implementation delays\. 5\. The PIU successfully coordinated the Project interventions, especially between IAs at central level, and the local councils\. It also disbursed funding within reasonable timelines and made prompt payments to contractors and consultants\. The PIU support strengthened the district councils in adhering to the social and environmental safeguards requirements\. Furthermore, the Regional Offices allowed the PIU coordinate technical, administrative and financial management issues at district council\. Nonetheless, the PIU should have strengthened the contract management system, the monitoring and evaluation framework and over reporting of the Project interventions and indicators\. Additionally, mid-way closure of the Regional Offices increased the workload for the PIU\. Moreover, high turnover at district council affected the institutional memory of the Project\. 6\. The borrower and other implementing partners have learnt a number of lessons from implementing the multi-sectoral MFERP as follows: 7\. Consultative process of preparing an Emergency Recovery Project: Consultative consensus in designing the Project between the borrower and the Bank team necessitated timely fulfilment of the requirements for the IDA financing within a period of six months, that is, from the time the floods disaster occurred to the effectiveness of the Project\. 8\. PSC Leadership and technical support: The PSC played a very critical in policy direction of the Project\. However, attendance was a problem because the committee did not have core members, who could be easily summoned to attend a PSC meeting and make key policy decisions\. Furthermore, Page 49 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) consistency of technical desk officers in Government ministries enhanced smooth implementation of MFERP activities, thereby, complementing the PIU in coordinating the Project implementation\. 9\. Avoiding spreading resources too thinly\. Project design should employ holistic approach to deepen impact and enhance sustainability of the initiative\. For example, the construction of East Bank road where only selected sections were partially constructed\. A better approach was to concentrate on a few kilometers of the road by providing bridges and box culverts and building the road to bitumen standard\. Similarly, the project design should have considered complementarities among project sub- components\. For instance, some structural investments could require some livelihood interventions which could have immediately cushioned the affected communities from adverse effects of the 2015 floods\. 10\. Safeguard requirements were a cornerstone to the Project success and timely completion\. The delays in the Project implementation could have been avoided with continuous sensitization and capacity building to communities and project’s relevant stakeholders on safeguards issues\. Moreover, the Project should have institutionalized and budgeted for the GRM and Safeguards requirements from the Project design\. 11\. Strong Financial and Contract management: strong financial and proper management of contracts was essential for timely execution of works, thereby, avoiding unnecessary cost and time overruns, and also ineligible expenditures\. Moreover, during implementation, timely feedback on the Project related issues between the borrower and the World Bank avoided cost and time overruns\. Accordingly, the borrower observed the following as critical for smooth contract management: (i) Swift preparation for Term of Reference for the procurement of consultants; (ii) Engaging independent consultants to supervise the works other than the design consultant for quality works; (iii) proper seasonal sequencing of some construction works, including drilling of boreholes and construction of irrigation schemes\. 12\. Decentralization of project implementation ensures ownership of project outputs\. Full delegation of activities to the district officers improved the implementation efficiency, effectiveness, and ownership of the projects activities by district staff and ensured potential sustainability of the Project interventions\. Page 50 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) ANNEX 6\. THABWA-CHITSEKO-SEVEN ROAD - CHRONOLOGY OF CRITICAL INCIDENTS DURING IMPLEMENTATION Thabwa Road Site and Safeguards Background 1\. The Thabwa-Chitseko-Seven Road is 59 km long and lies at the bottom of an escarpment, which receives regular torrential rains that gives rise to flash floods causing rivers to flow at extremely high speed carrying rocks and boulders from the escarpment and depositing them within the plain at the foot of the escarpment where the road is situated\. Shallow riverbeds result in flooding of the area during the rains with people unable to access critical facilities and services until the water levels in the drifts subside\. The road was in a state of disrepair, negatively affecting transportation and the local/national economy\. The two districts served by the road (Chikwawa and Nsanje) have the highest incidence of poverty and ultra- poverty in Malawi\. The area is largely dependent on agriculture for income, and residents of the area currently experience difficulty in transporting agricultural produce to the market\. The road connects the high agriculturally productive area of Chikwawa and Nsanje districts to markets in other areas of Chikwawa, Nsanje, and Blantyre districts and allows travel to access health services, education centers, and other facilities\. 2\. While the Project experienced numerous challenges due to Safeguards deficiencies and challenges with the contractors, the Project saw sustained progress in improving the capacity of the safeguards systems over the final years of implementation\. Improvements were seen in how the RA handled later events that surfaced, and the Bank provided intensive technical and safeguards support to ensure completion of the road project and enhance the existing safeguards systems in Malawi\. Chronology of Critical Incidents During Implementation, Actions Taken and Safeguards Progress Fatality at the Construction Site (September 2018) 3\. On September 29, 2018, the World Bank received a report from the Roads Authority regarding a fatality that occurred on September 28, 2018, involving a seven-year-old schoolgirl who was hit by a truck operated by the contractor\. The police charged the driver with causing death through negligence\. The root cause analysis found that the contractor had not fully complied with the Environmental, Health and Safety Guidelines and their own OHS Plan\. Identified issues included limited or poor signage on the road, long stretches of unprotected culverts, inadequate safety and security of work sites, and inadequate safety measures being implemented\. 4\. Action taken\. A stop order was issued and a Safeguards Corrective Action Plan was developed specifying the measures that the contractor needed to implement to avoid future accidents and set time lines by which these measures were to be implemented and monitored on a bi-weekly basis to assess compliance\. The World Bank and the Roads Authority undertook a safeguards technical audit in October 2018\. Based on progress, the World Bank sent communication to the Roads Authority to allow for partial lifting of the stop order\. The Roads Authority partially lifted the stop order on October 31, 2018, to allow for the resumption of work on bridge sites and drainage as they were fully secured, and the stop order was lifted fully on November 27, 2018, after review of the implementation of the Safeguards Corrective Action Plan\. The letter to the contractor noted the importance of continued implementation of all safeguards and safety measures and those agreed in the Safeguards Corrective Action Plan and the Memorandum of Understanding\. Page 51 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) Labor Issues, GBV Incidents, and OHS Noncompliance (July 2019) 5\. During a World Bank supervision site visit, the team uncovered gross violations related to the environmental and social safeguards practices taking place during rehabilitation of the Thabwa-Chitseko- Seven Road\. Further, serious allegations of sexual harassment, rape, and labor issues were reported to the safeguards technical mission that visited the project site\. 6\. Labor OHS and GRM issues\. There was an absence of a fully functioning occupational and community health and safety system (unsafe practices at the campsite and worksite, non-provision of adequate personal protective equipment, and workers being transported in vehicles loaded with construction materials); noncompliance with labor requirements (unfair dismissals without pay or compensation and in some cases with no valid reason or prior warnings, failure to sign employment contracts and code of conduct by workers of the contractor, unresolved labor wage issues, and injured workers not being compensated or supported); nonfunctioning GRM; and noncompliance with the supervising engineers’ instructions on work schedule, OHS, and labor issues\. 7\. GBV incidents\. The contractor’s international staff sexually harassed local female staff and penalized them for not complying with their sexual advances\. The World Bank team carried out focus group discussions, with informed consent\. At the discussions and interviews, multiple instances of SEA/SH were reported and alleged to be perpetrated by both the contractor’s international and local workers\. The serious incidents included rape, sexual harassment, transactional sex, groping and sexual exploitation, and abuse of minors\. The World Bank team heard of two credible cases of rape\. In one instance, it was alleged that during the week starting June 17, 2019, the contractor’s international staff coerced and raped an underage girl, and the issue had not been reported to the police, but it was reported to the mission team by a third party\. The second case was uncovered by the HIV/AIDS service provider, but the case was dismissed by the contractor without an investigation\. Neither the GBV service provider nor the Roads Authority had knowledge of the allegations before the task team’s visit\. 8\. Action taken\. A stop order was issued on July 19, 2019, to stop all activities being undertaken by the contractor on the basis of the noncompliance with safeguards policies\. A mission was undertaken during July 21 to August 2, 2019, including the World Bank Global Director for the Environmental and Social Framework, the Malawi Country Manager, and the Africa Urban and Disaster Risk Management Team Practice Manager\. A meeting was held with the Minister of Finance to outline issues found and detailed next actions were shared with the Road Authority\. The contract of the GBV service provider was revised to allow adequate full-time presence in the field and offer expanded services to the survivors\. 9\. Partial suspension of financing, removal of contractor, and safeguards system strengthening\. A partial suspension of financing by the World Bank was issued effective August 3, 2019, allowing no further financing of the contract\. The suspension was based on the gross safeguards violations and systems failures found in safeguards implementation\. The GOM proposed a Safeguards Corrective Action Plan that was agreed with the World Bank and was designed to restore compliance with safeguards obligations under the Financing Agreement\. The Government terminated the contractor on November 25, 2019\. The World Bank task team undertook numerous and intensive implementation support missions and multiple sites visits and frequently reviewed progress of the action plan, verified its accuracy through the project site visits, and confirmed the commitment of the Government in implementing the agreed actions\. Page 52 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) 10\. Under the action plan, the Roads Authority completed the following: (a) recruited a social expert; (b) amended the GBV service provider’s contract for full-time project site presence; (c) revamped and expanded the GRCs to respond to GBV/SEA/SH and community health and safety for both the community and contracted labor; (d) established safe and confidential reporting mechanisms; (e) involved critical departments and ministries, including the Ministry of Gender, Children, and Social Welfare; and (f) reviewed terms of employment and ensured that all employees signed codes of conduct, allowing for the application of disciplinary procedures\. 11\. The partial suspension of financing was lifted on February 21, 2020, based on the system improvements in the areas of OHS in line with the ESIA and OHS management plan, labor management processes compliant with the Contractor Environmental and Social Management Plan (C-ESMP) and local labor laws, revamping of the GRM for both the community and workers, strengthening the system to manage GBV risks in accordance with the C-ESMP, and providing services and support to survivors\. 12\. Following the removal of the contractor and lifting of the financing suspension, two local contractors were hired to complete the work at the road site\. Incidents of Sexual Exploitation and Abuse (July–August 2020) 13\. In August 2020, the Roads Authority notified the World Bank of incidents of SEA/SH perpetrated by workers of the two local contractors\. 14\. In comparison with the aforementioned July 2019 incidents that were uncovered by the World Bank during a supervision mission, the August 2020 incidents were reported through the Roads Authority’s revamped GRM system\. Moreover, while in 2019 the Roads Authority and contractor at that time were reluctant to act, in this case the Roads Authority investigated all incidents in coordination with the contractors and supervising engineer and in collaboration with the Child Protection Office, the Gender Office, and the police\. Survivors were immediately provided medical, legal, and counseling support through the project’s GBV service provider\. The contractors promptly dismissed the perpetrators and conducted refresher GBV awareness sessions for all workers\. The Roads Authority worked swiftly to notify the World Bank and issue warning letters to the contractors, among other remedial actions\. 15\. The Roads Authority’s response to these incidents demonstrates the progress made in the environmental and social system\. Over the 10 months before the incidents, substantial efforts were made to revamp the GRM, expand on-ground presence, provide recurrent training, and build community confidence in the reporting mechanisms\. Notwithstanding, additional measures were agreed between the World Bank and the Roads Authority to enhance GBV risk management\. These included (a) the recruitment of a GBV third-party monitor; (b) refresher trainings for all GRCs for handling SEA/SH cases; (c) a series of SEA/SH awareness campaigns; (d) identification, training, and deployment of 17 female SEA/SH champions to work with the GBV service provider; and (e) refresher training in SEA/SH prevention and response for Chikwawa District Council trauma counselors\. 16\. Weakened on-ground presence due to COVID-19\. Before March 2020, the Roads Authority had almost continuous presence in the field, but its presence since then has also been curtailed\. Likewise, the World Bank team was previously conducting frequent field visits but were unable to travel frequently since March 2020 due to COVID-19-related travel restrictions\. All the senior managers/staff of the contractor who were in the field since June 2019 returned to their home countries due to COVID-19, Page 53 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) leaving site management to the foreman and the safety officer (the two individuals responsible for the GBV cases reported)\. This resulted in weakened internal contractor oversight and accountability systems\. Page 54 of 55 The World Bank Malawi Floods Emergency Recovery (P154803) ANNEX 7\. DIRECT PROJECT BENEFICIARIES Blantyre Rural Beneficiaries Zomba Rural Total Direct Chiradzulu Chikwawa Phalombe Mangochi Machinga Mulanje Karonga Rumphi Ntcheu Nsanje Thyolo Salima Balaka Sector IFA 2,866 1,835 3,218 6,063 14,625 15,518 10,964 24,069 8,318 24,680 13,026 19,361 17,593 22,135 24,482 208,753 SGR 2,638 1,023 3,373 10,913 41,056 48,596 68,651 81,987 35,203 23,079 9,525 30,227 72,899 61,927 72,465 563,562 Roads n\.a\. n\.a\. 153,161 n\.a\. 312,731 n\.a\. 41,000 88,000 n\.a\. n\.a\. 27,597 47,381 94,297 16,334 8,800 789,301 Water 6,256 4,635 5,329 NA 4,865 69,586 n\.a\. 106,074 n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. 61,452 2,323 260,520 Supply Water 10,400 8,790 8,324 2,700 n\.a\. 9,800 n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. 24,100 10,100 7,856 5,298 87,368 Resources Health n\.a\. n\.a\. n\.a\. 19,164 n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. n\.a\. 32,722 90,156 24,736 n\.a\. 23,521 190,299 Education 3,856 3,100 9,062 9,291 13,402 12,465 8,591 13,787 13,140 15,094 3,262 17,289 22,440 15,983 15,943 176,705 Irrigation 254 207 827 905 757 2,120 2,404 1,714 424 1,995 691 323 1,688 930 6,099 21,338 Total 26,270 19,590 183,294 49,036 389,083 156,722 131,326 315,605 58,375 63,277 88,127 229,205 242,388 186,617 158,931 2,297,846 Page 55 of 55

REVIEW

P077454

 Document of The World Bank Report No: ICR2093 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-39280 IDA-H0970 TF-53572) ON A CREDIT IN THE AMOUNT OF SDR 3\.4 MILLION (US$ 5\.0 MILLION EQUIVALENT) AN IDA GRANT IN THE AMOUNT OF SDR 3\.9 MILLION (US$5\.8 MILLION EQUIVALENT) AND A GLOBAL ENVIRONMENT FACILITY GRANT IN THE AMOUNT OF US$ 4\.5 MILLION TO THE REPUBLIC OF TAJIKISTAN FOR A COMMUNITY AGRICULTURE AND WATERSHED MANAGEMENT PROJECT December 10, 2012 Sustainable Development Sector Department Central Asia Country Department Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective October 17, 2012) Currency Unit = Somoni TJS 1\.00 = US$ 0\.210 US$ 1\.00 = TJS 4\.764 FISCAL YEAR [January 1 – December 31] ABBREVIATIONS AND ACRONYMS Agency of Technical Cooperation and International Fund for Food and ACTED IFAD Development Aid (French) Agriculture AKF Agha Khan Foundation JDC Jamoat Development Committee CAS Country Assistance Strategy JRC Jamoat Resource Centers Committee CAP Community Action Plan IDA International Development Association Community Agriculture and Watershed Mountain Societies Development Support CAWMP MSDSP Management Project Program CBO Community Based Organization NBFO Non Bank Financial Organization Consultative Group on International National Social Investment Fund of CGIAR NSIFT Agricultural Research Tajikistan Canadian International Development Swedish International Development CIDA SIDA Agency Agency CIG Common Interest Group PMP Pest Management Plan CPS Country Partnership Strategy PMU Project Management Unit DFA Development Financing Agreement PPAP Pilot Poverty Alleviation Project EA Environmental Assessment PRSP Poverty Reduction Support Program Rural Infrastructure and Rehabilitation EMF Environmental Management Framework RIRP Project FAO Food and Agriculture Organization SCNP State Commette for Nature Protection FO Facilitating Organization PCU Project Coordination Unit FPSP Farm Privatization Support Project SLSC State Level Steering Committee GAA German Agro Action SPAP Second Poverty Alleviation Project GDP Gross Domestic Product TAAS Tajik Academy of Agricultural Sciences GEF Global Environment Facility UNDP United Nations Development Program MCI Mercy Corps International WDA Watershed Development Committee MOA Ministry of Agriculture WUA Water User Association International Center for Agricultural Ministry of Amelioration and Water ICARDA MAWRM Research in the Dry Areas Resources Management Local Government (Oblast, Raion or Rural Reconstruction and Development LG RRDP Jamoat level) Program Vice President: Philippe H\. Le Houerou Country Director: Saroj Kumar Jha Sector Manager: Kulsum Ahmed Project Team Leader: Bobojon Yatimov ICR Team Leader: Craig Meisner ii  TAJIKISTAN Community Agriculture and Watershed Management Project CONTENTS DATA SHEET \. iv A\. Basic Information \. iv B\. Key Dates \. iv C\. Ratings Summary \. v D\. Sector and Theme Codes \. vi E\. Bank Staff \. vii F\. Results Framework Analysis \. vii G\. Ratings of Project Performance in ISRs \. xi H\. Restructuring (if any) \.xii I\. Disbursement Profile \.xiii 1\. Project Context, Development and Global Environment Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 8 3\. Assessment of Outcomes \. 15 4\. Assessment of Risk to Development Outcome and Global Environment Outcome \. 18 5\. Assessment of Bank and Borrower Performance \. 18 6\. Lessons Learned \. 20 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 22 Annex 1\. Project Costs and Financing \. 23 Annex 2\. Outputs by Component \. 25 Annex 3\. Economic and Financial Analysis \. 33 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 35 Lending \. 36 Annex 5\. Beneficiary Survey Results \. 37 Annex 6\. Stakeholder Workshop Report and Results \. 46 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 47 Annex 8\. Comments of Cofinanciers and other Partners/Stakeholders \. 70 Annex 9\. List of Supporting Documents \. 71 MAP iii  DATA SHEET A\. Basic Information Community Agriculture & Country: Tajikistan Project Name: Watershed Management Project IDA-39280, IDA-H0970, TF- Project ID: P077454, P081159 L/C/TF Number(s): 53572 ICR Date: 12/05/2012 ICR Type: Core ICR Lending Instrument: SIL, SIL Borrower: REPUBLIC OF TAJIKSTAN Original Total XDR 7\.30M,USD Disbursed Amount: XDR 7\.30M,USD 4\.50M Commitment: 4\.50M Environmental Category: F/F Focal Area: B Implementing Agencies: Community Agriculture and Watershed Management Project Management Unit Co-financiers and Other External Partners: B\. Key Dates Community Agriculture & Watershed Management Project - P077454 Process Date Process Original Date Revised / Actual Date(s) Concept Review: 10/15/2002 Effectiveness: 11/25/2004 11/25/2004 11/25/2004 11/25/2004 05/25/2005 05/25/2005 Appraisal: 02/12/2004 Restructuring(s): 10/09/2008 10/09/2008 04/27/2011 04/27/2011 Approval: 06/15/2004 Mid-term Review: 05/12/2008 05/12/2008 Closing: 04/30/2011 04/30/2012 Community Agriculture & Watershed Management GEF Project - P081159 Process Date Process Original Date Revised / Actual Date(s) Concept Review: 10/15/2002 Effectiveness: 11/30/2004 11/25/2004 11/25/2004 11/25/2004 Appraisal: 02/12/2004 Restructuring(s): 10/08/2008 10/08/2008 04/27/2011 04/27/2011 Approval: 06/15/2004 Mid-term Review: 05/12/2008 05/12/2008 Closing: 04/30/2011 04/30/2011 iv C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes Satisfactory GEO Outcomes Satisfactory Risk to Development Outcome Moderate Risk to GEO Outcome Moderate Bank Performance Satisfactory Borrower Performance Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Borrower Overall Bank Performance Satisfactory Moderately Satisfactory Performance C\.3 Quality at Entry and Implementation Performance Indicators Community Agriculture & Watershed Management Project - P077454 Implementation Performance Indicators QAG Assessments (if any) Rating: Potential Problem Project at any time Yes Quality at Entry (QEA) None (Yes/No): Problem Project at any time Quality of Supervision No None (Yes/No): (QSA) DO rating before Closing/Inactive Satisfactory status Community Agriculture & Watershed Management GEF Project - P081159 Implementation Performance Indicators QAG Assessments (if any) Rating: Potential Problem Project at any time No Quality at Entry (QEA) None (Yes/No): Problem Project at any time Quality of Supervision No None (Yes/No): (QSA) GEO rating before Closing/Inactive Satisfactory Status v D\. Sector and Theme Codes Community Agriculture & Watershed Management Project - P077454 Original Actual Sector Code (as % of total Bank financing) Agricultural extension and research 10 10 General agriculture, fishing and forestry sector 49 49 Roads and highways 8 8 Sub-national government administration 25 25 Water supply 8 8 Theme Code (as % of total Bank financing) Biodiversity 24 24 Land administration and management 25 25 Other rural development 25 25 Participation and civic engagement 13 13 Rural services and infrastructure 13 13 Community Agriculture & Watershed Management GEF Project - P081159 Original Actual Sector Code (as % of total Bank financing) Animal production 25 25 Crops 30 30 Forestry 20 20 Irrigation and drainage 25 25 Theme Code (as % of total Bank financing) Land administration and management 40 40 Other social development 20 20 Rural non-farm income generation 20 20 Water resource management 20 20 vi E\. Bank Staff Community Agriculture & Watershed Management Project - P077454 Positions At ICR At Approval Vice President: Philippe H\. Le Houerou Shigeo Katsu Country Director: Saroj Kumar Jha Dennis N\. de Tray Sector Manager: Kulsum Ahmed Marjory-Anne Bromhead Project Team Leader: Bobojon Yatimov Thirumangalam V\. Sampath ICR Team Leader: Craig M\. Meisner ICR Primary Author: Craig M\. Meisner Community Agriculture & Watershed Management GEF Project - P081159 Positions At ICR At Approval Vice President: Philippe H\. Le Houerou Shigeo Katsu Country Director: Saroj Kumar Jha Dennis N\. de Tray Sector Manager: Kulsum Ahmed Marjory-Anne Bromhead Project Team Leader: Bobojon Yatimov Thirumangalam V\. Sampath ICR Team Leader: Craig M\. Meisner ICR Primary Author: Craig M\. Meisner F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project objective was to build the productive assets of rural communities in selected mountain watersheds, in ways that sustainably increase productivity and curtail degradation of fragile lands and ecosystems\. Revised Project Development Objectives (as approved by original approving authority) The PDO was not revised\. Global Environment Objectives (from Project Appraisal Document) The global environmental objective was to entail protection of globally significant mountain ecosystems by mainstreaming sustainable land use and biodiversity conservation considerations within agricultural and associated rural investment decisions\. This integrated management approach was also to provide replicable models for comparable areas throughout the country\. The GEF objective was mainstreamed into the overall development objective and outcomes\. Revised Global Environment Objectives (as approved by original approving authority) The GEO was not revised\. vii (a) PDO Indicator(s) (at appraisal) Original Target Formally Actual Value Achieved Values (from Indicator Baseline Value Revised at Completion or approval Target Values Target Years documents) % of rural production investments are successful according to agreed economic, Indicator 1 : financial, social, and environmental standards and are being sustained\. Value 80% of investments (quantitative or Not applicable 85% successful Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2012 Comments 100% achieved\. Takes into account financial, social, and environmental parameters (incl\. % and weighted by value of investment\. achievement) Indicator 2 : # Households participating in some part of the rural production component\. Value (quantitative or 0 32,000 households 43,513 Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2012 Comments 100% achieved\. Double counting makes exact measurement difficult - this counts farm (incl\. % productivity and land resource management only and excludes rural infrastructure achievement) subprojects in order to avoid double counting\. Indicator 3 : % population is above poverty level in villages that are participating in Project\. Value About 3% of the About 30% of the (quantitative or population above households above 50% Qualitative) poverty level poverty level Date achieved 06/15/2004 04/30/2011 04/30/2012 Comments (incl\. % 100% achieved\. achievement) Negative trends of land and mountain ecosystem degradation halted in Project area Indicator 4 : Jamoats\. Value YR1: Past 10-year trends (quantitative or Restoration evident 78,000 ha 96,600 ha analyzed Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2011 04/30/2012 Comments Indicator revised to "Area in ha covered by land resource management subprojects and (incl\. % other project activities that directly and successfully address land and ecosystem achievement) degradation\." Also a GEO indicator\. See section 1\.4 for further explanation\. viii (b) GEO Indicator(s) (at appraisal) Original Target Formally Actual Value Achieved Values (from Indicator Baseline Value Revised at Completion or approval Target Values Target Years documents) Negative trends of land and mountain ecosystem degradation halted in project area Indicator 1 : Jamoats\. Value YR1: Past 10-year trends (quantitative or Restoration evident 78,000 ha 96,600 ha analyzed Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2011 04/30/2012 Comments Indicator revised to "Area in ha covered by land resource management subprojects and (incl\. % other project activities that directly and successfully address land and ecosystem achievement) degradation\." See section 1\.4 for further explanation\. Area in ha covered by land resource management subprojects and benefiting very poor Indicator 2 : at least in proportion to their numbers in a community\. Value US$5\.39 (quantitative or 0 78,000 ha US$6\.20 million million Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2011 04/30/2012 Comments 100% achieved\. Revised to “Total value in $US of land resource management (incl\. % subprojects designed and funded\.â€? To avoid overlap with revised outcome indicator #4 achievement) above\. See section 1\.4 for further explanation\. (c) Intermediate Outcome Indicator(s) (at appraisal) Original Target Formally Actual Value Achieved Values (from Indicator Baseline Value Revised at Completion or approval Target Values Target Years documents) Indicator 1 : Total value of farm production investments where Project is operational\. Value (quantitative or 0 US$ 3\.8 million US$ 3\.85 million Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2012 Comments 100% achieved\. Funds in JRC/JDC accounts, beneficiary contribution, revolving funds, (incl\. % and personal reinvestments\. achievement) Area in ha covered by land resource management subprojects and benefitting very poor Indicator 2 : at least in proportion to their numbers in a community\. Value US$5\.39 (quantitative or Not applicable 78,000 ha US$6\.2 million million Qualitative) ix Date achieved 06/15/2004 04/30/2011 04/30/2011 04/30/2012 Comments 100% achieved\. Indicator revised to "Total value in $US of land resource management (incl\. % subprojects designed and funded\." Also a GEO indicator\. See Section 1\.4 for further achievement) discussion\. Number of improved public facilities, disaggregated by type of investment (village Indicator 3 : drinking water, roads and electricity)\. Value Target not (quantitative or Not applicable established but will 577 Qualitative) be monitored\. Date achieved 06/15/2004 04/30/2011 04/30/2012 Comments 100% achieved - based on 577 total including facilities held by private beneficiary (incl\. % groups\. 170 drinking water, 131 small irrigation and drainage rehab, 227 access road achievement) rehab, 32 micro energy gen\. and transmission, and 17 other\. % of Project-financed farm production and land management investments applying Indicator 4 : improved technologies, and receiving good access to necessary inputs and knowledge\. Value (quantitative or Not applicable 40% 8,000 9,175 Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2011 04/30/2012 Comments Indicator revised to "Cumulative number of rural people who have received technical (incl\. % training from TAAS, FOs, or other Project partners\." See section 1\.4 for further achievement) explanation\. Indicator 5 : Number of indigenous crop varieties from Project area preserved as live specimens\. Value Target not (quantitative or Not applicable\. 300 established\. Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2012 Comments (incl\. % 100% achieved\. See Section 1\.4 for further explanation\. achievement) Indicator 6 : Number of JDCs that are overseeing implementation of rural production subprojects\. Value (quantitative or Not applicable 47 39 39 Qualitative) Date achieved 06/15/2004 04/30/2011 04/30/2011 04/30/2012 Comments 100% achieved\. Indicator revised to 39 Jamoats due to budget constraints - see Section (incl\. % 1\.4 for further discussion\. achievement) Bank supervision ratings and reputation for integrity as perceived in public opinion Indicator 7 : surveys\. Value (quantitative or Not applicable\. Satisfactory On schedule On schedule Qualitative) x Date achieved 06/15/2004 04/30/2011 04/30/2011 04/30/2012 Comments Indicator revised to "Project management ensures Project implementation timeliness"\. (incl\. % See Section 1\.4 for further discussion\. achievement) G\. Ratings of Project Performance in ISRs Actual Disbursements Date ISR (USD millions) No\. DO GEO IP Archived Project 1 Project 2 1 06/29/2004 S S S 0\.00 0\.00 2 12/21/2004 S S S 0\.00 0\.00 3 05/24/2005 S S S 0\.50 0\.20 4 10/14/2005 S S S 0\.85 0\.20 5 12/12/2005 S S S 0\.85 0\.20 6 04/25/2006 S S MS 1\.53 0\.34 7 05/08/2006 S S MS 1\.53 0\.34 8 08/23/2006 S S MS 1\.90 0\.36 9 11/21/2006 S S MS 2\.22 0\.42 10 04/06/2007 MS MS MS 3\.47 0\.54 11 06/20/2007 MS MS MS 3\.96 0\.68 12 10/10/2007 MS MS MS 4\.31 1\.01 13 06/13/2008 S S S 5\.62 1\.60 14 10/14/2008 S S S 6\.40 2\.15 15 06/03/2009 S S S 7\.70 3\.28 16 11/21/2009 S S S 9\.10 4\.50 17 05/22/2010 S S MS 9\.70 4\.50 18 11/07/2010 S S S 10\.29 4\.50 19 05/31/2011 S S S 10\.70 4\.50 20 11/12/2011 S S S 11\.05 4\.50 21 03/25/2012 S S S 11\.05 4\.50 xi H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Approved Reason for Restructuring & Restructuring Date(s) PFO or GEO Key Changes Made PDO GEO IP in USD Change millions Amendments to the IDA Development Financing Agreement and GEF GA – changes made to percentages in 11/25/2004 N S S S 0\.00 expense categories; percentage of expenditures to finance Consultant services and Research and Demonstration grants changed\. Amendment to DFA- expenditure percentage change 05/25/2005 N S S S 1\.05 for incremental operating costs and new paragraph added for QBS of Consultants\. Amendments to the DFA and GEF GA - changes made to percentages in expense 10/09/2008 N S S S 10\.98 categories (DFA) and reallocation of funds across expense categories (DFA and GEF GA)\. a) Project extension from April 30, 2011 to April 30, 2012 for the IDA credit only; (b) consolidation of disbursement categories and percentages to simplify final project administration; (c) reference to mass media services provided by the government-owned enterprise as an incremental operating 04/27/2011 N S S S 14\.79 cost; (d) addition of sole source selection (SSS) as a procurement method for consultants; (e) minor revisions of the Results Framework; and (f) other revisions to ensure that past legal amendments and current updates of the cost estimates are accurately and consistently reflected in the official financing and cost data\. xii I\. Disbursement Profile P077454 P081159 xiii 1\. Project Context, Development and Global Environment Objectives and Design 1\.1 Context at Appraisal GDP growth, poverty, and agriculture\. Tajikistan has an area of some 141,000 km2 of which some two-thirds form the foothills and high mountains of the Pamirs\. Several regional ethnicities are represented among its population of 6\.3 million\. Independence, turmoil and civil war left it among the poorest countries in the world, but the economy was developing\. As of 2000 annual per capita income was only around US$l80, and some 83% of the population was poor, but during 2000-2003, real GDP growth ranged from 6\.0% to 10\.2% per year\. Tajikistan is an agrarian society and agriculture is critical to poverty reduction and economic growth\. Some two-thirds of the population was directly dependent for their living on Tajikistan's 4\.6 m ha of agriculture land, of which only about 850,000 ha were arable lands, and the remaining 3\.86 m ha were pasture, fallow lands and meadows\. Highland areas and land degradation\. About twenty percent of the population lived in hilly and mountain areas where access to most government services was limited\. Most of the 2\.5 m ha agricultural land they farm was pasture, only 206,000 ha were in perennial crops and orchards, and there were few significant irrigation systems\. Rural poverty, shifts in land management responsibilities, lack of integrated land management, inappropriate agriculture, and poor access to technical support were causing increasing land degradation\. Much of the population was using steep hillsides to grow cereal crops\. In turn, land degradation contributed to further impoverishment through mudslides (ruining villages, roads and farmland, and irrigation and water systems), soil-erosion (undermining agricultural productivity) and silting of waterways used for drinking water and irrigation\. However, highlands had good productive potential if appropriately farmed\. In addition to improving life for people in the highlands, utilizing this potential in sustainable ways would also prevent downstream damage and relieve pressure on the lowlands\. Mountain ecosystems\. Tajikistan had globally important mountain ecosystems with diverse flora and fauna, including many of economic importance, and under threat\. Pastures, for example, hosted over 3,000 plant species, but faced threats from localized over-grazing\. The wild-growing fruit plants of Tajikistan represented a unique genetic resource for agriculture\. The mountain territories of southern and south-eastern Tajikistan were the major regions for conservation of wild-growing fruits (apples, pears, apricots, mulberries, cherry plums and plums, among others), nuts (walnuts and almonds), grapes and berries (currants, sea-buckthorn berries)\. Country’s forest areas, which covered only 3% of the territory, decreased by about 15% between 1990 and 2000 due to the need for firewood\. Farm privatization\. Officially, some 55% of all arable land had been converted into lease farms, joint stock companies and family farms\. However, in lowland cotton growing areas, farmers were still not free to make their own management decisions, while in highlands they lacked the capital needed to exploit productive potential\. Furthermore, there were also large tracts of pasture, formerly under the control of state farms, which were under the control of Jamoats\. 1 These pastures faced problems of inadequate maintenance as well as arbitrary and inequitable access to grazing rights and land use\. For details, see Annex 1 of Project Appraisal Document (PAD)\. 1 The Jamoat (sub-district) is lowest official government unit, and usually comprises a number of villages\. 1 Government strategy\. The key elements of Tajikistan’s Poverty Reduction Strategy Program (PRSP) emphasized accelerated growth, provision of basic social services, and targeted support for the poor and improved governance\. The governance initiatives included more local planning and management, especially at the Jamoat level\. For the agriculture sector, the Government’s strategy supported the efficient use of, and access of the poor to land, water, financial and other resources, and eliminating government intervention in private farm decision making\. The PRSP also highlighted the regional dimension to poverty, with the highlands facing special difficulties, especially in the south-east\. For the environment, the PRSP emphasized addressing natural disasters, water pollution, soil degradation, deforestation and biodiversity conservation\. Specific measures related to afforestation, pasture improvements and protection, development of the institutional frameworks, and mainstreaming of sustainable land management and biodiversity conservation in agriculture and forestry were considered government priorities as documented in the National Strategy for Combating Desertification (2002), and the National Biodiversity Conservation Action Plan (2003)\. Tajikistan was an active party to the United Nations Conventions: (a) to Combat Desertification (1997); (b) on Biodiversity Conservation (1997); and (c) on Climate Change (1998)\. Government actions\. The Government was trying to delegate more authority to Jamoats within a broader government decentralization strategy and also attempting to implement its agriculture strategy through programs of farm privatization, irrigation and other rural infrastructure, improved technical support services, and improved access to rural finance\. However, there remained problems of past reliance on, and vested interests in, top-down control, and lack of accountability\. Furthermore, severe fiscal constraints and a lack of familiarity with incentive frameworks (which could address shortcomings of regulatory approaches where enforcement capacity was inadequate) limited the extent of overall program impacts\. For details, see Annex 1 of the PAD\. Bank projects were directly supporting the implementation of the Government’s programs focused on agriculture, with particular attention to developing new, replicable approaches that address the key implementation and sustainability constraints\. Based on this experience, the Government requested the Bank to extend its support to highland areas\. Rationale for Bank assistance Bank experience and potential for scaling up\. Bank support would build upon the experience, analysis and relationships already established under its project and sector work, and under programs of other donors\. The Bank had extensive operational experience in local demand-driven approaches to agricultural development\. Past Bank support had also demonstrated the use of field-level pilot experience to constructively influence crucial policy and legislation\. Bank-financed projects within Tajikistan had already established culturally-appropriate, community-managed models for: (a) allocation of land use rights in ways which ensure transparency, with participation of the community in the allocation of parcels, legitimacy (through involvement of traditional local institutions), conflict management, and land tenure security; (b) management of investments in irrigation infrastructure and their subsequent operation through Water User’s Associations; (c) establishment of efficient technology transfer mechanisms through Farmer Information and Advisory Services; and (d) establishment of a credit mechanism for seasonal agricultural needs through revolving funds via Non-Banking Financing Organizations\. In addition, the Bank was applying best practices and lessons developed by international NGOs, such as the Agha Khan Foundation (AKF), Mercy Corps International (MCI), German Agro Action (GAA), ACTED, and Care International\. The Bank was also building on United Nations Development Program’s (UNDP’s) Rural Reconstruction and Development Program (RRDP) initiatives to strengthen governance at the Jamoat level through Jamoat Development Committees (JDCs) comprising elected representatives from constituent villages\. The Project provided an opportunity to scale up these models in highland areas, and to strengthen linkages with local and national government\. 2 Value of World Bank support\. The Bank’s comparative advantage relative to other donors came from its ability to work at all levels of the Government, conducting policy dialogue at all levels of Government – top, line ministry and local officials, and implementation assistance at the line ministry, and local level\. The Bank’s ongoing support to farm privatization and the National Social Investment Fund of Tajikistan (NSIFT) also complemented the Community Agriculture and Watershed Management Project (CAWMP)\. The Bank’s value-added to CAWMP was: (a) providing capital for productive agriculture and land management investments at a scale beyond what other donors in the area could mobilize on their own; (b) encouraging community participation in the project design, implementation, operation, monitoring, and evaluation, building on the experience of projects financed by the Bank as well as other donors; (c) involving government and developing its capacity to play appropriate roles that foster the desired outcomes; and (d) experience in implementing similar projects in other countries (e\.g\., Turkey, Armenia)\. The Bank was able to share a wide range international experience, e\.g\., business and market development relevant to rural livelihoods, micro finance, feasibility and operation requirements for rural infrastructure, incentive structures for watershed management, knowledge generation and dissemination, and development of community institutions\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The Project objective was to build the productive assets of rural communities in selected mountain watersheds, in ways that sustainably increase productivity and curtail degradation of fragile lands and ecosystems\. Outcome indicators\. The key outcome indicators comprised: 1\. Eighty percent of farm productivity, land management, and rural infrastructure investments are successful according to agreed economic, financial, social, and environmental standards, and are being sustained\. 2\. At least half the households where the Project is operating (i\.e\. 32,000) directly participate in some part of the rural production component\. 3\. Increase in proportion of Project participants who are living above the poverty line from 3% to 30%\. 4\. Land and mountain ecosystem degradation trends halted (also pertains to GEF)\. Output indicators\. Implementation was to be assessed mainly on the basis of output indicators including: 1\. Total cumulative investment in agriculture production among Project participants (from initial grant, local contributions, and reinvestment) exceeds US$3\.8 million, i\.e\., more than the projection of Project-financed grants and capital infusions (implying high participation, desirable social and environmental impacts, commercial success, use and repayment of revolving funds)\. 2\. Land management investments cover 78,000 ha and benefit very poor at least in proportionate to their numbers in a community (also pertains to GEF)\. 3\. Number of improved public facilities, disaggregated by type of investment (e\.g\., village drinking water, roads, and electricity)\. 4\. Forty-seven JDCs overseeing rural production investments\. 5\. Forty percent of farm production and land management investments apply improved technologies, and receive good access to necessary inputs and knowledge\. 3  6\. Number of indigenous crop varieties from Project area preserved as live specimens (also pertains to GEF)\. 7\. Satisfactory Project administration as indicated by Bank supervision ratings and Project’s public reputation for integrity\. 1\.3 Original Global Environment Objectives (GEO) and Key Indicators (as approved) The global environmental objective was to entail protection of globally significant mountain ecosystems by mainstreaming sustainable land use and biodiversity conservation considerations within agricultural and associated rural investment decisions\. This integrated management approach was also to provide replicable models for comparable areas throughout the country\. The GEF objective was mainstreamed into the overall development objective and outcomes\. 1\.4 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised\. Revisions to key indicators were: Original Indicator Revised Indicator Explanation Did not exist\. Cumulative number of villages Measures breadth of initial project which have participated in implementation at the field level, as credibility investments\.2 [PDO] an early indication of PDO achievement\. Negative trends of land Area in ha covered by land resource The original PDO indicator was not and mountain management subprojects and other able to measure impacts due to ecosystem degradation project activities that directly and practical problems of scale, halted in Project successfully addresses land and seasonal variation, etc\. The revised Jamoats\. mountain ecosystem degradation\.3 PDO indicator was a minor [PDO, GEO] modification of an indicator which was originally classified as 2 Credibility investments are the small initial grants for locally selected initiatives made to each participating village in order to build the trust and confidence of local people in the project, prior to the development of proposals for other rural production investment grants\. 3 Confirmation that land resource management subprojects and US$ value of other project expenditures (e\.g\., farm productivity subprojects, rural infrastructure subprojects, specific training programs, specific consultancies, etc\.), in concept and then in implementation, include at least one of the following results on fragile lands: • Prevent or reduce soil erosion by water or wind • Increase vegetative cover through perennial crops and pasture • Provide soil and moisture conservation • Improve soil quality • Improve water use efficiency • Increase sustainable fodder or wood supply • Increase sustainable renewable energy supply • Increase integrated pest management • Indigenous plant preservation 4  Original Indicator Revised Indicator Explanation “intermediateâ€?\. Farmer-based guidelines and methods developed for market Measures results of final year of the Did not exist development in uplands, Jamoat- Project after the extension of the level pasture management, and closing date\. gravity-fed irrigation\. [PDO] With transformation of indicator on area covered by Project areas that Area in ha covered by Total value in US$ of land resource address degradation from an land resource management subprojects designed intermediate to PDO result, a new management and funded\. [GEO, Intermediate intermediate indicator was required subprojects\. Indicator] for land resource management subprojects\. Cumulative number of rural people Project participants who have received technical have access to and training from Tajikistan Academy Original indicator was not feasible adopt improved of Agricultural Science (TAAS), to measure\. agricultural Facilitating Organizations (FOs), or technologies\. other Project partners\. [Intermediate Indicator] Number of Jamoat Development Committee (JDCs) that Number of JDCs that have been Change only in the coverage target, have been established established and are overseeing based on need to fit updated budget and are overseeing implementation of credibility and allocations within available implementation of rural production subprojects – final financing\. credibility and rural target\. [Intermediate Indicator] production subprojects – final target 47\. Bank supervision Original indicator not practical ratings and reputation Project management ensures Project because of inadequate capacity to for integrity as implementation timeliness\. conduct surveys, and emphasis on perceived in public [Intermediate Indicator] integrity addressed through other opinion surveys\. mechanisms\. Added by World Bank as core Did not exist\. Number of Project beneficiaries\. indicator\. Added by World Bank as core Did not exist\. Number of female beneficiaries\. indicator\. 1\.5 Revised GEO (as approved by original approving authority) and Key Indicators, and reasons/justification The GEO was not revised\. See table above for indicator changes\. 1\.6 Main Beneficiaries\. The primary beneficiaries were Common interest groups (CIGs), and individuals, since they were the recipients of subproject grants for projects they identified and proposed\. 5 Villages, and their constituencies, also received Project budgets for each of the three types of rural infrastructure investments\. Participants and members of the various institutional entities that facilitated decision-making, granting and implementation of subprojects including the: Jamoat Development Committees (JDCs), Facilitators and Specialists from the Aga Khan Foundation /Mountain Societies Development Support Programme (AKF/MSDSP), Food and Agricultural Organization (FAO), United Nations Development Programme (UNDP), Welt Hunger Hilfe (WHH), and other international NGOs, Watershed Development Committees (WDCs), and Project Coordination Units (PCUs) in each of the four watersheds\. 1\.7 Original Components (as approved) Component I: Rural Production Investments\. (US$11\.9 m) A\. Farm Productivity Improvement: Individuals, and groups of farming households, would invest in productivity enhancing activities of their choice, most of which would provide immediate income\. Investments could include inputs for annual crops, horticulture, livestock, processing, distribution, leasing, and credit facilities\. B\. Land Resource Management: This subcomponent enabled local people to adopt more sustainable use of fragile lands that are currently under the jurisdiction of the Jamoat, and provided land use certificates after three years of maintenance, subject to continued good land use\. The combination of appropriate income-generating investments with soil conservation would enhance the organic content of soil and create incentives for sustainable land use by better addressing interests of local people\. Groups of nine or more households working on contiguous areas would make long-term investments such as horticulture, woodlots, or fodder, combined with soil and moisture management structures\. Blended financing from GEF would almost quadruple the land area covered beyond the level that will be supported by the government on purely national grounds\. C\. Rural Infrastructure: Investments to rehabilitate rural infrastructure would be made to community groups\. Typical investments would compliment agriculture and land resource management subprojects, would be small scale (about $4800 on average), and could include drinking water, small irrigation, access track rehabilitation, and small power generation\. Contribution Requirements and Budget Constraints\. Beneficiaries had to contribute their own resources in the form of labor, material and cash, for at least 20% of the total value of any investment\. Investment proposals would be prioritized within formulaic fixed budgets for villages based on population\. The share of all one-time, start-up grants to any one household would not exceed $290\. Farm productivity financing in subsequent years would be provided either through reinvestment of retained earnings or through credit or revolving funds\.4 Rural infrastructure would be restricted to productive investments and include operations and maintenance financing arrangements\. They would only be made if no alternative funding was available from other donor programs such as the National Social Investment Fund of Tajikistan (NSFT)\. Component II\. Institutional Support and Capacity Building\. (US$4\.3 m) 4 From the newly created Micro-finance Bank of Tajikistan supported by, existing interest bearing revolving funds operated locally with donor support, or newly created member owned revolving funds building on the model developed under the World Bank-financed Farm Privatization Support Project (FPSP)\. 6 A\. Research and Demonstration: This subcomponent helped scientific institutions and line ministries to provide technical services including training to communities\. It would include support for seed and seedling production, livestock breeding and animal health and husbandry improvements, and market and enterprise analysis and development\. Participating agencies included the Tajikistan Agricultural Research System (for research and extension and including preservation of live plant specimens in collaboration with the Consultative Group For International Agricultural Research’s (CGIAR) Central Asia and Caucasus (CAC) unit in Tashkent)\. The Farmer’s Training Center, Ministry of Agriculture and other Ministries and the State Committees such as Statistical Service, and Land Committee would also benefit\. Blended GEF financing would support the preservation of indigenous crop and other specimens\. B\. Community Mobilization and Subproject Preparation: This subcomponent included training and facilitation for Jamoat Development Committees (JDCs) as well as households and common interest groups with support of local facilitators (contracted through international NGOs)\. It also included support for small confidence building mobilization grants for each village, plus information and experience sharing\. Blended GEF financing enabled the planning and sharing associated with the additional land resource management investments\. Component III\. Project Management: (US$3\.6 m) This component supported project coordination, procurement, disbursement, financial management, reporting, monitoring, and evaluation, at both the national level and for each of the four Project watershed areas\. It built on project administration capacity and arrangements that already existed for ongoing Bank-financed projects\. The component also supported the secretariat services provided to the State Level Steering Committee (SLSC) and the Watershed Development Committees (WDCs)\. The component supported: • National Project Management Unit, • Project Coordination Units for the four watersheds, and • Evaluation 1\.8 Revised Components Components were not revised; however various planned targets were modified during implementation upon realization of on-the-ground conditions\. For example, at the time of the Mid-term Review in 2008 (MTR), the Bank team concluded that, “The number of households directly benefiting from subproject investments is likely to at least meet the original target of 32,000, even though the total number of households living in the participating villages is likely to be 57,375 compared to the appraisal target of 62,000 because the percent of direct beneficiaries is higher than expected\. The number of participating villages is likely to be 409, compared to the appraisal target of 404, and the number of Jamoats is likely to be 39, compared to the appraisal target of 47\. The number of villages per Jamoat was higher than anticipated and, together with higher than anticipated costs of facilitation support and of JDC/JRC support, this has increased the unit cost of project support per Jamoat\.â€? 1\.9 Other significant changes A few minor restructurings occurred during the Project\. Changes in expenditure financing percentages and reallocations between expenditure categories were made in the Development Financing Agreement (DFA) and GEF Grant Agreements in 2004, 2005, 2008, and 2011\. A Project extension closing date of one year was approved from April 30, 2011 to April 30, 2012 for the IDA credit – to: (a) enable the 7 Project to address further requirements related to irrigation, pasture management, and market development; and (b) complete the impact evaluation and to disseminate findings\. In April 2011 several revisions were made to ensure that past legal amendments and current updates of the cost estimates were accurately and consistently reflected in the official financing and cost data\. For example, as of April 2011, costs were lower than expected at the MTR due in part to changes in the exchange rate and also because some of the specific activities expanded less than expected (e\.g\., micro-finance, discretionary budget for subprojects, expansion of Facilitating Organization support), or had lower unit costs (e\.g\., PMU staff expenses)\. Project Costs (US$ Million) Components/Activities Appraisal Effectiveness MTR Proposed Actual Feb, 2004 Nov, 2004 May, 2008 April, 2011 September, 2012 Rural Production Investments 11\.90 11\.34 9\.99 9\.61 10\.69 Institutional Support and 4\.30 3\.60 5\.14 4\.71 4\.90 Capacity Building Project Management 3\.59 3\.03 3\.64 3\.85 3\.72 Total 19\.79 17\.97 18\.77 18\.17 19\.31 Similarly, the financing plan was updated (April, 2011) to reflect previous revisions, taking into account updated estimates of the Government counterpart expenditures, as well as fluctuations in the US$ equivalent value of the IDA Credit and Grant\. The update also corrected earlier estimates of Government counterpart (and hence the total amount of financing) which did not correctly reflect the Government financing requirements associated with the agreed IDA and GEF financing disbursement percentages\. Project Financing (US$ Million Equivalent) Financing Source Appraisal Effectiveness MTR Proposed Actual Feb, 2004 Nov, 2004 May, 2008 April, 2011 September, 2012 Government of Tajikistan 2\.00 0\.74 0\.74 0\.36 0\.58 Beneficiaries 2\.49 1\.93 1\.93 1\.92 3\.40 IDA Credit 5\.00 5\.00 5\.40 5\.24 4\.93 IDA Grant 5\.80 5\.80 6\.20 6\.16 5\.91 GEF Grant 4\.50 4\.50 4\.50 4\.50 4\.49 Other Financiers 0\.00 0\.00 0\.00 0\.00 0\.00 Total 19\.79 17\.97 18\.77 18\.17 19\.31 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry Project background analysis was satisfactory\. Background preparation took into account the World Bank’s previous engagements on land management, tenure security and poverty alleviation in Tajikistan (e\.g\., the Farm Privatization Support Project (FPSP), Rural Infrastructure Rehabilitation Project (RIRP), Pilot Poverty Alleviation Project (PPAP), Second Poverty Alleviation Project, and also from Turkey’s Eastern Anatolia Watershed Rehabilitation Program)\. 8 The Project also drew from the experience of other donor activities and developed a new model that took into account several important lessons: The participatory process cannot be target driven\. The design of the institutional structure and sub- granting mechanisms clearly demonstrated a participatory approach whereby the ideas came from individuals – and the CIGs were instrumental in bringing together people and ideas\. This was in contrast to the past where most activities focused on humanitarian aid rather than support for rural agricultural production – which was a foreign concept for local people\. Ultimately, changing this perception and attitude became one of the more important challenges at implementation\. Design and implementation should build on existing mechanisms with suitable external TA\. The Project drew on the existing institutions – such as the JDCs built under the UNDP Rural Reconstruction and Development Program – and reinvigorated them towards a new development goal\. JDCs continued their existing decision-making capacity, but were transformed to act as a clearinghouse for CIG and village investments, identify new sources of funding and facilitate clearances and registrations for subprojects (see Annex 6 in PAD for details on their role)\. Other NGOs were engaged as facilitators to assist villagers in preparing proposals and JDCs in monitoring and activities\. Training should be timely and appropriate\. Training as a prerequisite before investment was integral to sustainability – since local knowledge contained gaps in more modern and environmentally-sustainable techniques\. For example, individuals participated in training of pasture management and animal husbandry by the Institute of Husbandry Tajik Academy of Sciences and the Agrarian University of Tajikistan\. Long-term sustainability requires community involvement early on and full awareness of the level of operating expenses that will be required to maintain the investment\. Participation by and consultation of local communities and individuals at the outset better ensured the financial sustainability of investments\. The financial management aspect of farm and rural investments was part of the initial training package to precede investment\. All stakeholders need to be included\. Project preparation activities involved all key stakeholders: national, raion and Jamoat level authorities; NGOs; local communities including village elders, mahalla, farmers, livestock owners, and women\. Key stakeholders who would be involved directly in the Project include village leaders and village members, women, local government representatives, technical staff of the line ministries located primarily at the raion level, and staff of the PIUs and existing PMU at the central level\. NGOs would provide technical assistance during the facilitation and proposal development phase at the village level and JDCs would act as decision-makers and comprise of elected officials from the communities\. The rationale for Bank intervention was sound\. Inclusive to the rationale provided in section 1\.9, the Bank was well-positioned to undertake a bottom-up approach from its experience in local institution building, community-driven and participatory methods and the ability of providing sufficient resources to make an impact (scale)\. The World Bank sought high-level support such that Project outcomes and recommendations could be factored into higher-level decision-making and reform\. For example, this was particularly important for the continued effort of issuing land certificates to individuals – which, at the outset of the Project, was a slow, uncertain and cumbersome process\. Project design was generally sound\. Project components were designed appropriately around the overall objectives with an emphasis on improving rural production (retained earnings) and meeting rural infrastructure needs at a local level\. To effectively enable and sustain investments there was sufficient allocation given to the components on institutional support and capacity building – especially 9 on research and demonstration which had been shown to be one of the most effective ways in conveying best practice\. The geographical target areas were known to be very poor and vulnerable with relatively few income or diversification opportunities\. The social assessment surveyed individuals in the watershed areas of Zerafshan, Surkhob and Toirsu identifying opportunities and institutional structures that could be developed to support Project objectives – while respecting the traditional informal institutions for collective action like the hashars 5 – organized through traditional leadership structures of the mahalla\. 6 A considerable amount of thought and effort was then put into the development of the implementation arrangements through the system of institutions and stakeholders to ensure investments would remain locally-driven and screened by a transparent member body (JDCs) and process (see Annex 6 of the PAD on Implementation Arrangements)\. Project alternatives were rejected on sound reasoning\. By focusing on highland areas the focus was on the poorest experiencing the most severe land degradation – but complementing existing lowland area initiatives\. Rather than working solely with village-level institutions – the Project strengthened Jamoat- level institutions to better coordinate community initiatives\. This was also viewed as a more efficient and cost-effective method than supporting every village\. But in this regards, granting funds from the bottom-up was also considered a better model than the previous top-down approaches – where the record of such investments was uncertain\. Most risks were adequately identified and rated; mitigation measures were adequate\. Risks identified in the PAD were adequately supported by mitigation plans – however several came to fruition despite best efforts (more on this below)\. Some risks are inherent in Community-Driven Development (CDD) schemes and given the lack of experience with this form of support in Tajikistan at the time – a more robust set of mitigation alternatives could have been developed as backup plans\. 2\.2 Implementation All outcome and intermediate targets were exceeded before Project closing\. This includes the key outcome indicators of the percentage of successful and sustainable rural production investments (85%), number of participating households (>43,000), percentage of the population above the poverty line in Project villages (30%), and the number of participating villages (402)\. It also includes the area of land under sustainable management (GEO indicator: 96,000 ha)\. Many of these targets had sufficient momentum even by the MTR in 2008\. The main contributing factor in realizing these outcomes were the arrangements at the watershed level including partnerships between villages, common interest groups, JDCs/JRCs, Project Coordination Units (PCUs), WDCs and Facilitating Organizations (FOs)\. Effective coordination, although inexperienced at first, eventually took hold as demonstrations and first entrants were observed and lessons learned\. In terms of challenges there was an initial one-year lag in activity due to a combination of reasons\. First, there was inexperience within the PMU in contracting Facilitating Organizations and unfamiliarity with the Project’s concepts and innovative partnership arrangements\. The response was to increase capacity in financial management and procedures that were congruent with Tajikistan’s accounting methods and to seek clarity on the roles and responsibilities of FOs\. Second, there were differences of interpretation in Project design and procedures among the output-based partnerships with the FOs (AKF/MSDSP, 5 Hashars are Tajik community groups that get together to work on community projects that benefits everyone, such as improving the roads or cutting hay that everyone can use\. 6 Traditional mahalla/jamiyat institutions are the most important organizing force in project area hamlets\. The community selects their leaders somewhat democratically, although about half the leaders typically make decisions by themselves, while the remainders make decisions through councils or hamlet-wide discussions\. 10 FAO, UNDP and WHH)\. Subsequent meetings orienting the FOs to the objectives and procedures resulted in a more effective arrangement after the first year\. Thirdly, there was an initial lack of understanding at the local level of the procedures outlined in the Operational Manual for environmental analysis, business plans and the design of rural infrastructure\. This resulted in the FOs and PMUs playing more hands on role during the first trials in each area\. Ultimately, by the MTR, many of these issues had been resolved and disbursement increased significantly\. The Project was identified as a potential problem project in the first few years because of a lagging Component 1, but actions taken on both the World Bank and counterpart side guided the Project on track\. Minor restructurings took place – but mostly pertained to reallocations across expenditure categories and simplifying disbursement procedures (see section 1\.9)\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The key outcome and intermediate performance indicators listed in section 1\.2 were adequate in tracking progress towards achieving the PDO and GEO, although indicator #4, “Land and mountain ecosystem degradation trends haltedâ€? appeared ambitious through the rather expensive methods suggested in the PAD (Annex 3)\. Revisions to the indicators were undertaken at the time of the MTR reflecting implementation experience such as changing coverage to 39 Jamoats from 47 due to cost considerations as well as the base number of households\. These changes were reflected in amended supplemental letter to the DFA\. Design\. The M&E framework was designed to measure results at a very local scale – hence sufficient capacity would have to be built at the Jamoat-level\. Project progress and outcomes were measured through feedback mechanisms suited to limited capacity and challenging conditions\. Data collection methods included regular progress and financial reporting by Project partners, field supervision visits and partner workshops\. Project and watershed-level assessments were also conducted, and a final impact evaluation was planned\. The PAD suggested the contracting of an M&E and financial specialist at the JDC-level, however these functions were eventually separated with one financial and one M&E JDC specialist\. The initial design for some aspects of M&E was ambitious given the cost and local capacity to implement them\. For example the use of satellite imagery to measure land degradation trends was beyond local IT capacity, let alone costs\. Other measurable indicators through direct observation, or field visits, were more practical and resulted in more timely monthly reports that aided implementation\. Implementation\. Monthly reporting was undertaken by all major Project partners that allowed for Project management to aggregate data and findings\. This was especially important given the scale of interventions and scope of Project coverage\. For example, the challenges posed with monitoring land degradation (cost and capacity) resulted in the decision to change the indicator to measure the aggregate area covered by subprojects and other project activities which directly support sustainable land management (see section 1\.4)\. The Project made use of central and site-based project units, along with Project partners such as NGOs and research institutions to record, measure and verify results\. A central database of rural investments was maintained with qualitative and photographic data collected to improve data quality and analysis as well as overall Project assessments\. Overall monitoring was assessed as satisfactory throughout most of the Project, except in a couple of instances where environmental monitoring needed strengthening\. One unfortunate circumstance, by the time of the MTR, was the inability of the contracted socio-economic survey to generate data of sufficient quality and quantity for a comprehensive project baseline\. Poor communication with the consultants about required tasks and significant cultural/academic differences about what constitutes primary baseline data useful for Project monitoring and evaluation purposes contributed to the generally 11 inadequate data and associated analysis\. In response, an effort was made to collect sufficient secondary information at the raion-and watershed-levels in order to establish some baselines\. Utilization\. M&E data contributed to adaptive management in the Project, e\.g\., systematic use of the Results Framework and careful review of its underlying assumptions led to MTR corrections\. M&E data were also used to share project concepts, results and lessons learned with government, donors and civil society\. Data utilization, and its feedback into project implementation, was crucial in measuring progress towards the PDO and GEO\. For example, by the time of the MTR it was evident that covering 47 Jamoats was basically not affordable and would stretch resources far too thin – so the decision was made to focus on only 39\. M&E was integral in tracking the outcomes from thousands of subproject proposals, where information on successes (or failures) could be replicated (or avoided) in other areas\. It was important to identify and highlight positive demonstrations that could replicate best practice\. 2\.4 Safeguard and Fiduciary Compliance Financial Management\. The PMU was staffed by a Chief Accountant, an accounting assistant and supported by the FM specialist\. Financial management received unqualified (clean) audits throughout the Project’s life and delivered regular reports that informed project management, but began to struggle just before the MTR and was rated moderately satisfactory thereafter\. This was due to several reasons\. First, and as mentioned above, some delays were due to the PMU’s inexperience with contracting FOs and this led to delays in direct fund-flows to the JDCs in the earlier years\. Difficulties in finding technical assistance in this area also contributed to the delays\. Subsequent training and experience with these types of granting mechanisms eventually rectified the issue\. Second, regular Financial Management Reports (FMRs) identified deficiencies in IFR reporting, weak controls at some points or discrepancies that were not fully explained\. Thirdly, the recommended accounting software (1C) was never fully capable of providing timely and accurate reports in the manner which was acceptable to the Bank – which meant a lot of manual work in spreadsheets – leading to delays and some inaccuracies\. Frequent technical support was necessary and only came up to standard by the end of the Project\. While each of these issues was eventually dealt with – the chain of events kept financial management from achieving a satisfactory rating\. Counterpart financing was lower than originally agreed also at the MTR (US$0\.59 million versus US$0\.74 million) and replenishments were delayed a few times – although it did not severely jeopardize implementation\. Part of this was connected to the financial crisis (beginning in 2009) when austerity measures led to smaller allocations being transferred\. This required frequent monitoring to ensure it was not in violation of the counterpart financing parameters in the DFA\. Procurement\. According to the PAD, procurement had both centralized and decentralized roles\. The PMU had the overall responsibility for the Project, including the management and supervision of Project procurement activities\. Procurement of Component 1 activities was carried out by the common interest groups (CIGs) and households undertaking subprojects, with community participation in accordance with the Operational Manual (OM)\. The PMU, in collaboration with the PCUs and JDCs, was responsible for providing guidance and supervision necessary to ensure that CIGs and households procure in accordance with procedures outlined in the Operational Manual\. A memorandum of understanding (MOU) between the JDC and the subproject beneficiary was used to address procurement aspects\. The PMU was staffed with a full-time procurement specialist; however this person was initially divided among other projects until the MTR which contributed to the lagging procurement performance outlined below\. Due to the lack of clarity of contracting FOs in the initial stages and a lack of understanding at the CIG- level of OM procedures, procurement experienced delays for the first two years of the Project and was 12 subsequently downgraded from satisfactory to moderately satisfactory by 2006\. This affected fund flows to Component 1 subprojects and to the overall downgrading of the Project\. In response, internal capacity was quickly built up through extensive training and the FO contracting and OM issues were resolved by consultations with FOs and the CIGs\. By the MTR these major issues were no longer present and procurement performance remained satisfactory until the end of Project\. A multi-project fiduciary review conducted in 2009 commended the community procurement of rural investment projects under the Project\. Disbursement\. Overall disbursements were ahead of original expectation by 2007, however Component 1 flows to subprojects were delayed because of the implementation issues raised above\. By the time of the MTR, this was no longer an issue and all funds were fully disbursed by project closing\. Environmental Assessment\. For Environmental Assessment (EA) purposes the Project was rated “category FIâ€? under the World Bank Safeguard Policy OP 4\.01, since the Project involved funds for subprojects selected by the communities during implementation\. The environmental impact of the Project activities were expected to be largely positive and would not involve any major construction requiring resettlement, land acquisition, or invest in the construction of dams, new canals or head works that would allow for increased water abstraction\. The EA included an assessment of the benefits and risks of project activities and an environmental monitoring subcomponent and Pesticide Management Plan (PMP) for compliance with OP 4\.09; because activities would be supporting agricultural production\. The Environmental Assessment was discussed in consultation (2003) with stakeholders in each of the Project watersheds, as well as at the national level with participation of local people, representatives of local authorities, line agencies, other government officials, and NGOs\. The Project provided support for a full-time Environmental Specialist tasked with implementing the environmental monitoring of activities and compliance with safeguards, as well as training programs for line agency staff, subproject proponents, other stakeholders, and equipment for simple environmental analysis and monitoring\. Compliance with OP 4\.01 and OP 4\.09 was rated satisfactory throughout most of Project implementation with a few exceptions, the first in 2007 when the Environment Manual required updating and greater attention paid to the implementation of the environmental monitoring of subprojects\. In 2008 the PMP was urgently needed to be in place because there was anecdotal evidence of certain pesticides being recommended by advisors – which could have violated OP 4\.09\. In addition a full-time Environmental Specialist was not internalized until 2009; relying on part-time consultants before this\. By 2010 environmental monitoring activities were well underway delivering important information on the amount of land under sustainable management and compliance with safeguards\. In addition, training in Integrated Pest Management (IPM) has also been completed to instill knowledge on more environmentally-friendly techniques to pest management – than through the use of pesticides and excessive use of fertilizers\. Social Safeguards\. No social safeguards were triggered by the Project – but public participation was rated highly satisfactory throughout the Project due to the focus of Component 1 on local communities\. A Social Assessment was undertaken for the PAD (Annex 17) including a survey among individuals in Project watershed areas\. The Project was expected to result in increased equity, community empowerment and social inclusion – and central to this was greater gender equity in decision-making\. A core indicator on gender was added to the Results Agreement after the MTR – and although crudely measured - showed that approximately 40 percent of subproject beneficiaries were women\. 2\.5 Post-completion Operation/Next Phase 13 Sustainability\. The Project’s design of inclusive community-driven development contributes to the sustainability of rural investments\. Decisions were made at the local level on what investments to implement, who should benefit and the distribution of financial resources across Component 1 categories thus building ownership\. Capacity was internalized since villagers were responsible for financial management and procurement of investments and took into consideration economic, environmental and social/institutional considerations\. For example, they had to provide evidence of cash flow and cost recovery arrangements for 3-10 years depending on the type of investment, environmental conservation and mitigation measures, and the establishment of organizations such as water user associations to support long-term operations\. The beneficiary contribution requirement (which eventually totaled US$3\.4 million) also helped build ownership and contributed to the sustainability of these investments\. Replicability\. Demonstration is one of the most powerful mechanisms for learning and the Project generated numerous examples of this\. First, the CIG decision-making model itself with inclusive and representative coordination of subprojects demonstrated that CDD investments can indeed be undertaken, even in a social context more familiar with only humanitarian aid\. Second, pilots in specific areas resulted in knowledge of what worked and what did not\. This knowledge can now be used within the community to replicate successes that benefit the individual and the environment\. Third, by operating at a watershed and Jamoat level – cross-fertilization of ideas can spread even further than traditional boundaries\. The Government’s commitment in sustaining and replicating the success of CAWMP is also demonstrated through its recent consideration of the Environmental Land Management and Rural Livelihoods Project (ELMARL) to be jointly co-financed through the Pilot Program for Climate Resilience (PPCR) and the GEF\. Modeled after CAWMP – it will include components on building rural productive assets, including sub-components similar to those under Component 1 of CAWMP and local knowledge management that will support rural populations in planning, implementing and managing rural investments\. Other key actions that contributed to sustainability and replicability are given in the table below\. Table of Key Actions Contributing to Sustainability and Replicability of Outcomes Action Economic Environmental Social/Institutional Sustainability Beneficiary The requirement that beneficiaries contribute at least 20% of the total rural contribution investment costs (including 5% in cash for rural infrastructure) helps build ownership requirement of the investment and contribute to overall sustainability\. Project awareness Attended by more than 70% raising, e\.g\., meetings, of beneficiaries strengthening workshops, etc\. the knowledge base\. Replicable Jamoat Market development rangeland management Extension period support to help ensure plan guidelines; gravity- activities (April 2011- income from current fed irrigation support for 2012) and future production\. broader watershed management\. 821 certificates issued in Project sites providing greater security to groups carrying Land Use Rights out agricultural and environmental investments and contributing to sustainable Certificates management of fragile lands and sustained income\. Replicability Dissemination Materials were prepared, published and shared in the following formats: a book on 14  activities on Project achievements; Project leaflets; several technical brochures with different experience and topics; 3 radio programs were broadcasted; a 20-minute film about Project knowledge generated achievements in watersheds; published articles in the Republican newspaper and agriculture magazines\. Materials distributed among ministries, agencies, research institutes, international and national NGOs\. Replicable subproject On average 2-3 subprojects are being independently replicated in each village by models for small individuals; with an estimated 800 replications for entire Project\. The most common farmers were in horticulture, bee-keeping and woodlots\. Created awareness of good practices that can be replicated extensively by small Farmer competitions farmers for pasture management, efficient irrigation technologies and integrated pest management\. Demonstration of CDD CAWMP concept and approach was adapted for a large scale 6-year IFAD project in in Tajikistan Kathlon (18,000 households) focusing on 3 components: 1\. Rural productivity contributing to IFAD investments; 2\. Institutional capacity building of local structures; and 3\. Project Khatlon Livelihood management with similar grant approval committees\. Project and adoption Adoption of elements of CAWMP’s approach with organizations, e\.g\., NRM aspects by other organizations by AKF/MSDSP for village planning\. Request letter from Deputy Prime Minister, and Endorsement of GEF Application by Government initiative Committee on Environmental Protection\. This is in relation to the ELMARL project to request further described above\. Although, rural investments under CAWMP are designed to be support, and linked to sustainable, new financing would enrich the benefits from such investments to other programs\. beneficiaries (i\.e\. depth) as well as replicate activities in new locations (i\.e\. scope)\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation The Project’s objectives were aligned with country-level priorities in the PRSP and World Bank’s Country Assistance Strategy 2003-2007 at the time (see PAD, page 5-6) and remain so today\. Objectives are also consistent with the current Country Partnership Strategy’s 2010-2013(recently extended until 2014) goal of reducing constraints to a post-crisis recovery and sustained economic growth (page 16) which includes increasing the productivity of physical assets such as land, water and human capital\. It is also aligned with the objective of agricultural reform viewed as being critical to enhance productive capacity and reduce rural poverty (pages 17-18)\. Each of these falls under the overarching CPS pillar of paving the way for post-crisis recovery and sustained development (page 27)\. The Project’s objectives are also aligned with strategies and policies of the Government of Tajikistan\. The National Development Strategy (2015) and Poverty Reduction Strategy III (2012) both emphasize the need to promote economic growth, especially in rural areas, and recognize the importance of addressing environmental issues, including land management, for the country’s development and poverty reduction goals\. The government is also working to expand agricultural capacity through measures to improve land tenure security and independent farm management through its Freedom to Farm policy\. The National Environmental Action Plan also states that a primary challenge for the country is land degradation, including deterioration of pasturelands, arable and irrigated lands and forests\. 3\.2 Achievement of Project Development Objectives and Global Environment Objectives Project Development Objectives were achieved as indicated by the percentage of sustainable subprojects (85%) and by the area of Project land now under sustainable land management (96,600 ha) (outcome indicators #1 and #4)\. Indicative Component 1 investments included livestock production, poultry farming, bee-keeping and horticulture (see Annex 2 for details)\. The cumulative number of 15 households in Project areas that undertook rural investments was greater than 43,000 (outcome indicator #2) and of those 50 percent are now above the poverty line (outcome indicator #3)\. The Global Environmental Objective of integrating sustainable principles into agricultural and rural development decisions was achieved through 1) the number of hectares under sustainable land management (96,600), 2) integration of environmental monitoring and impact assessment into rural subprojects, and 3) through the replication of best practice to other areas of the country - over 9,000 trained (intermediate indicator #4)\. Another globally relevant outcome was the preservation and documentation of live indigenous plant specimens\. Several expeditions were made by the Institute of Botany resulting in the identification of over 300 endemic and rare plant species including fruit trees\. The Institute also updated the Tajikistan Red Book with their findings\. Other specific outputs supporting each outcome indicator are detailed in Annex 2\. 3\.3 Efficiency The economic and financial analysis conducted in the PAD analyzed how farm productivity improvements could translate into increased retained earnings and thus reducing the percentage of people below the poverty line\. With the Project, the proportion of Project participants above the poverty line would increase to 44% by 2011\. Detailed monitoring information at the farm-level of productivity gains was not available for comparison – however improvements in income were estimated as part of monitoring and evaluation activities\. Outcome indicator #3 shows that approximately 50 percent of Project beneficiaries are above the poverty line – suggesting that the Project was economically efficient and effective\. A GEF incremental cost analysis (ICA) was also undertaken at the time of appraisal in order to justify GEF funding (see PAD Annex 15)\. The baseline cost of the Project was US$14\.4 million with an incremental cost to be supported by the GEF of US$5\.4 million\. 7 The Project cost at closing was US$11\.42 million (IDA Credit, IDA Grant, and borrower) with beneficiaries contributing US$3\.4 million (in-kind, but even more than projected) along with contributions from FOs 8 and other grants\.9 Project targets were exceeded in all instances, thus the realized benefits were greater than initially estimated – and at a lower overall project cost\. Thus, the Project can be considered efficient\. For details see Annex 3\. 3\.4 Justification of Overall Outcome and Global Environment Outcome Rating Rating: Satisfactory The PDO and GEO remain highly relevant for local rural development and global environmental protection and in meeting the objectives of the Government of Tajikistan and the World Bank\. The PDO was achieved, and surpassed in all outcome and intermediate indicators, and the GEO was achieved through the integration of sustainable land management practices at the local level and in rural 7 It was assumed that the GEF contribution (US$4\.5 million) would also leverage US$0\.9 million in beneficiary support for a total of US$5\.4 million\. 8 Facilitating Organization (FO) contributions: AKF/MSDSP – US$100,000\.00; UNDP - US$84,000\.00; WHH – US$345,000\.00 9 Separate Bank-executed project on Capacity Building in Geospatial Analysis (US$160,000\.00) and DfiD-funded Rural Vulnerability and Resilience Study (US$200,000\.00)\. 16 development decision-making\. Overall Project costs were lower than anticipated, beneficiary contributions exceeded expectations, and thus results were achieved in a cost-effective manner\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Poverty, gender and social development were all part of the objectives of the CAWMP\. Poverty, as indicated above was reduced among Project participants\. Female participation in subprojects was also a main goal of the Project and as outcome indicator #7 suggests over 40% of project beneficiaries were women\. Social development can be defined in this context as expanding participatory methods (a la CDD) in decision making through the CIG model\. Greater social cohesion can also be claimed through the sharing of experiences and interactions across Jamoats and watersheds\. (b) Institutional Change/Strengthening The model introduced under the Project was completely new for Tajikistan\. It was contrary to the humanitarian aid-type of development that rural communities and the donor community was use to\. In this regard, institutional strengthening occurred at many levels\. First, at the local- and watershed-levels through the participatory methods of the CIG model mentioned above, it built local knowledge of best practice not only in productive asset building, but also with business plans, fiduciary requirements and environmental impacts\. Second, the Project also supported increased knowledge at the PMU and Government levels of how bottom-up approaches can be successful\. Finally, among other donors – it demonstrated a new way of doing development in a country where a substantial proportion of the population live in rural areas and that local empowerment can improve livelihoods - if the will is there\. (c) Other Unintended Outcomes and Impacts (positive or negative) In 2010 the CAWMP won the World Bank award for “Improving the Lives of People in the Europe and Central Asia Regionâ€?\. The Project was recognized for its achievements in improving rural livelihoods, increasing agriculture production, improving land resource management including pasture improvement, rural infrastructure rehabilitation, and involving the rural population\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops A comprehensive survey of beneficiaries was not undertaken however interviews were conducted with a representative sample of subprojects\. These are summarized in Annex 5\. An important, and related, study on Farmer and Farm Worker Perceptions of Land Reform and Sustainable Agriculture was undertaken in 2011 to examine farmer perceptions in Project areas 10 that supported farmland restructuring and sustainable agricultural land management practices among rural households\. Several CAWMP areas were surveyed and it was found that farmers do indeed perceive improvements in their livelihoods and “Freedom to Farmâ€?\. 11 The executive summary is also attached in Annex 5\. 10 Project areas of several projects including: World Bank - Land Registration and Cadastre System for Sustainable Agriculture Project (LRCSP); World Bank - CAWMP; USAID – Land Reform Project in Tajikistan (LRPT); DFID – The Rural Growth Program (RGP – 2010-2012)\. 11 That is, farmers feel as though they have control over the use of their land; and the farming decisions they make\. 17 Numerous workshops were held over the life of the Project – on demonstration, training, methods, Bank procedures, etc\. In terms of outreach the PMU was also very active and disseminated many types of information to the rest of the project constituency\. These are summarized in Annex 6\. 4\. Assessment of Risk to Development Outcome and Global Environment Outcome Rating: Moderate As outlined under sustainability and replicability the objectives of CAWMP remain a priority for the Government and it is likely that support in these areas will continue\. Many of the realized benefits at the local-level are cost effective and likely to be sustained through self-initiative in preserving retained earnings\. The new World Bank project (ELMARL) will build on the achievements and lessons learned under CAWMP to expand support for climate change resilience (under grant funding from the PPCR)\. The Government’s commitment under the National Development Strategy (2015) and Poverty Reduction Strategy III (2012) also targets rural areas and agriculture as a central focal point\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The Bank identified an area of support that was and remains relevant to Tajikistan, rural livelihoods, sustainable land management, as well as with the global commons (biodiversity conservation)\. Core Project activities focused on supporting a bottom-up, participatory approach that would instill local ownership of subproject investments and build capacity to ensure its sustainability from an economic, social and environmental perspective\. The balance of components was appropriate – giving greater weight to subproject investments but supported through sufficient capacity building efforts in Component 2\. The scope was ambitious, at a scale that could demonstrate results and drew on lessons elsewhere - but Tajikistan remained untested ground for CDD-type projects\. The Bank correctly identified institutional capacity issues as a significant risk at the outset of the Project and had mitigation plans in place however it may have underestimated the extent to which this was true (more on this under Section 6\. implementation)\. Given the rather complex institutional framework to implement subprojects - it might have been worthwhile to do an institutional analysis to identify possible facilitating and contracting constraints to the CDD model\. (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Satisfactory The Bank closely supervised Project implementation through semi-annual (or more frequent) missions and, fiduciary reviews and also maintained a constructive dialogue between the PMU, the PCUs, JDCs, WDCs, FOs and other stakeholders\. Issues raised were addressed in a timely manner and were candidly reported in official documentation – along with critical path milestones\. 12 For example, when delays in subproject flows appeared, an emphasis was placed on strengthening weak areas such as procurement 12 The Aide Memoires were thoroughly detailed and noted for identifying issues and their resolution\. 18 and training was initiated to support this gap\. However, overemphasis on subproject fund flows led to a lack of focus on other components such as environmental monitoring and this became an issue by time of the MTR\. 13 The Bank maintained focus on the fulfillment of Project objectives, and these were met or surpassed in many cases, but the underestimation of local capacity was a cause for slow disbursement and procurement issues in the beginning\. Unfamiliarity with contracting FOs in this context proved to be problematic since there was no precedent in these types of contracts and when combined with the local unfamiliarity with the OM implementation lags were encountered\. This translated into greater attention being paid to the fund flow issues from 2005-2007\. Greater guidance to the PMU on how to resolve these issues was warranted\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory World Bank support to the Government of Tajikistan in preparing and implementing the Project is rated as satisfactory largely due to its relative responsiveness to issues and adaptation to unpredictable circumstances\. Closer attention to local capacity issues – and their appropriate resolution such as an institutional analysis may have greater impact on mitigating this risk\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory Government was supportive of the Project and provided the necessary facilities for project management and coordination, including field facilities\. The Ministry of Agriculture, State Land Committee, Committee on Environmental Protection and State Committee on Investments provided regular assistance to support implementation of Project activities\. The State Land Committee also provided assistance to the Project for the issuance of Land Use Rights certificates for Project beneficiaries\. However, Government counterpart funding delays were encountered during the economic crisis (around 2009) and eventually led to a slight under-commitment according to the DFA\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory The PMU, as the main implementing agency, remained committed to the Project and provided satisfactory support to the JDCs, WDCs, and CIGs on daily issues and in resolving problems\. This was evident from the many interactions with stakeholders to resolve issues such as the FO contracting issue and the lack of understanding by CIGs on the OM\. In some instances there were changes in staff or vacant positions that led to some delays\. For example the Environmental Specialist position for environmental monitoring purposes was occupied only on a part-time basis until 2010 and at times other specialists were divided among other projects\. While the PMU was experienced in certain areas, the country itself had little or no experience with CDD-type projects which hindered progress in the first few years\. The PMU was able to overcome most procurement and monitoring issues, but some financial management issues persisted throughout the entire Project\. Renewed efforts, momentum and 13 Of course, it should also be understood that a lack of subprojects meant little to monitor and evaluate\. 19 subproject flow after the MTR demonstrated the PMU’s significant contribution to the Project in meeting, and exceeding, its targets\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory Overall borrower performance is rated as moderately satisfactory taking into account the PMU’s commitment to achieving the PDO, GEO and the Government’s support of the Project\. Despite the initial two-year lag in subproject granting, actions taken by the PMU and local stakeholders led to the achievement of the PDO and GEO\. The rating is moderately satisfactory - the lower of the two individual ratings on Government and Implementing Agency Performance ratings as per ICR Guidelines\. 6\. Lessons Learned Project design Direct investment support to farmers through a systematic small grants program, coupled with facilitation and training built entrepreneurial capacity through a learning-by-doing approach\. Farmers assumed responsibility for sustaining their livelihoods in financially and environmentally sound ways\. This move toward self-reliance represents a dramatic shift from the culture of dependency associated initially with Soviet-era subsidies and then post-conflict emergency food aid\. Participatory planning along with village and household budget limits was an effective mechanism for villagers to prioritize and assess risks of various options, as well as allocate resources\. Furthermore, open disclosure of available funds and amounts allocated to investments improved accountability\. To further disseminate this aspect, the process and results need to be documented and then shared widely with government, donors and other implementing agencies and organizations so that similar measures can be included in future planning processes\. A multi-stakeholder approach to project implementation was worthwhile even in the Tajik context where limited prior experience and local conditions made management challenging\. In addition to generating expected project outcomes, this approach improved project transparency and accountability, increased respect for partners’ strengths and provided new learning opportunities for Project participants\. New forms of collaboration between government, international agencies, NGOs, scientists, and local community groups highlighted their respective strengths, e\.g\., there is greater respect for the capacities of villagers and traditional knowledge\. The learning process has been experiential with project partners sharing good practice, e\.g\., site and personnel exchanges\. Right of Use of Land Certificates (RULC) is key for sustainability, especially for land-related subprojects in CAWMP and for other similar initiatives\. According the CAWMP design the RULC should be issued after 3 years of successful using of subproject (land)\. However, during Project implementation and the RULC issuance process - it was evident that the RULC should be given after 1 year after subproject startup or less\. This increases the confidence of farmers to use the land as a real user and owner, and the certificates should be issued without delay\. Although it was not in the Project objectives to address broader policy and legal issues related to pastures and rangelands, sustainable rangeland management will require policy and legal support informed by practical, field-based examples and experiences such as those implemented in CAWMP\. The Project reduced overgrazing pressure locally within villages’ territories through several types of 20 subprojects and demonstrated activities contributed to sustainable rangeland management\. Grazing rights are a sensitive topic because it involves several types of farmers with potentially conflicting interests (family farmer, sheep farmer, Dehkan farms, and commercial private stock breeder) and might require new legislation and /or law enforcement\. Research and demonstration of appropriate technologies can be integrated differently at Project design\. The success of the Farmers Competition shows that agricultural innovation and good practice can be demonstrated and shared in an efficient and effective way\. While research institutes have shown limited practical skills for small-scale, upland farms in terms of approach, new technology introduction is still a high priority as it increases the value of subprojects even though this may be risky in terms of adoption\. New technologies / varieties can be tested first on farmer’s plots, demonstrating their value before sharing with local authorities and other interested parties\. A more practical approach is Farmer Field Schools at the raion (Jamoat) level – reproducing actual farm conditions\. The linkage is stronger between research (NGO, institute) – demonstrations (farmer’s plot with the assistance of FO & Hukumat) – and dissemination (demonstration by farmers and Fos)\. In addition, linking these activities with government programs or priorities may help to some extent encourage Hukumat authorities to keep engaged at the end of a project\. It should be noted that these types of activities will require international assistance of the type that was planned under CAWMP from IFAD and ICARDA\. The Project would have benefitted from greater marketing expertise (e\.g\., value chain development, association formation)\. Some CIG products reaching commercial scale such as fruit, vegetables, honey, etc\. require knowledge on effective marketing\. Female participation can be strengthened through additional processes during planning\. Women beneficiaries were positively represented in CIGs with 40% of beneficiaries listed as female but the approach from the beneficiaries’ point of view appeared at times to be filling ‘quotas’ than reflecting women’s concerns\. Taking into account local-cultural circumstances, it may be possible to focus on gender specific credibility grants, gender-oriented participatory planning resulting in a more integrated community action plan and subprojects focusing on women’s strengths\. Implementation The scope and scale of JDC mandates is effective for delivering services to upland, and often more remote, farmers\. In CAWMP sub-district level organizations proved to be an effective component of scaling-up strategies for SLM in a challenging physical landscape\. In the Project 39 JDC’s handled more than 3,800 CIGs and over US$7\.0 mln\. in fund transfers\. Additionally, participatory processes helped ensure that organizations such as JDCs worked effectively with government management units to deliver technical and financial resources to farmers\. Future efforts should maintain a focus on strengthening sub-district level support to farmers with scaling-up strategies requiring investment in institutional arrangements\. It will be important to ensure that participatory processes, including financial management mechanisms, are well integrated into SLM programs\. Contracting other organizations (e\.g\., FOs) requires clarity in procedures and Project objectives – up front\. The Project experienced wide variation amongst the FOs in terms of the conditions, level of funding and support\. Part of this was explained by the lack of a coherent and consistent mandate that could have been resolved through comprehensive introductory workshops or seminars\. At PIU level, it would be beneficial to have an M&E specialist so as to relieve PMU monitoring efforts\. Monitoring at the PCU level was primarily of financial aspects with little attention on analyzing the Project implementation pace, suggesting improvements or monitoring of impact\. M&E and financial 21 specialists tended to be reactive to PMU M&E requirements and not proactive\. At the same time, any future M&E efforts also need to take into account the limited capacities and skills available in field locations as well as salary scales for government jobs\. A simpler and clearer operational manual for rural investment preparation would have been more effective\. The manual was very comprehensive and relatively clear for professional staff but for villagers, especially the less well-educated, it posed difficulties\. The requirements for environmental analysis, the business plan and the design and calculations of rural infrastructure were not well understood at Project start-up\. This resulted in JDC and FOs often preparing the proposals for those beneficiaries, leading to delays in preparation and/or grant approval because the information provided by CIGs was incomplete\. Future guidelines must accommodate the skill levels of these beneficiaries with clearer and simpler guidelines for environmental analysis and feasibility assessment\. Similarly, the proposal format requirements need to be simplified for future operations so that they can be done in time and for the most part prepared by beneficiaries\. While the manual was comprehensive on certain aspects such as approval processes, FOs had considerable flexibility in the participatory rural appraisal (PRA) process leading to the preparation of the Community Action Plans and the choice of investments by villagers\. As a result, there was variation in the quality of some proposals and some questionable investment choices\. In future, establishing a set of minimum PRA requirements for CAP preparation should help ensure that key issues are analyzed consistently\. These would include participatory environmental analyses, training in which was provided to Project partners part-way through the Project\. Training in community driven development procurement procedures would have been beneficial for PMU and PCU staff as well as other Project partners\. Such training would have enabled staff to be aware of the flexibility possible in this approach and be more able to provide suitable advice to beneficiaries, e\.g\., the options available regarding how many local shopping quotes are required for local procurement\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Comments on the ICR were received from Government and summarized in the letter provided in Annex 7 – pages 68-69\. 22 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Community Agriculture & Watershed Management Project - P077454 Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Rural Production Investments 10\.71 10\.69 99\.8 Institutional Support and Capacity Building 3\.97 4\.90 123\.4 Project Management and Coordination 3\.34 3\.72 111\.4 Total Baseline Cost 18\.01 19\.31 Physical Contingencies 0\.00 0\.00 Price Contingencies 1\.77 0\.00 Total Project Costs PPF 0\.00 0\.00 Front-end fee IBRD 0\.00 0\.00 Total Financing Required 19\.79 19\.31 Community Agriculture & Watershed Management GEF Project - P081159 Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Rural Production Investments 3\.80 3\.34 87\.9 Institutional Support and Capacity Building 0\.60 0\.98 163\.0 Project Management and Coordination 0\.10 0\.17 170\.0 Total Baseline Cost 4\.50 4\.49 99\.8 Physical Contingencies 0\.00 0\.00 Price Contingencies 0\.00 0\.00 Total Project Costs PPF 0\.00 0\.00 Front-end fee IBRD 0\.00 0\.00 Total Financing Required 4\.50 4\.49 99\.8 23  (b) Financing P077454 - Community Agriculture & Watershed Management Project Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate 14 Financing Appraisal (USD millions) (USD millions) IDA Grant (H0970) 5\.80 5\.91 101\.8 IDA Credit (39280) 5\.00 4\.93 98\.6 Borrower 0\.74 15 0\.58 78\.4 Other grants 0\.00 0\.36 16 - Beneficiary contribution (in-kind) 2\.49 3\.40 17 136\.5 Facilitating Organizations (in-kind) 0\.00 0\.53 18 - Total: 14\.03 15\.71 112\.0 P081159 - Community Agriculture & Watershed Management GEF Project Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate14 Financing Appraisal (USD millions) (USD millions) Global Environment Facility (GEF) 4\.50 4\.49 99\.8 14 As of April 30, 2012\. 15 As revised on November 25, 2005 in amendments to the IDA Development Financing Agreement and GEF Grant Agreement - in accordance with country financing parameters\. 16 Separate Bank-executed project on Capacity Building in Geospatial Analysis (US$160,000\.00) and DfiD- funded Rural Vulnerability and Resilience Study (US$200,000\.00)\. 17 This is the beneficiary contribution, which is mostly “in-kindâ€? but with an estimated value budgeted and monitored in project accounts\. 18 Facilitating Organization (FO) contributions: AKF/MSDSP – US$100,000\.00; UNDP - US$84,000\.00; WHH – US$345,000\.00\. 24 Annex 2\. Outputs by Component Table A2\.1 Subproject Implementation Number of villages A2 Land Resource A2 –Value (US$) A3 - value (US$) A1 Value (US$) Management - Infrastructure Total Number Productivity - subprojects subprojects subprojects Number of Number of Number of Total US$ A3 Rural A1 Farm Watershed Surkob 98 197,525 222 487,593 84 202,087 404 887,205 47 Zarafshan 915 1,200,257 1,489 2,796,524 336 794,239 2,740 4,791,020 222 Vanj 72 127,230 103 313,819 70 119,028 245 560,077 71 Toirsu 123 264,865 246 658,225 87 249,284 456 1,172,374 62 Total 1,208 1,789,877 2,060 4,256,162 577 1,364,638 3,845 7,410,677 402 19 Total HH 11,379 32,134 34,299 77,812 Table A2\.2 Component 1- Farm Productivity Investments contribution, amount, US$ amount, US$ Beneficiaries Units/ Units Households subprojects Number of Quantity of Beneficiary Number of Number of Grant Total USS Subproject Category Repair of Agricultural 33 344 1,523 33 units 66, 279 43,885 22,394 machinery Bee- keeping 159 1,600 9,158 2,584 beehives 414,061 288,584 125,476 Blacksmith shops 34 458 2,418 34 units 101,715 71,059 30,656 Livestock development 510 4,363 23,608 6,433 heads 1,049,681 679,197 370,484 (purchasing livestock) Yak breeding 4 49 352 40 heads 14,758 10,573 4,185 Poultry farming 99 813 4,760 11,324 heads 199,266 136,920 62,346 Greenhouse 54 484 2,545 1,9 ha 134,875 84,427 50,448 Horticulture 64 683 3,311 74 ha 115,258 68,239 47,019 Join use of agricultural 5 81 385 5 units 15,847 11,440 4,407 machinery and equipment Annual crops 12 135 753 15 ha 35,462 18,804 16,658 Melon 5 45 233 15 ha 10,270 6,412 3,858 Plan Nursery 12 105 563 5 ha 24,135 15,922 8,213 Potato production 25 187 1,233 23 ha 51,379 38,950 12,429 19 The number of benefiting households is reported by type of investment\. It should be noted that households may participate in more than one type of investment and therefore the total reflects some double-counting\. However, it is clear that more than 43,000 households participated in the subprojects, since there was very little, if any overlap between A1 and A2 recipients\. 25  contribution, amount, US$ amount, US$ Beneficiaries Units/ Units Households subprojects Number of Quantity of Beneficiary Number of Number of Grant Total USS Subproject Category Small enterprises for agri- 47,182 produced 140 1 413 7 460 304,191 209,166 95,025 processing units 20 Vet/Vaccination 36 389 2 388 100,722 72,004 28,718 Storage for agricultural 2 48 281 2 units 8,436 5,861 2,575 production Watering place for 5 54 322 43 ha 10,840 7,763 3,077 livestock Wool processing 5 54 313 5 workshop units 13,155 7,946 5,208 Fishery 4 74 373 6 ha 18,887 12,724 6,163 TOTAL: 1,208 11,379 61,979 2,689,217 1,789,877 899,341 Table A2\.3 Component 1 – Land Resource Management contribution, amount, US$ amount, US$ Beneficiaries Units/ Units Households subprojects Quantity of Beneficiary Number of Number of Number of Grant Total US$ Subproject Category River Bank protection 22 467 2,963 1,094 ha 90,109 63,303 26,806 Canal rehab and repairing for 86 4,059 21,294 6,227 ha 431,092 290,106 140,984 irrigation Cattle pen building and repairing 30 530 2,706 30 units 92,265 67,791 24,474 Stone remove for horticulture 2 31 236 4 ha 10,157 8,000 2,157 Conversion of slope land and 79 1,147 5,874 278 ha 221,799 142,699 79,100 planting trees Annual crop 145 1,910 10,100 480 ha 386,830 259,528 127,302 Horticulture/Terracing 1,379 18,118 98,743 2,570 ha 3,817,859 2,607,742 1,210,117 Plant Nursery 2 10 48 1 ha 1,647 1,320 327 Pasture improvement 152 3,119 18,555 23,061 ha 646,942 455,856 191,086 Rehab and opening the road to 10 231 1,659 10,410 ha 25,707 20,134 5,573 pasture Potato production 2 25 133 1 ha 5,494 3,805 1,689 Vineyards 62 1,146 6,613 431 ha 243,034 166,281 76,754 Building of small dams for small 8 127 733 7 048 24,020 18,518 5,502 water reservoirs cattle in pasture Woodlots 69 1,084 5,691 80 ha 177,964 136,057 41,907 Planting of Herbs 6 69 329 57 ha 13,622 9,949 3,673 Composting 5 37 175 5 units 3,512 2,260 1,252 Water storage 1 24 169 125 3,778 2,812 966 TOTAL: 2,060 32,134 176,021 6,195,832 4,256,161 1,939,669 20 These are items such as jars, etc\. 26 Table A2\.4 Component 1 – Rural Infrastructure contribution, amount, US$ amount, US$ Beneficiaries Units/ Units Households subprojects Quantity of Beneficiary Number of Number of Number of Grant Total US$ Subproject Category Drinking water supply 170 11,676 83,517 622,899 448,013 174,886 Biogas 2 62 337 1 unit 8,539 6,484 2,055 Building for biogas system 1 13 70 1 unit 2 572 2 052 520 Rehab and opening the road to 161 9,149 55,019 23,226 ha 468 510 339,543 128,966 pasture Repair of Pump station 7 505 2,496 36 494 22 084 14,410 River Bank protection 10 670 3,432 414 ha 28 554 21 771 6,783 Repair and built of small bridge 56 4,066 23,414 842 meters 194 443 140,305 54,138 Building for SHPS 1 12 59 1 unit 2,646 2,117 529 Rehabilitation of Small Hydro 24 522 2,852 189 KWt 65,015 39 602 25,413 Power Station (SHPS) Repair of transformation 2 35 181 32 units 6,384 5 107 1,277 Canal rehabilitation repair for 131 7,200 43,922 13 419 ha 461,768 317 135 144,633 irrigation Drainage rehabilitation 7 207 1,252 5 km 19,251 14 771 4,480 Use of Solar Energy 5 120 943 8 kWt 5,077 4,026 1,051 TOTAL: 577 34,237 217,494 1,922,151 1,363,010 559,140 Table A2\.5 Information on Fruit and Nut trees, Woodlots and Nursery Subprojects Number of Number of trees Of which Nut № District Area, Ha subprojects planted trees Horticulture 1 Tajikabad 40 63\.5 25,745 569 2 Jirgatal 60 115 43,110 1,110 3 Aini 403 335 100,780 1,400 4 Mastchohi Kuhi 53 481 137,860 1,300 5 Panjakent 640 1,192 455,040 13,600 6 Danghara 164 295 105,900 8,900 7 Vanj 83 162\.4 64,880 3,600 Total: 1,443 2,643\.9 933,315 30,479 Woodlots 1 Tojikobad 6 16 118400 27  Number of Number of trees Of which Nut № District Area, Ha subprojects planted trees 2 Jirgatal 37 26 247,000 3 Aini 8 8 7,300 4 Mastchohi Kuhi 0 0 0 5 Panjakent 4 3 4,300 6 Danghara 6 6 4,890 7 Vanj 8 21 20,970 Total: 69 80 402,860 Nursery 1 Tajikobod 0 0 0 2 Jirgatal 3 2 74,500 3 Aini 8 2\.1 75,000 4 Mastchohi Kuhi 0 0 0 5 Panjakent 3 1\.5 56,000 6 Danghara 0 0 0 7 Vanj 0 0 0 Total: 14 5\.6 205,500 NOTE: Walnut trees were planted in 4 ha in Jirgital district only, with planting scheme of 6 X 6\. Other nut trees are planted on contours, and within gardens\. Table A2\.6 Monitoring of sustainable land management and other environmental impacts Amount in Type of Quantity Area Subprojects categorized by main activities: Quantity US$ Units of Units covered Repair of agricultural machinery 33 43,885 Bee-keeping 159 288,584 Bee hives 2,584 Blacksmith shops 34 71,059 Livestock development (purchasing livestock) 510 679,197 heads 6,433 Yak breeding 4 10,573 heads 40 Poultry farming 99 136,920 heads 11,324 Greenhouse 54 84,427 ha 2 2 Horticulture 1443 2,675,981 ha 2,644 2,644 Joint use of agricultural machinery and equipment 5 11,440 Annual crops 157 278,332 ha 495 495 Melon 5 6,412 ha 15 15 Plant nursery 14 17,242 ha 6 6 Potato production 27 42,755 ha 24 24 Small enterprises for agricultural processing 140 209,166 Veterinary/Vaccination 36 72,004 28  Amount in Type of Quantity Area Subprojects categorized by main activities: Quantity US$ Units of Units covered Storage for agricultural production 2 5,861 m2 78 Watering places for livestock 13 26,281 ha 7,048 7,048 Wool processing 5 7,946 Fishery 4 12,724 ha 7 7 Drinking water supply 170 450,364 M 67,791 Biogas 3 8,536 Rehab and opening the road to pasture 171 359,677 ha 33,636 33,636 Repair of pump stations 7 22,084 ha 444 444 River banks protection 32 85,074 ha 1,508 1,508 Repair and built of small bridge 56 140,305 M 842 4,050 Rehabilitation of small hydropower stations 24 41,719 kBt 189 Repair of electric transformer 2 5,107 Canal rehabilitation and repairing for irrigation 217 607,241 M 19,646 1,250 Drainage rehabilitation 7 14,771 Km 5 340 Use of solar energy 5 4,026 kBt 8 Cattle pen building and repairing 30 67,791 m2 17,885 21,250 Stones removing for horticulture 2 8,000 ha 4 4 Terracing of slopes and planting trees 79 142,699 ha 278 278 Pasture improvement 152 455,135 ha 23,061 23,061 Vineyards 62 166,281 ha 431 431 Woodlots 69 136,057 ha 80 80 Planting of herbs 6 9,949 ha 57 57 Composting 5 2,260 Building of small dams for small water reservoirs 1 2,812 m3 125 TOTAL: 3845 7,410,677 0 196,691 96,630 Table A2\.7 Number of issued Land User Right Certificates № Watershed Number of Certificates Area, ha 1 Zarafshan 447 534 2 Surkhob 164 118 3 Toirsu 85 280 4 Vanjob 125 15 Total : 821 947 29 Project Outcomes At least 80% of rural production investments are successful according to agreed standards and are being maintained\. Field assessments indicate that about eighty-five of ten subprojects can be considered as successful\. Reasons for unsuccessful investments include loss of assets to disease, pests and natural events, e\.g\., loss of animals to floods\. All villages participate in credibility investments\. - All villages participated in credibility investments\. However, the timing of implementing these investments could have been better so that they were carried out before subproject implementation\. This overlap sometimes led to confusion among beneficiaries about what type of investment they were participating in\. Overall the purpose of these investments was achieved; beneficiaries gained confidence in some of the project approaches and also gained experience in the pilots of possible subprojects\. Number of participating households in at least one of the types of rural production investment is at least 50% of total Project area population and being replicated elsewhere\. - Overall more than 50% of the total Project households (>43,500) participated in subprojects\. In the case of rural infrastructure, depending on the type of investment entire villages benefited, e\.g\., drinking water supply\. This leads to some overlap in participation by households in land resource management and farm productivity investments as well\. Therefore, only the participants in these two types of investment arecounted, but numbers for each investment are provided in the tables above\. In communities that are participating in the Project, the proportion of people above poverty level increases from 3% to 30% - The proportion of people above the poverty level rose to 50% in Project communities\. Estimated income (after subtracting costs) for farm productivity and land resource management investment varies from US$100 to US$300/HH/year\. In addition, the food security effect is significant\. CIGs have a practice of sharing surplus produce with vulnerable and less-well off individuals\. They also consider such practices contribute to maintaining social cohesion and harmony in villages\. Improved livestock management is estimated at adding 5-10% value to the animals due to fattening, improved health\. In the case of land resource management investments, the effect on poverty reduction is higher as the CIGs already benefit from intercrops even before the trees bear fruit\. At least 78,000ha covered by land resource management subprojects and other Project activities that directly and successfully address land and ecosystem degradation (see Table A2\.6 above)\. - To date the total area of lands directly improved by Project beneficiaries through straight application of new and technologically effective approaches is 15,244 hectares\. A considerable portion of lands have also been improved due to secondary direct actions which decrease of the risks of degradation processes\. These actions and results include: Minor roads (access tracks) and trails reconstruction which enables people to use and improve remote lands and also to route herds which in turn promotes the natural restoration of lands along main trails of moving livestock\. 30 Reconstruction and repairing of small bridges has provided similar opportunities for local people\. By a preliminary expert estimation, these investments have allowed access to and opportunities to better manage approximately 9,900 ha of agricultural lands (the same assumption as above has been applied to assess the impact of this category of subprojects)\. Construction and reconstruction of animal housing has provided opportunities to decrease the impact on winter pastures and lands close to villages and also improved sanitary conditions in villages\. Creation of drinking ponds provided similar and even more widespread secondary benefits as these drinking points reduce the necessity of long droves, especially along lands adjacent to settlements and villages\. Other activities also add to decreasing the risk of land degradation through soil erosion, and improving soil conditions for sustainable land use: - bank protection with gabions and tree planting to combat gully erosion, - tree planting along canals and roads to prevent land degradation\. The total length of tree belts and gabions is more than 213 km\. Expert assessment indicates that at least 10,700 ha of fixed slopes and rehabilitated lands have positive impacts\. The rate used for this calculation is 50 meters width of the strip along the tree belts and\or gabions, leads to protection of 15 to 200 meters with a tendency for this area to become wider with tree growing\. The environmental impact of the Project is even larger due to additional beneficial effects of housing livestock\. The construction/reconstruction of 29 animal housing structures serves approximately 45,000 heads of small livestock\. On average in Tajikistan one sheep needs from 0\.8 to 1\.0 ha for sustainable grazing\. It means that the construction of these sheepfolds indirectly raises the health of sheep and they need relatively less forage while grazing on an area of more than 40,000 ha\. Positive impacts are achieved through the majority of herds being managed (veterinary service, shearing, lambing, etc\.) in more remote grazing areas away from settlements\. This results in decreased pressure on large areas between villages and remote pastures, which remain free of the high pressure of small cattle and livestock for the summer period\. The use of yaks in a few subprojects in Ayni and Jirgital raions instead of sheep and goats also adds to more sustainable management of summer pastures as yaks are less harmful to soils and vegetative cover\. Thus, beneficial secondary impacts of subproject actions cover not less than 79,800 ha, which when combined with the area under primary impacts results in not less than 96,000ha covered by land resource management and other project activities\. In addition to area under Project activities, it is necessary to note other beneficial environmental results: • Farmers are using biological methods for plant protection as alternatives to chemical control in at least 210 ha; • Farmers have established more than 5,300 beehives helping to revitalize an important economic activity as well as a critical ecological process for agricultural productivity and biodiversity conservation; • Water saving technologies in irrigation in subprojects are estimated to save at least 250 cubic meters a year; 31 • Power-saving technologies, such as solar heaters and driers and water mills, are estimated to save at least 260 thousand KW/hours per year\. Additionally, 25 micro-hydro units have been rehabilitated or established Intermediate indicator results Total investments in farm productivity and land resource management have exceeded targets\. Beneficiary contributions as noted elsewhere in this report have exceeded the minimum requirement with villagers contributing about 31% of total Project costs\. The Project also assisted in the establishment of 2 micro-loan organizations in Zarafshan\. Plans for additional MLOs had to be stopped when the national legislation on such organizations changed with an increase in the minimum amount required for establishment\. An initial capitalization of $200,000 was not possible under the Project framework\. More than 570 small-scale rural infrastructure investments have been completed (see Table A2\.4)\. These have helped reduce conflict in villages over resource use, reduced the burden on women and other households members in activities such as water collection\. Improved facilities also contributed to reduced local erosion, e\.g\., drinking water taps\. Villagers also formed associations to manage water resources to help ensure long-term operations\. The Project provided small grants to farmer groups to plant over 1\.3 million trees on their lands, covering about 3,000 ha\. Relevant subprojects include woodlots, horticulture (fruit and nut orchards), terracing and planting of trees, beekeeping, and plant nurseries (see Table A2\.5)\. The Project has also provided support to arrange for secure land use rights to the grant recipients for the land resource management subprojects, in order to ensure an incentive framework for sustainable land management (see Table A2\.6)\. At least 9,000 rural people received technical training from TAAS, FOs, or other Project partners\. Although this target was achieved it should be noted that the research and demonstration activities implemented by the scientific institutions were not as successful as anticipated\. The Project worked with the Tajik Academy of Agricultural Sciences, Soil Institute and Crop Husbandry Institute to strengthen their capacities to provide technical services and training to communities\. However, most scientists were more familiar with implementing Soviet-style, large-scale demonstration strategies and technical inputs that no longer match the needs of small mountain farmers and current production systems\. Anticipated support from IFAD to build JDC/JRC technical capacities did not materialize due to bureaucratic delays, and partnerships with CGIAR institutions, such as ICARDA, which would have provided technical assistance in collaborative and farmer-focused approaches\. Ultimately, 30 small demonstration plots were established to assist local farmers in improving their agricultural practices\. The overall impact of these demonstration plots and outreach to upland farmers was limited\. A more effective mechanism to share innovations was the farmer competition to highlight and reward good practices\. Preservation of live, indigenous plant specimens - several expeditions were made by the Institute of Botany resulting in the identification of over 300 endemic and rare plant species including fruit trees\. The Institute also updated the Tajikistan Red Book with their findings\. 32 Annex 3\. Economic and Financial Analysis An incremental cost analysis (ICA) was conducted at appraisal as per GEF requirements\. This Annex reviews the ICA against Project implementation results\. For details on the benefits, assumptions, baseline and GEF Alternative – refer to Annex 15 in the PAD\. Incremental Cost Analysis a) ICA at Appraisal The ICA compared the baseline scenario with the GEF-Alternative scenario\. The baseline included: (a) on-going and planned activities undertaken by the Government, in order to improve livelihoods of rural communities while reversing degradation of fragile lands and ecosystems (US$2\.0 million); (b) the associated contribution by beneficiaries in proportion to their level of external support (US$1\.6 million); and (c) activities and resources being financed by IFIs and other donors (US$10\.8 million)\. The full baseline scenario was estimated to be US$14\.4 million\. Baseline Benefits: The baseline scenario included the following benefits: • Provide rural infrastructure investments; • Provide support for farm productivity improvements; • Provide support for land resource management covering 21,000 ha\. The scale of gully and landslide prevention would be smaller; • Support for scientific research, including support for nurseries, field trials, and line agency capacity building\. However there would not be sufficient funding to restore Tajikistan’s capacity to preserve specimens of indigenous crop varieties; • Facilitation and planning support necessary to mobilize communities and ensure the feasibility of rural production investments\. Feasibility and eligibility guidelines include communications, group process, organizational and administrative arrangements, contribution requirements, budget limits, and institutional capacity, social, financial, commercial, technical, and environmental considerations\. However training and dissemination efforts would be limited\. Table A3\.1 Incremental cost matrix as of Project Appraisal and Completion (US$ million)* At Appraisal At Completion Incremental Cost Incremental Cost Component Baseline Baseline GEF Total GEF Total Cost Other Cost Other grant grant Rural Production 7\.20 3\.80 0\.90 11\.90 6\.45 3\.34 0\.9 10\.69 Investments Institutional Support and 3\.70 0\.60 0\.00 4\.30 3\.92 0\.98 0\.00 4\.9 Capacity Building Project Management and 3\.50 0\.10 0\.00 3\.60 3\.55 0\.17 0\.00 3\.72 Coordination Total 14\.40 4\.50 0\.90 19\.80 13\.92 4\.49 0\.90 19\.31 Source: PAD, Annex 15\. * Including physical and price contingencies\. 33 The GEF-Alternative scenario, at an incremental cost of US$19\.8 million of which the GEF would finance US$4\.5 million, would support in initiatives in each of the three components: 1\. Rural Production Investments (US$11\.9 million; GEF financing - US$3\.8 million)\. This component comprised support for subprojects in farm productivity improvement, land resource management, and rural infrastructure\. Financing from GEF, blended with the IDA financing, would accelerate and expand the land resource management subcomponent\. It would address biodiversity conservation and soil protection through vegetative cover restoration to 78,000 ha, which was 57,000 ha above the level that would have been supported by the government on purely national grounds\. It would promote biological conservation and moisture retention techniques which made the best use of in-situ water and recharge profiles, increase vegetative cover and generally improved soil structure and water holding capacity\. In addition, because of the requirement that beneficiaries contribute at least 20% of the subproject investment costs, GEF financing would leverage an additional US$0\.9 million in beneficiary contributions for land resource management subprojects, which would not have been forthcoming in the absence of the additional GEF financing\. 2\. Institutional Support and Capacity Building (US$4\.3 million; GEF financing - US$0\.6 million): This component would strengthen scientific institutions, and included the restoration of Tajikistan’s capacity to preserve specimens of indigenous crop varieties, in collaboration with the Consultative Group for International Agricultural Research’s Central Asia and Caucasus unit in Tashkent\. It would strengthen the capacity for seed and seedling production\. It would include training for communities, community-based organizations, and interest groups and the Jamoat and Watershed Development Committees\. It included initial confidence building mobilization grants for each participating village\. It would also include information and experience sharing on a wide variety of institutional, technical, environmental, financial, and management topics, including monitoring and evaluation\. Blended GEF financing would enable additional funding for extra support required to increase the extent of land resource management investments, information sharing and awareness-raising on land degradation and biodiversity conservation topics, as well as specimen preservation of indigenous crop varieties\. 3\. Project Management: (US$3\.6 million; GEF financing - US$0\.1 million)\. The Project management component would support Project coordination and administration staff, procurement, disbursement, financial management, reporting, monitoring, and evaluation activities, at the national level and for each of the four Project watershed areas\. The component would also support the secretariat services to be provided to the national Steering Committee, and support the Watershed Development Committees to enable them to appraise Jamoat proposals for financing from rural communities in a manner consistent with good practice\. Blended GEF financing would support increased management of land resource management investments, enabled more extensive evaluation of mountain ecosystem degradation trends, as well as exchange of experience both within the country and with other countries, thus further strengthening replication impact\. b) ICA at Completion Project results were exceeded in all cases with an incremental cost of US$5\.39 million including the GEF Grant of US$4\.5 million\. Thus from a cost-efficiency standpoint the Project can be rated as highly satisfactory\. 34 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Lending Allen Wazny Sr Financial Management Specialist ECSOQ Bekzod Shamsiev Senior Agriculture Economist SASDA Daniel P\. Gerber Rural Development Specialist ECSS1 Naushad A\. Khan Lead Procurement Specialist SARPS Thirumangalam V\. Sampath Consultant ECSS3 Supervision/ICR Alexander Balakov Procurement Specialist ECSO2 Aliya Kim Finance Assistant ECCKA Bekzod Shamsiev Senior Agriculture Economist SASDA Bobojon Yatimov Senior Rural Development Specialist ECSS1 Craig Meisner Environmental Economist ECSS3 Daniel P\. Gerber Rural Development Specialist ECSS1 Dilshod Karimova Procurement Analyst ECSO2 Eustacius N\. Betubiza Country Program Coordinator AFCCD Evelin Lehis Consultant ECSSD Fasliddin Rakhimov Procurement Specialist ECSO2 German Stanislavovich Kust Consultant ECSS3 Jessica Mott Sr Natural Resources Econ\. ECSS3 John Otieno Ogallo Sr Financial Management Specialist ECSO3 Marc Peter Sadler Senior Agriculture Economist ARD Nandita Jain Consultant ECSS3 Nigora Safarova Consultant ECSSD Norpulat Daniyarov Financial Management Specialist ECSO3 Peter Zara Junior Professional Associate ECSSD Sanjay Sinha Operations Officer ECSS2 Shodi Nazarov Financial Management Analyst ECSO3 Thirumangalam V\. Sampath Consultant ECSS3 35  (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY03 25\.79 147\.4 FY04 50\.89 207\.9 Total: 76\.68 355\.3 Supervision/ICR FY05 29\.97 92\.3 FY06 27\.88 102\.2 FY07 16\.85 108\.1 FY08 6\.11 39\.1 FY09 10\.97 81\.8 FY10 9\.95 99\.3 FY11 21\.73 148\.1 FY12 13\.93 84\.0 FY13 4\.83 5\.0 Total: 142\.22 760\.0 36 Annex 5\. Beneficiary Survey Results Experiences in subproject implementation The Project did not have a beneficiary survey however the information below summarizes feedback received during interviews with a representative sample of subprojects\. 1\. Gafforov Kurbonboy, member of the CIG “Zotiâ€?, Rudaki Jamoat Development Committee of Penjikent rayon, comment on their experience in animal husbandry: At the initial stage of the Project implementation we actively participated in the training courses on animal husbandry by using modern methods\. These training sessions were done by the Institute of Husbandry of Tajik Academy of Sciences, professors of the Agrarian University of Tajikistan employed by the Project\. During these sessions we gained theoretical knowledge of animal growth and care\. They also taught us how to identify animal illness\. Before the Project we did not have such knowledge, we did not even think of the modern methods - we just drove our cattle out for grazing\. Under the Project, we all have received instruction and information materials, we studied them and improved our knowledge on animal husbandry and gained experience\. After the subproject introduction, and after recommendation and support of the Jamoat Development Committee and PCU, we procured in Jillikul rayon of Khatlon oblast 6 cows of the Swiss breed\. This breed appeared in Switzerland based on the selection of best breeds adaptable for good fodder and keeping conditions\. This breed has 2 sub-breeds – mountain and low plain types\. The live weight of this cow averages to 600-650 kg, while oxen may reach up to 1000 kg\. Each of such cows in Switzerland produces 4200-4500 kg of milk; the milk fat is up to 3\.7%, proteins – 3\.4%\. This breed of cow is currently developing in the countries of Central Asia\. In Vakhsh rayon, as a result of interbreeding local cows of Zebumonad type with the Swiss oxen produced in the new breed – Swissuzebu-monand, which is well adaptable to hot and dry climate of this locality\. This breed retained the productivity of the Swiss breed and adaptability to local conditions\. For this new type of cattle, we constructed new big sty for the animals to keep and feed in winter time\. As was recommended by representative of local Jamoat, we stocked the vitamin-rich fodder for the entire year\. Owing to the Project, we now have a vet office\. Its specialist frequently visiting us to inspect the cows, and we have an opportunity to timely receive any assistance required\. Before that, only to find animal medicine we spent a lot of time\. Now we feed animals on schedule, we observe the keeping conditions\. In addition, we timely apply vaccination\. As a result of the use of modern technologies and sustainability methods the number of cattle heads increased several times\. The daily milk yield is 60-70 liters, part of it is consumed by families, and part is sold to neighbors and other people\. We collect manure to prepare compost, after this we use it as organic fertilizer to introduce to soil to increase its productivity\. We feed animals, according to recommendations, in the amount of 14- 15 fodder units\. The gained revenues distributed in equal shares among the CIG members\. Because of this, our welfare level is increased, and we will try to work to be even more effective in the future\. We receive visitors from the nearby villages, people learn our experience and build there the same small farms and grow cattle by using our technologies\. 37 2\. Experience and recommendations in the sphere of horticulture (pears and apples in the mountains) The orchard subproject in Tajikabad rayon; the group leader Khudoidodov Yusuf\. Considering regional climatic conditions and with Project support, we established a pilot regional garden for tree\. Using skills obtained from the training course and new technologies we learned new ways of introducing horticulture\. On 10 ha we planted a garden of which 560 quality seedlings were brought from Ministry of Agriculture’s nursery in Dushanbe\. The garden yielded rich fruits, melons and gourds from better row-spacing and through the prevention of soil erosion; the development of new methods of farming; and pest control as recommended by scholars and specialists\. In the course of subproject implementation we gained rich experience in growing fruit trees in mountain areas\. This experience was shared with other fruit tree planters in mountain areas\. For example, for apple trees we recommend the following: to ensure fast seedling growth - plant them in areas of 5-65m x 2-3m, for moderate growth 4-5m х 2- 3m, and for low-growth trees plant them in 3-4m х 2-3m\. Recommended types of trees: Summer: Selected Samarkand, Borovika Tashkentia, Plodorodny; Autumn: Golden Delicious, Goldspur, Jonored, Johnathan, Golden Winter Parmen; Winter: Ranet Semerenko, White Rosemarine, Delicious, Starcrimson, Wellspur and Delicious Red\. Growing pear trees also taught us a lot\. We learned that wild-growing varieties are a very important base for grafting and crossing-breeding\. The more popular local types of pears and noshpoti, keep well and during transport\. The Harm type of pears in regular storehouses under the normal temperature can be kept up to 7-8 months\. The tree is heat-loving, requires little water, but cannot stand dry weather\. In wet soil, with no ground water, it develops well and grows long\. The adaptable early-fruit bearing trees are: Trevi, Swallow, Klapai Aziz, Bee Zhiraf, Autumn Forest, Williams, Bere Ligellia, Bere Bosk, Winter Kure, Harmskaya Pear, Dilafruz, Zhosefina Makhelinsky, Der Seer\. A pear tree can be crossed with the quince tree or another pear tree\. The crossed hybrids bear good fruit and can sprout well in soil lacking moisture, and still develop\. To get bushy pear trees it is necessary to cross them with the small-fruit quince seedling\. The pear trees of type Harmsky, Red Nashpoti, Red Williams and Starcrimson crossed with quince is not recommended; since the operated place on the trunk develops weakly, breaks or dries out\. Only the Kurero type is advisable for quince crossing\. For this, a cut is made on the quince trunk, a groove is made to insert fresh twig of pear tree and one must wrap it tight with fabric\. In a short period of time the new twig will inoculate and start growing\. By crossing pears this way, it is then necessary to plant them in an interval of 6m х 6m for good results of crossing, or in the interval of 4m х 5m or 4m х 3 for satisfactory crossing results\. Pears are pollinable types of trees and many can turn out barren, so tree planting requires trees nearby with an abundance of pollen\. In mountain areas pear seedlings can, among others, get a “pear honeyâ€? disease\. This is a persistent disease and requires protection measures\. Our pilot garden was visited by people from other villages; they also learned these modern methods 38 of horticulture and introduced them in their own work\. 1\. Farmer Best Practices – examples of competition winners Pasture management With Project funds our CIG members improved pasture conditions in 2 ha\. We sowed summer cypress on land that was farmed intensively and was highly eroded\. Today the shrubs grow very well, and we hope to collect some 200 seeds and increase its sowing area\. All year round (any season) the summer cypress is used for fodder\. In cases of adequate care - this shrub produces good fodder for 25 years\. Activity benefits: Sowing summer cypress Cattle fodder availability, especially for small cattle Pastures restoration Good crops of cypress and perspective increase of sowing areas Vanj rayon, Muminshoev, B\., Chairman of the farm “Mukhamadâ€? To improve pastures a 3km long waterway was built and sowed alfalfa on 14 ha\. Climatic conditions allowed for 3 crops per season; with a yield of 14 centers per hectare\. The activity of Muminshoev was pasture improvement – but they were also able to stock fodder for winter from high-quality alfalfa\. Under local conditions domestic cattle only graze 6 months a year on pastures, and another 6 months should be kept in winter enclosures\. The farm members intended to increase alfalfa sowing on pastures in future\. Activity benefits: Water available for animals Cost effectiveness on water supply Pastures restoration which for years were not irrigated, and animals in search for water had to travel big distances and they were losing weight Modern plant protection methods Nabotova Makhvash, leader of the farm “Mekhnatâ€?, Jamoat Vanj Nabotova’s experience in plant protection and cultivation methods is rather interesting and extensive, and neighbors use this experience\. On an area of 1\.2 ha they planted an orchard of 0\.3 ha and the remaining 0\.9 ha was used for other cultivation\. The Nabotova’s orchard is well managed, and for pest control is using traditional methods (traps) with visible results\. In other areas she is growing potatoes, vegetables and other cultures for fodder\. Using such a sowing method is good for crop rotation; the harvest yield from trees and other cultures is high\. She is using modern technologies to grow cultures\. Activity benefits: Rational and effective use of plants protection 39 Land and crop rotation Receiving 2-3 harvests per season Marketing studies Nabotova’s area of 0\.5 ha have sown various vegetables, used advanced technologies and popular methods of plant protection\. During the work - the sowing calendar was observed\. Activity benefits: Effective use of plants protection methods Experimenting with growing different agricultures Organized sowing Manpower attraction, including women to work in fields Modern plant protection methods in the Ivan-Tojik Jamoat\. Kuhistoni Maschoh district Koziev Mullonemat, CIG leader form the Ivan-Tojik Jamoat, Niezov Niezbobo, leader of “Dobbukovâ€? farm, Jamoat Ivan-Tochik, and Junusov Junus, leader of “Revomtukâ€? farm, Jamoat Ivan-Tochik, were introducing popular plants protection methods and received good results\. Activity benefits: Staged use of known methods in own business Observing sowing terms and methods and tree protection Awareness raising and improved economy through training Use of modern methods in the mountains Executive summary from the World Bank Farmer and Farm Worker Perceptions of Land Reform and Sustainable Agriculture Study Farmer’s decisions are largely shaped by their perception of how exposed they are to different social, economic and environmental impacts\. Chief among these are limited management control over farmland, land degradation and low levels or sources of other assets\. Previous farmer assistance in this area has focused on building capacity to cope with these factors and create incentives for better land management\. The experience from former state-directed economies undergoing transition has shown that what works best is to create ‘incentive frameworks’ that link land tenure (or security) and asset accumulation along with building farmer’s capacity to respond to shocks and stresses\. This increases farmer confidence or ‘resilience’ and can lead to greater entrepreneurial behavior or even the adoption of more environmentally-friendly and sustainable land management practices\. Discovering these linkages and the underlying conditions of success still requires further field-evidence – especially in countries under transition\. This is a summary of a report that presents the findings of a recent study in Tajikistan that examined farmer perceptions in Project areas that supported farmland restructuring and sustainable agricultural land management practices among rural households\. The findings are expected to be of value to government decision-makers at all levels, civil society organizations, donors and other practitioners interested in practical recommendations for improving current and proposed projects in land reform, agricultural production, sustainable land resource management and related fields\. 40 The study was a collaborative effort of the British Department of International Development (DFID), World Bank and United States Agency for International Development (USAID), and focused primarily on sites where these agencies were supporting projects\. This report also draws on an earlier 2007 assessment by the World Bank and USAID that examined knowledge, attitudes and practices toward land restructuring among farmers and farm workers (World Bank and USAID, 2008)\. Two thirds of Tajikistan’s population is engaged in agriculture that falls into two broad farming systems: upland areas characterized by wheat, potatoes and certain types of horticulture along with large tracts of rain-fed pasture; and lowland areas where irrigated cotton in rotation dominates\. Unlike other countries in the Europe and Central Asia region, Tajikistan has not completed the reform process of allocating and registering land use rights for independent farmers so that they are better able to manage their farmland in response to market forces\. “Freedom to Farmâ€? without government interference is unevenly practiced in the country\. At the same time environmental degradation and unsustainable use of natural resources are important constraints to rural growth, and as a consequence, the country’s overall agricultural productivity remains low\. Fieldwork for the study was conducted between March and July 2011, and included a quantitative survey of 1,800 farmers in 18 raions (districts), supplemented by focus groups, in-depth interviews and case studies in eight raions\. Due to the modest sample size the study cannot claim to be representative of all farms and farmers in the country, however for the areas covered it does describe the results of interventions from the farmer’s viewpoint (or perception)\. While the knowledge, attitudes, and real and perceived assessments are critical in shaping behavior, it should be noted these may not accurately reflect the actual legal situation or official government data\. Changes and Results in the Process of Farmland Restructuring Under the World Bank financed Land Registration and Cadastre System Project (LRCSP), there has been significant acceleration in the issuance of land use rights certificates for family farms (25 or fewer shareholders), with 36,911 issued since 2009\. This acceleration is an important outcome of the 2009 Government decree\. Qualitative results show that farmers acknowledge speedier, more transparent, and no-fee processing of applications compared to the regular Land Committee channels in which farmers might encounter delays, mistakes, and resistance to restructuring by local officials\. The study indicates that rural people have basic knowledge about their rights, but do not fully understand the details of the farmland restructuring process\. Both the 2007 and 2011 surveys documented that respondents are aware of having heritable rights and freedom to choose what to plant\. However, despite educational efforts by projects, few farmers know about specific differences between farm types, and the steps needed to fully restructure farms\. Key perceived barriers to undertaking restructuring include a lack of machinery, lack of experience managing a farm, lack of access to irrigation water, process costs, and the associated tax and debt burden, all of which contribute to an overall lack of confidence in farming independently\. Those who work on farms yet to be restructured into units of less than 25 members are the most concerned about these barriers\. However, perceived benefits, such as the ability to farm independently and make money are also rated as being very important incentives to restructure\. 41 Freedom to Farm The confidence of farmers that they control use of their land has increased significantly since 2007\. In 2011, close to half of all respondents strongly agree that farmers can make farming decisions, compared to slightly more than 25% in 2007\. Exceptions can be found, however, in cotton production, where only 29% of women strongly agree compared to almost half of men\. In collective farms with more than 25 members/workers, farm heads continue to be the decision- makers\. Upland farmers are more likely to say they are able to make independent farming decisions than farmers in lowland areas where cotton predominates\. Yet areas still remain, such as Tojikobod and Konibodom, where local authorities pressure family farms to grow a fixed percentage of key crops such as potato and cotton\. Gender Issues and Social Tax Conservative attitudes and practices which are still maintained in some regions of the country limit women’s access to information about restructuring and agricultural operations, even though it is widely acknowledged that women comprise the bulk of agricultural labor\. In 2011, 25% of women still report having no sources of information on restructuring\. Women also are much less likely than men to have either advanced general education or specialized agricultural training\. The long-term rights of women are affected by their omission from certificates\. Survey respondents confirmed that women were omitted from certificates in one of every ten cases\. Cultural norms and practices attach more importance to including men’s names; however, in about 40% of the excluded cases, the social tax was cited as a somewhat important or very important reason\. The social tax of 15 somoni (about $3) per month also results in other family members being omitted from certificates, e\.g\., young adults\. Other difficulties with the social tax include payments that are due when members are not working, and having to pay twice if someone works on two farms\. The burden of the social tax and associated transaction costs can be substantial for small, labor-intensive farms\. Failure to pay the social tax can result in the farmer losing rights to the land\. Rural Organizations Mechanisms are needed to resolve problems and take advantage of opportunities that extend beyond the farm and family\. Examples of problems include access to irrigation and canal maintenance, machinery, and credit\. Coordinated efforts necessary for watershed management and other activities to sustain and protect the environment and resources should also be included\. A mix of approaches are being used and tested, including Mahalla Councils, hashars and other traditional practices, commercial services by private vendors, and non-governmental and donor organization activities\. The Community Agriculture and Watershed Management Project (CAWMP), which used farmer common interest groups, is an example of donor-sponsored activities\. With the exception of Vanj, where the Aga Khan Foundation/Mountain Societies Development Support Programme has set up village organization activities as a regular practice, 42 mechanisms to resolve these problems are often either lacking or unable to successfully address issues\. Agricultural Operations, Livelihood Outcomes and Aspects of Vulnerability Compared to 10-15 years ago, more than half of men and 44% of women say they are better off\. When asked about conditions 10-15 years ago, only about 10% of men and women say they are worse off, with the rest saying they are the same\. Qualitative results indicate that migrant remittances played a key role in the improved status of many households\. Comparing the results between the 2007 and 2011 surveys, farmers indicated a 10% decline in the number of households where farming was the only source of income, and a 10% increase in the number of households where agriculture was no longer a significant source of income\. For farmers in both lowland and upland areas, financial concerns such as access to credit, access to markets, and farm debt are key sources of risk and problems in agriculture and rank in the top five out of 20 problems\. Pasture access and rotation also rank in the top five for both regions\. In the uplands, the major problem was bad roads, bridges and infrastructure, whereas for lowlands, landslides/mudslides were one of the top five natural resource-related problems\. Generally, lowland respondents and those on family farms expressed more concern about environmental issues\. Water conservation, integrated pest management and erosion control practices had the lowest adoption rates and levels of knowledge among farmers, with intercropping and windbreaks the highest\. To examine the sensitivity of households as a factor in rural vulnerability, four variables were assessed to indicate the susceptibility of livelihoods to risks\. Upland farming could be considered more sensitive overall than lowland farming, due to higher numbers of respondents growing only one crop, and reporting lower income and education levels\. However, more lowland farmers reported agriculture as their sole source of income\. Farmers on restructured family farms with 25 or fewer members are more likely to have only one crop and limited educational levels, but slightly more income sources\. Women tend to have less income and education, but show more crop diversity and income sources\. To examine the potential to adapt to risks and problems, a number of variables were assessed across types of farmers\. Results indicate that lowland farm households are more likely to receive migrant remittances and some cash savings\. Upland households are more likely to invest in livestock and slightly more likely to adopt sustainable environmental practices\. Family farms with 25 or fewer members are more likely to invest in livestock, make investments in farm improvements, and have two or more income sources\. Family farms, while being more sensitive in some aspects than collective farms to economic and environmental stresses, do show more potential to adapt\. These farms made more investments, adopted more environmental management practices and between 2007 and 2011 grew a greater diversity of crops\. Women are less likely to report investments in livestock, but slightly more likely to report income from migrant remittances\. The findings indicate that a combination of farmland restructuring and freedom to farm, although necessary for the incentive framework for agriculture and economic transition, is not sufficient\. The experience of other transition economies highlights a package of key reforms: (a) creating macroeconomic stability; (b) reforming property rights; (c) hardening budget constraints on 43 collective and similar farms; and (d) creating institutions that facilitate exchange and develop an environment within which contracts can be enforced and new firms can enter\. Family farms need support through this transition in building livelihood assets that help reduce vulnerability\. Recommendations Strengthen and expand farmland restructuring in order to increase beneficial livelihood outcomes and potential to adapt\. In addition to providing donor support, efforts should incorporate as much as possible the Land Registration and Cadastre System for Sustainable Agriculture Project (LRCSP) “good practiceâ€? on certificate issuance into other government programs\. Although it may not be feasible for the regular government program to adopt the no-fee arrangement or the spatial technology in the short term, ways to address these factors should be considered in the development of the longer-term government strategy\. Continued commitment to the issuance of family land use rights certificates is imperative\. Future legislation, including proposed amendments to the Land Code, would create conditions for marketable land rights, and those without legal rights are likely to be particularly vulnerable to land grabs, etc\. Although there has been progress in Freedom to Farm, government interference in agriculture needs to be further reduced\. Freedom to farm independently and without interference does, however, need to take into account the constraints of the country’s resource base and environmental fragility\. Family farms will need continued support and guidance to manage land resources responsibly through efforts similar to those, such as CAWMP, LRCSP and others that supported the environmental management of agriculture and other measures that can reduce sensitivity and increase adaptive capacity\. Improve awareness raising and training activities on farmland restructuring, and give more attention to gender inclusion\. Local mass media, seminars, etc\. should be used to increase awareness of possibilities and the benefits of acting independently\. Efforts should focus on new project areas and test to ensure that people are learning and making informed decisions\. The curriculum should include realistic case studies illustrating the consequences of land restructuring in each local area and be gender-inclusive\. Education efforts should raise key issues such as land debt and taxes, the social tax and the consequences of not being listed on certificates, and alternative planting strategies\. Activities should also focus on building skills to solve common problems rather than just trying to increase knowledge about laws\. The burden and implications of the social tax on farm members, especially on family farms, is a serious issue, and warrant immediate attention and further investigation\. Study findings indicate that the current social tax policies appear to discourage the inclusion of women and other adult family members other than the household head from being listed as shareholders on family farm certificates\. Qualitative findings indicate that the social tax can even discourage poor households from seeking family farm rights altogether\. However, a full analysis of the social tax was beyond the scope of this study\. Analysis is now required to explore alternative approaches to social protection\. For example, good practice from elsewhere uses policies of income-based taxation rather than a flat rate per head\. Any analysis should consider not only issues of social tax policy but also of implementation\. In Tajikistan, for example, are there differences between various groups (including family farms versus larger farms versus various forms of non- agricultural enterprises) in social tax collection rates (e\.g\., enforcement, compliance) and actual access to and flows of social protection benefits\. 44 Strengthen farmer-to-farmer learning about agriculture and access to resources and markets\. Informal farmer networks are effective in promoting innovation and replication and help build farmer confidence in operating independently\. Conventional methods of communication and learning (e\.g\., advice through fee-for-service, Jamoat Development Committees) should be complemented with farmer field schools, competitions that highlight good practice, innovation and early initiators, and farmer exchanges\. Support local empowerment through associations and groups\. Promoting informal and formal groups, examples of which are already active (e\.g\., Water User Associations, machinery or pasture user groups) can help farmers access and maintain machinery, infrastructure, pasture, credit and other inputs\. Producer associations and groups provide similar opportunities for farmers to access markets and obtain fairer prices for their products\. 45 Annex 6\. Stakeholder Workshop Report and Results Communication and information sharing activities Several types of publications and directories, magazines, leaflets, informational posters were published and distributed to PCUs, CIGs, JDCs, and WDCs\. These materials contained information about environmental protection, rational use of natural resources, better crop production technologies, effective usage of water resources and other information which promote advanced knowledge to improve the capacity of local residents to enhance their income\. № ITEM Issued 1 Agriculture Magazine “Zamindorâ€? with different contents and topics 23,300 2 Agriculture Magazine “Kishovarzâ€? with different contents and topics 28,300 3 Information leaflets 6,000 4 Color Informational Posters (different types) 30,000 5 Pamphlet (Information about Project districts and watersheds) 14,000 6 Pamphlet (Information on agricultural pest management) 3,000 Books (biogas system, composting, pasture management and livestock 7 13,100 breeding, Project achievements, methodological guidelines, etc\.) 8 Leaflets of Project concept and subproject preparation 12,000 9 Methodological recommendation for horticulture in Vanj region 3,000 Other publications (Video materials, VCD, CD, calendars, banners, 10 17,160 posters, maps, etc\.) Total: 149,860 46 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR Project Context, Development Objectives and Design 1\.1\.Context at appraisal Tajikistan has an area over 143,000 km² of which more than 93% are located in mountainous regions\. In the period 2000-2003, barely a decade after independence and during a period of stabilisation after the civil war, Tajikistan moved its development efforts from humanitarian aid and reconstruction to more long term development activities\. During that period poverty decreased substantially from over 85% to 60% in 2004 with still over 20% of the population considered as very poor (1\.18$/day/person)\. Government of Tajikistan action was guided by the PRSP and the national development strategy which emphasize growth, provision of basic services, supporting the poor and improving governance\. Within this context and as a follow-up to the successful farm privatisation project, GOT, World Bank and GEF designed in 2004/2005 a project focussing on both poverty and environment in mountainous regions where 20% of the population lives and where poverty and land degradation are highest\. The Community Agriculture Watershed Management Project (CAWMP) is addressing 2 major challenges in Tajikistan: poverty reduction through agricultural development and income generation, and environmental degradation through integrating sustainable land management practices\. Both issues are closely linked, in particular in mountainous areas where inadequate land management practices due to lack of investment and/or knowledge lead to serious environmental degradation such as mudslides, soil erosion, silting of rivers\. Still, highlands in Tajikistan have good agricultural and livestock potential if only managed appropriately\. In addition, mountainous ecosystems, some of which are under threat like pastures and forests, constitute a unique pool of genetic diversity of wild-growing plants which is worth conserving\. In Tajikistan the breakdown of the Soviet agricultural system after 1990 and the production decline pointed to the need for land reform\. The first legal acts on land reform and farm restructuring in Tajikistan were issued in 1992, but land reform began actively only in 1995, with a presidential decree allocating additional land to household plots – always a highly productive sector in all of the former Soviet Union\. In the uplands, farmers lacked capital to exploit the productive potential of their lands\. At the time of Project design, in rural areas a lot of development aid was focussed on humanitarian responses rather than activities to support rural agricultural production\. This Project was a departure with its focus on agricultural production and sustainable natural resource management plus its community driven decision-making on the types of investments to be made by villagers\. Table 1: Administrative Units, Population, Number of Households and Types of Farm in the Four Watersheds Rural population Jamoats covered Number of rural Villages covered kolkhozes and cooperatives dehkan and households Number of Number of Number of Number of Number of Number of by Project by Project sovkhozes Jamoats villages (‘000) farms Watershed Districts 47  Darband 2 26 16\.0 2,133 11 5 0 0 (30%) Jirgatol 9 49 51\.6 10,072 143 12 5 24 Surkhob Rasht 12 117 80\.6 12,515 263 4 0 0 Tajikobod 4 43 32\.0 5,107 197 11 3 23 Vanj Vanj 6 57 28\.3 2,855 19 2 6 71 Ayni 8 62 77\.4 15,411 31 3 7 62 Zarafshan Matcho 2 30 12\.0 2,628 14 12 2 51 Panjakent 14 134 170\.3 34,048 59 13 10 109 Toirsu Dangara 8 75 81\.7 11,059 120 10 6 62 Total : 9 64 593 549\.9 93,002 857 72 39 402 Figure 1\. Project Sites (1\. Surkhob; 2\. Zarafshan, 3\. Dangara, 4\. Vanj) 1\.2\.Project Development Objectives (PDO) and Outcomes The Project objectives are twofold, reflecting WB and GEF contributions: 48  - Build the productive assets of rural communities in selected mountain watersheds, in ways that sustainably increase productivity and curtail degradation of fragile lands and ecosystems\. - GEF Objective: Protect globally important ecosystems by mainstreaming sustainable land use and biodiversity conservation considerations within agriculture and associated rural development decisions, providing replicable models for comparable areas throughout the country\. At the time of Project Appraisal, the performance indicators for the Project outcomes were: At outcome level: - At least eighty percent of rural production investments are successful according to agreed economic, financial, social, and environmental standards, and are being sustained; - Number of participating households in at least one of the types of rural production investment is at least 50% of total Project area population and being replicated elsewhere; - In communities that are participating in the Project, proportion of people above poverty level increased from 3% to 30%; - Negative trends of land and mountain ecosystem degradation trends halted in Project area Jamoats\. At intermediate results level: - The total cumulative investment in agriculture production among Project participants (from initial grant, local contributions, and reinvestment) exceeds US$3\.8 million, i\.e\. more than the projection of Project-financed grants and capital infusions (implying high participation, desirable social and environmental impacts, commercial success, use and repayment of revolving funds); - Land management investments cover 78,000 ha and benefit very poor at least in proportion to their numbers in a community; - Number of improved public facilities, disaggregated by type of investment (e\.g\., village drinking water, roads and electricity); - 47 JDCs overseeing rural production investments; - 40% of farm production and land management investments apply improved technologies, and receive good access to necessary inputs and knowledge; - Number of indigenous crop varieties from Project area preserved as live specimens; - Satisfactory Project administration as indicated by Bank supervision ratings and Project’s public reputation for integrity\. At the time of Project appraisal, these objectives and targets were considered relevant to conditions in Tajikistan as mentioned in the previous section\. However, achieving these targets would be dependent on capacities among project management and partners since the Project design was significantly different to previous projects implemented in Tajikistan\. 1\.3\.Adjustments in Project Outcomes and Intermediate Results By the time of and during the Mid-Term Review in May 2008, the following adjustments were made\. 49 Outcomes a) Proportion of people above poverty level participating in the Project: The means of verification for this outcome indicator was changed given that the baseline assessment of poverty levels in the Project sites was unable to provide primary data of adequate quality\. This outcome was measured through analyzing qualitative data gathered from sample subproject reviews during project assessments; b) Halting of negative trends of land and mountain ecosystem degradation in Project Jamoats: This outcome indicator related to land degradation was revised, since the original indicator, an aggregate spatial assessment of land degradation trends, could not easily capture the impacts of the small-scale Project-financed subprojects\. A replacement indicator instead measured the number of hectares positively affected by practices, which contributed to sustainable land management\. In 2009 monitoring formats were developed for subprojects that have served as the basis for assessing sustainable land management benefits\. Intermediate Results c) Credibility investments: An outcome indicator was added to measure participation in credibility investments since these served important functions of building interest in the Project and awareness of new concepts such as natural resource management\. This indicator also provided useful information for the initial period of Project implementation, when other results could not yet be measured; d) Percentage of Project-financed investments having access to and applying improved technologies: This result indicator for the component on technical dissemination was replaced with the number of persons trained, which was more practical and easier to measure than adoption rates; e) Number of Jamoats: At inception, the Project planned to cover 47 Jamoats, but by Year 2 it was clear that this target needed to be reduced\. Beginning with the first FO contract in 2005, it was evident that the unit costs per Jamoat and village for facilitation assistance, even with co-financing from the FOs, had been significantly underestimated during Project design\. Experience also showed that it was necessary to provide additional resources to support JDC/JRC establishment and operations and ensure that they could play the critical facilitation and financial roles envisaged in the Project\. Corrections also needed to be made to the base number of households in the Project Jamoats since these had also changed since appraisal\. At the MTR, the following adjustments were therefore made based on more accurate data and available resources: • The Project will cover 9 raions containing 39 Jamoats and 402 villages; and • The base number of households would be 57,375 of which at least 50% would be Project beneficiaries\. f) Bank supervision ratings: A small modification was made in the indicator for Project management to a more logical measure based on implementation timeliness rather than Bank supervision ratings\. g) Project reputation for integrity: This indicator was dropped since there was inadequate in- country capacity to conduct and analyze the necessary surveys\. The Project’s implementation and 50 fiduciary arrangement shad the intended effects of lessening the opportunity for inappropriate capture of project resources and increasing transparency\. Such measures included public disclosure of subproject costs, community consensus on investment choices and direct transfers of funds to Jamoats\. h) New gender indicator added at the time of Project restructuring in April 2011\. Table 2\. Summary of modifications to the Results Framework Indicators at the time of the MTR, May 2008 Original Indicator Revised Indicator Explanation Cumulative number of villages which Useful, especially during initial Did not exist have participated in credibility implementation when other investments results not yet achieved\. Negative trends of Areas in ha covered by land resource land and mountain management subprojects and other Original indicator will not be able ecosystem degradation project activities that directly and to measure impacts due to halted in Project successfully address land and problems of scale\. Jamoats\. mountain ecosystem degradation\.21 Area in ha covered by land resource management Total value in US$ of land resource subprojects and Avoid duplication with revised management subprojects designed benefiting very poor at outcome indicator above\. and funded\. least in proportion to their numbers in a community\. Project participants Cumulative number of rural people have access to and who have received technical training Original indicator not feasible to adopt improved from TAAS, FOs, or other project measure\. agricultural partners\. technologies\. Bank supervision Project management ensures project Original indicator not practical ratings and reputation implementation timeliness\. because of inadequate capacity to 21 Confirmation that land resource management subprojects and US$ value of other project expenditures (e\.g\., farm productivity subprojects, rural infrastructure subprojects, specific training programs, specific consultancies, etc\.), in concept and then in implementation, include at least one of the following results on fragile lands: • Prevent or reduce soil erosion by water or wind • Increase vegetative cover through perennial crops and pasture • Provide soil and moisture conservation • Improve soil quality • Improve water use efficiency • Increase sustainable fodder or wood supply • Increase sustainable renewable energy supply • Increase integrated pest management • Indigenous plant preservation 51  Original Indicator Revised Indicator Explanation for integrity as conduct surveys, and emphasis on perceived in public integrity addressed through other opinion surveys\. mechanisms\. Added by World Bank as core Did not exist\. Number of Project beneficiaries\. indicator at the time Project Restructuring Added by World Bank as core Did not exist\. Number of female beneficiaries\. indicator at the time of Project restructuring At the time of Project completion the objectives and outcome indicators are still considered to be relevant\. The GOT continues to recognize the importance of addressing land degradation (see reference to UN Assembly September 2011) in the country\. Project objectives are relevant to current GOT programmes in food security, poverty reduction, horticulture development, sustainable pasture management and adaptation to climate change\. Emerging challenges to the objectives including employment generation include market development, the need to continue building the rural knowledge base and advisory services to support production, processing and land management\. 1\.4\.Project Components The Project was funded through a GEF grant, IDA credit and grant, GOT counterpart financing and beneficiary contributions investments estimated costing 19\.8M$ at PAD stage\. At the time of the MTR, this figure was revised to 18\.77M$ that took into account exchange rate changes, as well as changes in GOT counterpart financing levels and estimates of co-financing by facilitation organisations\. 1\.4\.1\. Funding sources and disbursement/expenditure (‘000 USD) % of expenditure contribution etc\.) Funding sources Government co No and Date of Credit (Grant) disbursement Agreements expenditure beneficiary (Credit (s), Total Sum financing, Grant(s), Balance Actual Actual № IDA Credit 3928-TJ 1 5,000,00 5 171,45 4 947,14 224,31 99% №3928-TJ 25\.11\.04 Government of 3928-TJ 2 2,000,00 591,25 590,45 0,80 30% Tajikistan contribution 25\.11\.04 H097-TJ 3 IDA Grant; №H097-TJ 5,800,00 5 942,18 5 896,36 45,82 102% 25\.11\.04 053572-TJ 4 GEF Grant №053572-TJ 4,500,00 4 499,90 4 498,73 1,17 100% 25\.11\.04 5 Beneficiary contribution 2,400,00 - 3 400,00 - Total: 19,700,000 16 204,780 19 332,680 272,10 98% 52 Component 1: Rural production investments These investments were to benefit the population through access to small grants A\. Farm productivity improvement: individuals or groups of households invested in specific activities providing income on a short term basis (within 1-3 years)\. These included provision of inputs for cropping systems, horticulture, livestock, processing, leasing, etc\. B\. Land Resource Management (environment): this subcomponent enabled local people to adopt more sustainable use of fragile lands and provided Right of Use of Land Certificates after three years of maintenance, subject to continued good land use (this provision was changed during Project implementation to issuance of certificates according to the schedule of issuances in the Land Registration and Cadastral Survey Project for the CAWMP locations)\. Most activities combined long term income-generating investments (3-4 years and on) in order to enhance sustainable land use\. Activities included horticulture, woodlots, pasture management, soil and water conservation measures, etc\. C\. Rural Infrastructure: these investments rehabilitated small-scale rural infrastructure intended to benefit community groups and complement the above subcomponents\. Activities included drinking water, small irrigation, minor transportation rehabilitation, small power generation, etc\. Beneficiaries organized as Common Interest Groups (CIGs) accessed grant money by providing a 20% minimum contribution for the total subproject costs\. Their proposals had to follow fixed budgets based on village population as long as any household does not exceed US$290 grant money while group members applying for a rural infrastructure grant cannot excess US$50/HH\. Component 2: Institutional Support and Capacity Building A\. Research and Demonstration: scientific institutions and line ministries provided technical services including training to communities in the following areas: seed and seedling production, livestock breeding and animal health and husbandry improvements, and market and enterprise analysis and development\. Activities were financed to support the preservation of indigenous crop and other specimens\. B\. Community Mobilization and Subproject Preparation: including training and facilitation for Jamoat Development Committees (JDCs) as well as households and common interest groups with support of facilitating organizations\. It also included support for small confidence building mobilization grants ($1,000) for each village\. Component 3: Project Management This component supported all functions related to project management (project coordination, procurement, disbursement, financial management, reporting, monitoring, and evaluation) and supports the secretariat services provided to the State Level Steering Committee (SLSC) and the Watershed Development Committees (WDCs) which are to approve the grants\. There were no significant changes made to the Project components\. Some changes were made to strengthen Project activities in sustainable rangeland management through additional technical assistance including a dedicated PMU specialist, and a decreased emphasis on rural infrastructure\. Indicators and the Project cost estimates were adjusted during the Mid-term Review in 2008\. 53 1\.5\.Project Implementation The Project followed the concept of community-linked development, a participatory process which involves communities in identifying their needs, and provides for their direct involvement in resource allocation, decision making, implementation, and monitoring at the local level, with Jamoat Development Committees (JDCs) playing a key role\. Villages allocated resources within fixed budget constraints among the subprojects sponsored by common interest groups or households, through a process a participatory analysis facilitated by Project-contracted NGOs (such as Aga Khan Foundation, WeltHungerHilfe, FAO and UNDP which were NGOs and agencies already active in Tajikistan) and JDC representatives\. The subproject investments in any one village would take place over a three year period\. Specialists from Government line agencies and NGOs assisted common interest groups in developing feasible and eligible proposals\. Guidelines include communications, group process, organizational and administrative arrangements, contribution requirements, budget limits, and institutional capacity, social, financial, commercial, technical, and environmental considerations\. After the review and approval process, JDCs provide resources directly to the common interest groups undertaking subprojects\. The common interest groups had ownership of completed installations, and responsibility for their subsequent operation and maintenance\. To avoid misuse of grants or misunderstandings of Project’s objectives, each FO had to present at the start of their contract, a limited number of subprojects directly to PMU (and the donor) whatever the amount for approval, after which the Project’s procedure could be followed: this was an efficient procedure and enabled PMU to rectify FO and JDC support to CIG whenever necessary in terms of subprojects funding criteria\. Table 3 below summarizes the various partners and key stakeholders in the Project, their function and plus assessments of their roles in Project implementation\. Table 3\. Project Partners and Stakeholders –Roles and Assessment Project Key Roles Positive Negative Stakeholders Provide conditions for See Borrower GOT project operation, performance counterpart financing Project administration, PMU coordination, M&E, technical support Limited initial skills Field presence, local and understanding for Field coordination and PCUs knowledge, gained skills project\. Weak on support through the project M&E, esp\. project outcomes 54  Project Key Roles Positive Negative Stakeholders Early FOs did not Experienced and staff fully understand Facilitation in community relevant to project sites\. project design and mobilization, capacity Took initiative to FOs role of GOT and WB\. building, and technical exchange experiences Projected themselves support to JDCs and CIGs across project sites, e\.g\., as implementers and FAO financing bodies\. Some effective results Limited experience in Research, demonstration of shown in live specimen demand-driven, Scientific technologies, dissemination conservation, soil small-scale upland Institutes to farmers rehabilitation and IPM agriculture strategies requirements Worked effectively to Fund transfer to CIG, CIG transfer funds to CIGs, Weak monitoring of support, rural investment Local presence and subprojects – lacked JDCs review and approval, M&E, knowledge was effective facilities, e\.g\., WDC members and valuable\. Skill vehicles and skills levels increased\. Exceeded minimum Variable skill levels beneficiary contribution and knowledge led Design and implementation CIGs requirements, capable of difficulties in design of investments implementing and M&E of subprojects subprojects Institutional support, Line Ministries technical advice, review of (inc\. regions) investments Review of investments, Raion technical support, WDC Authorities members Review and approval of Did not perform WDCs investments uniformly Functions conducted Review and approval of by other bodies, few SLSC investments over $5000 proposals over USD 5,000 Local NGOs Technical support The overall process and relationships between key players is outlined in the figure below\. Figure 2\. Preparation and Implementation of Rural Production Investments 55 On the Group of Common Interests level: Sub-projects preparation Implementation of sub-projects Distribution of revenues from sub-projects On the village level: Problems assessment Formation of Groups of Common Interest Subproject implementation plan preparation and submission Participation in subprojects monitoring and work of Jamoats Development Committee On the level of Jamoats Development Committees: Review and approval of plans of subprojects for village development Approval of grant subprojects up to $500 МOU Resume, subprojects financing and monitoring Submission of subprojects to Water-Collection Basins Development Committees for consideration On the level of Watershed Development Committees: Review and approval of work plans of Jamoat Development Committees Review and approval of grant subprojects up to $5000 Submission of grant subprojects over $5000 to the State Coordination Committee for consideration and approval Given little prior experience of working together and the project’s innovative and complex processes and mechanisms, e\.g\., household and village budget limits and the community-driven approach, these partnerships have been effective in community mobilization, in designing, supporting, appraising and monitoring subprojects and in providing related training and technical assistance\. The partnerships with international organizations (AKF/MSDSP, FAO, UNDP and WHH) generated both benefits and challenges for the project; while different approaches and competencies have resulted in some opportunities to learn from a range of good practices, somewhat independent watershed approaches did initially result in inconsistent (and sometimes incorrect) interpretations of project design and procedures\. 1\.6\. Monitoring and Evaluation (M&E) Design and Implementation M&E design: A monitoring and evaluation manual was prepared for the project in 2004 and revised in 2008\. M&E implementation: Most monitoring activities were focused on results: it culminated in the design of a comprehensive project database for all project grants after swaps of various databases designs produced by both PMU and each FO\. 56 The PAD suggested the contracting of an M&E and financial specialist at JDC level\. These functions were separated: financial monitoring of results was effectively carried out by the financial and M&E JDC specialist\. In the context of the overall monitoring and evaluation approach, assessing and reporting on outputs has, as expected, been easier and more effective than similar activities regarding outcomes\. A number of the activities planned to assist in evaluating outcomes have not been possible or practical, e\.g\., analysis of satellite imagery due to lack of in-country capacity while for others such as baseline socio-economic surveys in-country capacities were not fully developed for project purposes\. The Results Framework has been revised to reflect implementation experience\. On the other hand, the planned monitoring of outputs using reports, simple databases and field visits has been effective and more suited to Tajik conditions where communications can be difficult, IT facilities were limited and project sites are scattered and remote\. Monthly reporting by all major project partners allowed project management to aggregate data and findings\. M&E was carried out by all stakeholders with site-specific approaches\. By project’s end some efforts had been made in order provide continued monitoring; in particular, the relationship between the project partners and hukumat authorities could have been strengthened both for on- going support and monitoring\. FO follow-up has resulted in additional support through new interventions– replication of similar types of subprojects or entire approach with grants (e\.g\., Aga Khan in Vanj) and/or additional support for increased impact (e\.g\., WHH in Zarafshon)\. Two phases of assessing environmental impacts of rural investments have been undertaken that provided possibilities to assess primary and secondary environmental benefits (refer to table with details of environmental impacts in Annex 2)\. 2\. Project Outcomes and Results Table 4\. Project Results Framework Development Objective: to build the productive assets of rural communities in selected mountain watersheds, in ways that sustainably increase productivity and curtail degradation of fragile lands and ecosystems\. Global Environment Objective: Protect globally important ecosystems by mainstreaming sustainable land use and biodiversity conservation considerations within agriculture and associated rural investment decisions, providing replicable models for comparable areas throughout the country\. Pre Actual Apr Outcome Indicator Project Final Target 2012 Baseline % of rural production investments are successful according to agreed standards 22 and are being NA 85% 80% sustained\. Cumulative number of villages which have 0 402 402 participated in credibility investments 22 Taking into account economic, financial, social, and environment parameters, and weighted by value of investment\. 57  Cumulative number of households which have participated in some part of the rural production 0 43,513 23 32,000 component Proportion of population above poverty level in 3% 50% 30% villages that are participating in project Area in ha covered by land resource management subprojects and other project activities that directly 0 96,600 25 78,000 and successfully address land and ecosystem degradation 24\. Number of project beneficiaries 238,000 192,300 Number of female beneficiaries 91,304 88,000 Pre Actual Apr Intermediate Indicator for Each Component Project Final Target 2012 Baseline IA : Total value in US$ m of farm production investments (regardless of financing source) to date 0 $3\.85 million 26 $3\.8 million in villages where project is operational IB : Total value in US$ m of land resource $5\.39 0 $6\.20 million management subprojects designed and funded\. 27 million 28 IC: Number of improved public facilities, disaggregated by type of investment (village 0 422 29 * 30 drinking water, roads, bridges, and electricity)\. 23 This indicator now reported by number of households participating in each type of rural investment\. Since households participate in more than one type of investment, a breakdown by investment provides more useful assessment of project impacts 24 Confirmation that land resource management subprojects and US$ value of other project expenditures (e\.g\., farm productivity subprojects, rural infrastructure subprojects, specific training programs, specific consultancies, etc\.), in concept and then in implementation, include at least one of the following results on fragile lands: • Prevent or reduce soil erosion • Increase vegetative cover through perennial crops and pasture • Provide soil and moisture conservation • Improve soil quality • Improve water use efficiency • Increase sustainable fodder or wood supply • Increase sustainable renewable energy supply • Increase integrated pest management 25 Updated estimate based on August 2010 review of rural production investments 26 Funds in JRC/JDC accounts, beneficiary contribution, revolving funds, and reinvestments 27 Funds in JRC/JDC accounts and beneficiary contribution 28 Based on estimated project costs as revised at MTR 29 Completed and under implementation 30 *Indicates target not appropriate but numbers were monitored 58  Pre Actual Apr Intermediate Indicator for Each Component Project Final Target 2012 Baseline IIA: Cumulative number of rural people who have 0 received technical training from TAAS, FOs, or 9175 8,000 other project partners Number of varieties preserved as live specimens 0 300 * 31 IIB: Number of JDCs that have been established and are overseeing implementation of credibility NA 39 39 and rural production subprojects On schedule or prior delays being III: Project management ensures project Completion on NA overcome and implementation timeliness schedule completion on schedule possible Project outcomes and outputs by component are detailed in Annex 2\. Communication and Information Sharing activities See Annex 6\. 3\. Financial Management and Procurement 3\.1\. Overview: There was a one-year delay in project start-up\. Facilitation support proved to be difficult to procure\. UNDP was the first FO contracted but there was a misunderstanding about the project concept with the result that implementation was delayed as operational guidelines were clarified and agreed\. UNDP was also the only FO to transfer funds to JDCs rather than the PMU\. This was not an ideal arrangement and subsequent transfers in other project sites were made by the PMU\. Thereafter the phased introduction of watersheds proceeded as mostly as planned and disbursement rates to subprojects were at the time of the completion of this component were at target values\. The primary reasons for the initial delays included inexperience within the PMU and in the WB in contracting facilitating organizations and within the PMU unfamiliarity with the project’s concepts and implementation arrangements\. The PMU was not familiar with managing output-based contracts with FOs and faced challenges in reconciling these arrangements with Tajikistan’s accounting methods, as well as with direct fund-flow mechanisms to Jamoats\. But the growth in PMU capacity to manage these aspects of the project has been a significant achievement\. Arrangements were worked out with FOs on financial reporting that would meet GOT requirements\. The project’s fund flow arrangements required building capacity especially for the 31 Indicates target not appropriate but numbers were monitored 59 PMU and JDCs who played critical roles in financial management\. Initially, it was difficult to find technical assistance in this area and this delayed implementation, but once this was found, financial management staff and systems were put in place to disburse and report on subproject funds in a timely and transparent manner\. A fiduciary field visit conducted in May 2008 which checked financial management and procurement on a random sample at the local level in Vanj, Toirsu and Surkhob found no problems in fund flow to beneficiaries and JDCs, nor in local procurement\. Regular annual national and international audits raised no significant concerns\. Similarly a review of the project by a Commission of the Presidential Administration of Tajikistan conducted in early 2008 raised no major issues regarding project management\. A detailed review of financial management arrangements of the project was carried out by the World Bank team under Tajikistan Portfolio Fiduciary Review during April 28- May 10, 2008\. No major concerns were raised and all issues were addressed\. 3\.2\. Some Key Challenges: Requiring the use of financial management software (1C) meant that frequent technical support was needed in order to meet Bank reporting requirements\. The project only finally met Bank requirements at the end of the project\. Difficulties were experienced in fund transfer from the PMU for JDC operations\. Payment of the JDCs through the PCUs was not efficient and it would have been better to have deposited funds directly into JDC bank accounts\. 3\.3\. Beneficiary contributions: At the time of completion of Component 1 implementation, it was estimated that beneficiary co- financing had on an average exceeded the minimum requirement of 20% of the total value of the rural production investment to 31% (i\.e\., 45% match for project financing)\. In numerous cases, beneficiaries absorbed increases in costs that have occurred since subproject preparation due in some part to delays in transferring funds to JDCs/JRCs as well inflation\. Although almost all of this contribution is usually as labor, materials, etc\., the level of contribution demonstrates strong ownership and commitment, and thus a critical contribution to subproject sustainability\. As of September 2011, the value of beneficiary contributions was approximately US$3\.4 m\. 4\. Assessment of Bank and Borrower Performance 4\.1\. Bank Performance Bank performance in Ensuring Quality at Entry: At the time of project start-up, the roles of the various project partners was not fully explained and understood, especially by those at the local level\. The Operational Manual for Community Mobilization and Rural Production Investments was complicated and not very clear including the guidelines for subproject proposal preparation\. This lack of clearness created difficulties, particularly at the local level\. Initially there was a lack of experience in the Bank and the PMU on how to contract the FOs and the type of contract proposed – output based – was one that the PMU had not previously managed\. Project partners did not also fully understand the concept of the GEF alternative\. 60 Quality of Supervision: In comparison with other donors, the supervision of the WB has been effective\. For example, efforts were made to explain and clarify GEF alternative and FO roles and contracts\. Generally, within the overall framework of the project, and in comparison with other donors the WB was flexible in assisting project partners to implement activities given the constraints and possible opportunities, e\.g\., reducing the number of subprojects for prior approval from 10 to 3 per investment category thus saving time, adjusting staffing in PMU to accommodate important issues such as rangeland management, market development\. While the number of missions per year was adequate, the timing could have been better coordinated with peak periods of rural activities in project sites\. Overall the working relationship with the Bank team was collegial\. 4\.2\. Borrower Performance Government performance: The GOT provided the necessary facilities for project management and coordination, including field facilities\. The estimated counterpart funding at completion is US$591,000\. Government bodies continue to pay attention to the project and its outcomes\. The Ministry of Agriculture, State Land Committee, State Committee on Environmental Protection and State Committee on Investments provided regular assistance to support the implementation of project activities\. The State Land Committee provided assistance to the project for the issuance of Land Use Rights certificates for project beneficiaries\. The project also collaborated closely with the Land Registration and Cadastral Survey Project on this issue as well\. 5\. CAWMP Actions to Help Ensure Sustainability and Replicability of Project Outcomes 5\.1\. Sustainability of rural production investments The overall concept and process of community-driven development contributes to the sustainability of rural investments\. Villagers made decisions on what investments to implement, who should benefit and the distribution of financial resources across the three categories thus building ownership and contributing to the sustainability of these activities\. Villagers were also responsible for financial management and procurement for investments\. Proposals for these investments required villages to consider economic, environmental and social/institutional sustainability, e\.g\., cash flows and cost recovery arrangements for 3-10 years depending on the type of investment, environmental conservation and mitigation measures, and establishing organizations such as water user associations to support long-term operations\. Furthermore, the requirement of beneficiary contributions (including cash contributions for rural infrastructure) helped build ownership and also contribute to the sustainability of these investments\. Other key actions that contributed to sustainability are given in section 2\.5 of the PAD’s main text\. 6\. Additional Activities When the project was extended in spring of 2011 until April 2012 it allowed for additional activities in project pilot districts\. Project activities included the following areas: “Creation of 61 gravity irrigation in small watershedsâ€?, “Sustainable pasture management at the Jamoat levelâ€? and “Assistance in market development and fruit processingâ€?: 6\.1\. “Creation of gravity irrigation in small watershedsâ€?\. The overall objective of this component was to assist in the implementation of initiatives related to water resources management in areas where gravity irrigation is used; as well as farmers’ awareness raising living in the upper and lower reaches of rivers; rational use of water resources and operation of water systems\. Project activities were carried out in the Mogien watershed in the Zarafshan valley in four Jamoats of Panjakent district\. Seven Water User Associations (WUAs) were covered by project activities as well as other water and land users living upstream of the river\. To achieve these objectives the following was carried out: (a) identification of effective applications of perspective water saving technologies on the ground; conducting training and workshops; study tours based on the examples of the best local achievement with the involvement of trainers among farmers; and (b) organizing and conducting tenders for small works of advanced water-saving technologies between water users\. As a result of these activities recommendations were developed on the establishment of a multilateral cooperation between the WUAs and other water users in small watersheds, including the evaluation of existing and potential opportunities, risks and conflicts, standard diagnostic methods, dissemination of positive practices of water and soil conservation technologies with a description of typical efficient water saving technologies\. A model project implemented in small watershed of Mogien river of Panjakent district achieved the following results: - Recommendations and offers were described on improving the relationship between water users of the upper and lower reaches of Mogien River with regard to use and water resources management; - - Activity water users associations gained the necessary additional knowledge in the field of water saving technologies and rational use of land resources; - - Through tendering support was rendered to the best farmers and attention was paid to the following key aspects of water saving techniques: effective use of innovative and traditional water saving technologies, economic efficiency through water saving, the increase of the crop yield and efficient use of water resources; - - Environmental aspects of effective regulation of water supply were identified in small watersheds along with their associated economic efficiency\. - 6\.2\. “Sustainable pasture management at the level of Jamoatâ€?\. The overall objective of this activity was to assist in the development of a pasture management plan for pilot Jamoats\. For this purpose, Dar-Dar Jamoat was selected, which is located in Aini district in the Zarafshan Valley\. Despite the fact that the project always focused on the importance of grazing issues in Tajikistan, active work on pasture issues only started in the second half of the project period\. The project held a series of interventions to stimulate offers for organizing pasture subprojects; the study of mountain pastures and their management system; training of rural residents in rational methods of pasture use; and breeding and maintaining livestock\. To achieve these goals, circumstances and the experience gained by the project were taken into account during 62 model project organization on integrated pasture management in Dar-Dar Jamoat (Ayni district)\. The model project stipulated the following economic, environmental and institutional aspects: - key acting persons and partners were identified; - social, economic and natural resources (sufficiency-deficiency) were defined both at the level of individual villages and at the Jamoat as a whole; - prospects and potential of grazing development were assessed at the village and Jamoat level and the sustainability of current methods of pasture management; - main environmental, social and environmental risks of grazing were assessed currently and in the future at the village and Jamoat level; - potential and existing conflicts were identified as well as social, environmental and landscape issues and the extent of the impact on grazing development; - modules of the pasture system were described (watering, pasture rotation, access to roads, shelter for livestock, veterinary services, preparation of fodder for the winter and etc); - preparation of action plans with indication of executors, sources of funding and timing; - cartographic materials were prepared (pasture rotation schemes, the location of the main modules, etc\.) for management purposes; - guidance on pasture management at the Jamoat level were prepared comprising: identification of the need and possible preparation plans, risk assessment, issues and resources, ways of conflict resolution, and the organization of planning and monitoring to ensure sustainability; - training modules were developed to improve knowledge and skills of beneficiaries at the village and Jamoat level; - Execution of works to allow for successful use of approaches developed by the model area in other similar conditions in Tajikistan\. Project implementation identified key aspects related to pasture degradation (the causes, extent and rate of degradation); outline main directions for pasture improvement and the reduction of pasture use by specific organizational, economic, and agricultural, animal husbandry, veterinary measures and methods as well as educational technology and public awareness raising\. An action plan was developed on pasture improvement and conditions created for pasture user associations at the Jamoat level\. 6\.3\. “Assistance in local market development and fruit (drying) processingâ€?\. Within the framework of this component marketing plans were developed that stipulated the demonstration of technologies for processing of agricultural products, such as a tunnel dryer and improved trays for drying of agricultural products, establishing business contacts with potential buyers, as well as creating conditions for possible assistance from other projects in the future and initiatives upon complention of CAWMP implementation\. Dissemination activities, organization of training and provision of technical materials facilitated a large number of Community Interest Groups in understanding the key aspects of marketing\. 63 A work plan was also developed which included: (a) assessment of existing and future levels of agricultural production in project villages where the emphasis is on production of certain agricultural products, including mainly apricots and apples, and (b) the organization of training on the wide range of issues (including the value chain, quality of products and quality standards, processing technology (including the use of trays for drying and tunnel dryers) and preparation of business plans) as well as development of appropriate work plans by farm production groups, and (c) the establishment of business relations between farmers groups of the project, local experts, local enterprises on products processing and the projects funded by donor organizations\. The main work was carried out in two Jamoats, namely Shirinchashma (Tojikobad district) and Urmetan (Aini district), including additional project activities at district level - in seven districts of project area with the view to cover a wider target audience\. In addition the Project concluded a contract with NGO, which would provide the necessary assistance and close cooperation with other projects in agricultural marketing, such as USAID / PRO-APT, GIZ - Rural Development Programme and the Helvetas - Local Market Development Project\. 7\. Lessons Learned and Recommendations The project has successfully achieved considerable results responding to the needs of beneficiaries\. CAWMP is a success because it has changed the way farmers grasp their potential for income generation and their relationship with environment\. An important impact of the project is that the numerous small grants to groups of farmers at the village level has resulted in these beneficiaries being exposed to a large number of potential agriculture and environment related activities; as interviews for the final evaluation showed, the beneficiaries are far more open minded now thanks to this project: they exchange views and ideas on new income generating activities, discuss the advantages and disadvantages of subprojects, their technicalities or consider replicating similar small-scale initiatives\. Project design: - Participatory planning along with village and household budget limits was an effective mechanism for villagers to prioritize and assess risks of various options, as well as allocate resources\. Furthermore, open disclosure of available funds and amounts allocated to investments improved accountability\. To further disseminate this aspect, the process and results need to be documented (some documentation already underway) and then share widely with government, donors and other implementing agencies and organizations so that similar measures can be included in future planning processes\. - Right of Use of Land Certificates (RULC) are key for sustainability, especially for land related subprojects in CAWMP and for other similar initiatives\. According to the CAWMP design the RULC should be issued after 3 years of successful using of subproject (land)\. However, during the project implementation and RULC issuance process it was learnt that it would be better if the RULC is given after 1 year of starting of subproject, even a half year is acceptable\. It increases the confidence of farmers to use the land as a real user and owner, and the certificates should be issued without delays\. 64  - Although it was not in the project objectives to address broader policy and legal issues related to pastures and rangelands, sustainable rangeland management will require policy and legal support informed by practical, field-based examples and experiences such as those implemented in CAWMP\. The project has reduced overgrazing pressure locally within villages’ territories through several types of subprojects and demonstrated activities that contribute to sustainable rangeland management\. Grazing rights are a sensitive topic because it involves several types of farmers with potentially conflicting interests (family farmer, sheep farmer, Dekhan farms, and commercial private stock breeder) and might require new legislation and /or law enforcement\. - Research and demonstration of appropriate technologies can be integrated differently at project design\. The success of the Farmers Competition shows that agricultural innovation and good practice can be demonstrated and shared in an efficient and effective way\. While research institutes have shown limited practical skills for small-scale applications, new technologies in upland farms remains a high priority as it increases the value of subprojects even though this may be risky in terms of adoption\. New technologies / varieties can be tested first on farmer’s plots, their added value demonstrated before sharing with local authorities and other interested parties\. A more practical approach and different from the focus on research institutes can be considered at raion (Jamoat) level through Farmer Field Schools - reproducing farming real conditions\. In that case, a strong linkage should be established between the Research (NGO, institute) – Demonstration (farmer’s plot with the assistance of FO & Hukumat) – Dissemination (FFS 32) (demonstration by farmers and FO)\.Linking these activities with government programs or priorities may help to some extent to encourage Hukumat authorities to keep engaged at the end of a project\. It should be noted that these types of activities will require international assistance of the type that was planned under CAWMP from IFAD and ICARDA but which unfortunately did not materialize\. A similar approach can be adopted when considering preservation of rare endemic species (inventory –demonstration (preservation / conservation garden) – dissemination (of species of interest): a new role for demonstration farmers might also be devised in preserving rare / endemic species (which would on-site strengthen farmer’s awareness on environment degradation through FFS)\. - An additional project component (e\.g\., value chain development, association formation) to serve successful beneficiaries would have been beneficial to support market development for subproject products\. This would be of benefit when production levels for certain items such as fruit, vegetables, honey, etc\., are enough to sell more commercially\. Not all CIGs have the capacity to understand marketing opportunities and how these might be exploited\. - Female participation can be strengthened through additional processes during planning\. Women beneficiaries were positively represented in CIGs with 40% of beneficiaries listed as female but the approach from the beneficiaries’ point of view seemed at times to be more like filling ‘quotas’ than reflecting women’s concerns\. Taking into account local cultural circumstances, it may be possible to focus on gender specific credibility grants, gender oriented participatory planning resulting in a more integrated community action plan and subprojects focusing on women’s strengths\. 32 Farmer Field Schools 65 Implementation: - Scale and scope of JDC mandates is effective for delivering services to upland, and often remote, farmers\. In CAWMP sub-district level organizations proved to be an effective component of scaling-up strategies for SLM in a challenging physical landscape\. In the project 39 JDC’s handled more than 3,800 CIGs and over US$7\.0m in fund transfers\. Additionally, participatory processes helped ensure that organizations such as JDCs worked effectively with government management units to deliver technical and financial resources to farmers\. Future efforts should maintain a focus on strengthening sub-district level support to farmers with scaling- up strategies requiring investment in institutional arrangements\. It will be important to ensure that participatory processes, including financial management mechanisms, are well integrated into SLM programs\. - The TOR for FOs should be clearer so as to help ensure financial proposals with a consistent amount of CIG follow-up\. The quantity and quality of the FO’s support has been wide ranging; some FOs were to support CIGs with less funds but 5 or 6 times more subprojects than other FOs\. In this context, trainings, follow-up of CIGs, monitoring cannot be of the same intensity between FOs\. Contracting also needs to take into account the existing presence and resources that FOs have in the geographical area of operation\. - Upon contracting FOs, a comprehensive introduction, e\.g\., workshops, seminars, would have been beneficial to explain the objectives and rationale behind the project so that expectations and roles of all parties were better understood\. A lack of orientation from PMU at the start of the project, itself due in part to lack of steering by the project design team resulted in PMU, PCU and FO’s using different approaches and independently\. This resulted in some cases in confusing messages for project beneficiaries and difficult relationships between the implementing agency (at PCU level – to a lesser extend at PMU level) and the FOs\. - At PCU level, it would be beneficial to have an M&E specialist so as to relieve PMU monitoring efforts\. Monitoring at the PCU level was primarily of financial aspects with little attention on analyzing the project implementation pace, suggesting improvements or monitoring of impact\. M&E and financial specialists tended to be reactive to PMU M&E requirements and not proactive\. At the same time, any future M&E efforts also need to take into account the limited capacities and skills available in field locations as well as salary scales for government jobs\. - A simpler and clearer operational manual for rural investment preparation would have been more effective\. The manual is very comprehensive and relatively clear for professional staff but for villagers, especially the less well educated, it posed difficulties\. The requirements for environmental analysis, the business plan and the design and calculations of rural infrastructure were not well understood at project start-up\. This resulted in JDC and FOs often preparing the proposals for those beneficiaries, leading to delays in preparation and/or grants approval because the information provided by CIGs was incomplete\. Future guidelines must accommodate the skill levels of these beneficiaries with clearer and simpler guidelines for environmental analysis and feasibility assessment\. Similarly, the proposal format requirements need to be simplified for future operations so that they can be done in time and for the most part prepared by beneficiaries\. 66 While the manual was comprehensive on certain aspects such as approval processes, FOs had considerable flexibility in the participatory rural appraisal (PRA) process leading to the preparation of the Community Action Plans and the choice of investments by villagers\. As a result, there was variation in the quality of some proposals and some questionable investment choices\. In future, establishing a set of minimum PRA requirements for CAP preparation should help ensure that key issues are analyzed consistently\. These would include participatory environmental analyses, training in which was provided to project partners part-way through the project\. - Training in community driven development procurement procedures would have been beneficial for PMU and PCU staff as well as other project partners\. Such training would have enabled staff to be aware of the flexibility possible in this approach and be more able to provide suitable advice to beneficiaries, e\.g\., the options available regarding how many local shopping quotes are needed for local procurement\. 67 Comments on Draft ICR Unofficial translation of the Letter received from Mr\. Jalil Piriev, Head of the Department of Agriculture and Land Use under the Executive Office of the President, Republic of Tajikistan Department of Agriculture and Land Use Executive Office of the President Date: December 7, 2012 Ref#: 201 To: Mrs\. Marsha Olive World Bank Country Manager for Tajikistan Dear Mrs\. Olive, First of all, let me thank you for the opportunity to comment on the draft Implementation Completion Report prepared by the World Bank for Community Agriculture and Watershed Management Project (CAWMP)\. The Government of the Republic of Tajikistan is interested in obtaining an objective independent assessment on the results of projects implementation, in order to learn lessons from the experience of implemented projects\. The Community Agriculture and Watershed Management Project (CAWMP) was one of the first projects in Tajikistan aimed at the implementation of measures to encourage further development of agricultural production, rather than merely provision of humanitarian aid\. This project was a starting point and had a great impact, because in addition to being designed to ensure growth of agricultural production and sustainable management of natural resources, it also provided opportunities for collective decision-making by the community residents with regards to various investments to be made\. The project was aimed at addressing two major problems in Tajikistan: reducing poverty through agricultural development and accumulation of income and prevention of environmental degradation through application of sustainable land management methods and practices\. The project implementation objectives corresponded to the content of government programs and priorities which include food security, poverty reduction, horticulture development, sustainable pasture management and improving climate change resilience\. Difficulties associated with the achievement of goals, as well as creation of new jobs, include the need for market expansion, further improvement of the knowledge base in agriculture and establishment of advisory services to assist in the development of agricultural production, product processing, and land management\. In addition, the priority for the Government is also to protect mountain ecosystems that are at risk, such as grasslands and forests that make up the unique collection of the genetic diversity of wild plants\. The project achieved significant results, given the adjustments that were made in the course of its implementation in the design and its development concept by working closely with the communities that were to determine their needs, and also provided for direct participation of rural people in the allocation of funds, decision-making, implementation and monitoring of activities at 68 the local level, where Jamoat Development Committees played a key role\. This initiative is fairly new for the country, and its successful implementation required additional effort on the part of the implementation agency and other organizations involved in the implementation\. 40% of investments aimed at improving agricultural production and land management, have been used for the application of advanced technology and gaining wide access to necessary materials and knowledge\. The fact that some activities also contributed to the reduction of risks associated with land degradation due to soil erosion, as well as the improvement of soil resources needed for sustainable land use, was very important\. At least 10,700 hectares of reinforced slopes and reclaimed land demonstrated positive outcomes\. In addition, in line with beekeeping development program, farmers created more than 5,300 hives that contribute to the revival of a very important economic activity, as well as an ecological process, which is vital for agricultural production and conservation of biological diversity\. Also, small grants were provided to farmers groups to plant more than 1\.3 million trees on their land covering a total area of approximately 3,000 hectares\. Unfortunately, the project failed to establish a mechanism for the post-project sustainability and saving the results\. This is primarily due to the fact that the project was not integrated into the system of the Ministry of Agriculture and not aligned with the policy in the agricultural sector\. It would be desirable to establish the project implementation mechanism that would ensure clear division and understanding of the roles among the different project partners, especially those who have worked in the field\. In addition, cooperation was not established in the course of project implementation with the Tajik Academy of Agricultural Sciences, Institute of Soil Science and the Institute of Farming Agriculture in order to develop and strengthen the capacity of professionals to provide advisory services and training for communities\. Only a certain support was provided to the Institute of Botanics in the arrangement of several scientific expeditions to identify more than 300 endemic and rare species of plants, including fruit trees\. We agree with the assessment made by the World Bank with regards to the project and in general and are grateful for the assistance in the development of the agriculture sector\. Sincerely J\.Piriev 69 Annex 8\. Comments of Cofinanciers and other Partners/Stakeholders Not applicable\. 70 Annex 9\. List of Supporting Documents GEF (2004), Global Environment Facility Trust Fund Grant Agreement, Grant No\. 053572-TJ, World Bank, Washington, DC\. Government of Tajikistan (2012), Community Agriculture and Watershed Management Project: Project Completion Report, PMU report, April 25, Dushanbe, Tajikistan\. World Bank (2003), Environmental Assessment, Volume 1: Environmental Management Framework, World Bank, Washington, DC\. World Bank (2003), Environmental Assessment, Volume 2: Pest Management Plan, World Bank, Washington, DC\. World Bank (2004), Development Financing Agreement, Credit No\. 3928-TJ/ Grant No\. H097- TJ, World Bank, Washington, DC\. World Bank (2004), Community Agriculture and Watershed Management Project, Project Appraisal Document, Report No: 28913 - TJ, World Bank, Washington, DC\. World Bank (2012), Farmer and Farm Worker Perceptions of Land Reform and Sustainable Agriculture Study, Report No: AAA81 – TJ, World Bank, Washington, DC\. 71

REVIEW

P003860

 ICRR 10866 Report Number : ICRR10866 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 11/10/2000 PROJ ID : P003860 Appraisal Actual Project Name : Treecrops Smallholder Project Costs 154\.5 149\.5 Development Project US$M ) (US$M) Country : Indonesia Loan/ US$M ) 87\.6 Loan /Credit (US$M) 76\.9 Sector (s): Perennial Crops Cofinancing 0 0 US$M ) (US$M) L/C Number : L3464 Board Approval 92 FY ) (FY) Partners involved : None Closing Date 09/30/1998 03/31/2000 Prepared by : Reviewed by : Group Manager : Group : 2\. Project Objectives and Components a\. Objectives "The project would promote income growth and employment opportunities in the outer islands \. It would seek to: (a) assist poor farm families increase their incomes; (b) test ways of lowering support costs to facilitate a more rapid and spontaneous expansion of planting with improved varieties; (c) further strengthen the Directorate General of Estates' supervision of smallholder program activities; and (d) help the Government to further develop sustainable financing procedures for the smallholder tree crop program " (Staff Appraisal Report, p\. 12) b\. Components "The project would: (a) assist 93,000 farm families establish 65,000 ha of rubber and 35,000 ha of hybrid coconuts; (b) assist 7,000 farmers develop 4,000 ha of rubber and 3,000 ha of coconuts using a self -help approach; (c) assist 61,000 farm families maintain 61,500 ha of rubber and 13,000 ha of coconuts established under earlier projects; (d) construct farm access roads; (e) provide for training and extension to new farm families joining the project, and to farmers assisted under earlier projects; staff training; and project management; (f) implement the project's environmental management plan; (g) improve monitoring and inspection of project and program activities; and (h) provide for administration and recovery of credit granted under the project, for a study of sustainable financing and cost recovery options, for a feasibility study and start -up of a future smallholder tree crop project, and for other agreed studies"\. (Staff Appraisal Report, p\. 12) c\. Comments on Project Cost, Financing and Dates None 3\. Achievement of Relevant Objectives: The project: (a) successfully assisted poor families increase their incomes ---by an increment of Rupiah 26,220/day for rubber farmers and Rupiah 28,312/day for coconut farmers, respectively 404% and 529% higher than forecast at appraisal; (b) partially succeeded in facilitating expansion of planting with improved varieties, falling short because the hybrid coconut self-help program was curtailed; (c) failed to strengthen the Directorate General of Estates' supervision of smallholders; and (d) failed to develop sustainable financing procedures \. 4\. Significant Outcomes/Impacts: The economic rate of return was 21%, compared to the appraisal forecast of 14%\. The project assisted the establishment of 70,769 ha of rubber and 41,036 ha of coconut, respectively 9% and 17% higher than the appraisal target\. It also assisted maintenance of 59,565 ha of rubber and 13,304 ha of coconut, in line with appraisal expectations\. Construction of access roads, bridges and culverts also met targets \. Project farmers--and some farmers in neighboring areas-- have improved treecrop husbandry, based on technologies diffused by the project \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The project did not provide adequately for cost recovery, making staff responsible for collecting loans (because earlier programs which used banks to recover credit had failed ) even though the implementing agency had no relevant experience\. Staff spent an inordinate amount of time on credit recovery, reducing their effectiveness as extension agents\. The provision of free planting material (intended to reduce the credit burden on farmers facing rising interest rates) worked against the development of private nurseries and may have weakened sustainability \. Land titling was delayed, possibly inhibiting the development of a sound system of smallholder financing : 153,189 ha were titled, leaving a balance of 156,118 ha still awaiting title\. Only 35% of the 12,000 farmer groups established--intended as a precursor to cooperatives --were at an "advanced" stage when the project closed \. There is no quality premium in the prices paid to farmers \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory Weak performance on credit recovery, land titling and farmer cooperative development; unsatisfactory quality at entry\. Institutional Dev \.: Modest Negligible Sustainable financing of the smallholders has not been achieved, cooperative formation lagged and management capacity remains weak\. Sustainability : Unlikely Unlikely Bank Performance : Unsatisfactory Unsatisfactory Borrower Perf \.: Unsatisfactory Unsatisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: (a) Project management units tend to undermine institutional development; (b) Extension workers should not be used as debt collectors; (c) Providing planting material free to farmers does not provide a sustainable basis for treecrop development; (d) Processors should reward farmers for product quality \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: Generally well laid out; but, in Annex 3, the figure for Net Present Value may reflect typographic error (if it is correct an economic rate of return of 21% would not be plausible)\.

REVIEW

P004850

 ICRR 11620 Report Number : ICRR11620 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 09/22/2003 PROJ ID : P004850 Appraisal Actual Project Name : Vietnam - Poverty Project Costs 250 250 Reduc\.support Credit US$M ) (US$M) Country : Vietnam Loan /Credit (US$M) Loan/ US$M ) Sector (s): Board: EP - Central Cofinancing 47\.53 47\.53 government administration US$M ) (US$M) (32%), Banking (32%), General industry and trade sector (26%), General information and communications sector (5%), General energy sector (5%) L/C Number : C3511 Board Approval 01 FY ) (FY) Partners involved : Denmark, Netherlands, Closing Date 12/31/2002 12/31/2002 Sweden, United Kingdom Prepared by : Reviewed by : Group Manager : Group : Lily L\. Chu Laurie Effron Kyle Peters OEDCR 2\. Project Objectives and Components a\. Objectives The overall objective of faster growth and poverty reduction would be supported through : (a) Improving the climate for the private sector; (b) Reforming State Owned Enterprises (SOEs) to improve efficiency and free up fiscal resources \. (c) Restructuring the banking sector to reduce the risk of financial crisis; in particular, promote enhanced transparency, better financial intermediation, and accountability \. (d) Improving trade; and (e) Improving public expenditure management (PEM) b\. Components (a) Private Sector: Remove or modify business licenses for at least 50 trades, industries or services (this follows a pre-Board action removing 145 other business licenses and requirements )\. (b) State Owned Enterprises: (i) Streamline process for equitization, remove ceilings on ownership of SOEs, improve transparency of process; (ii) complete major equitization (65% of shares) of at least 200 SOEs and minority equitization of at least 200 SOEs; (iii) modify and implement design of fund providing a safety net for SOE workers; and (iv) adopt detailed restructuring plans for three major SOEs \. (c) Banking Sector: (i) strengthen legal and regulatory framework; (ii) adopt restructuring plans and complete audits in accordance with international accounting and auditing standards for the four state -owned commercial banks (SCBs); (iii) close nine joint-stock banks (JSBs) under State Bank of Vietnam's intervention, ensure compliance of all remaining JSBs; and (iv) bring loan-classification by banks into accordance with international practice \. (d) Trade: (i) removal of most quantitative import restrictions for clinker and paper (e) Public Expenditure Management: (i) improve transparency by designating State Treasury as responsible for a comprehensive management information system for government expenditures and publishing sectoral breakdowns of at least 75% of government -spending  c\. Comments on Project Cost, Financing and Dates $250 million is a substantial amount for an adjustment credit \. Given the large size, it may have been more effectively used to promote deeper reforms in some areas rather than initial steps across a range of areas \. 3\. Achievement of Relevant Objectives: All but one of the legal conditions were met \. A waiver was granted for the final condition, the adoption of restructuring plans for three large SOEs \. Work on restructuring plans was continued under donor financed TA, and it is expected that this condition will be met in the fall of 2003\. However, the legal conditions captured only a small part of the overall objectives outlined in the original project documents, which reflected in part the longer - term goals that were envisioned to be supported by a series of PRSCs \. The actions in the legal covenants, while necessary first steps, in many cases are not significant on their own, and may be easily subject to reversals \. It will be important to monitor the success of follow -up PRSCs, to see if reforms are sustained \. (a) Private sector\. Between May 2001 and July 2002, 51 license and licensing requirements were removed and 10 were modified (following a pre-Board removal of 145 licenses)\. The ICR mentions that a detailed review of remaining business licenses has been carried out, but does not provide details on how many licenses still exist, or an estimate of what percent of the economy would be affected by the remaining licenses \. Actions outside the context of the PRSC included revising laws on land use and collateral \. The private sector is improving, with approximately 50,000 new firms and private investment increasing from 8% in early 2001 to 9% by end-2002, but it is not yet clear whether these gains presage a significant and sustained growth in the private sector, nor is it clear to what extent that growth stemmed from the actions taken under the PRSC \. (b) State-owned enterprises: The overall objective was to improve efficiency and decrease the drain on the fiscal budget\. The actions laid out under the PRSC, while useful first steps, have minimal effect on improving overall SOE efficiency and the fiscal deficit \. The PRSC covenants included the "equitization" of a number of SOEs, and to date, the equitizations, sales, and liquidations have taken place for over 400 SOEs, but these represented only about 2\.5% of SOE debt and 5% of SOE employment\. In addition, 30 diagnostic audits of SOEs have been completed or are underway, and restructuring plans for 3 other SOEs are underway; it will be necessary to see if these audit results and restructuring plans lead to implemented actions \. The preliminary steps under this component will not by themselves have a major impact on overall efficiency and fiscal discipline; it will be critical to see if additional progress and implementation occurs in future stages of the reform program \. (c) Banking sector reform: All the legal conditions in this area were met \. However, as in SOE reform; most of these conditions (adoption of restructuring plans for four SCBs, issuing new regulations for loan classification, completing audits for four SCBs) represent important first steps in banking sector reform, but are not by themselves significant enough to have long-lasting effects on the banking sector \. The revocation of licenses and closure of noncompliant banks is a more difficult step; although the ICR does not discuss what percent of bank assets was involved, and if the remaining 36 banks can be reasonably healthy, or whether those banks may face closures in the future as well \. For each of these covenants, it will be necessary to see if the next steps are carried out, e \.g\., the actual implementation of restructuring plans of the SCBs and the strict enforcement and monitoring of loan classification \. (d) Trade: Pre-Board actions included (i) adopting the ASEAN Free Trade Agreement (AFTA) roadmap on tariff reduction, (ii) allow all registered domestic firms to import most goods directly without a license; (iii) expand the rights of foreign firms to import goods, (iv) enterprises remove quantitative import restrictions on 8 products groups\. The sole second tranche release condition was the removal of quantitative restrictions for clinker and paper \. The ICR does not specify what percentage of imports are included in the product groups where quantitative restrictions have been removed\. Exports have increased, from 47% to 48% of GDP, but it is not clear how the improvement in trade is due to reforms required by ongoing trade negotiations under other trade agreements, versus those supported by the PRSC\. (e) Public Expenditure Management: The covenants were met\. However, both actions, the designation of the State Treasury as the agency responsible for the comprehensive management information system for government expenditures and the publishing of sectoral breakdowns for at least 75% of government spending, are easily reversed, and by themselves do not make major improvements in Public Expenditure Management \. The ICR notes that there is a project underway to support the development of an automated MIS for the Treasury, which should improve implementation of PEM\. 4\. Significant Outcomes/Impacts: Initial indicators have been positive (e\.g\., increased exports and foreign investment; 50,000 new firms; improved banking compliance, equitization /sale/liquidation of more than 400 SOEs, closure of noncompliant banks ), although not enough time has elapsed to measure the full effects of these reforms, nor is it clear how strongly these steps will be supported through future actions \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): As noted in Section 3 above, while loan covenants for this project were largely met, the preliminary nature of a number of the actions may make sustainability difficult \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory While almost all the legal covenants were met, the depth of the reform actions taken was limited\. Institutional Dev \.: Substantial Modest While there was some improvement in laws, regulations, and enabling environment, many of these changes are not yet deeply rooted enough to ascertain if they will have a significant and sustained impact on development \. Sustainability : Highly Likely Non-evaluable Although the Government currently indicates strong support, many of the reforms carried out under the PRSC are preliminary steps (e\.g\., development of restructuring plans, carrying out of audits), or are easily reversible (e\.g\., designation of the State Treasury as the agency responsible for the MIS system for government expenditures)\. Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. NOTE: 7\. Lessons of Broad Applicability: Achieving major reforms across a broad range of areas is difficult, especially in a country where building strong and broad-based supports is difficult and time -consuming\. It may be better to focus on in -depth reforms in one or two areas, rather than achieve initial (and easily reversible) reforms in multiple areas\. 8\. Assessment Recommended? Yes No Why? This PRSC was envisioned as the first of a series of adjustment loans \. In some areas, the first steps of reform have been taken under this project \. It would be useful to see if the follow -up steps are implemented over the course of the next set of adjustment credits \. 9\. Comments on Quality of ICR: The ICR should have included more information, such as that found in the President's Report for the PRSC II, which was relevant to the assessment of the achievements under PRSC I and which would have provided a less sanguine, and in our view, a more balanced view of PRSC I \. For example, it would have been useful to know the extent to which new banking regulations were enforced, the rate of new credit growth to the SOEs, and the pace of ongoing SOE equitizations\.

REVIEW

P039002

 ICRR 10995 Report Number : ICRR10995 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 07/30/2001 PROJ ID : P039002 Appraisal Actual Project Name : Istria Water Supply Project Costs 141\.2 123\.0 US$M ) (US$M) Country : Croatia Loan/ US$M ) 27\.8 Loan /Credit (US$M) 22\.5 Sector (s): Board: WS - Water supply Cofinancing 0 0 (100%) US$M ) (US$M) L/C Number : L3069 Board Approval 89 FY ) (FY) Partners involved : Closing Date 12/31/1995 12/31/2000 Prepared by : Reviewed by : Group Manager : Group : Klas B\. Ringskog Ridley Nelson Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives (1) Eliminate water shortages in the project area; (2) Provide additional water supply capacity needed for the expansion of the tourism industry and growth in domestic and industrial/commercial demand in the project area; (3) Reduce unaccounted water in the Pula Water Works (PWW) distribution network; (4) Protect existing water sources and coastal tourist areas from pollution; and (5) Increase efficiency in the delivery of water supply and sewerage services in the project area \. b\. Components Water Supply and Treatment : (1) A protective zone for the Butoniga reservoir; and (2) the Butoniga water treatment plant (WTP) with an initial capacity of 1,000 l/sec, including a new raw water pumping station and a treated water pumping station \. Water Transmission and Storage : (3) A 0\.8 km raw water transmission line from the Butoniga reservoir to the Butoniga WTP and a 11\.2 km treated water transmission line from the WTP to Beram; (4) A 46 km treated water transmission line from Beram to Loborika with 32\.7 km of branching trunk main connecting the communities of Rovinij, Pazin and Pula; (5) Distribution storage totalling 19,000 m3; and (6) Telemetering and controls for system operation \. nstitutional Strengthening of the Butoniga, Istrian and Pula Water Works (BWW,IWW,PWW, respectively ): Institutional (6) Technical assistance to PWW to reduce unaccounted water; (7) A study of the feasibility of combining IWW and PWW, and the operation of the Butoniga water supply system; (8) A study of IWW's and PWW's tariff structures; (9) A sewerage master plan for Central Istria; (10) Operational and maintenance equipment for the Butoniga water supply system, and instrumentation for water loss control in the Pula water distribution system; and (11) Training courses and materials for the staff of IWW, PWW and BWW \. Sewerage : (12) Construction of sewers, collectors, pumping station rehabilitation and replacement, and rehabilitation/construction of wastewater treatment plants in six communities in Croatia \. c\. Comments on Project Cost, Financing and Dates The breakup of the Former Socialist Republic of Yugoslavia and the associated war from 1991-1995 delayed project closing by five years and delayed the completion of important components \. Compared to the appraisal estimate of US$ 141\.2 million the latest estimate of total project costs is US$ 126\.6 million, of which the Bank financed 20% and the national and local governments 80%\. \. 3\. Achievement of Relevant Objectives: (1) Water shortages in the area were eliminated but most of all because of the collapse of demand that was 55% of appraisal estimates for the year 2000; (2) Water supply capacity has not yet been added since the Butoniga water supply system is not expected to be completed until December 2001 at the earliest; (3) The percentage unaccounted water in the PWW was not reduced but rose slightly to 32% compared to 29% in 1989; (4) Judging by the results of water sampling the project achieved its objective of protecting existing water sources and tourist areas from pollution; and (5)) Judging by the percentage of unaccounted water the efficiency of delivery of water supply and sewerage services did not improve in the project area \. 4\. Significant Outcomes/Impacts: No noteworthy positive outcomes although the breakup of the FSRY, the war, and the highly negative impact of the local communities are all extenuating circumstances \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The Butoniga WTP is still not completed due to serious disagreements with the turn -key contractor whose contract was signed in 1995 to ensure a speedy completion of the WTP \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Unsatisfactory Three of five objectives were not achieved\. The recalculated economic rate-of-return is only 2% compared to the appraisal estimate of 16%, due to the sharp drop in consumption and added capacity remaining idle\. Institutional Dev \.: Modest Modest Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory The "unsatisfactory" outcome rating should not be blamed on either the Bank, or the Borrower since neither could have been foreseen the breakup of FSRY, the depth of the economic recession and particularly the war which made project implementation very difficult\. Borrower Perf \.: Satisfactory Satisfactory The "unsatisfactory" outcome rating should not be blamed on either the Bank, or the Borrower since neither could have been foreseen the breakup of FSRY, the depth of the economic recession and particularly the war which made project implementation very difficult\. Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: (1) Turnkey contracts are complicated to design and supervise \. In this case, the contract went seriously wrong; (2) Demand projections and project design always need to incorporate flexibility, and particularly for transition economies; and (3) For the Bank to be able to influence the implementation of a given component, it should finance a share of costs, sufficient to provide leverage \. In this case, the Bank financed nil of the sewerage and treatment works, yet these had been included in the project\. 8\. Assessment Recommended? Yes No Why? (1) To learn what went wrong with the turnkey contract of the Butoniga water treatment plant; (2) To learn if demand projections, project design and implementation could have incorporated more flexibility; and (3) To learn how the Bank could possibly influence the implementation of components (such as the sewerage works under this particular project) which it does not finance itself \. 9\. Comments on Quality of ICR: The ICR provides a wealth of data and candid analysis which could facilitate further analysis \.

REVIEW

P050717

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 18649 IMPLEMENTATION COMPLETION REPORT URUGUAY CONTRACTUAL SAVINGS STRUCTURAL ADJUSTMENT LOAN Loan No\. 4280-UR December 3, 1998 Finance\. Private Sector & Infrastructure (FPSI) Country Management Unit 7 Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit Uruguayan Peso US$1\.00 UR$10 (October 1998) FISCAL YEAR July I to June 30 ABBREVIATIONS AND ACRONYMS AFAP Administradora de Fondos de Ahorro y Prevision (Pension Fund Administrator) AFPs Administradoras de Fondos de Pensiones (Chilean Pension Fund Administrators) BCU Banco Central del Uruguay (Central Bank of Uruguay) BPS Banco de Prevision Social (Public Pension Administration Agency) BROU Banco de la Repuiblica Oriental del Uruguay (State Bank of Uruguay) CAS Country Assistance Strategy CSAL Contractual Savings Structural Adjustment Loan DB Defined Benefit Pension Scheme DC Defined Contribution Pension Scheme ESW Economic Sector Work GDP Gross Domestic Product IDB Inter-American Development Bank IMF International Monetary Fund MERCOSUR Mercado del Cono Sur (Common Market of the Southern Cone) PAYG Pay-as-you-go Pension System SAL Structural Adjustment Loan SECAL Sector Adjustment Loan URs Wage adjusted pesos Vice President: Mr\. Shahid Javed Burki Director LCC7C: Ms\. Myrna Alexander Director LCSFP: Mr\. Danny Leipziger Task Manager: Ms\. Mariluz Cortes  FOR OFFICIAL USE ONLY TABLE OF CONTENTS page number Preface ii Evaluation Sumnmary iv Part One Contractual Savings Structural Adjustment Implementation Assessment I\. Background\. I II\. Program Objectives\. 2 III\. Achievement of Program Objectives\. 3 IV\. Major Factors Affecting the Program\. 8 V\. Program Sustainability\. 9 VI\. Bank Performance \.11 VII\. Borrower Performance \.11 VIII\. Assessment of Outcome \.12 IX\. Future Operations \.12 X\. Lessons Learned \.13 Part Two Statistical Annex of ICR Tables \.15 Appendixes A\. Evidence of Compliance with Policy Actions B\. Evolution of Aggregate AFAP Industry Portfolio C\. ICR Mission's Aide-memoire D\. Borrower Contribution to the ICR (English & Spanish) E\. Map 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\.  ii\. IMPLEMENTATION COMPLETION REPORT URUGUAY CONT]RACTUAL SAVINGS STRUCTURAL ADJUSTMENT PROGRAM (Loan No\. 4280-UR) Preface This is the Implementation Completion Report (ICR) for the Contractual Savings Structural Adjustment Program in Uruguay, for which Loan 4280-UR in the amount of US$100 million was approved on February 3, 1998 and made effective on May 26, 1998\. The single tranche loan was fully disbursed upon effectiveness, and closed on June 30, 1998\. The ICR\. was authored by Mr\. Truman Packard, Economist (Consultant), under the supervision of Ms\. Mariluz Cortes, Senior Operations Officer (LCSFP) of the Latin America and Caribbean Regilon, and was reviewed by Ms\. Maria Victoria Lister, Quality Assurance Officer (LCSFP)\. The borrower provided comments that have been incorporated to the ICR and are reproduced unedited in an appendix to the report\. Preparation of this ICR was begun during the Bank's completion mission to Montevideo, August 31 - September 4, 1998\. The report is based on material in the project file, interviews with key participants in the loan's preparation, the implementation team's counterparts, and the findings of earlier Bank studies of the pension system and financial sector in Uruguay\.   IV\. IMPLEMENTATION COMPLETION REPORT URUGUAY CONTRACTUAL SAVINGS STRUCTURAL ADJUSTMENT PROGRAM Loan No\. 4280-UR Evaluation Summary Introduction 1\. Of the programs in Uruguay's historically broad welfare system, its public pension scheme - the oldest mandatory pension system in the region - has been the most demanding on public resources\. Rising life expectancy, a low retirement age, overly generous benefits, and widespread evasion, inflated the country's implicit pension debt to 300 percent of GDP - one of the highest in the world, and a clear indicator of the urgent need for reform\. 2\. After nearly thirteen years of intense public debate a new Social Security Reform Law was passed in September 1995 that introduced a multi-pillar pension structure, by reducing and restructuring the public pay-as-you-go (PAYG) system, and adding a complementary regime of independently managed, individually capitalized accounts\. The reform's central objective was to establish a more financially viable system of social security, and in the long run, to reduce the Government's future pension liability\. The implementation of Uruguay's pension reform was supported with an adjustment loan from the IDB of US$150 million\. The new multi-pillar system came into effect in April 1996\. 3\. Although beneficial to the overall economy and to the Government's fiscal stance in the long term, the reform incurred significant short term costs and losses to the PAYG system\. In light of the initial high costs, the most important challenge to the Government has been to maintain its medium-term strategy for restructuring the national pension system, while avoiding a reversal of the progress it has made in reducing the country's consolidated fiscal deficit\. The Contractual Savings Structural Adjustment Loan (CSAL), for US$100 million, has supported the Government's efforts to strengthen the second-pillar capitalization regime, while easing the fiscal impact of thie transition\. The lending instrument chosen for the CSAL to support the Government's medium-term reform agenda, was a single-tranche adjustment operation (STO) - the first in a proposed series of such operations in Uruguay\. Program Objectives 4\. Based on an medium-term strategy agreed between the Government and the Bank, this loan was the first iin a planned series of operations to support Uruguay's pension reform program, and complementary capital market reforms\. The long-term aim of the program is to maximize the pension benefits provided by the capitalization regime by; (a) increasing the supply of high return marketable securities to improve the financial performance of theAdministradoras de Fondos de Ahorro Previsional (AFAPs); (b) spurring competition and creating incentives for the fund managers to reduce their operating costs; and (c) stimulating development of the private capital markets\. 5\. The CSAL's specific objectives were to support measures taken by the Government to: (i) liberalize the investment regime governing the AFAPs to allow greater investment in private  V\. securities; (ii) increase the availability of private securities to match the growth of pension funds; and (iii) create incentives to improve cost-consciousness and transparency in disclosure among the AFAPs\. These objectives are seen as essential steps in an incremental reform process that will lead to greater returns on the investment of retirement savings, cuts indistortionary pay-roll taxes, reductions in evasion of pension contributions, and accelerated development of the private capital market\. Implementation Experience 6\. When the new capitalization regime and the AFAP industry came into full operation, investment regulation was heavily biased towards government securities\. Initially, the fund managers were obliged to invest at least eighty percent of retirement savings in government issues\. With the objective of relaxing a potential constraint on the AFAPs' investment activity, and of stimulating financial sector development, the Bank and the Borrower agreed to take advantage of a provision in the 1995 Social Security Law allowing for yearly reductions of five to ten percent in the minimum required AFAP investment in government instruments\. An important condition of the loan was the acceleration of these reductions\. As a condition of loan effectiveness, the Borrower issued an Executive Decree on March 4, 1998, providing for scheduled reductions that, by April 1999, will have lowered the portion of required AFAP investment in government instruments to fifty-five percent\. 7\. However, the calculation of the AFAPs' required reserves originally stipulated excluded their holdings of government bonds, making investment in public debt attractive\. The Borrower's commitment to gradually lower the minimum required investment in government securities would have little impact if not accompanied by changes in how required reserves were calculated\. As a condition of Board presentation, a draft bill of law introducing changes in the calculation of the AFAPs' reserves to include government securities, was submitted to Parliament in December 1997\. The bill is currently being deliberated by a senatorial commission, and the authorities expect it to be passed in late 1998 or early 1999\. 8\. In order to widen the supply and availability of investment instruments to keep pace with the rapid accumulation of retirement funds in the AFAP system, the authorities have initiated changes in financial regulation with the support of the CSAL\. The authorities recognized that the development of a domestic risk-rating industry would be critical to AFAP investment\. Authorization of at least one risk-rating agency became a condition of Board presentation\. Since the loan was disbursed five risk-rating agencies have begun operating in Uruguay\. Of the five, three are international risk-qualifiers\. To date, four private issues have been rated; two by domestic private banks, and two by private agro-industries\. 9\. Additionally, the Borrower issued a decree in December 1997, allowing AFAPs to invest in bonds issued by public enterprises and by private companies holding public concessions, to finance large infrastructure projects\. Although the decree is an important step, financial authorities have identified a number of clauses that could introduce distortions to the market for the proposed infrastructure bonds\. A second decree is being prepared to refine the guidelines established in the first, and is expected to be issued in late 1998 or early 1999\. 10\. The special pension bonds introduced with the 1996 reform specifically for the AFAPs, were originally issued in URs at a rate of interest set by the BCU, and forbidden to other investors\. In mid 1997, Parliament passed a law allowing the BCU to issue the bonds in a wider range of currencies at market rates\. Further, the law permits all actors in the financial sector to transact these instruments\. Since the law's passage, there have been two issues of the new bonds\.  vi\. The opening of the pension bond market has made the instruments more attractive to the AFAPs, and allowed a secondary market in the pension bonds to develop\. 11\. In response to the investment needs of the AFAPs, the BCU has modified its debt issuing policies to prov ide a wider variety of public bonds\. These include: (i) bonds with fixed rates of interest, (ii) issues in dollars at fixed rates with longer maturities, (iii) bonds in pesos with higher returns, (iv) instruments issued on the international market offering greater liquidity, and (v) the proposed fixed-iincome instruments indexed for inflation\. Authorities hope that theBCU's efforts to cater to AFAP investment demand will complement and not crowd-out the development of private instruments\. 12\. Within the framework of the CSAL, financial authorities have been fielding two critical legislative initiatives that would allow the introduction of new asset classes onto the financial arena\. In Septemrber 1997, as a condition of Board presentation, the authorities submitted a draft Securitization Law to Parliament that would permit the packaging of assets such as mortgages and credit card receivables into tradable securities\. Of the bill's fifty separate articles, only ten have been discussed and accepted\. Financial authorities have held weekly discussions with the Commission since April 1998 to explain and promote the measure, but do not expect final passage until laite 1998 or early 1999\. A more elaborate Trust Law that would expand the range of permissible securitization of assets even further, has also been drafted\. The passage of the Trust Law and its insertion into the broader regulatory framework will require controversial modifications of the country's Civil Code\. The authorities prefer to wait until the Securitization Law is passed to introduce the farther-reaching and more controversial draft Trust Law to public debate\. 13\. In the period since its inception, the new capitalization regime in Uruguay exhibited some of the common structural limitations that have constrained the efficiency of fund managers in other Latin Amrerican countries\. A number of measures were taken by the Government, with support of the C'SAL, to try and correct these limitations to provide incentives for efficiency gains and greater transparency\. As a condition of Board presentation, the BCU issued regulations requiring the use of market mechanisms for AFAP investment in securities issued by related companies\. The requirement that all AFAP investment be conducted through formal markets is the first significant step toward introducing transparency to financial transactions between the fund managers and their related companies\. 14\. Until recently the AFAPs were only required to report gross returns\. This less-than-full disclosure of performance kept affiliates from making a fully informed choice between fund managers, and opened the new system to political attack\. The Bank assisted the Government in setting a formula to calculate returns net of commissions that reflect the AFAPs' expected performance in the long-run\. The new formula improves the information received by workers on the relative performance of their fund managers, while reducing the likelihood of myopic reaction against the new system on the part of affiliates and opposition leaders in Parliament\. 15\. Although not included as a condition of the CSAL, the authorities decided to modify the structure of the 'fondos de fluctuaci6n"\. In Uruguay the mechanism had encouraged herd- behavior in investment allocation, and dampened competition between the fund managers by disguising their' true relative performance\. In July 1997, authorities issued regulations modifying the thresholds for deposit into and withdrawal from the fluctuations funds, widening the band around the industry's average return\. They hope that this modification will induce greater competition based on investment performance\.  vii\. Performance 16\. Borrower performance in the identification, preparation and implementation of the loan, was highly satisfactory\. The contribution made by the Bank's counterparts to the preparation and execution of the CSAL was considerable, given the enormous demands on their time\. Furthermore, the Bank team benefited from the close proximity of their counterparts to decision- makers in the administration\. The Bank was able to count on a small, core team of financial and regulatory professionals with the ability to understand and debate complex ideas and proposals, and arrive at a program of politically viable reforms\. 17\. Bank performance was also highly satisfactory\. The Bank responded in a timely fashion to the Government's request for financial and technical support in meeting the fiscal costs of pension reform, improving the new multi-pillar system, and advancing complementary capital market reforms to increase the options for AFAP investment\. In addition to specific technical assistance, that included a review of the Government's estimates of the fiscal costs of transition and the formula for calculating the projected net-returns of the fund managers, the Bank was effective in helping the Borrower to articulate a medium-term reform strategy that would ensure the financial viability of the national pension system\. Program Sustainability and Assessment of Outcome 18\. The sustainability of Uruguay's multi-pillar pension system and that of the reforms supported by the first CSAL are subject to a number of risks, but appear likely\. The sustainability of the new system can only be judged in the long run when workers in the transition generation begin to draw an adequate retirement income from their AFAP accounts\. However, a more immediate test of the Government's pension reform program and the sustainability of the progress it has achieved thus far is fast approaching with the onset of primary and general elections\. Opposition parties have already voiced their objection to the 1995 Social Security Reform Law\. However, Uruguayan authorities and the fund managers are quick to point out that workers have already participated in a defacto referendum on the Government's reform\. The extent of worker affiliation with the AFAP regime in the two years since its inception, is an endorsement of the new system that opposition parties can ill afford to ignore\. The Government now faces the challenge of holding the course of its reform efforts through the election season ahead, and avoiding the temptation to back-track on the progress it has achieved\. Having said this, policy makers should keep abreast of developments in the ongoing pensions debate, pay close attention to regulatory revisions being considered in other countries, and remain open to modifications in the structure of the AFAP system should further changes be theoretically and empirically justified\. 19\. Overall, the outcome of the operation is considered highly satisfactory\. The preliminary analysis of indicators in this report concludes that, despite current delays in Parliament, the Borrower has complied fully with the conditions of the first contractual savings adjustment operation, and that Uruguay's medium term program of pension reform is headed on an appropriate course\. Lessons Learned 20\. The main conclusions and principal lessons learned in the implementation of the first Contractual Savings Structural Adjustment Loan are: (i) The Value of Demonstrating Strong Technical Capacity\. In preparing complex sector adjustment operations, the Bank should lead with it's comparative advantage - bringing to bear  Viii\. strong technical capacity, honed by practical cross-country experience\. The Borrower must be confident that its dialogue with the Bank will be of added value to its own efforts\. The Bank team was able offer its counterparts credible alternatives to a simple replication of the Chilean pension model in Uruguay, and to suggest how the model could be improved to best meet the client's long-term goal of a financially viable, yet equitable, national pension system\. (ii) The Need for Sensitivity to the Political Economy of Reform\. The political economy surrounding the formulation of labor policy has consistently constrained the reform agenda of even the most resolute of governments\. Social security reform is particularly treacherous, and especially so at the onset of an election year\. Political factors and the legislative needs of the client need to be understood at entry, and should be included in the Bank's dialogue with the client\. In the case of the CSAL in Uruguay, the Bank's willingness to support a more modest program of imaprovements to the reformed pension system will allow the institution to have a greater influence on the formulation of future reforms\. (iii) The Importance of Selecting an Appropriate Instrument\. Rather than risk delays and failure in the achievement of the program's long term aims by locking the client into an overly ambitions and politically sensitive policy agenda, the Bank team chose to negotiate a medium- term reform strategy, and to allocate its reform goals over a series of single-tranche adjustment operations (STOs) - a lending vehicle design by the Bank specifically to protect the integrity of lengthy adjustment operations from significant political shifts in borrowing countries\. The choice of the STO over the traditional multiple-tranche option provided the Bank with greater agility in the disbursement of the CSAL, and will enhance the institution's efficiency and leverage in establishing the conditions of the proposed second loan\.  Uruguay: Contractual Savings Structural Adjustment Loan Page i of 21 PART ONE: PROJECT IMPLEMENTATION ASSESSMENT I\. BACKGROUND 1\. Uruguay's economy is undergoing a steady recovery from the effects of the 1994 - 1995 financial crisis in Latin America\. Interest rate hikes in the wake of the "Tequila Effect" and the recessions thal: followed, lowered demand for the country's exports among its partners in MERCOSUR, depressed economic growth and raised levels of unemployment\. The budgetary demands of an extensive system of social benefits combined with an overall decline in tax revenue, caused the country's fiscal deficit to swell as high as 3\.1 percent of GDP in 1994\. The weight of the fiscal burden provided the new administration that took office in 1995 with sufficient resolve to undertake a difficult program of austerity measures and economic reforms\. As a result of these measures, the Government has achieved a consolidated public sector deficit of 1\.7 percent of GDP in the past two years, and while facing repercussions from the recent Russian debt default and currency devaluation, expects to improve on this result with a projected deficit of I percent of GDP in 1998\. 2\. Of the programs in Uruguay's historically broad welfare system, its public pension scheme - the oldest mandatory pension system in the region' - has been the most demanding on public resources, placing it at the top of the Government's reform agenda\. Since the mid 1960's, the economy has struggled to sustain support ratios as low as four active contributors for a single pensioner\. Rising life expectancy, a low retirement age, overly generous benefits, and widespread evasion, inflateid the country's implicit pension debt to 300 percent of GDP - one of the highest in the world, and zan indicator of the urgent need for reform\. 3\. After nearly thirteen years of intense public debate on the need for pension reform and the direction the reform should take, a new Social Security Reform Law was passed in September 1995 that introdluced a multi-pillar framework, by reducing and restructuring the public pay-as- you-go (PAYG) system, and adding a complementary regime of independently managed, individually capitalized accounts\. The reform's central objective was to establish a more financially viable system of social security, and in the long run, to reduce the Government's future pension liability\. The implementation of Uruguay's pension reform was supported with an adjustment loan from the IDB of US$150 million, and the new multi-pillar system came into effect in April 1 99672 4\. Under the reform, switching rules and transition arrangements were established that will eventually shift the bulk of pensions liability away from the public pillar onto the second-pillar, capitalization nrgime of individual accounts managed by independentAdministradoras de Fondos de Ahorro Previsional (AFAPs)\. Although beneficial to the overall economy and to the Government's iFiscal stance in the long term, this transition incurred significant short term costs to the Banco de Previsi6n Social (BPS) and losses to the PAYG system, as more workers began to contribute mainly into their individual accounts\. The 1995 reform legislation establishes both income and age parameters to define that segment of the population for whom immediate participation in the capitalization regime would be mandatory' However, voluntary worker ' A brief history of the social security system in Uruguay, and comment on the new system can be found in, Queisser, M\., 1998, The Second Generation Pension Reforms in Latin America, OECD Development Centre Studies 2 Due to length constraints, the structure of the new Uruguayan pension system will not be provided in this report\. For details on the reformed system - contribution and replacement rates, averaging and vesting periods - see President's Report No\. P7190-UR Affiliation with an AFAP was optional for workers over 40 years of age\. Workers under forty at the time of the reform, and new entrants to the labor force earning between five- and fifteen-thousand pesos per month (in May 1995 pesos), are required to contribute 15% of their income above five thousand pesos, into an individual AFAP account\.  Implementation Completion Report Page 2 of2l affiliation to the AFAP system in the two years since the reform has far surpassed Government expectations, and has greatly increased the short-term cost of the transition\. While financial authorities welcomed the unexpected level of enthusiasm for the second-pillar regime, they were forced to take urgent measures to finance ballooning short-term transition costs\. 5\. In light of the initial high costs, the most important challenge to the Government has been to continue following its medium-termn strategy for restructuring the national pension system, while avoiding a reversal of the progress it has made in reducing the consolidated fiscal deficit\. Concerned with the increased costs of reform, the Government approached the Bank in early 1997 to request its assistance\. The Contractual Savings Structural Adjustment Loan (CSAL), for US$100 million, has supported the Government's efforts to strengthen the second-pillar capitalization regime, while easing the fiscal impact of the transition\. The lending instrument chosen for the CSAL to support the Government's medium-term reform agenda, was a single- tranche adjustment operation (STO) - the first in a proposed series of such operations in Uruguay\. 11\. PROGRAM OBJECTIVES 6\. The number of workers that voluntarily chose the new capitalization regime in Uruguay far surpassed official expectations, increasing the cost of pension reform in terms of lost revenue to the PAYG system administered by BPS, and rapidly accumulating retirement assets under AFAP management\. Figure I shows the evolution of worker affiliation with the AFAP regime in the last year alone, and the volume of transfers from BPS to the fund managers\. o500\. 200 aTransfer \.0-Affiliates 180 ; 480 l 160 0~~~~~~~~~~~~~~~\.4 46012 -10 440 100o E ~~~~~~~~~~~~~~~~~0 U\. 420 60 4 060 40 400 20 0 &0~~~~~~~~~~~~~ 7\. The original reform legislation required the fund managers to invest the bulk of retirement assets in low-yielding government securities\. Shallow capital markets, and a lack of investment opportunities in Uruguay, left the fund managers with few alternatives\. In addition to covering a portion of the additional short-run cost of the reform, the CSAL supported a number of important modifications to the new system introduced in 1996, and regulatory measures to increase the set of investment opportunities available to the capitalization regime\.  Uruguay: Contractual Savings Structural Adjustment Loan Page 3 of 21 8\. Basecl on an medium-term strategy agreed between the Government and the Bank, this loan was the fiirst in a planned series of operations to support Uruguay's pension reform program, and complementary capital market reforms\. The long-term aim of the program is to maximize the pension benefits provided by the capitalization regime by; (a) increasing the supply of high return marketable securities to improve the financial performance of the AFAPs; (b) spurring competition and creating incentives for the fund managers to reduce their operating costs; and (c) stimulating de velopment of the private capital markets\. 9\. The CSAL's specific objectives were to support measures taken by the Government to: (i) liberalize the investment regime governing the AFAPs to allow greater investment in private securities; (ii) increase the availability of private securities to match the growth of pension funds; and (iii) create incentives to improve cost-consciousness and transparency in disclosure among the AFAPs\. These objectives are seen as essential steps in an incremental reform process that will lead to greater returns on the investment of retirement savings, cuts in distortionary pay-roll taxes, reductions in evasion of pension contributions, and accelerated development of the private capital market\. 10\. The loan's objectives were clear and in the context of a medium-term framework, were appropriately designed for a single tranche operation\. The objectives were consistent with the Government's policy agenda, as articulated in the Letter of Development Policy, dated December 10, 1997\. The loan's objectives where in line with the Bank's Country Assistance Strategy (CAS) for Uruguay, issued on June 25, 1997, which sets the establishment of a financially sustainable social security system, the further reduction of distortions to the economy imposed by the PAYG system, efficiency gains though decreases in hiring costs, and the expansion of the country's private financial markets, as priorities in the institution's lending program\. III\. ACHIEVEMENT OF PROGRAM OBJECTIVES 11\. An in-depth analysis of the design and recent operation of the new pension system in Uruguay, as well as of the Government's medium-term strategy for pension refonn, are provided in the President's Report No\. P7190-UR\. As is the case in single-tranche adjustment lending, most of the objectives of the CSAL were met prior to the loan's presentation to the Board\. These included changes to existing financial regulation to allow greater flexibility of investment, and to guidelines governing the activities of the AFAPs\. Details on preparatory measures taken by the Bank and Borrower, and the rationale behind the conditions of Board presentation, are also contained in the President's Report\. Evidence of the Borrower's compliance with all of the loan conditions is provided in Appendix A: Evidence of Compliance with Policy Actions of this report\. 12\. Because the objectives of the CSAL are part of a phased reform process, it is too early to fully assess the progress achieved toward meeting the Government's long term aims\. However, an analysis of current indicators as to whether these long term goals are likely to be achieved is vital to the Bank's, continuing dialogue with the Borrower, and as a guide to future Bank support of deeper reforml of Uruguay's social security system\. The key indicators of progress achieved under the Government's medium-term strategy are presented below\. Readers are encouraged to refer to Annex B: Evolution of Aggregate AFAP Industry Portfolio 1996 - June 1998, of this report for data on AFAP investment before and after implementation of the CSAL (i) Increased Flexibility in the Investment Regime 13\. When the new AFAP system came into full operation in 1996, regulation governing the investment of retirement funds was heavily biased towards government securities\. Initially, the fund managers were obliged to invest at least eighty percent of retirement savings in government issues\. Althiough few financial instruments existed in Uruguay at the time of the reform, these  Implementation Completion Report Page 4 of 21 tight restrictions on AFAP investment were driven more by the Government's concern for financing the costs of transition, than by capital market considerations\. An important objective of the CSAL was to liberalize the investment regime governing the AFAPs, to allow greater investment in private securities ia\. Reductions in Minimum Investment in Government Issues\. 14\. With the objective of relaxing a potential constraint on the AFAPs investment activity, and of stimulating financial sector development, the Bank and the Borrower agreed to take advantage of a provision in the 1995 Social Security Law which allows for yearly reductions of five to ten percent in the minimum required AFAP investment in government instruments\. An important condition of the loan was the considerable acceleration of these reductions\. In April 1997, one year after the reform's implementation, the minimum requirement had been lowered to seventy-five percent of assets under management\. As a condition of loan effectiveness, the Borrower issued an Executive Decree (No\. 57/98) on March 4, 1998, providing for further scheduled reductions that, by April 1999, will have lowered the portion of required AFAP investment in government instruments to fifty-five percent\. Lb\. Changes in Calculation of Required Reserves\. 15\. The AFAPs are obliged to provide a minimum return to their affiliates\. To cover the contingent liability this guarantee presents, current regulation requires that the fund managers hold capital reserves valued at two percent of fund assets\. However, the original calculation of reserves excluded their holdings of government bonds, making investment in low-yielding public debt attractive\. Bank experts pointed out that the Borrower's commitment to gradually lower the minimum required investment in government securities would have little impact on the asset allocation decisions of the AFAPs, if not accompanied by changes in how these required reserves are calculated\. As a condition of Board presentation, a draft bill of law introducing changes in the calculation of the AFAPs' reserves to include government securities, was submitted to Parliament in December 1997\. The administration made modifications to the bill in June 1998\. The bill is currently being deliberated by a senatorial commission, and authorities expect it to be passed in late 1998 or early 1999\.4 (ii) Greater Supply of Financial Instruments Available for AFAP Investment 16\. Financial authorities have taken several measures intended to widen the supply and availability of investment instruments to keep pace with the rapid accumulation of retirement funds in the AFAP system\. Probably the most important indicator of progress achieved towards meeting Government's long-term objective of a strong and dynamic capitalization regime, is the reaction of Uruguay's nascent capital market to changes in financial regulation conducted with the support of the CSAL\. iLa\. Risk Rating Requirement and Rating Industry 17\. During preparation of the loan, the Government approved a decree allowing the AFAP system's regulator - a branch of the BCU - to require that the fund managers invest only in risk- rated instruments\. The authorities recognized that the development of a domestic risk-rating industry would be critical to AFAP investment in private securities\. Authorization of at least one risk-rating agency became a condition of Board presentation\. 4 As is detailed in Section Ill\.(iii) of this report, much of the Government's legislative agenda prepared or submitted to Parliament as a condition of the CSAL, has remained in the deliberation stage\. Although the Borrower is technically in compliance with the conditions of the loan, progress toward meeting the long- term objectives faces delay\. See Section IV of this ICR for explanation of delays provided by the authorities\.  Uruguay: Contractual Savings Structural Adjustment Loan Page 5 of 21 18\. In recent years the market for privately issued debt has grown considerably in Uruguay\. Commercial culture is such that debt- rather than share-financing is more prevalent in the private sector\. In January 1998 the debt market suffered its first major crisis, as one of the country's largest private industries, Granja Moro defaulted on its obligations\. The impact of the default highlighted the dangers of traditionally opaque commercial and financial transactions, and catalyzed publiic support for greater transparency and disclosure on the part of private companies\. Fortunately, because of restrictions that they invest only in rated instruments, no AFAP suffered from the defau It\. However, the incident underscored the need for the development of a risk-rating industry in Uruguay\. 19\. Since the loan was disbursed five risk-rating agencies have begun operating in Uruguay\. Of the five, three are international risk-qualifiers\. To date, four private issues have been rated; two by domestic private banks, and two by private agro-industries\. It is important to note that within the various constraints of the current regime, the fund managers have optimized their investment allocations in the private instruments that are currently available, indicating demand for a greater supply of private issues\. iib\. Investment in Infrastructure Bonds 21\. The Borrower issued an Executive Decree in December 1997, allowing AFAPs to invest in bonds issued by public enterprises and by private companies holding public concessions, to finance large infrastructure projects\. Although the decree is an important step, financial authorities have identified a number of clauses that could introduce distortions to the market for the proposed infrastructure bonds\.5 A second Executive Decree is being prepared to refine the guidelines established in the first, and is expected to be issued in latel998 or early 1999\. 22\. The AFAP industry has indicated its demand for the new instruments, and is eager for the required regulation to be put in place\. The AFAPs have tried to accelerate the regulatory process by organizing events to press the need for the new instruments among financial authorities and parliamentary figures\. Further, the fund managers have identified existing regulatory obstacles to the timely availability of the new instruments and are taking actions to have these removed6 iic\. Increasing the Marketfor Pension Bonds 23\. The special government securities introduced with the 1996 reform specifically for the AFAPs, were originally issued in URs at a rate of interest set by the BCU, and forbidden to other investors\. Although the average AFAP portfolio allocation in pension bonds was 57\.5% in June 1996, the instrument's features and restricted market made the bonds illiquid and unattractive\. In mid 1997, Parliament passed a law allowing the BCU to issue pension bonds in a wider range of currencies at market rates, and expanding the secondary market for the special bonds\. Further, the law permits all actors in the financial sector to transact these instruments\. 24\. Since the law's passage, there have been two issues of the new bonds, and the opening of the pension bond market has made the instruments more attractive to the AFAPs\. A secondary 5 Such as the requirement that the BCU rate instruments for certain infrastructure projects - a function best left to the new rating agencies\. 6 AFAP investment officers report that the current regime's 3% portfolio limit on investment in the issues of a single emitter, has acted as a disincentive to private companies bidding for public concessions - except in the case of AFAP Republica the largest AFAP with 55\.9% of retirement assets under management in June 1998, the 3% constraint seriously limits what private companies can expect to receive in future AFAP investment\. This disincentive has slowed the process of private concessions and delayed the supply of the new instruments\. The AFAPs intend to lobby authorities for the constraint to be relaxed\.  Implementation Completion Report Page 6 of 21 market in the pension bonds has begun to develop\. Insurance companies in particular have sought out the instruments which allow them to better match their assets with their long-run liabilities\. Since the law came into effect, the AFAPs have increased their portfolio allocation in pension bonds only marginally\. However, the relative allocation should be considered against the increased supply of additional public and private instruments\. iid Diversifying the Supply of Public Instruments 25\. When the AFAPs began to operate, the BCU underestimated the relative dominance of public bonds on Uruguay's capital market\. A restrictive investment regime and the shortage of alternative instruments, caused a bubble in the price of public issues to develop\. The BCU has responded to the investment demands of the AFAPs by modifying its debt issuing policies to provide a wider variety of public bonds tailored to the needs of the fund managers\. These include: (i) bonds with fixed rates of interest, (ii) issues in dollars at fixed rates with longer maturities, (iii) bonds in pesos with higher returns, (iv) instruments issued on the international market offering greater liquidity, and (v) the proposed fixed-income instruments indexed for inflation\. The BCU's efforts to cater to AFAP investment needs will avoid future price bubbles, and hopefully complement, and not crowd-out the development of private instruments\. iie\. AdditionalCapitalMarketRegulation\. 26\. Apart from the legislative initiatives specified as conditions of the CSAL, financial authorities have taken additional measures critical to the development of Uruguay's capital market\. These include regulation requiring greater disclosure of the activities of private commercial groups to the capital markets, the enactment of a public register of private companies, disclosure of the identity and contact information of private executive and financial directors, and the creation of new sanctions against individuals accused of financial irregularities\. These measures are intended to minimize systemic risks to investment of retirement assets, as well as promote greater confidence among investors\. (iii) Pending Legislative Agenda: 27\. In the two years since the inception of the AFAP system, a major source of private investment instruments has remained untapped\. Uruguay's Civil Code prevents the securitization of mortgage loans and other assets\. Financial authorities have been fielding two critical legislative initiatives that would allow the introduction of new asset classes onto the financial arena\. iiia\. Securitization Law 28\. In September 1997, as a condition of Board presentation, the authorities submitted a draft Securitization Law to Parliament that would permit the packaging of assets such as mortgages and credit card receivables into tradable securities\. The legislation was originally written with technical assistance under a previous Bank loan, and finalized during the preparation of the CSAL\. The bill is currently being deliberated by a Senatorial Commission\. Of the bill's fifty separate articles, only ten have been discussed and accepted\. Financial authorities have held weekly discussions with the Commission since April 1998 to explain and promote the measure, but do not expect final passage until late 1998 or early 1999\. iib\. TrustLaw 29\. As a condition of the CSAL, the Borrower issued a Ministerial Resolution appointing a working group within the Finance Ministry to establish the legal framework of a Trust Law\. The law will considerably expand the set of permissible securitization operations proposed in the draft Securitization Law, and thus further increase the supply of private instruments\. The working group has been active since April 1998, and has finished a draft law to submit to Parliament\.  Uruguay: Contractual Savings Structural Adjustment Loan Page 7 of 21 30\. The passage of the Trust Law through the legislature and its insertion into the broader regulatory framework will require controversial modifications of the country's Civil Code\. The prevailing legal framework in Uruguay translates what in many countries would be a purely financial issue, into a matter of civil law\. Financial authorities prefer to wait until the Securitization Law is passed to introduce the farther-reaching and more controversial draft Trust Law to public debate\. (iv) The AFAP Industry: Incentives to Increase Efficiency and Transparency 31\. In the period since its inception, the new capitalization regime in Uruguay exhibited some of the commlon structural limitations that have constrained the efficiency of fund managers in similar pension systems in other Latin American countries\. A number of measures were taken by the Government, with support of the CSAL, to try and correct these limitations, to provide the incentives for efficiency gains and greater transparency, and to increase the potential returns of the system to the affiliated workers\. iiia\. Transactions with Related Companies 32\. In Uruguay transactions between related financial and commercial groups are common as a strategy fir minimizing risk and uncertainty\. However, related-party transacting is often informal ancl opaque, and can lead to conflicts of interest that could erode the credibility and popular support for the newly formed pension system\. Bank supported pension reform programs have consistently pursued regulatory measures to minimize and formalize related-party transacting in the financial sector\. 33\. As a condition of Board presentation, the BCU issued regulations requiring the use of market mechanisms for AFAP investment in securities issued by related companies\. The requirement that all AFAP investment be conducted through formal markets is the first significant step toward introducing transparency to financial transactions between the fund managers and their related companies\. Strict regulation of related-party transactions should increase confidence in the safety of retirement investments\. AFAP investment managers have commented that although the new transaction requirements have constrained their operations to an extent, that formalization has helped to deepen capital markets and has greatly increased the volume of transactions\. iiib\. Reporting Net Returns\. 34\. The 1995 reform legislation allows the AFAPs to charge commissions on their affiliates' current contributions, instead of on accumulated assets\. This extreme front-loading of commissions introduces powerful incentives for AFAPs to incur high marketing expenses in the rush for market share in the first few years of operation\. High promotional spending by the AFAPs has resulted in negative net returns in the first few years of the system, and could contribute to popular opposition to the reform\. Until recently the AFAPs were only required to report gross returns\. This less-than-full disclosure of performance kept affiliates from making a fully informed choice between fund managers, and opened the new system to political attack\. 35\. The Bank assisted the Government in setting a formula to calculate returns net of commissions that reflect the AFAPs' expected performance in the long-run\. The AFAPs have been requirecl to report net returns calculated according to this formula since March 1998\. 7 BCU Circulars No\. 1559 on September 9, 1997, No\. 1585 on February 9, 1998, and No\. 1587, on March 6, 1998  Implementation Completion Report Page 8 of 21 AFAP by Rank Real Annual Gross Returns, July AFAP by Rank Real Net-Projected Retums, Based on 1997- June 1998' Last Five Years to June 19982 Comercial 6\.41 Union 7\.91 Union 5\.66 Comercial 7\.80 Santander 5\.48 Integracion 6\.77 Integracion 5\.34 Capital 6\.45 Capital 4\.83 Santander 6\.25 Republica 4\.38 Republica 5\.53 Source: Banco Central del Uruguay 1998 I\. in URs 2\. until new system has completed five years, base period of calculation is July 1996 when AFAPs began to operate The new formula improves the information received by workers on the relative performance of their fund managers, while reducing the likelihood of myopic reaction against the new system on the part of affiliates and opposition leaders in Parliament\. 36\. The AFAPs accept that reporting of net returns will improve transparency and performance in the long run, however, there has yet been no noticeable response from their affiliates to the change\. It is too early to expect a measurable reaction to the new performance indicators\.8 It should be noted that calculation of net-returns has not yet captured the effects of recent formalization of transactions and, therefore, will not accurately reflect the relative investment performance of the fund managers until April 1999\. i-ic\. Modifications in the Structure of Fluctuation Funds 37\. Although not included as a condition of the CSAL, in their review of the financial regulation of the AFAPs to identify areas of possible improvement, authorities decided to modify the structure of the 'fondos de fluctuaci6n"\. Borrowed from the Chilean AFPs, the fluctuation funds were intended to smooth investment returns in very volatile markets - the fund manager pays into the fund any returns above a pre-set threshold based on the industry's average, and draws from the fund in times of poor performance to top-up the accounts of its affiliates\. Although intended to avoid wide fluctuations in the investment earnings of account holders, in Uruguay the mechanism has encouraged herd-behavior in investment allocation, and dampened competition between the fund managers by disguising their true relative performance\. In July 1997, authorities issued regulations modifying the thresholds for deposit into and withdrawal from the fluctuations funds, widening the band around the industry's average return\.9 They hope that this modification will induce greater competition based on investment performance\. IV\. MAJOR FACTORS AFFECTING THE PROGRAM 38\. With the implementation period of the program limited to actions taken prior to Board presentation, and the issuance of Executive Decree No\. 33940 on reductions in the minimum- required AFAP investment in government securities as a condition of effectiveness, "majorfactors affecting the program" should be approached from both a design and an implementation 8 Some of the fund managers have expressed concern that multiple performance indicators might confuse the affiliat\.-s\. The AFAPs recommend that the industry and its regulator come to consensus on a simplified set of indicators\. 9 BCU Circular 1558  Uruguay: Contractual Savings Structural Adjustment Loan Page 9 of 21 perspective\. The success of the operation hinged to a great extent, on the ability of the Uruguayan authorities to enact significant improvements to the reformed system without putting progress achieved since 1995 at risk\. 39\. The Social Security Reform Law of 1995 was the product of thirteen years of debate and compromise between the political parties in the current coalition government and its opposition\. Of the contractual savings reforms that have taken place in the region, Uruguay's is by far the least ambitious\.'° However, the progress achieved by the Government in reformning it's pension system must be considered in the context of a political environment in which significant reforms can be both enacted and repealed by popular referendum\. Taking this constitutional reality and a widespread social aversion to swift shifts in policy into account, the Government's advancements in improving its national system of pension provision have been considerable\. 40\. The conditions negotiated between the Bank and the Borrower for the first CSAL were shaped within prevailing political constraints\. The Bank and the Borrower chose to identify and pursue what improvements to the new system could be made without attempting significant changes to the 1995 reform legislation\. This constraint limited the program of measures supported by the CSAL to minor, but important, changes to existing regulation and technically detailed legislative packages that the opposition was unable to easily exploit to its advantage\. 41\. Both financial authorities and the fund managers interviewed in Montevideo stressed the importance of pursuing a prudent strategy\. Uruguay is entering its 1999 general election season much earlier than in previous years due to the recent introduction of a new system of intra-party primaries that will commence in the fall of 1998\. Much of the pending legislative agenda, presented to Parliament to meet the conditions of the CSAL is currently delayed due to the shift of the legislature's focus toward the primaries\. While the authorities and the AFAP industry recognize the long-term benefits of the Bank's more ambitious suggestions for further reforms - such as changes in the commission structure, liberalization of the investment regime, and further reductions ol the PAYG pillar - the administration is eager to avoid having its social security agenda seized upon by any party in the upcoming race\. The Bank team preferred to accommodate these concerns, and to postpone major changes in the design of the AFAP system to a proposedi second contractual savings operation after the 1999 presidential elections\. V\. PROGRAM SUSTAINABILITY 42\. The sustainability of Uruguay's multi-pillar pension system and that of the reforms supported by the first CSAL are subject to a number of risks, but appear likely\. The sustainability of the new system can only be judged in the long run when workers in the transition generation begin to draw an adequate retirement income from their AFAP accounts\. However, a more 10 Pension reiform specialists from the Bank were invited to review the Government's original reform proposal in 1995\. From a purely technical perspective, the Bank team judged the proposed reforms inadequate to address the fundamental weaknesses of Uruguay's bankrupt social security system\. Due to political difficulties the Government was unable and unwilling to pursue deeper reforms, and the Bank chose not to lend financial support the new system established in 1996\. It should be noted that the Bank's analysis of the reform proposal in 1995 failed to predict the popularity of the AFAP regime, and considerably overestimated the importance that the restructured PAYG pillar would retain after the reform\. When voluntary worker affiliation with the AFAP pillar raised transition costs far above Government estimates, the authorities in Uruguay decided to approach the Bank for assistance\. By choosing to come to the Government's aid in 1997 the Bank is now in an advantageous position to advise the Governmeint on what direction it's medium term reform strategy should take\.  Implementation Completion Report Page IO of 21 immediate test of the Government's pension reform program and the sustainability of the progress it has achieved thus far is fast approaching with the onset of primary and general elections in months ahead\. 43\. Opposition parties have already voiced their objection to the 1995 Social Security Reform Law, and have initiated a grass-roots campaign to collect a sufficient number of signatures to force a referendum on the issue\. However, Uruguayan authorities and the fund managers that were interviewed for this report, are quick to point out that workers have already participated in a defacto referendum on the Government's reform of the pension system\. The extent of worker affiliation with the AFAP regime in the two years since its inception, is an endorsement of the new system that opposition parties can ill afford to ignore\. 44\. Although not directly related to the conditions of the CSAL, an important concrete indicator of the long-term sustainability of the new pension system is it's apparent positive impact on the rate of evasion\. Authorities have noticed a rise in the number of contributors to BPS\. Figure 2a below, shows the increase in the number of workers contributing to BPS since the reform, while Figure 2b shows the quarterly variation in the agency's rate of collection since 1996\. 790,000 140 780\.000\. {770,°M, l ll 120 760,000, ~~~~~~~~100 i750000, l :1 l80 740,000 730\. W60 720,0700 4 40 z 700,000 ~~~~~~~~~20 890\.000 \. \. Quarterly change, Q 9 1996 100 _0 _ Authorities attribute the rise in participation in the national pension system to the correction of perverse incentives that obtained under the old PAYG scheme, the option afforded to lower income workers to split their pension contributions between BPS and an AFAP account," and the increased attention pension reform and pension-related issues has received in the national press\. 45\. The Government now faces the challenge of holding the course of its reform efforts through the election season ahead, and avoiding the temptation to back-track on the progress it has achieved\. Having said this, it should be noted that in Uruguay, as it has in the other seven Latin American countries that have undergone reform, the private pillar of the reformed pension system and the AFAP industry have been criticized for their high, front-loaded fees, an oligopolist structure, and collusive practices that have obstructed price competition and dampened incentives for efficiency gains\.'2 Policy makers should keep abreast of developments in the ongoing pensions " To encourage the participation of lower-income workers, the 1995 reform legislation allows workers earning less than five-thousand pesos per month to contribute up to half of their mandatory 7\.5% BPS contribution, into an individual AFAP account\. 12 For a fuller, cross-country critical analysis of the "Chilean Model", see Shah, H\., 1997, Toward Better Regulation of Private Pension Funds, World Bank PRWP Series No\. 1791\.  Uruguay: Contractual Savings Structural Adjustment Loan Page 11 of 21 debate, pay close attention to regulatory revisions being considered in other countries, and remain open to modifications in the structure of the AFAP system should further changes be theoretically and empiricallly justified\. VI\. BANK PERFORMANCE 46\. Bank performance in the identification, preparation, appraisal and the shortened supervision period of the first Contractual Savings Structural Adjustment Loan, was highly satisfactory\. The Bank responded in a timely fashion to the Government's request for financial and technical support in meeting the fiscal costs of pension reform, improving the new multi- pillar system, and advancing complementary capital market reforms to increase the options for AFAP invesltment\. In addition to specific technical assistance, that included a review of the Government's estimates of the fiscal costs of transition and the formula for calculating the projected nel:-retums of the fund managers, the Bank was effective in helping the Borrower to articulate a medium-term reform strategy that would ensure the financial viability of the national pension system\. 47\. The approach of the Bank team throughout the first contractual savings operation was multi-disciplinary\. In addition to expertise in pension reform and social protection, the team drew on professionals from a variety of disciplines, including capital market development\. The team was not only diverse in its expertise, but in its opinions on how best to handle the technical challenges facing the client\. The diversity of skills and perspectives sustained a lively and productive debate between the Bank and the Borrower, and although many of the team's suggested solutions could not be included in the conditions of the loan, they served to orient the operation in an appropriate direction\. 48\. The Bank team was congratulated on the quality of its technical assistance to the financial authorities in Uruguay, and for the pragmatism it demonstrated in formulating a realistic set of conditions with which the Borrower could comply\. To give the Borrower a greater degree of flexibility in implementing modifications to the new pension system in the months approaching a general election, the Bank chose to use the single-tranche lending instrument that would engage the Government in a continuing dialogue on contractual savings reform\. Although it its too early to tell to what degree the long term aims of the reform will be achieved, the choice of the single- tranche instrament within a framework of an agreed medium-term strategy with the Government, appears to have been reasonable\. VII\. BORROWER PERFORMANCE 49\. Borrower performance in the identification, preparation and implementation of the first contractual savings structural adjustment loan, was highly satisfactory\. The contribution made by the Bank's counterparts to the preparation and execution of the CSAL was considerable, given the enormous demands on their time\. Furthermore, the Bank team benefited from the close proximity of their counterparts to decision-makers in the administration\. 50\. The Bank was able to count on a small, core team of financial and regulatory professionals with the ability to understand and debate complex ideas and proposals, and arrive at a program o:f politically viable reforms\. Financial authorities were able to take the Bank's ideas and analytical tools and measure their impact for themselves\. In the overall analysis of the reformed system conducted to identify conditions for the CSAL, the authorities were able to detect additional improvements that could be made to the system in the momentum of the  Implementation Completion Report Page 12 of21 adjustment operation, including modifications to the AFAPs fluctuation funds and the enactment of new debt-issuing policies at the BCU to accommodate the demands of the fund managers\. 51\. Financial authorities were responsible for estimating the fiscal costs of the reform not only for the Bank's operation, but for the IDB loan that preceded it\. The Figure 3 below, shows the Government's projected pension deficit with and without the reform, clearly demonstrating the long-run savings that can be expected after the transition\. 4\.5 4 3\.5\. 3 E EL O2\.5\. 0 2 0\.5 0 1997 1998 1999 2000 2005 2010 2015 2020 2025 2030 2035 E Wthout Reform [3 Wth Reform Although the Uruguayan authorities initially underestimated the number of workers that would chose to participate in the AFAP system, and the lost contributions to BPS, they later adjusted the parameters of their model to reflect the higher levels of affiliation with the second pillar\. VIII\. ASSESSMENT OF OUTCOME 52\. Based on interviews with the Borrower and the Bank, and as detailed in the paragraphs above, the overall outcome of the operation is considered highly satisfactory\. The preliminary analysis of indicators in Section III of this report concludes that, despite current delays in Parliament, the Borrower has complied fully with the conditions of the first contractual savings adjustment operation, and that Uruguay's medium term program of pension reform is headed on an appropriate course\. IX\. FUTURE OPERATIONS 53\. Identification and preparation efforts have begun for a proposed second contractual savings loan (CSAL II), which is expected to be presented to the Bank's Board in the third quarter of fiscal year 1999\. The Government estimates that its efforts thus far will begin generating savings to the public PAYG system in about four years\. The first CSAL helped finance part of the reforn's transition costs in 1998, while the proposed second operation will finance a portion of these costs for 1999/2000\. A project preparation facility of US$2 million has been approved to finance sector studies and technical assistance to lay the ground-work for the  Uruguay: Contractual Savings Structural Adjustment Loan Page 13 of 21 second operation\. The second loan would support further improvements of Uruguay's multi- pillar pension system, the creation of additional incentives for long-term costs minimizing among the AFAPs, and expanded reform of the country's financial sector and capital market regulation\. 54\. During preparation of the first CSAL, Bank staff evaluated the Government's projections of the transition costs, and assisted authorities in recalibrating their model\. The Bank's simulation model could not be applied during the first CSAL due to the limited data available on BPS contributors\. The implementation team decided that the Government's projections of the fiscal costs znd the yearly transfers from BPS to the capitalization pillar were sufficient to proceed with the first loan\. In the course of preparing a proposed follow-up operation, the Bank would like to improve its estimate of the projected costs of the reforrn, using thePension Reform Options Simulation Toolkit (PROST)\. 55\. While the authorities would welcome the use of PROST and the valuable data collection exercise that the model would demand, they do not expect the Bank's simulation to significantly improve the accuracy of their own projections, and would attribute any divergence of results to minor differences in assumptions\. The Bank's counterparts have expressed a strong preference for a more nimble model that would help them to better estimate short term costs - with a maximum one- or two-year time horizon - and that would perform better with lower inflation expectations\. The Borrower believes that the establishment of a special unit within BPS dedicated to this sort of short-term modeling would be a superior use of resources\. X\. LESSONS LEARNED 56\. The main conclusions and principal lessons learned in the implementation of the first Contractual Savings Structural Adjustment Loan are: (i) The Value of Demonstrating Strong Technical Capacity\. In preparing complex sector adjustment operations, the Bank should lead with it's comparative advantage - bringing to bear strong technical capacity, honed by practical cross-country experience\. The Borrower must be confident that its dialogue with the Bank will be of added value to its own efforts\. The Bank team was able offer its counterparts credible alternatives to a simple replication of the Chilean pension model in Uruguay, and to suggest how the model could be improved to best meet the client's long-term goal of a financially viable, yet equitable, national pension system\. (ii) The Need for Sensitivity to the Political Economy of Reform\. The political economy surrounding the formulation of labor policy has consistently constrained the reform agenda of even the most resolute of governments\. Social security reform is particularly treacherous, and especially sc, at the onset of an election year\. Political factors and the legislative needs of the client need to be understood at entry, and should be included in the Bank's dialogue with the client\. In the case of the CSAL in Uruguay, the Bank's willingness to support a more modest program of improvements to the reformed pension system will allow the institution to have a greater influence on the formulation of future reforms\. (iii) The Importance of Selecting an Appropriate Instrument\. Rather than risk delays and failure in the achievement of the program's long term aims by locking the client into an overly ambitions and politically sensitive policy agenda, the Bank team chose to negotiate a medium- term reform strategy, and to allocate its reform goals over a series of single-tranche adjustment operations (STOs) - a lending vehicle design by the Bank specifically to protect the integrity of lengthy adjustment operations from significant political shifts in borrowing countries\. The choice of the STO over the traditional multiple-tranche option provided the Bank with greater agility in the disbursement of the CSAL, and will enhance the institution's efficiency and leverage in establishing the conditions of the proposed second loan\.   Uruguay: Contractual Savings Structural Adjustment Loan Page 15 of 21 PART TWO: STATISTICAL TABLES Table 1: Summary of Assessment Table 2: Related Bank Loans Table 3: Project Timetable Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual Table 5: Project Financing Table 6: Status of Legal Covenants Table 7: Bank Resources: Staff Inputs Table 8: Bank Resources: Missions  Implementation Completion Report Page 16 of21 A\. Achievement of Objectives Substantial Partial Negligible Not applicable Macro Policies 0l E O O Sector Policies Q 0 E El Financial Objectives 0 El E Ol Institutional Development 0 El E E] Physical Objectives 03 Poverty Reduction I] 0 Gender Issues EO Other Social Objectives ] j] Environmental Objectives El El E -3 Public Sector Management E El Private Sector Development 0 El El Other (specify) E E E E B\. Proiect Sustainabilitv Likely Unlikely Uncertain 0 ; 0 , 1- f 0 Cd t 0fEl El  Uruguay: Contractual Savings Structural Adjustment Loan Page 17 of 21 Hi2h' -" C\. Bank Performance satisfactory Satisfactory Deficient (1) (1$) \. (1) Identification [ Preparation Assistance i: El Appraisal 0 E El Supervision 0 0 El Highly D\. Borrower Performance satisfactory Satisfactorv Deficient (v) (V/) (1) Preparation 0 a Cl Implementation 0 E E Covenant Compliance i: El Operation (if applicable) E E E Highlv Y E\. Assessment of Outcome satisfactorv Satisfactorv Unsatisfactory unsatisfactor -- 'I' xii 1'i2: Ri;i I \NK [oI 1:)1 Loan/Amount US$ Millions Purpose Year of Status approval Preceding operations UY-PA-8169 for US$ I Public Enterprise Reform 1992 Closed UY-PA-8161 for US$15\.6 Health Sector Development 1995 Disbursing Following operations UY-PE-8186 for US$13\.02 Health Sector Development 1999 Undisbursed Proposed US$100 Second Contractual Savings Structural 1999 Proposed Adjustment  Implementation Completion Report Page 18 of21 Steps in Project Cycle Date Planned Date Actual Identification January - May 1997 May 30, 1997 Preparation June 1997 June 16 - 20, 1997 Appraisal September 1997 September 15 - 19, 1997 Negotiations October 1997 October 29 - 31, 1997 Letter of Development Policy December 1997 December 11, 1997 Board Presentation February 1998 February 3, 1998 | Signing February 1998 February 26, 1998 Effectiveness February 1998 March 17, 1998 Single Tranche Release February 1998 March 17, 1998 Loan Closing June 1998 June 30, 1998 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual (US$ millions) FY'98 Appraisal Estimate 100 Actual 100 Actual as % of Estimate 100 Date of Final Disbursement March 17, 1998  Uruguay: Contractual Savings Structural Adjustment Loan Page 19 of 21 ActuaULatest Estimate(US$M) Local Foreign Total Source Costs Costs IBRD/IDA 100 100 Cofinancing linstitution __ --- --- Other External Sources _ __ --- Domestic Contribution _ _ --- TOTAL --- 100 100 T uu\.i- 6: Su r\.%rt s oi Lr(\.;\. Cov'E',kN rs Agreement Covenant Present Description of Comments type status covenant 2\.02(b) 5 C The Borrower to open and maintain in the Central Bank a deposit account in In Compliance dollars\. All withdrawals from Loan Account to be deposited in such Deposit Account\. 2\.02(c) 5 C The Borrower undertakes that proceeds of the Loan shall not be used to In Compliance finance expenditures excluded pursuant to Schedule I to this Agreement\. 2\.03 5 C The Closing Date of the Loan shall be June 30, 1998\. In Compliance 2\.04 5 C The Borrower h shall pay to the Bank a commitment charge at the rate of Single Tranche - three-fourths of one percent per annum on the principal amount of the Loan filly disbursed at not withdrawn from time to time effectiveness 2\.05\.(a) 5 C The Borrower shall pay interest on the principal amount of the loan In Compliance withdrawn and outstanding from time to time at a rate for each Interest Period equal to LIBOR Base Rate plus LIBOR Total Spread\. 3\.01(b) 5 C The Borrower to fumish to the Bank for review a report on the progress in In Compliance carrying out the Program in such detail as the Bank requests\. 3\.02(a)(b)(c) I C Upon Bank request, the Borrower shall have the Deposit Account audited and In Compliance fumish to the Bank audit report not later than four months after the Bank request and all other information requested 5\.01(a) 10 C The macroeconomic policy framework of the Borrower is consistent with the In Compliance objectives of the Program 5\.01(aXb) 10 C The Bank is satisfied, after an exchange of views as described in Section In Compliance 3\.01 (a), with the progress achieved by the Borrower in the carrying out of the Program 5\.01 (a)(b)(c) 10 C The Borrower has issued an Executive Decree acceptable to the Bank, In Compliance providing for scheduled reductions in the minimum required investment of the AFAPs' pension funds in securities of the Borrower so as to reach 55% on April 1, 1999  Implementation Completion Report Page 20 of 21 Covenant types: I\. = Accounts/audits 8\. = Indigenous people 2\. = Financial performance/revenue generation from 9\. = Monitoring, review, and reporting beneficiaries 10\. = Project implementation not covered by categories 1-9 3\. = Flow and utilization of project funds It\. = Sectoral or cross-sectoral budgetary or other resource 4\. = Counterpart funding allocation 5\. = Management aspects of the project or executing 12\. = Sectoral or cross-sectoral policy/ agency regulatory/institutional action 6\. = Environmental covenants 13\. = Other 7\. = Involuntary resettlement 8\. Present Status: C = covenant complied with CD = complied with after delay CP = complied with partially NC = not complied with Stage of Planned Actual Project Cycle _ E_\._I Weeks US$ (OOOs) Weeks US$ (OOOs) Preparation to Appraisal 22 114\.9 28\.1 137 Negotiations through Board Approval 1\.8 6\.4 0\.9 3\.4 Supervision 10\.2 43\.3 0\.6 3\.0 Completion 6\.8 10\.0 6\.2 6\.2 TOTAL 40\.8 174\.6 35\.8 149\.6  Uruguay: Contractual Savings Structural Adjustment Loan Page 21 of2l T\.wlL 8: B\.vNK RESO( K'ES: Ml1SlONS Performance Rating Number Days Specialized Implemen Develop- Stage of Month/ of in Staff Skills -tation ment Types of Project Cycle Year Persons Field Represented Status Objectives Problem s Through Appraisal Preliminary 2 10 a\.b, _ _ January 15-25, 1997 Identification 2 8 ac, April 7-15\.1997 Preparation 3 4 ab\.c\. June 16-20, 1997 Appraisal througln Appraisal 2 4 ac\. _ _ _ Board Approval September 15 - 19, 1997 Supervision Completion ICR 2 5 a,d, - - _ August 31 - i ___________________ September 5, 1998 Key: Snecialized Staff Skills a\. Task Manger - Sr\. Operations Officer b\. Pensions Specialist- Social Protection c\. Pensions Specialist - Capital Market Development d\. Economist - Consultant  Uruguay - Contractual Savings Structural Adjustment Loan (CSAL) - Evidence of Compliance with Policy Actions A\. Macroeconomic Stability Maintain sound | A precautionary stand-by through March 1999 was approved | Maintenance of sound macroeconomic | GDP growth in 1997: 5\. 1%, macroeconomic stability to | by the IMF in May 1997 framework consistent with policy I Vp-A g- 199\.- Q- I AO/ facilitate further pension objectives described in Letter of A\. - - \. I-v \. reforms Development Policy Consumer price inflation in 1997: 19\. 1O% Expected inflation 1998: 10,4% B\. Investment RegimeforAFAPs Reduce concentration of > Minimum investment in government securities was > Executive decree, acceptable to the / Issuance of Executive Decree No AFAP investments in lowered from 80% to 75% in April 1997 Bank, announcing the scheduled 57/98 on May 4, 1998 govemment securities reductions in minimum required > Borrower committed to lower AFAP minimum required investment by AFAPs in investment in government securities to 55% by April government issues 1999 >' Draft bill of law modifying > Borrower committed to modify the calculation of Special calculation of the Special Reserves v Bill submitted in December 1997 - Reserves held by AFAPs, to include holdings of submitted to Congress expected to be passed October 1998 government securities > Issuance of regulations acceptable to v BCU Regulation > Borrower committed to allow AFAP investment in bonds the Bank, allowing investment in issued to finance large infrastructure projects bonds financing infrastructure projects C\. Capital Market Laws and Regulations Increase AFAP investment > Investment Funds Law passed in September 1997 > Authorization of at least one risk V Five risk rating agencies have opened opportunities in private rating agency to operate in Uruguay offices in Uruguay - three of these are securities > Risk Rating Decree issued in May 1997 international agencies > Issuance of Ministerial Resolution > Draft Securitization Law submitted to Parliament in appointing a working group to carry V Working group active since April September 1997 out analysis of legal framework, and 1998, and draft Trust Law ready - thereafter to draft a Trust Law authorities will submit when > Commitment to initiate preparation of draft Trust Law Securitization Law is passed AppendixA Page I of 2  Uruguay - Contractual Savings StructuralAdjustment Loan (CSAL) - Evidence of Compliance with Policy Actions D\. Public Debt Regime Allow the development of > Draft law submitted to Parliament April 1997, allowing I Law approved - all enterprises a secondary market in debt Government to issue pension bonds in different permitted to purchase pension bonds\. instruments linked to currencies and allowing their purchase by all types of Significant secondary market has pension reform enterprises developed\. E\. Regulation ofAFAPs Create incentives for > In July 1997, AFAPs began to report gross returns in > Issuance of decree, acceptable to the \. BCU Communication No\. 98/44 issued AFAPs to increase wage adjusted units Bank, requiring AFAPs to report net on April 6, 1998 efficiency and transparency returns to affiliates from March > Borrower committed to require AFAPs to report net 1998 - decree providing returns to affiliates, according to a formula agreed with methodology for calculation of net the Bank returns / BCU Circulars No\. 1559 on September > Borrower committed to regulate AFAP investment in > Issuance of regulations acceptable to 9, 1997, No\. 1585 on February 9, related companies the Bank, establishing the use of 1998, and No\. 1 587,on March 6, 1998 market mechanisms for AFAP investment in related companies ADDpendix A Page 2 of 2  Z,\.Iuti\.s\.rAUr,pt\.AFAPl\.d\.ftyP\.nf\.IK J- Md\. My IM 1"7 19" \.0 A,- ftk
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g-y 1998 Appendix B Page I of]  Appendix C Page I of 3 IRUGUAY - CONTRACTUAL SAVINGS ADJUSTMENT LOAN ICR MISSION (August 31 - September 4, 1998) AIDE MEMOIRE This note summarizes the main findings of the World Bank mission on contractual savings development that visited Montevideo during August 31 - September 4, 1998\. The mission consisted of Ms\. Mariluz Cortes, Sr\. Operations Officer, and Mr\. Truman Packard, Economist (Consultant)\. The mission would like to thank the Government of Uruguay for the collaboration and support provided\. The objectives of the mission were to: > assess progress to date in the implementation of reforms supported by the first Contractual Savings Adjustment Loan (CSAL); > gather information for the preparation of the Implementation Completion Report (ICR) for CSAL; The mission's agenda was set with the help of the Ministerio de Economia y Finanzas\. Interviews were conducted with Authorities at the Ministry of Finance, and the Central Bank, as well as with representatives from AFAP Republica and AFAP Comercial\. Overall Impressions Based on the comments and observations the mission received during its interviews with various public and private entities, the overall progress achieved by the Government in meeting the long-term objectives of its pension reform program, has been significant\. The Borrower has complied fully with all of the conditions of the loan\. The mission was able to gather information on the impact of reforms supported by the loan, the progression in Parliament of several legislative inil:iatives linked to the loan's conditions, and the reaction of market participants - the Administradoras de Fondos de Ahorro Previsional (AFAPs) - to changes in the regulatory regime since the loan was approved\. (i) Contractual Savings Legislative Agenda\. Further changes in the regulatory framework to encourage a gradual reduction of AFAP investment in government securities, are making slow but steady progress through Parliament\. Since the issuance of Executive Decree No\. 33940 announcing accelerated scheduled reductions in the minimum required investment by AFAPs in government bonds, the fund managers have reduced their total holdings of public debt\. To eliminate finaLncial incentives for AFAPs to overly invest in government bonds, Authorities submitted to a Senatorial Committee in December 1997 legislation modifying the calculation of required Speciial Reserves to include previously exempted public issues\. No action was taken on this legislative package for several months\. Authorities took advantage of delays in the deliberation process to expand the scope of the package to include further measures to increase the efficiency of the fund managers\. Two important draft bills of law that should significantly increase the supply of private securities in Uruguay's capital markets are pending further action\. A draft Securitization Law was submitted to the Senatorial Committee in August 1997 as a condition of CSAL, but was not seriously discussed until April 1998\. Since April, the team at the Finance Ministry that prepared the draft law have been called to brief the committee on a weekly basis\. Of the draft law's 50 separate articles, 10 have received the Committee's approval\. A draft Trust Law is almost ready, but will require extensive reformn of the country's Civil Code for passage\. The Authorities prefer  Appendix C Page 2 of 3 to wait until the draft Securitization Law is passed before submitting the draft Trust Law to Parliament for debate\. The mission was told that due to the establishment of a new electoral process of intra-party primaries to select presidential candidates, political attention is already tightly focussed on the presidential race of 1999\. Primaries are to be held in mid-October 1998\. The Authorities are pressing their pending legislative agenda as much as possible, however, they were frank in the admission that if the Senatorial Committee does not finish its deliberations by the start of the primaries, action on the modifications in the calculation of Special Reserves and the draft Securitization Law is not likely to be taken before the election of the next administration\. The mission appreciates the delicate timing of the Government's legislative agenda, and expressed its approval of the Authorities' goal to have the Special Reserves legislation and the draft Securitization Law passed before October 1998\. (ii) Development of Private Instruments\. The mission has found that since the loan's disbursement, opportunities for AFAP investment in private securities have increased at the margin\. The Authorities reported that the development of the market for private debt has suffered from the impact of a default in January 1998 of one of Uruguay's largest private companies, Granja Moro\. Fortunately no AFAP was affected by the default, and the incident served to underscore the need for independent risk-rating agencies and greater transparency in commercial dealings\. Five risk-rating agencies have begun to operate in Uruguay, and to date, have rated four private issues; two by domestic private banks, and two by private agro-industries\. The mission has observed that within the various constraints of the current investment regime, the fund managers it interviewed have optimized their investment allocation in the private instruments that are currently available, indicating pent-up demand for a greater supply of private issues\. The mission inquired into the demand for share-financing among companies in the private sector and was informed that private commercial culture in Uruguay is more disposed to debt- than to equity-financing\. Included in the preparation of the proposed second Contractual Savings operation will be a comprehensive study of the country's financial sector that Authorities hope will identify policy initiatives that would spur the supply of private share offerings in the long run\. In December 1997, Authorities issued a decree allowing AFAP investment in bonds issued by private companies with public concessions to finance large infrastructure projects\. Further regulation is being prepared that will make the issuing and rating process for these infrastructure bonds more flexible\. Although these instruments are not yet available, both the Authorities and the AFAPs are confident that they will go far in alleviating the serious shortage of private securities\. The AFAPs are eager for the instruments to become available and to this end, have organized information events to press the urgency among financial Authorities, congressional and business leaders\. The infrastructure bonds will also be qualified by the independent risk-rating agencies\. (iii) Formalization of AFAP Transactions & Reporting of Net Returns\. Significant advances have been made in the formalization of AFAP transactions with related companies\. The Authorities are pleased with the development of market systems to ensure transparency in trading and pricing of instruments\. AFAP investment officers report that although the adjustment to the new requirements has been difficult, these have lead to significant increases in the volume of trade and deepened the Uruguayan capital market\. One of the AFAPs interviewed by the mission reported that formalization of operations, as well as the limits on investment in own-group issues have acted as real constraints on their investment decisions\. AFAPs have been required to report net-projected retums to their affiliates since the issuance of BCU Circular No\. 1596 on April 6, 1998\. The new AFAP performance rankings according to net-projected retums were published in the July 1998 AFAP bulletin\. The change in  Appendix C Page 3 of 3 performance ranking from gross to net-projected returns is considerable\. The fund managers interviewed mentioned that, although they accept that reporting of net returns will improve transparency and performance in the long run, there has yet been no response from their affiliates to the change\. AFAP Comercial expressed the concern that multiple performance indicators are likely to confiuse the affiliates, and made the recommendation that the industry and its regulator come to consensus on a simplified set of indicators\. (iv) Modification of Public Debt Issues to Meet AFAP Needs\. AFAP Authorities at the BCU report important changes in the Government's debt-issuing policies in response to the needs of the AFAPs and other financial market participants\. Passage of legislation in 1997 allowed the Government to issue Pension Bonds in different currencies, and has permitted their purchase by enterprises other than the fund managers\. This has made the special instruments more attractive to the AFAPs and led to the development of a secondary market\. Further important changes in the issuing of government bonds include: (i) bonds with fixed rates of interest, (ii) issues in dollars with longer maturities, (iii) bonds in pesos with higher returns, (iv) instruments issued on the international market with greater liquidity, and (v) the design of fixed-income instruments indexed for inflation\. The BCUs efforts to cater to AFAP investment needs will avoid future price bubbles like that observed at the start of AFAP investment when only a very limited set of public issues was available\. CSAL ICR Preparation The mission was successful in obtaining the necessary inputs to complete the ICR for the CSAL\. The Authorities will prepare their own assessment of the design, preparation and implementation of CSAL (no more than 10 pages), along the guidelines discussed during the mission with Econ\. Gustavo Michellin\. Upon returning to Washington, the Bank will complete the first draft of the ICR, which is expected to be shared with the Authorities by end-October 1998\.  Appendix D: Borrower Comments Page I of 6 Comments on the Implementation Completion Report (ICR) for Loan No\. 4280-UR' I\. Background 1\. The Government shares the brief description given in the ICR, however, the following points do deserve to be mentioned\. Uruguay's economy suffered only slightly from the effects of the Tequila Crisis\. The country's GDP fell by only 1\.8% in 1995, and quickly recovered in the years that followed to annual rates greater than 5%\. Within this framework, the fiscal policies adopted by the Government have financial balance as their objective\. Based on the latest available figures this objective is being meet, with the public sector deficit at 2\.8% of GDP in 1994, and although this could have risen in the first few months of 1995, a rise was prevented by fiscal adjustment in April of that year\. 2\. From this stance, and in a manner consistent with implementation of the reform of social security, the Government sought to balance the financial situation of the public sector, lowering its deficit to barely 1\.6% of GDP in the two years that followed\. In the twelve months to June 1998 the consolidated public sector deficit is approximately 0\.7% of GDP\. 3\. It should be noted that the bulk of the deficit is made up of government transfers to the Administradoras de Fondos de Ahorro Previsional (AFAP) and the costs associated with State Reform\. Future government transfers to the AFAPs are expected to continue at 1% of GDP per year\. If the transfers to the AFAPs arising from the reform are considered, public accounts are actually in surplus\. Therefore, a portion of the costs of the reform are being paid out of public- sector savings\. 1I\. Program Objectives 4\. In this section the preliminary assertion made in the ICR of the successful acceptance of the combined pension system is critical, since this factor determined the situation that the Government hiad to manage\. In effect, the number of workers that voluntarily opted to enter the new multi-pillar system, was far greater than official expectations - 80% of eligible participants\. As is asserted in the ICR, the high rate of participation acted as an indirect plebiscite in support of the reform\. 5\. With respect to the new pension funds, the Government agrees with the report's analysis of the limitations imposed on the new system by legislation in the first few years of the reformed system\. However, the Government wishes to express its disagreement with a point made in the ICR\. In paragraph 7 the report says that the fund managers must invest the greater part of assets in low-yielding government bonds\. It should be made clear that the instruments issued by the Government are instruments issued at public auction, listed on the market, and acquired voluntarily by various agents both in the primary and secondary markets\. These markets are open and competitive, and even interact with international markets in the case of government issues such as the Eurobono and the Bonos Globales\. This being the case, it is incorrect for these instruments to be considered "low-yielding", since their yield is that to be expected of instruments issued by a Latin American country with a BBB rating\. 6\. As an example, in the case of the peso-denominated government bonds issued specifically for the AFAPs (indexed to the salary index), whose return and liquidity did not satisfy the fund 'Translated from Spanish by Truman G\. Packard, LCSFP, November 24, 1998 - original comments follow\.  Appendix D: Borrower Comments Page 2 of 6 managers, there was little demand\. The AFAPs can chose among the various governments instruments issued on the market\. 7\. The problem arising from the minimum required investment in government issues, is a lack of dynamism in the private capital market, and a lack of diversification and less room for variable-rate instruments in the portfolios of the fund managers\. These problems are the motivation of the reform measures supported by the loan, and not the possible low-yields of any single asset\. III\. Achievement of Program Objectives 8\. As is stated in the ICR, the majority of the CSAL's objectives were achieved before disbursement of the loan's single tranche\. In an analysis of the main components of the matrix of policy conditions, the Government's concern with the continuous improvement of the social security regime and contractual savings system is apparent\. 9\. With respect to the increasing flexibility in the investment regime, the Government agrees with the importance of lowering the minimum level of required investment in government issues, and with the changes in the calculation of required reserves\. These objectives have been achieved\. 10\. The second major objective was to improve the supply of financial instruments available for AFAP investment\. In paragraph 17 of the ICR, it is claimed that the Central Bank's regulations determine minimum levels of risk, when all that is in fact required by the Central Bank is that the risk of every instrument be rated\. The Central Bank does not establish minimum levels of risk2 11\. The impact of the Granja Moro incident on the securities market is important, principally because it was an unusual event in a market that was only recently formed, and because of the weight of the company in relation to total private debt issued, and the total private debt negotiated in the year\. This is not to say that the company is one of the largest in the economy, nor that the productive sector has been adversely impacted by its default\. 12\. With respect to the decree on infrastructure bonds that was expected to be issued in October 1998, technical improvements have delayed the issue of these instruments\. It is expected that the issue will take place latter this quarter\. 13\. Regarding the pending legislative agenda, the ICR mentions that the Securitization Law originally presented to Parliament by the Executive branch has been modified in response to the concerns of the legislators in order to improve both its format and chances of passage\. Although these modifications accelerate the process of legislative approval, it should be noted that parliamentary recess fast approaches\. The Securitization Law will most likely be considered by Parliament after the recess\. In paragraph 27 the ICR claims that the Civil Code limits securitization, when to be exact, it mainly affects the proposed Trust Law\. 14\. The improvement of incentives for efficiency gains in the AFAP industry, is one of the principal concerns of the Government and of the division supervising the AFAPs within the BCU\. Paragraph 34 the ICR discusses one of the issues that generated productive debate between the World Bank and representatives of the Government\. 2 Since corrected\.  Appendix D: Borrower Comments Page 3 of 6 15\. At the core of the debate is what concept of "net returns" is relevant to a pensions savings account\. It would be incorrect to consider net returns negative in the first few years of contribution to an account whose manager charges commissions up-front (front-loading commission) for the management of that account over the course of the contributor's active career\. It should be noted that mandatory and not voluntary savings are at issue\. These savings cannot be witlidrawn until the moment of retirement\. Net returns in the short run are not relevant\. 16\. Thus an agreement was reached that the net returns that would be published by the BCU would reflect a longer, uniform time-period of 35 years - the minimum vesting period required by the law for a worker to qualify to receive retirement benefits\. 17\. Additionally, paragraph 34 attributes low returns in the first years of the system's operation to high costs of promotion\. It is difficult to assess whether promotion costs have been high or low, since these are the start-up costs of a new regime with a large initial sales force to achieve the highest level of worker affiliation possible\. In this light, the Government considers the AFAPs to have been very cost-efficient in this start-up period, as demonstrated by the rapid affiliation of 80% of the eligible workers (in other countries similar rates of affiliation have taken many years to achieve)\. Further, total commissions have fallen with time, transferring the savings from economies of scale to the consumer\. IV\. Major Factors Affecting the Program 18\. A correction: the number of the decree that reduces the minimum required investment by the AFAPs in government bonds, is 57/98, and not 33940\.3 19\. The changes to the system supported by the loan have not been minor\. The Government considers these changes to have been significant within the general framework of the reform - they do not change the course of the reform, but rather significantly improve the operation of the new system\. The political constraints on reform that are well described in the ICR determined that the changres that were supported by the loan where strictly technical in nature, but did not alter the fundamental philosophy of the reform\. 3 Since corrected\.  Appendix D: Borrower Comments Page 4 of 6 Comentarios al Implementation Completion Report (ICR) del prestamo No\. 4280-JR I - Background 1\. Se comparte la breve descripci6n realizada en el reporte, mereciendo solamente las siguientes precisiones\. La economia uruguaya sufri6 en forrna muy leve la crisis originada en el "Efecto Tequila"\. El PBI disminuye en 1995 solamente -1\.8%, recuperandose en los afios siguientes a tasas superiores al 5% anual\. En este marco, la politica fiscal adoptada busca conseguir resultados financieros equilibrados y en los hechos, basindonos en las ultimas cifras disponibles, se puede afirmar que dicho objetivo se estA logrando ya que el deficit del sector publico que se ubic6 en 2\.8% del PBI en 1994, y que tenia un potencial de crecimiento muy importante en los primeros meses de 1995, fue controlado en base a un ajuste fiscal en abril de 1995\. 2\. A partir de esta situaci6n y en forma consistente con la implementaci6n de la reforma de la seguridad socia!, se procura equilibrar la situaci6n financiera del sector puiblico, logrAndose resultados deficitarios de 1\.6% y 1,4% del PBI respectivamente en los dos anos siguientes, en tanto en los doce meses culminados en junio de 1998 el deficit fiscal consolidado del sector piiblico se ubica en 0\.7% del PBI\. 3\. Hay que notar que gran parte del deficit se trata de los egresos por traspasos a las Administradoras de Fondos de Ahorro Previsional (AFAP) y la Reforma del Estado\. Simplemente considerando el primer caso (contabilizaci6n de egresos futuros por anticipado) se tiene una transferencia del gobierno a dichas cuentas de aproximadamente 1% del PBI por afio\. Al corregir el resultado fiscal por dichas transferencias se llega a que en la actualidad el sector p6blico se encuentra con superavit previo a realizar los egresos correspondientes a las reformas\. Por lo tanto, parte del costo de las reformas se paga con ahorro del sector publico\. II - Program Objectives 4\. Dentro de los objetivos del programa, parece importante la precisi6n inicial que se realiza en el documento sobre el exito obtenido en la aceptaci6n del sistema mixto, ya que esta situaci6n determina que la realidad que se debi6 administrar ha sido totalmente diferente\. En efecto, el nuimero de trabajadores que en forma voluntaria opt6 por conformar una cobertura de seguridad social bajo un r6gimen mixto o de varios pilares, super6 las previsiones oficiales, con mAs del 80% de los potenciales integrantes del regimen ya integrados\. Esta situaci6n, tal como se expresa en el ICR conforma un plebiscito indirecto sobre la aceptaci6n de la reforma\. 5\. Respecto al funcionamiento de la reforma en lo que refiere a los fondos de ahorro previsional, se coincide con el diagn6stico sobre las limitaciones que impone la ley en los primeros afios de la reforma\. Sin embargo, se desea dejar establecido en este informe una diferencia con lo expresado en el ICR\. En el parrafo 7 se menciona que las administradoras de fondos deben invertir la mayor parte de los mismos en activos del gobierno de bajo rendimiento\. Se desea dejar constancia que los activos del gobierno que deben incluir como minimo en el portafolio, son activos que emiten en licitaci6n piiblica, cotizan en el mercado y son adquiridos voluntariamente por distintos agentes, tanto en el mercado primario como en el secundario\. Estos mercados son competitivos y abiertos, arbitrando incluso con los mercados internacionales en el caso de titulos como los Eurobonos o Bonos Globales\. Es asi que en las ultimas emisiones, los mismos han sido adquiridos por prestigiosos Fondos de Pensi6n y Compafiias de Seguros a nivel mundial\. En estas circunstancias es imposible pensar que los activos son de bajo rendimiento, el rendimiento es acorde a un pais con calificaci6n de riesgo BBB- ubicado en America Latina\.  Appendix D: Borrower Comments Page 5 of 6 6\. A via de ejemplo de esta situaci6n, en el caso de un titulo del Estado, emitido especificamente para las AFAP y nominado en pesos (indexado al indice de salarios), cuyo rendimiento y condiciones de liquidez no satisfascieron a las administradoras, estas directamente no los demandaron\. Es decir que las AFAP pueden elegir dentro de titulos emitidos en condiciones de mercado\. 7\. El problema que surge de esta lirmitaci6n minima de titulos del Estado es la falta de dinamismo en el mercado de capitales privado y la falta de diversificaci6n en los portafolios, con menos margen para titulos de renta variable\. Estos problemas son los que justifican las reformas propuestas en el prestamo y no el potencial bajo rendimiento de los activos en forma individual\. III - Achievement of Program Objectives 8\. Como biern se indica en el ICR, la gran mayoria de los objetivos del CSAL se cumplian previo al desembolso en un uinico tramo\. Siguiendo el analisis de los principales componentes de la matriz de co ndiciones para el desembolso, se percibe la preocupaci6n a nivel del gobierno por mejorar en fonrina continua el funcionamiento del sistema de seguridad social y los esquemas de ahorros contractuales\. 9\. Respecto a la creciente flexibilidad en el regimen de inversiones se coincide con la importancia de reducir el nivel minimo a invertir de titulos del gobierno y con el calculo de las reservas\. En los hechos se han cumplido los objetivos plenamente\. 10\. El segundo gran objetivo es mejorar la oferta de instrumentos financieros disponibles para las AFAP\. En el parrafo 17 se expresa que la norma del Banco Central determina niveles minimos de riesgo cuando lo iinico que exige el Banco Central es que exista calificaci6n de riesgo, pero no se establecen minimos, las AFAP son libres en su elecci6n y la informaci6n es puiblica\. 11\. El impactci del caso de Granja Moro en el mercado de valores es importante, principalmente porque se trato de algo inusual para un mercado recidn nacido y por su tamaffo relativo respecto al total emitido de obligaciones negociables y al total negociado por aflo en estos instrumentos\. Lo que no quiere decir que esta empresa sea una de las mas grandes de la economia y que por lo tanto el sector productivo haya recibido un impacto en su funcionamiento\. 12\. Respecto al decreto sobre la inversi6n en bonos de infraestructura, que se esperaba emitir en octubre, el mejoramiento de aspectos tecnicos determina que se haya postergado su emisi6n\. Se estima que la rnisma estara completa en el correr del trimestre\. 13\. En el caso de la agenda legislativa pendiente, se destaca que la ley de titularizaci6n de activos (securitizaci6n) originalmente presentada al Parlamento por el Poder Ejecutivo, ha sufrido modificaciones para contemplar los problemas que detectaron los legisladores y asi mejorar su redacci6n y facilitar el apoyo legislativo a la misma\. Estas modificaciones aceleraran el proceso de aprobaci6n, pero hay que tener en cuenta que se esta muy pr6ximo al receso parlamentario y que por lo tanito se estima que esta ley formarA parte de la agenda del Poder Legislativo una vez finalizado el receso\. En el caso del parrafo 27 se establece que el C6digo Civil limita la securitizaci6n, cuando para ser estrictos, las limitaciones del derecho de familia afectan principalmente a la ley de fideicomiso (Trust law)\. 14\. El tema de la mejora de los incentivos y la eficiencia en la industrias de las AFAP es uno de los de mayor preocupacion por parte del gobiemo y de la Divisi6n de Control de las Administradoras del BCU\. En el parrafo 34 del ICR, se trata uno de los temas que ha generado  Appendix D: Borrower Comments Page 6 of 6 una discusi6n constructiva entre los representantes del gobiemo y los tecnicos del Banco Mundial\. 15\. El centro de la discusi6n es el concepto de rendimiento neto relevante para una cuenta de ahorro previsional\. Considerar que los rendimientos netos son negativos durante los primeros ailos de contribuci6n a un fondo que, cobra por adelantado un porcentaje sobre lo aportado (front- loading commission) por la administraci6n a lo largo de toda la vida activa no es correcto\. Hay que tener en cuenta que se trata de un ahorro obligatorio y no voluntario, y por lo tanto este no se puede retirar hasta el momento en que se cumple con los requisitos para acceder a la pasividad\. El retorno neto en el corto plazo no es relevante\. 16\. Es asi que se convino que la rentabilidad neta que se publique por parte del BCU corresponda a la replica del periodo considerado, por un periodo de tiempo uniforme que se determin6 en 35 afnos, el minimo exigido por ley para acceder al beneficio de jubilaci6n\. 17\. Adicionalmente, el parrafo 34 atribuye el bajo rendimiento neto en los primeros afnos a los altos gastos de promoci6n\. Respecto al nivel de los mismos es dificil aventurar si son altos o bajos, se trata de los costos al inicio de un r6gimen nuevo, con un alto despliegue de fuerza de ventas para lograr la mayor afiliaci6n posible\. En tal sentido, el gobierno considera que los gastos realizados por las AFAP en esta etapa han sido altamente eficientes ya que se ha logrado en muy poco tiempo alcanzar el 80% de la poblaci6n objetivo (en otros paises esta tarea ha llevado anios y mayores gastos)\. A su vez, el nivel de comisi6n total ha bajado con el tiempo, transmitiendo hacia el consumidor las ganancias en economia de escala\. IV - Major Factors Affecting the Program 18\. Una precisi6n sobre el numero de decreto que reduce los minimos obligatorios de titulos del Estado para las AFAP, el mismo es 57/98 y no 33940\. 19\. Por ultimo, las autoridades consideran que los cambios introducidos con motivo del programa no son menores\. El gobierno estima que dichos cambios son significativos siempre dentro del marco general determinado por la reforma, no alteran el rumbo de la misma pero mejoran la operativa en forma significativa\. La restricci6n politica para introducir reformas que bien se describe en el ICR determin6 que los cambios a los que se accediera tuvieran caracter estrictamente tecnico, pero no en la filosofia subyacente, la qu6 ademas se comparte por esta Administraci6n\.  ' i3' />/ _r nV 50' 5, 514' %t5 el ) X 2 i tk /; \ 445 05 (3,,1 g/ K z ) \ * 0 < = u le-osme>>5y X \ B R A Z I L H tS r / w \ oX hIt;v~~~~~~~~~/ V~~~~~~~~~~~~~~~~~' * A\d 1- R- t A ROEN TINA @WMONTXVIDEO '~ ~~~~~~~~~~~~~~~~~~~~~~4 - "1' 1'1'4"Of "d 1A "'4 fl4 C4'", ,1'Mt,4" ,,A' G 4 I + AS\. AdONEVDp hrn*1z ,~~~~~ ~ ~ ~ oo uo r HL s[ -_P w on R i A\. 5 : ER/(/ I --r56dD5 > vF + + -ol-o >h > iz UiiWal_IT B R 9 X l rt cN | ; L 8 4 0 / B t t ; k

REVIEW

P078619

 ICRR 12064 Report Number : ICRR12064 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 03/14/2005 PROJ ID : P076808 Appraisal Actual Project Name : Gh: Prsc I Project Costs 125 125 US$M ) (US$M) Country : Ghana Loan/ US$M ) 125 Loan /Credit (US$M) 125 Sector (s): Board: PS - General public Cofinancing administration sector US$M ) (US$M) (30%), General education sector (20%), Health (20%), General industry and trade sector (20%), Other social services (10%) L/C Number : C3797; CH052 Board Approval 3 FY ) (FY) Partners involved : Closing Date 06/30/2004 06/30/2004 Prepared by : Reviewed by : Group Manager : Group : Fareed M\. A\. Hassan Jorge Garcia-Garcia Kyle Peters OEDCR 2\. Project Objectives and Components a\. Objectives The Poverty Reduction Support Credit (PRSC I) is the first of a series of three PRSCs prepared annually within a rolling three-year horizon\. The project was designed to support the Government's Poverty Reduction Strategy, focusing on growth and employment promotion, human service delivery improvement, and governance and public sector management strengthening \. b\. Components 1\. Growth and employment promotion addresses reducing the cost of doing business through : (i) restructuring the power authority (Volta River Authority); (ii) adjusting electricity tariffs while protecting the poor; and (iii) conducting a cost of doing business survey \. 2\. Human service delivery improvement focuses on : (i) expanding access to education and health services, particularly in most deprived regions, and enhancing quality; and (ii) improving the efficiency and equity of education and health services, and ensuring sustainable financing arrangements that protect the poor \. 3\. Governance and public sector management strengthening incorporates actions designed to : (i) strengthen the institutions of participatory democracy and accountable rule, and (ii) improve the efficiency of the public services and the quality of public expenditure management \.  c\. Comments on Project Cost, Financing and Dates The PRSC I was fully disbursed, on schedule, in a single tranche upon effectiveness, June 25, 2003, against Borrower measures already completed prior to Board presentation \. 3\. Achievement of Relevant Objectives: 1\. Growth and employment promotion\. (i) The Volta River Authority was restructured, separating transmission from generation\. (ii) Implementation of electricity tariff adjustment, with a 72 percent increase in tariffs (in nominal terms) during the period 2002- 2003\. (iii) Completion of a survey of regulatory and administrative costs of doing business, designed to prepare an action plan to reduce them \. Macroeconomic performance improved in terms of growth and inflation (see Section 4 below) but the fiscal deficit remained below the projected level \. 2\. Human service delivery improvement \. Policy actions undertaken were : (i) completion of the school mapping exercise in five deprived regions with the objective of improving the targeting of budget resources; and (ii) launching implementation of national policy of community -based Health Planning Services that emphasizes basic primary services, and adopting fee exemption policy for maternal deliveries for deprived regions \. The ICR does not discuss whether these policy actions were translated in better education and health outcomes such as high access, lower infant and maternal mortality rates, particularly in the deprived regions, noting that it is an interim ICR and that a full analysis of outcomes is planned with the programmatic ICR to be prepared at the time of the completion of PRSC III \. 3\. Governance and public sector management strengthening \. Measures undertaken were: (i) submitting to Parliament the new Financial Administration, Local Government Service, and Public Procurement Acts, and (ii) reviewing public sector programs, aligning them with the priorities of the GPRS, launching a census of public sector employees, and installing a new budget and public expenditure accounting system to improve efficiency in managing public expenditures\. 4\. Significant Outcomes/Impacts: Macroeconomic performance improved \. Annual GDP growth rose from 4\.5 percent in 2002 to 4\.7 percent in 2003 and 5\.2 percent in 2004, exceeding the project's projections \. The rate of inflation fell\. The increased growth and lower inflation may have positive implications for poverty reduction, though the ICR does not monitor poverty trends as there are long lags in estimating and publishing poverty figures \. However, recent Bank analysis since the ICR was completed in December 2003 indicated that poverty did decline between 1997 and 2003, falling by about 7 percent\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The ICR does not provide evidence on progress toward improving education and health service delivery \. This is worrisome given that the President's Report identified key performance indicators (Tables 5 and 6) such as increased education access in deprived regions and reduced under five mortality and maternal mortality rates \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Substantial Modest While new regulations were prepared and submitted to Parliament, their effective implementation in terms of efficient management of state resources, including revenues and expenditures, were not documented\. Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. NOTE: 7\. Lessons of Broad Applicability: As the project is the first in a series of three projects, and is designed to lay the groundwork for helping the country to attack poverty in a comprehensive manner, it is too early to draw lessons \. 8\. Assessment Recommended? Yes No Why? The project is the first part of a planned three -phased program supporting Ghana's Poverty Reduction Strategy and further analysis of the program as a whole through a PPAR, following the completion of the programmatic ICR, is appropriate\. 9\. Comments on Quality of ICR: The ICR is of good quality, though evidence of the achievements in the education and health sectors is not included \.

REVIEW

P106468

Document of The World Bank Report No: ICR00001730 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H3960 IDA-H5170) ON A PUBLIC AND NATURAL RESOURCE MANAGEMENT DEVELOPMENT POLICY GRANT IN THE AMOUNT OF SDR3\.7 MILLION (US$6 MILLION EQUIVALENT) AND SUPPLEMENTAL FINANCING IN THE AMOUNT OF SDR1\.3 MILLION (US$2 MILLION EQUIVALENT) TO THE DEMOCRATIC REPUBLIC OF SÃO TOMÉ AND PRÍNCIPE December 27, 2010 Poverty Reduction and Economic Management 1 Country Department AFCS2 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective as of December 24, 2010) Government Fiscal Year January 1­December 31 Currency Equivalents (US$1 = 18,894 Dobras) Currency Unit Dobra ABBREVIATIONS AND ACRONYMS AfDB African Development Bank CAS Country Assistance Strategy CEMAC Economic and Monetary Community of Central Africa CFAA Country Financial Accountability Assessment CPAR Country Procurement Assessment Report DTIS Diagnostic Trade Integration Study DPO Development Policy Operation ECCAS Economic Community of Central African States EEZ Exclusive Economic Zone EITI Extractive Industries Transparency Initiative EPA Economic Partnership Agreement EU European Union FDI Foreign Direct Investment GDP Gross Domestic Product GNP Gross National Product GoSTP Government of São Tomé and Príncipe HIPC Heavily Indebted Poor Countries IBRD International Bank for Reconstruction and Development ICR Implementation Completion Report IDA International Development Association IFC International Finance Corporation IFRS International Financial Reporting Standards IGF Inspecção Geral de Finanças (General Inspection of Finances) IMF International Monetary Fund INE National Statistical Institute IFRS International Financial Reporting Standards ISN Interim Strategy Note JDA Joint Development Agency JDZ Joint Development Zone JSAN Joint Staff Assessment Note LDP Letter of Development Policy MCC Millennium Challenge Corporation MDGs Millennium Development Goals MDRI Multilateral Debt Relief Initiative MoE Ministry of Education MFIC Ministry of Finance and International Cooperation MTEF Medium-Term Expenditure Framework NOA National Oil Account ORML Oil Revenue Management Law PEMFAR Public Expenditure Management and Financial Accountability Review PER Public Expenditure Review PFM Public Finance Management PNRMD Public and Natural Resource Management Development PRGF Poverty Reduction and Growth Facility PRMG Public Resource Management and Governance Reform PRSP Poverty Reduction Strategic Paper SDR Special Drawing Rights SOE State Owned Enterprise STP Democratic Republic of São Tomé and Príncipe UNDP United Nations Development Program WTO World Trade Organization Vice President: Obiageli Katryn Ezekwesili Country Director: Olivier Godron (Acting) Sector Director: Jan Walliser (Acting) Sector Manager: John Panzer Task Team Leader: Rafael Muñoz Moreno ICR Team Leader: Marco Antonio Hernández Oré   DEMOCRATIC REPUBLIC OF SÃO TOMÉ AND PRÍNCIPE PUBLIC AND NATURAL RESOURCE MANAGEMENT DEVELOPMENT POLICY GRANT AND SUPPLEMENTAL FINANCING Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Program Performance in ISRs H\. Restructuring 1\. Program Context, Development Objectives and Design\. 1 2\. Key Factors Affecting Implementation and Outcomes\. 1 3\. Assessment of Outcomes \. 2 4\. Assessment of Risk to Development Outcome \. 3 5\. Assessment of Bank and Borrower Performance\. 3 6\. Lessons Learned\. 3 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\. 3 Annex 1 Bank Lending and Implementation Support/Supervision Processes\. 4 Annex 2\. Beneficiary Survey Results \. 5 Annex 3\. Stakeholder Workshop Report and Results \. 6 Annex 4\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 7 Annex 5\. Comments of Cofinanciers and Other Partners/Stakeholders \. 8 Annex 6\. List of Supporting Documents\. 9 MAP  A\. Basic Information Country: São Tomé and Program Name: Public and Natural Príncipe Resource Management Development Policy Grant Program ID: P106468 and L/C/TF Number(s) IDA-H396 and IDA- P116178 H517 ICR Date: 11/01/10 ICR Type: Core ICR Lending Instrument: DPL Borrower: Democratic Republic of São Tomé and Príncipe Original Total SDR 3\.7M Disbursed Amount: SDR 3\.7M Commitment: Supplemental Financing SDR 1\.3M Disbursed Amount: SDR 1\.3M Total Amount: SDR5\.0M Disbursed Amount: SDR 5\.0M Implementation Ministry of Planning Agencies: and Finance Cofinanciers and Other None External Partners: B\. Key Dates Process Date Process Original Date Revised/Actual Date(s) PNRMD Grant Concept Review: 03/11/2008 Effectiveness 08/12/2008 08/12/2008 Appraisal: 04/16/2008 Restructuring -- -- Approval: 06/10/2008 Mid-term review -- -- Closing 06/30/2009 06/30/2010 Supplemental Financing Concept Review: 03/18/2009 Effectiveness 12/10/2009 12/10/2009 Appraisal: 05/27/2009 Restructuring -- -- Approval: 08/07/2009 Mid-term review -- -- Closing 12/31/2009 06/30/2010 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Negligible to Low Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Performance: Quality at Entry: Moderately Satisfactory Bank Performance: Quality of Supervision: Satisfactory Overall Bank Performance: Moderately Satisfactory  Borrower Performance Moderately Satisfactory C\.3 Quality at Entry and Implementation Performance Indicators Implementation Indicators QAG Assessments (if Rating Performance any) Potential Problem Program at No Quality at Entry (QEA): None any time (Yes/No) Problem Program at any time Quality of (Yes/No) No Supervision (QSA): None DO rating before Closing/Inactive status Moderately Satisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central Government Administration 80 80 Oil and Gas 20 20 Theme Code (as % of total Bank financing) Public expenditure, financial management and 29 29 procurement Tax policy and administration 29 29 Other public sector governance 28 28 Poverty strategy, analysis and monitoring 14 14 E\. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekewesili Obiageli Katryn Ezekewesili Country Director: Oliver Godron (acting) Mary A\. Barton-Dock Sector Manager: John Panzer Jan Walliser Program Team Leader: Rafael Muñoz Moreno Rafael Muñoz Moreno ICR Team Leader: Marco A\. Hernández Oré ICR Primary Author: José B\. Sokol F\. Results Framework Analysis Program Development Objectives (from Project Appraisal Document) The proposed Public and Natural Resources Management Development (PNRMD) operation is designed to help implement the Government's economic reform program for 2008-2009 that is based on São Tomé and Príncipe's Poverty Reduction Strategy Paper (PRSP)\. It supports policy measures aimed principally at improving the accountability, effectiveness and level of public resources and at strengthening governance in the oil sector\. It will in addition support the authorities' efforts to initiate the preparation of a new PRSP based on updated information on oil prospects and in-depth analysis of growth diversification options\. Revised Program Development Objectives (if any, as approved by original approving authority) PDOs were not revised\. (a) PDO Indicator(s) Original Target Formally Actual Value Value (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 PRSP document is revised to incorporate the petroleum economy and a growth strategy Council of PRSP Committee Preparation of new Ministers formed and PRSP Development authorized the process Strategy led by Poverty underway\. Planning Directorate Observatory to with technical develop new committee formed by PRSP\. PRSP Coordination Office, INE, and sectors underway\. Date achieved 05/07/2008 12/31/09 10/23/2009 Comments (incl\. % Met achievement) Indicator 2 Improved budget preparation that reflects the priorities of the Government and enhanced institutions Council of 2008 budget National National Assembly Ministers approved after Assembly approved 2009 presented the 2008 FY begins\. approves the 2009 budget on December Budget to the Comprehensive Budget following 2008, before the National Assembly quarterly reports the SAFE law beginning of FY\. in compliance with with pro-poor (prior to the Quarterly budget the SAFE law and codes are not beginning of the monitoring reports adopted a decree prepared\. Fiscal Year)\. produced\. Pro-poor with pro-poor Increased budget expenditures in 2009 budget codes\. allocation to pro- budget are 66 percent poor expenditures above 2008 budget\. in 2009 Budget compared to 2008 Budget\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. % Met achievement) Indicator 3 More transparent procurement process Council of No recording of 70 percent of Procurement Ministers approved contract contracts above legislation approved a decree on following US$50,000 follow and training procurement competitive competitive provided\. regulation, created procurement procedures\. Procurement the Procurement procedures\. supervisory body Supervisory Body Procurement created, staffed, and and designed a supervisory body operational\. 95 training program does not exist\. percent of public on procurement for Staff at sector contracts above all Ministries' ministries not US$60,000 follow procurement trained in competitive bidding officers\. procurement\. procedures\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. % Met achievement) Indicator 4 Increased transparency and accountability of public financial resources The MoPF Quarterly reports Quarterly reports Legislation and prepares an of Treasury of Treasury procedures to inventory of financial financial positions prepare and monitor government positions not ­cash plans cash plans, including unsettled financial produced\. including analyses manuals for Treasury obligations of the Comprehensive of financial operations are being Treasury\. report on SOEs monitoring implemented, but not Council of financial status is performance formally approved\. A Ministers adopt a not produced\. produced\. report is being decree to adopt a Comprehensive produced quarterly new methodology reports on SOE on budget execution\. for preparing financial status Comprehensive financial programs and monitoring reports on SOE and cash plans at systems\. financial status and the Treasury and a monitoring systems decree that adopts not yet produced\. new manuals for Treasury operations\. IGF and Treasury, carries out a diagnosis study of the accounting procedures and financial status of SOEs\. Date achieved 06/10/09 12/31/09 10/23/09 Comments (incl\. % Mostly met\. achievement) Indicator 5 Improved government management of government accounts and assets MoPF uses budget Public accounts Produce 2008 Inventory of public codes approved in are not produced\. pilot public assets by a firm was 2007\. IT system not in accounts\. 2009 underway but not Council of place to produce Budget prepared finalized before Ministers adopts (i) public accounts\. based on SAFE-e project closed\. decree establishing Single database system\. Complete SAFE-e system not an accounting that centralizes survey of assets operational as system for public information on and single technical accounts; (ii) public assets database with complexities in decree creating a does not exist\. Department of developing the Public Accounting Assets SAFE-e system were Department with Management underestimated\. appropriate budget information\. and personnel allocations; (iii) decree creating an Information Technology Department with appropriate budget and personnel allocations; (iv) decree creating and staffing a department of Asset Management; (v) hires a firm to carry out a survey of all government assets\. Date achieved 06/10/09 12/31/09 10/23/09 Comments (incl\. % Progress made but achievement) target not met\. Indicator 6 Improved payroll management Council of Government An action plan to An action plan to Ministers approves personnel merge the payroll update the personnel a plan for database does and personnel database de facto developing a not exist\. databases is exists\. GoSTP is personnel records adopted\. taking steps toward database and merging the payroll carries out a and personnel general headcount databases\. The of government SAFE-e will include employees\. a personnel module linked to the budget\. Date achieved 06/10/09 12/31/09 10/23/09 Comments (incl\. % Mostly met\. achievement) Indicator 7 Simpler and more equitable tax system MoPF presented to Corporate tax Reduce corporate New corporate tax the National rate stands at 45 tax rate to 25 and income tax laws Assembly (i) a bill percent of percent\. adopted with rate of of law creating a profits\. Single Progressive profits at 25 percent new corporate tax tax on wages, income tax rates and progressive code; and (ii) a bill not overall in place covering income tax rates of law creating a income\. all sources of covering all sources new personal Institution to income\. Create of income\. Institution income tax code\. resolve tax institution to to resolve tax The National disputes does not resolve tax disputes not yet Assembly exist\. disputes\. created\. approves (i) a new urban tax; and (ii) the organic law that establishes the Tax Tribunal\. Date achieved 06/10/09 12/31/09 10/23/09 Comments (incl\. % Mostly met achievement) Indicator 8 Transparent and efficient use of petroleum resources The Ministry of EITI report not First EITI report The Handbook of Oil Natural Resources produced\. published October Management was and Environment 2008\. Qualified published and the adopts the EITI companies Petroleum Sector roadmap for expressing Development implementation of interest in EEZ Strategy adopted\. the EITI\. bidding\. Joint strategy with The National the Nigerian EITI Assembly adopted a Committee to National Petroleum appropriately sector bill with supervise international transparency in the standards of JDZ adopted\. transparency and Council of competition; and the Ministers (i) council of Ministers submits to the adopted the model National Assembly contract for a National production sharing\. Petroleum sector An international bill with competitive bidding international of 7 petroleum standards of blocks in STP's EEZ transparency and is underway\. competition; and (ii) adopts the Implementation of model contract for the EITI was production sharing hampered by delays setting with in the creation of a international joint STP-Nigeria standards of EITI Committee\. As transparency and a result, STP was competition\. delisted from the The Handbook of EITI\. Oil Management is published and the Petroleum Sector Development  Strategy adopted\. Date achieved 06/10/09 12/31/09 10/23/09 Comments (incl\. % Partially met\. achievement) (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Formally Actual Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 Budget preparation and implementation Council of Budget Directorate Decree Decree with new Ministers issues and Investment streamlining and functions of Budget a decree Directorate not in clarifying roles Directorate approved\. streamlining and line with SAFE and functions of Software for clarifying roles reform\. the Budget programming of and functions of Directorate\. investment is part of the Budget Utilize software SAFE-e and was not Directorate\. for programming ready\. MoPF develops of investment and budget\. adoptssoftware for budgetary programming covering the investment budget\. Date achieved 06/10/08 12/31/09 12/31/09 Comments (incl\. Partially met\. % achievement) Indicator 2 Procurement processes Council of No procurement Decree on Procurement law Ministers issues regulation\. No procurement adopted\. Procurement a decree (i) on procurement regulation\. supervisory body procurement supervisory body\. Decree creates created\. Procurement regulation; (ii) to No training procurement training provided\. create the program on supervisory Procurement procurement\. body\. Design a Supervisory training program Body for all ministries' (November procurement 2008); and (iii) officers\. design a training program on procurement for all Ministries' procurement officers\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. Met\. % achievement) Indicator 3 Government unsettled financial obligations of the Treasury and accounting procedures and financial status of the four fully owned SOEs The MoPF No inventory of Inventory of No inventory of prepares an government unsettled unsettled obligations inventory of unsettled financial obligations as of carried out\. government obligations of the 12/31/07\. Institutional capacity unsettled Treasury\. No study Diagnosis study in supervision of financial of accounting of accounting SOEs provided by obligations of procedures and procedures and Portugal\. the Treasury\. financial status as financial status Council of of 12/31/07 of four as of 12/31/07 Ministers adopt SOEs\. for four SOEs\. a decree to adopt a new methodology for preparing financial programs and cash plans at the Treasury and a decree that adopts new manuals for Treasury operations\. IGF and Treasury, carries out a diagnosis study of the accounting procedures and financial status of SOEs\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. Not met\. % achievement) Indicator 4 Improved Treasury operations Council of No methodology for Adopt Methodology for Ministers adopts preparing financial methodology for Treasury financial a decree (i) to programs and cash preparing programs and cash adopt a new plans at the financial plans prepared\. methodology for Treasury or programs and Manuals for Treasury preparing manuals for cash plans at operations prepared financial Treasury Treasury and but not adopted\. programs and operations\. adopt manuals cash plans at the for Treasury Treasury; and to operations\. (ii) adopt new manuals for Treasury operations\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. Partially met\. % achievement) Indicator 5 Department of Asset Management Operational MoPF adopts (i) No Department of Create and staff Department of Assets decree creating Assets Management a Department of Management created and staffing a operational\. No Assets and staffed\. Survey of department of survey of Management all public assets Asset government assets\. separate from the prepared by a firm Management; Treasury underway\. and (ii) hires a Department and firm to carry out adopt new a survey of all manuals for government Treasury\. assets\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. Mostly met\. % achievement) Indicator 6 Improved public personnel management Council of Need to approve Approve plan for An action plan for Ministers plan for developing developing updating the approves a plan a personnel records personnel personnel database de for developing a database at MoJPA records database facto exists\. GoSTP personnel (Dec\. 08)\. Need to at MoJPA\. Carry is taking steps toward records database carry out general out a general merging the payroll and carries out a government headcount of and personnel general employees' employees\. databases\. The headcount of headcount\. SAFE-e will include government a personnel module employees\. linked to the budget that will allow the general headcount of employees\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. Progress made but  % achievement) target not met\. Indicator 7 Improved urban tax and tax collection The National Outdated urban tax NA approves New urban tax Assembly adopts and no Tax new urban tax adopted, but Tax (i) a new urban Tribunal in line and Tax Tribunal Tribunal was not tax; and (ii) the with the General in line with the created before the organic law that Tax Code and Tax General Tax and project closing date\. establishes the Procedural Code Tax Procedural Tax Tribunal\. approved in 2007\. Codes\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. Partially met\. % achievement) Indicator 8 Enhance petroleum related transparency Joint strategy No joint strategy Approve joint Handbook of oil with the with Nigerian EITI strategy with Management Law Nigerian EITI Committee to Nigerian EITI published and Committee to supervise Committee to Petroleum Sector appropriately transparency at supervise Development supervise JDZ\. No Handbook transparency at Strategy adopted\. transparency in of Oil Management JDZ\. Publish Joint STP-Nigerian the JDZ adopted\. Law for the Handbook of Oil Committee not The Handbook Petroleum Management formed\. of Oil Development Law and form Management is Strategy\. Joint STP- published and Nigerian the Petroleum Committee\. Sector Strategy Development endorsed by Strategy JDZ\. adopted\. Date achieved 06/10/08 12/31/09 10/23/09 Comments (incl\. Partially met\. % achievement) G\. Ratings of Program Performance in ISRs No\. Date ISR DO IP Actual Disbursements Achieved (USD millions) 1 12/19/2008 MS MS 6\.0 2 05/14/2009 MS MS 3 11/15/2009 MS MS 2\.0 (supplemental financing) H\. Restructuring (if any) Not Applicable 1\. Program Context, Development Objectives and Design 1\.1 Context at Appraisal São Tomé and Príncipe (STP) is a small and fragile state\. An archipelago of just over 1,000 square kilometers in the Gulf of Guinea, STP is one of the smallest economies in Africa with about 160,000 inhabitants and a gross national income (GNI) per capita of US$1,140 (2009)\. The country faces many development challenges due to its small size and insularity, limited institutional capacity, and aid dependency\. As in other small island states, STP cannot take advantage of economies of scale in the provision of infrastructure, services, and economic activities\. This translates into: (i) high costs per unit of government and utility provision services; (ii) little flexibility of the economy to adapt to shocks; and (iii) few opportunities for risk diversification within the domestic market\. The last household survey (2001) estimated poverty incidence at 54 percent (including 15 percent in extreme poverty)\. Poverty in 2001 remained largely a rural phenomenon with 65 percent of the rural population living below the poverty line and 22 percent below the extreme poverty line\. Although a number of social indicators have improved in recent years, progress toward achieving STP's Millennium Development Goals (MDGs) has been slow\. STP has consolidated democratic rule since 1991 although marked by frequent government turnover\. The political system is characterized by coalition arrangements that have led to frequent changes of government and delays in the implementation of the development agenda\. Despite a number of such changes taking place, all governments have largely implemented policies that consolidated macroeconomic stability and alleviated poverty, although implementation of the reform agenda slowed down during 2004-2006\. Oil was discovered in the joint waters shared with Nigeria and since 2005, the country has received US$77\.8 million in oil bonuses from oil exploration\. The use of these funds has helped close the fiscal gap, but has also raised strong expectations of social improvement\. Effective oil exploitation, previously expected to start in 2011, has been delayed given the high risks involved in offshore drilling, and it is not expected until at least 2015 at the earliest\. Fiscal sustainability would be at stake if the proceeds from the projected oil production were not to materialize\. At the time of appraisal, commitment to structural reforms and macroeconomic stability had allowed STP to achieve high growth and to receive debt relief\. Structural reforms aimed at: (i) pursuing prudent fiscal and monetary policies; (ii) improving the efficiency of public spending; (iii) liberalizing the economy by reforming the import tariff structure, preparing for liberalization of the telecoms sector, and privatizing a number of public enterprises; (iv) developing new strategies in health and education; and (v) building institutional capacities, especially in the nascent petroleum sector\. These reforms had positive results\. In 2007, STP reached the Completion Point of the Enhanced HIPC Initiative and received debt relief in the amount of US$314 million\. Successful implementation of these reforms and a buoyant external environment, characterized by a booming activity in the tourism and construction sectors, and the arrival of signature oil bonuses, led to a high economic growth that averaged 6\.2 percent during 2006-08\. Yet, difficulties to control inflation led the authorities to strengthen fiscal discipline\. Economic policy loosened as a result of high budget inflows (mainly from the arrival of oil bonuses), growing social demands, and a very volatile political environment\. In a context of high international prices of food and fuel, annual inflation was larger than 25 percent during 2006- 1 2008\. Concerns about fiscal sustainability, particularly given uncertainty in the arrival of future oil bonuses, led the Government to strengthen fiscal and monetary discipline\. As a result of prudent macroeconomic policies, the Government reduced the annual domestic primary fiscal deficit from around 15 percent of GDP in 2004 to 7\.5 percent of GDP in 2008, financed mainly by oil signature bonuses and privatization receipts\. As it embarked on fiscal consolidation, STP's economy was hard hit by two consecutive external shocks: (i) the sharp increase in international food and fuel prices in mid-2008; and (ii) the international economic and financial slowdown since 2009\. The food and fuel crisis had a substantial effect on the population\. The World Food Program (WFP) estimated an increase in the number of vulnerable people that needed its support (those for whom food is inadequate or at the limit) by 10-15 percent only one year after the onset of the crisis\. Furthermore, the global economic slowdown since 2009 also had serious repercussions for STP\. Growth slowed down to 4 percent in 2009 following a sharp decline in foreign direct investment, tourism receipts, and foreign assistance, although limited external portfolio and exposure to toxic financial assets kept the country's financial system remained relatively unaffected\. These external shocks limited the capacity of the authorities to maintain the pace of fiscal consolidation\. The growth slowdown and oil signature bonuses that did not materialize translated into lower Government revenues that the new corporate and personal income tax laws introduced in 2009 (aimed at enhancing compliance), were not been able to offset\. The domestic primary deficit widened to 8\.2 percent of GDP in 2009\. The PNRMD program, approved in 2008, provided critical budgetary support and financing (US$6 million) to facilitate the continuation of the reform process, strengthen institutional capacity for PRSP implementation and budget processes, and improve the policy framework in the petroleum sector by setting forth best international practices of transparency and accountability, particularly in opening up the EEZ to oil exploration\. PNRMD was to be implemented in close collaboration with donors involved in the on-going Public Finance Management (PFM) reform (e\.g\., Portugal, France, EU, Millennium Challenge Corporation (MCC), UNDP, and AfDB)\. In 2009, the mobilization of oil signature bonuses under the PNRMD appeared to be somewhat uncertain, and there was also uncertainty as to the degree that external foreign assistance support might mitigate the impact of the crisis\. The lower tourism receipts, tightening of credit to the private sector, falling remittances, and reduced FDI flows were impacting negatively on growth and poverty\. The global liquidity squeeze and lower than expected economic growth were also taking a toll on tax collection\. These developments prompted the Bank to bolster the PNRMD with a Supplemental Financing Grant\. In 2009 the Bank approved a supplemental financing of US$2 million to provide timely assistance to the Government to close the fiscal gap, maintain macroeconomic stability, and continue its reform program\. 1\.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) The proposed Public and Natural Resources Management Development (PNRMD) operation is designed to help implement the Government's economic reform program for 2008-2009 that is based on São Tomé and Príncipe's Poverty Reduction Strategy Paper (PRSP)\. It supports policy measures aimed principally at improving the accountability, effectiveness and level of public resources and at strengthening governance in the oil sector\. It will in addition support the authorities' efforts to initiate the preparation of a new PRSP based on updated information on oil prospects and in-depth analysis of growth diversification options\. 2 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification The objectives of the operation were not revised\. 1\.4 Original Policy Areas Supported by the Program (as approved) (a) Strengthening Public Financial Management PNRMD intended to raise the level of public spending to better deliver key services\. However, the systems of accountability and effectiveness of public resources were either non-existent or operated at low levels of efficiency\. The PFM component aimed at strengthening budget preparation and execution using modern harmonized nomenclatures and accounting framework and plan in order to undertake yearly budget audits, publish them promptly, and submit them to the National Assembly\. These actions were expected to raise public expenditure efficiency by strengthening the links between budget allocations and policy priorities while improving transparency and accountability of public resources\. The PNRMD program focused on strengthening institutions by introducing legislation and procedures to help adapt MoPF Directorates to their new role of coordinating and supervising a decentralized budget execution by sector ministries\. A Public Accounting Directorate (AD) was to be created and an Information Technology Directorate would assist in the preparation of the State's public accounts\. A Coordination and Assistance Procurement Supervisory Body was to be created to centralize procurement information, assist decentralized procurement units, and ensure uniformity and quality across units\. A new Public Assets Management Directorate was to be made responsible for carrying out a survey of all State assets and develop software to ensure their adequate management\. Updated functions of the Treasury Directorate were to focus on improving budget controls and better SOE supervision\. The PNRMD program also envisaged an improved Integrated Financial Management Information System (SAFE-e) that not only incorporates new budgetary codes to allow a functional classification of operations while strengthening budget control, monitoring, and reporting, but also would facilitate the preparation of public accounts\. Given MoPF's fairly weak institutional capacity, consultants financed by IDA's Governance Capacity Building and Technical Assistance Project (GCBTA) were hired to assist the authorities to implement many of the activities of the PNRMD program\. The World Bank's GCBTA project was approved in 2004 and the component on PFM focused on: (i) improving legislation, notably the Organic Law on Public Finance Management (SAFE law) to eliminate the dual budgeting of current and investment expenditures; complemented with new budget codes\. This would permit a more homogenous and transparent recording of financial transactions, facilitating the analysis of outcomes in accordance with international best practice standards and the adoption of a chart of accounts employing double-entry accounting; (ii) a new Procurement Law that would introduce decentralized procurement and fostered competitive bidding in public purchases; and (iii) updating public revenue legislation (General Tax and Tax Procedural Codes) and strengthening collection enforcement, to be complemented with new Urban and Corporate and Personal Income Tax Laws\. 3  (b) Strengthening Governance in the Petroleum Sector PNRMD sought to build an institutional and legal framework to supervise and regulate the petroleum sector in preparation for the granting of concessions in the EEZ following an international competitive bidding process that was expected to materialize with qualified oil companies' participation\. Transparency in the petroleum sector was also to be emphasized with the publication of the first Extractive Industries Initiative (EITI) report that would complement previous transparency efforts such as the Petroleum Oversight Committee and the Public Registration and Transparency Information Office to disseminate all public petroleum information\. (c) Preparation of New PRSP PNRMD supported the initiation of a new PRSP\. A Committee was to be appointed in 2008 to prepare a new Poverty Reduction Strategy Paper\. For this purpose, the poverty profile was to be updated utilizing information emanating from a household survey which needed to be reviewed\. 1\.5 Revised Policy Areas (if applicable) The policy areas were not revised\. 1\.6 Other significant changes Not applicable\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Program Performance PNRMD was a single tranche operation\. The Grant was approved on June 10, 2008, became effective on August 12, 2008, and was originally set to close on June 30, 2009\. The closing date needed to be extended twice, first to December 31, 2009 and later to June 30, 2010 to respond to the significant exogenous shocks in the form of increasing international food and fuel prices and subsequently the global financial crisis\. A Supplemental Financing Grant was approved on August 7, 2009, became effective on December 10, 2009, and was originally set to close on December 31, 2009\. The closing date was extended to June 30, 2010 to provide enough time to STP's National Assembly to ratify the Supplemental Financing Grant Agreement, as PNRMD attention was diverted to addressing the exogenous shocks\. This Supplemental Financing helped the Government address pressing social needs while ensuring macroeconomic stability in line with PNRMD objectives\. The operation's design appeared to be simple, with 10 prior actions that were met by the time of Board approval\. However, the program included some complex technical activities, such as developing the SAFE-e system to manage public finances, which were proven to be highly ambitious in light of the low level of institutional capacity in STP\. The Implementation Status and Results Report (ISR) produced rated achievement of the program objectives as Moderately Satisfactory, which was logical given delays in achieving development outcomes when PNRMD attention was diverted to addressing the food and financial crisis that motivated the supplemental 4 financing, and also because of delays in getting the supplemental financing effective and disbursed\. The operation was largely successful overall and the PDO were broadly achieved\. Six of eight program targets were fully or partially met (three met, two mostly met, and two partially met)\. The remaining program target, namely improved government management of government accounts and assets, was not achieved although significant progress was made in this policy area\. This program target was beyond the capacity of GoSTP to deliver it in the time frame required\. Indeed, improved government management of accounts and assets had been hampered due to the technical complexities in preparing the SAFE-e public financial management system, which had been underestimated\. This prevented GoSTP from producing the public accounts in 2009, a task that requires the SAFE-e system to be operational for at least a year\. Quality at entry should have been more focused\. Project design was too optimistic with respect to the possibility of achieving the performance indicators on time and did not concentrate sufficiently on the project's technical complexities and human resource and institutional capacity constraints\. Linked to this was the fact that the Bank had not been involved with a DPO in STP for some time and was not familiar with circumstances on the ground\. The Bank overestimated GoSTP's capacity to approve legislation and underestimated its limited capacity to undertake timely actions according to a preset schedule in the policy matrix given the country's high vulnerability to political changes, low levels of capacity overall, and an overstretched staff\. Overall, a candid risk analysis (see further below) had been carried out at the time of the Decision Meeting, which noted the weak institutional capacity of STP, but the development of program targets would have benefitted from a more in-depth institutional capacity assessment and a more careful consideration of Nigeria's commitment to move rapidly on EITI in the JDZ\. Instead, project design relied on the work of the GCBTA, which, in turn, was also fairly optimistic in achieving results and also lacked an institutional capacity assessment that would have shed light on the feasibility of achieving results over the time frame expected\. 5  (a) Prior Actions PNRMD Prior Actions Policy Area Original Measures PNRMD Improving Accountability and Efficiency of Public Resources Poverty reduction Council of Ministers issued decree number 9/2008 on April 30, 2008, published in Diário de República number 21 on May 7, 2008 authorizing the Poverty Observatory (Observatório da Pobreza) to develop a new PRSP\. Budget preparation Council of Ministers has presented the 2008 Budget to the National Assembly in compliance with article 23 of the Organic Law for Public Finance (SAFE Law 3/27) Budget reporting Council of Ministers issued decree number 10/2008 on April 30, 2008, published in Diário de República number 21 on May 7, 2008 that specifies all budget codes that correspond to PRSP priorities in social sectors\. Budget reporting MoPF used in the 2008 Budget submitted to the National Assembly the new budget codes approved in 2007, which allow tracking of revenues and expenditures by functions of the State Accounting system for public Council of Ministers issued decree 21/2007 on May 24, accounts established 2007, published in Diário da República number 43 on September 7, 2007 establishing an accounting system for public accounts\. Public accounting and information Council of Ministers issued decree number 8/2008 on technology services established April 30, 2008 creating a Public Accounting Department in the MoPF with appropriate budget and personnel allocations and decree number 7/2008 on April 30, 2008, creating an Information Technology Department in the MoPF with appropriate budget and personnel allocations\. Domestic revenue mobilization MoPF presented to the National Assembly a bill of law creating a new corporate tax code as a first step toward final approval\. Domestic revenue mobilization MoPF presented to the National Assembly a bill of law creating a new personal income tax code as a first step toward final approval\. Strengthening Governance in the Oil Sector Petroleum sector reforms Council of Ministers has issued decree 11/2008 on April 30, 2008 approving the model contract for production sharing setting forth international standards of transparency and competition\. Petroleum sector reforms Council of Ministers has submitted to the National Assembly a National Petroleum sector bill of law setting forth international standards of transparency and competition\. 6 2\.2 Major Factors Affecting Implementation: (a) External Factors Two back-to-back external shocks had a devastating impact on STP's population, first increasing food and fuel prices, then reducing external financing\. Starting in 2007, food prices rose sharply--the consumer price and food price indexes rose by 51 percent and 63 percent, respectively, between January 2007 and September 2008\. Rice and milk prices skyrocketed by 97 and 275 percent respectively while banana prices jumped by 52 percent\. Fuel prices also increased by 41 percent, exacerbating already existing inflationary pressures in transport and energy\. In addition, STP suffered trade disruptions affecting imports of key food products such as salt, milk and rice\. The rising cost of living led to a 10-15 percent increase in the number of vulnerable people in 2008\. As a result of the international financial crisis that erupted in end-2008, there were lower than expected tourism receipts, tightening of private sector credit, falling remittances, dropping FDI and foreign aid flows\. These external financing shortcomings translated into lower growth, and falling tax collections that limited the government's human and institutional resources to implement its reform program\. These exogenous shocks created a major distraction for the authorities to implement the reform agenda, in a country with very limited implementation capacity\. (b) Factors Under Government Control In response to the emerging crisis, GoSTP adjusted its policy framework and mobilized funding for investment\. Under pressure to find additional resources, the authorities sold in November 2008 a 35 percent controlling stake in the oil import and distribution local company (ENCO), to the Angolan-owned oil company Sonangol for US$21 million\. The government tightened recurrent expenditure while protecting already limited social safety net allocations\. It funded an investment program partially with Treasury resources obtained from the sale of ENCO and sought to mobilize additional grants as well as other concessional financing\. The emphasis of the public investment program was shifted toward domestic agriculture production and infrastructure in order to address low productivity issues, increased domestic food crops and food security, improved rural income and employment, and poverty reduction\. GoSTP also intended to carry out a comprehensive review of its social safety net and social protection strategy\. However, the government was overstretched during the crisis and as a result PNRMD implementation was delayed\. (c) Adequacy of Government Commitment The PNRMD program closely reflected the government priorities as set out in its government program and the budget support it provided became a key incentive in enlisting the authorities' support for the operation\. GoSTP commitment was very strong despite three government changes taking place and difficulties arising from a challenging governing environment resulting from the exogenous shocks\. To respond to these shocks and sustain the growth effort, GoSTP introduced a revised macroeconomic framework and public investment program which was endorsed by a three-year Extended Credit Facility (ECF) with the IMF, approved in March 2009\. The authorities' commitment to strengthen public governance continued as the crisis deepened\. The National Assembly approved the Petroleum Sector and Petroleum Tax Laws, and the GoSTP 7 entered into discussions with its Nigerian counterparts into forming a Joint STP-Nigeria committee for the EITI, and committed itself to supervise the petroleum operations of the JDZ\. PFM accelerated and in some areas the GoSTP even exceeded the PNRMD's objectives, particularly regarding the payments system, single treasury account, and legislation for transferring all revenues to the Treasury\. (d) Soundness of Background Analysis The PRSP was adopted in 2003 following an extensive consultative process managed by a Steering Committee, chaired by the Prime Minister, consisting of representatives of GoSTP and civil society\. Numerous workshops were organized with the participation of civil society, private sector, political parties, and other stakeholders\. The poverty strategy set an ambitious policy agenda and laid out a strategic plan for poverty reduction based on five pillars: (i) reform of public institutions, capacity building, and promotion of good governance; (ii) accelerated and redistributive growth; (iii) creation of opportunities to increase and diversify income for the poor; (iv) human resource development and access to basic social services; and (v) adoption of mechanisms to monitor, assess, and update the strategy\. However, the PRSP was not results- oriented and did not have clear outcomes and measurable performance indicators\. Limited statistical information further hindered PRSP's monitoring and evaluation process\. Therefore, its usefulness in providing a strong action route for the government program and the Bank assistance was limited\. Background analysis underpinning PNRMD operation was comprehensive and responded to country priorities by providing a strong action plan\. Building on the achievements and lessons of previous Bank projects and of the Public Expenditure Management and Financial Accountability Review (PEMFAR), the PNRMD program supported STP's CAS and the GoSTP's Action Plan in line with PRSP objectives of: (i) improving public expenditure efficiency through better budget preparation, execution, and control; strengthening tax legislation; and assuring a stronger impact of public expenditures on poverty; and (ii) raising the standard of oil revenue management in line with EITI\. The social and environmental analysis was adequate\. Weak governance and fragile institutions were identified as major causes of poverty in the background work\. The PNRMD program also built on PEMFAR's findings that pro-poor expenditures have a limited impact due to sector strategies that are not fully consistent with the annual budget allocations and the long-term strategy set on the PRSP\. Aware of these challenges the GoSTP had initiated a medium term reform program supported by the World Bank GCBTA project to improve PFM, develop public accounts and a modern procurement system, and create petroleum management legislation and institutions\. Furthermore, the macroeconomic framework was in line with the 2006-2008 IMF- PRGF program and the Supplemental Financing revised macroeconomic framework was in line with the 2009-2011 IMF ECF\. (e) Assessment of the Operation's Design The project development objectives were measured by a set of program targets for which the operation could reasonably be held accountable given its duration, resources, and approach\. Program targets were clear, and important, as well as fully responsive to borrower requirements and development priorities\. Priorities were defined to address the most pressing PFM issues, as well as governance requirements in the petroleum sector, although the program targets were somewhat ambitious given the technical complexity of developing the SAFE-e system and the difficulties to coordinate with Nigeria on setting up joint EITI institutions in the JDZ\. 8 Project design was closely linked to GCBTA's agenda, taking advantage of economies of scale in project preparation and supervision and in particular during project implementation by the authorities\. The analysis of individual components was consistent with their relative importance to the objectives of the operation\. Good practice principles on conditionality were applied\. These included reinforcing ownership, agreeing up front on a coordinated accountability framework, customizing the accountability framework and modalities of Bank support to STP's circumstances, choosing actions critical for achieving results on conditions for disbursement, and conducting transparent progress reviews\. An institutional capacity assessment was not prepared, which was somewhat unfortunate since two of the operation's eight program targets were either very complex to be completed in the time required, or depended on coordinating with Nigeria to address petroleum transparency in the JDZ\. Indeed, the complexity and the time required for introducing the SAFE-e system was grossly underestimated\. Notwithstanding the lack of an institutional capacity assessment, the PNRMD program's design benefitted from the fact that GCBTA was operational and provided updated information on country systems\. Effective consultations were held with key stakeholders and included meetings with country officials, legislators, civil society, and the private sector\. Workshops were held with government officials to discuss the policy matrix and Grant Agreement, both of which were translated into Portuguese and discussed in that language\. Given the pressing needs to move quickly the PD was only issued in English although its content was thoroughly discussed with the authorities\. Also PEMFAR, a key background document, had been translated into Portuguese and disseminated widely in STP, which facilitated GoSTP's understanding of the operation\. Donor coordination did not become a critical factor in the operation's design\. Donor coordination has lacked a formal consultative group type mechanism that focuses on STP's medium term policy reform agenda, ensures project coordination in tandem with the implementation of the policy agenda, and acts as a conduit for the pledging of donor contributions\. Nonetheless, the Bank team developed good working arrangements with the IMF, UNDP, the African Development Bank, the European Union, Portugal and the MCC, informing them of the work program while in the field\. (f) Relevance of Risk Analysis The PD identified five main risks that could influence the operation's expected outcomes: (i) external factors that could have a deterring impact on economic growth, reduce government resources and affect its ability to conduct its reform program; (ii) policy reversals or slippages in structural reforms, notably petroleum sector management, could affect the GoSTP's ability to maintain a stable macroeconomic environment and focus expenditure on poverty reducing priorities identified in the PRSP; (iii) weak human, institutional, and managerial capacity could slow down the pace of implementation; (iv) fiduciary risks with regard to the use of public funds remain as internal and external control mechanisms remain weak; and (v) reforms and the growth momentum may not be sustainable if oil exploitation does not materialize\. The Supplemental Financing PD reviewed the risk analysis considering progress made at the early stages of implementation and specified four major risks that could influence the operation's expected outcomes\. These risks were: (i) uncertainties surrounding the global economic downturn and the impact on STP's external financing and the macroeconomy; (ii) political stalemate that could slowdown the reform program; (iii) fiduciary risks associated to weak internal and external 9 financial control mechanisms; and (iv) the weak institutional capacity to implement the domestically financed investment program\. Proposed mitigation measures as specified in the PD included: (i) close cooperation with bilateral donors and the IMF to reduce macroeconomic risks; (ii) design the prior actions to assure early implementation of key policies; (iii) concentrate reforms in a limited number of sectors and heighten technical assistance to mitigate the risk of weak institutional capacity in STP; and (iv) a support wide scope of public finance management reforms to mitigate fiduciary risks\. In addition, the PD noted the strength of the Government's ownership and commitment to implement the proposed measures, in particular public finance management, and the active policy dialogue with Bank and Fund staff and the extension of the Bank's Technical Assistance Capacity Building project\. The risk analysis for both operations was fully relevant and the mitigation measures proposed broadly adequate\. Nonetheless, although the PD identified external factors as a risk, it did not envisage an international financial sector crisis or the ensuing global recession emerging as part of the operation's risks\. But the PD should not be faulted for this omission since these were risks that took the whole developed and developing world by surprise\. Nonetheless, all such risks were mitigated through the use of the supplemental financing made available to GoSTP\. The PD also did not envisage the complexities of setting up a joint EITI committee with Nigeria\. Even though an institutional capacity assessment would have helped in the design of the operation, it should be noted that the STP-Nigeria JDZ is the only joint-zone evaluated by the EITI Secretariat and therefore the degree of risk was hard to predict\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: Given a weak monitoring and evaluation system in-country and a single tranche operation, PNRMD's M&E framework was largely based on relevant and easy to monitor indicators and program goals, which could be tracked and were aligned with objectives\. These were listed as policy interventions and results for each of the two PNRMD objectives in the PD\. Nonetheless, the results indicators could have possibly been better quantified, but that proved to be somewhat difficult because of the paucity of the data in the country\. A half-yearly review was carried out taking into account the rather short period to have a full visible impact\. The operation also benefitted from the monitoring system in place under the IMF ECF\. Development of longer term indicators would have been desirable to better measure results over the medium-term, but again this would have been difficult given the data constraints\. Although the Bank encouraged institutionalizing an M&E culture in the country, its impact on such a dramatic change in oversight was limited for this operation but continue to be address in the context of the GCTA project\. 2\.4 Expected Next Phase/Follow-up Operation (if any): Although the authorities have made substantial progress over the past five years in the macroeconomic and PFM areas and in improving petroleum sector governance, the economy remains fragile and vulnerable to external shocks, poverty persists, there critical public sector and economic governance challenges and the PFM agenda remains unfinished\. Small island states pursuing good economic management practices initially tend to reflect somewhat better macroeconomic, fiscal, and social results than larger countries given their small economic base, initial starting point, and small population numbers\. Yet these positive results mask major capacity constraints that hamper the development of their growth potential and strengthening their governance requirements\. 10 The country needs to consolidate its PFM reform agenda and lay out stronger foundations for achieving sustained longer term growth and poverty reduction\. For this reason, the Bank should be prepared to remain an active participant in supporting STP's development efforts over the longer term; otherwise the risk of reversal of hard won gains is likely to increase sharply\. Because of this, supporting Bank financial and technical assistance will most likely be required even during the period when the potential revenues emanating from the development of its oil resources begin to flow\. The priorities supported by the PNRMD program have largely focused on developing and strengthening public sector financial systems and processes and petroleum governance\. This aims first to developing institutional capability, utilizing modern techniques and approaches, to raise public sector efficiency\. It also aims to increasing transparency in the petroleum sector, developing the mechanisms to ensure that the benefits of future oil extraction will materialize optimally within standards of good governance\. The next phase of reforms would need to consolidate the gains achieved through the PNRMD program and the GCTA project\. Within this context, the Bank should continue its focus on raising the accountability and effectiveness of public resources by encouraging preparation of a results oriented development strategy and helping strengthen donor coordination in support of the strategy, increasing transparency and accountability of budget preparation\. The Bank should also support the authorities to adequately maintaining fiscal discipline, regardless of whether or not oil production materializes in the medium term\. In the medium term, a substantial amount of technical assistance will be required in the preparation of a medium term expenditure and fiscal framework (MTEF)\. Activities in this regard will include developing criteria for the most efficient use of resources in project selection, and preparing medium term public investment program within the context of maintaining a stable and competitive macroeconomic framework in line with resource availability and prudent debt management practices\. Another potential area of improvement is civil service management although this is known to require substantial background analysis and long term commitment\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation The PNRMD's objectives, design, and implementation were consistent with GoSTP's development priorities and corporate goals as reflected in STP's PRSP and the Bank's CAS\. The operation remains critically important for achieving STP's and Bank objectives in light of the adverse external shocks that impacted the country, which the supplemental financing grant contributed to mitigate\. 3\.2 Achievement of Program Development Objectives The PNRMD PDOs were largely achieved as evidenced by STP's performance in relation to the targeted program indicators\. The operation was also successful in providing critical resources to implement the GoSTP reform program, address social needs during high food and fuel prices\. When key indicators such as the economy's growth rate, expected mobilization of external assistance and foreign direct investment, tax collections, and primary surplus/deficit deteriorated in 2008/09 due to the global economic downturn\. Under these conditions, the US$2 million supplemental financing and the extension of the closing date of the PNRMD program provided timely assistance and allowed the Government to close its fiscal gap, maintain macroeconomic 11 stability, and the GoSTP reform program\. Table 1 below provides selected macroeconomic indicators for 2000 and for 2005 through 2009\. Outcomes under the PNRMD supported program are discussed next and detailed in Section F in the Data Sheet\. (a) Objective 1: Strengthening Public Financial Management Substantial progress has been achieved in increasing the transparency and accountability of public financial resources\. reflecting the priorities of GoSTP\. The 2008 Budget was prepared before the fiscal year started facilitating budget implementation\. Also, quarterly budget monitoring reports have been prepared, helping the authorities monitor budget execution\. Pro-poor expenditures in the 2009 Budget were 66 percent above the amount included in the 2008 Budget, in line with PRSP priorities\. A Decree with the proposed new functions of the Budget Directorate has been approved, moving forward the reform toward decentralization of budget execution\. Draft legislation and procedures to prepare/monitor cash plans, including manuals for Treasury operations are being implemented, but they have not been formally approved\. In addition, no reports on the financial position of SOEs have been prepared so far\. Transparency in procurement processes has been strengthened\. New procurement legislation was approved and training provided in the area of procurement to all ministries' procurement officers\. A Procurement Supervisory Body has been staffed and is operational\. As a result of these improvements, 93 percent of public contracts above US$60,000 now follow competitive bidding procedures\. Yet, it is worth mentioning that during program supervision it was found that procurement problems arose because of insufficient competition and presentation of bids due to their low value, which has not been sufficient to attract international suppliers\. This problem is common in small island countries and deserves further analysis\. There has been some progress in improving the management of government accounts and assets but not all program targets were met\. Importantly, the public accounts of the State are not produced for STP\. The non existence of public accounts means that an external audit cannot be conducted by the court of accounts\. This is an important weakness because limits public sector accountability, implying that the STP population does not have adequate information about how public resources are used\. In addition, this lack of information inhibits direct budget support by many other donors because these donors require the public accounts to be audited\. To a large extent the lack of public accounts of the State has resulted from the technical complexities of developing and making operational the SAFE-e system\.1 An inventory of public assets by a consulting firm is underway and needs to be completed as it is an important step in designing a more effective public management system by enabling the centralization of government assets into a single database run by Directorate of Assets Management\. The mechanism for domestic revenue mobilization has been strengthened\. Important legislation has been adopted\. A new corporate tax law and income tax law were adopted in 2009 with a rate on profits of 25 percent in line with regional levels and progressive income tax rates in place covering all sources of income, respectively\. A new urban tax was also adopted with updated property tax values to increase tax collection although lack of urban cadastre has limited its implementation\. Another important limitation is that a Tax Tribunal in line with the General Tax 1 However, it is important to note that there are also several other activities that need to be carried out in order to prepare the public accounts (i\.e\. opening of the accounts, selection of the accounting standards, and building up capacity)\. 12 Code and the Tax Procedural Code approved in 2007 is not operational\. This limits the capacity of the government to resolve tax disputes and seize unpaid taxes\. Table 1: São Tomé and Príncipe, Selected Macroeconomic Indicators, 2000 and 2005-2009 2000 2005 2006 2007 2008 2009 Real GDP growth rate (%) 0\.4 5\.7 6\.7 6\.0 5\.8 4\.0 Population growth (%) 1\.8 1\.7 1\.6 1\.6 1\.6 1\.6 Real GDP per capita growth rate (% ) -1\.3 3\.9 5\.0 4\.3 4\.1 2\.4 GDP per capita (2000 US$) 547\.4 686\.4 720\.4 751\.5 782\.5 800\.9 Consumer price inflation (%) 11\.0 17\.2 23\.1 18\.5 26\.0 17\.0 Exports of goods and services (% of GDP) 21\.2 13\.9 13\.7 9\.2 12\.0 11\.1 Imports of goods and services (% of GDP) 57\.4 52\.9 70\.4 63\.1 78\.9 69\.7 Current account balance (% of GDP)1 -15\.1 -10\.3 -28\.8 -38\.1 -50\.1 -34\.7 Gross Reserves (in Millions of USD $) 5\.5 21\.0 20\.2 22\.8 34\.4 29\.0 Gross national savings (% of GDP) 8\.6 24\.8 11\.0 -6\.8 -19\.2 10\.1 Gross fixed capital formation (% of GDP) 26\.1 35\.0 39\.7 31\.3 30\.9 44\.8 Private fixed capital formation 8\.4 18\.8 18\.8 18\.9 18\.9 21\.8 Revenue excl\. grants (% of GDP) 29\.2 17\.3 20\.9 19\.1 17\.7 17\.0 Grants (% of GDP) 33\.1 17\.0 15\.9 120\.1 30\.0 19\.2 Expenditure and net lending (% of GDP) 89\.6 44\.0 50\.5 39\.9 33\.0 47\.1 Public Capital expenditure (%of GDP) 38\.4 15\.5 19\.8 11\.5 8\.6 25\.4 Overall fiscal deficit (% of GDP) -27\.3 37\.1 -13\.7 120\.3 14\.5 -11\.6 Public Debt (% of GDP) 381\.8 275\.6 286\.8 103\.0 62\.2 56\.3 FDI inflows (Millions of US $) 3\.8 55\.4 27\.0 52\.6 54\.2 18\.8 GDP ( Constant LCU) 612\.0 835\.8 891\.6 945\.1 999\.9 1039\.9 GDP (in Millions 2000 USD) 76\.7 104\.8 111\.8 118\.5 125\.3 130\.3 National income per capita (in USD) 347\.1 739\.0 823\.2 961\.2 1118\.3 1192\.7 Total Public debt (in millions USD) 307\.4 324\.6 324\.5 153\.8 122\.7 79\.2 Foreign laons (in Millions USD) 11\.1 0\.0 1\.9 -12\.9 2\.0 2\.0 Source: IMF and WDI 2010 With regards to the program target concerning the development of a plan to merge personnel records database in the MoPF and the Ministry of Public Administration was not formally adopted\. Yet, a de facto action plan exists in this area, as the SAFE-e will have be a personnel module linked to the budget that will effectively merge the two databases and provide the necessary personnel information required\. The GoSTP is taking steps toward achieving the objective of merging the payroll and personnel databases through the SAFE-e system, which will include a personnel module linked to the budget\. Objective 2: Strengthening Governance in the Petroleum Sector Good progress has been achieved in enhancing petroleum related transparency\. STP has developed the required legislation and institutions to exploit its JDZ, and is finalizing a Petroleum Environmental Law with the support of Norway\. Importantly, a Handbook of the Oil Management Law has been published and a Petroleum Sector Development Strategy adopted\. Despite government commitment to implement the EITI, it has not been possible to set up the EITI institutions in the JDZ due to coordination difficulties with Nigeria\. With reference to the petroleum related PDO, EITI depended on a joint meeting of the STP-Nigeria Committee that 13 apparently was not an urgent priority for Nigeria\. As a result STP was delisted from the EITI although the authorities have shown their commitment to deepen transparency measures and re- apply to the EITI as soon as the EITI institutions in the JDZ are made created\. STP efforts to improve transparency in the petroleum sector have also allowed STP to initiate in March 2010 the license round of seven blocks in its Exclusive Economic Zone (EEZ) following an international competitive bidding process and qualified petroleum companies have expressed interest in the EEZ bidding\. Objective 3: Preparation of a New PRSP The Council of Ministers created a Technical Committee in charge of preparing a new PRSP, formed by the Directorate of Planning and the PRSP Unit (Observatorio da Pobreça) among others\. Preparation of the new PRSP is however delayed as a critical household survey that updates the poverty profile has not been finalized yet due to limited capacity and lack of resources\. The authorities, however, has shown their commitment to preparing a new PRSP by partially funding such a household survey with domestic resources to accelerate PRSP preparation although additional resources will be needed\. 3\.4 Justification of Overall Outcome Rating Moderately Satisfactory\. Key indicators were largely met for a majority of outcomes as indicated above, particularly in procurement, budget preparation and monitoring, and strengthening of the tax base\. Systems introduced have become operational\. Work on the new PRSP has begun but key next steps will need to take place for the PRSP to be completed\. Despite being delisted from the EITI, petroleum-related transparency has improved as reflected by the interest demonstrated by qualified oil companies in participating in EEZ competitive bidding\. Although these are areas that have strongly strengthened the reform process, preparation of public accounts remains a key priority in the reform agenda\. The lack of public accounts negatively affects transparency and accountability of public financial resources\. In addition, inadequate payroll management systems hinder effect civil service management and penalize public sector efficiency\. All in all, substantial progress has been made, with five out of the eight targets met and progress on the remaining three that in some cases were beyond the control of the authorities\. Once all these factors considered, the overall outcome is rated Moderately Satisfactory\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development PNRMD is likely to have a positive impact on STP's population in terms of poverty reduction, gender aspects, and social development\. Domestic resource mobilization has been strengthened, providing critical resources for implementing the PRSP\. Improvements in PFM will serve to raise the efficiency of public expenditure, for instance, by quantifying the amounts of and identifying the destination of poverty and social development related expenditures\. All of these improvements have strengthened GoSTP's capacity to support social, gender related, and poverty reduction programs through the public budget\. 14 (b) Institutional Change/Strengthening The institutional change and strengthening impact of the reform measures supported by the PNRMD program has been significant\. The PNRMD program supported key reforms to improve PFM framework and systems\. Institutions have been created which have become operational and have strengthened governance\. Capacity has been built in identifying poverty expenditures in the budget\. The tax collection system has been strengthened\. Public procurement has become more transparent\. Management of government accounts and assets is gradually being improved\. The systems for a more transparent and efficient utilization of future petroleum resources have been put in place\. (c) Other Unintended Outcomes and Impacts (positive or negative, if any) Not applicable\. There were no unintended outcomes and impacts\. 4\. Assessment of Risk to Development Outcome Negligible to Low\. Given the high level of commitment of all political parties around the reforms supported by the project (notably PFM reforms), and the continuous support from the Bank, the assessment of the risk to the development outcome is Negligible to Low, reflecting the likely probability that the objectives will be achieved and sustained in the medium term\. Some factors could weaken the pace of reforms, but not the sustainability of the development outcome\. For instance, a prolonged international recession or a recurrence of rising oil and food prices could weaken STP's economy, increase inflationary pressures, affect fiscal performance, and reverse gains in the social areas and in reducing poverty\. Other external shocks could also affect the recently elected administration's ability to ensure rapid approval of critical legislation required to underpin the reform process\. Yet, with regards to the PNRMD objectives, the Government of STP is committed to consolidate the reform program in PFM and the transparency efforts in the petroleum sector, as well as to accelerate preparation of the new PRSP\. This government initiative will be complemented with efforts to continue implementation of the IMF ECF program to ensure macroeconomic stability\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Moderately Satisfactory\. Preparation of the PNRMD program and its supplemental financing was moderately satisfactory\. The reform was guided by the parallel GCBTA project and reflected key critical areas for STP's development\. The peer reviewers' comments and guidance proved to be instrumental in focusing the operation\. Consultations with the IMF, Portugal, and MCC were useful in ensuring quality at entry\. Bank missions coincided with IMF missions and coordination was highly effective, notably during the preparation of the supplemental financing that require timely macroeconomic assessments\. Notwithstanding overall efforts in ensuring quality at entry, limited attention was given to preparing an institutional capacity assessment, which would have probably identified 15 critical constraints to implement the PNRMD operation (notably the SAFE-e system and coordination with Nigeria with regards to the EITI)\. (b) Quality of Supervision Satisfactory\. Supervision of the PNRMD and its supplemental financing was moderately satisfactory\. The task team leader (TTL) for the PNRMD and its Supplemental Financing was also responsible for supervising the GCBTA project, thus facilitating cross-fertilization between the two operations\. Project supervision included several missions as reflected in the ISR prepared\. A close level of supervision of the PNRMD implementation was instrumental to overcome technical difficulties in communicating with counterparts in STP\. Aide-memoires and program implementation matrices were prepared and discussed with the counterpart team, stating clearly specified areas of weaknesses and recommendations to overcome them\. The TTL ensured that the reform had the sufficient technical and financial resources for implementing the program\. Other Bank units also provided adequate support when required, particularly in the areas of public finance management, procurement, and petroleum\. It is important to note that a close level of supervision was only possible by sharing supervision cost between the PNRMD program and the GCBTA project\. The PNRMD program proved to be a high cost operation for a number of reasons\. First, there is no country office in STP and therefore daily supervision is not possible\. Second, telecommunications in STP are very poor and it is difficult to reach the country by phone or e-mail\. Third, air transportation is limited and its costly\. Fourth, the authorities have limited experience in implementing budget support operations\. 5\.2 Borrower Performance Moderately Satisfactory\. The Borrower was fully committed to the operation\. The GoSTP saw the operation as providing an opportunity to promote country-owned reforms strongly supported by the administration\. The PIU Coordinator for GCBTA was also appointed as PNRMD Coordinator\. Key senior GoSTP officials were fully on board, including the Minister of Planning and Finance and the Director of the National Petroleum Agency\. The TTL established a good working relationship with its counterparts, which permitted the supervisory work to be undertaken under an environment of mutual trust\. Notwithstanding the GoSTP commitment to the reform program, PNRMD implementation was delayed because the GoSTP partially had to divert its attention away from the operation to address pressing issues arising from the increasing fuel and food prices, as well as the impact of the global recession\. As a result, the operation's closing date was extended twice\. The second extension of the closing date of the project from December 2009 to June 2010 was granted to provide STP's National Assembly enough time to ratify the Supplemental Financing Grant Agreement\. 6\. Lessons Learned 1\. Parallel investment projects can help DPLs if adequately coordinated\. Fragile economies beset by weak institutions and persistent poverty such as STP require long term technical and financial external support and the Bank should ensure such an assistance continues\. A parallel capacity building technical assistance project has contributed to ensure that the PNRMD objectives were achieved\. 16 2\. Operations in fragile states should incorporate an adequate M&E system with realistic outcome indicators and a reduced number of intermediate indicators\. To develop an adequate M&E system for DPL operations in countries with fragile institutions and weak or non-existent PFM systems, the task team would need to identify critical capacity constraints (e\.g\. by preparing an institutional capacity assessment during DPL preparation)\. After indentifying such capacity constraints, effective use of M&E systems should be based on relevant, precise, quantifiable to the extent possible, and easy to monitor indicators and program goals that help track information from all government agencies/ministries\. M&E should become part of a Borrower's everyday duties and responsibilities in the economic management area\. 3\. Do not underestimate technical complexities\. Introducing sophisticated software in a low capacity country is a highly complex and time consuming activity\. Therefore, Bank operations should take this into account when developing a policy matrix of conditionalities\. 4\. Need to provide adequate supervision funding\. Adequate supervision of the PNRMD operation was made possible because of the availability of resources for supervising both PNRMD and GCBTA operations\. Countries with low institutional capacity such as STP require additional supervision funding\. If such funding is not made available, DPL operations may encounter serious implementation problems\. 5\. Strengthen donor coordination\. Future DPLs on fragile states would benefit from having a formal donor coordination mechanism that ensures adequate program and project coordination and implementation\. Such a donor coordination mechanism would also act as a conduit for the pledging of donor contributions in support of the agenda, reducing transaction costs for already overstretch the authorities\. Stronger donor coordination is expected to foster exchange of information around the government strategy, creating guiding principles that support (rather than substitute for or duplicate the functions of) Government ministries and agencies\. Periodic donor reviews should ensure that donor financed projects are implemented on a timely basis\. 17 Annex 1 Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Rafael Muñoz Moreno Economist AFTP3 Team Leader Aissatou Diallo Finance Officer LOAFC Lending Aspects Renaud Seligmann Sr\. Financial Management Specialist AFTFM Financial Management Eleodoro O\. Mayorga Alba Consultant COCPO Coordinator COPCO Antonio Chamuco Procurement Specialist AFTPC Procurement Beth Dabak Operations Analyst LEGJR Operations Analysis Janet Dooley Senior Country Officer AFCCM Country Operations Anna Victoria Gyllerup Operations Officer AFTRL Bank Operations Stephane Legros Public Health Specialist WBIHD Health Geraldo Martins Senior Education Specialist AFTH2 Social Development Eduardo Brito Senior Counsel LEGAL Legal Eric Bell Lead Economist AFTP3 Guidance and Advice Kathryn Hollifield Country Program Coordinator AFCCM Guidance and Advice Supervision Rafael Muñoz Moreno Economist AFTP3 Team Leader Eric Bell Lead Economist AFTP3 Guidance and Advise Marco Antonio Hernández Oré Young Professional AFTP3 Public Finance Eleodoro O\. Mayorga Alba Consultant LCSSO Coordinator COPCO Financial Renaud Seligmann Sr Financial Management Specialist AFTFM Management (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY08 34 173\.87 FY09 20 99\.0 Total: 54 272\.87 Supervision/ICR FY08 FY09 11 60\.1 Total: 11 60\.1 18  Annex 2\. Summary of Borrower's ICR and/or Comments on Draft ICR Translation of the Government Evaluation of the DPO "Evaluation and Comments on the Draft Implementation Completion and Results (ICR) Report" Overview IDA grants in the amount of US$8 million to Sao Tomé and Príncipe were approved to help implement the Government's economic reform program for 2008-2009 that was based on Sao Tomé and Príncipe's Poverty Reduction Strategy (PRSP)\. The Public and Natural Resource Management Development (PNRMD) operation supported policy measures aimed principally at improving the accountability, effectiveness and level of public resources and at strengthening governance in the oil sector\. It also supported the authorities' efforts to initiate the preparation of a new PRSP based on in-depth analysis of growth diversification options\. This operation supported the implementation of two pillars of the PRSP: strengthening public financial management and governance and transparency in government operations\. Context Program implementation took place in a difficult political and economic environment\. Coalition arrangements led to frequent changes of government and delays in the implementation of the development agenda\. Also, during program implementation, São Tomé and Príncipe was struck by two external shocks\. The first one originated from a sharp rise in international oil and food prices in mid-2008 and the second one was brought about by an international financial crisis that emerged unexpectedly and a major world recession that ensued\. Both external shocks took a significant toll on the country, with economic growth and poverty reduction becoming hostages from the impact of both shocks\. Mobilization of external assistance and foreign direct investment were lower than expected, which further reduced economic growth\. Under these conditions, it was extremely difficult for the Government to close its fiscal gap and maintain a viable macroeconomic framework\. In this sense, the provision of the US$2 million Supplemental Financing to the PNRMD and the extension of the closing date of the grant were essential for maintaining macroeconomic and political stability and the course of reforms\. Program Implementation The preparation and implementation of the operation was consistent with the Government's development priorities and corporate goals, and responded to the Government's request for assistance in critical areas for São Tomé and Príncipe's development\. Priorities were defined to address the most pressing public finance management issues, as well as governance requirements in the petroleum sector\. These priorities were somewhat ambitious given a low institutional capacity and the limited time frame required achieving them\. The design was closely linked to and supported by the Government Capacity Building Technical Assistance (GCBTA) operation's agenda\. Effective consultations were held with key stakeholders and included meetings with country and local officials, legislators, civil society, and the private sector\. Workshops were held with government officials to discuss the policy matrix and Grant Agreement, which were translated into Portuguese and discussed in that language\. 19 We have reviewed the draft implementation Completion Report prepared by the World Bank and we agree with the assessment made\. One key constraint to program implementation continues to be our limited existing capacity resulting from weak financial management systems in place, and dearth of qualified staff\. A key factor to overcoming these constraints and achieving most of the program's objectives was the complementary Bank assistance through the above-mentioned GCBTA\. Results All ten prior actions supported by the PNRMD and its Supplemental Financing were met\. To strengthen public finance management and improve governance in the petroleum sector the Government implemented the following actions: Council of Ministers issued decree number 9/2008 on April 30, 2008, published in Diário da República number 21 on May 7, 2008 authorizing the Poverty Observatory (Observatorio da Pobreza) to develop a new PRSP\. Council of Ministers has presented the 2008 Budget to the National Assembly in compliance with article 23 of the Organic Law for Public Finance (SAFE Law 3/2007)\. Council of Ministers issued decree number 10/2008 on April 30, 2008, published in Diário da República number 21 on May 7, 2008 that specifies all budget codes that correspond to PRSP priorities in social sectors\. Ministry of Planning and Finance used in the 2008 Budget submitted to the National Assembly the new budget codes approved in 2007, which allow tracking of revenues and expenditures by functions of the State\. Council of Ministers issued decree 21/2007 on May 24, 2007, published in the Diário da República number 43 on September 7, 2007 establishing an accounting system for public accounts\. Council of Ministers issued decree number 8/2008 on April 30, 2008 creating a Public Accounting Department in the Ministry of Planning and Finance with appropriate budget and personnel allocations and decree number 7/2008 on April 30, 2008, creating an Information Technology Department in the Ministry of Planning and Finance with appropriated budget and personnel allocations\. Ministry of Planning and Finance presented to the National Assembly a bill of law creating a new corporate tax code as a first step toward final approval\. Ministry of Planning and Finance presented to the National Assembly a bill of law creating a new personal income tax code as a first step toward final approval\. The Ministry of Natural Resources and Environment's resolution number 11/2008 on April 23, 2008 adopted the Extractive Industries Transparency Initiative (EITI) National Committee's detailed roadmap for the implementation of the EITI\. Petroleum sector governance: a\. Council of Ministers has issued decree 11/2008 approving the model contract for production sharing setting forth international standards of transparency and competition\. b\. Council of Ministers has submitted to the National Assembly a National Petroleum sector bill of law setting forth international standards of transparency and competition\. Other Reforms The program has been supportive of the Government's reform program\. The Government remains committed to the reform agenda and will continue to ensure that all of the program objectives are achieved\. 20 Reporting on budget preparation and execution has improved considerably reflecting the priorities of the Government and of its enhanced institutions\. The 2008 Budget was prepared before the fiscal year started\. Quarterly budget monitoring reports are being prepared\. Pro-poor expenditures in the 2009 Budget were 66 percent above the amount included in the 2008 Budget\. A draft Decree with the proposed new functions of the Budget Directorate has been approved\. The software for the budgetary programming of investment is part of SAFE-e and will await the operationalization of that system for its introduction\. Transparency in procurement processes has been strengthened\. New procurement legislation was approved and training provided in the area of procurement for all ministries' procurement officers\. A Procurement Supervisory Body has been staffed and is operational and has reported that 93 percent of public contracts above US$60,000 follow competitive bidding procedures\. Transparency and accountability of public financial resources is being achieved\. Draft legislation and procedures to prepare/monitor cash plans, including manuals for Treasury operations are being implemented, although they will need to be formally approved\. A report is being produced quarterly on budget execution\. The next step in the reform agenda is to produce reports on the financial position of SOEs that we will expect to be produced in 2011\. Delays in the preparation of the public accounts have resulted from the technical complexities of developing and making operational the SAFE-e system, which is now operational and will facilitate the preparation of the 2011 public accounts of the State\. An inventory of public assets by a consulting firm has been underway and is in the process of being completed\. Its adoption will enable the centralization of government assets into a single database run by the Department of Asset Management\. Payroll management is gradually improving\. A de facto action plan to merge the payroll and personnel databases in order to reconcile, update, and merge different personnel records databases or the headcount of government employees is in place and is being implemented\. The Government is taking steps toward achieving the objective of merging the payroll and personnel databases through the SAFE-e system, which will include a personnel module linked to the budget, once it is completed\. The mechanism for domestic revenue mobilization has been strengthened\. New corporate tax law and income tax law were adopted with a rate on profits of 25 percent in line with regional levels and progressive income tax rates in place covering all sources of income, respectively\. A new urban tax was also adopted\. The next step in this process envisaged by the Government is the creation of a Tax Tribunal in line with the tax reform approved in 2007 which will require of close collaboration with the Ministry of Justice Petroleum related transparency is being enhanced and a Handbook of the Oil Management Law has been published and a Petroleum Sector Development Strategy adopted\. The joint STP-Nigeria EITI Committee could not be formed, reflecting the complexity to make operational the EITI requirements in a joint international organization that must report to two States\. Nonetheless being delisted from the EITI in February 2010, we remain committed to the initiative and will continue our efforts to re-apply as soon as conditions are met\. Also, we have initiated an open and transparent bidding process of seven blocks in our Exclusive Economic Zone in March 2010 and qualified petroleum companies have expressed interest in EEZ bidding\. 21 The new PRSP document is being prepared based on a domestic-led growth strategy and is intended to become results-oriented\. Preparation of the New Development Strategy is being led by the Planning Directorate with a Technical Committee formed by the PRSP Coordinating Office\. Program Supervision Bank supervision of the Bank-financed operation has been appropriate\. The task team leader responsible for supervising GCBTA was also in charge of supervising the PNRMD grant and its supplement, which contributed to successful program supervision\. The Bank team visited the country three times and assisted the supervision unit in helping deliver the reform program\. Aide- memoires and matrices were issued and discussed in close consultation with the supervision unit\. These included clearly specified areas of weakness and attention, and made an effective use of the supervision reports prepared for the GCBTA project\. The Bank team also ensured through the GCBTA project that the counterpart team had the sufficient technical and financial resources for implementing the program\. Bank missions coincided with IMF missions and coordination was highly effective\. The project unit in charge of monitoring the GCBTA was also in charge of monitoring the PNRMD\. 22  Avaliação do DPL (Empréstimo para Políticas de Desenvolvimento) e Comentários sobre o Relatório Preliminar sobre Conclusão de Implementação e Resultados (ICR) Síntese As doações da AID a S\. Tomé e Príncipe, no montante de USD 8 milhões foram aprovadas com o fim de ajudar a implementar o programa de reformas económicas do Governo para 2008-2009, que tinha por base a Estratégia de Redução da Pobreza de S\. Tomé e Príncipe (ENRP)\. A operação de Desenvolvimento de Gestão dos Recursos Públicos e Naturais (PNRMD) apoiou medidas políticas destinadas principalmente a melhorar a responsabilização, eficácia e nível de recursos públicos e a reforçar a governação no sector do petróleo\. Apoiou também os esforços das autoridades no sentido de dar início à preparação de uma nova ENRP com base numa análise aprofundada de opções de diversificação para o crescimento\. Esta operação apoiava a implementação de dois pilares da ENRP: o reforço da gestão financeira pública e da governação, e a transparência nas operações do governo\. Contexto A implementação do programa decorreu num clima político e económico difícil\. A rotura dos acordos de coligação establecidos resultaram em frequentes mudanças de governo e a atrasos na implementação do programa\. Acresce ainda que, durante a implementação do programa, São Tomé e Príncipe foi atingido por dois choques exógenos\. O primeiro, em meados de 2008, teve origem numa acentuada subida dos preços internacionais do petróleo e dos alimentos e o segundo foi provocado por uma crise financeira internacional que surgiu inesperadamente e uma recessão mundial de grandes dimensões\. Ambos estes choques externos tiveram significativo impacto no país, tornando o crescimento económico e a redução da pobreza reféns do impacto de ambos\. A mobilização da ajuda externa e do investimento directo estrangeiro foram abaixo em relação do esperado, o que reduziu ainda mais o crescimento económico\. Nestas condições, foi extremamente difícil ao Governo reduzir o défice fiscal e manter um quadro macroeconómico viável\. Neste aspecto, a concessão de um Suplemento ao Financiamento do PNRMD no montante de USD 2 milhões, e o prolongamento da data de fecho da doação, foram essenciais para a manutenção da estabilidade macroeconómica e política e a continuidade das reformas\. Implementação do Programa A preparação e a implementação da operação estiveram em linha com as prioridades de desenvolvimento do Governo e com os objectivos corporativos, dando resposta ao pedido de apoio do Governo em certas áreas de importância crítica para o desenvolvimento de São Tomé e Príncipe\. Foram definidas prioridades para atender à questões mais prementes da gestão das finanças públicas, bem como à necessidades de governação no sector do petróleo\. Estas prioridades eram algo ambiciosas, dada a reduzida capacidade institucional e o limitado enquadramento temporal para as alcançar\. A concepção foi estreitamente ligada e apoiada pelo projecto de Assistência Técnica para o reforço da Capacidade de Governação (PATRCG)\. Foram realizadas consultas aos principais intervenientes interessados, incluindo reuniões com funcionários a nível nacional e local, legisladores, sociedade civil e o sector privado\. Foram organizados workshops com elementos do governo, para debater a matriz das políticas e o Acordo de Doação, os quais foram traduzidos para português e analisados neste idioma\. Analisámos o Relatório de Conclusão preliminar relativo à implementação, elaborado pelo Banco Mundial e concordamos com a avaliação apresentada\. Uma das principais dificuldades para a 23 implementação do programa continua a ser a nossa actual limitação de capacidade, resultante dos débeis sistemas de gestão financeira aqui existentes, e a escassez de pessoal qualificado\. Um factor importante para ultrapassar estes constrangimentos e alcançar a maioria dos objectivos do programa, foi o apoio complementar do Banco, através do já referido PATRCG\. Resultados Todas as dez acções prévias apoiadas pelo PNRMD e o seu Financiamento Suplementar foram cumpridas\.Para reforçar a gestão financeira pública e melhorar a governação no sector do petróleo, o Governo implementou as seguintes acções: O Conselho de Ministros emitiu o decreto número 9/2008 de 30 de Abril de 2008, publicado no Diário da República número 21 de 7 de Maio de 2008, autorizando o Observatório da Pobreza a desenvolver uma nova ENRP\. O Conselho de Ministros apresentou o Orçamento para 2008 à Assembleia Nacional em conformidade com o artigo 23 da Lei Orgânica das Finanças Públicas (Lei SAFE 3/2007)\. O Conselho de Ministros emitiu o decreto número 10/2008 de 30 de Abril de 2008, publicado no Diário da República número 21 de 7 de Maio de 2008 que estabelece todos os códigos orçamentais que correspondem a prioridades da ENRP nos sectores sociais\. O Ministério do Plano e Finanças utilizou, no Orçamento para 2008 apresentado à Assembleia Nacional, os novos códigos do orçamento aprovados em 2007, que permitem o acompanhamento de receitas e despesas por funções do Estado\. O Conselho de Ministros emitiu o decreto número 21/2007 de 24 de Maio de 2007, publicado no Diário da República número 43 de 7 de Setembro de 2007, estabelecendo um sistema de contabilidade para as contas públicas\. O Conselho de Ministros publicou o decreto número 8/2008 em 30 de Abril de 2008, criando uma Direcção da Contabilidade Pública no Ministério do Plano e Finanças, com dotações apropriadas de orçamento e pessoal e o decreto número 7/2008 de 30 de Abril de 2008, criando a Direcção de Tecnologia de Informação no Ministério do Plano e Finanças, com dotações apropriadas de orçamento e pessoal\. O Ministério do Plano e Finanças apresentou à Assembleia Nacional uma proposta de lei criando um novo código de taxas corporativas, como primeiro passo no sentido de uma aprovação final\. O Ministério do Plano e Finanças apresentou à Assembleia Nacional uma proposta de lei criando um novo código de imposto sobre rendimento singular, como primeiro passo no sentido de uma aprovação final\. A resolução número 11/2008 de 23 de Abril de 2008, do Ministério dos Recursos Naturais e Ambiente adoptou o plano detalhado do Comité Nacional da Iniciativa de Transparência nas Indústrias Extractivas (EITI), para a implementação da EITI\. 24  Governação do sector do petróleo: a\. O Conselho de Ministros publicou o decreto 11/2008 aprovando o Modelo de Contrato de Partilha e Produção, estabelecendo padrões internacionais de transparência e concorrência\. b\. O Conselho de Ministros submeteu à Assembleia Nacional uma proposta de lei estabelecendo padrões internacionais de transparência e concorrência\. Outras Reformas O programa vem apoiar o programa de reformas do Governo, o qual se mantém empenhado na sua agenda de reformas e continuará a providenciar para que sejam cumpridos todos os objectivos do programa\. A elaboração de relatórios sobre a preparação do orçamento tem melhorado consideravelmente, reflectindo as prioridades do Governo e das suas instituições melhoradas\. O Orçamento para 2008 foi elaborado antes do início do ano fiscal\. Estão a ser feitos relatórios trimestrais de monitorização\. As despesas pró-pobres no Orçamento de 2009 contemplaram uma verba 66 por cento acima do montante do Orçamento de 2008\. Foi aprovada uma proposta de Decreto com as novas funções que se pretende atribuir à Direcção do Orçamento\. O software para a programação orçamental do investimento está incluído no SAFE-e e aguarda a operacionalização desse sistema para ser introduzido\. A transparência nos processos de aquisições (procurement) foi reforçada\. Foi aprovada nova legislação e dada formação na área das aquisições à todos os elementos deste sector nos Ministérios\. Uma Agência para a Supervisão de Aquisições foi criada e dotada de pessoal, está já operacional e relatou já que 93 por cento dos contratos públicos de valor superior a USD 60\.000 cumprem os procedimentos de licitação competitiva\. A transparência e a responsabilização de recursos financeiros públicos estão a ser alcançadas\. Estão a ser implementados legislação e procedimentos provisórios para preparar/monitorizar planos de tesouraria, incluindo manuais para operações do Tesouro, embora tenham ainda de ser formalmente aprovados\. Está a ser produzido um relatório trimestral sobre a execução do orçamento\. O passo seguinte, na agenda de reformas, é a elaboração de relatórios sobre a posição financeira das Empresas Públicas, que deverão começar a ser apresentados em 2011\. Os atrasos na preparação das contas públicas têm resultado das complexidades técnicas de desenvolver e operacionalizar o sistema SAFE-e, que irá facilitar a elaboração das contas do Estado para 2011\. Tem estado a ser preparado, por uma empresa de consultoria, um inventário de activos públicos, o qual está agora na fase final\. A sua adopção permitirá a centralização dos activos do Estado numa única base de dados, que será gerida pelo Direcção de Património do Estado\. A gestão de salários está gradualmente a melhorar\. Foi criado um plano concreto de acção para fazer a fusão das bases de dados dos salários e do pessoal, de forma a reconciliar, actualizar e integrar as diferentes bases de dados de registo de pessoal e a quantificação dos funcionários do governo, e este plano está a ser implementado\. O Governo está a tomar medidas no sentido de 25 concretizar o objectivo de integrar as bases de dados dos salários e do pessoal através do sistema SAFE-e, o qual incluirá, uma vez completado, um módulo de pessoal\. O mecanismo para a mobilização da receita doméstica foi reforçado\. As novas leis do imposto sobre pessoas colectivas e imposto sobre rendimentos foram adoptadas, com uma taxa sobre os lucros de 25 por cento, o que está em linha com os níveis regionais, e a instituição de taxas progressivas sobre os rendimentos, abrangendo todas as fontes de rendimento\. Foi também adoptada uma nova taxa urbana\. Uma outra medida deste processo que está a ser contemplada pelo Governo, é a criação de um Tribunal Fiscal, em consonância com a reforma fiscal aprovada em 2007, que necessitará de uma estreita colaboração com o Ministério da Justiça\. A transparência relacionada com o petróleo está a ser incrementada graças à publicação de um Manual da Lei de Gestão do Petróleo e a adopção de uma Estratégia de Desenvolvimento do Sector do Petróleo\. O Comité conjunto da EITI STP-Nigéria não pôde ser constituído, o que revela a complexidade de operacionalizar os requisitos EITI numa organização conjunta internacional que tem de reportar à dois Estados\. No entanto, embora retirados da lista da EITI em Fevereiro 2010, continuamos empenhados na iniciativa e continuaremos os nossos esforços para nos recandidatarmos assim que possamos cumprir as condições\. Abrimos também um processo aberto e transparente de licitação de sete blocos na nossa Zona Económica Exclusiva em Março 2010 e várias empresas petrolíferas qualificadas manifestaram o seu interesse em participar na licitação na ZEE\. O novo documento ENRP está a ser preparado com base numa estratégia de crescimento desenvolvida internamente e pretende ser orientada pelos resultados\. A preparação da Nova Estratégia de Desenvolvimento está a ser conduzida pela Direcção do Plano, com um Comité Técnico formado pelo Gabinete de Coordenação da ENRP Supervisão do Programa A supervisão pelo Banco desta operação que o Banco financiou tem sido adequada\. O líder da equipa de trabalho responsável pela supervisão do PATRCG tinha também a cargo, a supervisão da doação do PNRMD e do seu suplemento, o que contribuiu para o sucesso da supervisão do programa\. Aide-memoires e matrizes foram distribuídas e discutidas em estreita consulta com a unidade de supervisão\. Essas consultas incluíram áreas claramente especificadas de fraqueza e que requererem atenção e fizeram uso eficaz dos relatórios de supervisão preparados para o projecto PATRCG\. A equipa do Banco providenciou também para que, através do projecto PATRCG, a sua congénere dispusesse de recursos técnicos e financeiros suficientes para implementar o programa\. As missões do Banco coincidiram com missões do FMI e a coordenação foi extremamente eficaz\. A UIP encarregada de formar o PATRCG foi também responsável pela monitorização do PNRMD\. 26 MAP 27

REVIEW

P058521

Document of The World Bank Report No: ICR0000997 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-35340) ON A CREDIT IN THE AMOUNT OF SDR 26\.4 MILLION (US$ 35\.0 MILLION EQUIVALENT) TO BOSNIA AND HERZEGOVINA FOR A THIRD ELECTRIC POWER RECONSTRUCTION PROJECT May 27, 2009 Sustainable Development Department South East Europe Country Unit Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective 1 April 2009) Currency Unit = KM 1\.00 = US$ 0\.65187 US$ 1\.00 = 1\.47 FISCAL YEAR ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan BiH Bosnia and Herzegovina CAS Country Assistance Strategy DFID Department for International Development (UK) EBRD European Bank for Reconstruction and Development EC European Commission ECSEE Energy Community of South East Europe EIB European Investment Bank EIRR Economic Internal Rate of Return EMP Environmental Management Plan EPBiH Elektroprivreda Bosnia and Herzegovina EPHZHB Elektroprivreda of the Croatian Community of Herzeg-Bosnia EPRS Elektroprivreda Republika Srpska ERP Enterprise Resource Planning ETSO European Transmission System Operators EU European Union FBiH Federation of Bosnia and Herzegovina FDI Foreign Direct Investment FMERI Federation Ministry of Energy, Mining and Industry GDP Gross Domestic Product IAS International Accounting Standards IASB International Accounting Standards Board ICB International Competitive Bidding ICR Implementation Completion and Results Report IDA International Development Association IFC International Finance Corporation IFRS International Financial Reporting Standards ISO Independent System Operator JUGEL Yugoslavia Electric Power Industry KfW Kreditanstalt für Wiederaufbau MOFTER Ministry of Foreign Trade and Economic Relations  `NCB National Competitive Bidding NGOs Non-Government Organizations NORAD Norwegian Agency for Development Cooperation PIU Project Implementation Unit RS Republika Srpska SCADA Supervisory Control and Data Acquisition SDRs Special Drawing Rights SEETEC Southeast European Electrical System Technical Support Project SECO State Secretariat for Economic Affairs (Switzerland) TPP Thermal Power Plant TSO Transmission System Operator UCTE Union for Coordination of Transmission of Electricity in Europe USAID United States Agency for International Development ZEKC Joint Power Coordination Center Vice President: Shigeo Katsu, ECAVP Country Director: Jane Armitage, ECCU4 Sector Manager: Ranjit Lamech, ECSSD Iftikhar Khalil, ECSSD Project Team Leader: Amarquaye Armar, ETWES ICR Team Leader: Mohinder Gulati, ECSSD  BOSNIA AND HERZEGOVINA FOR A THIRD ELECTRIC POWER RECONSTRUCTION PROJECT Table of Contents Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design \.1 2\. Key Factors Affecting Implementation and Outcomes\.6 3\. Assessment of Outcomes\.15 4\. Assessment of Risk to Development Outcome \.20 5\. Assessment of Bank and Borrower Performance\.20 6\. Lessons Learned \.22 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \.22 Annex 1\. Project Costs and Financing\.23 Annex 2\. Outputs by Component\.24 Annex 3\. Economic and Financial Analysis \.28 Annex 4\. Bank Lending and Implementation Support/Supervision Processes\.32 Annex 5\. Summary of Borrower's ICR and/or Comments on Draft ICR \.34 Annex 6\. Comments of Cofinanciers and Other Partners/Stakeholders \.35 Annex 7\. List of Supporting Documents\.36 IBRD MAP 30803  A\. Basic Information Electric Power Bosnia and Country: Project Name: Reconstruction 3 Herzegovina Project Project ID: P058521 L/C/TF Number(s): IDA-35340 ICR Date: 05/28/2009 ICR Type: Core ICR BOSNIA AND Lending Instrument: SIL Borrower: HERZEGOVINA Original Total XDR 26\.4M Disbursed Amount: XDR 24\.2M Commitment: Environmental Category: B Implementing Agencies: EPBiH EPHZHB EPRS Cofinanciers and Other External Partners: Department for International Development UK (DFID) European Bank for Reconstruction and Development (EBRD) European Investment Bank (EIB) SDC SPAIN EC KfW Norwegian Agency for Development Cooperation USAID B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 11/23/1999 Effectiveness: 01/16/2002 Appraisal: 03/27/2000 Restructuring(s): Approval: 06/26/2001 Mid-term Review: 02/11/2004 Closing: 03/31/2005 05/31/2008 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory i  C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Highly Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory Overall Bank Overall Borrower Performance: Satisfactory Performance: Satisfactory C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project No Quality at Entry None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 4 4 Power 96 96 Theme Code (as % of total Bank financing) Conflict prevention and post-conflict reconstruction 40 40 Infrastructure services for private sector development 40 40 Regulation and competition policy 20 20 E\. Bank Staff Positions At ICR At Approval Vice President: Shigeo Katsu Johannes F\. Linn Country Director: Jane Armitage Christiaan J\. Poortman Sector Manager: Ranjit J\. Lamech Hinderikus Busz Project Team Leader: Mohinder P\. Gulati Iftikhar Khalil ICR Team Leader: Mohinder P\. Gulati ICR Primary Author: Mohinder P\. Gulati Shinya Nishimura Yolanda Litan Gedse ii  F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Continue the post-conflict reconstruction program in the power sector and ensure access to reliable, lower cost electricity, to be supplied with reduced environmental and safety risks, and improved cost recovery by the suppliers\. Revised Project Development Objectives (as approved by original approving authority) No revision (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : Improved revenue collection EPBiH Value quantitative or 97% 99% 99% Qualitative) Date achieved 06/26/2001 03/31/2005 12/31/2007 Comments (incl\. % achievement) Indicator 2 : Improved revenue collection EPHZHB Value quantitative or 89% 100% 99% Qualitative) Date achieved 06/26/2001 03/31/2005 12/31/2007 Comments (incl\. % achievement) Indicator 3 : Improved revenue collection EPRS Value quantitative or 87% 96% 99% Qualitative) Date achieved 06/26/2001 03/31/2005 12/31/2007 Comments (incl\. % achievement) Indicator 4 : Convert ZEKC to ISO Value quantitative or completed Qualitative) Date achieved 06/08/2005 Comments (incl\. % achievement) iii  (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Indicator 1 : Length of Transmission Lines restored Value (quantitative 0 % 100% 100% or Qualitative) Date achieved 06/26/2001 05/31/2005 12/31/2008 Comments (incl\. % achievement) Indicator 2 : Completion of planned expenditures in Distribution Value (quantitative 0% or Qualitative) Date achieved 12/31/2008 Comments (incl\. % Difficult to monitor since USAID implemented this component through achievement) contractors directly hired by it\. Financing from Spain did not materialize\. Indicator 3 : Increased gross power flows between EPs Value (quantitative or Qualitative) Date achieved Comments Because of the yet-to-be stabilized operation of Transco/ISO, difficult to obtain (incl\. % reliable data at present time\. However, the flows between the EPs are estimated achievement) to be about 720 GWh which are significantly affected by the quantities EPHZHB supplies Indicator 4 : Passage of Law and Establishment of Regulatory Agencies Value (quantitative Completed or Qualitative) Date achieved 08/23/2002 Comments (incl\. % achievement) Indicator 5 : Completion of Restructuring and Provatization Study and Adoption of Satisfactory Plans Value (quantitative or Qualitative) Date achieved Comments (incl\. % Energy Sector Study completed iv  achievement) Indicator 6 : Completion of planned expenditures in Hydropower Plants Value (quantitative 0% 99\.7% or Qualitative) Date achieved 05/24/2001 12/31/2008 Comments (incl\. % achievement) Indicator 7 : Reduce particulate emissions in thermal power plants Value (quantitative 0% 110% or Qualitative) Date achieved 05/24/2001 12/31/2008 Comments (incl\. % Please see paragraph 25 of the attached ICR dated 27 May 2009 for details on achievement) each thermal plant\. Indicator 8 : Beginning of new management information systems Value All three EPs have One EP fully (quantitative 0% implemented implemented FMIS; or Qualitative) FMIS one partially; and the third none at all Date achieved 05/24/2001 05/31/2006 12/31/2008 Comments (incl\. % After delays, implementation is progressing in EPRS and EPBiH through achievement) follow-on project (ECSEE APL 3) G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived DO IP Disbursements (USD millions) 1 08/10/2001 Satisfactory Satisfactory 0\.00 2 06/18/2002 Satisfactory Satisfactory 0\.00 3 12/03/2002 Satisfactory Satisfactory 0\.51 4 06/25/2003 Satisfactory Satisfactory 0\.99 5 12/12/2003 Satisfactory Satisfactory 1\.30 6 06/28/2004 Satisfactory Satisfactory 9\.63 7 10/29/2004 Satisfactory Satisfactory 19\.46 8 05/18/2005 Satisfactory Satisfactory 27\.72 9 12/07/2005 Satisfactory Satisfactory 31\.32 10 03/14/2007 Satisfactory Satisfactory 33\.28 11 02/19/2008 Satisfactory Satisfactory 33\.99 H\. Restructuring (if any) Not Applicable v  I\. Disbursement Profile vi  1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. After four years of devastating war that ended in 1995, Bosnia-Herzegovina depended on external technical and financial assistance for reconstruction and recovery\. The new State Institutions - State-level Presidency and a Council of Ministers, and two constituent Entities the Federation of Bosnia and Herzegovina (Federation) and Republika Srpska (RS) - were established pursuant to Dayton Peace Agreement\. By 2001 when Third Electric Power Reconstruction Project was prepared, these institutions had started managing the government business reasonably well\. Strong economic growth spurred by donor-funded reconstruction led BiH to launch in 2000 its first Economic Development Strategy to attract investment resources and expand trade remained strong\. However, there were still large unmet needs for post-conflict reconstruction\. Stronger institutions and governance, and deeper sector reforms were needed to achieve BiH's development objectives\. Prior to the war, BiH had a single vertically-integrated socially-owned power company\. This company was separated into three vertically-integrated companies (two in the Federation and one in RS) serving three separate groups of consumers in Bosnia, Herzegovina, and Republika Srpska\. In addition to reconstruction, the power sector reforms were needed to underpin the government's economic recovery efforts\. 2\. In 1990, BiH produced 12,613 Gigawatt hours (GWh) of electricity from generating plants located on its territory\. Electricity consumption was 11,535 GWh\. The system comprised 13 hydropower plants with a total capacity of 2,034 megawatts (MW) and an average output of 6,922 GWh/year, and 4 thermal power plants with a total capacity of 1,957 MW and an output of 9,252 GWh in 1990\. Total export was 1,268 GWh\. The thermal power plants were brown coal and lignite fired, with the fuel coming from mines within BiH\. BiH was responsible for operating its own power system and meeting local demand\. However, being part of the former Yugoslav network, the 400 kV power grid in BiH as well as power exchanges were controlled by Yugoslav Electric Power Industry's (JUGEL) dispatching center in Belgrade\. 3\. At the beginning of 1996, more than half of the generating capacity had been put out of operation because of direct damages, destroyed transmission lines or lack of coal\. Most plants had also suffered from lack of maintenance during the war\. About 60% of the transmission network and control system in the Federation of Bosnia-Herzegovina (Federation) was seriously damaged, including transmission facilities and interconnection lines to neighboring countries\. The transmission network and control system in Republika Srpska (RS) were also heavily damaged, particularly in those areas located close to confrontation lines\. The 400 kV system in BiH was almost completely out of operation (the main exception was the Trebinje-Podgorica 400 kV transmission line)\. Many distribution networks were badly damaged in both the Federation and RS as a result of fighting and a lack of maintenance\. Many transformer stations, buildings, telecommunications and maintenance facilities and equipment were also either seriously damaged or destroyed\. 4\. Soon after the conflict ended the Bank prepared investment projects to rehabilitate the damaged infrastructure quickly organized as Electric Power Reconstruction Project\. The first project was prepared for the Federation, while the Second Electric Power Reconstruction Project 1  included all three Elektroprivreda (EPs), and had more ambitious institutional and sector reform objectives\. Rehabilitation enabled total generation to reach 10,429 GWh in 2000 (83% of the 1990 level) and consumption within BiH to reach 9,365 GWh in 1999 (81% of the 1990 level)\. However, despite these achievements, the remaining rehabilitation needs were still very large and many facilities remained to be reconstructed\. Investments were also needed to improve reliability, safety and environmental protection\. 5\. The Federation and RS governments had placed high priority on continued reconstruction of the power system as one of the primary means to re-launch economic activity\. International Development Association (IDA) and other international financiers had been supporting this reconstruction, and agreed with the priorities stated by the government that further investments were needed to continue the post-war reconstruction program\. 6\. The Project was therefore designed to (i) continue reconstruction of conflict-damaged infrastructure, (ii) strengthen institutions, governance, and power sector reforms, and (iii) improve coordination between the three power utilities, Elektroprivreda Bosnia and Herzegovina (EPBiH), Elektroprivreda of Croatian Community of Herzeg-Bosnia (EPHZHB), and Elektroprivreda Republika Sprska (EPRS) to (a) establish a single control area to enable BiH to rejoin the European Union for the Coordination of Transmission of Electricity (UCTE), and (b) strengthen State level integration mechanisms for creating a common economic space\. 7\. Large reconstruction financing requirements, and the need for a common platform to channel donor support, led to complexities in the project design\. With US$35 million of financing, IDA coordinated nine other financers to finance a project costing more than US$230 million\. The components to be financed by each donor were carefully selected to avoid duplication, and were clearly defined to obtain synergies\. Each donor handled procurement and implementation of their respective component\. Though it is possible to argue in hindsight that a common implementation consultant may have increased the efficiency of implementation, the arrangement selected by the Bank and the development partners seems to have worked well\. 8\. This was the third project to continue to support reconstruction and rehabilitation needs, and to support the sector restructuring and reforms to enable BiH to participate in the regional electricity market\. Three projects had progressively more ambitious institutional and sector restructuring goals, and a follow up project ECSEE APL-3 was approved to deepen integration of BiH into the regional energy market\. The Project Development Objectives were appropriate for the post-conflict situation, consistent with the Country's stated priorities and the Bank's Country Assistance Strategy\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 9\. The project development objective was to continue the post-conflict reconstruction program in the power sector and ensure access to reliable, lower cost electricity, to be supplied with reduced environmental and safety risks, and improved cost recovery by the suppliers\. While priority was given to reconstruction of power supply infrastructure and cost recovery, strong emphasis was also placed on improving power coordination among the power companies and sector reforms to enable BiH to participate fully in the regional electricity market\. 2  Below is the table of key indicators in the original project document: Table 1\.1 - Key Indicators Sector Indicators 1\. Improved revenue collection relative to amounts billed 2\. Convert ZEKC to ISO Outcome/Impact Indicators 1\. Increased restored and new connections 2\. Reduced distribution losses and avoidance of increase in transmission losses 3\. Reduced particulate emissions at rehabilitated thermal power stations 4\. Improved self-financing of investments 5\. Improved revenue collection relative to amounts billed 6\. Satisfactory debt service coverage ratio Outputs Output Indicators Increase transmission capacity - Length of transmission lines and number of substations restored Increase distribution capacity - Completion of planned expenditures BiH power system - Increased gross power flows between the EPs Establish a legislative and regulatory framework conducive to privatization and competition - Passage of laws and physical establishment of regulatory agencies Prepare restructuring and privatization 1\. Completion of study 2\. Adoption of satisfactory plans Improve availability and safety at hydropower plants Completion of planned expenditures Reduced pollution at thermal power plants Reduced particulate emissions at specific plants Establish new management information systems Beginning of operation of the new system 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification PDO or the Key Indicators were not revised during implementation\. 1\.4 Main Beneficiaries 10\. The target population was household and non-household consumers of electricity throughout BiH, particularly returning refugees (such as in Konjic, Ravno, Livno, Glamoc), settlements in Lasva (Vitez, Busovaca) and those in small towns and rural areas who did not benefit from previous stages of rehabilitation of the power system\. Many of these potential 3  beneficiaries were living in poverty, and all three governments wanted to improve availability of electricity to the refugee population to improve the quality of their lives\. 1\.5 Original Components (as approved) 11\. The project's focus was on restoration of the 400 kV and other high voltage transmission systems, especially reconstruction of damaged substations\. This restoration was envisioned to help BiH to restore the pre-war interconnections with the other parts of former Yugoslavia and eventually to re-join the Union for the Coordination of Transmission in Europe (UCTE)\. There were seven principal project components (Details given in Table 1\.2 below): a) Rehabilitation of the high voltage transmission network lines started under Power 2\. b) Reconstruction of key 400/220/110 kV substations\. c) Establishment of a Supervisory Control and Data Acquisition (SCADA) System and associated telecommunication facilities\. d) Safety and rehabilitation requirements of select hydropower stations (Jablanica, Rama and Trebinje)\. e) Pollution reduction at select thermal power generation plants at Tuzla, Kakanj, Gacko and Ugljevik\. f) Distribution investments focusing on: (i) areas identified for refuge return; (ii) heavily damaged and cut-off areas, which have little or no electricity supply; (iii) areas with seriously overloaded networks, due to resettlement of refugees; and (iv) areas with war damage where many connections are of a temporary nature and power supply is unreliable and unsafe g) Technical assistance and training in support of: (i) procurement and implementation of the physical components; (ii) the development of the Joint Power Coordinating Center (ZEKC) into an Independent System Operator for BiH system; (iii) a survey of socially vulnerable electricity consumers; (iv) corporatization and commercialization of the power sector enterprises; and (v) establishment of independent power sector regulatory agencies for BiH\. Training was included for g\. (i), (ii), (iv) and (v)\. 4  Table 1\.2 ­ Project Components 1\.6 Revised Components 12\. The components were generally unchanged, although some of the terms of reference of the consultants were refined and scopes of works were revised based on detailed technical designs\. Scope of work in case of SCADA was increased while the functionality remained the same\. In addition, the cost savings from the EIB component were utilized for additional works in Tuzla and Kakanj thermal power stations, and in case of EPRS for additional rehabilitation of transmission lines and substations\. 1\.7 Other significant changes 13\. Implementation was significantly delayed from the schedule envisioned at appraisal\. Consequently the project closing date had to be extended three times from March 31, 2005 to May 31, 2008\. There was more than a year of delay at the initial stage due to disagreement over the arrangement of the transmission company among co-financiers that led to the initial extension\. The project closing date was extended twice more due to delays in implementation schedule, caused mainly by political impasse during election periods in 2002 and 2006\. Although the IDA financed investments were mostly completed according to schedule, the implementation of policy and institutional reform of the sector, energy sector study and Financial Management 5  Information System (FMIS) for each of the Elektroprivredas were delayed\. FMIS component also experienced procurement disputes (see Section 2\.2)\. Seeing the benefits of FMIS implementation in EPHZHB and in the demonstration pilots in EPRS, both EPRS and EPBiH have decided to roll out the FMIS through the companies (see Section 2\.5)\. Components co- financed by the development partners were also completed except delays in implementation of EBRD financed SCADA-EMS component and distribution strengthening to be financed by Spain was cancelled\. The EBRD financed SCADA-EMS, currently in advanced stages of implementation, is nearing completion\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 14\. Lessons learned from the previous projects (Power 1 and 2 both were co-financed by several development partners), other post-conflict construction projects, and sector reforms financed by the Bank Group were taken into account\. The project design paid particular attention to the lessons learned from the previous operations with BiH: Since the expected international financing covered only part of the large remaining reconstruction needs, it was essential to obtain the agreement of all the project implementing agencies on the investments to be included under the project and the allocation of available financing among the three Elektroprivredas\. The main feasibility study provided the basis of this agreement, which was reached during the pre-appraisal mission\. Co-financing to be made available in a timely manner\. Reasonably firm financing commitments had been secured at appraisal to cover all costs except US$ 13\.6 million\. Additional financing from other development partners was secured as well\. Financing for technical assistance needs to be secured early in order to avoid delays in project components that depend on prior completion of that technical assistance\. IDA would finance the critical procurement technical assistance, while other bilateral agencies provided other TA funds\. PIUs need to have strong capacities and be well-staffed\. The PIUs for Power 2 continued implementation under Power 3 and technical assistance was provided where necessary\. Progress towards power sector coordination and reform requires patience and an active role by the Bank because of the need to gain the agreement of the implementing agencies and the Entity Governments under the existing political climate\. This turned out to be the most difficult component\. The development partners and the Bank worked in a coordinated manner to encourage sector reforms\. The USAID and EC funded consultants worked full time to draft laws and help in implementation\. The team painstakingly worked with the State and Entity governments, power companies, the development partners, and the civil society to move the process of sector reforms\. Though with some delay, a sector structure acceptable to all the stakeholders, and consistent with the requirements of regional electricity market (ECSEE) and EU Directives, was finalized and phased implementation started\. However, in mid 2008 disagreement among the Entities has arisen on structure and management of one element of the new sector 6  structure (national Transmission company and Independent System Operator)\. Efforts of the international community are ongoing to resolve these disputes (see Section 2\.2)\. Bundling of contracts greatly increased the efficiency of the procurement process and supervision\. In the earlier projects, the investments had been divided into smaller contracts with different financiers, which caused delays to the investments and increased the resource requirements for proper supervision\. Bundling of contracts by components streamlined the procurement process as well as increased the efficiency of supervision\. 15\. The project also benefited from activities under previous projects in an additional way\. The environmental components included under the project were based partly on the Environmental Management Plans prepared under Power 1 and Power 2\. A lesson learned from the experience in other countries in the Europe and Central Asia Region is the desirability of minimizing barter trade arrangements\. The project contributed to this goal by emphasizing measures to strengthen the financial viability of the EPs and encouraging actions towards corporatization and operation on a commercial basis\. In this respect, agreement was reached to increase the proportion of bills to be paid in cash for coal purchases by EPBiH\. Identified Risks 16\. The risks identified at the appraisal stage are summarized in Table 1\.3\. Special attention was paid to two risks: Timely construction of Ernestinovo substation in Croatia and associated transmission lines\. Before the war, this substation was an important node in the 400 kV grid which linked together the power transmission system of former Yugoslavia\. Without this substation or a substitute, an important part of the international benefits of the project, through improved power interchanges in the Balkans, would not have been realized\. In addition, BiH would not earn any revenue (estimated present value at appraisal US$8\.9 million) from wheeling power between north-eastern Croatia and western Croatia\. The risk was mitigated by making the commencement of reconstruction of Ernestinovo substation as a condition precedent for staring reconstruction of the Ugljevik-Ernestinovo transmission line\. BiH power system may not operate as an integrated system after the transmission system is rehabilitated and the SCADA system is completed\. The possible consequence were identified as follows; o The SCADA investment of about US$ 7\.8 million made for ZEKC (ISO) would be wasted since non-integrated system implies that ZEKC (ISO) would be ineffectual\. The SCADA investments in the regional dispatch centers and the associated communications networks would still be useful\. o BiH would be unable to rejoin the UCTE as a separate control area\. Its membership might be further delayed as a result\. A possible scenario involving UCTE membership in which the Federation would become part of Croatia control area and RS would become part of a future FRY control area had been identified\. In such a scenario additional metering investments would have been needed at the 7  interface between the Federation and RS power systems that would not be required if BiH is accepted as a single control area\. o Non-integrated operation would likely result in more frequent and longer power outages than integrated operation\. o Due to non-synchronization of EPRS and EPBiH systems with each other, it would not be possible for EPRS to supply the full power demand in northern RS\. o Non-integrated operation would not allow the Elektroprivredas to enjoy the benefits of wheeling power to foreign markets evaluated in the cost-benefit analysis since in each case the power would need to be transmitted through the transmission lines of more than one Elektroprivreda\. o Non-integrated operation would make it difficult to enable use of Capljina as pump- storage project to meet peak demand in the system\. o Transmission system losses would be greater under the non-integrated operation\. 8  Table 1\.3 ­ Critical Risks 9  17\. Of the risks identified at appraisal, two risks did materialize: (a) delay in implementation, and (b) failure to secure full financing\. However, most of the delay was due to political instability and delayed effectiveness caused by elections, except for implementation of Financial Management Information System that was delayed leading to cancellation of about SDR 2\.2 million--about SDR 2\.0 million for FMIS for EPBiH and EPRS, and SDR0\.2 million for EPHZHB due to savings from network rehabilitation that could not be utilized in time\. The delay in implementation of FMIS component occurred partly due to delay by EPBiH and partly due to a dispute between the EPs and the consultant due to apparent conflict of interest of one of the associates of the consultant\. Financing was secured from all financers except for an amount of about US$18 million equivalent (8% of project cost) from Government of Spain due to failure of the parties to resolve procedural and procurement issues\. Since this component was to finance distribution network improvement, it was programmatic in nature and therefore did not affect the overall project\. 2\.2 Implementation 18\. The assessment carried out by IDA at appraisal showed that the EPs were capable of implementing the proposed project\. As this was a complex project with a major reform component, three responsible implementing agencies and several co-financiers, a significant supervision effort was required\. Significant delays in implementation resulted from the following reasons: a) Political impasse created after elections held in 2002 and 2006\. b) The large number of organizations and entities involved in the reform process made coordination difficult and cumbersome\. The number of organizations involved in the reform of the BiH power sector includes Office of High Representative (OHR), Parliaments, various tiers of the three Governments (including the Prime Ministers, the State and Entity Ministries dealing with energy, and the two Entity privatization agencies), all of the existing and future power sector organizations (three EPs and their post-restructuring successor companies, Joint Power Coordination Center (ZEKC), the Independent System Operator, and the three Regulatory Commissions), eleven financiers (of which six are actively involved in the reform process), and five consultants providing assistance for the reform process\. Although the overall reform concepts were agreed, there were issues on specific implementation aspects that frequently needed to be resolved between several, if not all, of these various organizations\. Disagreement on role, responsibilities, management and operation of TRANSCO and ISO continue to linger\. Both the Entity Governments and the State have taken significant steps by signing an Agreement on Energy Principles and its ratification by the respective legislatures that inter-alia includes resolution of TRANSCO and ISO issues\. However, instead of resolving the disagreement, more recent developments indicate further deepening of the disagreement\. Retaining Transco as a national company would not only benefit the power sector but also strengthen the coordination processes among the Entities and the State\. 10  c) The FMIS component was fully implemented by EPHZHB, partially by EPRS, and to a very limited extent by EPBiH which delayed the implementation within its company\. During implementation, a dispute arose with the consultant due to apparent conflict of interest of one of the associates of the consultant\. The contract was terminated and further implementation of FMIS in EPBiH came to a halt\. This component will be continued through the ECSEE APL3 Project\. d) A total amount of SDR2\.2 million was cancelled\. About SDR 0\.2 million of cost savings of EPHZHB from network rehabilitation component could not be utilized and were therefore cancelled\. A larger amount of cancellation (SDR 2\.0 million) was on account of delay in implementation of FMIS component by EPBiH and EPRS\. However, having seen the benefits of FMIS in EPHZHB and pilot in EPRS, both the companies have now decided to roll it out across their companies\. e) Implementation of SCADA has been delayed and is still ongoing with EBRD having extended its loan to enable its completion\. One of the reasons for delay is the disagreement on the issue of transfer of credit to Transco and ISO for which now a solution has been agreed that the EPs will pay for the SCADA investments made in their respective jurisdictions\. (f) Distribution component to be financed through a bilateral Credit from Spain was cancelled due to disagreement on procurement procedures and was therefore not completed\. Although the Ministry of Foreign Trade and Economic Relations (MOFTER) had initiated coordination meeting at regular intervals in conjunction with the project team, efficient and effective coordination and implementation proved difficult\. IDA carried out a mid-term review of the project in February 2004\. In addition to the topics covered under the Project Monitoring Reports (PMRs), the mid-term review included a review of the economic viability of the project components, based on actual costs and benefits achieved to- date, and of the overall institutional and financial performance of the EPs\. This review identified the delays in the reform process and in implementation of some co-financed components and indicated that the extension of the closing date was likely\. 19\. The audited financial statements of the three EPs were made available to and reviewed by the Association in the supervision process\. Measures to strengthen these systems such as the appointment of auditors, appropriate staff and installation of FMIS for each of the entities were implemented, albeit with significant delays which pushed the completion of the system past project implementation period\. 20\. During the implementation period, the EPs substantially improved their operational and financial performance and achieved the objectives of supply of lower cost electricity and improved cost recovery\. Table 1 below provides a comparison of the targeted/covenanted values of key financial and operational performance indicators with achievement\. Detailed financial statements for the three power companies, including comparisons of projections at appraisal with 11  actual performance, are provided in Tables 2 to 4 in Annex 3\. A comparison of selected financial performance indicators (projected vs\. achieved) is given in Table 1\. Table 1: Key Financial Performance Indicators (Target vs Actual) Unit 2000 2001 2002 2003 2004 2005 2006 2007 (Baseline) EPBiH Distribution losses % Target (not higher than) % 12% 12% 12% 12% 12% 12% Actual % 12% 11% 11% 11% 11% 11% 10\.9% 10\.8% Self-financing of % investments % Target (not lower than) % 40% 40% 40% 40% 40% 40% Actual 112% 99% 67% 84% 167% 68% 96% Revenue collection % performance % Target (not lower than) % 97% 97% 97% 99% 99% 99% Actual 97% 97% 100% 97% 108% 96% 100% 99% Debt service coverage ratio Target (not lower than) ratio 1\.5 1\.5 1\.5 1\.5 1\.5 1\.5 Actual ratio 38\.2 3\.6 5\.2 7\.5 1\.6 7\.8 EPHZHB Distribution losses % Target (not higher than) % 19% 16% 12% 12% 12% 12% Actual % 25% 24,38% 22,46% 21,31% 19,77% 17\.7% 16\.8% Self-financing of % investments % Target (not lower than) % 40% 40% 40% 40% 40% 40% Actual 56% 88% 76% 53% 130% 112% -5% Revenue collection % performance % Target (not lower than) % 89% 99% 99% 99% 100% 100% Actual 89% 91% 126% 99% 96% 97% 97% 99% Debt service coverage ratio Target (not lower than) ratio 1\.5 1\.5 1\.5 1\.5 1\.5 1\.5 Actual ratio 45\.4 2\.5 11\.7 5\.1 4\.2 23\.2 -10\.6 EPRS Distribution losses % Target (not higher than) % 19% 16% 12% 12% 12% 12% Actual % 27% 20\.68 20\.80 21\.53 20\.60 20\.84 17\.41% Self-financing of % investments % Target (not lower than) % 40% 40% 40% 40% 40% 40% Actual 77% 58% 90% 95% 105% 151% Revenue collection % performance % Target (not lower than) % 87% 87% 87% 96% 96% 96% Actual 87% 95% 104% 81% 101% 96% 99% 99% Debt service coverage ratio Target (not lower than) ratio 1\.5 1\.5 1\.5 1\.5 1\.5 1\.5 Actual ratio 14\.4 4\.6 4\.3 11\.8 8\.2 11\.6 16\.3 12  21\. As measured by these key indicators, the objective of lower cost supply and improved cost recovery was almost consistently achieved in the case of all three power companies\. With the exception of reductions in distribution losses, the other indicators were consistently achieved in all three EPs with the exception of 2007 in EPHZHB\. In 2007, EPHZHB, whose generation capacity is mainly hydro, faced a particularly difficult environment\. Due to adverse hydrological conditions, EPHZHB's hydropower generation was seriously curtailed\. EPHZHB's own generation of about 1500 GWh is sufficient to meet its demand but it needs to import power to meet the demand of one aluminum manufacturing company (about 500 GWh) that is supplied power at concessional tariff1\. To meet demand, EPHZHB had to resort to substantially increased imports at the high import prices prevailing at the time\. 22\. Since the regulated tariffs were not sufficient to cover the costs, EPHZHB's cash flow was seriously affected in 2007\. This affected EPHZHB's self-financing and debt service coverage ratios in 2007\. For all three companies, the self-financing of investments and debt service coverage ratios were otherwise substantially in excess of the covenanted minimum ratios of 40% and 1\.5 respectively\. Revenue collection performance was also strong, in some years exceeding 100% reflecting successful collection of arrears\. However, in regard to distribution losses, only EPBiH was able to consistently achieve the targeted reductions\. In the case of EPHZHB and EPRS, there have been significant reductions in losses as compared to the baseline situation in 2000\. Nevertheless, through 2007, the distribution losses continued to be substantially higher than the targets\. In 2006, the two companies had agreed to develop a program for accelerating improvements in this area\. Further reductions in distribution losses were achieved in 2007\. 2\.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) Environmental 23\. Consistent with the requirements for a Category "B" project, Environmental Management Plans (EMPs) and mitigation actions were prepared by the Elektroprivredas\. The EMPs were incorporated into the Project Implementation Plan\. 24\. The EMPs had been prepared in consultation with consumer groups and local non- governmental organizations (NGOs)\. In the preparation of the reconstruction components, on the other hand, direct participation of final electricity consumers or NGOs, was not sought since the project aimed to rehabilitate (and where possible improve) existing facilities\. 25\. The environmental impacts were correctly and adequately identified, monitored, and mitigated\. Key issues were: (a) construction impacts (noise, dust) of transmission lines and substations, electromagnetic radiation from transmission lines, use of PCBs in transformers and other substation equipment\. Construction impacts were mitigated well, and environmental performance of rehabilitated thermal plants improved considerably\. For example, emission of 1 Only 30% of aluminum company's demand is supplied at concessional tariffs and the company is required to procure the remaining from the open market\. 13  particulate matter reduced from 650 to 50 mg/m3 for Tuzla and 300-400 to 100 mg/m3 for Kakanj, water pollution levels from cooling towers of Kakanj were reduced to one third and water consumption for cooling was reduced to less than 10% of pre-rehabilitation stage\. Similarly, for Gacko thermal power plant the dust emission was reduced by about 50% and water consumption in ash transportation reduced from 150 t/h to 70 t/h, and for Ugljevic thermal power plant, the dust emission was reduced by 70%\. In addition, due to construction of cascades on the ash ponds, previously frequent direct discharge of ash into the Mezgraja river was stopped\. Social Since poverty is wide spread, and especially amongst the refugee population, measures to target both the incidence of project-related benefits and the mitigation of project-related costs to the poor were supported under the project\. In order to facilitate the targeting of project-related benefits, those development partners planning to fund investments in low-voltage distribution networks undertook case-by-case feasibility study in close coordination with the inter-agency Refugee Return Task Force (RRTF) to ensure that returning refugees and the poor will benefit\. A study on the social impact of the electricity tariffs was also completed in 2003 by Ekonomski Institut AD, Banjaluka to ensure that any tariff increase that may be required will be implemented along with a social protection program for the poor (see Section 3\.5)\. 26\. The EPs and the Regulatory Commissions have started issuing tariffs based on the new regulations from 2006\. The entities were advised to sequence the rationalization of the tariff to minimize the impact it would have on the poor and socially vulnerable\. A social assessment was carried out that included both quantitative study of household expenditure on electricity services and substitutes and the impact of possible tariff increases and a qualitative consumer satisfaction survey\. 2\.5 Post-completion Operation/Next Phase 27\. Reconstruction of 400 kV transmission lines and substations was completed leading to synchronization of Bosnia-Herzegovina's power system with Union for the Coordination of Transmission in Europe (UCTE), higher availability of transmission capacity, and improvement in quality and reliability of supply within Bosnia-Herzegovina\. Elektroprenos (Transco) is operating and managing the system well, but is experiencing major constraints in investments, financing, human resource management, and institutional capacity development because of weak governance and management arrangements and deepening disputes between the Federation and the Republika Srpska\. Although, the physical benefits of reconstruction of the high voltage transmission network have been realized, protracted delay in resolution of disputes among the shareholders may lead to gradual deterioration of the benefits of these investments and of institutional capacity support provided through the project\. 28\. EPs will continue to operate and maintain the hydroelectric power plants for which the project financed rehabilitation, and thermal power plants for which environmental upgrading of thermal power plants was financed through the project\. The EPs have adequate technical and financial capacity to operate and maintain these plants\. 14  29\. After the closing date of the project, the EPs will continue with the implementation of the FMIS installation, which has been phased so that IDA funds will finance the components which will be completed during the allocated project period\. A follow up operation ECSEE APL 3 (BiH) has allocated US$ 3 million equivalent for continued support for implementation of FMIS\. The EPs have decided to roll out the FMIS throughout the companies and will provide counterpart funds for meeting the shortfall\. This is an excellent development, would leverage the initial investment in modernization of information technology tools in the EPs, and the benefits are likely to sustain\. 30\. With the exception of the dispute about Transco/ISO, sector restructuring and reforms have been implemented well\. Regulatory agencies have been established at the State and Entity level and have become operational, BiH power system has been reconnected and synchronized with Union for Coordination of Transmission in Europe (UCTE), an Energy Study has been prepared, and financial and operational performance of the three EPs has significantly improved\. The benefits of these reforms are likely to sustain\. However, in the current environment it is unclear whether and when further reforms and restructuring, and opening of market to competition, envisaged in the restructuring plans will be implemented\. 31\. Additional works on reconstruction and on BiH's commitments made under the Energy Community of South East Europe (ECSEE) were to be addressed in the ECSEE APL3 project\. The project was prepared while Power 3 was still under implementation\. The ECSEE APL-3 project became effective in April 2007, and is currently under implementation\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 32\. Given the post-conflict environment, reconstruction of war-damaged infrastructure was critical to restore power supply and services, trigger economic activity, and improve quality of life for a traumatized people that included returning refugees\. In addition to the damage, prolonged conflict had also led to neglect of maintenance of assets and deterioration of environmental performance of power generation plants\. Rehabilitation and environmental upgrading of power plants was consistent with the global priorities, regional imperatives of peace and stability, and the Bank assistance strategy\. The sector reform and institutional strengthening goals have contributed to increased financial viability, sustainability of its operations and transparency to the EPs\. Due to high priority given by the government and the donors to post- conflict reconstruction and institutional strengthening envisaged under this project, it was co- financed by several development partners\. The project supported the CAS goals of (i) strengthening institutions and governance, and (ii) fostering private sector-led growth and employment\. 3\.2 Achievement of Project Development Objectives 33\. The project achieved the development objective of post-conflict reconstruction of power sector to ensure access to reliable, lower cost electricity, improved cost recovery, and reduced environmental and safety risks\. Investment components such as transmission lines, substations, 15  distribution network, environmental upgrading of selected thermal plants, rehabilitation of selected hydropower plants were implemented well\. Bosnia-Herzegovina power system was reconnected to UCTE\. Part of distribution network investments (equivalent to about US$7 million) to be financed by Spain did not materialize\. However, other donors implemented the distribution network rehabilitation, in particular in the refugee settlements and in areas where refugees had returned\. To accelerate the reconstruction and strengthening the distribution network, USAID implemented the investment schemes directly through the contractors hired by them instead of routing the funding through the EPs 34\. Integration of BiH power system with UCTE was an important objective since its achievement was of critical importance for the whole Balkan region\. It was also intended to help ensure the entire BiH system functioned as a single control area for the purpose of participation in the regional electricity market\. Resynchronization with UCTE depended on Croatia completing the Ernestinovo 400 kV substation which was accomplished well in time and much celebrated by the Energy Community of South East Europe\. 35\. Improvement in dam safety in old hydropower stations was timely and was of high priority\. Not only was this idea pursued further through a follow up operation (ECSEE APL3), it was also taken up by Albania for its old hydropower plants through the regional APL program (ECSEE APL)\. 36\. Intense preparation phase of the project facilitated approval of Electricity Policy Statements by the Entities before the project was approved by the Bank\. An Energy Sector Study was prepared through a participatory and consultative process, partly affected by lack of data, but nevertheless provides a basis for preparing sector and sub-sector strategies and a framework for future sector studies\. The three EPs, MOFTER, and the energy ministries of the two Entity governments, and several national consultants contributed to the preparation of the study and participation in several public meetings that took place\. The Bank responded in a flexible manner when more discussions were needed to develop a common understanding it mobilized additional resources through the Public Private Infrastructure Advisory Facility (PPIAF)\. 37\. The Bank and the development partners put in significant efforts in development of a framework for sector restructuring that was acceptable to the competing stakeholders, consistent with ECSEE, and commercially efficient\. Restructuring study, new legal framework for sector reforms, new regulation and regulatory institutions, and creating enabling frameworks for BiH to sign EU pre-accession agreement, were some of the achievements made possible by the sustained engagement of the Bank and development partners in the BiH energy sector\. The sector was restructured to establish an Independent System Operator (by converting the coordination center ZEKC into an ISO), a national Transmission company (Elektroprenos), and two Entity and one State Regulatory Commission\. However, efforts at building institutional capacity in Transco and ISO were only partially successful\. 38\. The project did not perform well on two components: (a) establishing a sustainable business model for the national Transmission company, and (b) implementation of SCADA- EMS in the sector companies\. It achieved partial success on Financial Management Information 16  System, and preparation of a national (State) energy strategy\. The first two were financed by the development partners\. IDA financed the FMIS and preparation of an energy study that was to underpin the development of strategy by the State and the Entities\. Though the energy study was completed, preparation of energy strategy was delayed\. On the single Transmission Company, deep disagreements have emerged among the power utilities and the two Entity governments\. The disagreement spans a wide range of issues: Governance arrangements, management processes, investments and financing decisions, and staffing (the company has not yet evolved its own Human Resource policies and a common cadre of employees\. The staff is drawn from the three EPs and work under different terms and conditions)\. It was expected that the Agreement on Principles of Energy Policies signed by the State and the two Entities, and ratified by their respective parliaments, would pave the way for finding a solution to this contentious issue but instead of reaching a resolution the disagreement has further deepened\. Implementation of SCADA was delayed and has not yet been completed\. EBRD has extended its loan to enable completion, now expected to be completed in 2009\. FMIS was implemented, as designed, by EPHZHB and only partially by EPRS\. EPBiH did not make much progress beyond the initial requirement definition\. However, both EPRS and EPBiH now want to implement it throughout the companies and are using the funding from follow on project (ESCEE APL3) and their own resources\. The State Energy Strategy has not yet been prepared though it is fair to say that the Entities are making progress in preparing and finalizing their respective strategies\. To the extent that the project had set out to achieve preparation of a national energy strategy it did not achieve that outcome\. Overall the project development objectives were achieved- reconstruction of the power system was accomplished well in time and to high quality standards, ZEKC was converted into an ISO and a new Transmission company established, Restructuring Action Plans prepared, energy study was completed, the EPs reduced transmission and distribution losses, improved their revenues and financial performance\. 3\.3 Efficiency Economic 39\. A cost-benefit analysis was carried out using the same assumptions as at project appraisal except where the data were available in a different form\. Available information only permitted the analysis to be carried out for the components for transmission and the Jablanica Hydropower Plant, Units #5 and #6\. The investments for these components accounted for two-thirds of the total project cost\. For other components, the analysis could not be carried out since Distribution investments were either made directly by the donor or financing was not made available, and investment in SCADA/EMS financed by EBRD is still ongoing and expected to be completed only by 2010\. Costs and benefits were evaluated at the conversion factor of Euro 1\.00 = 17  US$1\.4303 as of September 30, 2008\. The overall net present value of benefits was estimated to be US$1,678 million compared to US$1,166 million at appraisal\. The internal economic rate of return was estimated to be 78%, compared to 61% at appraisal\. 40\. The transmission benefits are dominated by the impact of the enlarged transmission capacity in allowing additional sales of electricity to be made\. This benefit was measured using willingness to pay for sales to final customers within BiH less the supply cost excluding transmission\. Willingness to pay was measured, as at appraisal, on the basis of the cost of producing electricity from diesel generators\. Since actual and forecast diesel oil prices are much higher than estimated at appraisal, the ex-post internal rate of return on the transmission was estimated to be 117%, compared to 62% at the time of appraisal\. 41\. The only benefit measured for Jablanica was the increase in production in GWh in an average hydrological year, estimated by EPBiH to be 12 GWh\. This benefit was valued at the export price of electricity\. The present value of benefits using this measure is less than the present value of costs\. However, it is likely that the benefits of improved dam safety and life extension that were not measured since they had not been evaluated at appraisal would make the overall component economically justified\. Financial 42\. A project financial analysis was carried out for the same components\. The only difference from the economic analysis is that the outage reductions due to the international connections and the increased transmission capacity benefit were valued at the transmission tariff\. The financial internal rate of return was estimated to be 7% as against 32%\. 43\. The big difference in results is due to (i) the exclusion in the ex-post analysis of some components that had been included at appraisal; and (ii) a difference in the measure of the expanded transmission capacity benefit\. At appraisal the expanded transmission capacity benefit was valued as the difference between the weighted average retail tariff and the costs of supply, excluding transmission\. At that time a regulated tariff for transmission did not exist\. The ex- post analysis used instead the transmission tariff that was introduced in 2006\. As a result the financial internal rate of return for transmission is estimated to be 8%\. The SERC has not fixed an allowed rate of return for Transco since the company is not privately owned\. However, the 8% rate of return is acceptable when compared to allowed rates of return in other countries\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory\. The project was prepared and implemented in a very complex political and economic environment\. Post-conflict reconstruction was combined with a progressively increasing reform agenda\. An energy study to provide comprehensive information to the stakeholders for future decisions was completed; sector reforms were strengthened, and new institutions were established to enable BiH to integrate into the regional electricity market; regional interconnections were re-established; and stage was set through SCADA/EMS and FMIS to 18  modernize and improve governance of the sector entities\. The three EPs improved their operational and financial performance significantly\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 44\. A report, "Social Assessment of Electricity Consumers and Evaluation of Related Social Protection Programs" was completed in 2003 by Ekonomski Institut, funded under the project\. Under the study, surveys of 1,500 households and 2 workshops with relevant stakeholders of the sector were implemented\. The study concluded that the electricity tariffs are already a heavy burden on the poor and consideration must be given to the vulnerable population in case of tariff increases\. The study also indicated that the social protection program needs to be more targeted, since the various existing programs based on social categories such as veterans, pensioners, refugees, etc\., do not necessarily target the economically disadvantaged well\. The study also suggests, at least for EPHZHB and EPRS, that improvement in collection and reduction in losses would provide the resources to better provide for the disadvantaged\. The shortfall, would need to be covered either through budgetary support or cross subsidization by other consumer groups, which seems to be an acceptable solution for most of the respondents of the survey\. (b) Institutional Change/Strengthening 45\. Very significant institutional changes were implemented through this project: After carrying out a comprehensive analysis, sector restructuring plans to guide the reforms were prepared and approved by the respective Entity Parliaments\. Three Regulatory Commissions were created and the Commissioners appointed\. Laws were enacted to create a single Transmission company and an Independent System Operator\. Agreement was achieved on ownership and management of a single Transco/ISO (on which recently disagreements have arisen)\. An integrated Financial Management Information System based on SAP software was introduced and, seeing the benefits the three implementing agencies (EPs) are rolling it out throughout each of the companies partly using their own resources\. FMIS will not only improve financial management, it will be extended to all business units including power generation and trading\. 46\. Further measures and review of sector reforms are necessary\. For example, there is still no clarity on the market operator, liberalization of the market is slow, there are delays in development of generation capacity for export to the regional electricity market, and the disagreements about Transco/ISO need to be resolved\. Further opening of electricity market in the region is likely to stimulate investments in generation and transmission\. It is important that clear and transparent rules are developed for attracting generation investments and to ensure that the development benefits of export projects are captured for the citizens of Bosnia-Herzegovina\. (c) Other Unintended Outcomes and Impacts (positive or negative) 47\. Though some of the benefits, e\.g\. commercial sale of spare communication capacity of SCADA system, use of pump-storage hydroelectric plant at Capljina have not yet been realized, no unintended impacts were noticed\. 19  3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 48\. Not Applicable 4\. Assessment of Risk to Development Outcome Rating: Moderate 49\. Though there is a deepening disagreement among the Entities about ownership, governance, and management of the Transmission Company, which is in turn delaying the much needed investments in 110 kV network and possible delay in some potential investments in generation projects, there is a strong motivation in the sector companies and other players to strengthen integration with the regional electricity market\. The outcomes linked to physical investments, e\.g\. increased transmission and distribution capacity, operation of BiH system as a single control area, reconnecting to UCTE, reduction of pollution from thermal plants, improved availability and safety at hydro plants, have been realized and will likely sustain\. Most of the sector reforms and restructuring outcomes, e\.g\. unbundling, independent regulation, institutional arrangements, improved information and management control systems will also sustain\. However, because of complex constitutional and political arrangements, there may be some adjustments to the sector structure defined in the Restructuring Action Plans\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance Bank Performance in Ensuring Quality at Entry Rating: Highly Satisfactory 50\. The Bank took the lead in designing the project and leveraged its small resources (US$35 million) to mobilize large amounts of co-financing (total project value of US$231 million)\. The design was highly relevant to post-conflict reconstruction, including restoring/providing power supply to returning refugees\. Despite a very complex political and governance environment, the Bank was able to achieve consensus among the State and the Entity governments, implementing agencies, and development partners\. High quality analytical and engineering studies were prepared to identify the high priority investments through a very transparent criteria\. Sector restructuring plans were prepared with intense consultation\. A social assessment was prepared through the project to provide protection to the vulnerable consumers\. (b) Quality of Supervision Rating: Satisfactory 51\. Supervision of investments, procurement and financial management, was carried out well, and the sector and country team spent considerable efforts and resources on continuous engagement with the client to ensure implementation of policy, institutional, and enterprise 20  commercialization activities\. Due to a complex and difficult political environment, the team had to facilitate the dialogue among the stakeholders and development partners\. Seeing the difficulties in emergence of consensus on the Energy Study, the team mobilized additional resources to hire reputed sector experts from within the region to conduct consultations and dialogue at high political and enterprise level\. Some of the consultation workshops, e\.g\., on environmental issues in Mostar, attracted considerable interest and participation of civil society\. Though, the Energy Study was limited by data quality on some aspects, such as wood consumption (data which is always hard to get except through extrapolation of samples), it was considered a good quality, comprehensive, document that is being extensively used by the power utilities, policy makers, civil society, and the development partners\. During the early years of project implementation the task team had to put in substantially higher efforts in supervision compared to average Bank projects\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 52\. The Bank took great care in designing the project, identifying high priority investments, assisting in design and implementation of sector reforms and restructuring plans that helped the country to integrate into the regional electricity market, and carried out intensive consultations with the stakeholders through preparation and implementation\. The client and the development partners have been very complimentary of the role of the Bank and the performance of the task teams\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory 53\. The Entities helped their respective power companies to implement the physical investments and improve their operational and financial performance\. However, the complex political and governance arrangements rendered the participation of MOFTER less effective\. A more clearly defined mandate, better resources, and acceptance by the Entities of the need for a national level coordination institution, would be necessary for an orderly and faster development of the energy sector in BiH\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 54\. The Borrower and the implementing agencies took ownership of the project, and demonstrated a high degree of commitment\. Though the project effectiveness was delayed it 21  was beyond their control due to political instability, elections, and delay in formation of government\. Despite the delays the physical investments were carried out diligently after the project became effective and implementation started\. However, there were delays in implementation of technical assistance activities, and contractual disputes arose with one of the consultants because of an apparent conflict of interest of one of the associates of that consulting firm\. 6\. Lessons Learned 55\. Some of the factors that contributed to the successful implementation of the project, and lessons learnt for other and future projects in Bosnia-Herzegovina, are: Need for high quality feasibility studies for preparation of investments within an overall plan that is agreed by the stakeholders, and a transparent criteria for selection of schemes; Sector reforms and restructuring should be based on high quality analytical work, meaningful consultation and participation of stakeholders, and should be backed by political commitment; Design of sector restructuring and the pace of its implementation should be owned and endorsed by the major stakeholders\. The success of FMIS indicates that pilots for demonstration, and familiarization of the staff with new technologies, should be carried out before introducing a major change in business processes and sophisticated IT tools\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (b) Cofinanciers The Bank had an energy expert posted in its Sarajevo office to supervise the Bank's energy sector program and post-conflict reconstruction support\. Soon after conclusion of preparation of Third Electric Power Reconstruction Project, the Bank's energy expert left the Sarajevo office\. USAID has commented that the Bank should have posted a full time energy expert in the field to fill the gap\. However, the team is of the view that the TTL for this project was spending enormous amount of time on policy dialogue and implementation supervision, and was in almost daily contact with the counterparts\. Given the pace of reforms, and significant presence of donors in the field, presence of a full time energy expert in the Bank's Country office may not have necessarily helped accelerate sector reforms\. (c) Other partners and stakeholders 22  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Components Appraisal Estimate Actual/Latest Percentage of (USD millions) Estimate (USD Appraisal millions) 1\. TRANSMISSION LINES 26\.54 26\.00 98\.0% 2\. TRANSMISSION 55\.22 65\.26 118\.2% SUBSTATIONS 3\. SCADA 39\.06 31\.54 80\.7% 4\. DISTRIBUTION 38\.98 0\.00 0\.00 5\. HYDROPOWER STATIONS 20\.40 20\.16 98\.8% 6\. ENVIRONMENTAL 14\.99 17\.85 119\.1% INVESTMENTS 7\. TECHNICAL ASSISTANCE 13\.38 4\.70 35\.2% Total Baseline Cost 208\.51 165\.51 79\.4% Physical Contingencies 13\.54 0\.00 0\.00 Price Contingencies 9\.09 0\.00 0\.00 Total Project Costs 231\.13 165\.51 71\.6% Front-end fee PPF 0\.00 0\.00 0\.00 Front-end fee IBRD 0\.00 0\.00 0\.00 Total Financing Required 231\.13 165\.51 71\.6% (b) Financing Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate Cofinancing Appraisal (USD millions) (USD millions) US: Agency for International Development 19\.80 0\.00 0% (USAID) Borrower 0\.00 0\.00 0% UK: British Department for International 1\.00 0\.00 0% Development (DFID) European Bank for Reconstruction and 44\.20 44\.46 100\.6% Development EC: Assistance for South East Europe 1\.80 0\.44 24\.5% EC: European Investment Bank 53\.60 56\.80 106\.0% SPAIN, Govt\. of 18\.00 0\.00 0% International Development Association (IDA) 35\.00 28\.00 80\.0% GERMANY: KREDITANSTALT FUR 2\.90 2\.00 134\.1% WIEDERAUFBAU (KFW) NORWAY: Norwegian Agency for Dev\. Coop\. 6\.20 0\.00 0% (NORAD) Local Sources of Borrowing Country 21\.00 20\.13 95\.9% FOREIGN SOURCES (UNIDENTIFIED) 13\.60 0\.00 0% SWITZERLAND: Swiss Agency for Dev\. & 14\.00 13\.68 97\.7% Coop\. (SDC) Note: EUR/US$ = 0\.9791 (ECB reference rate as of Jan 31, 2000) 23  Annex 2\. Outputs by Component Table 1: Project Cost by Component EPBiH EPHZHB EPRS TOTAL (US$ 000) appraisal actual appraisal actual appraisal actual appraisal actual A\.1 Transmission lines 11,563 9,947 4,150 3,834 10,825 12,217 26,538 25,998 A\.2 Transmission substations 15,395 14,944 16,658 17,624 23,169 32,693 55,222 65,261 B\. SCADA* 7,533 8,661 15,343 39,060 31,536 C\. Hydropower Stations 14,049 13,680 3,144 3,725 3,203 2,753 20,396 20,159 D\. Thermal power stations 8,118 9,282 - - 6,869 8,571 14,987 17,853 E\. Distribution 14,948 - 10,665 - 13,364 - 38,977 - F\. Technical Assistance - 1,069 2,466 1,167 13,380 4,703 TOTAL 64,073 56,455 34,617 36,311 57,430 72,744 208,560 165,510 Euro/US$ = 0\.9791 (as of January 31, 2000) * SCADA investments have not been completed 24  Table 2: Project Financing by Component Own IDA EBRD EIB SECO KfW DFID USAID** EC Spain NORAD Funds (USD million) EPBiH 10\.29 16\.81 14\.94 13\.68 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.73 A\. Transmission 9\.22 0\.00 14\.94 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.73 B\. SCADA 0\.00 7\.53 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 C\. Hydropower Stations 0\.00 0\.00 0\.00 13\.68 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 D\. Thermal power stations 0\.00 9\.28 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 E\. Distribution 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 F\. Technical Assistance 1\.07 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 EPHZHB 7\.75 8\.67 17\.62 0\.00 0\.00 0\.00 0\.00 0\.44 0\.00 0\.00 1\.85 A\. Transmission lines 3\.09 0\.00 17\.62 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.74 B\. SCADA 0\.00 8\.67 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 C\. Hydropower Stations 2\.62 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 1\.10 D\. Thermal power stations 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 E\. Distribution 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 F\. Technical Assistance 2\.04 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.44 0\.00 0\.00 0\.00 EPRS 9\.96 18\.98 24\.24 0\.00 2\.00 0\.00 0\.00 0\.00 0\.00 0\.00 17\.56 A\. Transmission lines 8\.79 0\.00 24\.24 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 11\.88 B\. SCADA 0\.00 11\.79 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 3\.55 C\. Hydropower Stations 0\.00 0\.00 0\.00 0\.00 2\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.75 D\. Thermal power stations 0\.00 7\.19 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 1\.38 E\. Distribution 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 F\. Technical Assistance 1\.17 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 TOTAL 28\.00 44\.46 56\.80 13\.68 2\.00 0\.00 0\.00 0\.44 0\.00 0\.00 20\.13 * EUR/US$ = 0\.9791 (ECB reference rate as of Jan 31, 2000) ** USAID carried out investments in distribution system strengthening through contractors directly hired by it, instead of providing funds to the EPs\. 25  Output of IDA financed components ¾ Rehabilitation of high voltage transmission lines (one each for the 400 kV and 220 kV lines) was completed between August 2004 and June 2005\. Detailed final report on the work performed was prepared by the implementation consultants\. ¾ Rehabilitation of Rama Hydropower plant was started in July 2004 and completed by September 2004, ahead of schedule\. A detailed report on rehabilitation work was prepared by the consultants\. Savings from the Credit were used for undertaking additional rehabilitation work with additional counterpart funds provided by EPHZHB\. ¾ The social assessment study was completed by 2004 and final report submitted by the consultants to the implementing agencies and the government\. ¾ Contract for the Energy Study was delayed and finally signed in late 2006\. Because of delay in finalization of the study the project closing had to be extended\. During the course of the study it was felt that more extensive consultations should be carried out to resolve the different points of view and also deeper engagement with the stakeholders\. The Bank mobilized additional funds through Energy Sector Management Assistance Program (ESMAP) to engage reputed experts from the region and to conduct additional consultation workshops\. ¾ Implementation of Financial Management Information System experienced long delays\. The consultants for preparation of requirement definition, technical specifications, and bidding documents were engaged in late 2005\. Only EP Mostar completed the installation of FMIS before the final project closure in May 2008 while EPRS carried out only partial implementation in the holding company, one generation and one distribution subsidiary\. Implementation in EPBiH did not go beyond preparation of initial draft bidding document\. However, both EPBiH and EPRS have since decided to implement not only FMIS but also roll the Enterprise Resource Planning (ERP) through all the functions of their companies\. ¾ Distribution network strengthening was implemented by USAID through contractors hired by it directly instead of providing funds to the EPs\. In addition, Spain did not provide the promised financing of US$7 million\. Output of Co-financed components EBRD: Progress in implementation of the EBRD-financed SCADA-EMS has been slow and it is currently under implementation\. Environmental upgrades at thermal power plants in EPBiH have been completed with considerable delays\. EIB: Implementation of investments under the EIB loan for the rehabilitation of transmission substations proceeded well\. Installation of most of the equipment initially planned to be financed was completed\. Substantial savings resulted from the amount allocated to the originally envisaged contracts, and additional equipment were purchased with these savings\. USAID: USAID financing of rehabilitation of distribution components under the project was completed, and more than 45,000 households were reconnected in seven villages in Kojic municipality and several settlements in Mostar\. The technical assistance covering various reform aspects made good progress; however the institutional capacity building of the ISO for development of market rules was considerably delayed- partly for reasons of disputes that arose among the Entities and the EPs on Transco/ISO\. 26  Switzerland: Rehabilitation of Units 5 and 6 at Jablanica Hydropower Plant, as well as the reconstruction of associated 110 kV switchgear and spillway gates, all financed by Switzerland, were completed\. Savings from these contracts were utilized for additional works, spare parts and studies in order to optimize further the Plant's operation and to increase the sustainability of effected investments\. Norway: Norway's financing of rehabilitation of distribution components was completed\. KfW: The KfW-financed safety and availability-related investments at the Trebinje Hydropower Plant (Phase 1) were completed\. Phase 2 for the rehabilitation of major components (turbine, generator, etc\.) was launched in February 2005 and was subsequently completed\. Implementation consultants were engaged to help with implementation\. EC: The EC-financed technical assistance to the Elektroprivredas for financial management systems was completed in October 2003\. This formed the basis of subsequent support through the IDA project\. DFID: The work of the Consultants retained by DFID to provide technical assistance to ZEKC in the establishment of the ISO was completed on February 28, 2005\. The Consultants assisted in the development of business processes, book of rules, grid code, organizational structure and training\. In their final report, the Consultants included recommendations on further technical assistance required by the ISO\. CIDA: The work of the CIDA-financed Consultants under the Southeast European Electrical System Technical Support Project (SEETEC) primarily covered issues having a regional perspective and the financing of the assignment of the Advisor to the Department of Energy in MOFTER and was concluded on March 31, 2007\. Their assistance in the establishment of Transco was also completed, and EC-financed Consultants continued assisting Transco until December 2007\. Spain: The provision of financing of US$ 7 million by the Government of Spain for the rehabilitation of distribution components was finally cancelled after the parties could not resolve their differences on procedures and procurement approach\. 27  Annex 3\. Economic and Financial Analysis Assumptions for the Economic Analysis Investments The total foreign and local costs for each category of investments are the actual values in US dollars shown in the Detailed Project Cost Table\. The allocation between years was provided by the Elektroprivredas\. O&M for Transmission Assumed to be equal to 2% of the investments per year\. Benefits of the Gacko-Mostar transmission line (i) Based on data provided by Transco, this line has resulted in reduced transmission losses of 5\.2 GWh per year, which are valued at the export price\. Projected prices are assumed to be equal to the 2008 export price of US$0\.08/kWh\. (ii) No benefit was registered for transfer of power on behalf of Croatia\. (iii) Rehabilitation did not affect production at Gacko since it had been possible to send all power produced at the plant to market even before the transmission line rehabilitation was completed\. Benefits of the Visegrad-Tuzla transmission line\. (i) Based on data provided by Transco, this line has resulted in reduced transmission losses of 9\.6 GWh per year, which are valued at the export price in the same way as for the Gacko-Mostar line\. (ii) Rehabilitation did not affect production at Visegrad since it had been possible to send all power produced at the plant to market even before the transmission line was rehabilitated\. Benefits from international connections (i) Reductions in outages attributable to these connections were measured in the same way as at appraisal\. It was assumed that in the absence of the connections there would be one additional transmission outage in 2004 lasting for 6 hours and affecting the whole transmission system, two such outages in 2005, and so on until the number of additional outages reaches 14\. Transmission system use projections are the lowest of four scenarios prepared by the ISO\. Demand growth is shown to decrease from 2\.21% in 2009 to 1\.90% by 2014\. Un-served energy attributable to the outages was valued at US0\.25/kWh as at appraisal\. Net benefits were estimated by subtracting the estimated supply cost from this value\. The supply cost was assumed to be equal to the weighted average retail tariff, which was about US$0\.10/kWh from 2005 through 2007 and US$0\.15/ kWh in 2008, and assumed to remain at this level thereafter\. (ii) No wheeling benefits were identified by Transco resulting from the international connections\. Transmission benefits from resumption of pumped storage at Capljina At the time of appraisal it was expected that the rehabilitation of transmission would permit the resumption of pumped storage at Capljina\. This did occur, but pumped storage operation was hardly used at all from 2005 through 2007 and not at all in 2008 since it was not profitable to do so in competition with electricity available from other countries\. No benefits are shown for resumption of pumped storage at Capljina\. Transmission benefits from additional sales The rehabilitated transmission system is assumed to be able to accommodate additional demand of 774 GWh in 2005 (one year after the extra capacity was estimated to be available in the PAD because of delay in implementing the investment program) up to 2,700 GWh\. Based on projections of growth in electricity demand prepared by the ISO of about 2\.2% per year from 2008 through 2013 and 1\.9% per year after 2013 the maximum capacity would be reached by 2013\. The benefits of the increase in transmission capacity were valued at willingness to 28  pay by final consumers (based on the alternative of diesel generators as was done at appraisal) less supply cost (excluding transmission cost), which was assumed to be equal to the weighted average retail tariff\. Willingness to pay was estimated to increase from US$0\.25/kWh in 2005 to US$0\.45/kWh in 2008, fall to US$0\.22/kWh in 2009 and rise gradually to US$0\.36/kWh in 2015 and after\. The historical and forecast oil prices used for the calculations are World Bank estimates made in January 2009\. The weighted average tariff was about US$0\.10/kWh from 2005 through 2007 and US$0\.15/kWh in 2008\. It is assumed to continue at US$0\.15/kWh\. The transmission tariff is assumed to be the present level of US$0\.006/kWh for all years\. Jablanica costs\. The SECO-investments for Units #5 and #6 began in 1999 before the IDA-financed component of Power 3 became effective\. The costs consist entirely of investments\. Jablanica benefits\. The benefits in terms of additional hydropower production in average hydrological years are 12 GWh\. They are valued at the export price of US$0\.052/kWh in 2005, US$0\.043/kWh in 2006 and 2007, and US$0\.08/kWh in 2008 and thereafter\. The present value of these benefits is less than the present value of the investments\. However, the safety and life extension benefits of the rehabilitation were not taken into account at the time of appraisal and thus were not estimated for the ICR\. Trebinje benefits\. Information was not available concerning possible increases in production at Trebinje resulting from rehabilitation under the project\. Distribution costs and benefits\. The distribution component carried out with USAID financing was handled independently by USAID, which did its own procurement of the supply and installation of equipment\. The Elektroprivredas were unable to provide enough data to permit an ex-post analysis to be carried out\. SCADA/EMS\. Since this EBRD-financed component had not been completed at the time the ICR was prepared there were no ex-post benefits that could be used for a cost- benefit analysis\. Assumptions for the Financial Analysis The same assumptions were used for the financial analysis with the following exceptions: The reductions in transmission outages resulting from rehabilitation of the international connections were valued at the transmission tariff of US$0\.006/kWh, which came into effect in 2006\. It is assumed to remain at this level to the end of the forecast period\. Additional sales were valued at the transmission tariff\. 29  BOSNIA AND HERZEGOVINA THIRD ELECTRIC POWER RECONSTRUCTION PROJECT PROJECT ECONOMIC ANALYSIS (US$ million) NPV EIRR 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2028 (at 12%) Transmission Costs Investment 0 8\.9 16\.9 53\.6 32\.0 12\.7 2\.3 0\.6 0\.0 0 $79\.0 O&M 0 0 0 1\.3 1\.6 1\.8 1\.8 1\.8 1\.8 1\.8 $9\.6 Subtotal 0 8\.9 16\.9 54\.9 33\.6 14\.5 4\.1 2\.4 1\.8 1\.8 $88\.6 Trans\. Benefits Gacko-Mostar 0 0 0 0\.2 0\.2 0\.2 0\.3 0\.4 0\.4 0\.3 $4\.1 Visegrad-Tuzla 0 0 0 0\.3 0\.4 0\.4 0\.6 0\.8 0\.8 0\.8 $3\.5 Internet connections 0 0 0 1\.1 2\.2 3\.4 4\.7 3\.9 3\.9 3\.9 $19\.1 Loss Red\. & Capljina 0 0 0 Additional Sales 0 0 0 0 120\.7 185\.4 247\.8 449 133 583\.2 $1,744\.6 Subtotal 0 0 0 1\.6 123\.5 189\.4 253\.4 453\.7 138\.0 588\.2 $1,771\.3 Net Benefits 0 -8\.9 -16\.9 -53\.2 89\.9 174\.9 249\.4 451\.2 136\.2 586\.4 $1,682\.7 117% Distribution Costs Investment Other Subtotal Dist\. Benefits Red\. unserved energy Additional sales Subtotal Net Benefits Jablanica #5 and #6 Costs 2\.2 2\.3 4\.9 5\.1 1\.6 0\.1 0\.4 $11\.7 Benefits 0\.6 0\.5 0\.5 1\.0 1\.0 1\.0 $6\.5 Net Benefits -2\.2 -2\.3 -4\.9 -5\.1 -1\.6 -0\.1 0\.3 0\.5 0\.5 1\.0 1\.0 1\.0 ($8\.4) Hydro - Trebinje #1 Costs Benefits Net Benefits SCADA/EMS Costs Investment O&M Subtotal SCADA Benefits Salary savings Red\. unserved energy Spare commun\. rev\. Subtotal Net Benefits Total Costs 2\.2 2\.3 4\.9 14\.0 18\.5 54\.9 33\.9 14\.5 4\.1 2\.4 1\.8 1\.8 $100\.3 Total Benefits 0 0 0 0 0 1\.6 124\.1 189\.9 254\.0 454\.6 139\.0 589\.1 $1,777\.8 Net Benefits -2\.24 -2\.3 -4\.91 -13\.99 -18\.51 -53\.3 90\.2 175\.4 249\.9 452\.2 137\.2 587\.3 $1,677\.5 78% 30  BOSNIA AND HERZEGOVINA THIRD ELECTRIC POWER RECONSTRUCTION PROJECT PROJECT FINANCIAL ANALYSIS (US$ million) NPV EIRR 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2028 (at 12%) Transmission Costs Investment 0 8\.9 16\.9 53\.6 32\.0 12\.7 2\.3 0\.6 0\.0 0 $79\.0 O&M 0 0 0 1\.3 1\.6 1\.8 1\.8 1\.8 1\.8 1\.8 $9\.6 Subtotal 0 8\.9 16\.9 54\.9 33\.6 14\.5 4\.1 2\.4 1\.8 1\.8 $88\.6 Trans\. Benefits Gacko-Mostar 0 0 0 0\.2 0\.2 0\.2 0\.3 0\.4 0\.4 0\.4 $1\.9 Visegrad-Tuzla 0 0 0 0\.3 0\.4 0\.4 0\.6 0\.8 0\.8 0\.8 $3\.5 Internat\. connections 0 0 0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 $0\.2 Loss Red\.& Capljina 0 0 0 0\.0 0 Additional Sales 0 0 0 0 4\.6 5\.4 6\.3 8\.8 10\.5 16\.2 $56\.2 Subtotal 0 0 0 0\.5 5\.2 6\.1 7\.4 10\.0 11\.7 17\.4 61\.9 Net Benefits 0 -8\.9 -16\.9 -54\.3 -28\.3 -8\.4 3\.3 7\.6 9\.9 15\.6 -26\.7 8% Distribution Costs Investment Other Subtotal Dist\. Benefits Red\. unserved energy Additional sales Subtotal Net Benefits Jablanica #5 and #6 Costs 2\.2 2\.3 4\.9 5\.1 1\.6 0\.1 0\.4 $11\.7 Benefits 0\.6 0\.5 0\.5 0\.8 1\.0 1\.0 $6\.4 Net Benefits -2\.2 -2\.3 -4\.9 -5\.1 -1\.6 -0\.1 0\.224 0\.516 0\.516 0\.792 0\.96 0\.96 -5\.3 Hydro - Trebinje #1 Costs Benefits Net Benefits SCADA/EMS Costs Investment O&M Subtotal SCADA Benefits Salary savings Red\. unserved energy Spare commun\. rev\. Subtotal Net Benefits Total Costs 2\.2 2\.3 4\.9 14\.0 18\.5 55\.0 34\.0 14\.5 4\.1 2\.4 1\.8 1\.8 100\.3 Total Benefits 0 0 0 0 0 0\.5 5\.9 6\.6 7\.9 10\.8 12\.7 18\.4 68\.3 Net Benefits -2\.2 -2\.3 -4\.9 -13\.98 -18\.47 -54\.4 -28\.1 -7\.9 3\.8 8\.4 10\.9 16\.6 -32\.0 7% 31  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Supervision/ICR Mohinder Gulati Country Sector Coordinator ECSSD Amarquaye Armar Program Manager ETWES Iftikhar Khalil Program Manager ECSSD Bernard Baratz Consultant EASTE Johannes C\. Exel Consultant AFTEG Vesna Francic Senior Operations Officer ECSSD Siew Chai Ting Lead Finance Officer LOAFC Felix Martin Economist ECSSD Richard E\. Hamilton Consultant ECSSD Ana Bjerde Sector Manager MNSSD Migara Jayawardena Senior Infrastructure Specialist EASTE Laszlo Jamniczky Consultant ECSSD ECSIE- Peter Kelly Consultant HIS Kishore Nadkarni Consultant ECSSD Demetrios Papathanasiou Sr Energy Econ\. ECSSD Sanjay N\. Vani Lead Financial Management Spec OPCFM Angelica Fernandes Procurement Analyst ECSPS Yolanda Gedse Program Assistant ECSSD 32  (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY98 3\.92 FY99 34\.45 FY00 128 312\.99 FY01 24 98\.31 FY02 0\.05 FY03 0\.00 FY04 0\.09 FY05 0\.02 Total: 152 449\.83 Supervision/ICR FY98 0\.00 FY99 0\.84 FY00 1- -1\.10 FY01 0\.10 FY02 13 80\.05 FY03 20 119\.04 FY04 20 153\.53 FY05 17 132\.90 FY06 13 72\.94 FY07 22 104\.06 FY08 17 76\.49 FY09 27\.88 Total: 121 738\.85 33  Annex 5\. Summary of Borrower's ICR and/or Comments on Draft ICR Significant inputs to the ICR were provided by the implementing agencies, and drafts reviewed by the Recipient, the Entity governments, and the implementing agencies\. The ICR team held consultations with them during a mission in March 2009 and discussed an early draft\. After incorporating their comments, a revised draft was sent for their final comments\. These comments have since been incorporated\. 34  Annex 6\. Comments of Cofinanciers and Other Partners/Stakeholders The ICR was reviewed by several co-financers and other stakeholders\. European Investment Bank, KfW, Norwegian Embassy, Office of High Representative, and Canadian Embassy informed that they do not have any comments on the ICR\. Comments received from USAID are appended below: International assistance up to The Third Electric Power Reconstruction Project ("Power III") focused on physical infrastructure restoration\. Power III provided the opportunity to begin the process for overall sector reform that was international in character\. The US Agency for International Development (USAID) energy assistance program also gave much greater emphasis to the critical sector reform issues after the significant reconstruction period preceding 2000\. The extended World Bank-USAID-Government of BiH dialogue on the proposed reform agenda for the period of Power III required postponement of the original Board date for one year\. As a result of extensive negotiations, agreement was reached for the establishment of a single Transmission Company (Transco), a State Regulator with authority over the Transco and two entity regulators with authority over generation and distribution\. USAID agreed to provide the technical assistance support for the implementation of the sector and institutional reforms and engaged management consultants and legal advisors to provide assistance over the life of Power III\. Work was initiated in September 2001 at the time of the Power III startup\. The management consultants developed the Restructuring and Privatization Study that was the basis for the entity Action Plans that were ultimately approved\. The legal advisors worked from 2001-2007 to develop the State laws establishing the Transco, the Independent System Operator (ISO) and the State Energy Regulatory Commission (SERC) and the entity laws establishing the two entity energy regulatory bodies\. Extensive effort was expended on the establishment of the regulatory bodies in particular and DFID provided support for the ISO institutional development\. The USAID energy sector reform assistance continued with the provision of technical assistance continuing in 2007 through 2011\. Approximately $10 million in USAID financed technical assistance was provided over the decade\. The Completion Report accurately describes the complexity of the reform process (section 17 (a)) including the number of organizations involved--Bosnian, donor and international\. Complicating the complexity cited was the underlying concern about sector corruption identified in the OSCE forensic audit\. This complicated environment combined with the resistance to fully implement the transmission company, the incomplete financial management reforms and contested (EBRD) SCADA system implementation leads to a conclusion that the Project would have benefited from the presence of a full time energy sector expert in the World Bank local office to focus on the institutional reforms and lead and strengthen the donor dialogue and efforts\. 35  Annex 7\. List of Supporting Documents 1\. Project Appraisal Document dated May 24, 2001, and the Legal Agreements\. 2\. Aide memoire of the supervision missions, related Implementation Supervision Reports, and back-to-office reports\. 3\. Mid-term review report February 2004\. 4\. Project Monitoring Reports submitted by the implementing agencies\. 5\. Inputs provided by the EPs for Implementation Completion Reports through several emails and reports between January and April 2009\. 6\. Energy Study Report March 2008\. 7\. Social Assessment of Electricity Consumers and Evaluation of Related Social Protection Programs report dated April 2004\. 36  IBRD 30803 16° 17° 18° 19° C R O A T I A Danube Meduric´ Bosanska S\. Brod V\. Kladusa Mraclin Gradiska Djakovo Zupanja Vrnograc Bosanski B\. Dubica Brod Srbac Ernestinovo Sava N\. Topola Odzak 45° Bosanski Novi B\. Samac 45°Cazin Bosna Modrica Bosanska Laktasi Derventa TS Prijedor 2 TS Prijedor Una Krupa Prnjavor TS Gradacac TS Bihac´ 1 TS Banja Luka TS Banja Luka 6 Brcko Bijeljina Ukrina Stanari Srebrenik TS Ugljevik Sanski Most Lesnica Doboj TP Ugljevik Sanica Vrbas Gracanica Kotor Varos Lukavac TP Tuzla Centar Tesanj Tuzla Osecina Kulen Vakuf HP Bocac Teslic´ Maglaj Dubrave Bosanski Glinica Kljuc Lesnica D\. Lapac Petrovac Zavidovici´ Zavidovici TS Tuzla Zvornik Loznica CROATIA Mrkonjic HP Jajce 1 Banovici´ Durdevik Grad HP Zvornik Sakovica´ L\. Dugopolje Sjever Drvar Jug Drina Kladanj TS Jajce 2 Travnik TS Zenica 2 Donji Vitez Vlasenica Vakuf Vares Srebrenica EVP Strmica B\. Grahovo Busovaca Glamoc Bugojno TP Kakanj TP Kakanj HP B\. Basta Kupres 44° SG Kakanj SG Kakanj Ilijas Sokolac 44° Knin Gornji Vakuf Visoko TS Sarajevo 10 TS Sarajevo 10 Pale TS Visegrad Pozega Livno Rogatica TS Sarajevo 20 TS Sarajevo 20 HP Rama Pazaric´ Pazaric Tomislavgrad HP Visegrad Peruca ´ B\. Blato Rudo SG Jablanica SG Jablanica Gorazde Konjic Konjic HP Jablanica HP Jablanica Kraljevac HP Grabovica Konjsko Neretva Potpec´ Foca HP Salakovac Pljevlja Zakucac HP Mostar Kraljevac Grude TS Mostar 2Nevesinje TS Mostar TS Mostar 4 Citluk TP Gacko Piva FEDERAL Liubuski TS Mostar 3 Makarsko TS Gacko REPUBLIC Capljina Stolac OF 43° Opuzen 43° PHP YUGOSLAVIA Capljina Neum Bileca ´ (SERBIA / A d r i a t i c S e a Ston HP Trebinje MONTENEGRO) Ston TS Trebinje TS rebinje Niksic ´ Komolac BOSNIA AND HERZEGOVINA Podgorica THIRD ELECTRIC POWER HP Dubrovnik H\. Novi RECONSTRUCTION PROJECT 0 25 50 75 KILOMETERS PROJECT EXISTING COMPONENT TRANSMISSION LINES: LUX\. 10° 20° 30° 50° CZECH POLAND UKRAINE 400 kV REP\. GERMANY 220 kV SLOVAK REP\. FRANCE MOLDOVA SWITZ\. AUSTRIA 110 kV HUNGARY 42° SLOVENIA ROMANIA 42° HYDRO POWER PLANTS CROATIA This map was produced by the THERMAL POWER PLANTS Map Design Unit of The World Bank\. Adriatic BOSNIA AND HERZEGOVINA The boundaries, colors, denominations FED\. REP\. SUBSTATIONS OF Black and any other information shown on ITALY YUGOSLAVIA Sea (SERB\./MONT\.) BULGARIA Sea this map do not imply, on the part of RIVERS The World Bank Group, any judgment Area of map FYR MACEDONIA on the legal status of any territory, or NATIONAL CAPITAL ALBANIA any endorsement or acceptance of 40° 40° Tyrrhenian 30° INTERNATIONAL BOUNDARIES such boundaries\. Sea GREECE Aegean Sea TURKEY 16° 17° 18° 10° 20° MAY 2000

REVIEW

P070089

 ICRR 12441 Report Number : ICRR12441 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 07/05/2006 PROJ ID :P070089 Appraisal Actual Project Name :Trade & Transport Project Costs 14\.4 14\.28 Facilitation In South East US$M ) (US$M) Europe Country :Macedonia Loan/ US$M ) Loan /Credit (US$M) 9\.3 10\.18 Sector (s):Board: ): TR - Central US$M) Cofinancing (US$M ) government administration (100%) L/C Number :C3402 FY ) Board Approval (FY) 01 Partners involved : Closing Date 06/30/2004 12/31/2005 Evaluator : Panel Reviewer : Division Manager : Division : Michael R\. Lav Peter Nigel Freeman Kyle Peters IEGCR 2\. Project Objectives and Components a\. Objectives (i) to reduce the non-tariff costs to trade and transportation; and (ii) to prevent smuggling and corruption at border crossings \. b\. Components (or Key Conditions in the case of Adjustment Loans ): (i) customs administration institutional reform (US$2\.0 million at appraisal, US$ 0\.8 million actual); (ii) trade facilitation development (US$0\.4 million at appraisal, nil actual); (iii) improvement of integrated customs information systems (US$ 5\.7 million at appraisal, US$ 6\.1 million actual) (iv) Improvement of border crossing facilities (US$ 6\.9 million at appraisal, US$ 6\.88 million actual) (v) Program and Project implementation (US$ 0\.5 million at appraisal, US$ 0\.4 million actual)\. Note: the differences between appraisal and actual costs are not clearly discussed in the ICR (see section 11 below)\. c\. Comments on Project Cost, Financing, Borrower Contribution, and Dates The project cost US$14\.28 million financed by an IDA credit for US $ 10\.18 million and Borrower (government) contribution of US $4\.10 million\. USAID contributed to the project with parallel financing \. The project was appraised in February, 2000, approved by the Board on July 25, 2000, made effective on February 26, 2001, and closed on December 31, 2005, 18 months behind schedule\. The implementation delays were largely the result of the civil conflict in 2001 which caused redeployment of the advisory team and prevented access to border sites \. An additional factor in postponing project closing was delays in upgrading of Tabanovce Border Crossing \. 3\. Relevance of Objectives & Design : The project was fully consistent with the FY 2000 CAS and with two of the three priority areas emphasized by both the CAS and the Government's "National Development Strategy for Macedonia ", namely; (i) promoting private sector growth, and (ii) increasing the effectiveness of the state \. Further, the regional program for Trade and Transport Faciliation in Southeast Europe (TTFSE) provide the substantive, regional, and country context for this operation \. 4\. Achievement of Objectives (Efficacy) : 1\. Reduce the non-tariff costs to trade and transport - substantial achievement\. Import clearance times at Kumanovo Pilot Inland terminal decreased by more than 50% from 1999 and 2000 to 2005, although the reduction was not sufficient to reach the target \. Border exit and entry times at Tabanovce Pilot Border and at Kafasan Pilot Border Crossings were reduced by about two -thirds and actual performance exceeded targeted performance \. Border exit and entry times at Deve Bair Pilot Border Crossing were reduced substantially but targets were not achieved \. USAID support for the project (assistance to customs) seems to have been an important factor in the project's success \. 2, Reduce smuggling and corruption at border crossings - Modest Achievement\. The ICR gives no direct evidence on this, and, for example, there are no data entered in the row for "surveyed occurrence of corruption " in Table 2\. However, the Risk Analysis Unit (RAU) has been strengthened and prepares risk profiles and selectivity criteria \. RAU prepares monthly reports for irregularities at the pilot border crossings in this project \. Targets for irregularities per number of examinations were met at Kumanovo and Deve Bair, but were not met at Tabanovce \. No irregularities were detected at Kafasan\.  5\. Efficiency : The estimated rate of return for the project is 34%, compared to the estimate at appraisal of 16%\. This is due to faster traffic growth than projected which benefited from the decreased processing times noted above \. In addition, the daily unit cost of utilizing a truck had been estimated at appraisal at US$ 250, but subsequent review resulting in increasing this estimate to US$300 per day, which is more in line with that found in neighboring countries such as Bulgaria\. The ICR notes some interference by police at border crossings, contrary to international convention \. This added to border crossing time and reduced the benefits of the project \. It should be noted that the ICR used an estimate of benefits due to increased volumes of trade related to the improvements supported by the project equivalent to 20 percent of the cost reduction benefits of the project, which the ICR considers to be a conservative estimate\. However, the methodology underlying this analysis is based on a very simple model with numerous assumptions, and appears to be speculative rather than conservative \. 6\. M&E Design, Implementation, & Utilization: M&E design and implementation for the first objective of the project, reduction of non - tariff costs, were carefully designed and formed an integral part of the project \. However, had it been possible to also monitor non -pilot sites, the project could have generated important "with and without project" comparators\. Little information is offered for the second component of the project, to reduce smuggling and corruption \. The PAD notes (see Annex 1, page 1) that an annual survey of truckers crossing the border is to be made, and a key performance indicator would be the reduction in the occurrence of corruption by 50 percent by 2003\. Unfortunately, the ICR offers no information on this \. 7\. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative): Safeguards and Fiduciary aspects of the projects have been addressed in the PSRs and raise no special issues \. There appear to have been no unintended effects \. 8\. Ratings : ICR ICR Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory In the absence of any surveys (or other indicators) which show that corruption and smuggling was reduced, a "benefit of the doubt" rating of moderately satisfactory is appropriate\. It should be noted that the rating of "Moderately Satisfactory" was not available to the Region at the time that the ICR was prepared\. Institutional Dev \.: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness \. 9\. Lessons: 1\. Interagency cooperation is a key aspect to implementing a trade faciliation or other multi -sector project\. High level support for such projects is important \. The ISRs point to a great deal of supervision effort on the part of the Bank which was necessary to support implementation \. Such supervision should promote a cooperative culture so that improvements can continue subsequent to project implementation \. 2\. Development of an international drivers permit for professional drivers, similar to the International Seafarer's ID, would speed up processing at international borders and could also help to ensure application of common professional standards \. 3\. A more holistic corridor approach to trade and transport facilitation would help optimize benefits of transport and trade facilitation activities \. Such an approach should include targeting both the physical and functional bottlenecks of transport corridors to optimize their use and capacity and should complement EU policy of transport corridor development for those countries in the EU region\. 10\. Assessment Recommended? Yes No 11\. Comments on Quality of ICR: The ICR covers many of the basics and offers a good description of the project components \. The ICR also shows in adequate detail the impact of the project on trade in Macedonia \. However, the ICR should have offered more information on the project's impact on smuggling and corruption and should have provided indicators of progress, or explained the problems in developing such indicators \. In addition, the ICR could have presented more clearly the reasons for the differences between estimated cost of the project components and actual cost \. It appears that the information systems cost more than anticipated (perhaps due to exchange rate fluctuations ) and that cost savings on other components allowed this to be accommodated \.

REVIEW

P104595

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) Report Number : ICRR0020789 1\. Project Data Project ID Project Name CF-Emergency Urban Infrastruct ERL P104595 (F07) Country Practice Area(Lead) Additional Financing Social, Urban, Rural and Resilience P117616 Central African Republic Global Practice L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-48050,IDA-H2910,IDA-H6110 31-Jan-2012 18,000,000\.00 Bank Approval Date Closing Date (Actual) 24-May-2007 30-Sep-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 18,000,000\.00 0\.00 Revised Commitment 41,163,263\.78 0\.00 Actual 41,279,292\.10 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Divya Kapoor Ridley Nelson Christopher David Nelson IEGSD (Unit 4) 2\. Project Objectives and Components a\. Objectives *Note Project Data in Section 1 is incorrect\. See Section 2e below under Project Cost heading\. --------------- There were some differences in language between the PDO statements in the PAD and the Financing Agreement\. The Project Development Objective (PDO) in the PAD dated May 3, 2007 (page 5) was: to support the Government of Central African Republic (GoCAR) to increase access to infrastructure and urban services in Bangui, the capital city\. The project would support GoCAR to rapidly rehabilitate, restore, Page 1 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) improve and expand sustainable access to basic infrastructure services for the population of the most deprived districts of Bangui\. The achievement of this objective would support GoCAR's efforts to demonstrate visible and tangible improvements in the lives of its citizens that are critical for sustaining social and political stability in the country\. In the Financing Agreement dated June 20, 2007 (page 5) the objective of the Project was: to assist the Recipient in rapidly rehabilitating, restoring, improving and expanding sustainable access to basic infrastructure services to the population of the most deprived districts of Bangui\. The Project consisted of two parts: Infrastructure Rehabilitation and Capacity Building For the purposes of this Review, the PDO from the Financial Agreement is used for further analysis\. Additional Financing was approved September 2010 to scale-up the project for enhancing its development impact, and to finance cost overruns to complete some original project activities\. The PDO remained unchanged, and the project outcome indicators remained largely the same in terms of intent and scope except that the targets were adjusted upwards to reflect the additional activities being financed\. b\. Were the project objectives/key associated outcome targets revised during implementation? Yes Did the Board approve the revised objectives/key associated outcome targets? Yes Date of Board Approval 28-Sep-2010 PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? No d\. Components Component A: Infrastructure Rehabilitation (Appraisal estimate US$ 15 million equivalent, Actual cost US$ 14\.6 million) Component A had four subcomponents: 1) Water Supply (Appraisal estimate US$ 4\.2 million equivalent, Actual Cost US$ 4\.2 million): Increasing potable water supply to the residents of Bangui, through support in: (i) rehabilitating parts of the SODECA network to reduce water losses; (ii) increasing SODECA’s water delivery capacity through improved pumping and electrical equipment, and (iii) providing deep boreholes powered by solar energy and constructing water kiosks for improved access to water in unserved neighborhoods\. 2) Drainage Rehabilitation (Appraisal estimate US$ 4\.2 million equivalent, Actual cost US$ 4\.5 million): Reducing the number of people affected by periodic flooding through support in: (i) rehabilitating drainage structures in particular the main Bouagba canal and feeder network; and (ii) piloting low cost drainage technologies through labor-intensive construction techniques\. 3) Solid Waste Management (Appraisal estimate US$ 2\.8 million equivalent, Actual cost US$ 2\.7 million): Creating an operational solid waste management system while building the foundations for a long term Page 2 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) sustainable service through support in: (i) constructing transfer stations; (ii) improving the access to, and operation of, the existing dumpsite, and providing gradually declining funds for transfer of solid waste to the dumpsite; (iii) strengthening the capacity of the stakeholders in solid waste management; and (iv) increasing communities’ solid waste management awareness\. Operating cost was to be funded by the project on a regressive basis, with the Municipality of Bangui gradually taking on the cost\. 4) Urban Road Rehabilitation (Appraisal estimate US$ 3\.8 million equivalent, Actual cost US$ 3\.2 million): Rehabilitating primary and secondary gravel and dirt roads in Bangui, through support in: (i) rehabilitating roads; and (ii) improving the drainage along these roads\. Component B: Institutional Strengthening (Appraisal estimate US$ 3 million equivalent, Actual Cost US$ 2\.9 million) This component aimed to strengthen the capacity of the institutions involved in the management of the project and responsible for the delivery of urban services to ensure some measure of sustainability of the activities to be financed by the project\. The PP made it clear that the emergency operation would not be able to address all the important sustainability issues associated with the delivery services\. Activities under this component were: (i) technical assistance to the Ministry of Urban Affairs; (ii) strengthening the fiduciary functions in the Technical Secretariat responsible for project coordination; and (iii) acquisition of software for financial and procurement management, monitoring and evaluation (M&E), instituting environmental and social safeguards, and training technical staff of GoCAR agencies (Ministry of Urban Affairs, Ministries of Public Works and of Water, SODECA, AGETIP-CAF -the implementing agency- and Municipality of Bangui) and communities involved in the project\. Revised Components An Additional Financing (AF) of US$ 23\.9 was approved in September 2010 to scale-up the project for enhancing its development impact, and to finance cost overruns to complete some original project activities\. The revised components were as follows: Component A (Additional Financing US$ 21\.7 million equivalent, Actual cost US$ 19\.1 million) 1) Water Supply (Additional Financing US$ 3\.4 million equivalent, Actual cost US$ 2\.4 million): Finalization and scale up of increased water access through water kiosks and installation of household connections\. Continued emergency works to improve the reliability of water service delivery to existing SODECA customers\. Increased emphasis was put on securing access to safe drinking water in areas vulnerable to flooding by construction of water kiosks on the existing water main lines\. 2) Flood Reduction and Mitigation of Flood Impacts (Additional Financing US$ 11\.0 million equivalent, Actual cost US$ 11\.8 million): The subcomponent scaled up drainage works to reduce floods\. However, it was also broadened to include a community-based flood preparedness and response program to reduce impacts of future floods in terms of loss of shelter, and exposure to water-borne diseases\. 3) Solid Waste Management (Additional Financing US$ 2\.8million equivalent, Actual cost US$ 3\.6 million): Activities aimed to consolidate the city-wide solid waste management system established with original EUIRMP financing and also comprised upgrading of the Kolongo landfill and technical studies related to a larger landfill for the future\. 4) Urban Road Rehabilitation (Additional Financing US$ 2\.6 million equivalent, Actual cost US$ 1\.3 million): The additional activities would contribute to providing more people with access to all-season roads and fund part of the original program of works that had not been implemented due to cost overruns\. Page 3 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) Emphasis was put on sustainability of the road rehabilitating to be funded by the AF through consistent inclusion of roadside drainage\. Component B (Additional Financing US$ 3\.1 million equivalent, Actual cost US$ 2\.7 million) The main change in Component B was a scale-up of institutional strengthening of the institutions responsible for the delivery of urban services (SODECA and the Municipalities of Bangui and Bimbo), including funding for developing a priority infrastructure maintenance program for the Municipality of Bangui and increased cost recovery\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost At appraisal, the total project cost was estimated to be US$ 18 million (IDA grant)\. After the approval of Additional Financing and restructuring, an additional IDA financing of US$ 23\.9 million equivalent was approved, which included a US$ 10\.2 million equivalent IDA credit\. Financing Original Project - IDA Grant SDR 12 million (US$ 18 million equivalent) Additional Financing - IDA Grant and Credit - SDR 15\.8 million (US$ 23\.9 million equivalent) Financing sources from ICR Annex 1 page 23 were as follows:: Source of Funds Appraisal Estimate Additional Financing Actual Estimate (US$ millions) (US$ millions) (US$ millions) Borrower 0\.0 0\.8 0\.0 IDA Grant (IDA-H2910) 18\.0 0\.0 17\.5 IDA Grant (IDA-H6110) 0\.0 16\.4 15\.0 IDA Credit (IDA-48050) 0\.0 7\.5 6\.8 Total 18\.0 24\.7 39\.3 Dates Approval: 05/24/2007 Original Closing: 01/31/2012 Restructurings: 09/28/2010, 03/17/2011, 08/19/2011, 06/13/2014, 01/22/2016 Revised/Actual Closing: 09/30/2016 Restructuring and Additional Financing 09/28/2010: Additional Financing was approved to scale up the Project and to fund the cost over-runs\. The closing date was extended from January 31, 2012 to July 31, 2014\. In accordance with OP/BP 13\.20, the Additional Financing (US$ 23\.9 million) would primarily be used to: (a) expand or scale-up the project to enhance its development impact (US$16\.25 million), and (b) finance cost overruns to complete some original project activities (US$7\.65 million) (Emergency Project Paper page 7)\. Page 4 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) 03/17/2011: Reallocation of SDR 328,000 from Category 1 Goods, works and consultants' services for Component A of project to Category 2 Goods, works and consultants' services for Component B of project to allow completion of Component B activities (Restructuring paper page 4)\. 08/19/2011: Extension of deadline (from August 31, 2011 to December 31, 2011) for satisfying the dated covenant related to sealing the Kolongo landfill in accordance with the Environmental Management Plan (Restructuring paper page 4)\. 06/13/2014: Restructuring to: (i) extend closing date from July 31, 2014 to January 31, 2016 to make up for implementation delays and to allow for the implementation of labor-intensive public works; (ii) update the results framework to reflect scaled-up labor-intensive drainage works; (iii) reallocate US$ 200,000 from Component B to Component A, allocate US$ 1\.9 million of contingencies to Component A, adjust funds between Component A subcomponents; (iv) include provision of water to camps for displaced persons and make other minor implementation adjustments; and (v) revise disbursement estimates (ICR page xii and *Word document attached in CD Memo dated June 2014) 01/22/2016: Extension of closing date from January 31, 2016 to September 30, 2016, to make up for lost time due to the volatile country situation and a temporary disbursement suspension and cancel US$800,000 of client counterpart funding (Restructuring Paper page 5)\. Note: *This restructuring paper was not easily accessible on WBDocs Split Rating Since there was no change in the original PDO, since key associated outcome target changes were insufficient to be treated as changes of intent, and since the indicator scale changes were largely attributable to the additional funding, this review does not consider a Split Evaluation necessary\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives The relevance of objectives, when assessed in relation to country conditions, the Bank's strategy, and the Borrower's strategy at the time of project closing, remain substantial\. The Central African Republic (CAR) still needs support to close the infrastructure gap\. The government’s 2016 5-year Recovery and Peace Consolidation Plan contains investments amounting to US$740 million in basic services, water and roads (ICR page 12)\. Bangui houses 11 percent of the country’s poor and gradual return of displaced persons to neighborhoods wholly or partially destroyed in the 2013 conflict creates additional pressure for rapid restoration of access to basic infrastructure services, in line with the project’s PDO\. According to the ICR, the Government has requested that the Bank continues to fund infrastructure investments in the capital under new projects\. Intervention in CAR by the Bank is consistent with the IDA-18 focus on fragile and conflict- affected states\. The objectives of targeting rapid and sustainable improvements to services remain relevant in the current context\. Page 5 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) Rating Revised Rating Substantial Not Rated/Not Applicable b\. Relevance of Design The project included a program of activities to address the several problems identified in the capital region of Bangui, consistent with the stated objectives\. The causal chain between funding and outcomes was clear\. While there were differences between the stated objective in the financing agreement and the PAD, the activities in each sector would lead to achievement of measurable improvements in access to services\. The use of labor-intensive construction techniques was a design element to create employment opportunities for the disenfranchised youth to reduce risk of recurring violence\. The apparent differences in the PAD and Financing agreement objectives were resolved when the AF was approved\. Rating Revised Rating Substantial Not Rated/Not Applicable 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective Increasing potable water supply to the residents of Bangui in the most deprived districts\. Rationale Consolidated Outputs for Water Supply Infrastructure Rehabilitation (from ICR Annex 2, page 24): • Rehabilitation of 6\.27 kilometers of the water network main lines\. • Separation of transport and distribution network by doubling pipes to R2 and R3 reservoirs\. • Construction of 10 water bore holes in neighborhoods not covered by the SODECA network and installation of micro-systems with pumps running on solar power and 3 water kiosks in each system and 2 bore holes equipped with manual pumps\. • Construction of 29 water kiosks on the existing SODECA network\. • Rehabilitation and/or replacement of pumping equipment (power pumps and feed pumps)\. • Installation of chemical dosage pumps to improve the reliability of water production facilities\. • Rehabilitation or replacement of defective electrical installations (old instrument cabinets, etc\.)\. • Rehabilitation of the filters’ hydraulic partition system\. • Installation of 1,978 subsidized household water connections\. • Reestablishing the water main connecting the 6ème arrondissement** to the network after erosion caused a bridge to collapse\. Page 6 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) **The ICR does not always make it clear what percentage of particular outputs were in the most deprived districts of Bangui however subsequent information from the project team indicates a substantial share was provided in the most deprived districts\. Additional Financing was secured for: • Finalization and scale up of increased water access through water kiosks and installation of household connections\. • Continued emergency works to improve the reliability of water service delivery to existing SODECA customers\. • Increased emphasis was put on securing access to safe drinking water in areas vulnerable to flooding by construction of water kiosks on the existing water main lines\. Outcome and Performance Indicator: Number of people getting access to potable water The Appraisal value was 110,000, which was revised down to 38,800 in the AF document "owing to initial miscalculation of indicator" (as per the ICR page vii)\. The target was further reduced to 34,300 in the 2014 restructuring\. The actual achievement in the Results Framework is reported as 39,300 people attaining access to water, above the revised target\. However, the ICR also notes (p\.13) that an additional (perhaps with some overlap) 132,158 benefitted from the rehabilitation of a collapsed watermain\. Adding half of these to allow for some overlap would mean that even the original target prior to the first revision would have been almost met\. There is little evidence beyond an update on civil works about aspects related to reducing water losses and unaccounted for water and increasing SODECA’s water delivery capacity\. The beneficiary survey (Annex 5) found that 69% of beneficiaries reported a reduction in time collecting water and 71% responded that tariffs were affordable\. Some of the more negative responses on water collection are attributed to the 2013 political crisis\. Some respondents noted that two of the surveyed kiosks were not operational due to absence of a manager in one case and payment arrears to SODECA in the other case\. SODECA continues to be affected by technical difficulties, including water intake from the river during the dry season and the ageing network and losses in the network\. There was evidence from the survey of a deterioration in service after the project\. On balance, particularly allowing for the large number of beneficiaries from the rehabilitation of the collapsed water main, the achievement is rated Substantial although sustainability remains a question\. Rating Substantial PHREVDELTBL PHEFFICACYTBL Objective 2 Objective Reducing the number of people affected by periodic flooding in the most deprived districts Page 7 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) Rationale Consolidated Outputs for Drainage Infrastructure Rehabilitation (from ICR Annex 2, page 24): • Rehabilitation of 7\.66 kilometers of trunk drainage infrastructure\. • Cleaning of 21\.77 kilometers of drainage\. • Developing and implementing a community-based flood preparedness and response program\. • Construction of two flood-resistant homes as a pilot to demonstrate feasibility for low cost drainage technologies\. Additional Financing was secured to scale up efforts for Flood Reduction and Mitigation of Flood Impacts\. The aim was to scale up drainage works and to broaden the approach to include a community-based flood preparedness and response program to reduce impacts of future floods, particularly loss of shelter and exposure to water-borne diseases\. Outcome and Performance Indicator: Number of people protected against periodic flooding The PDO indicator in the ICR indicates that 168,400 people had access to improved drainage in areas served by the project from baseline value of 6,000 and a revised target of 70,000 - this indicator was revised upward from 58,000 during the AF approval\. The beneficiary survey (Annex 5) noted that some portions of the drainage infrastructure are clean and allow easy passage of the water\. Others, on the other hand, begin to become clogged with waste and vegetation\. The torrential nature of rains promotes soil erosion which leads to gradual clogging of drains\. The general population’s habit of using the drainage to deposit household waste also contributes to diminishing their effectiveness\. Given the substantial over-achievement of the revised objective, despite again some concerns about O&M and sustainability, this objective is rated Substantial\. Rating Substantial PHREVDELTBL PHEFFICACYTBL Objective 3 Objective Creating an operational solid waste management system in the most deprived districts Rationale Consolidated Outputs for Solid Waste Management Infrastructure Rehabilitation (from ICR Annex 2, page 24): • Construction of 51 transfer stations\. Page 8 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) • Provision of 62 containers\. • Provision of collection equipment\. • Upgrading of the existing uncontrolled landfill to adequate environmental standards\. • Installation of a weighbridge and control post on the landfill\. • Provision of materials for landfill management (charger, compactor, water storage) • Funding secondary collection (from transfer stations to the landfill)\. • Information, education, and communication activities\. Additional Financing was used for (1) activities aimed to consolidate the city-wide solid waste management system established with original project financing as well as to (2) to upgrade the Kolongo landfill and conduct technical studies related to a larger landfill for the future\. Outcome and Performance Indicator: Number of people getting access to a sustainable solid waste management system 183,600 people had access to regular solid waste collection under the project\. The original target was 257,000 and the revised target after AF approval was 390,000\. This indicator was underachieved relative to the targets\. The baseline was 30,000\. There is no clear evidence for strengthened capacity of stakeholders in solid waste management\. 72% of beneficiaries were satisfied with waste collection from the transit depot but that is only a part of the disposal chain\. Again, there was dissatisfaction with performance after project closure\. The beneficiary survey notes that secondary collection was contracted to three companies paid by the project\. An examination of the quantities collected from 2010 to 2016 showed that they have evolved irregularly with phases of increase and decrease; the lowest level not unexpectedly was recorded in 2013 during the crisis and the highest in 2016, before project closure\. Not all the constructed infrastructure was operational due to reasons such as insecurity in the neighborhood or because it was not accepted by the population\. The study sets the number of transfer points not in operation at 13 (out of 51 constructed)\. Overall, this evidence leads to a Modest rating\. Rating Modest PHREVDELTBL PHEFFICACYTBL Objective 4 Objective Rehabilitating primary and secondary gravels and dirt roads in Bangui's most deprived districts Rationale Consolidated Outputs for Urban Road Rehabilitation Infrastructure Rehabilitation (from ICR Annex 2, page 24): Page 9 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) • Rehabilitation of 48\.0 kilometers of the primary and secondary earth roads network in Bangui, and construction of 12\.0 kilometers of drainage along rehabilitated roads\. • Rehabilitation of 34\.1 kilometers of roads by labor-intensive methods\. • Reinforcement works on the Sapéké bridge\. Additional Financing was used for activities that contributed to providing more people with access to all- season roads and to fund part of the original program of works that had not been implemented due to cost overruns\. Emphasis was put on sustainability of the road rehabilitating to be funded by the AF through consistent inclusion of roadside drainage\. Outcome and Performance Indicator: Number of people getting access to all year passable roads The number of people in urban areas provided with access to all-season roads within a 500 meter range under the project was 568,100\. The original target was 470,000 while the revised target after AF approval was 310,254 so the achievement was well beyond the revised target\. 98% of beneficiaries surveyed say they have saved travel time\. The time saved on a one way trip was substantial at 35 minutes\. 71% said that the road condition was average or better while 29% say roads were in bad condition\. Again, the beneficiary survey (Annex 5) notes that since completion of the works, the roads have not been maintained\. Observations on the ground showed roads with both slight degradation and others with substantial degradation\. However, the ICR reports that most roads improved by the project are still used\. On balance, based mainly on the time saved by beneficiaries, this objective is rated Substantial\. However, again there are concerns about sustainability\. Based on the large number of beneficiaries from road improvement relative to the other activities of water, drainage, and solid waste\. This rating is given somewhat higher weight in aggregating achievement of objectives ratings\. Rating Substantial PHREVDELTBL PHEFFICACYTBL Objective 5 Objective Institutional strengthening and capacity building to improve infrastructure access in the most deprived districts of Bangui Rationale Consolidated Outputs for Institutional Strengthening and Capacity Building - (from ICR Annex 2, page 24): • Training in fiduciary aspects, monitoring and evaluation, supervision of works and contracts, community participation techniques, etc\. • Support to the Municipality of Bangui for improved regulation and maintenance of urban infrastructure services and strategic planning\. Page 10 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) • Management training for: (i) the Municipality of Bangui in the areas of SWM, drainage and urban roads; (ii) SODECA (Société de Distribution de l’Eau de Centrafrique – the national water utility company) to better manage water systems in Bangui; and (iii) Ministry of Urban Affairs and Ministry of Water in strategic planning for project implementation\. • Audit of the Urban Infrastructure Maintenance Fund and training of staff of the Ministry of Urban Affairs, Municipality of Bangui and AGETIP-CAF (Agence d’Exécution des Travaux d’Intérêt Publique en Centrafrique – Central African Public Works Implementing Agency) in the operation of the fund\. • Provision of four vehicles, 14 motorcycles, ten computers, and standard office software, fiduciary and management software, and some tools for management (accounting, auditing and M&E systems)\. • Hiring of a procurement specialist (AGETIP-CAF), a communication specialist (SODECA), an urban specialist (Municipality of Bangui), and M&E specialist (Technical Secretariat)\. • Development of a solid waste management strategy for Bangui and Bimbo\. • Development of water supply master plan for Bangui\. • Development of detailed technical study of the bypass road of the city of Bangui\. With Additional Financing, the main change in this objective was a scale-up of institutional strengthening of the institutions responsible for the delivery of urban services (SODECA and the Municipalities of Bangui and Bimbo), including through funding for developing a priority infrastructure maintenance program for the Municipality of Bangui and increased cost recovery\. Outcome and Performance Indicator: There is limited evidence\. No capacity indicator was designed or reported\. However, establishment and operation of a solid waste management team in Bangui Municipality was achieved (although this indicator was dropped in the AF)\. There is limited evidence presented for cost recovery except that all water kiosks apart from eight generate income for SODECA\. The project did provide training, equipment for maintenance, planning skills and support for the Urban Infrastructure Maintenance Fund\. But evidence for the actual achievement of institution building and capacity development is limited and the concerns about sustainability and O&M after the project closed beyond the more likely sustainable water kiosks leave questions about system capacity\. Rating Modest PHREVDELTBL PHREVISEDTBL 5\. Efficiency Economic Efficiency No ex ante economic analysis was carried out for the original project or the AF, as allowed by emergency procedures\. The ICR carried out a cost-benefit analysis based on available data collected through a beneficiary satisfaction Page 11 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) and results survey and combined with other available data\. A discount rate of 8% was used for the calculations and investments were analyzed over a time horizon ranging from 5-10 years\. The results of this economic analysis (from ICR paragraph 3\.3) are given below: Investment Investment cost (US$ Economic rate of return Net present value (US$ million) (ERR) million) Drainage 6\.6 54% 1\.7 Water 16\.3 19% 1\.4 SWM 6\.3 Not calculated Not calculated Roads 4\.5 42% 3\.5 The analysis covered US$ 27\.4 million of investments (~ 70% of total actual investments)\. The ERR activity estimates in two cases are not robust to reductions in benefit streams by 25%\. No aggregated ERR was done for the project\. IEG has some concerns about the methodology at the component level since it is not always clear what the "without project" scenario would have been, for example with water\. In the case of water, the volume of water per household seems high for poor beneficiaries, the main target group of the project\. Unfortunately there was insufficient data to estimate DALY benefit streams generated from mortality and morbidity evidence for those activities impacting health\. Financial Efficiency There is limited evidence presented in the ICR on cost recovery so financial efficiency is difficult to estimate\. Operations and Maintenance arrangements are not clear and the beneficiary surveys suggest quite rapid deterioration of services post-project in some sectors\. Whether this means that benefit streams are optimistic is difficult to judge but added to the sensitivity of at least two of the benefit streams, this raises questions about the robustness of some estimates\. Administrative and Implementation Efficiency This seems to have been modest at best given the multiple restructurings and revisions later in the project, combined with delays due to the volatile country context\. Even allowing for, and after, the additional financing, the project closing had to be extended beyond the revised closing date projections\. In conclusion, this review finds that, given the sensitivity of some of the estimates to benefit stream assumptions, the project extensions and restructurings to complete activities following the crisis, and concerns about O&M, some becoming evident even in the short term and so raising questions about sustainability, efficiency can be rated only modest\. Efficiency Rating Modest a\. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) Page 12 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) 0 Appraisal 0 Not Applicable 0 ICR Estimate 0 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome The Relevance of Objectives and Design are rated Substantial\. The project was clearly an important emergency operation\. Of the five objectives three are rated Substantial on balance although not without concerns about sustainability, two are rated Modest\. One of the three objectives rated Substantial affected a larger number of beneficiaries than the others\. Efficiency shows mixed evidence, and, for some activities, limited evidence with some net benefit streams being quite sensitive to reduced benefit assumptions\. For these reasons, Efficiency is rated Modest\. The project had moderate shortcomings and outcome is rated Moderately Satisfactory\. A split rating approach would not have changed this\. a\. Outcome Rating Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating According to the ICR (page 19) the project closed against a backdrop of gradual but uneven improvement in the security situation in the country and in Bangui\. If large-scale outbreaks of violence in Bangui were to recur (as was the case during the project implementation when due to severe budget constraints, the government was not able to provide the counterpart funds), most project investments could be affected, and hence the risk to development outcome remains high\. Moreover, weak maintenance and a constrained macro-economic context presents an overall risk\. Sustained operations and maintenance (O&M) activities would be required to fully support the continued flow of benefits from the rehabilitated infrastructure in the longer term\. Beneficiary surveys suggest that there were already, at project closing, signs of infrastructure deterioration in some cases\. a\. Risk to Development Outcome Rating High Page 13 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) 8\. Assessment of Bank Performance a\. Quality-at-Entry According to the ICR (page 19), the Bank played an important role in facilitating preparation in a context of post-conflict transition\. The preparation time of just over four months from the concept review to approval was highly compressed\. The project parts related to capacity building could, measured by regular project standards, have been developed more, but the project laid out the main capacity shortcomings to be addressed and the design wisely made use of a private sector agency for implementation\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision According to the ICR (page 20), during implementation the Bank proactively identified implementation bottlenecks and developed solutions\. During the crisis period of Bank mission suspension, reverse missions were carried out in Yaoundé to assure continuation of implementation support and the Bank proposed solutions to overcome the volatile security situation to assure continued progress towards service delivery objectives\. Among these measures were payment of an advance to AGETIP-CAF\. However, the client expressed (in its completion report) that the number of Bank task team leaders, four in total, led to some level of discontinuity in the Bank’s implementation support\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. Assessment of Borrower Performance a\. Government Performance According to the ICR (page 21), the inter-ministerial committee provided guidance during project preparation, but was less active during implementation and did not meet following the 2013 crisis, when a transitional government was in place\. The government was open to trying new ideas and implemented the Bank’s advice, to the extent this was within its means\. Due to severe budget constraints, the government was not able to provide the counterpart funds for operation of the Solid Waste Management system\. More adequate government contributions to the Urban Infrastructure Maintenance Fund would have promoted sustainability of road and drainage investments\. This remains the project's biggest issue\. Government Performance Rating Moderately Satisfactory Page 14 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) b\. Implementing Agency Performance The implementing agency, Agence d’Exécution des Travaux d’Intérêt Publique en Centrafrique – Central African Public Works Implementing Agency (AGETIP-CAF), generally assured good collaboration with stakeholders and assisted the Municipality of Bangui and Société de Distribution de l’Eau de Centrafrique – the national water utility company (SODECA) in carrying out beneficiary consultations and developing technical specifications\. The ICR notes that the disbursement suspension in 2013 negatively impacted the agency’s ability to operate\. Following the change of government, unclear responsibility for contract management also contributed to delays and partly explains why the access road along the Kokoro canal could not be completed\. It also noted that theft and destruction of part of the implementing agency’s equipment and materials, difficulties to pay staff timely due to the disbursement suspension, as well as power cut off, and late arrival and early departure at the office for security reasons was not conducive to effective project management\. The project was implemented in compliance with the relevant Bank policy and procedural requirements, with two exceptions (ICR page 10): (i) an instance of ineligible expenses in the total amount of FCFA 40 million was found by auditors (an ineligible personal guarantee for an AGETIP-CAF staff paid during the 2013 crisis) and the corresponding amounts reimbursed by the government; and (ii) a payment of advances to contractors in non-conformity with the contractual provisions\. The payments were made by AGETIP-CAF in an attempt to help speed up the works and advances were recovered before project closing\. Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The M&E design had some shortcomings flowing in part from the difference between the PDO in the PAD and in the financing agreement\. The PDO indicators to capture the outcome of the four infrastructure subcomponents were well selected, but there were no indicators to measure the parts of the PDO related to the rapidity and sustainability of interventions, apart from the indicator on the setting in place of an SWM unit in the Municipality of Bangui\. Also, capacity building indicators were weak\. According to the ICR, the target for an indicator related to access to water was calculated incorrectly in the PAD\. The ICR highlighted both the over-estimation as well as under-estimation of targets when commenting on M&E design\. The ICR also notes the lack of recruitment of an M&E specialist for the Technical Secretariat of the Steering Committee\. Page 15 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) b\. M&E Implementation The ICR notes (page 9) that collecting and aggregating indicator data for effective measurement of project implementation and its progress towards the PDO was a challenge because of the scarcity of data in CAR and staff instability in the Technical Secretariat charged with collecting data\. Community participation in M&E was not implemented, in part due to focusing efforts on getting the overall project M&E system to work\. On the Bank’s suggestion, in 2010, an international consultant was mobilized to assist in collecting data to track progress\. The system was in place when the AF was approved, but quality of reporting suffered from continued instability in the M&E position in the Technical Secretariat\. To incorporate the AF activities and respond to the changing context, changes were made to indicator values several times during the project\. No substantial evaluation of impacts was carried out during implementation\. c\. M&E Utilization According to the ICR, although data quality varied, it did serve to inform project management\. For example, data collected on the operation of water kiosks led to implemented technical solutions to improve quality of water from the drillings, and data on SWM was collected by the Municipality of Bangui, leading to proposals for a user-paid house-to-house collection system (but which has yet to be implemented)\. However, the majority of M&E activities served to monitor activity implementation rather than evaluating outcomes\. M&E Quality Rating Negligible 11\. Other Issues a\. Safeguards The project was classified as a Category B\. The required safeguards instruments -Environmental and Social Management Framework and Resettlement Policy Framework- were prepared and disclosed within six months of effectiveness as required by OP8\.00\. According to the ICR (page 10) a safeguards specialist was recruited to the AGETIP-CAF in compliance with the dated covenant in the financing agreement\. The safeguards instruments prepared also covered the AF and were re-disclosed prior to appraisal of the AF\. Bank implementation support missions revealed some shortcomings in the implementation of Environmental and Social Management Plans and Resettlement Action Plans\. These in particular concerned limited understanding of safeguards procedures by contractors and by the counterpart, which led to omission of cost of mitigation measures in the bidding documents\. The AF dated covenant regarding sealing of the Kolongo landfill could not be complied with by the deadline, and for this reason a level two restructuring was implemented to extend the deadline by 4 months\. The covenant was complied with before the new deadline\. b\. Fiduciary Compliance Page 16 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) According to the ICR (page 10), fiduciary management was generally rated in the satisfactory range during implementation, furthered by regular procurement and financial management training to AGETIP-CAF staff\. The project was implemented in compliance with the relevant Bank policy and procedural requirements, with two exceptions: (i) an instance of ineligible expenses in the total amount of FCFA 40 million was found by auditors (an ineligible personal guarantee for an AGETIP-CAF staff paid during the 2013 crisis) and the corresponding amounts reimbursed by the government; and (ii) a payment of advances to contractors in non-conformity with the contractual provisions\. The payments were made by AGETIP-CAF in an attempt to help speed up the works and advances were recovered before project closing\. Covenants in the financing agreement were complied with through recruitment of the internal and external auditors and a procurement specialist, and establishment of a computerized financial management and procurement information system\. Financial reports and audits were submitted on time and were unqualified and audit recommendations were adequately implemented\. Due to budget constraints and absence of mandated transfers from the government, the Municipality of Bangui, and later the government, were not able to provide the expected counterpart funding for the operation of the solid waste management system\. Despite repeated attempts to make funds available, this did not happen and in the January 2016 restructuring the government was released from this obligation\. c\. Unintended impacts (Positive or Negative) According to the ICR (page 18), the pilots funded by the project to construct two flood-resistant houses with low construction cost (around CFAF 3 million for a three-bedroom house) showed good technical results and is being replicated by other partners\. d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Outcome Moderately Satisfactory --- Satisfactory Sustained operations and maintenance (O&M) activities Risk to Development would be required to fully Substantial High Outcome support the continued flow of benefits from the rehabilitated infrastructure Moderately Bank Performance Moderately Satisfactory --- Satisfactory Moderately Borrower Performance Moderately Satisfactory --- Satisfactory Page 17 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) Quality of ICR Substantial --- Note When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons The following are the main lessons taken from the ICR but with some adaptation: • Flexible design and adaptive implementation in a fragile and conflict-affected environment is even more important than for a project in a stable environment because the inherent uncertainties and newly emerging diagnoses of the needs are more likely to call for reallocation of resources\. In this project, such flexibility was feasible due to the multi-sector nature of the project and the targeting of several neighborhoods within the same city\. This was achieved without significantly increasing the level of project complexity\. • Finding a well-performing contract management agency is particularly important in a conflict- affected environment to mitigate capacity constraints\. In this case, the management agency arrangement was coupled with flexibility on the Bank’s side to accommodate the evolving context and to address capacity rebuilding following the crisis situation\. The agency was able to continue at a minimum operational level following the 2013 crisis due to the Bank’s flexibility to pay a management advance\. • Designing outreach and communication activities in a conflict or post-conflict environment marked by low levels of social capital is an important element in assuring ownership by stakeholders\. In this case, the community consultations on the household water connections were successful due to the presence of SODECA agents in the field and similarly due to the presence of an NGO for the drainage activities\. 14\. Assessment Recommended? No 15\. Comments on Quality of ICR The overall quality of the ICR was substantial\. It was an outcome-driven narrative and provided substantial country context and outline of the related challenges\. The split rating rationale in this case was not necessary\. Some information about the "labor-intensive construction techniques" used in the project would have been helpful to assess the potential spillover effects and peace dividends\. It was not entirely clear what some of the "without project" scenarios were in the efficiency analysis\. The lessons were thoughtful\. The future of O&M could have been given somewhat more attention\. Page 18 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review CF-Emergency Urban Infrastruct ERL (F07) (P104595) a\. Quality of ICR Rating Substantial Page 19 of 19

REVIEW

P066065

Document of The World Bank Report No: ICR0000652 IMPLEMENTATION COMPLETION AND RESULTS REPORT (WBTF-50327) ON A GLOBAL ENVIRONMENT FACILITY TRUST FUND GRANT IN THE AMOUNT OF SDR 4\.0 MILLION (US$ 5\.15 MILLION EQUIVALENT) TO THE GOVERNMENT OF ROMANIA FOR AN AGRICULTURAL POLLUTION CONTROL PROJECT December 28, 2007 Sustainable Development Sector Department South Central Europe Country Management Unit Europe And Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective November 28, 2007) Currency Unit = Romanian New Leu (RON) RON 1\.00 = US$ 0\.42 US$ 1\.00 = RON 2\.39 FISCAL YEAR January 1 ­ December 31 ABBREVIATIONS AND ACRONYMS ANAR National Water Authority M&E Monitoring and Evaluation APC Agricultural Pollution Control MAFF Ministry of Agriculture, Food and APCP Agricultural Pollution Control Project Forests ASSP Agricultural Support Services Project MARD Ministry of Agriculture and Rural CAP Common Agricultural Policy Development CAS Country Assistance Strategy MWEP Ministry of Waters and Environmental CE Cost Effectiveness Protection CGS Competitive Grant Scheme MESD Ministry of Environment and CGAP Code of Good Agricultural Practices Sustainable Development DGA Directorate General of Agriculture N Nitrogen EMP Environmental Management Plan ND Nitrates Directive EPI Environmental Protection Inspectorate NFA National Forest Administration EPA Environmental Protection Agency NVZ Nitrate Vulnerable Zone EU European Union O&M Operations and Maintenance GAP Good Agricultural Practices P Phosphorus GEF Global Environment Facility PAD Project Appraisal Document GEO Global Environment Objective PIP Project Implementation Plan GoR Government of Romania PMU Project Management Unit IBRD International Bank for Reconstruction UNDP United National Development and Development Programme ICR Implementation Completion and USAID United States Agency for International Results Report Development INPCP Integrated Nutrient Pollution Control US$ United States Dollars Project WB World Bank ISR Implementation Supervision Report Vice President: Shigeo Katsu Country Director: Benoit Blarel (acting) Sector Manager: Juergen Voegele Project Team Leader: Doina Petrescu ICR Team Leader Tijen Arin  Romania Agricultural Pollution Control Project CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Global Environment Objectives and Design \.1 2\. Key Factors Affecting Implementation and Outcomes \.6 3\. Assessment of Outcomes\.12 4\. Assessment of Risk to Development Outcome\.15 5\. Assessment of Bank and Borrower Performance \.17 6\. Lessons Learned \.22 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \.23 Annex 1\. Project Costs and Financing\.234 Annex 2\. Outputs by Component \.25 Annex 3\. Economic and Financial Analysis\.28 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \.30 Annex 5\. Beneficiary Survey Results\.32 Annex 6\. Stakeholder Workshop Report and Results\.34 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders\.44 Annex 9\. List of Supporting Documents \.45 MAP  A\. Basic Information Agricultural Pollution Country: Romania Project Name: Control GEF Project Project ID: P066065 L/C/TF Number(s): WBTF-50327 ICR Date: 12/28/2007 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL Borrower: ROMANIA Original Total USD 5\.2M Disbursed Amount: USD 5\.1M Commitment: Environmental Category: B Global Focal Area: I Implementing Agencies: Ministry of Environment and Water Management Cofinanciers and Other External Partners: B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 12/16/1999 Effectiveness: 04/29/2002 04/29/2002 Appraisal: 07/19/2001 Restructuring(s): Approval: 12/13/2001 Mid-term Review: 04/30/2004 01/17/2005 Closing: 06/30/2007 06/30/2007 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Global Environment Outcome Moderate Bank Performance: Satisfactory Borrower Performance: Highly Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Highly Satisfactory Quality of Supervision: Highly Satisfactory Implementing Agency/Agencies: Highly Satisfactory Overall Bank Overall Borrower Performance: Satisfactory Performance: Highly Satisfactory C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project No Quality at Entry None i  at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): GEO rating before Highly Satisfactory Closing/Inactive status D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Agricultural extension and research 73 73 Central government administration 5 5 Forestry 9 9 General education sector 8 8 Sub-national government administration 5 5 Theme Code (Primary/Secondary) Environmental policies and institutions Primary Primary Land administration and management Secondary Secondary Other rural development Primary Primary Pollution management and environmental health Primary Primary Water resource management Primary Primary E\. Bank Staff Positions At ICR At Approval Vice President: Shigeo Katsu Johannes F\. Linn Country Director: Benoit Paul Blarel Andrew N\. Vorkink Sector Manager: Juergen Voegele Jane E\. Holt Project Team Leader: Doina Petrescu Jitendra P\. Srivastava ICR Team Leader: Tijen Arin ICR Primary Author: ii  F\. Results Framework Analysis Global Environment Objectives (GEO) and Key Indicators(as approved) The objective of the Project is to increase the use of agricultural practices that benefit the environment and lead to reduced nutrient discharge from agricultural sources in Romania to the Danube River and the Black Sea\. Key Indicators: (i) Percentage of households with livestock in project area adopting improved manure handling facilities - targeted to move from baseline of zero to 45% by 2006 and 65% by 2010; (ii) Percentage cropped area coming under nutrient management systems including crop rotation, crop nutrient management with soil testing, and use of organic manure - targeted to reach 30% by 2006 and 65% by 2010; (iii) Percentage of cropped area employing environment-friendly practices - target of 65% by 2010; and (iv) Trends in water quality indicators at designated sites - flow of nitrogen and phosphate to Danube River to be reduced by 10% by 2006\. Revised Global Environment Objectives (as approved by original approving authority) and Key Indicators and reasons/justifications The GEO was not revised\. Indicator No\.4 #Trends in water quality indicators at designated sites# was revised in the sense that it would not be measured in numerical values, but only in terms of direction (positive, neutral or negative)\. This was necessary as a numerically measured indicator would have necessitated a high-cost complex geo-hydrological model and intensive sampling while adding little to the attainment of the GEO\. (a) GEO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : Percentage of households with livestock in the project area using village manure storage, household bunkers and segregating waste materials Value (quantitative or 0% 45% 54\.4% Qualitative) Date achieved 12/31/2002 12/31/2006 12/31/2006 Comments (incl\. % * The actual value was ascertained in a survey carried out in early 2007 achievement) Indicator 2 : Percentage of area under nutrient management systems including crop rotation, crop nutrient management with soil testing, and use of organic manure Value (quantitative or 0% 30% 34% iii  Qualitative) Date achieved 12/31/2002 12/31/2006 12/31/2006 Comments (incl\. % * The actual value was ascertained in a survey carried out in early 2007 achievement) Indicator 3 : Percentage of area under enviornmentally-friendly agricultural practices Value (quantitative or 0% 30% 34% Qualitative) Date achieved 12/31/2002 12/31/2006 12/31/2006 Comments (incl\. % * The actual value was ascertained in a survey carried out in early 2007 achievement) Indicator 4 : Trends in water quality indicators at designated sites Value (quantitative or 0% 10% *Positive Qualitative) Date achieved 12/31/2002 12/31/2006 12/31/2006 Comments (incl\. % *Please see explanation above\. achievement) (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Indicator 1 : Number of village level manure storage facilities built finalized Value (quantitative or 0 14 18 Qualitative) Date achieved 12/31/2002 12/31/2006 06/30/2007 Comments (incl\. % Number of household manure bunkers built achievement) Indicator 2 : Number of household manure bunkers built Value (quantitative or 0 4,000 2,250 Qualitative) Date achieved 12/31/2002 12/31/2006 12/05/2005 Comments (incl\. % achievement) Indicator 3 : Percentage of vulnerable terrace areas planted to trees Value (quantitative or 10% 100% 100% iv  Qualitative) Date achieved 12/31/2002 06/30/2007 06/30/2007 Comments (incl\. % The indicators presented here are those that were tracked in the ISR as they best achievement) gauge project progress\. G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived GEO IP Disbursements (USD millions) 1 03/13/2002 Satisfactory Satisfactory 0\.00 2 05/17/2002 Satisfactory Satisfactory 0\.00 3 08/27/2002 Satisfactory Satisfactory 0\.30 4 03/05/2003 Satisfactory Satisfactory 0\.44 5 05/29/2003 Satisfactory Satisfactory 0\.46 6 12/01/2003 Satisfactory Highly Satisfactory 1\.21 7 06/28/2004 Satisfactory Satisfactory 2\.16 8 12/22/2004 Satisfactory Satisfactory 2\.77 9 03/14/2005 Satisfactory Satisfactory 3\.39 10 04/02/2005 Satisfactory Satisfactory 3\.39 11 12/12/2005 Satisfactory Satisfactory 4\.17 12 08/17/2006 Satisfactory Satisfactory 4\.36 13 01/23/2007 Highly Satisfactory Highly Satisfactory 4\.62 14 06/28/2007 Highly Satisfactory Highly Satisfactory 5\.15 H\. Restructuring (if any) Not Applicable v  I\. Disbursement Profile vi  1\. Project Context, Global Environment Objectives and Design 1\.1 Context at Appraisal The project was designed as part of the GEF / WB regional Black Sea Danube Strategic Partnership ­ Nutrient Reduction Investment Fund\. This Fund aims at reducing nutrient flows to the Danube River and ultimately the Black Sea\. The Investment Fund and the project in particular are in line with the "Strategic Action Plan for the Protection and Rehabilitation of the Black Sea" which had identified discharges of nutrients, nitrogen (N) and phosphorus (P), as the most serious problem leading to the degradation of the Black Sea ecosystem\. Nutrients of agricultural origin were found to constitute more than 50% of the nutrients transported by the Danube River and Romania was a significant contributor\. Like other riparian countries Romania had signed the Bucharest Convention committing itself to reducing nutrient flows to the Danube\. At the time of Appraisal, Romania was on the path of EU accession and facing the challenge of harmonizing with the EU environmental acquis\. Given its large agriculture sector, the EU Directive 91/676/CEE- Directive regarding water protection against pollution with nutrients originating from agriculture ("the Nitrates Directive") was of special importance\. Inappropriate unprotected storage of manure on in backyards and farm grounds and dumping of manure on roadsides and farms was the main source of nutrient pollution\. Excessive application of fertilizers had ceased to be a source of nutrient pollution due to the phasing out of subsidies for mineral fertilizers in the early 1990s\. On the other hand, Romania's accession to the EU was expected to lead to renewed intensification of agriculture, notably through mineral fertilization of soils\. Romanian policy makers aimed at counterbalancing this expected trend through the implementation of the Nitrates Directive, which includes both appropriate fertilization techniques and proper storage and application to land of manure as part of good agricultural practices\. Policy makers sought a pilot project which would test these practices under Romanian conditions and devise a strategy for country-wide implementation\. Agricultural pollution had also consequences for the rural population\. Run-off caused contamination of groundwater wells which were used for drinking water supply causing nitrate poisoning among infants\. In 1997, in the Calarasi County, the project area, an analysis of samples from 45 public wells revealed that over 79% of the samples exceeded acceptable levels of chemical content and 76% of samples exceed bacteriological standards\. Poor families who could not afford bottled water were affected most\. The project perfectly fit with the main focus of the 2001 CAS, namely support for EU accession and poverty reduction\. In particular it was consistent with one of in the CAS's five priorities: Protection and sustainable management of natural resources and the environment\. The project directly addressed the major development challenge of protecting and enhancing the environment, assisting the country towards EU accession and institution building\. The project was designed as a pilot for later country-wide implementation of the EU Nitrates Directive\. 1  1\.2 Original Global Environment Objectives (GEO) and Key Indicators (as approved) Global environmental objective: To reduce, over the long-term, the discharge of nutrients (nitrogen and phosphorus) and other agricultural pollutants into the Danube River and Black Sea through integrated land and water management of the Calarasi region and ecologically sustainable use of natural resources in two agricultural polders\. Key Indicators: (i) Percentage of households with livestock in project area adopting improved manure handling facilities - targeted to move from baseline of zero to 45% by 2006 and 65% by 2010; (ii) Percentage cropped area coming under nutrient management systems including crop rotation, crop nutrient management with soil testing, and use of organic manure - targeted to reach 30% by 2006 and 65% by 2010; (iii) Percentage of cropped area employing environment-friendly practices - target of 65% by 2010; and (iv) Trends in water quality indicators at designated sites - flow of nitrogen and phosphate to Danube River to be reduced by 10% by 2006\. 1\.3 Revised GEO (as approved by original approving authority) and Key Indicators, and Reasons/Justification The GEO was not revised\. Indicator No\.4 "Trends in water quality indicators at designated sites" was revised in the sense that it would not be measured in numerical values, but only in terms of direction (positive, neutral or negative\.)\. This was necessary as a numerically measured indicator would have necessitated a high-cost complex geo-hydrological model and intensive sampling while adding little to the attainment of the GEO\. 1\.4 Main Beneficiaries At appraisal the primary target groups were identified as: (i) All forty-eight communities (comunas) of the Calarasi County comprising about 410,000 ha of arable land and a total population of 332,000 in 94,000 households, where the Project would provide support for technology adaptation and extension interventions for environment-friendly agricultural practices; (ii) Seven comunas of the Calarasi County comprising a total area of about 90,000 ha of which 70,000 ha was arable and a total rural population of 26,700 in 10,540 households\. These comunas participated in the manure management and demonstration of environment friendly agricultural practices sub-components; (iii) Local communities around the Calarasi County who would benefit from the demonstration effect of the project\. The main target groups did not change during project implementation\. 2  Other groups who benefited from the project were Central Government agencies, notably the Ministry of Environment and Sustainable Development (MESD)1 and the Ministry of Agriculture and Rural Development (MARD)2, as staff knowledge on environmentally friendly agriculture was strengthened, allowing them to implement a country-wide follow-up project in fulfillment of EU Nitrates Directive (ND) requirements\. 1\.5 Original Components (as approved) The project comprised four components: Component 1: Activities in the Calarasi County (US$9\.22 with US$4\.02 GEF) The component consisted of four sub-components: (a) Manure Management Practices (US$5\.20 with US$2\.54 GEF\.) Provision of incentives to comunas and individual households for the installation of improved manure storage facilities and equipment for manure collection and application in seven comunas\. Provision of grants to a few large private dairy and pig units covering up to one third of the cost of installing solid or liquid waste handling systems\. Construction of near impermeable facilities for storing manure would contribute to the achievement of the project objectives by reducing nutrient leakage into the groundwater\. (b) Promotion of Environment-friendly Agricultural Practices (US$2\.46 with US$0\.82 GEF\.) Promotion of (i) environmentally-friendly agricultural activities (nutrient management, shrub rows, narrow vegetative barriers, conservation tillage, tree planting and riparian buffer strips), and (ii) demonstration of integrated crop and nutrient management\. Members of the local agricultural community would be competitively allocated grants for projects demonstrating application of these practices\. As these practices lead to lower application to land of nutrients and retention of nutrients in soil, their successful replication would allow an overall reduction in N and P levels reaching the Danube\. (c) Integrated management of Boianu-Sticleanu Polder and Ecological Restoration of part of the Calarasi-Raul Polder (US$1\.09 with US$0\.45 GEF\.) (i) In the Boianu-Sticleanu Polder: (a) Plantation of trees for agro-forestry on the degraded lands adjacent to the Iezer Calarasi and buffer strips on unproductive riparian land; (b) implementation of the Code of Good Agricultural Practices (CGAP) on the neighboring arable land; and (c) implementation of a conservation management plan for the proposed Iezer Calarasi nature reserve\. 1The name of this Ministry was "Ministry of Water and Environmental Protection" in early phases of the project\. It was changed to "Ministry of Environment and Sustainable Development" during project implementation\. The functions and mandate of the Ministry vis à vis the project was not affected by this change\. For consistency this document refers to it by the latter name\. 2Similarly, in earlier phases of the project the name of this Ministry was "Ministry of Agriculture, Food and Forests" and was changed to "Ministry of Agriculture and Rural Development"\. For consistency, in this document it is referred to as "Ministry of Agriculture and Rural Development"\. 3  (ii) Regarding the Calarasi-Raul Polder: Studies for restoration of wetlands on part of the polder and restoration program\. Both sets of activities would reduce the flow of nutrients to the Danube\. Wetlands are known to sequester nutrients\. (d) Strengthening Capacity in Calarasi County (Environmental Protection Inspectorate (EPI) and Public Health Directorate) to Monitor Soil and Water Quality and Environmental Impacts (US$0\.46 with US$ 0\.21GEF\.) Setting up, implementing and provision of training and equipment for a soil and water program in the project area\. Improved monitoring capacity would help policy makers and regulators plan and enforce measures which limit agriculture's contribution to nutrient flows\. Component 2: Strengthening National Policy and Regulatory Capacity (US$0\.27 with US$0\.21GEF) Support to MESD and MARD for: (a) Work relating to the application of the Nitrate Directive and harmonization of legislation with EU requirements; (b) Developing a CGAP; and (c) Strengthening the National Authority for Ecological Agriculture (NAEA) when it is established\. The EU acquis requires broad-based application of environment-friendly agricultural practices in member states' farming communities; hence project support to acquis implementation would help achievement of the PDO\. Support to NAEA which was to promote scientific organic farming and land use management would help the Government help the farming community implement these practices\. Component 3: Public Awareness and Replication Strategy (US$0\.45 with US$0\.38 GEF) Support for broad public information campaign on the project's activities and benefits at the local, national and regional levels\. The project would strive to induce behavioral changes necessary to the success of the project (notably use of manure management system, environmental friendly agricultural practices) so that the overall goal of reducing nutrient discharge to the Black Sea could be achieved\. Component 4: Project Management Unit (PMU) (US$0\.87 with US$0\.54 GEF) Support to the operations of a PMU located in the offices of the Directorate General for Agriculture (DGA) of Calarasi\. Effective project management would ensure that project outputs are realized in a timely manner and the project objective is achieved\. 1\.6 Revised Components There was no significant change to the project components in the course of implementation\. However some activities in sub-components 1a, 1b, 1c and 2c were dropped or amended, as listed below (sub-component identified in parentheses): A lower number of household platforms were built (2,250 as opposed to the originally envisaged 4,000) due to significant increases in the cost of these facilities relative to the costs estimated during project preparation\. The increase in costs was 4  due to a general increase in the price of construction materials and labor and a severe depreciation of the US Dollar against Leu\. Transfer of funds from other project components was considered to partially increase the number of these facilities, however this idea was rejected, because (i) the households with a large number of livestock and those most likely to be contributing to nutrient discharge into the groundwater were already selected to participate in the project; and (ii) financing additional individual manure storage facilities would not bring significant impact from the project objective perspective (1a\.) Support to large private dairy and pig farms from project funds was dropped as no expressions of interest were received from such farms at the proposed level of project grant co-financing\. The main reason for this lack of interest was the availability of EU funds at better terms\. Facing a choice between increasing the grant contribution ratio and dropping the activity, the project steering committee opted for the latter and reallocated funds to the support of activities that were of higher priority for the local communities, such as afforestation\. This was considered a better use of international grant funds especially since through EU funds allowed private farms to reduce their nutrient leakages, which also supported the project's GEO (1a\.) Equipment for DGA for monitoring (GIS facility Land use information system) was dropped because the Payment Agency (Agency set up to process rural development payments to farms) has this equipment and purchasing the same equipment for the DGA would have been an unnecessary duplication (1b\.) 488 ha as opposed to the 1,090ha originally planned land in the Boianu-Sticleanu Polder were afforested\. Instead comparable erosion prone land in the terrace area was afforested and the total afforested land reached 1,570ha\. The reason for this shift was that a significant portion of the land in the polder that had been proposed for afforestation was under private lease\. The private commercial farms (the lessees) had a concession agreement with the Agency for State Domains (the lessor) which stipulated that the lessees would allow implementation of the CGAP on these lands, including afforestation of degraded agricultural lands\. However, the enforcement instruments were missing / weak, and, while other elements of the CGAP were implemented in the polder, afforestation was achieved in a much smaller proportion\. Towards the end of the project, some parts of the land were transferred by the farms to the National Forestry Amendment (NFA), and thus NFA was able to afforest those areas\. Funds allocated to the polder were directed to the afforestation of degraded areas on the terrace instead (1c\.) The envisaged rehabilitation of the Calarasi-Raul polder was not achieved because the feasibility study indicated much higher costs than those estimated at appraisal, insufficient social consensus regarding the land use changes that the restoration would necessitate, and necessary amendments to the technical solution envisaged at appraisal which would have led to high maintenance costs\. However, the project- funded feasibility study helped the local government in applying for a follow-up EU grant for implementing similar activities on the polder (1c\.) 5  Support to the envisaged National Agency for Ecological Agriculture was not materialized, since the proposed agency was never set up, and the small department which initially existed in MARD was also abolished (2c\.) The dropped activities listed above did not require formal WB Board approval since they were not substantial in terms of project costs or the achievement of project objectives\. 1\.7 Other significant changes No other significant changes occurred\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry Key factors during the preparation stage that affected implementation and outcome are summarized below\. The background analysis was sound\. The rationale for the physical interventions of the project was provided by the Black Sea Danube Transboundary Diagnostic Analysis carried out in the late 1990s by an international group of scientists and concluded that agricultural pollution caused at least 50% of the nutrients discharged into the Danube and reached the Black Sea\. This analysis was supplemented by an analysis of social acceptability as discussed under lessons learnt below\. Lessons Learnt Incorporated in Project Design Although the project was a first in Romania to pilot APC practices, it benefited from the incorporation of lessons learnt from earlier operations, both in Romania (notably the Romania Danube Delta Biodiversity Project) and in the region (notably the Poland Rural Environmental Protection Project): (i) Lesson: The early involvement of key stakeholders in project preparation, specifically including local communities and influential decision makers, is essential in order to ensure ownership and successful project implementation\. Agricultural Pollution Control Project (APCP) response: Project developers focused on identifying local stakeholder priorities as first step in project design\. Key local stakeholders were comunas and the DGA of Calarasi\. Mayors and local councils representing comunas pointed to communal level organic waste platforms as well as support to households for waste segregation as a first priority\. These measures would help them solve the widespread problem of illegal haphazard dumping of mixed waste for which the comunas had been fined by the EPI\. A survey among inhabitants of the comunas found that people had no alternative but to dump their waste on unauthorized sites and requested proper facilities\. The project's main intervention thus focused on facilities for storage and segregation of organic household waste including manure\. These interventions also responded to the EPI's main concern on leakage of nutrients and other pollutants from unauthorized dumps\. Its request to improve monitoring of such leakage and impact on ambient water quality was met through project support for local capacity development for water and soil quality monitoring\. 6  DGA of Calarasi viewed CGAP and associated training funded by the project as an instrument to improving its demonstration and extension services to farmers\. As an indication of its commitment to the project it provided free office space to the PMU from its earliest stages\. (ii) Lesson\. Environment friendly agricultural activities should yield tangible benefits for key stakeholders, specifically local communities, in order to ensure adoption\. APCP response\. The environment friendly agricultural activities selected for project support were known to yield tangible benefits to the local communities, as reflected in the PAD: (i) additional income from effective use of organic waste (manure as fertilizer), crop rotations, organic produce, and improved livestock grazing practices; (ii) improved production efficiency through low input use and better farm management; (iii) improvements in health and sanitation following improvements in the drinking water and general hygiene of the villages; and (iv) through terrestrial and aquatic habitat enhancement, increased populations of birds and fish species of local economic and social importance\. (iii) Lesson\. An effective monitoring and evaluation mechanism needs to be developed and applied to gauge project impact and feed lessons into project design\. APCP response\. An effective monitoring and evaluation mechanism was put in place at the beginning of the project\. M&E was used to measure the projects impact, adjust project operations, and amend the mode and content of project activities as needed\. (iv) Lesson\. Decentralized responsibility for financial and project management (e\.g\., in the Romania Danube Delta Biodiversity Project) build local ownership and sustainability of project activities; counterpart training and specialized support for project related activities such as procurement, disbursement, financial management (FM) are a must\. APCP response\. Decentralized responsibility for financial and project management was achieved by locating the PMU in Calarasi County, housed in the DGA\. Provision of training to PMU in procurement and FM was incorporated in the project budget\. Local leaders were involved in project design from the early stages of identification\. (v) Lesson\. Dissemination of information about the benefits of improved environmental management is critical to the widespread adoption of new technologies and practices\. APCP response\. A public awareness campaign was made one of the focal activities of the project and is considered by all stakeholders contacted by the ICR mission as a major factor in the project's success\. The rationale for the Bank's involvement was sound\. The Bank's distinct comparative advantage in investment operations allowed it to carry out on the ground investments which were needed to reduce nutrient pollution from agriculture\. The Bank had already supported and gained experience from the Poland Rural Environmental Protection Project which was similar to the APCP\. The Bank was also leading the GEF co-funded Investment Fund for Nutrient Reduction in the Black Sea Danube Basin which put it in a 7  good position to transfer experience among 13 basin countries\. Furthermore, the Bank had been supporting a number of agriculture and biodiversity protection projects which provided the Bank with a significant understanding of these sectors\. The assessment that the Bank-funded Agricultural Support Services Project (ASSP) would allow for synergies in the demonstration of environment friendly agricultural practices proved correct\. The project was designed well\. A key element of the project design was its geographical focus\. Implementation arrangements were also non-complex, with one government agency, the MESD being in charge of the entire project\. The alternative of dividing project components among MESD and the MARD would most likely have led to delays, as has been the case in other multi-agency projects\. With respect to the thematic focus of the project one might question whether sub-components 1b and 1c made the project unduly complicated and whether the project should have not concentrated on manure management only\. As discussed in the PAD, this option was considered but dropped by the designers with the justification that agricultural nutrient pollution reduction requires more than just manure management\. This justification is acceptable in the light of the broad scope of environment-friendly agriculture and the need of Romanian farmers and agricultural extension services to be trained in them so as to implement the EU ND\. The timely implementation of these components and of the entire project indicates that the design was not overly complicated\. One shortcoming in the design relates to the sub-component 1c where the importance of land ownership issues was either neglected, as in the case of the planned afforestation of 1,090 ha on the Boianu-Sticleanu Polder or underestimated, as in the case of the rehabilitation of the Calarasi-Raul Polder\. With regard to the Boianu-Sticleanu Polder, a more realistic assessment of NFA's capacity to enforce afforestation on leased land would have indicated an overly ambitious afforestation target in the polder\. The land ownership issue in the Calarasi-Raul Polder was raised in the PAD as a modest risk and mitigation measures were identified as "The land has been leased for long term\. GoR is requiring the lessee to follow good agricultural practices in the area as required by APCP"\. A more thorough investigation of the contractual relationship, GoR's ability to impose GAP activities in the absence of an enabling regulatory framework, and social issues around this would have likely led to a more realistic risk assessment and the exclusion of this activity from the project\. Government commitment was highly satisfactory\. The high level of local governmental involvement in the project design is discussed under Lesson (i) above\. Among central governmental stakeholders, the commitment of MESD and the MARD was important for the project's success\. The project concept was discussed extensively in round table meetings and the project designers made an effort to reach compromises among stakeholder interests so as to ensure ownership from all key stakeholders\. Key among these central agencies was the National Water Authority under MESD which was responsible for implementing the EU ND in a relatively short period of time and regarded the project as a key activity in this regard\. Assessment of risks\. Key risks to project implementation identified at Appraisal are listed in the PAD\. The risk ratings proved to be mostly adequate\. The "substantial risk" rating for "beneficiary cannot develop new manure handling and storage systems that are financially attractive" was correct\. Social surveys carried out during the project indicated 8  that most households would not be able to afford individual bunkers on their own and government grants were necessary for their uptake\. In case of commune level storage facilities, a combination of donor, comuna and county funding made their construction possible which was also highlighted as a risk mitigation measure\. On the other hand, experience in project implementation showed that the risk associated with "landownership issues for polder restoration" in the case of the Calarasi-Raul Polder was underestimated and risk mitigation measure identified proved ineffective\. Furthermore, the risk of the status of land on the Boianu-Sticleau Polder designated for afforestation was not taken into account in the risk assessment carried out at appraisal\. 2\.2 Implementation Project implementation was highly successful\. There was no project restructuring and the project was at no time at risk\. Furthermore the project was the only project in Romania in recent years which was completed in the originally foreseen time without any requests for extension\. Implementation performance was satisfactory throughout the project period and in fact became highly satisfactory in the final year, as documented in the ISRs\. Key factors leading to highly successful implementation were: Constant Government commitment, especially at the local level; Highly effective PMU with good skill composition (managerial, public relations, technical, fiduciary); Flexible management\. The first two factors are discussed in detail in other parts of this report\. Flexibility on the part of both the Government and of the WB supervision team was key to successful implementation as it allowed the revisions to project components discussed above in a relatively smooth manner\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization An M&E Plan was designed during project preparation and included in the Project Implementation Plan (PIP)\. A full-time member of the PMU titled "M&E and Technical Specialist" was in charge of M&E activities during the entire project implementation\. M&E design\. The M&E plan was comprehensive and, despite some shortcomings, allowed for adequate measurement of outputs and outcomes\. M&E implementation was adequate\. Appropriate data were collected most of the time for the majority of the indicators\. The indicators which depended on social surveys were not measured during the first two years of project implementation as such surveys were not carried out\. These surveys could not be carried out because time was needed to build and start the operation of the first manure facilities and to install the demonstration fields for the environment friendly agricultural practices\. In the case of complex indicators the PMU made an extra and honest effort to use available data in a meaningful manner\. M&E utilization\. The PMU assessed appropriate data and formally reported them in biannual project progress reports\. These reports were shared with the MESD and World 9  Bank supervision missions\. The M&E results enabled implementers to gain detailed insight in outputs from individual project activities and address implementation problems\. 2\.4 Safeguard and Fiduciary Compliance Financial management Throughout the project life a highly satisfactory financial management system was maintained\. The Recipient respected the relevant GEF grant financial covenants by submitting to the Bank quarterly financial monitoring reports and annual audit reports in a timely manner and in a format acceptable to the Bank\. Audit opinions were all unqualified and no internal control issues were mentioned, including in the final audit of the project, submitted in August 2007\. Counterpart financing, including funding received from Central Government, Calarasi County Council and budgets of the seven participating comunas was highly satisfactory during the project life\. The financial management capacity built throughout the project life in the PMU within the MESD has been transferred and scaled up to the Integrated Nutrient Pollution Control Project, which is financed through an IBRD loan and a GEF grant\. Thus, the APCP financial management systems, procedures and certain project staff will be used as part of the new project's institutional arrangements\. Procurement Procurement management was successful and cooperation between the Borrower and the Bank was very good\. Throughout the project the PMU had sufficient level of delegation by the implementing agency, which allowed smooth implementation of the project (despite some staff turnover)\. As the project had numerous procurements subject to post- review supervision missions regularly included procurement staff to conduct post review\. However no major deviations from the Bank's Guidelines were found\. Disbursement Disbursement of project funds followed the projections made at the beginning of project implementation and no significant delays were experienced\. There were no deviations or waivers from Bank disbursement policies and procedures\. Environmental assessment During preparation, the project was categorized as a "category B project" requiring partial environmental assessment\. An environmental assessment plan and an environmental management plan (EMP) were prepared\. The latter identified mitigation measures (design to be prepared under the supervision of the county council engineering staff and the EPI) and monitoring measures (regular water quality testing around the storage facilities)\. Compliance with the above mitigation and monitoring measures was satisfactory throughout the project\. A consultant environmental specialist hired by the Bank in late 2004 found that the EMP was implemented adequately\. Specifically the consultant confirmed that: (i) the design of the large and individual manure storage facilities was 10  prepared under the supervision of the Calarasi County Council engineering staff; (ii) the EPI ensured that the construction of the manure storage facilities met environmental guidelines on stopping manure leakage to surface or ground water sources and an environmental permit was issued for each comuna platform); (iii) facilities were not built close to any surface water body; (iv) an extensive soil and water monitoring program to ensure that leakage of manure to groundwater does not occur was implemented; (v) the institutional capacity of the Calarasi Water Management Service was strengthened by the project; and (vi) a public awareness campaign was undertaken to create awareness and promote adoption of environment-friendly manure management practices\. None of the Bank's other safeguards policies applied to this project\. Furthermore, no social risks due to the project arose during implementation\. 2\.5 Post-completion Operation/Next Phase Transition arrangements\. Project investments were carried out in close cooperation with local beneficiary institutions which began using assets procured by the project from the date of acquisition during the implementation period\. Hence special transition arrangements were not necessary\. Various aspects of sustainability of their operation are discussed in detail under Section 4 "Assessment of Risk to Development Outcome"\. The key performance indicator by which the project (outcomes) can be monitored and evaluated in the future is "the trend of nitrate pollution of water bodies in the project area"\. Collection of these data is an integral part of the Calarasi Management Service's monitoring program since the county is a "Nitrate Vulnerable Zone" (NVZ\.) The institutional capacity and funding to carry out this monitoring are adequate, as discussed in Section 4\. While a centrally maintained M&E system to monitor all project investments will not be available in the post-project period, beneficiary organizations are expected to continue monitoring and evaluating key project outputs\. This is particularly the case of comuna administrations that will monitor use and maintenance of household bunkers of and comuna platforms for the purpose of planning their waste management activities\. Furthermore, the local Environmental Protection Agency (EPA) will continue to monitor and enforce measures against activities that will cause nutrient pollution of water bodies in the project region, and the county soil laboratory will continue to monitor and report on soils\. A follow-up operation has been designed to replicate the APCP in other parts of Romania\. On October 30, 2007 the World Bank Board of Directors approved the "Integrated Nutrient Pollution Control Project" (INPCP) which will cost US$ 81\.20 million (of which US$ 68 million is financed by the IBRD) and builds on the positive experience from the APCP\. INPCP's overall development objective is to support the Government of Romania to meet the EU ND requirements by (a) reducing nutrient discharges to water bodies, (b) promoting behavioral change at the communal level, and (c) strengthening institutional and regulatory capacity\. The GEO is to reduce over the long term the discharge of nutrients into water bodies leading to the Danube River and Black Sea through integrated land and water management\. The project will support four components: (i) a menu of investments focusing on NVZ-designated comunas in ten river basins and eleven 11  counties; (ii) capacity building within the MESD and their National Water Authority, as well as other national regional and county agencies involved in the ND; (iii) broad public awareness and information campaign focused on investment replication and behavior change; and (iv) PMU\. The INPCP will use the Calarasi County as a training area for the eleven new beneficiary counties while adopting the specific project activities to their specific socio-economic, geo-morphological and cultural characteristics\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation The relevance of the project's objectives, design and implementation are highly relevant to Romania's current development priorities, as Romania, a new EU member, tries to implement the environment chapter of the acquis communautaire\. The Country Partnership Strategy of 2006 emphasizes the high cost (about Euro 30 billion during 2004-2015) and institutional capacity requirements of this endeavor\. The EU ND is among the costliest and most labor intensive parts of the EU environment related legislation due to the structure of the Romanian agriculture sector\. The country's 251 NVZs are dominated by small family farms with an average of 2\.2ha of arable land and small holdings of livestock (typically one or two cows, pig, chickens and sheep)\. The vast majority of these farms do not follow proper practices for manure collection, handling and storage\. Nutrient leachate contaminates groundwater which still constitutes the main source of drinking water in rural areas accessed through wells\. High concentrations of nitrates continue to lead to public health threats, as indicated by incidences of acute methaemoglobinaemia, commonly known as the "blue baby syndrome"\. Significant EU grants will be available for farmers under the Common Agricultural Policy (CAP) Pillar 2 to help them make necessary on-farm capital investments\. However, knowledge on good practices is very limited among small and medium farmers\. Hence, there is a need for substantial demonstration of best practices, farmer training, and awareness raising\. Best practices piloted under the APCP in Calarasi offer a tested model to be replicated in all NVZs of Romania, through the INPCP\. The project's objective also remains a global environment priority\. Reducing nutrient pollution in the Black Sea continues to be a priority in the region\. The GEF WB UNDP Strategic Partnership for Nutrient Reduction funds projects aiming at reducing agricultural nutrient pollution in Moldova, Serbia, Turkey, and Croatia in addition to Romania\. Furthermore, pollution reduction is among the key aims under the EU Water Framework Directive\. To fulfill the requirements of this directive, the 13 riparian countries of the Danube River basin are cooperating to develop a river basin management and action plan by 2009-2010\. Data and experience gained under the APCP are helping Romania fulfill its obligations to contribute to the plan's development\. 3\.2 Achievement of Global Environmental Objectives The project's outputs provide strong indication that the project's global environment objective "to reduce over the long-term the discharge of nutrients and other agricultural pollutants into the Danube River and Black Sea through integrated land and water management of the Calarasi region and ecologically sustainable use of natural resources 12  in two agricultural polders" has been achieved\. This can be illustrated through the values achieved for the four key performance indicators identified in the PAD: Indicator 1: Percentage of households with livestock in project area adopting improved manure handling facilities\. As the results of a social survey carried out in early 2007 indicated, the percentage of households with livestock in the project area using village manure storage, household bunkers and segregating waste materials reached 54\.4% compared to the baseline of 0%, and end-of-project target value of 45%\.3 Indicator 2: Percentage cropped area coming under nutrient management systems including crop rotation, crop nutrient management with soil testing, and use of organic manure\. The same survey found that the percentage of area under nutrient management systems including crop rotation, crop nutrient management with soil testing, and use of organic manures is 34%, compared to the baseline of 1%, and the end-of-project target value of 30%\. Indicator 3: Percentage of cropped area employing environment-friendly practices\. Over the course of the project the area under environmentally friendly practices increased from 0% to 33\.9% exceeding the target value of 30%\.4 Indicator 4: Trends in water quality indicators at designated sites\. The water monitoring program found a decreasing trend in N and P in the water bodies of the project region that drain into the Danube River\. In other words the trend in water quality was found to be positive\. Estimations based on land under environment friendly agricultural practices indicated a decrease in nutrient discharge into surface and ground waters of about 15 % for N and 27% for P in 2006\. These values exceed the target value of 10% for 2006\. The results captured by indicators no\. 1-3 point to rural Calarasi communities' increased ability to keep in check expected nutrient releases following from a likely intensification of agriculture as a result of Romania's participation in the EU CAP\. In addition to the above indicators, the project's success in achieving implementation and enforcement capacity and skills to develop project proposals for EU funding, especially at the local levels, in raising public awareness in rural areas of proper practices to reduce environmental pollution, and strengthening the communication between communities and their mayoralties should be highlighted\. 3\.3 Efficiency The PAD in line with GEF requirements included an incremental costs analysis (ICA) of the project which predicted that the project would introduce and demonstrate more sustainable and environmentally benign technologies and practices at an estimated incremental cost of US$ 5\.15 million over the baseline scenario\. The project achieved this objective at the estimated incremental costs\. 3Annex 1 of the PAD indicates a target value of 65%, but does not specify by what year this is to be achieved\. The M&E framework included in the PIP indicates that 65% was foreseen for 2010 whereas 45% was foreseen for 2006\. 4The M&E framework included in the PIP indicates that 65% was foreseen for 2010 whereas 30% was foreseen for 2006\. 13  To further evaluate the efficiency of the project, cost effectiveness (CE) ratios, defined as the cost of reducing one kg of N or P leakage into surface and ground waters were calculated for individual environment-friendly practices\. The estimated CE ratios vary between US$10/kg and US$40/kg depending on the practice considered\. At US$10/kg nutrient management was found to be the most cost effective practice, followed by strip crops and cover crops (US$12-15/kg\.)5 At US$30- 40/kg manure management was the costliest practice, which is explained by the high initial capital cost\. These CE ratios may be compared with those achieved in other parts of the world\. In Poland, the CE ratios achieved by the Bank funded Rural Environmental Protection Project in four regions ranged between US$18\.5 / kg N and US$24\.8 / kg N\. These CE ratios are lower than the above estimates for the Romania APCP since they were calculated in present value terms with a discount rate of 10% and expressed in 2000 Dollars while the CE ratios in Romania are in current value terms\. In the Chesapeake Basin of the United States the median CE ratio for animal waste systems was estimated at US$39 / kg N removed for animal waste systems and at US$19\.5/kg N removed for the combination of nutrient management and animal waste systems\. (Both values are in 2003 terms\.) It may be concluded that the CE ratios achieved in Romania are broadly in line with international experience\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory\. The overall outcome rating is based on a combination of the achievement of objectives, relevance and efficiency\. The GEO was fully achieved as evidenced by measurements on four key performance indicators\. The project remains highly relevant, as evidenced by the large follow-on loan project which will build on the model it piloted\. The cost effectiveness ratios with which these results were achieved are comparable with those realized in other parts of the world\. This rating also reflects the project's success in bringing about behavioral change in the target population for better environmental management in rural areas\. The project demonstrated effective work with communities to this end\. As such the project proved a successful pilot not only for Romania, where it is now replicated through an IBRD funded project across the country, but also in other countries of the Black Sea Basin\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Social surveys have indicated that a key "unplanned" outcome of the project was improvement in relations between mayoralties and comuna members\. This was a result of tools provided to citizens to communicate their needs and expectations to their administrators provided by the project\. 5Estimates conducted by the PMU\. 14  (b) Institutional Change/Strengthening Studies carried out under the project also found increased local capacity to access and manage community development projects due to their experience with the APCP\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops In the spring of 2007, a survey and in-depth interviews were carried out among stakeholders in the project region\. The study aimed at assessing the project's impact on the target population and evaluated the level of use of environment friendly agricultural practices and of nutrient management plans, at the levels of both agricultural associations and individual households\. The following are the key findings of the study: The number of associations using composted manure from comuna platforms and implementing environment-friendly agricultural practices increased from 2005 to 2006\. Among households that work the land themselves, the most frequently used environment friendly practices were crop rotation and seed selection, however at a much lower rate than associations\. Land size emerged as a key determinant\. In 2006, households used crop rotation and expert-guided chemical fertilizer application more frequently than in 2005\. Most of the problems encountered earlier with regard to garbage and manure management were solved thanks to the efforts of the APCP and of the local administration\. Also water pollution was reduced as was the incidence of nitrite poisoning\. Improper utilization of individual platforms and euro-bins was lower in 2007 than in 2005 and 2006\. The project was relatively well known in the project region among households and other local stakeholders, being primarily associated with garbage management\. The project effects were perceived generally as positive\. The project seemed to have positive consequences also at institutional level, mayoralties being the main beneficiary\. Improvement in relations between mayoralties and comuna citizens and in local capacity to access and manage community development projects were cited by persons interviewed\. 4\. Assessment of Risk to Development Outcome Rating: Moderate A sub-component-by- sub-component analysis is provided to substantiate this rating\. (a) Manure Management Practices The sustainability of the operation of village and household level platforms is closely linked to the sustainability of the commune level waste management system which involves storage and segregation at the household level, transport to the village platforms, spreading on private farmland and communal pastures\. High level stakeholder support 15  will play an important role\. Local communities appreciate the cleanliness of their backyards and communal areas as indicated by the social survey of May 2007\. One of the mayors is using the comuna newspaper for social "blame and shame" to enforce proper disposal of manure and other garbage in the designated storage facility rather than dumping on unauthorized areas\. Public awareness is expected to continue to grow through the follow-on project, INPCP\. The financial sustainability of the system will hinge on a combination of user fees by households, cost sharing by buyers of composted materials, comuna budget allocations to cover the operations and maintenance (O&M) of the comuna facilities\. In the two comunas visited by the ICR mission, fees covered between 30-40% of O&M costs\. Mayoralties intend to gradually increase the fees, while recognizing limitations posed by households' ability to pay\. Furthermore, one of the comunas charges a large poultry farm unsubsidized fees for the transportation and disposal of its manure on the communal platform\. There are also encouraging signs of contributions by buyers\. In one comuna the farmers' association which spreads the composted organic waste on its farmland paid for transportation and spreading costs\. While the further development of these and other user fee based financing modalities will take time, commitment by mayoralties is strong providing reassurance for financial sustainability in the short and medium terms\. In terms of physical sustainability, the design life of the village level platforms is 50 years\. On the other hand the project life of household bunkers is low due to the quick degradation potential of the wooden walls surrounding a concrete base\. Wooden planks degrade quickly when exposed to the highly acidic slurry at the bottom of the manure heap\. However, the cost of wooden planks is relatively low (Euro3-5 / plank), so it is not expected to cause a hardship for households to replace them as they degrade every 3-8 years\. Furthermore, concrete bases which have a life of about 20 years were designed to be mobile which would allow their easy transfer to other locations should the household decide to move or stop keeping livestock, a likely prospect in Romania's evolving agricultural sector\. This also speaks in favor of project sustainability\. On the policy side, the environmental cross-compliance requirement under the EU CAP Pillar 1 area payment system is a strong incentive for agricultural households to continue to properly manage their manure\. (b) Promotion of Environment-friendly Agricultural Practices The social survey carried out in the spring of 2007 indicated a significant uptake of several environment-friendly agricultural activities\. Several factors point to strong prospects for the sustainability of ongoing practices and increased adoption by farmers in the area\. The key policy factor is the designation of Calarasi as an NVZ, which makes the implementation of CGAP compulsory in this county\. Farmers also face a significant incentive to adopt some of these practices, notably shelterbelts/windbreaks and riparian buffers as these help prevent crop losses due to erosion which is highly prevalent in Calarasi\. Institutionally, the project helped build capacity among agricultural extension agents, to adequately advise farmers interested in replicating these practices\. 16  (c) Integrated management of the Boinau-Sticleanu Polder The prospects for the sustainability of the afforestation program are positive because farmers benefit significantly from the trees' erosion prevention benefits\. With regard to the Iezer Calarasi Lake Nature Reserve, commitment and technical capacity of the custodian, a commercial fish farm (SC Piscicola) to effectively manage the reserve according to the management plan, will be key factors for sustainability\. The custodian stands to benefit from the positive public relations effect of adequate implementation of the management plan prepared under the project\. It has allocated part of the time of one of its staff to manage the Reserve\. However, SC Piscicola also faces a dilemma in that one of the bird species protected in the reserve feeds on young/small fish\. Nevertheless, the local EPA Office interviewed by the ICR mission indicated that the farm has so abided by the terms of the custody contract and it has held a number of educational events for young visitors\. Furthermore, the custodian has obtained support under an EU LIFE project for follow-up investments (such as additional basic visitor infrastructure specified in the Management Plan) to facilitate more of such activities\. On the other hand, increased visitation will necessitate increased staffing for management which the custodian will have to finance\. (d) Soil and Water Quality Monitoring The financial sustainability of the operations of the water laboratory of the Calarasi County Water Management Service and the soil laboratory of the Calarasi DGA appears good\. Both laboratories charge for their services at levels that cover O&M costs\. The nutrient analysis equipment procured under the project allows the laboratories to carry out analyses for third party clients\. Furthermore, demand for such services is ensured to grow as the ND is implemented\. The water laboratory also has other revenue sources, notably from river quarry operations\. In fact, its revenues exceed its O&M costs by 35% which it transfers to a higher administrative level\. Strengthening National Policy and Regulatory Capacity The project supported transposition of the EU ND into Romanian legislation and preparation of a CGAP are expected to be sustainable now that Romania is an EU member\. Some 250 comunas have been designated as NVZ where CGAP implementation is compulsory\. Further institutional capacity building for implementation and enforcement will be carried out under the INPCP\. Public Awareness Public awareness raising activities will continue through the INPCP as well as through local media which some mayoralties use to promote proper manure management\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 17  The Bank ensured high quality in several aspects of project identification, preparation, and appraisal with only minor shortcomings in some aspects\. Strategic relevance and approach\. The project identified was of high strategic relevance for Romania in its efforts to harmonize with the EU environment acquis and the evolving EU CAP, and for the Bank in its leadership of the GEF Investment Fund for Nutrient Reduction in the Black Sea and Danube\. A successful pilot project in Romania, the largest country in the Danube Basin, would not only provide Romania but also provide the entire Black Sea Danube Region with a model to replicate\. The approach to tackle nutrient leakage was well chosen\. By emphasizing the domestic benefits of agricultural pollution control and combining it with the counties' own waste management and erosion control strategies, the project secured the full engagement of the local stakeholders throughout project preparation and implementation\. Technical, financial and economic aspects\. The technical approach to manure management was relatively new and untested when it was designed for Romania\. It consisted of a system of small household platforms and large village platforms, the latter being managed by the comuna administrations\. Most EU member and candidate countries, including Poland where the Bank was supporting a project, aimed a reducing nutrient pollution focused on building larger on-farm manure storage facilities from where farmers take manure to their plots themselves\. In particular, the financial sustainability of the system was questionable\. However the system designed in Romania suited the predominance of very small farms with dispersed plots\. Furthermore, households were mixing regular household (organic and non-organic) household waste with manure\. The project design addressed this problem by introducing segregation at source and separate (though adjacent) platforms for different waste types at the village facility\. Policy and institutional aspects\. Project support to policy harmonization with the EU ND and to institutional capacity building for its implementation, was highly appropriate and necessary for the attainment of the project objective\. Poverty, gender and social development aspects\. The project's development objective was not specifically related to poverty alleviation, gender issues or social development\. Nevertheless, reduction of nitrate pollution in communal wells and of the related incidence of the "blue baby" disease stood to benefit especially the poorer sections of the communities who did not have the means to purchase bottled water\. Environmental aspects\. The low potential impact of project interventions on the environment justifies the categorization of the project as a "category B project" for environmental safeguards purposes\. An environmental assessment was carried out\. A summary provided in Annex 11 of the PAD indicates that nutrient leakage from village level platforms was identified as the key potential impact\. The associated management plan identified mitigation measures (design to be prepared under the supervision of the county council engineering staff and the EPI) and monitoring measures (regular water quality testing around the storage facility)\. It is common practice for environmental assessments of construction activities to also consider the potential adverse effects and mitigation measures during the construction phase itself, but this was likely omitted due to the remote location of the selected locations for the village platforms\. 18  Fiduciary aspects\. The fiduciary aspects related to procurement were adequately considered and reflected in implementation arrangements made\. Risks related to procurement were considered to be high; however project implementation experience demonstrated that mitigation measures were adequate for the risk level\. Financial management aspects were also designed well leading to highly satisfactory FM implementation performance\. Implementation arrangements\. Project implementation arrangements were well conceived\. In particular, agreement with the Government that one agency would be in charge of overall project management (as opposed to dividing responsibility among two or more agencies) was highly appropriate\. Furthermore, the selection of an agency, the MESD, which was committed to implementing the EU ND, was appropriate\. On the other hand, it should also be noted the Bank team adequately recognized local and national agencies' points of interests in the project and worked with them to ensure that project was reasonably responsive to all\. This ensured that diverse agencies collaborated smoothly during project implementation while leadership was provided by one\. Finally, the location of the PMU in Calarasi in the premises of the DGA was most appropriate, as was the arrangement that the PMU Manager would report to the County Council and to the Prefect, in addition to MESD, in ensuring local institutional ownership of the project\. Monitoring and evaluation arrangements\. Adequate M&E implementation arrangements were made already during project preparation, as documented in the PAD\. The PMU staff member in charge of M&E implementation attended a specialized M&E workshop which strengthened PMU's capacity to measure and report project indicators\. Risk assessment\. As discussed under "2\.1 Project Preparation, Design and Quality at Entry", the appraisal team assessed the risks facing the project generally well\. In particular, the financial risk associated with the manure management scheme was correctly assessed as "substantial"\. However the risk assessment had the shortcoming that it (i) did not flag the private lease status of Boianu-Sticleanu land designated for afforestation as a risk and (ii) underestimated the risk associated with the landownership issues associated with the restoration of the Calarasi-Raul Polder\. (b) Quality of Supervision Rating: Highly Satisfactory Focus on development impact\. Project supervision remained highly focused on achieving the project objective which in the words of a Calarasi administrator "lifted Romanian agriculture to a higher level" by making it environment friendly\. Supervision of fiduciary and safeguards aspects\. Fiduciary supervision was carried out with efficiency and professionalism\. Both the procurement and the financial management specialist assigned to the project were based in Bucharest, which allowed them to interact with the PMU directly and frequently\. Supervision of compliance with environmental safeguards was satisfactory\. The Bank team verified that village platforms were inspected by county engineering and environmental officials and water quality measurements were taken\. The Bank hired a consultant environmental specialist in late 2004 to review compliance at all 13 village platforms completed up to that point\. The results of the 19  review were documented in the aide memoire for the mid-term review in early 2005\. One notes that the ISRs pertaining to the later part of project implementation indicate a "satisfactory" rating for environmental safeguards compliance although the aide memoires no longer document verification of mitigation and monitoring measures\. This may be explained by the fact that the measures had become a routine part project implementation\. Nevertheless, for the sake of completeness, such documentation would have been appropriate at least in the final supervision aide-memoire\. Candor and quality of performance reporting\. Reporting on project progress was candid\. The ISRs highlighted key issues in a to-the-point manner\. While always diplomatic and constructive, the aide memoires and letters to the Government did not shy away from pointing out challenges in project implementation when they occurred\. Risk ratings were adjusted in a timely manner\. A good example is the increase in the risk rating of "land ownership" from moderate to high when this issue emerged as a serious obstacle to the activities in the polder area already seven months after project effectiveness\. Implementation performance and global environment objective ratings were also adjusted in a timely manner to reflect changes in performance\. Role in ensuring adequate transition arrangements (for regular operation of supported activities after loan/credit closing\.) Transition arrangements were not necessary since all project investments were implemented by local authorities from the day of their inception\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The Bank teams worked with their Romanian counterparts in a highly collegiate manner during project preparation and implementation\. The latter greatly appreciated the respect shown to local and national authorities' insights and the flexibility with which requests for amendments in implementation were treated\. The team mobilized international technical support when needed/requested and helped the Romanian implementers share their experiences with countries in the region\. 5\.2 Borrower (a) Government Performance Rating: Highly Satisfactory Government ownership and commitment to achieving development objectives was high\. In particular, county and comuna level governments contributed significantly to project preparation and implementation\. During project preparation, county and community governments clearly identified manure management as a priority for the project and committed resources for co-financing\. The Central Government also embraced the project objective and allocated co-financing during project preparation\. During project implementation, central, county and community governments facilitated, co-financed and participated in project activities\. There was full ownership by Government agencies at all levels\. Vertical and horizontal coordination was effective and characterized by professionalism and result orientation\. County and comuna governments provided co- financing for investments in and operations of communal waste management facilities 20  and afforestation\. The DGA of Calarasi supported the project financially by providing office space to the PMU\. Most implementation issues were resolved in a timely manner\. A notable exception was the issue of afforestation on the Boianu-Sticleanu polder which emerged soon after project effectiveness\. It took the agencies involved nearly two years to definitively resolve it in a satisfactory manner\. Fiduciary (financial management, governance, provision of counterpart funding, procurement, reimbursements, compliance with covenants)\. The Government's performance in fiduciary issues was highly satisfactory\. Notably, provision of counterpart funding by both local and national governments was timely and adequate\. There were no issues with governance or compliance with covenants\. (b) Implementing Agency or Agencies Performance Rating: Highly satisfactory Agency commitment to achieving development objectives\. The MESD was committed to reducing the nutrient pollution impact from Romanian agriculture in line with the requirements of the EU ND\. Adequacy of beneficiary / stakeholder consultations and involvement\. During project preparation the implementing agency worked closely with county and comuna level stakeholders, including the prefect, the comuna mayors, the County and comuna councils, as well as national and county level branches of MARD, MESD, and EPI in order to identify their priorities\. During implementation, county and comuna level agencies were main agents of implementation, and the PMU was based in the project area\. Household surveys (one during preparation, one in 2005 and a final one in 2007) gauged the awareness of and satisfaction with the project on the part of the local population\. Readiness for implementation, implementation arrangements and capacity, and appointment of key staff\. The PMU was fully staffed before project effectiveness and the structure of personnel and the specialists initially hired remained unchanged during project implementation, except for the Procurement Specialist\. The PMU had an excellent mix of technical and managerial skills\. The constant involvement in the project of the National Water Authority from the earliest stages of project identification until the end of implementation was also instrumental\. The arrangement that project oversight responsibility was with the Under-secretary of State rather than with the Minister helped minimize disruptions associated with governmental transitions\. Timely resolution of implementation issues\. The Implementing Agency / PMU resolved most implementation issues within their realm of responsibility in a timely manner\. Fiduciary (financial management, governance, provision of counterpart funding, procurement, reimbursements, compliance with covenants\.) Fiduciary management by the implementing agency was highly satisfactory\. The PMU cooperated closely with the World Bank team\. Adequacy of M&E arrangements, including the utilization of M&E data in decision- making and resource allocation\. M&E arrangements were adequate\. Key indicators in the M&E framework, such as level of participation in manure management and other 21  environment friendly agricultural practices, were used to gauge the level of achievement of project goals and resource allocation\. Relationships and coordination with donors/partners/stakeholders\. The MESD nurtured good cooperation with the USAID which provided grant financing for a village platform in Calarasi County and co-financed capacity building in the Calarasi County for water and soil monitoring and for strengthening national policy and regulatory capacity for nutrient management at MESD and MARD\. The PMU was instrumental in keeping relevant agencies involved and informed in the project\. It also nurtured exemplary relations with beneficiary communities and their leaders\. (c) Justification of Rating for Overall Borrower Performance Rating: Highly Satisfactory The performance of both the Government in general and of the implementing agency in particular was exemplary justifying the overall "highly satisfactory" rating\. 6\. Lessons Learned The experience of APCP highlighted the importance of the following factors for smooth and timely project implementation: Ownership of local communities and their leaders through delivery of visible and tangible benefits\. The afforestation program which helped farmers against erosion and the manure platforms which achieved health benefits and cleaner environment are most notable in this respect\. A strong, full-time PMU with a good mix of diplomatic, managerial and technical skills based in the project area\. Cultivation of good relations with ALL project stakeholders\. The PMU Manager excelled in relations with stakeholders at all levels and gained their trust and respect\. Technical staff of the PMU ensured smooth implementation of day-to-day project implementation, procurement, financial management, and M&E\. Central Government responsiveness to local communities' expressed needs and preferences\. The Central Government respected Country Council and comuna preferences in the design of project activities, notably the emphasis on manure storage as part of communal waste management and afforestation, and in amending some of the project activities, as discussed in earlier sections\. This was a key factor ensuring the local ownership that the project enjoyed and led it to success\. Flexibility and respect for client insights of Bank task team\. The Bank Supervision team's attitude to supervision was not prescriptive\. It offered technical support and opinion based on international experience but let the PMU which effectively represented local interests resolve implementation issues\. As a result, project implementers were empowered to be creative and reach compromises as issues emerged\. Dissemination of information through a broad public awareness campaign\. This is critical to the widespread adoption of new technologies and practices\. 22  Furthermore, information dissemination is needed early in the project cycle to overcome the considerable lack of understanding of the health and environmental benefits from improved waste management, and achieve significant participation in project activities\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The summary of the Borrower's ICR was received on November 8, 2007 and is reproduced in Annex 7\. While not explicitly rating the project's outcomes, the summary describes the project's outputs and outcomes in a highly positive tone\. It emphasizes the behavioral changes that the project has brought about, the project's demonstration value and the important role that public awareness raising played in this\. The ICR Team agrees with these observations\. A copy of the draft ICR was shared with MESD on December 13, 2007 for comments\. The response received from MESD on December 20, 2007 indicated that the Ministry had no comments on the draft\. This letter is reproduced in Annex 7\. In verbal communication with the PMU it was confirmed that there were no issues of disagreement\. (b) Cofinanciers In the early project implementation phase, USAID contributed US$ 150,000 to the project with which a comuna platform was built\. The ICR team attempted to contact the USAID Office in Bucharest in the first half of December 2007 for comments on the draft ICR\. However, due to the phasing out of the USAID Office in Bucharest in progress and the Holiday Season, contact could be established with the officer in charge of cooperation with the APCP only on December 28, 2007\. The team expects to receive comments on the ICR in early January and will file them in IRIS\. 23  Annex 1\. Project Costs and Financing (a) Project Cost by Component Appraisal Components Estimate Actual Percentage of (US$ millions) (US$ millions) Appraisal Calarasi Component 8\.41 9\.23** 110% Strengthening national policy and regulatory capacity 0\.24 0\.15 63% Public awareness and national and regional replication strategy 0\.38 0\.42 111% Project Management Unit 0\.78 1\.08 138% Total Baseline Cost 9\.81 10\.88 111% Physical Contingencies 0\.36 Price Contingencies 0\.63 Total Project Costs 10\.80 10\.88 101% Project Preparation Facility (PPF) 0\.27 0\.27 Front-end fee IBRD 0\.00 0\.00 Total Financing Required 11\.07 11\.15 101% * GEF PDF-B project preparation grant ** This figure includes the following items: (i) The cost of the community platform (under sub-component 1a) funded directly through a USAID contribution of US$0\.15million\. (ii) The cost of 11 sub-projects on environmentally-friendly agricultural practices US$ one million which were funded by the associated IBRD Agricultural Support Services Project (under sub- component 1b)\. (iii) In ­ kind (labor) contribution from comunas (sub-components 1a, b, c) estimated at US$1\.8 million\. (b) Financing Type of Appraisal Source of Funds Actual Percentage of Co-financing Estimate (US$ millions) (US$ millions) Appraisal Borrower 4\.65 4\.52 97% GLOBAL ENVIRONMENT - Associated IBRD Fund 1\.00 1\.06 106% Bilateral Donor (USAID)* 0\.00 0\.15 Global Environment Facility (GEF) 5\.15 5\.15 100% Total 10\.80 10\.88 101% 24  Annex 2\. Outputs by Component Component 1: Activities in the Calarasi County (a) Manure Management Practices This sub-component provided grants for the installation of improved manure storage facilities and equipment for manure collection and application in seven comunas\. Grants on a cost-sharing basis where provided for the construction of village-level solid waste and manure platforms and of small storage platforms with effluent collection facilities at the household level\. Beneficiary comunas also received equipment for manure handling and spreading\. Community training and awareness on good practices for waste collection and manure management, including composting, testing, and field application, were also provided\. The investment program for the commune /village level manure management consisted of construction of 18 platforms (17 financed by the project and one by USAID), with a total storage capacity of 53,900 tons\. At the household level the project financed a total of 2,250 individual platforms\. Also, farmers were provided with 5,710 waste bins in order to help the farmers to segregate the waste\. The individual bins, the individual platforms, the 18 commune level platforms and the equipment are being used by the beneficiaries\. (b) Promotion of Environment-friendly Agricultural Practices\. The Competitive Grant Scheme (CGS) was implemented from the start using a set of criteria and indicators that were set out in the operational manual of the Agricultural Support Services Project (ASSP)\. Two calls for proposals were made, first in June 2003 and the second in July 2003 and 21 concept notes were received by the ASSP Secretariat from which three were financed out of the APCP funds, and 11 from ASSP funds, with a total value of US$1,104,812\. These grants covered a wide range of applied research and extension technologies, such as improvement of cropping practices, diversification, integrated development, organic farming and farm management & information systems\. These projects were well implemented and appreciated by farmers and a number of technologies are being increasingly adopted in the region\. Within the program for testing and demonstration of the environment-friendly agricultural practices, eight testing/demonstration areas were selected (2 in the polder area and 6 on the terrace) according to the criteria agreed in the Project Implementation Plan\. The demonstrated practices included conservation tillage, shelterbelts/windbreaks, narrow vegetative barriers, filter strips, riparian buffers, nutrient management, agro- forestry, tree planting, grazing management, crop rotation and green fertilizers and land reclamation at the former unauthorized manure dumping sites\. To support these demonstrations, the project provided the necessary planting materials and the specialized equipment for demonstration\. Fourteen training sessions and field visits were organized with the participation of about 650 local farmers and specialists\. A survey carried out in the project region in the Spring of 2007 showed that the percentage of area under nutrient management systems including crop rotation, crop nutrient management with soil testing, and use of organic manures is 34%, compared to the baseline of 1%, and the end-of- project target value of 30%\. 25  As regards the rehabilitation of communes' pastures and improvement of the grazing management, the project provided support for the rehabilitation of 240 ha of pastures in the terrace area as well as in the Polder, including fixed and electric fences, mowers and mobile shelters for the pasture administrators, as demonstration of good practices\. The final supervision mission found that these demonstration pasture fields and equipment provided were being properly managed and used by the communities with the support of the mayors\. (c) Integrated Management of the Boianu-Sticleanu Polder Under the agro-forestry program a total of 1,570 hectares as opposed with the total of 1560 hectares planned was planted in the erosion prone locations in the terrace areas and in the degraded areas in the polder\. These were planted with acacia, poplar, willows and honey locust\. Comuna satisfaction with these plantations was high so that by the end of the project farmers reported to plant wind breaks themselves\. The project supported the preparation of a Conservation Management Plan for the Iezer Calarasi Lake Nature Reserve\. Following the approval of this plan by the Government, the project procured equipment needed by the local Environment Protection Agency (EPA) in Calarasi and by the Reserve custodian SC Piscicola Calarasi for activities related to the management of the nature reserve\. The project also helped the custodian of the protected area to demarcate the boundary, to develop an information center, and to development a public awareness strategy\. The Iezer Calarasi Lake nature reserve was functional by the end of the project implementation period\. (d) Strengthening the Soil and Water Quality Monitoring Capacity The project strengthened the capacity of the Calarasi Water Management Service (SGA) and of the Soil Laboratory of Calarasi to monitor water and soil quality, respectively, as well as the impact on nutrient reduction of specific project actions (manure management, tree planting, application of the CGAP and others)\. Towards this, the project supported the incremental costs of selecting and maintaining monitoring sites and of equipment upgrading\. Two national level courses were organized to train staff of the institutions involved in soil and water quality monitoring, and with the implementation of the EU Nitrates Directive\. Component II: Strengthening of the National Policy and Regulatory Capacity The project supported the MESD and the MARD in two main areas: (i) the application of the Nitrates Directive (cost assessment, methodology for diagnosis and action plan, training, national meetings, coordination among several institutions involved); and (ii) the development of the CGAP\. Two additional Codes were developed based on requests from the ministries, namely the Code of Good Agricultural Practices and Environment Condition, and the Code of Best Farming Practices\. The codes were approved through ministerial orders, published and disseminated in 12,000 copies\. Component III: Public Awareness and Replication Strategy A broad public information campaign of the project activities and benefits was undertaken at the local, national and regional levels\. The public awareness campaigns are widely cited by local and national stakeholders as a critical factor in inducing the 26  behavioral changes necessary for the success of the project\. This component organized a regional level conference to disseminate the information, hosted visitors from the neighboring countries, organized field trips and training for the institutions, mayors and farmers from other regions in the country and promoted environmental-friendly agricultural practices through publications, exhibitions, social activities, promotional materials and working with children in schools\. The project provided considerable support to the Government of Romania in the newly approved developing Integrated Nutrient Pollution Control Project based on the experience gained\. The project provided local information, and significant technical assistance in developing this new project to replicate its experience throughout Romania and to assist Romania in meeting its EU obligations regarding the Nitrates Directive\. The project also provided support in developing similar projects in other countries in the region\. Component IV: Project Management The Project Management Unit (PMU) was fully staffed before project effectiveness and the structure of personnel and the specialists initially hired remained unchanged during project implementation, except for the Procurement Specialist\. The PMU provided effective technical leadership and efficient project administration\. 27  Annex 3\. Economic and Financial Analysis The PAD in line with GEF requirements included an incremental costs analysis (ICA) of the project which predicted that the project would introduce and demonstrate more sustainable and environmentally benign technologies and practices at an estimated incremental cost of US$5\.15 million over the baseline scenario\. The project achieved this objective at the estimated incremental costs\.6 The ICA enumerated among benefits associated with the project estimated annual savings of dissolved nutrients flowing into the Black Sea of 20kg/ha N and 2\.5 kg/ha P\. Ex-post analysis indicates that while nutrient leakage reduction has been realized but at significantly lower rate\. The PIU calculated N and P leakage to groundwater in the project areas (69,011 ha of arable land) in 2005 and 2006\. The calculation was based on increased spreading of manure on land and avoidance of excessive application of mineral fertilizers according the Code of Good Agricultural Practices\. The PIU found that in 2005 avoided leakage was 1\.9 kg N / ha and 1\.6 kg P / ha\. In 2006 the corresponding figures were estimated at 1\.8 kg N / ha and 1\.4 kg N / ha\. A possible explanation for the large discrepancy is that the figure quoted in the PAD may have been derived from observations in other parts of Central and Eastern Europe in the early 1990s when drastic increases in prices of mineral fertilizers led to substantial reductions in their use\. To further evaluate the efficiency of the project, cost effectiveness (CE) ratios, defined as the cost of reducing one kg of N or P leakage into surface and ground waters were calculated for individual environment-friendly practices\. The CE ratios were calculated by dividing the monetary cost of implementing a practice by the total amount of leakage prevented through this practice in a particular area during a one year period\. Leakage was estimated based on the difference of quantity of manure disposed on land improperly and conservative coefficients derived from international observations on release of nutrients from manure to soil\. Costs taken included capital investment costs, maintenance and operation costs, and project management costs apportioned to the activity\. Financial costs of the interventions were considered to equal economic costs due to insignificant market distortions\. The estimation of annual leakages prevented due to the practice in question was based on the actual data reported by the project beneficiaries and provided to the PMU by the Department of Agriculture Calarasi\. The estimated CE ratios vary between US$10/kg and US$40/kg depending on the practice considered\. At US$10/kg nutrient management was found to be the most cost effective practice, followed by strip crops and cover crops (US$12-15/kg\.)7 At US$30- 40/kg manure management was the costliest practice, which is explained by the high initial capital cost\. 6Under more current GEF ICA practices, not only the GEF funded but also Government, beneficiary and other donor funded incremental costs would also be included in the analysis\. Nevertheless, regardless of ICA methodology the project achieved its objective at estimated incremental costs\. 7Estimates conducted by the PMU\. 28  These CE ratios may be compared with those achieved in other parts of the world\. In Poland, the CE ratios achieved by the World Bank funded Rural Environmental Protection Project in four regions ranged between US$18\.5/kg N and US$24\.8/kg N\. These CE ratios are lower than the above estimates for the Romania APCP since they were calculated in present value terms with a discount rate of 10% and expressed in 2000 Dollars while the CE ratios in Romania are in current value terms\. These CE ratios are within the same range of CE ratios achieved in the Chesapeake Basin of the United States where comparable CE ratios were calculated\. As the below table indicates the median CE ratio for manure management was US$30 per kg of N removed\. This ration is roughly equivalent US$39/kg N in 2003 terms (table below)\. CE ratios were lowest in Romania for nutrient management\. This phenomenon was also observed in the Chesapeake Basin\. Nitrogen reduction cost effectiveness rations achieved in the Chesapeake Basin (US$/kg N removed)* 25 percentile Median 75 percentile Nutrient Management and 10\.4 19\.5 28\.6 Animal Waste Systems Animal Waste Systems 20\.8 39 58\.5 Source: Adapted from Camacho (1992), p\.38\. * The CE ratios were adjusted for inflation using a GDP deflator of 1\.30 from 1990 to 2003\. It may be concluded that the CE ratios achieved in Romania are broadly in line with international experience\. 29  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending Task team Jitendra Srivastava Lead Agriculturalist ECSSD leadership and technical input Doina Petrescu Sr\. Operations Officer ECSSD Technical input Meeta Sehgal Consultant ECSSD Technical input Naushad Khan Sr\. Procurement Spec\. ECSPS Procurement plan Arben Maho Procurement Analyst preparation Ranjan Ganguli Sr\. Financial Management Spec\. ECSPS Financial Bogdan Constantin management plan Constantinescu Sr\. Financial Management Spec\. ECSPS preparation Rohan Selvarathnam Operations Analyst ECSSD Project costing Stan Peabody Lead Social Scientist ECSSD Social assessment Dana Dobrescu Consultant ECSSD Social assessment Srish Kumar Consultant ECSSD Project costing Supervision/ICR Doina Petrescu Sr\. Operations Officer ECSSD Task team leadership Nadia Badea Operations Analyst ECSSD Technical input Bogdan Constantin Financial Constantinescu Sr\. Financial Management Spec\. ECSPS management supervision Vladislav Krasikov Sr\. Procurement Spec\. ECSPS Procurement Blaga Djourdjin Procurement Analyst ECSPS supervision Ana Maria Ihora Program Assistant ECCRO Organizational support Jitendra P\. Srivastava Consultant ECSSD Technical input Tijen Arin Sr\. Environmental Economist ECSSD Main author of ICR (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No\. of staff weeks US$ Thousands (including travel and consultant costs) Lending FY99 6\.22 FY00 169\.82 FY01 117\.42 30  FY02 46\.60 FY03 0\.00 FY04 0\.00 FY05 0\.00 FY06 0\.00 FY07 0\.00 FY08 0\.00 Total: 340\.06 Supervision/ICR FY99 0\.00 FY00 0\.00 FY01 0\.00 FY02 36\.62 FY03 42\.97 FY04 42\.82 FY05 35\.07 FY06 14\.11 FY07 30\.34 FY08 0\.78 Total: 202\.71 31  Annex 5\. Beneficiary Survey Results In the spring of 2007, a survey and in-depth interviews were carried out among stakeholders in the project region\. The study aimed at assessing the project's impact on the target population and evaluated the level of use of environment friendly agricultural practices and of nutrient management plans, at the levels of both agricultural associations and individual households\. The following are the key findings of the study: The number of associations involved in the project increased from 2005 to 2006\. This increase was related mainly to the usage of the compost/manure collected from the households\. The most frequently used environment friendly practices were crop rotation, seed selection, and use of pesticides and chemical fertilizers assisted by a specialist\. However, association representatives mentioned difficulties in implementing these practices, including lack of an irrigation system, high costs of transportation and spreading on land of composted manure, and insufficient availability of composted manure\. Among households that work the land themselves and that could use the environment friendly practices; the most frequently used environment friendly practices were crop rotation and seed selection\. However the ratios were much lower than the ratio of associations\. The key factor affecting level of implementation of such practices was found to be land size ­ the larger the land the more likely the household to use one of these practices\. In 2006, households used crop rotation and expert-guided chemical fertilizer application more frequently than in 2005\. Analysis of the evolution of environment friendly practices indicated that the largest increases brought about by the project were in expert-guided application of chemical fertilizers and pesticides and in natural windbreaks\. Most of the problems encountered earlier with regard to garbage and manure management were solved thanks to the efforts of the APCP and of the local administration\. Generally speaking the situation improved in project area with respect to waste and manure collection, storage, disposal\. The approach to waste and manure management was considered appropriate\. Water pollution was reduced as was the incidence of nitrite poisoning\. Villagers were taking their garbage and collected manure to the commune's platform, consequently non-authorized platforms had disappeared and the general appearance of the villages has improved\. Improper utilization of individual platforms and euro-bins was lower in 2007 than in 2005 and 2006, owing to the efforts of the local administration and the APCP\. Local administrators controlled the use of the bins and platforms, while the APCP provided holey bins with wholes which made their use for food storage impossible\. In four of the seven project communes, public service for waste and manure collection was operational and transported waste collected by households to the communal platforms\. In the other three communes public authorities were at the tie of the study organizing the service with the support of APCP and of the County 32  Council\. Three new communal waste and manure platforms were under construction, providing easier access for the local population for waste disposal\. The project was relatively well known in the project region among households and other local stakeholders\. The APCP was mainly identified as a project that assisted and had the entire community as beneficiary\. The project's aim and results were primarily associated with garbage management\. Data gathered, in particular qualitative data, suggested that project implementation was achieved without major difficulties\. The project effects were perceived generally as positive\. However, there were differences in stakeholders' perceptions of the project's sub-components\. While environment friendly agricultural practices component was associated more with positive effects than the garbage management sub-component, its consequences seemed rather diffuse\. On the other hand, the cleansing of the locality was perceived as the main benefit of the garbage management component by 72% of persons who answered the questionnaire and a large majority the persons interviewed\. The project seemed to have positive consequences also at institutional level, mayoralties being the main beneficiary\. Qualitative information suggested an improvement of relations between mayoralties and communes' citizens, and also an increase in local capacity to access and manage community development projects, due to experience gained in the project\. According to data gathered (especially qualitative data), various activities were carried out to disseminate information about the project\. Almost all communes reported of visits of representatives of institutions that could develop similar project (representatives of mayoralties from Clrai and neighbor counties)\. 33  Annex 6\. Stakeholder Workshop Report and Results Not applicable\. 34  Annex 7\. Summary of Borrower's ICR Introduction The Implementation Completion Report provides an: Assessment of the Project objective, design and implementation experience\. Evaluation of the borrower's performance during the implementation of the Project, with special emphasis on lessons learned that may be relevant in the future\. Evaluation of the performance by the Bank, the co-financiers and other partners during the evolution and implementation of the Project, including the effectiveness of their relationships, with special emphasis on lessons learned\. Assessment of the Project objective, design and implementation experience Project Objectives The overall project development objective is to increase significantly the use of environmentally-friendly agricultural practices in the project area and thereby reduce nutrient discharge from agricultural sources in Romania to the Danube River and Black Sea\. The project was envisaged as a demonstration activity in the southern part of Romania, along the lower Danube, that may provide replicable lessons for introduction of similar practices in other zones of Romania as well as other Black Sea Riparian Countries\. This was a valid objective because, at the time, Romania was one of the major contributor to the Danube and Black Sea pollution with nutrients originating from agricultural activities and the Government needed assistance in order to honor its international obligations as well as moving Romania towards EU accession by addressing EU Directive 91/676/CEE regarding the water protection against pollution with nutrients originating from agricultural sources (Nitrate Directive)\. Many new farmers that had recovered their land in the early 1990s started to practice agriculture without having the necessary skills, experience and the appropriate equipment and therefore they started to seek advice on developing their farming enterprises\. This was a good opportunity for the Project to offer them demonstrations on environment-friendly agricultural practices with low inputs, organic farming, manure management and nutrient management\. With regard to the communes, they were confronted with huge problems of pollution generated by the householders that in the 1990s started to grow animals inside the villages\. This activity generated large amounts of manure improperly managed that was dumped mixed with inorganic and other household waste on agricultural lands, making them inappropriate for agriculture and a source of pollution with nutrients (mainly nitrogen and phosphorous) of the soil and water resources\. There was a need to introduce, at the commune level, adequate manure management practices, supported with the necessary investments, equipment and training\. With regard to the drinking water quality, the population in the Project area was affected by the high nitrogen content and the exceeded acceptable levels for Streptococus fecalis 35  and for fecal coli forms\. Between 1996 and1999, forty-five cases of acute nitrate poisoning were reported in the Calarasi County\. In fact, all cases of acute nitrate poisoning in 1997 in Romania were in the Calarasi County\. Project Design To achieve its overall objective, the Project was designed to: (i) facilitate the farmers' participation in the Competitive Grant Scheme organized by the Agricultural Services Support Project financed by the World Bank and implemented by the Ministry of Agriculture, with project proposals aiming the technology adaptation and extension interventions for environment-friendly practices; (ii) provide grants for the installation of improved manure storage facilities and equipment for manure collection and application in the seven comunas around Galatui Lake; (iii) promote the adoption of better agricultural practices that would improve agricultural production while reducing nutrient discharge pollution from agriculture; (iv) develop and support a specific land use management plan for the Boianu-Sticleanu Polder and the restoration of part of the Calarasi-Raul Polder; (v) strengthen the capacity of the local agencies (EPI, OJSPA and Public Health Directorate in Calarasi) to carry out soil and water quality monitoring programs; (vi) support the Ministry of Water and Environmental Protection (MWEP) and Ministry of Agriculture, Food and Forests (MAFF) for the application of the Nitrates Directive and harmonization of legislation with the requirements of the European Union, developing a Code of Good Agricultural Practices and strengthening the capacity of the National Authority for Ecological Agriculture; (vii) support public awareness campaigns at local level to familiarize the population and help induce the behavioral changes necessary to the success of the project in the seven selected comunas, and replication in the judet area, at national level, to disseminate the information concerning the benefits of the project activities and promote replication at national level and at regional level, in the Black Sea Riparian countries to promote the pilot project as a possible model for replication\. Implementation experience Competitive Grant Scheme (total cost US$1,104,812): Several trainings were jointly organized by the PMUs of the APC and ASS Projects with the participation of the OJCA and DADR specialists, to provide guidance to farmers on the preparation of projects proposals, according with the provisions of the Operational Manual of the ASSP\. Some 21 Concept Notes were submitted by farmers in Calarasi County and a number of three projects were eligible for the co-financing out of the APC Project\. The training program provided regular interaction between the extension staff and the farmers\. Farmers considered the disseminated information very useful for the preparation of project proposals not only for the CGS but also for other programs (PHARE, SAPARD) offering support on competitive basis\. The awarded projects were well implemented and several technologies demonstrated were adopted by farmers\. Manure management (total cost US$ 5,065,400): This sub-component provided grants on a cost-sharing basis for the construction of village-level solid waste manure facilities and small storage platforms with effluent collection facilities at the household level, as well as for equipment for manure handling and spreading\. The initial investment program 36  consisted in a number of 14 commune level manure platforms and about 4000 manure bunkers for the individual households\. In addition, the USAID offered support for the design and construction of a pilot manure storage facility and the initial training for farmers, mayors and communes' specialists in manure composting and use\. The collaboration with the Iowa State University provided useful support and information for refining the design of the manure platforms\. The implementation of this sub-component has made an important impact on the behavioral changes of villages' inhabitants, farmers and local authorities\. The construction of the commune level and of the individual platforms was done in a participatory manner, the beneficiaries being involved in all the construction stages\. Training and awareness on good practices for manure collection, composting and use as organic fertilizer was provided to the operators of the platforms and to individual farmers\. As a consequence of the good results obtained, the communes requested support for the construction of three additional platforms, and agreed to increase their part of co-financing in order to cover the construction costs\. Finally, at the level of the communes the project financed a number of 18 manure platforms with a total storage capacity of 53,900 tons\. At the household level the project financed a total of 2,250 individual platforms and, in order to help farmers to segregate the waste, 5,710 euro-bins were provided to the farmers\. Also, each commune platform was provided with an office-container completely furbished, with water tank and toilet\. The communities are fully using the platforms and the equipment and about 21 new working places were created\. The percentage of households with livestock in the project area using village manure storage, household bunkers and segregating waste materials reached 54\.4% compared to the baseline of 0%, and end-of-project target value of 45%\. Testing/Demonstration of the environment friendly agricultural practices (total value of US$ 311,832)\. This sub-component provided support for (i) testing and demonstration of environment friendly practices; (ii) strengthening the capacity of the OJSPA to provide services and technical assistance for farmers related to the nutrient management plans, soil testing and monitoring the soil quality; (iii) training of farmers and OJCA staff on agricultural environment-friendly practices\. The demonstrations were organized both in the Polder and the Terrace areas\. The demonstrated practices included conservation tillage, shelterbelts/windbreaks, narrow vegetative barriers, filter strips, riparian buffers, nutrient management, agro-forestry, tree planting, grazing management, crop rotation and green fertilizers\. In addition to these agricultural and agro-forestry practices there were organized demonstrations of the reclamation of the former unauthorized manure dumping places and recovering of the land for agricultural use\. Also, demonstrations regarding the fountains head protection were organized and a number of 18 public wells where rehabilitated as an example of good practice to be used by householders\. To support these demonstrations, the project provided the necessary planting materials and the specialized equipment for demonstration\. Fourteen training sessions and field visits were organized with the participation of about 650 local farmers and specialists\. Regarding the rehabilitation of communes' pastures and improvement of the grazing management, the project provided support for the rehabilitation of 240 ha of pastures in the terrace area as well as in the Polder as demonstration of good practices\. The project provided consultancy, selected seeds fixed and electric fences and mobile shelters for 37  pasture administrators\. The communes' representatives received guidance from the PMU for organizing the controlled grazing management on the rehabilitated pastures\. The brochure ,,Prescribed Grazing Management to Improve Pasture Productivity in New York" elaborated by the United States Department of Agriculture, Soil Conservation Service and Cornell University, Department of Animal Science, was translated from English and distributed to the communes to serving as a guide for preparing the grazing management plans\. These demonstration pasture fields are being properly managed and used by the communities\. With regards to the Nutrient Management Plans, the Project provided support for the preparation of a methodology for elaboration of the plans at the farm level\. As support for farmers, a Field Handbook containing information and guidance for the elaboration of the Nutrient Management Plans was prepared\. The methodology has been extensively discussed with all the stakeholders and approved by the Inter-ministerial Commission for Nitrates Directive and the MAFRD\. Also, the Nutrient Management Plans for 7 representative farms in the Project area and a training program for the farmers and specialists from OJCA, OSPA and DADR were carried on\. The OJCA and OJSPA were provided with the computer program elaborated by the Project, for Nutrient Management Plans preparation\. In order to strengthen the capacity of the OJSPA to perform soil tests, the project provided funds for minor rehabilitation of the laboratory, laboratory equipment, a four wheels vehicle and training of staff\. A survey regarding the use of the environment-friendly agricultural practices promoted under the APCP showed that the percentage of area under nutrient management systems including crop rotation, crop nutrient management with soil testing, and use of organic manures is 31%, compared to the baseline of 1%, and the end-of-project target value of 30%\. Integrated Management of Boianu-Sticleanu Polder and ecological restoration of part of Calarasi-Raul Polder (total value US$ 408,167)\. The main activity was related to the implementation of the Conservation management plan of the Iezer-Calarasi nature reserve\. The Project supported the elaboration and all necessary steps for approval through Government Decision of a Conservation Management Plan for the Iezer-Calarasi Avi-faunistic Protected Area\. Also, the project procured the equipment needed by the local Environment Protection Agency (EPA) in Calarasi and by the Custodian SC Piscicola Calarasi for the activities related to the management of the protected area and helped the custodian of the protected area to demarcate the boundary, to develop an information center and a public awareness strategy and to implement the overall conservation plan\. All these activities have been achieved and the Iezer Calarasi nature reserve is functional\. Under the agro-forestry planting program, an area of 1,569 hectares was planted with acacia, poplar, willows and honey locust as shelter belts, wind breaks, buffers on erosion prone location\. Out of the 1,090 hectares initially planed to be planted in the polder, only 858 hectares were planted because the difficulties in transferring the lands from the State Domain Agency to the National Forestry Regia\. For this reason, in consultation with the stakeholders the tree planting program, initially planed for the seven comunas, was extended at the County level and the remaining 232 hectares planned to be afforested in 38  the polder, were planted on the terrace area, as shelter belts and buffer strips\. As result, on the Project area, the tree planting indicator was met in proportion of 103\.4%\. The planting program was supported by an intensive training program addressed both to farmers and school children\. It worth to be mentioned the large participation of the school children in the tree planting program\. The envisaged rehabilitation of the Calarasi-Raul polder could not be achieved because the feasibility study elaborated by the Danube Delta National Consulting Institute, revealed that the ecological restoration of part of the Calarasi ­ Raul Polder to the initial conditions (before building the dike and transformation into an agricultural polder) is not possible anymore due to the modification of the hydrological conditions of the Danube course\. The potential ecological restoration of the Calarasi ­ Raul needs further consideration in the Danube Green Corridor context, subject to a more in-depth environmental and social assessment\. Also, the funds provided in the Project were much below the estimated cost of restoration\. The amount budgeted for the implementation and monitoring of the ecological restoration project for the Calarasi ­ Raul Polder was reallocated to other project components\. Strengthening the capacity of water quality monitoring at Calarasi County level (total value US$ 384,201)\. The project interventions consisted in providing funds for the construction of a piezometers network covering the project area\. The project also provided the necessary laboratory furniture, equipment, vehicle and training in order to create conditions for the laboratory accreditation\. An intensive sampling and testing program of the ground and surface waters nutrients content was carried on by the Water Management Service and the tests results were used for the assessment of the impact of the project interventions for reducing the nutrients loss into the waters\. The communes and farmers were regularly informed, direct and through the public awareness campaigns, about the water quality in the project area\. The WMS staff participated to the courses organized by the project at national level, to train the staff of the institutions involved with soil and water quality monitoring, and the implementation of the EU Nitrate directive\. Strengthening the national regulatory capacity regarding the environmental policy (total value US$ 146,102)\. The project supported the MWEM and the MARD for the application of the Nitrates Directive\. The project provided support for: (i) assessment of the costs required for the implementation of the Nitrate Directive and elaboration of the methodology for diagnosis and action plan; (ii) training of the staff of the institutions involved in the implementation of the Nitrate Directive at national and local levels; (iii) national meetings and consultation with the stakeholders; (iv) development of the Code of Good Agricultural Practices, Code of Good Agricultural Practices and Environment Condition, and the Code of Best Farming Practices\. The methodology for diagnosis and action plans elaborated with the project support provided a better understanding of the role of each of the institutions involved in the Nitrate Directive implementation\. 39  As regards the Codes of good agricultural practices, they were elaborated, approved through ministerial orders, published and disseminated in 15,500 copies\. These codes are an important support for farmers willing to organize their agricultural activities in order to access the EU funds\. Public Awareness and Replication Strategy (total value US$ 416,141) The public information campaign of the project activities and benefits was undertaken at three levels: (i) In Clrai County, in order to familiarize the population and to help inducing behavioral changes necessary for the success of the Project, in the seven communes selected and replication in the Project area; (ii) At national level, in order to disseminate the information regarding the benefits of the Project activities and promoting the replication at national level; and (iii) At regional level, in the Back Sea neighboring countries, for promoting the pilot Project as a possible replication model\. At the local level, the Project's objectives and results have been disseminated through activities organized in the communes from the Project area, promotional materials distributed to the participants to different contests on environmental friendly agricultural practices themes, publications dedicated exclusively to the "Agricultural Pollution Control" Project, different exhibitions organized with the participation of farmers and companies with activities in the area of organic agriculture\. The public awareness campaigns have been a critical factor in inducing the behavioral changes necessary for the success of the project\. In order to consolidate the new behavioral patterns, the farmers and the stakeholders were presented with the benefits of these activities\. The staff of the County Centre for Agricultural Consultancy and other local institutions (OJCA, WMS, PHD, County Council) was trained regarding the use and the benefits of the environmental friendly agricultural practices, and were involved in the demonstration and the field visits, therefore becoming an important mean with regards to encouraging the adoption of these practices in the entire county even after the project closing date\. At the national level, several conferences and consultations with the stakeholders were organized in order to promote the project replication\. The Project hosted visitors from other counties, organized project presentations and field visits for farmers from other regions in the country\. The project achievements were promoted through publications, exhibitions, promotional materials and social activities\. The awareness campaign was successful in building a general good-will for the project and its benefits and raised the interest of the authorities, mayors and farmers from other counties towards the aims of the project\. The project provided considerable support to the Government of Romania in developing a new project based on the experience gained during this project, named Integrated Nutrient Pollution Control (INPC)\. Thus the project has fulfilled its objective for replication at national level\. At the regional level the project provided for the participation to regional workshops, study visits and other activities to promote replication of project activities in other Black Sea riparian countries\. A Regional Conference on Agricultural Pollution in the Danube, Baltic and Black Sea Basins was held in Bucharest in 2003\. Under the regional replication efforts, the project supported the organization in Poland of a study tour of the mayors and farmers from Calarasi area\. 40  Borrower performance and Lessons Learned Project Management\. The Project Management Unit was established and fully staffed before the Project effectiveness and, during the project life, provided effective technical leadership and efficient project administration\. The structure of the PMU remained unchanged, except for the procurement specialist that left in the third year of the project, his tasks being taken by the Financial Manager and M&E Specialist\. Given the pilot nature of the Project it inevitably took time to build understanding at all levels of MWEP and to put in place the appropriate management systems\. The PMU has also played an important role in building a good relation with the Local Coordination Committee and Project beneficiaries\. As result the project development objectives has been achieved, expected outputs in many cases exceeded and funds fully disbursed\. The PMU worked continuous with the Bank Resident Mission and received guidance and support to resolve implementation issues as they arose\. Financial Management\. The financial management of the project was highly satisfactory\. The PMU has developed financial management software tailored for the project needs, with adequate security levels and its outputs were used to prepare quarterly financial monitoring reports of the project\. The system is flexible and can be scaled up for the new World Bank supported Project - Integrated Nutrient Pollution Control\. The project team uses a comprehensive set of accounting policies and internal control procedures in accordance with the Romanian legislation and the project financial management requirements\. The financial procedures manual for the project has been subject to periodic updates and regular reviews by the Bank\. Since the Project beginning, the PMU have been designated by the Implementing Agency, as third budgetary holder for the Project funds, which leaded to a successful, rapid and efficient implementation of the Project activities and a very good disbursement of the grant funds during the Project life\. The PMU financial activity have been annually audited by independent auditors, acceptable to the Bank, and unqualified audit opinions, with no internal control problems have been issued at every report\. The counterpart funds, from all sources, have been provided in time and necessary amounts\. The budgetary funds have been provided quarterly, according to the PMU requests, in the limits allocated in the annual budgets\. The local funds, from the Calarasi County Council and the seven beneficiary communes exceeded the amount initially allocated in the Project budget and the PMU collaboration with them have been highly satisfactory\. Procurement\. The procurement capacity of the PMU was adequate for successful management of the Grant\. The PMU was strictly followed Guidelines requirements and the quality of preparation of the documentation was good during the project implementation\. Project Monitoring and Evaluation\. The Borrower has fulfilled its obligations with respect to monitoring and evaluation of the project\. The project monitoring was done in accordance with the M&E Plan designed during project preparation and included in the Project Implementation Plan (PIP)\. The PMU has developed a comprehensive database including information related to the monitored indicators and prepared periodical progress reports\. These reports were shared with the MEWM and the World Bank and the M&E results were used by the project management to address the implementation problems\. 41  Lessons Learned\. Several lessons were learned from the implementation of the project, namely: (i) for the components requiring beneficiaries' contribution (in cash or in kind), the early involvement of the stakeholders in project preparation is essential in order to ensure ownership and make them aware about the actual level of the effort necessary for the successful component implementation; (ii) the environmentally friendly agricultural practices included in demonstration programs should yield tangible benefits for the farmers, in order to ensure their adoption; (iii) the best way to convince the decision factors to support an activity that is new in the project area, are the demonstration visits to similar places where such kind of activities were successfully implemented; (iv) early efforts should be made to ensure the training of the project beneficiaries regarding the further use of the provided facilities; (v) the establishment of a local coordination committee, including representatives of the local authorities and of the beneficiaries, is the best solution for addressing the implementation issues; (vi) a public awareness campaign focused on the project objectives needs to be organized from the early stage of the project implementation\. Performance of the World Bank and Other Co-financers The Bank's Resident Mission and Bank's supervision missions provided the needed assistance for resolving the problems occurred during the project life, and the ready accessibility of the Bank's team was particularly helpful in reaching timely decisions\. The relation with Calarasi County Council and Beneficiaries worked very well and the funds were made available on a timely basis\. There was a very good collaboration with USAID who provided funding for a pilot manure platform and a training program\. 42  Implementing Agency Comments on Draft ICR 43  Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders In the early project implementation phase, USAID contributed US$ 150,000 to the project with which a comuna platform was built\. The ICR team attempted to contact the USAID Office in Bucharest in the first half of December 2007 for comments on the draft ICR\. However, due to the phasing out of the USAID Office in Bucharest in progress and the Holiday Season, contact could be established with the officer in charge of cooperation with the APCP only on December 28, 2007\. The team expects to receive comments on the ICR in early January and will file them in IRIS\. 44  Annex 9\. List of Supporting Documents 1\. "Review of the Status of Implementation of the Environmental Management Plan Agreed at the project Appraisal (October 18 ­ November 18, 2004)" by Dr\. Violeta Visan, Consultant for the World Bank, Bucharest, Romania\. 2\. "The monitoring of Social Effects of the Agricultural Control Project\. A report for the Ministry for Environment and Water Management\." by Malina Voicu, Monica Constantinescu and Vlad Grigoras\. Romanian Academy Research Institute for Quality of Life\. Bucharest, May 2007\. 3\. Estimation of Nutrient Reduction\. Excel Sheet produced by the PMU\. "Nutrients Reduction\.xls"\. 45

REVIEW

P089751

 ICRR 14430 Report Number : ICRR14430 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 09/29/2014 Country : Azerbaijan Project ID : P089751 Appraisal Actual Project Name : Idp Economic US$M ): Project Costs (US$M): 12\.60 26\.69 Development Support Project L/C Number : C4034; C4395 Loan/ US$M): Loan /Credit (US$M): 11\.50 26\.37 Sector Board : Social Development Cofinancing (US$M): US$M ): NA NA Cofinanciers : NONE Board Approval Date : 02/15/2005 Closing Date : 12/31/2008 12/31/2011 Sector (s): Other social services (20%); Roads and highways (20%); Housing construction (20%); General water sanitation and flood protection sector (20%); Primary education (20%) Theme (s): Conflict prevention and post-conflict reconstruction (50% - P); Participation and civic engagement (25% - S); Other social protection and risk management (25% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Santhadevi Meenakshy George T\. K\. Pitman Christopher David IEGPS1 Nelson 2\. Project Objectives and Components: a\. Objectives: The Internally Displaced Persons (IDP) Economic Development Support Project is a ‘repeater projectâ€? that replicates part of the ‘Pilot Reconstruction Project’ (Cr\. 3 1090/3 1091-AZ, 1998-2005) and has the same objective\. The Project Appraisal Document (page 3) and the Development Credit Agreement (page 13) and state that the project development objective was : “to help improve the living conditions of IDPs and enhance their economic opportunities and prospects for social integration \.â€? The project was restructured in 2008 and at that time the project development objective was changed (Project Paper page (i) and Financing Agreement page 5): “to improve living conditions for IDP, through demand -driven community based infrastructure and service micro -projects \." b\.Were the project objectives/key associated outcome targets revised during implementation? Yes If yes, did the Board approve the revised objectives /key associated outcome targets? Yes Date of Board Approval: 05/15/2008 c\. Components: There are three components:  Micro -projects : (appraisal cost US$10\.60 million; additional financing cost US$ 21\.29 million; actual cost A : Micro- US$33\.89 million)\. The component was designed to finance the preparation and implementation of up to 200 small scale micro-projects (average cost about US$50,000) that included rehabilitation, repair or reconstruction as well as the acquisition of related equipment \. Micro-projects included basic small infrastructure, such as water supply and sewage networks, electricity distribution networks, access roads, and drainage systems; social infrastructure such as schools, community centers; and temporary shelter facilities \. To be eligible for financing all micro-projects had to be identified and selected by the beneficiary IDP communities and they were expected to provide a cash-contribution of 3% of the total cost as a demonstration of their commitment \. A large number of such micro-projects had already been identified under the ‘Pilot Reconstruction Project’ but could not be funded for lack of resources\. All projects had to demonstrate also that they represented the least -cost approach to the problems they were meant to address in terms of both the actual cost of the investment and the resulting operations\. and maintenance costs\. Under the additional financing the component was scaled up to prepare and implement about 250 more small-scale micro-projects at an average cost of between US$ 60,000-80,000\. The increase in average cost of micro -projects, compared to the original project, was based on the appraisal of the increased cost of construction inputs in 2008 compared to 2005\. The micro-project cycle was similar to the original project with the addition of two procedures intended to increase community involvement; (i) a community appraisal event to share the micro -projects designs with the community for feedback, and (ii) a community evaluation event for beneficiaries to reflect on the outcomes of the micro -project six months after its completion \. Micro -Credits (appraisal cost US$0\.50 million; actual cost US$ 0\.50 million)\. B: Micro- The component was designed to provide financing to 2 Partner Lending Institutions (PLI) for the on-lending of loans of not more than US$5,000 to IDPs to support start-up or expansion of their small enterprises \. Geographically, the use of micro-finance resources was to be restricted to the Greater Baku area (i\.e\. the Absheron Peninsula and the cities of Baku and Sumgait ) in order to avoid any territorial overlap or conflict with the Bank’s existing Agricultural Development and Credit Project and a proposed ADB Micro and Rural Finance Project, This component was to be financed exclusively from counterpart funding resources using funds repaid from the credits disbursed on the preceding pilot project \. PLIs were required that the share of IDPs in their loan portfolio on the Asheron peninsula is at least the same as the share of IDPs within the whole population \. IDP /EDS Implementation Support : (appraisal cost US$1\.50 million; additional financing cost US$ 2\.90 million: C: IDP/ actual cost US$4\.40 million)\. The component was designed to finance (a) the operating costs of the Social Fund for the Development of IDPs (SFDI), including staff salaries, office consumables, utilities, in -country travel, office and vehicle maintenance, insurance, etc\., as well as renewal of office equipment and vehicles, (b) SFDI staff training, (c) portfolio development activities, (d) annual audits, and (e) monitoring and evaluation surveys and studies \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Costs : The additional financing from the Bank and the government added US$ 24\.19 million to the project and US$21\.29 million of this addition was allocated for improvement of IDP living standards through the rehabilitation of various infrastructures, and the remaining funds were used for consultant services and SFDI operational expenses\. In addition, component C was scaled -up to support the additional operating costs of SFDI such as : staff training, repair and replacement of SFDI equipment and vehicles, and consulting services for project preparation, monitoring, evaluation, and audits during the three year extension of the project \. The increase in funding for this component reflected the administration of a larger amount of IDA financing as well as the need to increase the number of SFDI’s field-based staff to improve supervision quality \. Financing : The original IDA Credit of US$12\.6 million was supplemented by additional financing Credit of US$ 15\.0 million in March 2008 when the project was restructured \. At the time the restructuring was approved 32% of the total Credit had been disbursed\. Borrower Contribution : Originally the government agreed to provide US$ 1\.10 million and at the time of additional financing another US$9\.9 million was added\. The original community share was US$ 0\.5 million but the ICR does not indicate if this was provided\. Dates : The closing date was extended by three years from December 31, 2008 to December 31, 2011 when the project had the level-1 restructuring\. A second level-2 restructuring was carried out in 2011 to utilize unallocated funds  before project closure\. The project closed in December 2011\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Original and Revised Objectives : Substantial Azerbaijan’s armed conflict with Armenia over the Upper Garabagh region, which lasted from 1992 to 1994, left over 30,000 dead and over 1 million people displaced\. About 575,000 or 15% of Azerbaijan’s population became internally displaced persons ’ (IDPs) in addition to the about 200,000 Azerbaijanis who returned from Armenia\. IDPs were expected, at least in principle, to return to the areas from where they had been displaced as soon as a political settlement of the conflict could be reached \. Efforts to resettle them or promote their social and economic integration were therefore viewed as a lower priority and considered a purely “temporaryâ€? necessity\. By 2005, the government had resettled about 41,000 IDPs and thus a significant problem remained \. Even among those IDPs that did not have to be relocated immediately, many lived in conditions where infrastructure, housing and service needs were substantial \. Large numbers dwelt in excessively poor housing conditions in school dormitories, former hotels and /or occupied public buildings\. Others lived in informal settlements that often lacked most elementary services, such as water supply and electricity, schools or health facilities \. Economic opportunities were limited and unemployment was high, especially in places outside the Greater Baku area \. At project completion, 597,180 people (7% of the population) remained internally displaced in Azerbaijan and up to 50% of these IDPs lived in collective centers (public buildings, dormitories) and temporary housing shelters, where conditions continued to be harsh due to insufficient investment in the improvement of this form of accommodation\. The percentage of these IDPs that had access to hot water, adequate sanitation, and electricity was significantly lower than the general population \. Improving the living conditions and economic opportunities of IDPs was an explicit objective of the Government ’s poverty reduction strategy formulated in the State Program on Poverty Reduction and Economic Development \. The 2006 State Program on Poverty Reduction and Economic Development found that some 63% of all IDPs live in poverty and that 70% were unemployed\. The original and revised objectives are fully consistent with the Third Strategic Goal of the 2003 CAS that focused on improving social services and infrastructure \. The objective remained relevant to the FY 07-10 Country Partnership Strategy (CPS) that focused on increasing the quality of and access to social services in to improve living conditions and economic opportunities particularly for internally displaced persons \. The objective is currently relevant to the FY 11-14 CPS\. b\. Relevance of Design: Original Design : Modest The results chain was weak with a focus on infrastructure and service delivery outputs; there were no activities that would improve social integration apart from allowing benefiting communities to include both IDPs and local people\. While it was specified that micro-projects had to be selected through beneficiary participatory appraisal, be cost-effective and improve living conditions, the fact that a large number of potential projects were in the pipeline and ready-made at approval, and that community participation was only just starting, meant these were difficult conditions to impose\. In contrast, the allocation of responsibility for screening and implementation of micro-projects and establishment of a pool of pre -qualified contractors to the autonomous Social Fund for the Development of IDPs (SFDI) was an effective design feature to coordinate and manage the process, but even that was problematic because the emphasis was on technical quality, not community involvement \. Thus this arrangement proved to be insufficiently flexible in the light of subsequently revealed beneficiary preferences, particularly in some of the poorest communities where the preference was for medium -sized projects rather than micro-projects, mainly for the supply and /or rehabilitation of communal housing /dormitories\. As a result, concerns arose about targeting and the quality of medium -sized construction being built by micro -project qualified contractors\. The micro-credit component was designed to be implemented through SFDI who would on -lend to Partner Lending Institutions (PLIs) at interest rates and terms that were rigorously defined \. The PLIs selected by SFDI were allowed to extend micro-credits to clients in accordance with their own credit policies regarding eligibility, interest rates and loan duration \. Project design included very detailed criteria for selecting PLIs to minimize fiduciary risks\. Even then, not enough attention was given to the effect of government procedures that required PLIs to be registered with relevant license and tax identification code to access the loans \. These procedures were difficult to follow for those PLIs who resided in remote areas and were addressed by extending the end date of the loans as part of additional financing \. However, indicators were output -focused with almost no attention to evaluating how effectively the micro -credit would enhance beneficiaries ’ economic opportunities and prospects for social integration \. Revised design : Substantial The decision to drop the micro-credit component at the time of additional financing when the project was redesigned was relevant given the rapid growth of Micro Finance Institutions outside the project – their lending grew from US$22 million in 2004 to US$175 million in 2007\. The micro-project component was redesigned to bring in much -needed community mobilization skills for SFDI as well as the Bank, The project cycle was improved by introducing mandatory community consultations at the micro-project design stage to ensure beneficiary needs were met, and by a community evaluation six months after completion of the micro-project to utilize feed-back to improve relevance and quality of micro -project design\. Technical quality was improved through recruitment of three regionally -based technical consultants to oversee micro-project construction and adherence to standards \. Notwithstanding these improvements, there were still some problems remaining, Fixing the minimum community size to 100 led to exclusion of a few smaller but deserving IDP communities in rural areas \. Conversely, fixing the upper micro-project budget at US$75,000 equivalent led to the exclusion on commonly occurring demand for rehabilitation of 5-story 2-block dormitories housing 90 families but, in some cases, SFDI’s Supervisory Board made special exceptions to this policy \. 4\. Achievement of Objectives (Efficacy): Original Objective: “to help improve the living conditions of IDPs and enhance their economic opportunities and prospects for social integration \.â€? The achievement of the three sub -objectives: (a) to help improve IDPs’ living conditions; (b) enhance IDPs’ economic opportunities; and (c) enhance IDPs’ prospects for social integration, is discussed below : (a) help improve living conditions of IDPs : Substantial Outcomes : Micro-projects benefited about 110,000 people and 80% of the beneficiaries were IDPs\. As part of the mid-term review in 2007 a random sample of 12 micro-projects was selected from 32 completed projects and each sampled community participated in a focal group discussion and a survey; 99 of the 112 respondents were IDPs\. The sampled projects represented roads, drainage, water supply, school improvements and community service facilities (tents): Road improvements significantly reduced travel time and family costs, increased school attendance, livestock marketing, and access to social services, particularly medical \. Drainage projects reduced water logging and damp houses with health benefits, and crop production improved through better management of soil salinity \. Water projects provide safe water supplies that reportedly improved hygiene, reduced sickness and benefited livestock\. School improvements led to increased attendance and attracted additional government funding for equipment given better security and weatherproofing \. Outputs : 168 micro-projects were implemented (target 200)\. 142 of them were community infrastructure micro -projects including, 94 economic infrastructure, 25 social infrastructure, 2 sanitation and environmental and 21 group shelters\. 26 were community service micro-projects\. Average cost of micro-projects was US$63,000\. (b) enhance IDPs ’ economic opportunities : Modest Outcomes : 2,113 persons were employed short-term in construction works, 68% of whom were IDPs\. The average micro-project provided various types and duration of construction employment over a period of up to 113 days\. There is no information on how the economic opportunities created by the micro -loans benefited IDPs\. There is no information on the number IDPs benefitting from employment and /or enhanced incomes, and on the sustainability of benefits generated \. Outputs : The US$0\.5 million was fully utilized for micro-credits as planned, and 2,461 micro-loans (no target) were provided and the average loan was US$ 1,876\. The number of repaid loans at the end of 2008 was 2,143 (Borrower’s ICR page 59) and the repayment rate of credits by the clients was 100%\. Ratio of written-off loans was not more that 3% Micro-loans were used for the following investments :  71% trade 24% services (undefined) 4% production 1% agriculture (c) enhance IDPs ’ prospects for social integration : Modest Outcomes : No outcomes are available\. However, the MTR survey indicated that some community infrastructure has spill-over benefits to the local or adjacent communities \. How far that led to better social integration is unclear given that most sampled communities were composed solely of IDPs \. Restructured Objective "To improve living conditions for IDPs, through demand -driven community based infrastructure and service micro -projects ": Substantial Outcomes : Over 135,000 persons benefited (target 150,000) from improved infrastructure and service micro -projects and some medium-sized projects\. 72% of the beneficiaries were IDPs\. Beneficiaries reported that 44% of micro-projects directly improved living conditions and most other projects improved the quality of life\. Some of the main outcomes were: Roads improved accessibility to schools and between the community and regional centers; saved time; increased safety; improved agricultural marketing; and reduced car maintenance costs \. Community tents large enough to hold several hundred people for weddings and funerals led to time and money saving and generate income from tent hire \. Tents facilitated also social interactions and enhanced community relations with more opportunities for religious practices \. Community centers provided space for community social events and contributed to the development of the community\. Rehabilitated Schools the most commonly cited outcomes for school projects was improved quality of education and improved attendance \. Rehabilitated schools were also seen as secure locations and many were provided with new equipment independently from government and other donor projects \. Safe water supplies eliminated rationing, the need to purchase expensive water from water vendors, and reportedly improved health\. New electrical supplies enabled installation of modern electrical household equipment; led to money savings and new income generating activities; and enabled their children to progress with their homework at night\. Outputs : 100% of the micro-projects were chosen through participatory community involvement and 97% of community members rated the level of community participation as satisfactory \. 91% of micro-projects committees (target 100%) included at least 40% women\. 243 micro-projects were implemented (target 250)\. These included: 116 access roads to IDP settlements built or repaired 83 community ceremonial tents for weddings and funerals delivered or equipped 56 collective centers rehabilitated and 13 community centers built 53 schools were renovated (reaching 8,926 pupils) 50 water supply systems improved 35 electricity supply systems upgraded 4 sanitation supply systems restored 1 health center renovated Physical outputs from these micro -projects included: 642\.2 km of road surface installed of which 10\.6 km were urban, the rest rural, and this included 631\.6 km of rehabilitation and 31\.9 km of new rural roads\. 138\.5 km of electricity power supply cabling of which 15\.2 km were urban 40 new transformers 17 artesian wells 121\.8 km of new water supply piping 3\.6 km of sewage piping 10\.8 km of drainage\. Average cost per micro-project was US$85,500\. 2,104 persons were employed for short -term building and renovation works by the contractors and 65% of them were IDPs\. The average micro-project provided various types and duration of construction employment over periods of up to 57 days\.  41% of micro-projects were subject to technical audits for quality assurance \. 5\. Efficiency: Economic and Financial Efficiency No financial or economic analysis was undertaken at appraisal given the social fund nature of the project and that project identification would be demand -driven\. An economic analysis was made at completion of the project for each type of micro -project\. The assumptions were that their economic life would be 15 years, discount rate was 10%, and that intangible benefits were excluded\. Cost included investment, all operating costs, labor and capital maintenance and replacement costs \. Incremental benefits were identified by micro -project beneficiaries, additional focal group discussions and community-based observations and they differ from one micro -project type to another\. However, the analysis does not indicate the sample size, or basis for the selection of sample on which the economic analysis is based \. Overall, the economic rate of return (ERR) for the micro-project component was 33% and the net present value US$ 44\.3 million\. The highest ERRs were for community centers (50%), community tents (42%) and road rehabilitation\. Time savings were among the largest benefits and when this was excluded the ERRs declined to 42%, 22% and 16% respectively\. The lowest ERR was 17% for electricity micro-projects and this fell to only 13% when time savings were excluded \. All other micro-projects had rates of return in the range 24-30% and time savings reduced these values to 23-28%\. Housing micro-projects had an ERR of 30% and a NPV of US$ 9\.3 million – the main benefit in this case was the state ’s avoidance cost of providing alternative accommodation \. The ICR calculated the ERR of micro-credits as 144% with a NPV of US$26\.7 million\. However, no details are provided for the different classes of micro -credit, the size of the sample or how it was selected \. There were methodological issues also over the unwillingness of some business owners to divulge financial information \. Administrative and Institutional Efficiency A few modest institutional inefficiencies adversely affected the project \. The SFDI had initial capacity constraints, particularly for timely processing of micro -projects and assurance of their technical quality and procurement \. In addition, approving larger loans for housing projects to be constructed by prequalified micro -project contactors was inefficient and technical audits revealed that 14% of such micro-projects had technical problems and rapid deterioration of buildings made them difficult to operate and maintain \. The Borrower’s ICR mentions that institutional capacity constraints were also a problem for micro -credits\. Finally, in response to new VAT regulations of 2007, the Ministry of Finance required that the financing of each micro -project be individually cleared by them and this led to delays in processing of the counterpart funds and in payments to contractors \. Even so, these inefficiencies only had a modest effect on delaying delivery of project inputs and outputs \. Overall, project efficiency is rated Substantial \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate Yes 33% 81% * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Because the project was restructured the overall outcome rating will be determined by the relative outcomes before and after restructuring weighted by disbursement \. Original project \. The relevance of objectives is rated substantial and design was rated modest \. The efficacy of the first objective is rated substantial while the efficacy of the other two objectives is rated modest \. Efficiency is rated substantial with some minor shortcomings \. There were thus significant shortcomings in the achievement of some of its objectives and the outcome is rated moderately unsatisfactory \. Restructured project \. The relevance of objectives and design is rated substantial \. The efficacy of the objective is rated substantial\. Efficiency is rated substantial with some minor shortcomings \. While there were minor shortcomings in efficiency, the outcome is rated satisfactory \.  Overall Outcome \. At the time of Board approval SDR 5\.5 million or 32% had been disbursed of the total Credits of SDR 17\.10 million\. Moderately unsatisfactory = 3 and its weighted value is (3 x 0\.32) = 0\.96\. Satisfactory = 5 and its weighted value is (5 xo\.68) = 3\.4\. Together these sum to 4\.36\. Rounding to the nearest whole number = 4 = Moderately Satisfactory\. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: There are two major risks\. They are: (i) risk of physical deterioration of assets from micro -projects, due to lack of incentive among the IDPs for maintenance and (ii) there are no institutional arrangements in place to ensure utilization and maintenance of micro -project investments should resolution of Ngorno -Karabakh crisis enable IDPs to return home\. On the positive side, government commitment to continued assistance to the IDP community in the country remains high\. The Government and the World Bank agreed on a US$ 78\.5 million follow-up project in that will invest in IDP housing accommodation and respond to the Government ’s emphasis on expanding IDP employment opportunities\. The latter should enable IDPs to make a more significant contribution to the overall economy, and to reduce their dependency on government assistance \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: The Bank worked in close partnership with the government to build on the lessons learned from the pilot project\. Fiduciary and safeguard risks were thoroughly appraised and needed actions to meet Bank policies were identified\. However, despite being a follow-on project, appraisal had a number of deficiencies \. The results framework was output-orientated and not outcome-oriented and it was not well aligned with the stated development objectives\. In addition, there was insufficient appraisal of the likely demand for the various types of micro-project and this created some implementation problems regarding construction quality assurance and prequalification of building contractors for the larger projects that were approved \. There was over-optimistic appraisal also of the Borrower ’s institutional capacity to cope with the large community -driven demand, and the need for a social -science perspective rather than one focused infrastructure and services was missed\. at-Entry Rating : Quality -at- Moderately Unsatisfactory b\. Quality of supervision: Supervision was managed by two Task Team leaders \. The original team was unable to fully conceptualize the nature of this social fund type project \. This led to a lag in developing a systematic approach to social mobilization that was rectified only later into implementation when the project was re -mapped in March 2008 to the Social Development Sector and the new TTL was a Social Development Specialist \. The project was closely supervised and the 13 missions worked closely with the government and SFDI to monitor progress, identify problems and agree solutions \. The team was proactive in addressing problems arising from the technical audits that revealed targeting and quality assurance problems \. The remedies implemented – hiring three social development specialist and three regionally -based technical consultants - were effective in improving the quality and depth of community participation and the physical quality of project outputs \. Following mid-term review, the project objective was redefined to increase relevance and realism and the revised results framework became outcome -oriented rather than output-oriented, and M&E improved as a result\. When the 2007 post-procurement review revealed instances of fraud and corruption the Bank team worked closely with government and the SFDI to quickly and successfully resolve the problem with enhanced procurement procedures \. The Bank was assiduous in providing enhanced supervision of procurement for the rest of implementation period \. The Bank’s Department of Institutional Integrity in review  of this case concluded that the exploration and supervision efforts by the World Bank team and SFDI were accurate and adequate\. Apart from this procurement problem, no other safeguard or financial issues subsequently arose\. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The government had high ownership of the project and expeditiously responded to rectify corruption problems when they arose\. Subsequently, following the new VAT regulations, the Ministry of Finance ’s introduction of micro-project approvals on a project -by-project basis led to delays in processing counterpart funding and payments to contractors \. Despite lobbying by the State Committee for Refugees and IDPs, and the World Bank, this inefficient system was retained \. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance: SFDI performed well but had initial difficulties in coping with the rapidly expanding work load and adjusting to community-led development\. However, once additional resources were made available to build capacity to ensure full community participation and ensure technical quality, the institution performed very well \. It was very proactive (with government) in responding to findings of fraud and corruption, expeditiously replacing the Project Director and procurement and staff concerned, and introducing more rigorous procurement procedures\. Financial management was reliable and timely and was found to be consistently satisfactory \. Annual audits were generally submitted on time and were always unqualified and acceptable to the Bank (ICR page 15)\. Implementing Agency Performance Rating : Satisfactory Overall Borrower Performance Rating : Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The results framework at appraisal was notably deficient in providing any outcome indicators for both micro-projects and micro-grants, and M&E was focused on processes and outputs \. The arrangements for conducting M&E and maintaining databases within DFSI were satisfactory \. There was no baseline as the demand -driven nature of the project precluded its construction a priori\. b\. M&E Implementation: The unsatisfactory results framework was reformulated at mid -term review for micro-projects, and micro-credits were dropped from the project\. Technical audits were conducted regularly for quality assurance purposes \. Community-based qualitative evaluations were incorporated as part of the M&E process and provided information on quality of micro-project design, community satisfaction as well as progress towards desired outcome \. c\. M&E Utilization: The feedback from technical audits and communities enabled improvement to the quality of new micro -projects from measure taken to enhance DFDI ’s capacity\. While the improvements to the results framework were too late to provide outcome information for the activities in the first three years of the project, such information was generated for all activities supported by the additional financing \. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: The project was classified as “F1â€? under OP/BP 4\.01 Environmental Assessment as it was expected to have no significant or irreversible impacts, and many of the micro -projects were expected to produce environmental benefits\. An Environmental Management Plan (EMP) covering required environmental screening procedures and assessment of environmental impacts was prepared and applied at site -specific micro-project sites\. There was no involuntary resettlement or land acquisition \. The ICR states that throughout the project compliance with Environmental safeguards had been found to be satisfactory (ICR page 15)\. b\. Fiduciary Compliance: Financial Management : Financial management arrangements under the project were satisfactory \. Compliance with World Bank financial covenants and timely submission of quarterly financial monitoring reports and annual audit reports to the Bank in an acceptable format were supplied to the bank \. Annual audits were submitted on time except for one year (due to delays in contracting the audit firm ), and were always unqualified and acceptable to the Bank (ICR page 15)\. Procurement : The ICR (page 16) reports that “procurement undertaken by SFDI under the project was largely satisfactory\. However irregularities in the compliance with procurement procedures were discovered during a procurement post review in early 2007\. The findings suggested that in several instances, bidders may have engaged in collusive practices as defined under paragraph 1\.14 of the Bank Procurement Guidelines on “Fraud and Corruptionâ€?\. The Government and SFDI expeditiously and effectively dealt with this problem \. Changes in management staff were made with the immediate replacement of the Project Director and Procurement Manager\. Procurement procedures were modified as advised by the Bank, namely making ‘shopping’ more competitive and closer to NCB procedures \. Under guidance from the Regional Procurement Manager, a pool of approved contractors was created who could bid on micro -project contracts\. The pool was updated annually and the opportunity to join advertised in the press \. The Bank continued with closer and enhanced supervision of SFDI’s procurement over the remainder of project duration, including annual post -review of contracts, periodic physical inspections of a sample of post reviewed contracts and found that the majority of civil works inspected were generally of good quality and executed in conformity with the design documentation, specifications and bill of quantities approved by SFDI and in full compliance with national legislation, norms and standards \. A campaign of complaint letters regarding SFDI ’s procurement procedures occurred throughout 2007 and into 2008\. After thorough exploration and review by the Bank of the content, allegations of the letters and their source, it was concluded that the letters originated from a disgruntled contractor who may have been benefitting earlier from collusion practices and whose activities were curtailed by the new procurement procedures \. INT were alerted to the situation but closed the case concluding the exploration and supervision efforts by the World Bank team and SFDI were accurate and adequate \.â€? c\. Unintended Impacts (positive or negative): d\. Other: 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately The ICR did not follow the procedure Satisfactory specified for restructured projects when  their objectives and/or key associated outcomes are changed\. The ICR’s rating is based on the outcomes of the restructured project only\. Risk to Development Negligible to Low Moderate The two of the risks related to physical Outcome : deterioration of assets from micro-projects, and political risk from resolution of the Ngorno-Karabakh crisis, continue to be eminent\. Concerted efforts from the government ’ s side is required to ensure that the achieved development outcomes in terms of housing and social infrastructure are sustained \. Bank Performance : Satisfactory Moderately Appraisal of the original project had Satisfactory significant shortcomings in the results framework with almost no attention to outcomes; there were other weaknesses related to over -optimistic capacity assessment and disregard for community mobilization and participation in the design process \. Borrower Performance : Satisfactory Moderately There were moderate shortcomings in Satisfactory the government performance: procedures related to VAT were not very efficient\. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: The ICR offers three lessons that have been rewritten by IEG : 1\. Community demand -driven micro -projects may require a higher level of assistance to mobilize communities in former command and control economies \. The level of community mobilization was insufficient in certain places due to the implementation agency ’s inclination to focus on technical quality and expedited scheduling in a top -down manner and this led to a lack of opportunities for beneficiary participation in the micro-project cycle\. 2\. Sustaining comprehensive renovation of collective housing is a complex social undertaking, particularly in the area of operation and maintenance of common property areas \. Comprehensive renovations of collective housing were in notable demand in micro -projects, but the scope of micro -project financing allow mainly partial solutions that subsequently led to maintenance problems \. 3\. Participatory monitoring and evaluation mechanisms are essential for the delivery of results -oriented community demand -driven micro -projects \. Community preferences must be based on a full understanding of design, cost and implementation realities and this requires their in -depth participation in the whole project cycle\. And IEG draws one further lesson : 1\. Follow -on projects need as much care in appraisal as the original project to ensure that implementation and supervision arrangements are appropriate \. In this case, the pilot project was designed by urban  infrastructure specialists that lacked the social mobilization knowledge needed to implement community-driven micro-projects\. Project outcomes only improved when a social scientist was appointed as task team leader and the implementation agency bolstered is social mobilization and technical capacity \. 14\. Assessment Recommended? Yes No Why? Sustainability of some aspects of the projects (housing) was doubtful, and more information is required to determine the success of the micro -credit component\. 15\. Comments on Quality of ICR: Format and completeness are adequate \. The ICR describes the implementation of the project well and includes a good Borrower ICR\. Its extensive report of project investments gives the reader a good idea of project activities and problems faced \. The assessment of project performance is adequate \. The section on lessons learnt is evidence-based and well presented\. Stakeholders are well defined and the draft endorses their participation in various segments of the project cycle \. All the three overarching goals related to poverty, gender and social, are reported in the appropriate section \. While an economic analysis is provided it lacks details on sample selection criteria and size and it is unclear how representative the results are \. The most marked shortcoming of the ICR is that it did not applied the correct OPCS procedures to rating a project with restructured objectives and key associated outcomes \. Taking this into account, the overall quality of the ICR is moderately satisfactory a\.Quality of ICR Rating : Satisfactory

REVIEW

P045303

 ICRR 11351 Report Number : ICRR11351 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/12/2002 PROJ ID : P045303 Appraisal Actual Project Name : Pilot Water Supply Project Costs 7\.4 7\.93 US$M ) (US$M) Country : Kazakhstan Loan /Credit (US$M) Loan/ US$M ) 7 6\.48 Sector (s): Board: WS - Water supply Cofinancing 0 0 (100%) US$M ) (US$M) L/C Number : L4129 Board Approval 97 FY ) (FY) Partners involved : Closing Date 12/31/2001 12/31/2001 Prepared by : Reviewed by : Group Manager : Group : Kavita Mathur Roy Gilbert Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives The objectives of the full-scale Aral Sea Community Rehabilitation Project, of which the proposed Pilot Water Supply Project represents an initial learning phase, are to: (i) improve the health of the urban and rural populations of the Kzyl-Orda Oblast through the provision of safe drinking water and improved hygiene education and sanitation facilities; and (ii) to strengthen institutional capacity for the management, operation and financial performance of the regional water supply and sanitation utilities\. The objectives of the pilot project were to: (i) gain experience in developing operational methodologies and capabilities in all aspects of project processing, cost recovery, international procurement and contracting, and in project management and implementation under the same conditions as the full-scale project through certain small scale investments which need urgent attention; and (ii) speed up implementation of the full-scale project through early completion of detailed engineering design and preparation of bidding documents\. The relevance of these objectives were undermined by the decision not to proceed with a Bank financed full-scale project\. b\. Components The project consisted of two components: a small scale investment component to finance a water supply and distribution pilot project in the Aralsk and Kazalinsk Rayons of Kzyl-Orda Oblast, as well as the implementation on a pilot basis, elements of the institutional reform action plan; and technical assistance for the review of engineering designs, preparation of bid packages, and for the supervision of pilot project\. c\. Comments on Project Cost, Financing and Dates Total project cost at completion was US$7\.93 million slightly higher than the appraisal estimate of US$7\.4 million\. The final amount of the Bank loan is US$6\.48 million and US$ 0\.52 million was canceled\. The project closed on schedule on December 31, 2001\. 3\. Achievement of Relevant Objectives: The pilot project provided experience to Committee Water Resources (CWR) and vodocanals in Aralsk and Novokazalinsk in project management and implementation, international procurement and contracting, and developing operational methodologies and capabilities through financing of small scale investments in the water sector, although it would not be applied to a Bank financed full-scale operation\. The revised physical targets for rehabilitation works were achieved\. Detailed engineering designs and bidding documents for the full scale project were completed within an accelerated time frame\. The capacity of Project Implementation Unit (PIU) was substantially strengthened and the PIU served as "the  PIU" for five Bank projects in Kazakhstan\. The Bank decided not to go ahead with the full-scale project\. Since the full-scale project was not implemented, then the relevance of the objectives of the pilot is modest\. Germany and Kuwait are planning to finance the full scale project\. Their procurement and contracting practices are different from the Bank's, making much of the experience gained from the pilot project no longer relevant\. 4\. Significant Outcomes/Impacts: The project played a significant role in empowering the State Committee for Water Resources (CWR) and promoting inter-agency coordination between the Water Committee, the Ministry of Finance (MOF), and vodocanals in Aralsk and Novokazalinsk\. The repair of distribution network in Novokazalinsk has improved the water supply in the project area and resulted in 285 additional consumer connections\. Improved water supply to medical facilities in Aralsk\. Adoption of international accounting standards by Aralsk and Novokazlinsk vodocanals\. Preparation of full scale water supply project to be financed by KfW and Kuwait Fund\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): Kazakhstan was a relatively new borrower and was not familiar with Bank operations and requirements and the Bank's sector knowledge for Kazakhstan was limited\. The execution of works experienced delays due to the lack of initial counterpart funds\. There were cost over-runs due to poor quality of feasibility studies\. The scope of the project components had to be reduced and revised targets were set\. The project lacked appropriate performance indicators\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory The project achieved most of its major objectives but with modest overall relevance (see section 3 of the Evaluation Summary)\. Institutional Dev \.: Modest Modest Sustainability : Likely Non-evaluable Currently the water utilities are plagued with weak institutional capacity and poor financial viability which makes sustainability of water investments unlikely\. However, the sustainability of investment's financed under the project are highly dependent on the successful implementation of institutional and financial reforms under the full scale project which is currently under preparation and will be financed by other donors\. Therefore, the overall sustainability of the project benefits is non-evaluable\. Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. NOTE: 7\. Lessons of Broad Applicability: Due to limited sector knowledge and data availability, the feasibility studies for the pilot may be inadequate\. The feasibility study for the full scale project in Kazakhstan brought out many issues with respect to economic feasibility of the Atyrau Water Supply and the state of the Syr Darya River, that had significant implications to project design\. Therefore, the investments designed under the pilot may have limited impact on the targeted population\.  Implementation of investments under the pilot, without sufficient consideration of financial issues such as cost recovery, and associated institutional issues, can affect the sustainability of the investments\. Although the project objectives included gaining experience on cost recovery aspects, the delays in initiation of the full scale project mean that the financial situation for the water utilities continues to be very difficult\. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The report provides a satisfactory picture of project performance, although it does not clarify exactly what the status of the full-scale project is\. The appraisal cost estimates in ICR Annex 2 are inconsistent with the cost figures given in Table 3\.1 of the SAR\. The ICR omits ex-post estimate of economic rate of return (ERR)\. ERR is an important criterion for judging the efficiency and the overall outcome of the project, especially in water projects with major civil works components\.

REVIEW

P069864

 ICRR 12784 Report Number : ICRR12784 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 10/05/2007 PROJ ID : P069864 Appraisal Actual Project Name : Public Finance US$M ): Project Costs (US$M): 6\.53 5\.51 Management Project Country : Slovak Republic Loan /Credit (US$M): Loan/ US$M ): 5\.45 4\.9 Sector Board : PS US$M): Cofinancing (US$M ): Sector (s): Central government administration (100%) Theme (s): Debt management and fiscal sustainability (33% - P) Public expenditure financial management and procurement (33% - P) Economic statistics modeling and forecasting (17% - S) Other public sector governance (17% - S) L/C Number : L7178 Board Approval Date : 06/10/2003 Partners involved : EU (PHARE) Closing Date : 01/01/2007 01/01/2007 Evaluator : Panel Reviewer : Group Manager : Group : Clay Wescott Konstantin Atanesyan James Sackey IEGCR 2\. Project Objectives and Components: a\. Objectives: To strengthen Slovakia's institutional capacity to use public resources more effectively, efficiently and transparently, in line with Government priorities, through: (i) the improvement of the budget process within an overall medium -term framework; (ii) the strengthening of the macro -economic analysis and forecasting capacity of the Ministry of Finance (MOF) and the tightening of the link with other elements of the public finance system; (iii) the establishment of a professional debt management capacity and the completion of the institutional set -up of the new treasury system; and (iv) the effective coordination of the overall reform effort \. (Source: combined statements from PAD and loan document) b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): There were four components encompassing the provision of technical assistance, training, study tours and seminars: Improvement of the Budget Process : Improving allocative and operational efficiency of public expenditures by means of: better linking policy decisions to budgeting, increasing predictability and effective use of funding, expanding the use of evaluation of outcomes and results in future budgetary choices, enhancing of MOF ’s capacity for regular expenditure reviews, and preparing alternative financing arrangements to support a more decentralized public service delivery system\. Cost: $2\.58M appraised, $1\.89M actual\. Strengthening of the Macro-Economic Capacity in the MOF: Establishment of the Fiscal Policy Institute (FPI) as the core of macro-analysis in the MOF through the introduction of major technical and organizational improvements including: improving links between the FPI and the Tax Policy and Budget Sections of the MOF and the Borrower ’s Treasury and National Bank, using the FPI ’s macroeconomic forecasts as the sole basis for revenue estimates, and improving the quality of the medium-term macroeconomic and fiscal forecasts of the FPI and the economic reports accompanying the budget\. Cost: $0\.59M appraised, $0\.77M actual\. Support to the Debt and Liquidity Management Agency (DLMA) and Introduction of a New Treasury System : Strengthening the Borrower’s capability to manage its financial assets and liabilities and introducing the Borrower ’s new state treasury to its users, in particular by : clearly defining the roles and accountability of the MOF and the DLMA , striking an appropriate balance between risks and costs in the management of the Borrower ’s public debt and financial assets, further developing the Borrower ’s domestic debt market and of the overall legal framework for debt management, and facilitating the use of the new treasury system by end -users\. Cost: $1\.07M appraised, $1\.12M actual\. Program Coordination and Management: Strengthening of the MOF’s capabilities for effective public finance management reform coordination and Project management, in particular by assisting the senior management of the MOF in the continuous process of communication and coordination through new formal and informal structures and by providing the means to deal with organizational and institutional aspects of implementing the reform program and address the management of change appropriately, and including inputs and advice (Source: Loan Document, though PAD is consistent) Cost: $0\.66M appraised, $0\.65M actual\. In addition, a project preparation facility was provided to help finance design cost \. Cost: $0\.49M appraised, $0\.41M actual d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: A number of consultancies originally proposed within the four components were expanded, consolidated, or reduced as a result, of availability of funding from the EU -funded Poland and Hungary Assistance for Restructuring the Economies (PHARE), along with project developments and new demands \. These revisions help to explain discrepancies above between appraised and actual costs, along with the lower than planned overall amount disbursed\. PHARE was approved in 2003 for 2 million Euros ($2\.2M) to finance technical assistance (source for amount: PAD) to support, inter alia, a strategy for integration and further development of IT support for PFM, training for Treasury staff, and support to the Debt and Liquidity Management Agency \. The US Treasury also supported development of program budgeting over the period 2000-2003\. No information is provided on actual borrower contributions\. Disbursement was slower than expected in part because of procurement delays \. In addition, the project was financed by the Government, which was in turn reimbursed; thus, disbursement followed rather than preceded project activities \. Actual project costs, including the portion of the government's contribution that was not reimbursed, are unknown\. There was no cofinancing provided \. 3\. Relevance of Objectives & Design: The design is relevant to the desired objectives \. The four sub-objectives are logically connected, with strengthened debt management capacity in DLMA supported by improved budgetary discipline enforced by enhanced systems put in place by MOF, more accurate revenue forecasting capacity in FPI, and improved capacity in change management and inter-institutional coordination\. Although a public sector reform program loan had been discussed during CAS preparation, it was agreed that a technical assistance loan was more appropriate because, while there was no shortage of funds due to high rates of FDI, there was a severe shortage of administrative capacity to carry out essential reforms\. The objectives and design are relevant to the 2001 CAS, supporting one of its three objectives : Strengthening Governance and Institutions \. The project was relevant to the Government, underpinned by its Strategy on Public Finance Reform, and supporting its need to reduce its deficit in order to join the European Union in 2004, and greatly aided by the leadership elected in 2002, with its strong reform commitment\. The project remained relevant to the 2005-7 Country Partnership Strategy, which provides for the cross -country Public Finance Management Review that will recommend further reforms to restructure expenditures and reduce the deficit \. The project includes measurable outcomes, intermediate outcomes, and output targets embedded in indicators plausibly associated with project activities and inputs \. The performance monitoring and evaluation system reflected project objectives\. In some cases, exogenous factors helped explain results, and this is highlighted in ICR, e \.g\. strong economic performance helped make possible to add new spending within the year \. However, with the significant parallel financing from PHARE, and lack of details on exactly what PHARE financed vis a vis the Bank, it isn't always possible to attribute success in achieving particular targets to one or the other \. The monitoring framework could have benefitted from setting quantitative benchmarks where possible and appropriate, such as for reduction in difference between forecast and actual indicators, reduction in gross debt, and savings in bank fees and margins \. 4\. Achievement of Objectives (Efficacy): The sector-related CAS Goal was to increase transparency and reduce corruption \. The project doesn’t specify an outcome-level indicator to measure its contribution to this goal \. There was a modest improvement in the CPIA rating for transparency, accountability and corruption from 2003-6, but no significant change in the World Governance indicator for control of corruption during the same period, nor any significant change since initial estimates in 1996\. This is not surprising, since most countries require more time for reforms in this area to show significant effects \. Achievement by component in terms of original, planned outcome indicators was as follows: 1\. Improvement of the Budget Process \. The medium term budget framework (MTBF) was approved for 2003-7 and 2006-8, and included a firm (in comparison to previous years ) ceiling for the current year, and indicative ceilings for the next two years, which were given stature by presentation to Parliament in a Spring Bill \. This had the effect of discouraging the past practice of budget requests out of line with available resources \. Functional analysis of the budget process led to significant changes \. Annual budgets were prepared for 2005, 2006 and 2007 on schedule, and the variance between budgeted and actual expenditure declined (though some new spending was added aided by the financial cushion of strong economic performance )\. Although performance information is included, capacity needs to develop to use it in budget decisions \. Five of six pilot ministries prepared sectoral policy documents, but the link with the medium term budget framework and quality of performance measures needs to improve \. Program budgeting is still considered to be separate from the "real" budget preparation, there is little time devoted to substance, performance indicators are focused on outputs rather than outcomes, and program managers aren't accountable for results\. In addition, budget execution doesn't take place on a programmatic basis, reinforcing the view that the program budget isn't the "real" budget\. Fiscal decentralization was dropped from the project, because the Government decided to prepare decentralization options externally to the project\. Achievement under this sub-objective is rated: modest\. 2\. Strengthening of the Macro-Economic Capacity in the MOF\. The FPI constructed and used a new macroeconomic model (published on the MOF website) that reduced the difference between forecast and actual indicators from 170% in Q3 2004 to 17% in 2006\. However, it's not clear from ICR which indicators improved, and how the calculation of reduced difference between forecast and actual indicators was made \. External forecasts have been replaced by the FPI's own forecasts, validated by expert commissions \. Close institutional cooperation was achieved between FPI, the tax and budget sections of the MOF, the State Treasury and the NBS in macroeconomic forecasting \. Achievement under this sub-objective is rated: high\. 3\. Operationalizing the DLMA and Introduction of a New Treasury System \. Workload was split between MOF, DLMA and Treasury consistent with OECD good practice models \. The regulatory framework for DLMA provides for its independence, acting on behalf of MOF to implement the Government's debt strategy \. 2005 gross debt fell by 6\.8% of GDP, indicating improved debt management, and better revenue and budgetary management helped by the previous two components\. Savings in bank fees and margins totaled about 10 m Euros in 2005/6, indicating more efficient and professional debt management \. Communication was enhanced between DLMA and market participants\. IT systems integrated Treasury into the public finance system, and users were extensively trained \. A debt management strategy document was approved by the Government \. There were initial challenges in defining the institutional relationships with MOF and the State Treasury because these were not well -specified initially, but these were worked out over time\. Achievement under this sub-objective is rated: high\. 4\. Effective Program Coordination and Change Management \. MOF implemented recommendations from a functional analysis, including a 30% staff reduction, increased remuneration of staff, and a new organizational structure , as targeted under this sub-objective\. Professional aspects of the project overseen by the Steering Committee were split from organizational aspects overseen by the Project Coordination Unit \. The project was largely implemented on time\. However, project coordination could have been more effective in the implementation of program budgeting, with greater engagement of the political level in linking ministry strategies to budgets \. Although the Project Steering Committee became the principle locus for coordination and integration of PFM reforms projects, it only met infrequently, and most coordination was left to an informal group of the six budget heads in the pilot ministries \. Achievement under this sub-objective is rated: high\. 5\. Efficiency (not applicable to DPLs): An ERR/FRR was judged not applicable in the PAD \. But an estimation of ERR/FRR could have provided a stronger justification for the project \. In estimating ERR, for example, possible economic cost savings that could have been factored into the analysis would include greater efficiency in the use of public funds, and knock -on effects of greater economic benefits from rationalized investment in and maintenance of government supplied infrastructure \. Other potential savings could include, inter alia, reduction in bank charges paid for debt, and the benefits of better budget management to private sector suppliers in reducing time for paying invoices because of greater certainty of funds availability\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Planned results were largely achieved, with many shortcomings in sub-objective 1, and minor shortcomings in other components,as detailed above\. There was a modest improvement in the CPIA indicator for budgetary and financial management between 2003-6\. More work is needed on building capacity and incentives to effectively use program budgeting, with greater engagement of the political level in linking ministry strategies to budget s\. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: A key risk is in the ability to retain and /or recruit qualified staff to maintain and continue advances at FPI, DLMA, and MOF\. In the case of FPI, 4 out of 17 staff have already resigned to take up more lucrative opportunities \. DLMA has lost 2 of their most valuable staff (also out of 17)\. Substantial training costs were incurred that cannot be easily repeated\. Salaries at all institutions lag behind that of the private sector, and with new skills acquired, some staff are highly marketable\. Despite the staff turnover, it has reportedly not affected the performance of the institutions \. One of the key aspects of the overall reform was that relative salaries were increased substantially in both the FPI and the Debt Agency\. The prestige and professionalism of these two institutions has also been effective in counteracting the effects of somewhat lower salaries than in the private sector \. Staff turnover is less a problem with Treasury, which didn't exist before the project, and where skills are more narrowly focused\. The main challenge for Treasury is to assure that the Treasury system is complementary with the budget reporting systems, and that both can support decision -making without unnecessary duplication \. Another risk is limited political demand for M&E capacity needed for effective use of MTBF and program budgeting because strong economic growth and government revenues reduce the incentive for expenditure efficiency \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: The main strength of the Bank was in ensuring quality at entry \. The project was built on a solid foundation of analytical work, including, inter alia, policy notes on extra-budgetary funds, fiscal centralization and public debt management, a set of background papers for a Workshop on Budgeting and Expenditure Management in Slovakia,a country public procurement assessment (FY00) a country financial accountability assessment (FY01) and a Development Policy Review (FY03)\. This was carried out mainly under governments with ambivalent commitment to reform; yet, when the new, reform minded government took power in 2002, this prior work enabled them to hit the ground running in meeting EU accession requirements and other, related PFM reform priorities \. The design could have been improved by greater sensitivity to the pace and management of change in program budgeting reforms, and more robust risk mitigation measures to address the challenge of retaining sufficient qualified staff\. The Bank had a less important role in supervision, since the strong government team took on most supervisory work itself\. The Bank played a largely appropriate role, responding flexibly and supportively to minor changes in scope requested by the Government \. Although most consultants provided under the project were of high quality, and of great help to the government, there were some coordination problems that arose within the contracted firm\. In addition, one key consultant had to be replaced because of unsuitability for project requirements \. These problems might have been mitigated had a more appropriate consulting firm been selecte d\. at -Entry :Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Satisfactory c\. Overall Bank Performance :Satisfactory 9\. Assessment of Borrower Performance: The ownership and commitment of the Government elected in 2002 to achieving objectives was high \. Capable staff were assigned to support implementation, including the Policy Advisor to the MOF to provide substantive and strategic leadership, and a second advisor to manage logistical matters such as consultant supervision \. The Government took action to replace a weakly performing consultant, and proactively identified ways in which the project could respond to new opportunities, despite competing demands on the time of MOF staff during EU accession\. This proactive role has continued since project completion, with support to, inter alia, capacity building in M&E\. The project used the MOF's own systems for payments and transaction recording, and timely, quarterly financial monitoring reports were prepared \. We recognize that the Government did make considerable progress compared to the starting point before project implementation began, and that program budgeting is a long -term process of continuous learning \. To support this complex process, the Steering Committee could have given greater strategic guidance on emerging challenges and risks to the informal group of the six budget heads in the pilot ministries responsible for day -to-day coordination\. In addition, the political or policy levels of pilot ministries could have given more encouragement to linking ministry strategies to budgets, and in supporting capacity building to evaluate results and use them to inform future policy decisions \. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Satisfactory c\. Overall Borrower Performance :Satisfactory 10\. M&E Design, Implementation, & Utilization: The project's M&E systems were adequately designed in many respects, specified output indicators, collected relevant output data, and used the data collected to ensure that most intended results were achieved, and that the project was adapted to respond to new opportunities as they arose \. As mentioned above, the monitoring framework could have benefitted from quantitative benchmarks where possible and appropriate, such as for reduction in difference between forecast and actual indicators, reduction in gross debt, and savings in bank fees and margins \. There could have also been clearer specification of intended outcomes in a way that could be measured \. In addition, efforts to improve M&E capacity in the six pilot ministries needed for effective use of MTBF and program budgeting did not achieve the desired result s\. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Strong economic growth and government revenues reduced the incentive for expenditure efficiency at the political and policy level of the ministries \. 12\. Ratings : 12\. ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Negligible to Low Moderate The challenge of retaining trained staff Outcome : and recruiting and training new staff, given the strong economy and alternative opportunities for staff \. Bank Performance : Satisfactory Satisfactory Borrower Performance : Highly Satisfactory Satisfactory The Steering Committee could have been more active, and political or policy levels of pilot ministries more  encouraging to using performance information in the budget process \. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: Key lessons are summarized in the ICR \. Among the most important are: 1\. Strong analytical work can be valuable for the Bank to carry out even when Government's have limited commitment to reform, because leaders may change their views, or be replaced with committed reformers \. When a strong reform commitment arises, it is extremely useful to be able to hit the ground running, to achieve quick wins to help further strengthen political and popular support, and not to have to delay action to carry out complex studies\. 2\. Where there are powerful incentives for reform, such as the Maastricht debt criteria for EU accession, coupled with strong political support, and sound structures and bureaucratic capacity such as emerged in FPI, DLMA and Treasury, then rapid advances are possible \. 3\. Reforms to make greater use of performance information in the budget process can only succeed if they help concerned officials in targeted ministries achieve their priorities \. If there is no encouragement from the political and policy levels of the ministries for greater spending efficacy and efficiency, then budget officials are unlikely to dedicate much effort to building stronger performance information systems \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is informative in some respects, but has many shortcomings\. One minor shortcoming is that while the sector-related CAS Goal was to increase transparency and reduce corruption, there is no mention of possible impact of the project in this area , and the absence of a link made in the project design \. Also, because of the importance of the PHARE project to overall results, the ICR could have given more details, such as the key results achieved by PHARE, and funding provided to achieve each key result \. Without this, it is difficult to know how much to attribute results achieved to the Bank project, and how much to PHARE \. Similarly, while decentralization was only a minor sub-component of the overall project , it would be helpful to know why the Government chose to develop decentralization options outside of the Bank project, and the nature of the support they received in doing this \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P000906

 Second telecommunication project Report No: ; Type: Report/Evaluation Memorandum ; Country: Ghana; Region: Africa; Sector: Telecommunications & Informatics; Major Sector: Telecommunications & Informatics; ProjectID: P000906 The Ghana Second Telecommunications Project, supported by Credit 1946-GH for US$18\.0 million equivalent, was approved in FY89\. The credit was closed in FY96, three years behind schedule, and US$0\.7 million equivalent was canceled\. Cofinancing totaling US$183\.0 million was provided by Overseas Economic Cooperation Fund (OECF–Japan), the Japanese and Dutch Governments, and Caisse Française de Developpement (CFD–France)\. The Implementation Completion Report (ICR) was prepared by the Africa Regional Office\. No contribution was received from the Borrower and comments from co-financiers are not included\. The project's objectives were to: (i) support a program of institutional and management improvement for the telecommunications sector; (ii) improve the quality of service through rehabilitation and modernization of the network and improved maintenance practices; and (iii) improve the finances of Ghana Posts and Telecommunications Corporation (GPT), so as to eliminate the need for Government subsidies and eventually enable it to become a net contributor to the Treasury\. The cost of the project was about evenly distributed between: (a) physical investments in switching, transmission, local exchange, radio and satellite facilities, as well as vehicles and office equipment; and (b) technical assistance and training for GPT staff in the area of organization and manpower development, accounting and billing, procurement, digital technology, and sector policy and regulation\. The project’s most important objectives were either not achieved or achieved after substantial delays\. Project implementation was delayed by three years, due mainly to Government interference in procurement and high senior management turnover\. The original 1992 target for consumer connections was only reached in 1995; telephone density stagnated through 1994 and the expected improvements in operational efficiency and quality of service did not, for the most part, take place\. Some indicators even deteriorated\. As a result of insufficient tariff increases, poor collection practices and excessive public sector arrears, GPT has been unable to fully service its debt, let alone make a net contribution to the treasury, and remained virtually insolvent throughout the project implementation period\. Data provided in the ICR is insufficient to reconcile the relatively high ex-post economic rate of return/financial rate of return (ERR/FRR) calculated in the ICR (23 percent, as compared to 21 percent estimated at appraisal) with the reported dismal financial performance\. Finally, some key institutional components and/or conditions were either not carried out (tariff studies and preparation of annual corporate plans) or have had only limited impact so far (set up of new financial reporting system and establishment of a data processing center)\. In light of these poor results, the Government recently decided to embark on a major restructuring of the sector and initiated steps, with the Bank’s support, towards partial privatization of GPT, setting - up of a regulatory agency, and licensing of a second network operator\. If and when satisfactorily completed, these reforms should lead to rapid improvements in the sector’s ability to meet demand and achieve better service standards\. The Operations Evaluation Department (OED) rates project outcome as marginally unsatisfactory but institutional development impact as substantial (compared to satisfactory and partial, respectively, in the ICR)\. Sustainability is rated as uncertain (instead of likely in the ICR) at this point, since it hinges on the success of recently initiated sector reforms and on the Government’s willingness to permanently reverse its past practices of interfering with the sector’s commercial and financial autonomy\. The Bank’s performance is rated as satisfactory (as in the ICR)\. This project once again confirms the difficulty of bringing about lasting institutional and financial improvements to the telecommunication sector in the context of a traditional monopolistic environment\. OED rates the ICR as unsatisfactory because it fails, inter alia, to include: (i) a plan for future operation (including a set of indicators adequate for monitoring GPT’s future operations); (ii) sufficient information on GPT’s finances during implementation; and (iii) contributions or comments from co-financiers\. No audit is planned\.

REVIEW

P005278

 Shidiya phosphate mine project Report No: ; Type: Report/Evaluation Memorandum ; Country: Jordan; Region: Middle East And North Africa; Sector: Mining & Other Extractive; Major Sector: Mining; ProjectID: P005278 December 29, 1995 Jordan: Shidiya Phosphate Mine Project (Loan 2902-JO) The Implementation Completion Report (ICR) for the Jordan Shidiya Phosphate Mine project (supported by Loan 2902-JO in the amount of US$ 31 million approved in FY88) was prepared by the Middle East and North Africa Regional Office, with Part II contributed by the Borrower\. The project was designed to open up a new open-cast phosphate rock deposit in the southern part of Jordan, containing an estimated 1\.2 billion tons of proven and probable reserves\. By gradually developing these deposits and replacing production from two depleting mines, Jordan would retain its relative share of the international market\. The project's specific objectives were to: (a) produce, annually, 1\.5 million tons of direct export ore from a high quality phosphate bed, situated some 16-17 meters below ground level; (b) reorganize and restructure the phosphate sector by integration of the mining operations with downstream fertilizer producing facilities; and (c) mitigate environmental problems at the phosphate loading facilities at Aqaba\. Full capacity operation was delayed by an early procurement set-back, fall-out from the 1990 Gulf War, some technical problems and the accumulation of excessive stockpiles of lower grade phosphate rocks at the mine site (awaiting the completion of a beneficiation plant supported by Loan 3172-JO)\. The slow production build up (exports from the mine have reached nearly 1\.0 million tons in 1994), combined with the decline in phosphate rock prices, have reduced the ex-post economic rate of return (ERR)\. It is, however, still a robust 20 percent, down from an estimated 37 percent at appraisal\. The project has also realized its environmental objectives\. By fully integrating and rationalizing the mining and manufacturing operations and introducing financial controls and production planning, the company is now capable of facing a smaller and more competitive international market\. The ICR rates the project outcome as satisfactory, the institutional development impact as substantial and sustainability as likely\. Given the intrinsically low cost nature of the operation, the high quality of the company's management and its efficient and flexible operational performance, the Operations Evaluation Department (OED) agrees with these ratings\. OED also rates Bank performance as satisfactory\. Major lessons drawn by the ICR are that substantial benefits can be attained by a public sector company run on commercial lines, provided the project design is simple, and that projects involving commodity exports require careful sensitivity analysis\. The ICR is of satisfactory quality and includes a brief discussion of the project's future operation\. It does not provide, however, sufficient information about output quantities, costs and prices to allow an assessment of the reliability of the ex-post ERR and FRR calculation\. No audit is planned\.

REVIEW

P098459

Document of  The World Bank  FOR OFFICIAL USE ONLY      Report No: ICR00004571        IMPLEMENTATION COMPLETION AND RESULTS REPORT  (IBRD‐79250)  ON A  LOAN    IN THE AMOUNT OF EUROS25\.9 MILLION AND US$8\.6 MILLION  (US$43 MILLION EQUIVALENT)  TO THE     Office National de l'Electricité et de l'Eau Potable (ONEE)     WITH THE GUARANTEE OF THE  KINGDOM OF MOROCCO  FOR THE  MOROCCO OUM ER RBIA SANITATION ( P098459 )       November 30, 2018    Water Global Practice  Middle East And North Africa Region           CURRENCY EQUIVALENTS     (Exchange Rate Effective May 31, 2018)    Currency Unit  =    Moroccan Dirham (MAD)  MAD 9\.49  =  US$1  US$1\.42  =  SDR 1      FISCAL YEAR  January 1 – December 31                                  Regional Vice President: Ferid Belhaj  Country Director: Marie Francoise Marie‐Nelly  Senior Global Practice Director: Jennifer Sara  Practice Manager: Carmen Nonay  Task Team Leader(s): Jean‐Martin Brault, Daniel Camos Daurella  ICR Main Contributor: Rebecca Jean Gilsdorf       ABBREVIATIONS AND ACRONYMS  AM  Aide Memoire   BOD  Biochemical Oxygen Demand  BP  Bank Policy  COD  Chemical Oxygen Demand  CPF  Country Partnership Framework  CPS  Country Partnership Strategy   DGCL  Local Authorities General Directorate (Direction Générale des Collectivités Locales)  DPL  Development Project Loan  EA  Environmental Assessment  EIA  Environmental Impact Assessment  ERR  Economic Rate of Return  ESMP  Environmental and Social Management Plan  FM  Financial Management  GOM  Government of the Kingdom of Morocco  GRM  Grievance Redress Mechanism  IBRD  International Bank for Reconstruction and Development  ICR  Implementation Completion and Results Report  IP  Implementation Progress  IR  Involuntary Resettlement  ISR  Implementation Status and Results  LA  Loan Agreement  MAD  Moroccan Dirham  MDG  Millennium Development Goals  MENA  Middle East and North Africa  MTR  Mid‐term Review  M&E  Monitoring and Evaluation   NPV  Net Present Value  O&M  Operation and Maintenance  OCP  Office Chérifien des Phosphates   ONEE  National Electricity and Potable Water Office (Office National de l'Electricité et de l'Eau Potable)  ONEP  National Potable Water Office (Office National de l'Eau Potable)  OP  Operational Policy  PAD  Project Appraisal Document  PAP  Project Affected Persons  PDO  Project Development Objective  PNA  National Sanitation Program (Programme National d’Assainissement)  PPP  Purchasing Power Parity  REPI  Real Estate Price Index  RF  Results Framework  SD  Sustainable Development  SDR  Safeguards Documents Review   SEEE  State Secretary of Water and Environment (Secretariat d’Etat pour L’Eau et l’Environnement)  TA  Technical Assistance  TSS  Total Suspended Solids  TTL  Task Team Leader  UASB  Upflow Anaerobic Sludge Blanket   UCS  Use of Country Systems  WWTP  Wastewater treatment plant   TABLE OF CONTENTS  DATA SHEET \. 1  I\.  PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 5  A\. CONTEXT AT APPRAISAL \. 5  B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION \. 8  II\.  OUTCOME \. 11  A\. RELEVANCE OF PDOs \. 11  B\. ACHIEVEMENT OF PDOs (EFFICACY) \. 12  C\. EFFICIENCY \. 15  D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 16  E\. OTHER OUTCOMES AND IMPACTS \. 16  III\.  KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 18  A\. KEY FACTORS DURING PREPARATION\. 18  B\. KEY FACTORS DURING IMPLEMENTATION \. 18  IV\.  BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 19  A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 19  B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 20  C\. BANK PERFORMANCE \. 21  D\. RISK TO DEVELOPMENT OUTCOME \. 22  V\.  LESSONS AND RECOMMENDATIONS \. 23  ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 25  ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 32  ANNEX 3\. PROJECT COST BY COMPONENT\. 34  ANNEX 4\. EFFICIENCY ANALYSIS \. 35  ANNEX 5\. BORROWER, CO‐FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 43  ANNEX 6\. SUPPORTING DOCUMENTS \. 45  ANNEX 7\. REVIEW OF THE PERFORMANCE OF THE SAFEGUARDS APPROACH \. 46  ANNEX 8: SUMMARY OF REVISIONS TO PDO INDICATORS LINKED TO PROJECT  \. 51  RESTRUCTURINGS  ANNEX 9: SUMMARY OF WWTPS IMPACTED \. 52  ANNEX 10: POPULATION DATA ON PROJECT LOCATIONS \. 53  ANNEX 11: MAP OF PROJECT LOCATIONS \. 54        The World Bank Morocco Oum Er Rbia Sanitation (P098459)        DATA SHEET      BASIC INFORMATION   Product Information  Project ID  Project Name  P098459  Morocco Oum Er Rbia Sanitation  Country  Financing Instrument  Morocco  Investment Project Financing  Original EA Category  Revised EA Category  Partial Assessment (B)  Partial Assessment (B)  Organizations  Borrower  Implementing Agency  Office National de l'Electricité et de l'Eau Potable  Office National de l'Electricité et de l'Eau Potable (ONEE)  (ONEE)  Project Development Objective (PDO)    Original PDO  The objectives of the Project are to: (i) increase access to sewerage services and reduce wastewater‐related  pollution in selected towns in the Project provinces of Azilal, Benimellal, Khourigba, Safi, Yousoufia and Settat; and  (ii) pilot non‐conventional technologies for wastewater systems in selected locations\.    Revised PDO  The objective of the Project is to increase access to sanitation services and reduce wastewater‐related pollution in  selectedsmalland medium towns in the Project provinces\.      Page 1 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) FINANCING      Original Amount (US$)   Revised Amount (US$)  Actual Disbursed (US$)  World Bank Financing          43,000,000  43,000,000  37,511,569  IBRD‐79250  Total    43,000,000  43,000,000  37,511,569  Non‐World Bank Financing        Borrower  32,100,000  32,100,000  32,100,000  Total  32,100,000  32,100,000  32,100,000  Total Project Cost  75,100,000  75,100,000  69,611,569        KEY DATES      Approval  Effectiveness  MTR Review  Original Closing  Actual Closing  15‐Jun‐2010  15‐Feb‐2011  27‐Jan‐2014  31‐Dec‐2015  31‐May‐2018       RESTRUCTURING AND/OR ADDITIONAL FINANCING      Date(s)  Amount Disbursed (US$M)  Key Revisions  09‐May‐2013  \.17  Change in Implementing Agency  Other Change(s)  13‐Jun‐2014  2\.57  Change in Project Development Objectives  Change in Results Framework  Change in Components and Cost  Reallocation between Disbursement Categories  Change in Safeguard Policies Triggered  Change in Legal Covenants  30‐Sep‐2014  4\.64  Change in Loan Closing Date(s)  23‐May‐2017  28\.11  Change in Results Framework  Change in Loan Closing Date(s)  Reallocation between Disbursement Categories  Change in Implementation Schedule      Page 2 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) KEY RATINGS      Outcome  Bank Performance  M&E Quality  Moderately Satisfactory  Moderately Satisfactory  Substantial    RATINGS OF PROJECT PERFORMANCE IN ISRs      Actual  No\.  Date ISR Archived  DO Rating  IP Rating  Disbursements  (US$M)  01  30‐Jun‐2010  Satisfactory  Satisfactory  0  02  10‐May‐2011  Satisfactory  Satisfactory  0  03  09‐Jan‐2012  Satisfactory  Moderately Satisfactory  0  04  22‐Aug‐2012  Moderately Satisfactory  Moderately Unsatisfactory  0  Moderately  05  18‐May‐2013  Moderately Unsatisfactory  \.17  Unsatisfactory  Moderately  06  13‐Oct‐2013  Moderately Unsatisfactory  \.17  Unsatisfactory  Moderately  07  07‐Dec‐2013  Moderately Unsatisfactory  \.42  Unsatisfactory  Moderately  08  15‐Apr‐2014  Moderately Satisfactory  1\.47  Unsatisfactory  09  28‐Jun‐2014  Moderately Satisfactory  Moderately Satisfactory  2\.57  10  08‐Dec‐2014  Moderately Satisfactory  Moderately Satisfactory  6\.01  11  01‐Jun‐2015  Moderately Satisfactory  Moderately Satisfactory  9\.00  12  18‐Nov‐2015  Moderately Satisfactory  Moderately Unsatisfactory  14\.24  13  25‐Feb‐2016  Moderately Satisfactory  Moderately Unsatisfactory  17\.89  14  15‐Jun‐2016  Moderately Satisfactory  Moderately Satisfactory  20\.07  15  15‐Dec‐2016  Moderately Satisfactory  Moderately Satisfactory  22\.83  16  14‐Jun‐2017  Satisfactory  Moderately Satisfactory  28\.61  17  20‐Nov‐2017  Satisfactory  Moderately Satisfactory  30\.14  18  24‐May‐2018  Satisfactory  Satisfactory  37\.18    Page 3 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) SECTORS AND THEMES      Sectors  Major Sector/Sector  (%)    Water, Sanitation and Waste Management   100  Sanitation  94  Public Administration ‐ Water, Sanitation and Waste  6  Management      Themes    Major Theme/ Theme (Level 2)/ Theme (Level 3)  (%)    Urban and Rural Development  98    Urban Development  98    Services and Housing for the Poor  98        Environment and Natural Resource Management  3    Environmental Health and Pollution Management  3    Air quality management  1    Water Pollution  1    Soil Pollution  1            ADM STAFF  Role  At Approval  At ICR  Regional Vice President:  Shamshad Akhtar  Ferid Belhaj  Country Director:  Mats Karlsson  Marie Francoise Marie‐Nelly  Senior Global Practice Director:  Laszlo Lovei  Jennifer J\. Sara  Practice Manager:  Francis Ato Brown  Carmen Nonay  Jean‐Martin Brault, Daniel  Task Team Leader(s):  Alexander E\. Bakalian  Camos Daurella  ICR Contributing Author:    Rebecca Jean Gilsdorf               Page 4 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES  A\. CONTEXT AT APPRAISAL  Context  1\. Before the project, in Morocco, an estimated 76 percent of households in large cities (population greater than  100,000) were connected to sewer networks, whereas in small and medium cities, less than 40 percent of households  were connected\. Additionally, existing sewer networks commonly overflowed during the rainy season and existing  wastewater treatment capacity only covered about 8 percent of the volume of collected wastewater\. Further, the  Government of the Kingdom of Morocco (GOM) was particularly concerned about the uncontrolled manner in which  wastewater reuse, particularly with untreated wastewater, was occurring in many areas\. To address the challenges  of sanitation, the GOM developed the National Sanitation Program (Programme National d’Assainissement  [PNA]),  which gave the National Potable Water Office (Office National de l’Eau Potable  [ONEP]1) an expanded mandate for  sanitation service provision, which had been the responsibility of municipalities\.   2\. Receiving limited subsidies from the GOM for operations, ONEP was able to adequately achieve cost recovery  for  operational  expenses  through  tariffs  and  connection  fees,  as  well  as  bulk  water  supply\.  In  contrast,  capital  investments  were  largely  subsidized\.  Further,  the  overall  financial  and  operational  efficiency  of  ONEP  showed  multiple areas that needed improvement\.   3\. At  appraisal,  the  Bank  was  deemed  well  positioned  to  support  the  project  as  the  Bank  had  a  long‐standing  partnership with ONEP and the existing Country Partnership Strategy ([CPS] January 2010) included prioritization of  the Water Sector (also supported through a Water Sector Development Project Loan [DPL], P095840) and expansion  of  sanitation  service  provision,  as  part  of  the  third  pillar  on  “Sustainable  Development  in  Changing  Climate\.”  Furthermore, the Bank had the expertise to support ONEP in carrying out its relatively new mandate for sanitation  service provision\.   Theory of Change (Results Chain)  4\. The  project  was  designed  around  two  components:  1)  increasing  access  to  sewerage  services  and  improving  treatment of collected wastewater aiming to provide public health and environmental benefits and 2) piloting non‐ conventional technologies for wastewater treatment, with an aim towards ensuring better performance and cost‐ effectiveness of technology selection\. All activities were taking place within small towns in the Oum Er Rbia river  basin\. In parallel with the project, a number of additional GOM activities were ongoing to address long‐term planning  for the sector\. The Bank had some involvement in these activities, including review of GOM’s overall sector strategy\.   5\. Activities: For the first component, in the selected towns, the main activities included: expansion of sewerage  networks,  rehabilitation  of  portions  of  sewerage  networks;  new  and  rehabilitated  household  connections  to  the  networks; construction of new wastewater treatment plants (WWTP); and rehabilitation of existing WWTPs\. For the  second component, the main activities were selection of technologies to test (based on international experience)  and then implementation, including monitoring and evaluation of at least four pilots\. To support the full range of  activities, Technical Assistance (TA) and associated training/operational support were also provided to ONEP\.   6\. Outputs: The activities were expected to result in the following outputs: additional households connected to  sewer networks; increased fraction of generated wastewater arriving at WWTPs; improved systems and capacity for  1 ONEP was later merged in 2011 with the National Electricity Office (ONE) to become the National Electricity and Potable Water Office  (Office National de l’Electricité et de l’Eau Potable [ONEE])\.  Page 5 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) project  implementation  in  the  sanitation  sector;  and  data  on  the  performance  of  piloted  wastewater  treatment  technologies\.   7\. Outcomes: In the project locations, the outputs were intended to increase access to sewerage services, reduce  wastewater‐related pollution and result in the piloting of non‐conventional technologies for wastewater treatment  systems\.  8\. Long‐term  outcomes:  The  project  outcomes  are  expected  to  support  the  following  long‐term,  government  prioritized outcomes, (i) increased water usage by households (as sewer connections will reduce self‐limiting of water  usage);  (ii)  health  improvements  –  both  through  the  externalities  associated  with  improved  sanitation  and  the  reduction in negative health risks associated with irrigation with untreated wastewater – that are further linked to  increased  labor  productivity  and  poverty  reduction;  (iii)  improvements  in  environmental  water  quality;  and  (iv)  demonstration of lower cost options for treating wastewater, which will allow for existing budgets to provide service  to a larger number of people\.   Figure 1: Overview of Project’s Theory of Change at Appraisal      Project Development Objectives (PDOs)  9\. The objectives of the Project, as stated in the Loan Agreement ([LA], loan number 7925‐MA) are to: (i) increase  access to sewerage services and reduce wastewater‐related pollution in selected small and medium towns in the  Project Provinces; and (ii) pilot non‐conventional technologies for wastewater systems in selected locations\.  10\. The PDO stated in the LA and the Project Appraisal Document (PAD) are the same, except that the PAD lists the  specific Provinces where the project intended to work, while the LA broadened the language to “Project Provinces,”  Page 6 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) to ensure flexibility of the project\.  Key Expected Outcomes and Outcome Indicators  11\. The PDO indicators at appraisal, with associated targets, were:  ï‚ Number of new sewerage connections provided under the project: 13,000 connections;  ï‚ Number of WWTPs complying with national standards (3 out of 4 samples in compliance every year): 10  WWTPs;  ï‚ Volume  (mass)  of  Biochemical  Oxygen  Demand  (BOD)  pollution  loads  removed  by  treatment  plants;  financed under the project: 1,830 tons/year;  ï‚ Number of non‐conventional systems piloted: 4 plants\.    12\. The following intermediate outcome indicators, with associated targets, were also tracked at appraisal but were  eventually dropped:  ï‚ Number of Environmental Impact Assessment (EIA) studies approved by the relevant committees: 10 EIAs;  ï‚ Number of signed delegated management conventions: 10 contracts;  ï‚ Number  of  subprojects  where  consultation  meetings  with  local  stakeholders  were  carried  out:  10  subprojects;  ï‚ Number of WWTPs constructed: 10 WWTPs;  ï‚ Number  of  ONEP’s  operation  teams  equipped  with  adequate  operation  and  maintenance  (O&M);  equipment: 10 teams;  ï‚ Twinning contract signed and implemented as per schedule: pilots constructed and training completed;  ï‚ Odor control in existing treatment plants: 2 WWTPs\.    Components  13\. The proposed project was designed with two main components: 1) wastewater collection and treatment and 2)  piloting of wastewater technologies and implementation support\.   14\. Component  1  ‐  Wastewater  Collection  and  Treatment  (US$64\.1  million  original  allocation,  US$66\.8  million  revised allocation, US$63\.7 million actual costs) included: rehabilitation and expansion of existing sewerage systems,  including collection networks and treatment plants, and provision of equipment for the maintenance and operation  of systems for about eleven selected small and medium towns in the Project Provinces (Afourer, Beni Ayat, Boujniba,  Boulanouare, Chemaia, Demnate, El Brouj, El Ksiba, Hattane, Ouaouizeght, and Youssoufia), covering six provinces  in the Oum Er Rbia river basin\.   15\. The towns were selected based on: population, current impact of raw wastewater discharges on human health  and the environment, availability of feasibility studies, provision of potable water (by ONEP), and interest shown by  the  municipal  authorities  to  delegate  sanitation  responsibility  to  ONEP\.  As  originally  envisioned  under  this  component, an estimated 13,000 new households would be connected to the sewer networks, and wastewater from  an estimated 240,400 people would be treated\.   16\. Component  2  ‐  Piloting  of  Wastewater  Technologies  and  Implementation  Support  (US$5\.7  million  original  allocation,  US$4\.0  million  revised  allocation,  US$3\.3  million  actual  costs)  included  three  sub‐components:  1)  Page 7 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) strengthening  the  capacity  of  ONEP,  through  a  twinning  arrangement,  to  pilot  low‐cost,  non‐conventional  (for  Morocco) technologies for wastewater treatment in small towns; 2) piloting of odor‐control and methane‐capture  technology at two selected treatment plants; and 3) providing implementation support, for construction supervision,  project  management,  monitoring  and  reporting,  monitoring  of  environmental  management  plans,  community  awareness‐raising campaigns, promotion of wastewater reuse projects, and development of an operational strategic  plan for sanitation activities\.   17\. The first sub‐component (US$0\.4 million original allocation) was designed to finance the services to be provided  by the twinning partner\. This partner, a utility selected for this South‐South exchange, would need to have expertise  in low‐cost and non‐conventional wastewater treatment technologies, and further have expertise in sharing some  experiences  with  another  utility  (i\.e\.,  ONEP)\.  ONEP  would  then  be  responsible  for  further  disseminating  this  knowledge into the local consulting industry through workshops and conferences\.   18\. The second sub‐component (US$1\.8 million original allocation) was meant to finance the covering of anaerobic  ponds in two pilot cities, which would allow for odor reduction and methane capture\. The State Secretary of Water  and  Environment  (Secretariat  d’Etat  pour  l’Eau  et  l’Environnement  [SEEE])  had  previously  overseen  a  study  that  identified the floating geomembrane cover as the best option, based on technical and economic considerations\.   19\. The  third  sub‐component  (US$3\.5  million  original  allocation)  financed  consulting  services  for  construction  supervision, project management, and monitoring and reporting (including for safeguards related topics)\. The sub‐ component also financed inputs for: a) ONEP’s communications campaign, for raising awareness and engaging with  project  beneficiaries;  b)  catalyzing  the  development  of  reuse  projects;  and  c)  the  preparation  of  an  operational  strategic plan for sanitation activities\.   B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION   Revised PDOs and Outcome Targets   20\. In June 2014, a Level I restructuring was completed to remove the second objective from the PDO (in an effort to  focus more on prioritized component 1 activities), among other changes\. In line with the Millennium Development  Goals (MDGs), the language in the PDO was also broadened from “sewerage” to “sanitation\.”2 The revised PDO is “to  increase access to sanitation services and reduce wastewater‐related pollution in selected small and medium towns  in Project Provinces\.” In essence, the first objective of the original PDO remained unchanged\.   Revised PDO Indicators  21\. As part of the same June 2014 restructuring, and the associated change to the PDO, the results framework (RF)  was updated\. The changes to the RF also included revisions to align with Bank core sector indicators (and the language  of the MDGs) and updated targets based on more realistic estimates\. Table 1 summarizes the PDO and associated  indicators  from  appraisal  and  after  restructurings,  and  Annex  8  shows  the  original  PDO  indicators  as  well  as  the  indicators after the June 2014 restructuring and after the May 2017 restructuring\.         2 Though the term “sanitation” is broader than “sewerage,” the project activities are in line with this language and the language of the  MDGs, and are also aligned with the more recent Sustainable Development Goals, as they consider the full sanitation service chain:  from household access to conveyance, treatment and end use/safe disposal\.   Page 8 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459)   Table 1: Summary of PDO Indicators at Appraisal and after Restructurings  Outcome  Original Indicator (target)  Revised Indicator (target)a  Increase access to  Number new sewerage connections  Direct project beneficiaries (220,000)  sewerage services  provided under the project  [revised to read:  (13,000 connections) Female beneficiaries (50 percent)  “increase access to    sanitation services”]  Extremely poor beneficiaries   (15 percent)  Number of people in urban areas provided with access  to improved sanitation under the project (130,000)  Percentage of population in project area whose  wastewater is collected (90 percent)  Percentage of population in project area whose  wastewater is appropriately treated (90 percent)  Reduce wastewater‐ Number of WWTPs complying with  WWTPs constructed under the project complying with  related pollution   national standards (3 out of 4 samples  national discharge standards3 (6)b  in compliance every year) (10)    Volume (mass) of BOD pollution loads  Volume (mass) of BOD pollution load removed by  removed by treatment plants  treatment plant under the project (800 tons/year)c  financed under the project   (1,830 tons/year)    Pilot non‐conventional  Number of non‐conventional systems  dropped  technologies for  piloted  wastewater treatment  (4)    systems    a  The initial revisions to the RF took place as part of the June 2014 restructuring\. In May 2017, as part of a Level II restructuring, additional  changes were made to the RF, including two changes to intermediate results indicators and the addition of the PDO‐level indicator “Percentage  of  population  in  Project  area  whose  wastewater  is  appropriately  treated\.”  This  indicator  was  added  to  reflect  the  overall  improvement  in  sanitation services under the project\. Annex 8 shows the PDO indicators for all three phases of the RF\.   b The number of plants was reduced from ten to six as the revised indicator only includes WWTPs that were constructed under the project, and  not those that were already existing prior to the project\.   c The target for this indicator was reduced following the restructuring though no clear rationale was presented for the dramatic reduction in the  target\.     Revised Components  22\. The first component was never formally revised, though the specific towns and the total number of towns that  benefited under the project were revised\. Instead of the planned 11 towns, a total of 14 towns benefited from the  project\. The specific project towns were also changed due to difficulties in acquiring land in Afourer, Beni Ayat, and  Boujniba and due to local opposition in Demnate\. As a result, the following cities were added, per agreement between  ONEE and the World Bank: Azilal, Zaouiet Cheikh, Aghbala, Oued Zem, Khouribga, Berrechid, and Boujaad\. (See Annex  3  For  WWTP  certification,  monthly  sampling  campaigns  are  done  over  the  first  year  of  operation,  starting  right  after  provisional  acceptance of works, to measure BOD (limit=120 mg/L), COD (limit=250 mg/L) and TSS (limit=150 mg/L)\. If after one year, the WWTP is  in compliance, sampling frequency is reduced to once every 3 months\. See “Joint Ministerial Order of the Minister of the Interior, the  Minister of Territorial Planning, Water and the Environment and the Minister of Industry, Trade and Economic Upgrading No\. 1607‐06  du 29 joumada II 1427 (July 25, 2006) establishing the specific limit values for domestic WWTP effluents\. Page 9 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) 11 for a map of the project locations)\.  23\. As part of the June 2014 restructuring, the piloting of low‐cost and odor‐reducing, non‐conventional technologies  was dropped from the PDO, but these activities were still pursued under the project\. Consequently, overall, there  were no significant changes to the activities under either component\.     Other Changes  24\. In 2011, GOM approved a law (40‐09) that restructured ONEP and merged it with electricity to create the National  Electricity and Potable Water Office (Office National de l’Electricité et de l’Eau Potable [ONEE])\. Consequently, in May  2013, a loan assumption agreement was signed between the International Bank for Reconstruction and Development  (IBRD) and ONEE, as well as an Amended Guarantee Agreement with the Kingdom of Morocco to reflect the change  of Borrower in the Guarantee Agreement\.  25\. As part of the June 2014 restructuring, the legal covenant related to the Borrower’s Debt to Revenue ratio was  revised\. The original covenant required ONEP’s (annually calculated) net revenue be at least 1\.2 times its estimated  principal  debt  service  requirements\.  Following  the  restructuring,  the  new  legal  covenant  required  that  ONEE’s  cumulative debt to equity ratio be less than 4\.5\. This change was made to align with the then recently approved Rural  Water Supply Project (P145529, loan number 8397‐MA), which used the same covenant\.  26\. Due  to  works  in  the  city  of  Boujaad  including  a  portion  of  its  Old  Medina,  which  is  a  national  heritage  site,  Operational Policy/Bank Policy (OP/BP) 4\.11 related to Physical Cultural Resources was triggered, as part of the June  2014 restructuring\. As with the other safeguards triggered under the project, country systems were used\.   27\. The  project  closing  date  was  also  extended  twice  to  allow  for  additional  time  to  complete  project  activities,  particularly those in Chemaia, Youssoufia, Boulanouare and Hattane, which were activities closely aligned with the  PDO\.  In  September  2014,  an  18‐month  extension  was  approved  (in  part  due  to  the  expansion  to  additional/new  towns),  which  extended  the  closing  date  from  December  31,  2015  to  June  30,  2017\.  The  closing  date  was  again  extended, by 11 months, in May 2017, to May 31, 2018\.    28\. As a summary, the following restructurings took place and focused on the noted changes:  ï‚ May  2013  (level  II)  –  change  of  Borrower  from  ONEP  to  ONEE  (following  a  restructuring  of  the  sector  in  Morocco);  ï‚ June  2014  (level  I)  –  removal  of  pilots  from  PDO;  revision  of  RF;  reallocation  between  disbursement  categories (to reflect changes to PDO); triggering of OP 4\.11 on Physical Cultural Resources; change of legal  covenant on debt to equity ratio; change in disbursement estimates; changes in components and costs; and  appraisal summary change in risk assessment;  ï‚ September 2014 (level II) – 18‐month extension of closing date to June 30, 2017; and  ï‚ May  2017  (level  II)  –  11‐month  extension  of  closing  date  to  May  31,  2018;  revision  of  RF;  reallocation  between  disbursement  categories;  change  in  disbursement  estimates;  and  change  in  implementation  schedule\.  Rationale for Changes and Their Implication on the Original Theory of Change  29\. The main recommendation from the mid‐term review (MTR) was to focus on core infrastructure activities in order  to continue the existing implementation momentum and ensure achievement of the PDO\. Consequently, the project  was restructured to remove the piloting activities from the PDO\. However, these activities were not dropped from  Page 10 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) the project, and once the infrastructure activities were back on track, the pilots were again pursued, albeit with a  focus  on  piloting  without  a  twinning  arrangement\.  The  overall  Theory  of  Change  is  not  impacted  as  the  scope  of  activities did not change\.   II\. OUTCOME  A\. RELEVANCE OF PDOs  Assessment of Relevance of PDOs and Rating  30\. Results Area 2 in the current Moroccan CPS (Report no\. 86518‐MA for FY14‐FY17) focuses on “building a green  and resilient future\.” Under this results area, the first strategic outcome is to “strengthen management of soil, coastal  and water resources,” including bank support for expanding access to improved sanitation, wastewater treatment  and  reuse\.  The  project  directly  addresses  this  outcome\.  The  second  strategic  outcome  is  to  “increase  renewable  energy generation and enhance energy efficiency,” which this project supports through the use of solar power and  energy‐saving operating regimes for WWTPs (both under the pilots and for newly constructed WWTPs)\.     31\. Under  the  CPS,  Results  Area  3  focuses  on  “strengthening  governance  and  institutions  for  improved  service  delivery to all citizens\.” The first outcome, “support more open and inclusive governance ensuring effective rights for  citizens to access information and petition government,” includes reference to “enhancing access to water supply  and sanitation services, including in rural areas,” as entry points\. The project thus directly addresses this priority\. The  project further supports this Results Area’s strategic outcomes 3 and 4: “improve capacity to plan, manage and assess  the delivery of key services, especially at the local level” and “expand access to basic services,” where basic services  explicitly include sanitation for underserved areas\.     32\. The CPS also includes cross‐cutting themes on gender and voice and participation\. Though not explicitly included  in the PDO, the project included specific activities to ensure voice and participation of citizens, including special focus  for women in the beneficiary communities\.     33\. Further, as noted above, the project was developed to align with the GOM’s PNA and designed to finance PNA  activities in the project locations\. More specifically, under the PNA, the GOM aims to achieve 80 percent household  sanitation coverage and treat 60 percent of wastewater by 2020, and this project expands both household sanitation  coverage  and  portion  of  wastewater  treated  (through  both  new  construction  and  rehabilitation  of  existing  infrastructure)\. Further, the project’s focus on piloting of innovative technologies was in part meant to address the  large funding gap that the sector was facing in order to  implement  the PNA\.  By exploring  options for lower cost  technologies, the aim was to allow the GOM to provide service to a larger number of households and treatment  capacity for additional households\. As the pilots were dropped from the PDO, this focus was diminished, but the  piloting was still undertaken, and the project remained fully in line with the priorities in the PNA\.     34\. A new Country Partnership Framework (CPF) is currently under development and includes a strategic focus on  Territorial Development, which includes, among other things, further increasing access to basic sanitation services as  well  as  increased  water  resources  planning  with  greater  reliance  on  reuse  of  wastewater\.  The  new  CPF  will  also  continue to place a strong focus on governance and citizen engagement\. As such, the project’s relevance remains  high for the government’s priorities\.     35\. The overall rating for the relevance of the PDO is High, given the PDO’s clear alignment with the Results Areas in  the current CPS and overall alignment with the GOM’s PNA\.  Page 11 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459)   B\. ACHIEVEMENT OF PDOs (EFFICACY)  Assessment of Achievement of Each Objective/Outcome  36\. The original PDO can be unpacked to include the following three outcomes: increase access to sewerage services,  reduce  wastewater‐related  pollution,  and  pilot  non‐conventional  technologies  for  wastewater  treatment  systems\.  Each of these areas will be separately considered\. ONEE is responsible for sanitation service delivery management in  all 14 towns, based on the municipalities having delegated this authority to ONEE (agreements signed between 2011  and  2014,  depending  on  the  town)\.  This  exceeds  the  originally  targeted  10  delegated  management  contracts\.  Additionally, because of the PDO changes (Level 1 restructuring), the ICR is required to derive separate Efficacy ratings  before and after restructuring\. These split ratings are reflected below\.   Increase access to sanitation services  37\. Post‐restructurings\. Increased access to sanitation services was tracked based on five PDO indicators and four  intermediate  results  indicators\.  In  total,  144,004  people  in  urban  areas  were  provided  with  access  to  improved  sanitation, against a target of 130,000\. This result means that, at present, wastewater from 96\.3 percent of households  is  collected,  against  a  targeted  90  percent  (which  exceeds  the  GOM  national  target  of  80  percent  collection)\.  Additionally, of a targeted 220,000 beneficiaries, 231,964 people benefited from the project, of which 50\.4 percent  are female and 13\.2 percent are extremely poor, compared to targets of 50 percent (101% achieved) and 15 percent  (88  percent  achieved)\.4  The  intermediate  results  indicators  focused  on  number  of  new  versus  rehabilitated  connections to the network\. In total, 13,734 connections were rehabilitated and 10,239 were newly constructed for  a  total  of  23,973  connections  total,  against  targets  of  13,000;  9,000;  and  22,000  respectively5\.  The  project  also  exceeded the targets for total length of sewer laid with 385\.5 km laid (compared to the targeted 360 km)\.   38\. The household surveys conducted in El Brouj and Aghbala6 show that households that benefited from the project  are much more satisfied than they were prior to the project – with 92 percent of households currently satisfied with  their  sanitation  situation,  compared  with  3  percent  who  were  satisfied  before  the  project  (and  compared  to  19  percent  of  non‐beneficiary  households  in  the  same  cities)\.  Beneficiary  households  are  also  less  likely  to  report  problems with wastewater management, with 0 percent of households reporting problems at endline, compared to  17 percent prior to the project (and compared to 21 percent for non‐beneficiary households)\. Although beneficiary  households  continue  to  have  problems  with  greywater  management,  improvement  is  noted,  with  33  percent  reporting the existence of new or ongoing issues with greywater, down from 50 percent prior to the project (and  compared to 29 percent for non‐beneficiary households)\.   39\. Though  the  survey  did  not  track  volumetric  water  usage  per  household,  it  did  include  some  questions  which  suggest household water usage did increase for beneficiary households (in line with the proposed Theory of Change)\.  For example, at baseline, the average adult was taking 0\.8 showers per week (in beneficiary households, compared to  0\.7 for  non‐beneficiary households), but at  endline this had risen to 1\.5 showers per week – i\.e\., roughly double\.  Additionally,  beneficiary  households  increased  the  practice  of  at‐home  laundry,  going  from  60  to  78  percent  of  households handling laundry at home (compared to 41 percent of non‐beneficiary households)\. Lastly, beneficiary  4  Number  of female  and  extremely  poor  beneficiaries  are based on  province‐level  and  city‐level  data from  2014  (see  Annex  10 for  detailed data)\.  5 These targets were revised as part of the Level II restructuring in May 2017\.   6 Surveys were only conducted in two locations as a cost saving measure\. Within these two cities, households were selected randomly,  with quotas to ensure all relevant quarters of the city were represented\. In total 220 households (representing an estimated 1,078  people) were interviewed\.  Page 12 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) households  increased  handwashing  practices,  with  49  percent  of  surveyed  individuals  reporting  handwashing  at  critical moments, compared to 42 percent at baseline (and compared to 36 percent of non‐beneficiary households)\.   40\. Pre‐restructurings\. Prior to restructuring, this outcome was worded as “access to sewerage services\.” Originally,  the number of new sewer connections was a PDO indicator, targeting 13,000 new connections\. At the close of the  project, this original target was 78\.8 percent achieved\. Though some of the original intermediate results indicators  were dropped (2014 restructuring), the project held consultations in all 14 project locations (exceeding the targeted  10) and completed EIAs in all 14 locations as well (also exceeding the targeted 10)\.  41\. Overall, the project successfully expanded service to a large number of households and exceeded the target for  total  beneficiaries  based  on  revised  targets\.  Based  on  the  original  targets,  the  majority  of  indicators  were  met  or  nearly  met\.  Given  substantial  completion  of  the  original  target  for  improved  access,  and  overachievement  of  the  revised  targets,  the  efficacy  for  this  outcome  is  considered  Substantial  before  restructuring  and  High  after  restructuring\.   Reduce wastewater‐related pollution  42\. Post‐restructurings: Reduced wastewater‐related pollution was tracked based on three PDO indicators and three  intermediate results indicators\. Access to sewers greatly expanded under the project and 90 percent of generated  wastewater  is  treated  (matching  the  target  of  90  percent),  exceeding  the  GOM  national  target  of  60  percent  treatment\. On average, the newly constructed plants are removing 74\.2 percent of influent BOD, which is just below  the targeted 75 percent removal (98\.9 percent achievement)\. An estimated 1,353 tons of BOD pollution is removed  by these plants each year,7 which exceeds the targeted 800 tons per year (169 percent achieved)\.   43\. The  project  constructed  six  treatment  plants  (see  Annex  9  for  further  details)\.  At  present,  compliance  can  be  verified with only one of the six (16\.7 percent) treatment plants built under the project since the national standards  require plants to be in operation and evaluate effluent organic and suspended solids concentrations for at least 12  months before compliance can be assessed\. The other newly constructed plants have therefore not been in operation  long enough to officially meet the compliance standard, but based on current performance, in the coming months, an  additional three plants should officially be in compliance, that is, four total (66\.7 percent of the target)\. Similarly, five  of  the  plants  associated  with  the  project  (including  plants  that  already  existed  and  those  constructed  under  the  project) are  currently  compliant  (of 12 total plants under the  project)\. With  the additional three plants becoming  officially  compliant  in  the  coming  months,  a  total  of  eight  plants  will  be  in  compliance  (66\.7  percent  achieved)\.  Additionally, it is likely that the positive results from the pilots will help ONEE improve the overall performance of the  WWTPs  that  are  currently  not  in  compliance\.  The  treatment  plants  constructed  under  the  project  resulted  in  an  additional 115,891 population equivalents of treatment capacity (exceeding the targeted 115,000)\.  44\. Beyond  treating  wastewater,  the  GOM  also  aims  to  better  utilize  treated  wastewater  for  different  reuse  applications\. To that end, in Boujaad and Oued Zem there are existing plans in place for creating small‐scale treated  wastewater irrigation schemes for use by local farmers, but the agreements are not yet in effect due to lack of funding\.  Additionally,  in  Khouribga,  Youssoufia  and  Boulanouare,  the  OCP  Group  (formerly,  the  Office  Chérifien  des  Phosphates [OCP]) operates the WWTPs and uses the treated wastewater for its mining operations\.   7 This estimate is based on the number of new and rehabilitated connections made that go to a treatment plant, assuming an average  treatment efficiency of 71\.6 percent (based on a study done in 2017), an average per capita production of 30 g of BOD per day (reaching  the sewer network), and based on a city‐level estimates of number of people per connection (based on the 2014 census)\. Annex 9  includes a summary of the wastewater treatment plants impacted, including their current compliance status and BOD removal rates\.   Page 13 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) 45\. Pre‐restructurings\. As with the first outcome, the second outcome did not change as part of the restructuring\.  However,  the  outcome  indicators  and  targets  for  this  outcome  were  changed\.  As  originally  designed,  the  project  aimed to build ten treatment plants, remove 1,830 tons of BOD each year, and to have 10 project‐related WWTPs in  compliance with national standards\. The project achieved, or is expected to achieve, 60 percent (6 new treatment  plants constructed), 73\.9 percent (1,353 tons of BOD per year),8 and 50 percent (up to 80 percent once the newly  plants become officially compliant) of the original targets, respectively\.  46\. In light of modest achievement of the original targets, the pre‐restructuring efficacy is considered Modest\. Based  on  the  revised  targets,  BOD  loads  to  the  environment  have  been  significantly  reduced  (exceeding  the  post‐ restructuring target by over 40 percent) and the portion of wastewater treated achieved its target, but the number  of compliant treatment plants (reasonably expected to be officially compliant in the near future) will be somewhat  below  its  target  (67  percent  achievement,  but  with  the  potential  for  improved  performance  once  the  piloted  technologies can be scaled)\. Consequently, based on the revised targets, the overall rating is Substantial\.  Pilot non‐conventional technologies for wastewater treatment systems  47\. As originally envisioned, the project aimed to complete 4 pilots with non‐conventional wastewater treatment  technologies, including two pilots for technologies aimed at reducing odors\. This was to be completed, in part, through  a South‐South twinning arrangement\. Though the Bank organized a study tour to Brazil for a number of Moroccan  sector  professionals,  a  formal  twinning  arrangement  did  not  materialize\.  However,  ONEE  decided  to  pursue  the  piloting as part of the project, nonetheless\.   48\. In El Ksiba and Azilal, anaerobic ponds were covered with hexagonal plastic pieces, which proved successful in  reducing odors from these ponds, which met the original target of 2 pilots for reducing smells (100 percent achieved)\.9  In  El  Brouj,  Zaouiet  Cheikh  and  Chemaia,  floating  baffles  and  mixing  systems  were  piloted\.  The  results  on  the  effectiveness of the baffles were mixed (and thus inconclusive overall), and similarly the mixing system was shown to  have  limited  effectiveness\.  In  Boujaad,  one  channel  of  anaerobic  ponds  was  converted  to  aerated  ponds,  which  resulted in 66 percent reduction in BOD and 77 percent reduction in total suspended solids (TSS)\. In Ouaouizeght, a  rock filter was tested for removal of algae and found to reduce TSS by 68 percent\. Overall, the piloting was deemed  successful  given  1)  pilots  were  conducted  with  appropriate  monitoring  of  results  and  2)  ONEE  now  has  an  understanding of which options may be best to pursue moving forward\.  49\. Overall,  this  outcome  was  fully  achieved  and  greatly  exceeded  as  seven  pilots  (against  a  targeted  4)  were  completed  and  successfully  tracked/monitored  to  allow  for  scaling  up  of  effective  solutions\.  Consequently,  this  outcome, relevant for the pre‐restructuring rating only, is rated High\.   Justification of Overall Efficacy Rating   50\. Based on the original PDO, one of the three outcomes were rated High achievement, one was Substantial, and  one  was  Modestly  achieved,  which  leads  to  the  objectives  being  almost  fully  achieved  and  an  overall  rating  of  Substantial\. Based on the revised PDO, which only considers the first two outcomes (rated High and Substantial), the  8 The original target was calculated with a per capita BOD production of 50 gBOD per day (a standard figure for developed country  cities),  whereas  analyses  and  discussions  with  ONEE  later  confirmed  that  a  30  gBOD  per  capita  per  day  was  more  appropriate  for  Moroccan small towns\. The revised targets were therefore more aligned with the reality on the ground, although considerably reducing  the estimated affluent BOD loads to treatment plants which were part of the project\.  9 A household survey in Azilal found that 85 percent of surveyed respondents were satisfied with the results of the odor reduction pilot\.  This result stands in contrast to the 83 percent of households who originally raised concerns about the odors associated with the WWTP  in their community\.  Page 14 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) overall rating is also Substantial\.    Table 2: Summary of Overall Efficacy Ratings Before and After Level I Restructuring  Objectives/Outcome   Original PDO  Revised PDO  Achievement  Achievement  1 ‐ Increase access to sewerage services  Substantial  High  2 ‐ Reduce wastewater‐related pollution  Modest  Substantial  3 ‐ Pilot non‐conventional technologies for wastewater  High  N/A  treatment systems    Efficacy  Substantial  Substantial    C\. EFFICIENCY  Assessment of Efficiency and Rating  51\. Overall,  costs  for  the  project  ended  up  being  in  line  with  the  original  estimates,  and  expected  outputs  were  delivered\. Anticipated benefit streams to producer and consumer surplus (linked to the sewerage tariff and increased  property values, respectively) have not materialized as originally calculated\. Residential property prices in the project  area have only marginally increased in nominal terms (and actually decreased in real terms) over the lifespan of the  project\. However, a wide range of benefits identified, but not quantified at appraisal, have now been incorporated  (See Annex 4 for the detailed description of the economic and financial analyses)\. These include the direct costs of  emptying septic tanks, wastewater reuse in agriculture, reduction in environmental pollution, and health benefits\.  52\. Based on household septic tank emptying costs, households are now benefiting from lower costs for services,  totaling an estimated 2000 MAD (~US$200) per year per household\. Additionally, benefits linked to wastewater reuse  for  agriculture  and  reduced  environmental  pollution  (including  removal  of  BOD,  nitrogen  and  phosphorus)  were  assessed  at  the  ICR  stage  and  estimated  to  total  US$1\.5  to  2\.2  million  per  year  and  US$2\.4  million  per  year,  respectively\. Though no health data were collected at project sites, based on published literature, an annual benefit  of  US$10  per  person  living  in  the  project  area  was  estimated,  based  on  reductions  in  sanitation‐related  diseases  (namely diarrheal diseases), totaling over US$2\.1 million per year\. This combined benefit stream over a 40‐year project  period, at a discount rate of six percent,10 results in an economic net present value (NPV) of US$33\.6 million, or an  economic rate of return (ERR) of 9\.4 percent\.  53\. In terms of the financial analysis, ONEE’s operating cost coverage ratio, for its combined water and sewerage  operations, is well above the regional average\. Before depreciation, interest and tax charges, ONEE’s combined water  and sewerage operations generate a positive cash flow, reporting an operating cost coverage ratio of just under 2  over the 2010 to 2015 period\. Under the existing tariff structure, the system is designed with sanitation envisioned to  be  cross‐subsidized  by  the  other  sectors  under  ONEE’s  mandate\.  In  2016,  the  cross‐subsidy  to  sewerage  services  resulted  in  ONEE  reporting  a  deficit  of  129  million  MAD  (US$13  million)\.  Without  increasing  sewerage  tariffs,  the  burden  of  cross‐subsidizing  sewerage  will  grow  as  the  coverage of  sewerage  services  is  expanded  across  areas  of  Morocco\. Debt relating to water and sanitation investments has doubled in 8 years and the debt service has become  unsustainable\. Annex 4 includes additional information and analyses related to ONEE’s financial performance and the  impacts of proposed subsidy reforms\.   10  At  appraisal,  a  discount  rate  of  ten  percent  was  used,  but  at  present,  the  World  Bank’s  Sustainable  Development  Chief  Economist recommends a discount rate of six percent\.  Page 15 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) 54\. A summary of the economic and financial analysis results at Appraisal and at the ICR stage are shown in Table 3\.  Given that the economic analysis meets expectations in the sector, but ONEE’s financing is faring more poorly than at  the time of appraisal, the overall efficiency rating is Modest\.   Table 3: Summary of Economic and Financial Analysis at Appraisal and ICR    Economic Rate of  Economic NPV  Financial Rate of  Financial NPV  Return   (US$)  Return  (US$)  At  11 percent  4 million  5\.7 percent  ‐9 million  appraisal  At ICR  9\.4 percent  33\.6 million  n/a  ‐82 million    D\. JUSTIFICATION OF OVERALL OUTCOME RATING  55\. The  overall  rating  of  the  relevance  of  the  PDO  is  High\.  Based  on  both  the  original  and  revised  PDO  (and  the  associated  outcomes  and  targets),  the  project  efficacy  is  rated  Substantial,  as,  overall,  the  three  outcomes  were  substantially achieved, or can reasonably be expected to be achieved in the near future\. The Efficiency of the project  suffered  due  to  the  high  cost  of  sewered  sanitation  services  relative  to  the  measurable  benefits  and  lack  of  tariff  increases, and consequently was rated Modest\. Table 4 summarizes the overall outcome ratings for the project, based  on  the  required  methodology  for  projects  requiring  split  ratings\.  Based  on  this  approach,  the  project’s  Overall  Outcome rating is Moderately Satisfactory\.    Table 4: Summary of Overall Outcome Ratings Before and After Level I Restructuring    ICR Ratings  Original PDO  Revised PDO  Relevance  High  Efficacy  Substantial  Substantial  Efficiency  Modest  Outcome  Moderately Satisfactory  Moderately Satisfactory  Outcome Value on 6‐point scale  3  3  Disbursement weight  7\.4%  92\.6%  Weighed Outcome Value  0\.22  2\.78  Weighed Overall Outcome Valuea  3\.0  Weighed Overall Outcome rating  Moderately Satisfactory   a  Sum of weighted Outcome values for Original and Revised PDO (based on disbursements as of the time of ICR writing)\.    E\. OTHER OUTCOMES AND IMPACTS   Gender  56\. The project included a number of activities aimed at increasing (i) citizen engagement with ONEE and (ii) ONEE  responsiveness to citizens\. These activities included awareness raising and mobilization campaigns, as well as activities  aimed  at  women’s  needs  in  particular,  as  women  are  major  users  of  household  sanitation  services\.  For  example,  women represented 80 percent of the people contacted through door‐to‐door awareness raising about the project  Page 16 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) (32,000 of 40,000 people contacted)\. However, women were less well represented in consultations about getting new  households connections, as women were less likely to be heads of households (on average 18 percent of households  were female‐headed)\. Additionally, under the project, 116,910 women gained access to new or improved sanitation  services at home\.   Institutional Strengthening  57\. The project was the first project in Morocco to pilot the Use of Country Systems (UCS) for environmental and  social safeguards\. The UCS allowed for the strengthening of these systems and for greater government ownership and  capacity building around the use of these systems\.  58\. In addition, the Bank team mobilized, in 2016, parallel funding in the form of “just‐in‐time technical expertise”  (for  a  total  of  US$35,000)  to  support  the  development  of  ONEE’s  capacity  to  design,  operate,  and  maintain  new  innovative wastewater treatment technologies for the Moroccan context\. This support focused on two technologies  that ONEE had interest in piloting and expanding in the context of their PNA, namely anaerobic reactors (such as the  Upflow  Anaerobic  Sludge  Blanket  [UASB]  reactors)  and  aerated  lagoons\.  Design  manuals  for  each  of  these  technologies were developed and were used by ONEE to design the Hattane WWTP using aerated lagoons (financed  by the project) , as well as its first UASB plant in Chwitter (under construction; not financed by the project)\.  Mobilizing Private Sector Financing  59\. As noted, in Youssoufia and Boulanouare, the OCP Group operates the WWTPs and uses the treated wastewater  for its mining operations\. The OCP Group is responsible for funding both the capital and the O&M costs for these sites,  and ONEE handles investments (co‐financed with the participating towns), as well as the O&M of the sewer networks  and pumping stations, and uses the money collected through household tariffs to cover these costs\. This arrangement  ultimately results in the private sector (i\.e\., the OCP Group) funding part of the operational expenditure, in exchange  for unlimited use of the treated wastewater\.   Poverty Reduction and Shared Prosperity  60\. The project provided sanitation services to 30,584 extremely poor people11\. Further, by supporting treatment of  wastewater, the project indirectly provides benefits to public health and the environment – both of which are public  goods with further benefits for all\.   Other Unintended Outcomes and Impacts  61\. Due to early challenges with acquiring land, in part driven by the piloting of the UCS for safeguards and in part  due to some local opposition, the project ended up developing a detailed process of citizen engagement, focusing on  the land acquisition process and project information sharing\. The project developed and utilized a range of tools for  engaging  with  communities,  including:  appointment  of  an  ONEE  “Land  Acquisition  Focal  Point;”  establishing  Local  Monitoring Committees; holding consultations and public information campaigns; and utilizing a strong Grievance  Redress Mechanism (GRM) that allows for multiple channels of grievance collection, including oral methods (in line  with local practice)\. This approach was found to be so successful that ONEE is now using it for all sanitation projects,  and it was documented as one of the best regional practices by the Water GP’s citizen engagement team\. Annex 7  contains further details on the citizen engagement approach, including the Local Monitoring Committees and GRM\.     11 13\.2 percent of 231,964 beneficiaries\.  Page 17 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME  A\. KEY FACTORS DURING PREPARATION  62\. The project was designed to address a GOM priority and was based on international best practice for technical  interventions of this nature\. The project was prepared with a simple design, including clearly structured components  with  well‐planned  implementation  approaches\.  The  RF  was  also  designed  to  capture  the  key  activities  as  well  as  relevant outcomes for each part of the PDO\. The indicators chosen were appropriate and realistic, as well as easily  measurable\.  63\. The project was delayed once implementation began, however, some of the delays would have been difficult to  predict, given this was the first time country systems were being used under a Bank‐financed project in Morocco\.  However, given the significant challenges in securing land, and the public objections and demonstrations in multiple  locations, it is notable that the PAD does not reference any possible risk of delays due to land acquisition (though it  was flagged in the appraisal Safeguards Diagnostic, approved around the time the PAD was written)\. This gap suggests  lack of full recognition of the importance of local communities as key stakeholders in the process\.   64\. Additionally, delays in the first years of implementation were partly linked to the need to undertake a number of  studies and completion of standard bidding documents, which should have been completed during preparation\.   B\. KEY FACTORS DURING IMPLEMENTATION  65\. The project strongly benefited from clear leadership and commitment by ONEE’s project management team, and  its close coordination with the ONEE offices and local communities in each project area\. The project implementation  support TA helped the different parts of the project management team (e\.g\., fiduciary, safeguards, technical) in this  coordination and communication role\. The project team was well equipped and staffed with high capacity individuals\.  Consequently, the team was able to be highly responsive to the implementation challenges that arose\. Through close  monitoring  and  regular  engagement  with  key  stakeholders  –  especially  local  communities  –  implementation  challenges were documented and addressed in a timely manner, especially following the MTR\.    66\. The MTR was effectively used to scale back and prioritize key activities for the remaining years of the project\.  The removal of the pilots from the PDO, and the originally envisioned twinning arrangement, actually allowed ONEE  to revisit the approach to piloting\. And ultimately ONEE decided to pursue piloting without the need for a twinning  arrangement – which has proven to be quite effective\. Additionally, following the MTR, the project continued to utilize  the RF and related Monitoring and Evaluation (M&E) activities to ensure the project activities linked to the PDO were  completed in line with all fiduciary, safeguards and technical standards\.   67\. One of the most significant positive factors during implementation was the dedicated efforts of the Bank’s social  safeguards consultant and ONEE’s social safeguards team members\. The focus on citizen engagement and ensuring  proper land acquisition protocols were followed allowed construction for the project to move forward\. Without the  efforts of these individuals, and ONEE’s willingness to rethink its approach to land acquisition, the project would likely  have been unable to achieve the PDO\.   68\. The first years of the project’s implementation saw significant challenges linked to delays in disbursement and  difficulties in securing land\. The  disbursement delays were due  to delays in procuring  the  project implementation  support TA and incomplete design studies, which should have been completed during preparation\. As a result, the  first disbursement did not happen until nearly two years after effectiveness\. The procurement delays were noted over  the first years of implementation in the project Implementation Status and Results reports (ISRs), and the delays were  Page 18 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) also  linked  to  internal  changes  within  ONEE  (then  ONEP)  regarding  which  unit  would  be  responsible  for  implementation\.    IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME  A\. QUALITY OF MONITORING AND EVALUATION (M&E)  M&E Design  69\. Overall, the M&E system was well designed and included indicators for tracking key activities, outcomes, and  objectives in line with the Theory of Change\. However, the project included a number of activities (some of which  were not directly linked to the PDO), which, consequently, were not tracked in the RF\. The original RF did not include  intermediate  results  indicators  for  the  full  range  of  planned  activities,  but  following  restructuring,  the  RF  incorporated these intermediate indicators\. The indicators were well selected and were specific, measurable and  achievable\. The indicator on WWTP compliance struggled due to the long time lag in getting nationally approved  compliance (following 12 months of performance) and lack of data on the WWTPs operated by the OCP Group\.   70\. The M&E for the project RF was handled largely by the implementation support TA firm and the Bank team\.  However, ONEE’s team relied on the TA firm and the associated RF data for project implementation, in addition to  other M&E carried out by ONEE specifically for the pilots\.   M&E Implementation  71\. Though there were initially some challenges in the first years of the project, the MTR was a turning point that  allowed for refocusing activities for the remaining years of the project\. The RF was consistently and regularly updated,  using rigorous methods and triangulation, where possible, and these updates were reflected in the ISRs\. Further,  ONEE  did  considerable  data  collection  beyond  the  scope  of  the  RF  –  including  a  baseline  and  endline  household  survey in Aghbala and El Brouj, careful monitoring of the land acquisition processes, as well as careful M&E of the  wastewater treatment technology pilots\.    72\. The  RF was regularly  updated  during  the project to reflect the  changes in  the project focus/scope as  well as  experiences using the RF in practice\. For instance, intermediate results indicators were added to track construction  progress of the sewer networks and new versus rehabilitated household connections\.  73\. Apart from one ISR (ISR4), which noted poor quality M&E (specifically flagging the poor quality of the progress  report by ONEE,12 then ONEP), the overall M&E quality was high throughout the project\. Further, although the project  specific indicators were largely being tracked by the TA firm, much of the data for the RF and larger M&E were drawn  from regular ONEE data collection\.   M&E Utilization  74\. The project RF was effectively used, particularly following the MTR\. Project ratings were updated to reflect the  results in the RF\. For example, early in the project the Implementation Progress (IP) rating was kept at Moderately  Unsatisfactory to reflect the lack of progress on household connections, which were being tracked separately from  kilometers of network laid\. The ability to separately track length of network and number of household connections  is particularly important given international experience with low household connection rates in many other countries\.   12 Upon noting this issue in the ICR, it was quickly resolved, and the following ISR rated M&E Moderately Satisfactory\.  Page 19 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) 75\. The M&E for the piloting of wastewater treatment technologies continues to be utilized by ONEE to justify which  interventions should be scaled up or used elsewhere\.   Justification of Overall Rating of Quality of M&E  76\. There were minor shortcomings in the initial M&E design, but the RF was regularly updated and revised during  implementation to reflect realities on the ground and the changing needs of the project\. Additionally, the M&E was  regularly reported on and the results were used to inform how to prioritize actions, in line with the PDO\. The project  also used M&E for the piloting of treatment technologies, which allowed for a robust review of the effectiveness of  these technologies\. This testing went well beyond the scope of the originally envisioned RF and has been fully owned  by ONEE\. Similarly, the land acquisition was carefully monitored, which helped limit project delays\. Consequently,  the overall rating of the quality of M&E is Substantial\.   B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE  Environmental and Social Safeguards  77\. This project was the first in Morocco to pilot the UCS for environmental and social safeguards\. The project was  Category  B  and  triggered  the  following  safeguards:  OP/BP  4\.01  Environmental  Assessment,  OP/BP  4\.11  Physical  Cultural  Resources,  and  OP/BP  4\.12  Involuntary  Resettlement\.  The  project  complied  with  all  applicable  environmental and social safeguards\. However, early in the project there were delays, in part due to low capacity  and  limited  experience  with  the  UCS  under  a  Bank  project,  i\.e\.,  country  systems  complemented  with  the  improvements recommended following the environmental and social system assessments\.  78\. EIAs were carried out by ONEE, and deemed acceptable based on national legislation, for all fourteen towns\.  Some  ISRs  noted  minor  concerns  with  the  quality  of  reporting  on  Environmental  and  Social  Management  Plans  (ESMPs),  though  they  also  note  clear  compliance  with  relevant  workers  health  and  safety,  signage,  waste  management,  etc\.  Groundwater  quality  data  are  also  collected  surrounding  WWTP  locations  where  there  are  concerns about the groundwater table (namely in Hattane, Aghbala, El Ksiba, Brouj, and Ouaouizeght)\. At these sites,  beginning  in  2015,  upstream  and  downstream  groundwater  wells  were  installed  and  samples  are  analyzed  bi‐ annually\. To date, monitoring in Aghbala and Ouaouizeght have shown that groundwater quality is stable, while the  Hattane station is not yet operational, and the piezometers in El Ksiba and El Brouj are dry\. In Boulanouare, prior to  the project, raw waste was flowing into the environment\. The project helped to resolve this situation by building the  collection network and a pumping station, which deliver the wastewater to a treatment plant operated by the OCP  Group\. The network and pumping station are currently completed and operational, as of October 2018\.  79\. Under OP/BP 4\.11, in Boujaad, a small part of the works took place in the Old Medina, which is a national heritage  site\. GOM environmental legislation concerning the cultural heritage is Law 22‐80 (1‐80‐341) of 1980 amended and  supplemented  in  June  2006  and  Law  19‐05  (1‐06‐010215)  on  conservation  of  historic  monuments/sites,  art  and  antiquities\. As no chance finds were found, the protocols under these laws were not undertaken\.   80\. In line with the Diagnostic Safeguards  Review, prepared in  March 2010 for using the National Environmental  Protection System and the National Land Acquisition Procedure for the project under OP/BP 4\.00 “Piloting the Use  of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank‐Supported Projects,”  all the gap  filling and sustainability measures were implemented by the ONEE team who developed, implemented and ensured  a close follow‐up of an action plan to assist beneficiary municipalities with land acquisition processes for each sub‐ project\.  Land  acquisition  protocols  were  developed  under  the  project  and  are  now  being  used  for  all  sanitation  projects of ONEE and are being considered for use in all water supply projects (training of water personnel has already  occurred)\. Under these protocols, land acquisition for WWTPs, pumping stations and other small works are carried  Page 20 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) out by the communes13 with oversight from ONEE to ensure conformity with the overarching protocols\. The land was  acquired  through  willing‐buyer/willing‐seller  arrangements  and  in  some  cases  through  donations  (i\.e\.,  no  expropriation)\.  Among  a  total  of  134  owners,  117  were  compensated  and  17  (who  have  problems  of  succession  further  to  the  death  of  the  owner),  were  contacted  on  several  occasions,  informed  of  the  availability  of  their  compensation, which they will receive once their problems of succession are resolved\. Under the project, all land  acquisition was deemed compliant\. An external and independent review of land acquisition, in July 2015, found that:  (a)  the  project  does  not  generate  physical  displacement,  as  there  are  no  homes  on  the  land  to  be  acquired;  (b)  economic impacts of the project remain limited, as (i) land is either bare or used for cereal farming with very few  fruit trees, which are compensated for, (ii) plots to be acquired are mostly small14; (c) all persons affected by the  project are owners; and (d) acquisitions are voluntary and have, in many cases, been the subject of negotiations  regarding  their  principle  (owners  having  the  choice)  and  the  sale  price  of  the  property,  which  is  a  fundamental  difference  with  involuntary  acquisitions  and  even  more  so  with  involuntary  acquisitions  involving  physical  or  economic displacement\.   81\. Overall,  the  UCS  was  successful,  though  it  required  considerable  capacity  building  early  in  implementation\.  Additional details on and a deeper analysis of the UCS can be found in Annex 7\.  Fiduciary  82\. The project generally complied with financial management (FM) requirements, though there were some delays  in the first year of implementation due to use of Bank standard bidding documents\. Some delays were also seen later  in the project, which were part of the reason for the two extensions of the project closing date\. Considerable progress  was seen in the last two years of the projects, particularly in handling commitments and payments\. Overall, as issues  were raised in aide memoires (AMs) and ISRs, they were quickly addressed\. For instance, though one ISR (ISR 4) noted  an overdue audit, the issue was quickly resolved and moving forward deadlines were generally met for audits, though  there were delays in submitting letters of internal controls after audits\. ONEE complied with the annual requirement  that its debt ratio remained below the limit of 4\.5 (e\.g\., in 2016, the ratio was 3\.01)\.   83\. The audits recommended that ONEE improve its project accounting system, ensure better planning for annual  budget  (for  better  executing  procurement  in  a  timely  manner)  and  explore  having  a  separate  system  for  donor  financed projects\. ONEE is currently exploring options for updating its accounting system to better support reporting  for donors\.   84\. Overall, the activities complied with procurement requirements, though there were some procurement delays  at different stages in the project\. These delays were most often due to ONEE’s internal processes for disbursements\.  Additionally, ONEE faced some challenges with contract management\. In the first years of the project, procurement  was extremely slow and was thus rated Moderately Unsatisfactory (ISRs 4‐7)\. These challenges were overcome as  the project progressed\. For example, in ISR 7, it is noted that “strong senior management commitment” helped to  “halve  the  time  it  takes  from  bid  openings  to  contract  signature\.”  As  a  result,  the  project  was  consistently  rated  Moderately Satisfactory or Satisfactory for procurement from 2014 onward\.   C\. BANK PERFORMANCE  13 Morocco is sub‐divided into 12 regions, 75 second‐level administrative subdivisions, composed of 13 prefectures and 62 provinces,  as well as into 1,503 communes\. Each of these constitutes one of the levels of the decentralized territorial organization of the Kingdom  of Morocco and is governed by public law, endowed with a legal personality, as well as with administrative and financial autonomy\. 14 83 plots were less than 1 hectare in size and 58 of them were less than 500 m²\.    Page 21 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) Quality at Entry  85\. The Bank supported this project that was highly relevant and responsive to client demand\. The project’s technical  design was robust and aligned with the project’s objectives\. The project also prioritized environmental protection  and was well designed to ensure appropriate consideration of potential environmental impacts (both positive and  negative)\. Additionally, the implementation arrangements, fiduciary arrangements, and M&E arrangements for the  project were all well considered, overall\. Within the scope of the project, activities were well designed, however, the  Bank did not give larger consideration to supporting ONEE in creating a long‐term strategy for funding/financing the  sector\. Further, the economic analysis done at appraisal was not a sound/robust analysis and should have utilized  alternative methods, as further described in Annex 4\.   86\. Given the project piloted the UCS under a Bank project for the first time, additional time during preparation and  during the early years of preparation would have helped the project progress more smoothly and in a timelier fashion\.  Land acquisition issues were not sufficiently appreciated during design and were not fully understood by the Bank  team until a few years into implementation\. In spite of these challenges, the UCS was appropriate given the high  capacity client – and ultimately resulted in successful implementation, in line with Bank standards\.   Quality of Supervision  87\. Through the majority of implementation, the Bank team and Bank management provided fair and honest ratings  of  project  success,  as  seen  through  the  downgraded  ratings  during  the  early  project  delays  and  the  clear  details  provided in ISRs for how/when ratings would be updated for IP, safeguards, etc\. The ISRs and AMs also included well  written and thorough updates and reflections on the project’s progress\.   88\. The project was managed from the Bank side by a total of five task team leaders (TTLs), however, even though  there was considerable changeover in the TTLs, the project overall did not suffer as a result but instead seemed to  benefit from the infusion of new ideas at different stages of the project\. Additionally, the handovers generally were  well‐handled and allowed for overall smooth transitions\.   89\. The Bank team also effectively utilized the MTR to reassess the project and, with the GOM, reprioritize activities  to ensure a successful project\.   90\. Further, as noted above, the Bank’s social safeguards consultants provided critical on the ground support to the  project, which helped ensure land acquisition in a timely manner, in line with Bank requirements and Moroccan law\.  This  support  ultimately  ensured  that  construction  activities,  in  line  with  the  PDO,  were  able  to  occur  under  the  project\.   Justification of Overall Rating of Bank Performance  91\. Given the Bank’s overall performance at entry  had some shortcomings  but it  provided strong support of the  project during implementation, the Bank’s overall performance rating is Moderately Satisfactory\.     D\. RISK TO DEVELOPMENT OUTCOME  92\. ONEE  has  ongoing  responsibility  for  O&M  in  each  of  the  project  municipalities  and  given  its  long  history  of  working in sanitation, ONEE is well positioned to continue to operate and maintain the constructed networks and  treatment systems\. However, given its financial status, there may be challenges in long‐term funding for the sector\.  Sanitation specifically is highly subsidized within ONEE, with subsidies provided from its electricity and water supply  Page 22 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) activities, but, given sanitation’s considerable externalities (for public health and the environment), some form of  subsidization is to be expected\.   93\. However,  given  the  current  performance  of  the  new  and  rehabilitated  treatment  plants  –  as  well  as  other  treatment  plants  that  ONEE  operates  –  there  is  ongoing  concern  that  the  old  WWTPs  (those  not  built  under  the  project) will continue to not comply with national standards\. This risk is partially mitigated in light of the positive  experiences with piloting of new technologies that could be introduced at old, non‐compliant plants\.   94\. The piloting undertaken through the project is continuing to be scaled up to help improve performance of existing  treatment plants\. Additionally, ONEE continues to experiment with alternative treatment options – including its first  UASB reactor, to which ONEE was first exposed during the study visit to Brazil, and for which the Bank team mobilized  “just‐in‐time technical expertise\.”  V\. LESSONS AND RECOMMENDATIONS  Lessons  95\. The project benefited from a well‐structured RF that tracked all stages of the Theory of Change – including  activities,  outputs  and  outcomes\.  This  tracking  helped  ensure  that  the  full  results  chain  was  considered  and  the  project  objectives  were  met,  particularly  with  respect  to  household  connections\.  The  well‐designed  RF,  and  its  ongoing utilization, also helped the project adjust and refine focus as the implementation continued\.   96\. The use of appropriate monitoring was also reflected in the project’s use of pilots\.  Piloting, with appropriate  M&E,  was  found  to  be  effective  in  testing  the  applicability  of  new  technologies  and  to  assess  their  utility  in  improving performance, as well as nuisance conditions (i\.e\., odors)\. ONEE has demonstrated the capacity to select  the technologies to test, design an appropriate testing framework and timeline (including M&E), and analyze the  results to inform ongoing operations\. As mentioned, ONEE is continuing this innovation through the construction of  the first UASB for domestic wastewater treatment in Morocco\. This result also points to the value of study visits and  south‐south knowledge exchanges, which served as part of the initial inspiration for ONEE’s undertaking of this work\.   97\. In  Morocco,  the  trial  use  of  country  systems,  under  OP/BP  4\.00  “Piloting  the  Use  of  Borrower  Systems  to  Address  Environmental  and  Social  Safeguards  Issues  in  Bank‐Supported  Projects”  for  environmental  and  social  safeguards proved successful\. During project preparation, gaps between World Bank requirements and the country  systems were identified and gap mitigation measures agreed\. The UCS, particularly when used for the first time in a  country,  or  in  a  given  sector,  require  additional  time  and  support  during  preparation  and  implementation\.  This  approach  also  requires  sufficient  counterpart  buy‐in  and  understanding  of  what  ‘use  of  country  systems’  really  means, i\.e\., that the Bank will still evaluate these systems and may require some strengthening activities to ensure  compliance with the Bank’s overarching safeguards principles\.   98\. The  use  of  a  well‐designed,  adaptive  approach  to  citizen  engagement  helped  ensure  that  land  acquisition,  project  activities,  and  service  provision  aligned  with  citizen’s  concerns/interests  and  allowed  the  project  to  progress smoothly\. Without appropriate attention to the social dimensions of the project, particularly those related  to land acquisition, the project would have faced significant delays in construction\. By prioritizing this engagement,  households  were  able  to  stay  informed  and  ONEE  was  able  to  respond  to  citizens’  concerns  in  a  timely  manner\.  Through a mix of meetings, GRM systems, and connection programs that made sewer connections more affordable,  Page 23 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) the project balanced the financial and technical constraints with the underlying desire to serve citizens and provide  them with an improved service\.   99\. In the end, the project would not have been successful without the coordinated efforts of ONEE’s teams, the  TA  firm,  and  the  Bank’s  team\.  Within  ONEE,  a  number  of  offices  were  involved  in  the  project  –  given  the  implementation  spanned  14  towns\.  Additionally,  communes  were  involved,  and  ultimately  handled,  the  land  acquisition processes\. As with most large infrastructure projects, there were also a number of teams within ONEE  who  needed  to  coordinate,  including  those  working  on  technical  aspects,  environmental  safeguards,  social  safeguards, fiduciary aspects, etc\. Due to strong internal leadership, teamwork, and good communication, with all  parts of the team, as well as support from the project TA firm, the project was ultimately able to substantially achieve  its development objective by delivering increased access to sanitation services and a reduction in wastewater‐related  pollution\.   Recommendations  100\. The Oum er Rbia Sanitation Project provided clear evidence of ONEE’s commitment to provide adequate and  adaptable sanitation solutions to small towns, i\.e\. the landscape between urban and rural\. As ONEE moves towards  increasing access to collection and treatment services in less populated towns and areas, it will be necessary to close  the  technical  and  institutional  gaps  to  achieve  this  goal  by  defining  the  appropriate  technically  and  financially  sustainable solutions for sanitation in rural settings, as well as the corresponding institutional framework to deliver  these sanitation services\. Support to ONEE in that sense, given the lessons learned from this project, and best practice  in providing universal access to sanitation, could focus on: (i) developing a menu of technical solutions, combining  both onsite sanitation and sewerage solutions, with consideration of resource recovery and reuse, to ensure that  human waste is safely  managed along the whole sanitation service  chain;  (ii)  expanding  and adapting the citizen  engagement  approach  used  under  the  Project  to  rural  areas  to  ensure  that  everybody  benefits  from  adequate  sanitation service delivery outcomes; and (iii) developing new and creative ways of funding sanitation\.  \.  Page 24 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS          A\. RESULTS INDICATORS    A\.1 PDO Indicators            Objective/Outcome: Increase access to sewerage services  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Direct project beneficiaries  Number  0\.00  0\.00  220000\.00  231964\.00    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018    Female beneficiaries  Percentage  50\.00  0\.00  50\.00  50\.40    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018       Extremely poor  Percentage  15\.00  0\.00  15\.00  13\.20  beneficiaries    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018      Comments (achievements against targets): 105% achieved for direct beneficiaries; 101% achieved for female beneficiaries; 88% achieved for  extremely poor beneficiaries\. Estimates of female and extremely poor beneficiaries are based on province‐level and city‐level estimates\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Page 25 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459)   Number of people in urban  Number  0\.00  0\.00  130000\.00  144004\.00  areas provided with access to  Improved Sanitation under    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018  the project    Comments (achievements against targets): 111% achieved\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Percentage of population in  Percentage  0\.00  0\.00  90\.00  96\.30  Project area whose  wastewater is collected    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018    Percentage of population in  Percentage  50\.00  0\.00  90\.00  90\.00  Project area whose  wastewater is appropriately    30‐Jun‐2010      31‐May‐2018  treated      Comments (achievements against targets): 107% achieved for portion of collected waste; 100% achieved for portion of wastewater  appropriately treated\. [Note: portion of wastewater that is appropriately treated is aligned with the second (not the first) PDO  objective/outcome]\.        Objective/Outcome: Reduce wastewater‐related pollution  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  WWTPs constructed under  Number  0\.00  10\.00  6\.00  1\.00  Page 26 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459)   the Project complying with    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018  national standards    Comments (achievements against targets): 16\.7% achieved based on revised target; 10% achieved based on original target\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Volume(mass) of BOD  Tones/year  0\.00  1830\.00  800\.00  1353\.00  pollution load removed by  treatment plant under the    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018  project    Comments (achievements against targets): 169% achieved based on revised target; 73\.9% achieved based on original target\.        A\.2 Intermediate Results Indicators        Component: Increase access to sewerage services  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Household sewer  Number  0\.00  0\.00  13000\.00  13734\.00  connections rehabilitated  under the project    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018    Comments (achievements against targets): 106% achieved\.      Page 27 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459)   Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  New household sewer  Number  0\.00  13000\.00  9000\.00  10239\.00  connections constructed  under the project    30‐Jun‐2010  30‐Jun‐2014  31‐May‐2018  31‐May‐2018    Total number of household  Number  0\.00  0\.00  22000\.00  23973\.00  connections built under the  Project (new or    30‐Jun‐2010      31‐May‐2018  rehabilitated)      Comments (achievements against targets): 114% achieved for new connections (against revised target); 78\.8% achieved for new connections  (against original target); 109% achieved for total number of impacted connections\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Length of newly installed or  Kilometers  0\.00  0\.00  360\.00  385\.50  rehabilitated sewerage  network    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018    Comments (achievements against targets): 107% achieved\.        Component: Reduce wastewater‐related pollution  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Additional treatment  Number  0\.00  0\.00  115000\.00  115891\.00  Page 28 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459)   capacity of WWTPs    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018  constructed under the  Project (in population  equivalent)    Comments (achievements against targets): 101% achieved\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  WWTPs associated with the  Number  0\.00  0\.00  12\.00  5\.00  project complying with  national discharge standards    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018    Comments (achievements against targets): 41\.7% achieved\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Average BOD abatement rate  Percentage  0\.00  0\.00  75\.00  74\.20  of WWTPs constructed under  the Project    30‐Jun‐2010  30‐Jun‐2010  31‐May‐2018  31‐May‐2018    Comments (achievements against targets): 98\.9% achieved\.                     Page 29 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) B\. KEY OUTPUTS BY COMPONENT      Objective/Outcome 1: Increase access to sanitation services  1\. Direct project beneficiaries (231,964)  2\. Female beneficiaries (50\.4 percent)  3\. Extremely poor beneficiaries (13\.2 percent)   Outcome Indicators  4\. Number of people in urban areas provided with access to  improved sanitation (144,004)  5\. Percentage of population in Project area whose wastewater is  collected (96\.3 percent)  1\. Household sewer connections rehabilitated under the project  (13,734)  2\. New household sewer connections constructed under the project  (10,239)  Intermediate Results Indicators  3\. Total number of household connections built under the Project  (new or rehabilitated) (23,973)  4\. Length of newly installed or rehabilitated sewerage network  (385\.5 km)  1\. New household sewer connections (13,734)  Key Outputs by Component  2\. Rehabilitated household sewer connections (10,239)  (linked to the achievement of the Objective/Outcome 1)  3\. Sewer network expansion and rehabilitation (385\.5 km)  Objective/Outcome 2: Reduce wastewater‐related pollution  1\. WWTPs constructed under the project complying with national  discharge standards (1 at time of ICR; reasonably expected to be 4   Outcome Indicators  in the coming months)  2\. Volume(mass) of BOD pollution load removed by treatment plant  under the project (1,353 tons/year)  Page 30 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) 3\. Percentage of population in Project area whose wastewater is  appropriately treated (90 percent)  1\. Additional treatment capacity of WWTPs constructed under the  Project (in population equivalent) (115,891)  2\. WWTPs associated with the project complying with national  Intermediate Results Indicators  discharge standards (5 at time of ICR; reasonably expected to be 8  in the coming months)  3\. Average BOD abatement rate of WWTPs constructed under the  Project (74\.2 percent)  Key Outputs by Component  1\. New WWTPs constructed under the project (6)  (linked to the achievement of the Objective/Outcome 2)  2\. Pilots of new WWTP technologies to improve performance (7)      Page 31 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459)   ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION        A\. TASK TEAM MEMBERS    Name  Role  Preparation  Alexander Bakalian   Lead Water Resource Specialist (TTL at preparation)  Philippe Huc   Sr\. Water and Sanitation Specialist  Augustin Pierre Maria   Economist  Jean‐Charles de Daruvar   Senior Counsel  Hoi‐Chan Nguyen   Consultant, Lawyer  Mohammed Bekhechi   Lead Counsel  Hocine Chalal   Regional Safeguards Adviser  Andrea Liverani   Social Development Specialist  Zakia B\. Chummun  Language Program Assistant  Abdoulaye Keita   Procurement Specialist  Anas Abou El Mikias   Sr\. Financial Management Specialist   Richard Verspyck   Consultant, Financial Analyst  Larbi Khrouf   Consultant, Reuse Specialist  Abdelmourhit Lahbabi  Consultant, Environmental Specialist  Supervision/ICR  Jean‐Martin Brault, Daniel Camos Daurella  Task Team Leader(s)  Moustapha Ould El Bechir, Abdoulaye Keita  Procurement Specialist(s)  Laila Moudden  Financial Management Specialist  Claudine Kader  Team Member  Markus Friedrich Vorpahl  Social Safeguards Specialist  Taoufiq Bennouna  Environmental Safeguards Specialist  Khalid Anouar  Environmental Safeguards Specialist  Page 32 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) Mohamed Adnene Bezzaouia  Environmental Safeguards Specialist  Rebecca Jean Gilsdorf  Team Member  Houcine Gabi  Social Safeguards Specialist         B\. STAFF TIME AND COST  Staff Time and Cost  Stage of Project Cycle  No\. of staff weeks  US$ (including travel and consultant costs)  Preparation  FY07  \.600   930\.72  FY08  4\.982  46,242\.37  FY09  15\.790  125,972\.41  FY10  44\.823  393,408\.78  FY11  0  2,231\.84  Total  66\.20  568,786\.12    Supervision/ICR  FY11  16\.804  98,528\.20  FY12  5\.870  34,133\.34  FY13  13\.619  70,114\.08  FY14  15\.815  181,164\.77  FY15  9\.800  81,370\.54  FY16  21\.475  186,668\.85  FY17  17\.448  147,209\.47  FY18  7\.570  102,907\.53  FY19  11\.468  68,628\.79  Total  119\.87  970,725\.57                 Page 33 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 3\. PROJECT COST BY COMPONENT15          Amount at Approval   Actual at Project  Percentage of Approval  Components  (US$M)  Closing (US$M)  (%)  Part I: Wastewater collection  64\.1  63\.7  99\.4  and treatment  Part II: Piloting of  Wastewater Technologies  5\.7  3\.3  58\.5  and Implementation support  Unallocated (contingencies)  5\.3  0  0  Total     75\.1   67\.05     96\.1          15 The figures in this table do not match those shown in the ICR Data Sheet (page 2) because at the time of ICR writing, there were  still  funds  in  the  ONEE  Designated  Account  that  had  not  yet  been  used  for  a  specific  component\.  Some  of  these  funds  may  eventually be returned to the World Bank, if the items are not cleared before the end of the grace period, i\.e\. November 30, 2018\.  In addition, because of the currency dynamics between the Moroccan Dirham and the USD throughout the project implementation  period, the total cost ended up being lower than the original estimated amount of 75\.1 USD equivalent\. Between effectiveness  and the time when works started being initiated, the Moroccan Dirham had depreciated by more than 15 percent against the USD  and maintained this gap until project closing\.   Page 34 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 4\. EFFICIENCY ANALYSIS    Exchange rate 1 US$ = 9\.8 MAD in 201616  Economic Analysis  1\. Costs for the project were in line with estimates\. The Oum Er Rbia Sanitation project financed  sewage treatment plants in 13 towns in Morocco with a combined population of 240,000\. The total  cost  of  the  project  was  estimated  at  just  under  US$70  million  (including  both  hard  and  soft  components), US$ 43 million of which was financed by the International Bank for Reconstruction and  Development (IBRD)\. All the expected outputs were met by the project within the estimated costs\.      2\. But, anticipated benefit streams to producer and consumer surplus have not materialized  as originally calculated\. At project appraisal, the Economic Rate of Return (ERR) was estimated at 11%  with  the  investment  having  a  net  present  value  (NPV)  of  around  US$4  million\.  This  return  was  premised principally on two benefit streams: (i) a producer surplus through the sewerage tariff, and  (ii) a consumer surplus through estimation of the increase in property value derived from connecting  to  sewerage  services\.  Neither  of  these  benefit  streams  have  materialized  to  date  as  (i)  sewerage  revenues do not cover the costs of providing sewerage costs, hence there is no producer surplus (see  financial  analysis),  and  (ii)  there  has  been  only  a  modest  increase  in  residential  property  prices  in  nominal terms and a decrease in real terms (Figure A4\.1)\.   Figure A4\.1: Real Estate Price Index for Morocco Nominal Residential Property Price  Residential Property Price Index  Index  Source: Real Estate Price Indexes (REPI) were jointly constructed by Bank Al‐Maghrib and the Land Registry Office  The quarterly index, based on the value of 100 in 2006, are calculated following the repeat‐sales method that controls  the heterogeneity of properties\.    3\. From  the  above  real  estate  data,  there  is  also  no  indication  that  property  prices  have  increased more in towns with better access to sewerage than those with poorer access to sewerage\.  Though no ex‐post data on the relative prices of residential property with versus without access to  sewerage are available, an ex‐post household survey in two cities, El Brouj and Aghbala, reported that  92 percent of households were satisfied with their sanitation situation, compared with 3 percent who  were satisfied before the project (and compared to 19 percent of non‐beneficiary households in the  16 https://data\.worldbank\.org/indicator/PA\.NUS\.FCRF?locations=MA  Page 35 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) same cities)\. This suggests a benefit but unfortunately this was not quantified\.     4\. Other economic benefits including the direct costs of emptying septic tanks, health benefits,  and the environmental benefits of reducing pollution, were not estimated at appraisal\. The average  cost of emptying septic tanks for a 5‐person household, reported by ONEE, were between 1750 and  3500 MAD per year, compared to the estimated 619 MAD sewerage charge for a 5‐person household  per year\. This suggests two possible benefit streams: (i) to households, and (ii) to the environment\.  Taking the mid‐point of the emptying costs, the benefit to the household would be around 2,000 MAD  (~US$200) a year, and the benefit to environment would be the wastewater seepage avoided\. This  benefit would be based on the difference between the volume of septage emptied by households  (10m3 a year assuming one vacuum truck visit a year) and the amount of wastewater disposed by the  household, which could be as much as 80m3 a year (see point below on environmental costs)\. The  benefit stream related to household savings is based on the number of new connections (10,239) and  is estimated at just over US$2 million a year\.     5\. Water  reuse  for  agriculture  and  reductions  of  environmental  pollution  also  generated  benefit streams, albeit modest\. The costs of no action can be categorized into three groups: adverse  human  health  effects  associated  with  reduced  quality  of  drinking  and  bathing/recreational  water;  negative  environmental  effects  due  to  the  degradation  of  water  bodies  and  ecosystems  where  untreated or inadequately treated wastewater is discharged; and potential effects on those economic  activities that use polluted water for crop production, fisheries, aquaculture, or tourism\. The majority  of these are very difficult to value but estimates are made here of wastewater for agricultural reuse  and reduction in BOD per year\.    6\. Though there is no tariff for treated wastewater, agricultural irrigation water from other  sources costs between 1\.5 to 3 MAD/m3 for gravity irrigation and 4 to 8 MAD/m3 in other irrigation  schemes\. Based on a conservative estimate (1 MAD per m3) for the value of treated wastewater used  for  agriculture,  the  benefit  stream  over  the  40‐year  project  period  would  be  between  US$1\.5  to  US$2\.2 million (depending on 60‐90 liter per capita water use per day at a six percent discount rate)\.17     7\. The reductions in BOD were around 1,300 tons/year\.  Though there are no studies on the  value  of  these  reductions  in  Morocco,  studies  in  Spain  estimate  the  cost  of  inaction  as  being  equivalent to US$70 per ton per year\. This would generate a further benefit stream of just under US$  100,000 a year when pro‐rated for Moroccan GDP per capita on a Purchasing Power Parity (PPP) basis\.  Discharges  of  nitrogen  and  phosphorus  into  the  environment,  which  can  contribute  to  increasing  treatment costs at downstream water treatment plants, as well as to eutrophication, both monitored  by the Oum Er Rbia River Basin management institution (“Agence du Bassin Hydraulique de l'Oum Er  Rbia”), were attributed regret costs of just over US$1 million along a further US$1\.2 million a year for  other common sewage‐related pollutants\. Together these related environmental costs of non‐action  were estimated at US$2\.4 million per year\.     8\. Though no health data were collected at the project sites, a benefit of just under US$10 per  person living in the area was estimated based on a reduction in the prevalence of sanitation‐related  diseases  (mainly  diarrheal  disease)\.  A  total  of  just  over  US$2\.1  million  a  year,  based  on  the  17  The  discount  rate  used  at  appraisal  was  high  (10  percent)  and  it  is  now  recommended  by  the  World  Bank  Sustainable  Development (SD) Chief Economist that a discount rate of six percent is used\.   Page 36 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) productivity losses, was attributed to the project\.    9\. In  conclusion,  while  the  ERR  estimated  at  appraisal  based  on  producer  and  consumer  surpluses – through the tariff and land prices respectively – did not materialize, other benefit streams  were  estimated  based  on  benefits  identified,  but  not  quantified,  at  the  time  of  appraisal\.  These  benefits  included:  (i)  savings  from  septic  tank  emptying;  (ii)  wastewater  reuse  in  agriculture;  (iii)  reduction in environmental pollutants; and (iv) health benefits\. These combined benefit streams are  estimated to be around US$5\.7 million per year\. This combined benefit stream over a 40‐year period  at a discount rate of six percent generated an NPV of US$33\.6 million or an ERR of 9\.4 percent (as  shown in Table A4\.1)\.  Financial Analysis of ONEE as whole  10\. ONEE’s operating cost coverage ratio for its combined water and sewerage operations is  well  above  the  regional  average\.  ONEE  is  a  regional  leader  in  its  financial  performance\.  Before  depreciation, interest and tax charges ONEE’s combined water and sewerage operations generate a  positive cash flow, reporting an operating cost coverage ratio of just under 2 over the 2010 to 2015  period (see Figure A4\.2 for additional details)\.  Figure A4\.2\. Operating Cost Coverage Ratio (average 2010‐2015)  Source: IBNET and ONEE financial statements     11\. ONEE’s  financial  reports  are  prepared  on  an  accrual  basis  to  reflect  the  full  costs  of  operating,  replacing  and  financing  its  infrastructure\.  Accounting  in  this  way  is  international  good  practice for utilities and enables the Government of the Kingdom of Morocco and ONEE to monitor  and report on its performance relative to full cost recovery\. ONEE is responsible for repaying both  principal and interest on its borrowing\.    12\. On  this  basis,  ONEE’s  sewerage  operations  are  loss‐making  under  the  existing  tariff  structure\. This means that revenues from ONEE’s water services are used to cross‐subsidize sewerage  operations\. The cross‐subsidy from ONEE’s water operations to its sewerage operations totaled 413  Page 37 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) million  MAD  (US$42  million)  in  2016\.  This  included  343  million  MAD  (US$35  million)  to  cover  operational losses and depreciation as well as a further subsidy of 74 million MAD (US$8 million) to  cover sewerage related debt service\.    13\. In 2016 the cross‐subsidy to sewerage services resulted in ONEE reporting a deficit of 129  million  MAD  (US$13  million)\.    Sewerage  operations  consumed  63  percent  of  ONEE’s  operating  surplus, and, after debt financing, resulted in a deficit for ONEE’s water branch\. While this deficit was  only  a  small  proportion  of  ONEE’s  turnover  (2  percent),  cross‐subsidizing  sewerage  services  is  constraining ONEE’s overall cashflow\.     14\. Without increasing sewerage tariffs, the burden of cross‐subsidizing sewerage will grow as  the coverage of sewerage services is expanded across urban areas of Morocco\.  The average tariff  for sewerage services is just under 2 MAD/m3 only slightly above that at appraisal (1\.45 MAD/m3) and  well below the 5\.30 MAD/m3 anticipated to be achieved by 2020 (based on projections at the time of  appraisal)\.  Sewerage  services  are  a  relatively  small  proportion  of  ONEE’s  operations  –  around  15  percent of ONEE’s total operational expenditure\. At existing levels of tariff and operational efficiency  the  expansion  of  sewerage  services  would  further  erode  revenues  generated  by  ONEE’s  water  operations\.    15\. Debt relating to water and sanitation investments has doubled in eight years and the debt  service has become unsustainable\. By 2016, ONEE had accumulated 24 billion MAD (US$2\.5 billion)  in debt for capital projects with external financing institutions\. The cost of servicing this debt was just  under 750 million MAD (US$76 million) in 2016\. The ratio of net operating revenues to debt service  has fallen to 0\.7 in 2016 from 1\.3 in 2009\. This is below the target ratio of 1\.2 agreed at negotiations  and documented at appraisal\. Figure A4\.3 shows the trends in debt and operating ratio for ONEE’s  Water Branch\.  Figure A4\.3\. Financial data for ONEE’s Water Branch  Debt (MAD billions)   Ratio of net operating revenue to debt service  Source: ONEE audited accounts for 2009, 2010, 2011 and administrative data for 2016    16\. There is less transparency in the financial operations of ONEE’s water branch since it was  merged  with  electricity  in  2012\.  The  audited  accounts  do  not  present  the  results  of  water  and  Page 38 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) electricity separately\. Though administrative data for ONEE’s water branch was provided for 2016,  these data only showed the revenue and expenditure component of the financial statement not the  balance  sheet  or  cash  flow  components\.    On  the  positive  side,  the  administrative  accounts  did  disaggregate the sanitation from the water operations\.  Financial Analysis at town level  17\. ONEE  recognize  that  the  sewage  business  is  loss‐making  and  through  this  project  were  looking for solutions – an original objective of this project\. ONEE was only in the water business in  2007/08  but  was  mandated  by  the  Government  to  take  over  management  of  sewage  operations  previously built and managed by municipalities\.  One of the original objectives of this project was,  therefore,  to  pilot  non‐conventional  technologies  for  wastewater  treatment  systems  in  selected  locations,  with  a  view  to  reducing  costs  and  solving  other  operational  problems,  such  as  reducing  environmental pollution and nuisance conditions (e\.g\., odors) generated at some plants\.     18\. Though  this  objective  was  dropped  from  the  PDO,  the  project  did  undertake  a  series  of  pilots\.  The project expanded 6 existing systems and built eight new systems (sewage collectors and  treatment plants)\. Of these, two systems (Youssoufia and Khouribga) are connected to a WWTP that  is managed by a mining company through a Public‐Private Partnership arrangement in exchange for  the  company  using  the  treated  water  from  the  WWTP\.  The  systems  also  covered  a  range  of  technologies (e\.g\., ponds, lagoons, activated sludge) supplemented with additional pilot technologies  (e\.g\. floating baffles, rock filters, odor reduction etc\.) aimed at improving removal efficiencies, effluent  characteristics and odor conditions\.    19\. Not all WWTPs were finalized by 2016, so financial data at the town level do not yet fully  reflect the operational costs of all project‐built infrastructure\. The most recently available financial  data  was  from  2016\.  The  project  financed  a  combination  of  new  infrastructure  and  extensions  to  existing  (in  bold)  sewage  infrastructure  (Figure  A4\.4  shows  existing  plants  in  bold)\.  Some  of  the  WWTPs had not started operating in the last year for which there is financial data, including: Aghbala,  Chemaia and Youssoufia\.     20\. For the WWTPs that were operational in 2016, existing plants had higher costs per customer  connection  than  did  the  new  plants\.  With  the  exception  of  El  Brouj,  existing  plants  had  higher  revenues  and  costs  per  connection\.  Nine  of  the  WWTPs  had  revenues  greater  than  costs  per  connection\.  At Azilal and  Ouaouizeght, the systems  had higher costs than revenue per connection  (see Figure A4\.4)\.      Page 39 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) Figure A4\.4\. Revenue versus cost per connection for WWTPs in Oum Er Rbia valley (MAD)  Costs > Revenue (before depreciation) Revenue > Costs (before depreciation) Key: Existing plants in bold  Source: ONEE administrative data    21\. When  depreciation  charges  are  included,  existing  WWTPs  made  larger  losses  per  connection  than  did  the  new  plants  (see  Figure  A4\.5)\.  This  suggests  that  the  capital  depreciation  charges of the existing plants were higher than the new plants reflecting their greater original capital  costs\. Of the existing WWTPs, Khouribga, which is managed through a Public‐Private Partnership, is  the closest to full cost recovery\. Though the mining company manages the WWTP itself, ONEE still  covers costs of maintaining the sewage network as well as collecting revenues from the households\.   Page 40 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) Figure A4\.5\. Revenue versus cost + depreciation per connection for WWTPs in Oum Er Rbia valley  (MAD)  1,400 Costs + Depreciation > Zaouiet Cheikh: Existing Ponds  Floating baffles and mixing  1,200 systemsSolar  panels Bejaad: Existing Ponds Aeration Azilal: Existing Ponds Odour  reduciton 1,000 Berrechid: Existing Pon Cost + Depreciation per connection Oued Zem: Existing Ponds  800 El Ksiba: New Ponds Odour  El Brouj: New Ponds Flo reduciton baffles and mixing system panels Ouaouizeght: New Ponds Rock  filter 600 Khouribga:  Existing PPP Activated  400 sludge  Aghbala: New Ponds  Boulanouare: New network  Activated sludge in Khouribga  200 Revenue > Costs + Youssoufia: New PPP Activated sludge  Hattane: New Aerated lagoon  Chemaia: New Ponds Floating baffles and mixing systems 0 0 100 200 300 400 500 600 700 800 900 Revenue per connection Key: Existing plants in bold  Source: ONEE administrative data    22\. Additional years of financial data would be needed to establish whether the new systems  are more efficient than the existing systems\. It is too early to establish whether the new systems are  more efficient than the existing systems\. Additional years of financial data would also be necessary to  establish whether extensions and adaptations to the existing systems have made them more efficient\.  The towns that the project targeted have an annual population growth rate of 1\.3 percent and not all  households  were  connected\.  Connecting  these  additional  potential  customers  to  reach  universal  access would help those systems with an operational surplus (where revenue is higher than costs per  connection) as depreciation will fall as turnover increases to use the full capacity of the WWTPs\.         23\. At the project level an US$82 million loss is projected at existing tariff levels\. The actual  returns at ICR look far worse than the negative return estimated at appraisal\. This is due to the far  higher actual O&M costs reported by ONEE\. Because of this significant loss at existing sewage tariff  levels (scenario A), two other scenarios were examined for their returns\. Scenario B used the tariff  increase projected at appraisal which was 2\.5 MAD per cubic meter increasing at 0\.1 MAD per year\.  Page 41 of 54  The World Bank Morocco Oum Er Rbia Sanitation (P098459) Scenario C used a tariff of US$1 per cubic meter of sewage\. Only scenario C had a positive financial  rate of return approaching that required for full cost recovery\. A minimum effective tariff of US$0\.68  would be required to cover the cost of borrowing at IBRD rates\. Table A4\.1 summarizes the results of  the economic and financial analyses at appraisal and at the time of the ICR\.     Table A4\.1: Economic and financial rates of return (ERR and FIRR) under three scenarios   ERR (%)  Economic  FIRR (%)  Financial NPV     NPV ($)  ($)  At Appraisal  11%  $4,000,000  5\.7  ($9,000,000)  Scenario A ‐ At existing tariff structure  9\.4%  $33,629,618  ‐  ($81,973,036)  Scenario B ‐ At higher tariff structure  9\.5%  $34,361,740  (3\.1%)  ($58,996,535)  proposed in PAD  Scenario C ‐ At $1 per m3  15\.7%  $103,815,276  8\.6%  $40,193,395  Overall conclusion of the Economic and Financial Analysis  24\. While the ERR estimated at appraisal (based on producer and consumer surpluses – through  the  tariff  and  land  prices  respectively)  did  not  materialize,  other  benefit  streams  were  generated  including (i) savings from septic tank emptying; (ii) wastewater reuse in agriculture; (iii) reduction in  environmental pollutants; and (iv) health benefits\. These combined benefit streams are estimated  to be about US$5\.7 million a year, which, at a discount rate of six percent,18 generated a positive  NPV of US$33\.6 million\.     25\. Compared to other water supply and sanitation utilities in the Middle East and North Africa  (MENA) region, ONEE reports strong financial indicators including high operating cost coverage ratio  well above the regional average\.  However, along with its relatively strong financial position, it has  responsibility for covering both principal and interest payments on its borrowing for expansion as well  as responsibility for replacement of existing infrastructure\. As a result, it is one of the few utilities  whose accounts make it possible to monitor its performance on a full cost recovery basis\. On this basis  and at current tariff levels, its sewerage operations are loss‐making and so cross‐subsidized by water\.     26\. Continued monitoring of costs and revenues from the different types of WWTPs has potential  to point ONEE towards more efficient technological and management arrangements for the sewerage  side of their business\.    27\. However, to ensure that its sewage operations become self‐financing over the medium‐term,  ONEE  will  need  to  pursue  the  combination  of  immediate  and  regular  tariff  reviews,  efficiency  improvements and expansion of the sewage network to unconnected households\.          18 The discount rate used at appraisal was 10 percent, but the present analysis uses a discount rate of 6%, as per the 2016  recommendations of the World Bank’s Sustainable Development Chief Economist\.  Page 42 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 5\. BORROWER, CO‐FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS    Selected sections from Borrower ICR    1\. The  Borrower  (ONEE)  elaborated  a  complete  ICR  for  the  Oum  Er  Rbia  Sanitation  Project  (referred  to  as  “BIRD  III”)  with  thorough  accounts  of  project  implementation  for  each  beneficiary  town,  including  technical,  environmental  and  social  safeguards,  procurement  and  financial  management aspects\. Details provided were incorporated into the Bank’s ICR where appropriate, and  this Annex will thus only provide additional information on key aspects of the project\.     2\. Implementation  arrangements\.  Key  aspects  of  the  implementation  arrangements  were  summarized in the Borrower’s ICR:  ï‚ ONEE’s  Water  Branch,  particularly  its  Directorate  of  Sanitation  and  Environment  (DAE),  implemented the project in close coordination with and with the support of two of its regional  directorates  (Direction  Régionale  or  DR),  i\.e\.  DR2  (Tensift‐Marrakech)  and  DR3  (Centre‐ Khouribga)\. Implementation was the responsibility of ONEE's existing structures, under the  coordination  of a project  manager appointed within the DAE, and the technical assistance  (TA) firm which was hired to support implementation helped strengthen its institutional and  technical capacities over the course of the project;  ï‚ The regional directorates, with the support of ONEE’s central services, oversaw the technical  aspects of the sub‐projects, including community mobilization efforts and works carried out  over the course of the project by companies and consulting firms\. The regional directorates  were also responsible for the publication of calls for tenders and the award of contracts, while  the ONEE’s central Directorate of Supplies and Procurement (DAM) managed the tenders for  the studies carried out by the DAE;  ï‚ Before the project, communes, under the supervision of the Ministry of the Interior, were  responsible,  among  other  things,  for  the  supply  of  drinking  water  and  sanitation  services  (“liquid sanitation”) for towns and centers under their jurisdiction\. For all towns under the  project, communes had already transferred responsibility for water supply to ONEE, and after  developing in principle agreements with communal councils with regards to the transfer of  the management of sanitation services to ONEE, “Delegated Management Agreements” were  signed  before  works  could  begin  in  each  town\.  In  addition,  communes  needed  to  provide  evidence  satisfactory  to  both  the  Borrower  and  the  Bank  that  all  procedures  for  the  acquisition of and financial compensation for land required for treatment plants and pumping  stations  had  been  complied  with\.  Communes  contributed  50  percent  of  the  costs  of  the  subprojects (collection networks, treatment plants and maintenance equipment);    3\. Communication  and  consultations  with  beneficiary  populations\.  The  involvement  of  beneficiaries was considered essential to the success of the project\. Feasibility studies thus identified  the  concerns  of  potential  beneficiaries  and  took  their  needs  and  expectations  into  account  at  the  project design level, in order to facilitate the connection of households to future sanitation services\.  On  the  other  hand,  the  project  worked  to  develop  a  very  proactive  communication  strategy  to  promote  the  benefits  of  the  project  and  thus  increase  the  connection  rate  and  raise  the  financial  contributions  of  the  communal  governments  involved\.  Through  these  awareness  and  mobilization  campaigns, ONEE was better able to meet the needs of end‐users, particularly women as the main  users of the sanitation service within households\.  Page 43 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459)   4\. The special case of Boujaad: the rehabilitation of the sewerage network in the Old Medina  (registered  National  Heritage  since  2004)\.  This  case  deserves  special  attention  as  a  section  of  the  rehabilitation works of the Old Medina’s sanitation network was located in the right‐of‐way registered  under the National Heritage list19\. As a result, OP 4\.11 "Physical Cultural Resources" was triggered, as  well as the equivalent national policy, and the Bank carried out an analysis of the country system in  terms  of  heritage  conservation  and  management  against  the  guidelines  of  OP  4\.11\.  A  note  was  prepared to complement the country system diagnosis performed during project preparation in 2010,  as  the  original  diagnostic  focused  on  aspects  related  to  environmental  assessment  and  land  acquisition\.     5\. Due to the dilapidated state of certain areas in the Old Medina, and the substantial risk of  collapse, ONEE suspended the network rehabilitation works in the medina, in order to contract out a  study of technical alternatives and initiate consultations with the commune to define measures to  prevent  and  mitigate  the  potential  risks  of  housing  collapse,  as  well  as  to  ensure  the  safety  of  residents\. At the request of the DAE, a visit to the Old Medina took place on December 21, 2016 in  the presence of social and environmental safeguards experts from the World Bank, ONEE’s central  and regional teams (DAE, DR3), the TA firm, the company in charge of the works and two independent  experts in geotechnics and civil engineering\.    6\. The population of the Medina of Boujaad, who had strongly requested the rehabilitation of  their  sanitation  network,  was  informed  about  the  results  of  the  independent  technical  expertise  commissioned by ONEE for this purpose, in particular with regards to: (i) the very high risks of collapse  related to the poor quality of the soil, foundations and buildings, and (ii) the appropriate technical  methodologies to execute the works according to the identified risks\. The alternative which was finally  adopted was trenchless sewerage pipe repair and lining (“chemisage”), which would allow the works  to avoid the risks associated with the earthworks and with digging trenches in narrow medina streets\.  The TA firm mobilized an expert from June 28 to 29, 2017 to establish the procedures to be followed  for the realization of the rehabilitation works, and works were finally completed in May 2018\.      7\. In addition, ONEE provided comments on the World Bank ICR on November 19, 2018, which  were  incorporated  into  the  document\.  In  particular,  these  comments  served  to  add  clarity  on  the  rationale  behind  and  circumstances  around  the  different  project  restructurings,  as  well  as  on  the  reasons why certain towns were removed from the project scope\.          19 According to Order No\. 2\.04\.80 published in Official Bulletin No\. 5191 on March 1, 2004\.  Page 44 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 6\. SUPPORTING DOCUMENTS   Project Papers   Restructuring Paper (June 2, 2014), Report No\. RES14190 22‐Dec‐2017‐  http://documents\.worldbank\.org/curated/en/297341468052843183/pdf/RES141900P098400Box38 52222B00OUO090\.pdf  Restructuring Paper (May 9, 2013), Report No\. 75048‐MA ‐  http://documents\.worldbank\.org/curated/en/602881468062959846/pdf/750480PJPR0v100377315B 00PUBLIC00ACS\.pdf  Project Appraisal Document (May 20, 2010), Report No\. 49332 ‐ MA ‐  http://documents\.worldbank\.org/curated/en/465391468052846159/pdf/493320PAD0P098101Offici al0Use0Only1\.pdf  Financing Agreements  Amendment to Loan Agreement (June 18, 2014), Loan No\. 7925‐MA ‐    http://documents\.worldbank\.org/curated/en/993631468052797862/pdf/RAD822959691\.pdf  Loan Assumption Agreement (September 18, 2013), Loan No\. 7925‐MA ‐   http://documents\.worldbank\.org/curated/en/225771468279939694/pdf/Ln7925‐MA‐LA\.pdf  Original Loan Agreement (August 19, 2010), Loan No\. 7925‐MA ‐   http://documents\.worldbank\.org/curated/en/969371468275663037/pdf/L79251Oum0Er0R1tation1 LA1Conformed\.pdf  Guarantee Agreement (August 19, 2010), Loan No\. 7925‐MA ‐  http://documents\.worldbank\.org/curated/en/848331468279551396/pdf/L79251Oum0Er0R1tation1 GA1Conformed\.pdf  Additional Documents  Implementation Status and Results Reports and Safeguards Documents ‐  http://projects\.worldbank\.org/P098459/morocco‐oum‐er‐rbia‐ sanitation?lang=en&tab=documents&subTab=projectDocuments  Citizen Engagement in Water Snapshots: Morocco – Oum Er Rbia Sanitation Project (May 2017) ‐  http://documents\.worldbank\.org/curated/en/147031501045871254/pdf/117749‐REVISED‐Morocco‐ Citizen‐Engagement‐Snapshot‐Final‐External\.pdf  Country Partnership Strategy for the Kingdom of Morocco (FY14‐FY17), Report No\. 86518‐MA ‐  http://www\.worldbank\.org/content/dam/Worldbank/document/MNA/moroccocps/Morocco_CPS_F INAL\.pdf  Mission Environmental Reports for Aghbala and Ouaouizeght WWTPs (October 2015 and January  2016)\.    ONEE, 2018\. Rapport d’Achèvement: Programme de Dépollution du Bassin de l’Oum Errabia (BIRDIII)\. Rural Water Supply Project Loan Agreement, P145529 (May 2014), Loan No\. 8397‐MA –    http://documents\.worldbank\.org/curated/en/787071468052162276/pdf/RAD983598418\.pdf     Page 45 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 7\. REVIEW OF THE PERFORMANCE OF THE SAFEGUARDS APPROACH   THROUGH THE USE OF COUNTRY SYSTEMS & CITIZEN ENGAGEMENT DURING PROJECT  IMPLEMENTATION  Use of Country Systems (UCS)  1\. Background\. The Project adopted the piloting of the UCS for the environmental and social  safeguards aspects and triggered three of the eight safeguards that could be subject to piloting under  OP 4\.00\. “Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues  in  Bank‐Supported  Projects,”  i\.e\.,  (i)  Environmental  Assessment  (EA);  (ii)  Involuntary  Resettlement  (IR);  and  (iii)  Physical  Cultural  Resources\.  These  three  safeguards  were  triggered  because  project  activities  were  expected  to  have  environmental  impacts  during  and  after  construction,  activities  included land acquisition by the municipal authorities for the construction of wastewater treatment  plants (WWTPs), pumping stations and the installation of sewerage networks; and works were added  in the Medina of Boujaad, which is a national heritage site\.  2\. Considering  the  advances  that  had  been  made  by  Morocco’s  environmental  protection  legislation and environmental impact assessment (EIA) regulations, and recognizing ONEE’s capacity  and compliance track record, it had been decided that the UCS and procedures for the environmental  assessment  and  land  acquisition  aspects  of  the  Project  would  present  a  relatively  low  risk\.  It  was  further argued at the time of appraisal that local communities in Morocco would be presented with  better opportunities  to have their voices heard  in  matters of environmental and social safeguards  through UCS, particularly with regards to land expropriation for public use, and by adhering to local  regulations and practices, rather than those of international donors, it was hoped that both the level  and quality of sanitation services would be improved\.  3\. Assessment  of  country  systems  and  performance  of  OP  4\.00  pilot\.  An  assessment  of  the  country  systems  or  Safeguards  Diagnostic  Review  (SDR),  including  Equivalence  and  Acceptability  Analyses,  was  completed  as  per  OP/BP  4\.00,  and,  in  particular,  the  Objectives  and  Operational  Principles set forth in Table A1 of OP 4\.00\. The World Bank financed the development of the SDR,  which was finalized and disclosed on March 22, 2010\. This assessment highlighted the following:  a\. The  Equivalence  Analysis  concluded  that  the  totality  of  Moroccan  laws,  regulations,  administrative orders and guidelines applicable to  EA and IR in  the water and sanitation  sector were in nearly complete harmony with the Objectives and Operational Principles of  OP 4\.00, Table A1 and that the equivalence gaps could be remedied within the scope and  term  of  the  proposed  project  by  updating  the  ToRs  for  EIAs  to  be  carried  out  for  the  sanitation‐related investments and activities implemented under the Project;  b\. The Acceptability Analysis identified a number of gap‐filling measures for which ONEE was  responsible,  as  presented  in  Table  A7\.1,  along  with  how  these  measures  were  fulfilled  throughout the life of the Project\.    4\. The  SDR  also  recommended  conducting  an  external  evaluation  of  its  implementation,  focusing in particular on land acquisition, which was finalized in September 2015\. As recommended  by the OP 4\.00 Operational Manual, this review also documented changes in applicable legislation,  regulations, rules or procedures, as well as the effect of those changes on project implementation\.  Page 46 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) Table A7\.1 Gap‐filling measures from the Acceptability Analysis and outcomes  Gap‐filling measure  Outcome  [EA] Improve the EIA ToRs for  This was completed successfully, including all recommended elements during the Acceptability Analysis, such as: (i) conducting  sanitation sub‐projects to be  alternatives  analysis  including  the  “no  project”  alternative  to  all  sub‐projects;  (ii)  providing  detailed  mitigation  measures,  used during project  institutional arrangements for their implementation and monitoring, and a budget for each proposed mitigation measure\. These  implementation\.  measures  were  also  included  in  bidding  documents  and  contracts  for  the  construction  of  each  sub‐project;  (iii)  identifying  and    implementing capacity strengthening activities; (iv) ensuring that EIAs are prepared by experts independent from the engineering  and design study experts; (v) holding public consultations with local communities and stakeholders in view of informing them about  the sub‐projects in their area and their impacts on the environment and to collect their feedback and comments on the sub‐project  construction and operation; and (vi) disclosing final EIA reports on the ONEE website\.  [IR] Provide assistance to  A “Land Acquisition Focal Point” was appointed at ONEE to coordinate and accelerate land acquisitions and compensations under  beneficiary municipalities with  the project\. The Focal Point was trained in land acquisition requirements and policies, and was responsible for building the capacity  land acquisition processes for  of  and  assisting  municipalities  in  following  procedures  to  acquire  land,  including  informing  landowners  of  their  rights  and  of  each sanitation subproject\.  potential compensations\. The Focal Point also ensured that regular consultations and meetings were held with the PAP before  acquisition in order to seek their agreement and accompany them throughout the compensation process, and offered pro bono  support to help finalize the necessary documentation for land acquisition\. In essence, the Focal Point managed to create a unique,  personalized interface between landowners, local authorities and technical teams, as well as facilitate the convergence of technical  and social solutions, such as modifying the layout of transfer pipes on the basis of consultations with landowners\.  [IR] Monitor and document the  With the support of the World Bank social safeguards team, ONEE developed a “Land Acquisition Monitoring Matrix” which was  land acquisition and  regularly updated and sent to the Bank between and prior to supervision missions, as needed\. The World Bank social safeguards  compensation processes\. ONEE  specialist provided continuous support to the ONEE team, particularly the Land Acquisition Focal Point, and the Matrix allowed the  was to request the necessary  supervision teams to clearly identify where additional effort needed to be concentrated in order to allow all works to start in a  information from beneficiary  timely manner\. In addition, and in order to help speed up the acquisition and compensation processes, local and central authorities  municipalities before the start of  (the Local Authorities General Directorate of the Ministry of Interior, the Direction Générale des Collectivités Locales [DGCL]) were  construction of sanitation sub‐ sensitized and mobilized by ONEE teams at both central and local levels\.  projects\. In that sense,  Through  this  process,  ONEE  collected  for  each  lot  of  land  to  be  acquired:  (i)  maps  and  survey  documents;  and  (ii)  the  legal  compensation was also to be  documentation, including land titles, contracts through which the land is acquired (in the case the land is owned by an individual or  paid prior to the commencement  community under  the “Melk”  regime,  or  the  “Habous”  regime),  or  agreements  for  land  transfer  with  the  minutes  of  municipal  of works\.  councils, including a decision on a budget allocation set aside for compensation, and receipts of compensation payments, in the  case of “willing buyer‐willing seller” arrangements for public interest purposes\.  [IR] Disclose procedural acts  All documentation relating to land acquisition and compensation processes was filed and archived, and is publicy available\.  related to land lot acquisition and  consultation of affected persons\.  Page 47 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) 5\. Capacity strengthening and sustainability\.  The Project included technical assistance (TA) for the  project management team within ONEE, which included safeguards‐related aspects\. This TA first took the  form  of  training  the  ONEE  Land  Acquisition  Focal  Point,  as  well  as  developing  the  monitoring  tools  required to institutionalize the approaches developed under the Project\. In addition, support from the  World Bank social safeguards specialist was not only limited to land acquisition, and also included support  in  developing  the  Project’s  Grievance  Redress  Mechanism  (GRM),  incorporating  ONEE’s  Regional  Communication  Cells  and  technical  staff  (see  details  below  on  GRM)\.  A  gradual  handover  of  the  monitoring responsibilities (beyond what the Bank team would need to do during project supervision)  was  done  over  the  years  to  ensure  that  ONEE  staff  drove  the  process  and  understood  the  critical  importance of coordinating social/land acquisition/GRM aspects with technical aspects associated with  the  sanitation  sub‐projects\.  A  number  of  workshops  were  organized  over  the  years  to  gradually  institutionalize the approaches developed under the Project, including a project closing workshop on July  10, 2018 which provided an opportunity to present the success of these approaches, as well as lessons  learned, to a broader ONEE audience, including the central Sanitation Department, other regional units  (other than the two which were part of project implementation), as well as ONEE’s Drinking Water Branch,  amongst others\.  6\. Given the positive outcomes, as described in Table A7\.1, as well as the institutionalization of the  approaches developed (including the Land Acquisition Focal Point which is now a permanent staff position  within ONEE), it can be said that the UCS was successful\. Considerable capacity building was necessary at  the early stage of implementation, but it was shown that the UCS ultimately demonstrated its relevance  and effectiveness in achieving the Bank's safeguard policies objectives, as well as in the application of its  operational principles\. It is however important to note the following elements which can help “relativize”  the success of the UCS for this particular project, and may not allow it to be generalizable and applicable  to other contexts:  a\. The Moroccan country systems were not completely aligned with OP 4\.12 requirements, and  ONEE  therefore  adjusted  its  protocols  for  land  acquisition  in  order  to  meet  the  Bank’s  requirements\. In this case, ONEE has now seen the value in adopting the protocols which were  strengthened as part of the Project, but one may question whether the direct application of  OP 4\.12 would have achieved similar results, both in terms of achieving project objectives and  in terms of institutionalizing improved procedures for land acquisition;   b\. All land acquisitions under the Project made in the framework of the UCS did not result in any  physical resettlement of populations, and also had limited economic impacts\. No house or  other  building  were  documented  on  the  land  lots  which  were  acquired,  and  the  land  was  either bare or used for cereal agriculture with a small number of fruit trees (which were all  compensated  for)\.  Parcels  which  were  acquired  were  also,  for  the  most  part,  considered  small: out of a total of 134 parcels, 83 measured less than 1 hectare, of which 58 parcels were  of an area less than 0\.05 hectares\. All PAPs were the owners of the parcels and acquisitions  were  made  on  a  voluntary  basis,  with  the  majority  of  cases  resulting  in  negotiations  concerning the property transfer price\.  Citizen engagement  7\. Although citizen engagement activities were not part of the original project design, they were  added  in  an  organic  and  gradual  manner  in  response  to  the  project’s  needs\.  Buoyed  by  the  enabling  national  context,  which  had  recently  showed  signs  of  openness  towards  participatory  and  inclusive  approaches to engage with the population, PAPs were more prone to voice their concerns and opposition,  Page 48 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) stemming from anticipated bad odors emanating from WWTPs, illegal connections and complaints related  to connection costs and temporary inconvenience related to works\. Challenges and delays encountered  during  project  preparation  led  ONEE  and  the  Bank  team  to  address  the  community’s  concerns  by  rethinking  its  approach  and  to  adopt  an  array  of  tools  to  engage  with  the  local  community  and  all  stakeholders\. On top of the appointment of a Land Acquisition Focal Point described above, the Project  also put in place the following:    8\. Local  Monitoring  Committees\.  Local  Monitoring  Committees  were  established  and  were  comprised of local authorities, contractors, the external technical assistance or supervision firm, ONEE  and influential and trusted local actors, including traditional leaders\. These committees would ensure a  clear and continuous flow of communication between citizens and project authorities, and were set up at  each work site, holding weekly meetings open to the public to communicate consistent information to all  stakeholders, respond to citizens' demands and grievances\. This arrangement allowed parties to make  joint strategic and technical decisions, which alleviated concerns, and helped reduce the social impacts of  land  acquisition  and  the  risk  of  opposition\.  When  local  community  and  committees  included  local  population  and  communities,  ONEE  ensured  that  its  designated  staff  could  speak  the  local  dialect  or  language (e\.g\., Berber) to facilitate interactions\.    9\. Meaningful Consultations and Public Information Campaigns\. The regional Communication Cells  of ONEE were in charge of ensuring smooth interactions with populations and contributing to the proper  functioning of the citizen engagement mechanisms\. They were made up equally of men and women in  order to better interact with the community during door‐to‐door activities, consultations, and meetings\.  To  raise  awareness,  the  Communication  Cells  organized  large  community  events  such  as  debates  and  sports and cultural events, distributing flyers, t‐shirts and hats\. They also managed social teams, mainly in  charge  of  door‐to‐door  interactions,  to  present  the  content,  objectives  and  potential  impacts  of  the  project and its benefits in terms of health and hygiene\.     10\. In the specific cases of populations living near WWTPs, social teams informed the populations  living nearby – a prior mapping of these populations had been developed –  about the treatment process  and the mitigation measures to be put in place to address potential negative impacts (such as odors)\. Site  visits to WWTPs and pumping stations were also organized for the nearby populations\. In addition, two  satisfaction surveys concerning the piloting of WWTP odor reduction measures were carried out in the  rural community near the Azilal WWTP: the first before the implementation of the pilot project, and the  second after odor reduction measures had been put in place (April 2016), in order to assess the level of  perception related to odors depending on location, proximity and wind direction\. Through the use of these  surveys, ONEE hoped to test the piloted solution before expanding it other WWTPs of the project (and  beyond), and results were very positive: while odor nuisance was initially considered strong with 83% of  the  respondents,  85%  of  those  surveyed  after  the  installation  of  the  pilot  reported  satisfactory  improvements with regards to odors\.    11\. Social  teams  also  closely  tracked  the  progress  of  sewerage  networks,  to  consult  connecting  households just in time to explain benefits and payment facilities\.20 Any of those interactions became an  opportunity  to  inform  local  populations  about  the  existence  of  different  channels  for  gathering  20 Under the project, and in line with the PNA approach, the costs for connections were financed with 50 percent funding from  ONEE  and  the  remaining  50  percent  paid  by  the  Municipality\.  In  cases  were  insufficient  funds  were  available  to  connect  all  households, priority neighborhoods (e\.g\., the poorest neighborhoods) were selected to benefit from the subsidized costs\.   Page 49 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) grievances, and respond to any water, sanitation or water‐related issues, concerns or complaints\.    12\. GRM\.  A  GRM  system  was  put  in  place  progressively,  first  in  two  pilot  towns,  then  across  the  Project, and its design was largely adapted to the local context\. It established multiple ways of collecting  grievances, taking into account the long tradition of orality in project areas\. The ONEE Communications  Directorate (at the central level) and its regional Communications Cells provided strong technical support  to strengthen local ONEE teams, while also capturing effective local practices and sharing them across  ONEE  offices\.  Tools  and  channels  for  collecting,  recording,  and  monitoring  grievances  (including  oral  grievances)  were  developed\.  Roles  and  processes  were  well‐defined  for  each  actor,  and  training  was  provided regularly\. Complaints logs were redesigned and improved, and the information collected was  consolidated  by  regional  ONEE  offices  and  then  reported  to  ONEE’s  central  team  in  Rabat\.  The  team  analyzed the data to identify trends, emerging issues, or areas of improvement, and then fed it back to  local teams\. In addition, during project implementation, biannual reports were prepared and submitted  to  the  Bank\.  By  addressing  the  actual  needs  of  local  teams  to  respond  to  citizens  and  resolve  their  grievances, the GRM system successfully built local support, which enhanced its effectiveness\.    13\. In  light  of  the  satisfactory  results  of  the  use  of  these  tools,  ONEE’s  Central  Communication  Department decided to use the GRM for all its sanitation projects, and the approach developed under this  Project was documented as one of the best regional practices by the Water GP’s citizen engagement team\.  A  “Snapshot”  was  published  in  that  sense  and  is  available  at:  http://documents\.worldbank\.org/curated/en/147031501045871254/Citizen‐engagement‐in‐water‐ snapshots‐Morocco‐Oum‐er‐Rbia‐sanitation‐project\.            Page 50 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 8: SUMMARY OF REVISIONS TO PDO INDICATORS LINKED TO PROJECT RESTRUCTURINGS    Outcome  Original Indicator (target)  Revised Indicator, after June 2014 restructuring  Revised  Indicator,  after  May  2017  restructuring  (target)  (target)a  Increase access to  Number new sewerage  Direct project beneficiaries (220,000)  Direct project beneficiaries (220,000)  sewerage services  connections provided under the  (revised to read:  project  Female beneficiaries (50 percent)  Female beneficiaries (50 percent)  “increase access to  (13,000 connections) sanitation services”)  Extremely poor beneficiaries   Extremely poor beneficiaries     (15 percent)  (15 percent)  Number of people in urban areas provided with  Number of people in urban areas provided with  access to improved sanitation under the project  access to improved sanitation under the project  (130,000)  (130,000)  Rate of access to sanitation services in selected  Percentage of population in project area whose  towns (65 percent)  wastewater is collected (90 percent)  Percentage of population in project area whose  wastewater is appropriately treated (90 percent)  Reduce wastewater‐ Number of WWTPs complying  WWTPs constructed under the project complying  WWTPs constructed under the project complying  related pollution   with national standards (3 out of 4  with national discharge standards (6)b  with national discharge standards (6)b  samples in compliance every year  (10)  Volume (mass) of BOD pollution  Volume (mass) of BOD pollution load removed by  Volume (mass) of BOD pollution load removed by  loads removed by treatment  treatment plant under the project (800 tons/year)c  treatment plant under the project (800 tons/year)c  plants financed under the project   (1,830 tons/year)  Pilot non‐ Number of non‐conventional  dropped  dropped  conventional  systems piloted  technologies for  (4)  wastewater    treatment systems  a The initial revisions to the RF took place as part of the June 2014 restructuring\. In May 2017, as part of a Level II restructuring, additional changes were made to the RF, including  two changes to intermediate results indicators and the addition of the PDO‐level indicator “Percentage of population in Project area whose wastewater is appropriately treated\.”  This indicator was added to reflect the overall improvement in sanitation services under the project\. Annex 8 shows the PDO indicators for all three phases of the RF\.   b  The number of plants was reduced from ten to six as the revised indicator only includes WWTPs that were constructed under the project, and not those that were already  existing prior to the project\.   c The target for this indicator was reduced following the restructuring though no clear rationale was presented for the dramatic reduction in the target\.   Page 51 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 9: SUMMARY OF WWTPs IMPACTED  WWTP  Year Put  Volume of  Centre  Technologies  Nature of works  Piloting, if any  (new or  into  Compliance   BOD removed  existing)  Service  (ton/year)  El Ksiba  treatment ponds  new WWTP; rehabilitation of network  odor reduction pilot  new  2016  n/a2  161\.0  new WWTP; rehabilitation and extension of network;  rock filter pilot  Ouaouizeght  treatment ponds  complementary network  new  2016  yes  45\.1  El Brouj  treatment ponds  new WWTP; rehabilitation and extension of network  floating baffles  new  2015  n/a2  178\.7  rehabilitation and extension of network; OCP Group    Boulanouare  activated sludge  operates  n/a3  ‐  ‐  143\.4  Hattane  aerated ponds  new WWTP; rehabilitation and extension of network    new  2018  yes1  143\.1  Azilal  treatment ponds  rehabilitation and extension of network  odor reduction pilot  existing  2012  no  23\.0  mixing system, with  Zaouiet Cheikh  treatment ponds  rehabilitation and extension of network  solar panels for power  existing  2013  no  23\.6  Oued Zem  treatment ponds  rehabilitation and extension of network    existing  2012  yes  34\.9  Boujaad  treatment ponds  rehabilitation and extension of network  aeration added to pond  existing  2011  yes  12\.3  Aghbala  treatment ponds  new WWTP; rehabilitation and extension of network    new  2016  yes1  54\.2  existing WWTP operated by OCP Group;    Khouribga  activated sludge  rehabilitation of network  existing  2010  yes  46\.4  existing WWTP operated by OCP Group;    Youssoufia  activated sludge  rehabilitation and expansion of network  existing  n/a  yes  333\.2  floating baffles and  mixing system, with  Chemaia  treatment ponds  new WWTP; rehabilitation and extension of network  solar panels for power  new  2018  yes1  153\.8  TOTAL                   1,352\.7  1Plants must be in operation for at least a year to be eligible for compliance\. Those plants marked with a 1 have not yet been monitored for at least a year, but to date their compliance  is meeting the standards\.   2Not available\. These plants have not yet been in operation for the full required time period, but to date have shown inconsistent performance and thus may not meet the compliance  requirements\.   3The network in Boulanouare connects to the WWTP in Khouribga\.     Note: Berrechid is excluded from the table since it was added to the project at a later stage and equivalent information is not available\.     Page 52 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459) ANNEX 10: POPULATION DATA ON PROJECT LOCATIONS    Table A10\.1: City Population Data from 2014 Census  Households  Number of  Population  Households  Number of people  Locations  per  people per  Poverty rate   (2014)  (2014)  per household  connection  connection  El Ksiba  20,001  5,391  3\.7  1\.0  3\.7  4\.5%  Ouaouizeght  9,449  2,250  4\.2  1\.0  4\.2  28\.7%  El Brouj  19,235  3,841  5\.0  1\.2  6\.0  17\.6%  Boulanouare  12,756  2,802  4\.6  1\.1  5\.0  23\.4%  Hattane  10,618  2,364  4\.5  1\.1  4\.9  2\.2%  Azilal  38,520  8,438  4\.6  1\.2  5\.5  12\.1%  Zaouiet Cheikh  25,388  6,614  3\.8  1\.5  5\.8  10\.1%  Oued Zem  95,267  21,724  4\.4  1\.5  6\.6  6\.3%  Boujaad  46,893  11,091  4\.2  1\.5  6\.3  7\.7%  Aghbala  6,745  1,776  3\.8  1\.0  3\.8  56\.6%  Khouribga  196,196  43,487  4\.5  1\.7  7\.7  2\.6%  Youssoufia  67,628  14,762  4\.6  1\.2  5\.5  3\.7%  Chemaia  24,303  4,911  4\.9  1\.0  4\.9  5\.9%  Berrechid  136,634  31,705  4\.3  2\.0  8\.6  3\.2%  TOTAL  709,633  161,156              AVERAGE        4\.4  1\.3  5\.4  13\.2%    Table A10\.2: Province Population Data, by gender, from 2014 Census  Number of  Percent of  Population  Province  women  women  Corresponding project locations  (2014)  (2014)  (2014)  Beni Mellal  548,776  282,066  51\.4%  Zaouiet Cheikh; El Ksiba; Aghbala  Azilal  552,884  275,313  49\.8%  Azilal; Ouaouizeght  Boulanouare; Boujaad; Hattane; Khouribga; Oued  Khouribga  538,325  274,122  50\.9%  Zem  Berrechid  482,312  236,460  49\.0%  Berrechid  Settat  631,725  312,279  49\.4%  El Brouj  Youssoufia  251,943  123,571  49\.0%  Youssoufia; Chemaia  Total  2,457,189  1,221,745        Weighted  average        50\.4%     Average is weighted based on number of cities per province\.   Page 53 of 54 The World Bank Morocco Oum Er Rbia Sanitation (P098459)   ANNEX 11: MAP OF PROJECT LOCATIONS      Page 54 of 54

REVIEW

P073196

 ICRR 12919 Report Number : ICRR12919 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 03/12/2008 PROJ ID : P073196 Appraisal Actual Project Name : Emergency US$M ): Project Costs (US$M): 174\.1 173\.8 Demobilization & Reintegration Country : Ethiopia Loan/ US$M): Loan /Credit (US$M): 170\.6 170\.6 Sector Board : SP Cofinancing (US$M): US$M ): Sector (s): Other social services (100%) Theme (s): Conflict prevention and post-conflict reconstruction (50% - P) Social safety nets (50% - P) L/C Number : C3437 Board Approval Date : 12/05/2000 Partners involved : Closing Date : 12/31/2003 06/30/2007 Evaluator : Panel Reviewer : Group Manager : Group : Roy Gilbert Kris Hallberg Monika Huppi IEGSG 2\. Project Objectives and Components: a\. Objectives: (a) to demobilize and reintegrate 150,000 veterans; and (b) to support macroeconomic stability in the country \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): (i) Demobilization of Veterans (appraisal cost US$32\.5 million; actual cost US$9\.7 million) - demobilization involved: establishment of Demobilization Centers, transport of veterans from collection points to the Centers; registration, provision of identity cards, collection of socioeconomic data, and health screening and counselling; transport to the veterans' areas of origin \. (ii) Reinsertion (appraisal cost US$57\.1 million; actual costs US$34\.4 million) - cash payments (equivalent to the value of a basket of basic goods and services ) made to veterans once they have been officially relocated to their homes\. Payment to them was in three installments over a 12 month period\. (iii) Economic Reintegration (appraisal cost US$84\.5 million; actual costs US$50\.6 million) - training and apprenticeship schemes for veterans, referral services or grants to employers, provision of micro -projects or selected agricultural assistance\. (iv) Productive Safety Net Grant (PSNG) (appraisal cost US$0\.0 million; actual cost US$16\.0 million) d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Final costs reported in the ICR of US$ 98\.8 million are not consistent with the much higher final Credit amount of US$170\.6 given in that report\. For an Emergency Recovery Credit (ERC), more than doubling implementation from 3 to 6\.5 years obviously undermines its value as an emergency response\. It is not clear exactly when the project's "quick" disbursement of US$151 million against a positive list of imports was made, and whether this was in a single or in the three tranches intended\. The Bank's Client Connection shows a single disbursement was payment made in May 2006, while the ICR reports (p\. iv) significant (but somewhat smaller) disbursements already made by mid -2002\. According to later comments by the Region, three tranches of the quick disbursing component were disbursed by December 2003\. The Development Credit Agreement (DCA) was amended to allow US$35 million of this project's resources to be used to supplement the financing of the Ethiopia Emergency Economic Recovery Project (Cr\.3438)\. It is not clear from the ICR, how this transfer impacted the final costs of this project \. The ICR's report of a final total cost of US$98\.8 million is probably a significant underestimate, given that the final Credit disbursement alone was much higher\. Later comments by the Region confirmed that the ICR costs refer only to the costs of demobilization, reinsertion and reintegration activities \. The ICR figures did not include, as they should, the US$ 35 million transferred to the Emergency Recovery Project (P067084), and the US$40 million for the Productive Safety Net Grant \. IEG has added these figures in Section 1 above 3\. Relevance of Objectives & Design: The project objectives were substantially relevant to the government's ongoing commitment to maintaining the 2000 Peace Agreement signed with Eritrea \. They are also consistent with the latest (2002) CAS, with its emphasis upon pro-poor growth\. The project's objective of releasing military personnel to engage in productive economic activity was consistent with a national policy of promoting economic growth and reducing poverty \. Overall, the project design was modestly relevant to achieving the project objectives \. For demobilization, the design drew upon the lessons of earlier operations that highlighted the importance of going beyond demobilization to full reintegration of ex-combatants into their home society \. The ICR (p\. 5) notes that the project vocational and business training could have been better designed \. It nevertheless built upon the Borrower's experience of demobilizing 400,000 veterans following the end of the civil war in 1991, and the results of a trial run of demobilizing 10,000 veterans prior to the approval of this credit \. For achieving macro-economic stability, however, the design provided no instruments (policies, conditionality, etc\.)\. Nor could it have done, since OP 8\.50 (under which this ERC was prepared and implemented) is clear that an ERC does not include conditionality linked to macro -economic policies, a position re-stated in the updated OP 8\.0\. Since OP 8\.50 also explained that ERCs do not attempt to address long term economic problems, IEG asks whether an ERC like this one should have included this macro -economic stability objective, especially when it was already the objective of the sister Ethiopia Emergency Recovery and Rehabilitation Project (ERRP - P067084), designed explicitly with this purpose in mind \. Savings in defense expenditures may not easily be attributed to the EDRP project, since they assume the unlikely counterfactual that, after the war, the Government would have continued to pay for a large standing army had this project not been implemented \. Also, for the project to have an impact upon macroeconomic stability through fiscal adjustment, there would have to be mechanisms or conditions to ensure that savings in defense expenditures were not spent elsewhere \. In later comments on this ICR Review, the Region informed IEG that the project had no such mechanisms, confirming that it was not designed to achieve some net fiscal impact at the macro -economical level\. Project design was also weakened by the poor M&E, that gave little attention to reintegration and macroeconomic stability \. 4\. Achievement of Objectives (Efficacy): (a) to demobilize and reintegrate 150,000 veterans; modestly achieved \. Altogether, 148,093 veterans were demobilized by 2004, but there were shortcomings in reintegration \. Rural veterans, who accounted for 85 percent of the total, fared best with 66 percent of them (equivalent to slightly more than half of all the veterans ) reinstalled on their land\. The project's Beneficiary Impact Assessment (BIA) of a sample of 857 veterans found that 80 percent of them felt that project cash payments had been adequate for their demobilization \. But the BIA also found that 55 percent of respondents felt that their reintegration had not been as successful as it should have been \. There is no evidence that the resumption of veterans' economic activities was achieved through these cash payments \. 85-89 percent of veterans spent their reintegration grants on personal consumption \. 82 percent of disabled interviewees answered 'no' to the question 'have you benefited from the skill vocational training you have undertaken' \. Only 38 injured veterans stated that they received advice on how to start income generating activities \. The failures reported by the disabled are particularly significant \. The extra project attention given to them is cited by the Region as the rationale for extending the closing date of this operation \. But both urban and rural veterans reported that their assets had increased (it is unclear in the ICR whether this refers to physical stock or value )\. [In subsequent comments on this ICR, the Region informed that veterans' (negative) perceptions reported in the BIA could have been biased by their belief that such responses might help them receive additional assistance \. The ICR, however, does not report such bias in the BIA\. On the contrary, the ICR heralds it as "drawing on previous assessments and international best practice"\. IEG concludes that the BIA was adequate and that veterans' perceptions of reintegration results are a very important measure of project achievement since negative perceptions --meaning that veterans do not feel as though they are reintegrated, even if other formal criteria might indicate that they were, can increase the risk to the development outcomes of the project \.] Beyond the formal objectives the project seized the demobilization as an opportunity to increase awareness about the prevention and control of HIV /AIDS\. (b) to support macroeconomic stability in the country; negligibly achieved \. The ICR does not provide comparable before-project and after-project indicators as evidence of macro -economic stability, nor (correctly) does it claim that the project alone could be responsible for any macroeconomic stability achieved \. Later comments by the Region included data showing improvements to the country's foreign exchange reserves after the project \. Data from the World Development Indicators show improvements in GDP per capita, and falling government final consumption expenditure over the lifetime of this operation \. Inflation, on the other hand, has accelerated noticeably \. While the ICR does show that defense spending in Ethiopia had fallen to 11\.9 percent of total government expenditure in 2004/05, from 22\.4 percent in 2000/01, IEG considers that attributing this result to the project is not straightforward\. The end of hostilities and improved security for Ethiopia are among the main causes s\. Also, the macroeconomic impact of a reduction in defense expenditures can only be understood by reference to fiscal adjustments as a whole \. The ICR does not provide evidence of whether there was a fiscal adjustment overall, or whether defense expenditure savings simply allowed higher government spending in other areas \. 5\. Efficiency (not applicable to DPLs): Efficiency in achieving project results was undermined by actual implementation taking more than twice the time planned\. An ERR assessment of the performance of this project, being an ERC, was not required at appraisal, but could have been estimated at completion as was done for the sister operation, the Emergency Recovery and Rehabilitation Project (P067084)\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re-estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The project achieved its relevant objectives, fully meeting rehabilitation targets \. Some reintegration was achieved too, although the available evidence of it is somewhat less complete \. Support for macroeconomic stability was provided by the project, even if the actual results obtained were not clearly articulated, nor the results chain linking them to project interventions fully explained \. Implementation taking more than twice as long as planned was a moderate shortcoming, especially for an ERC\. (Because IEG does not consider achieving macro -economic stability to be a relevant objective for this project, it is not counted in this rating \.) a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The commitment of both Ethiopia and Eritrea to the peace agreement and the deployment of international observers diminishes the risk of interruption of project benefits \. But Eritrea's maintaining a war-time level standing army of 202,000 (compared with 46,000 pre-war) increases that risk \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: The Bank prepared the project quickly, making good use of experiences gleaned from elsewhere \. But the resulting design failed to adequately cover the reintegration and macroeconomic impacts of the project \. An M&E unfocused upon outcomes was a result of this \. These design shortcomings explain the less than fully satisfactory quality at entry\. Evidence provided in the ICR and later comments by the Region (about timely response, capable task team and building on lessons of past experience ) does not surpass what would ordinarily be expected for an operation of this kind, and therefore does not support a higher QAE rating \. Supervision was regular, with a fairly stable composition of mission teams \. at-Entry :Moderately Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Moderately Satisfactory  9\. Assessment of Borrower Performance: The government brought to bear on the project its significant experience in demobilization, involving more than 400,000 veterans after the civil war ended in 1991, \. It was able to deploy well qualified personnel \. Government use of project funds was quick and timely in response to urgent needs \. The project PIU located in the Ministry of Finance and Economic Development oversaw project implementation thoroughly and efficiently \. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Satisfactory c\. Overall Borrower Performance :Satisfactory 10\. M&E Design, Implementation, & Utilization: The M&E design focused almost exclusively upon measuring outputs, such as the numbers of people demobilized \. It was very thin on outcomes, particularly the reintegration of veterans \. For that the M&E could have tried to assemble and incorporate some simple baseline socioeconomic data of the before-conflict conditions of a sample of the veterans\. Easily measured indicators comparing their socioeconomic conditions today with those before the conflict could demonstrate progress in re- re -suming productive activities interrupted by war re -building their lives and re- re -integration\. The M&E also provided little guidance for monitoring the macroeconomic impact of the through re- project\. As expected, its implementation was mostly focused upon tracking outputs, a partial but necessary task that it pursued initially quite well, but then neglected for the final three years of the project \. M&E utilization was mainly for the purpose of monitoring project implementation --again useful and necessary, but not enough to inform changes that meet the objectives of the project \. A beneficiary impact assessment conducted by the Borrower after completion provide good data about the numbers and locations of demobilized veterans, and their opinions of the project services provided, but little about their reintegration experiences \. a\. M&E Quality Rating : Negligible 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Evidence of successful reintegration Satisfactory was thin\. The lengthy implementation period was a shortcoming, especially for what was intended as an emergency response\. (IEG avoids a lower outcome rating by not factoring in the failure to demonstrate that the project achieved macroeconomic stability--an irrelevant objective for this project, as far as IEG is concerned )\. Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Moderately For weaknesses in project design, Satisfactory especially regarding reintegration and macroeconomic impact, as well as poor M&E design\. Borrower Performance : Satisfactory Satisfactory Quality of ICR : Unsatisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: Special medical rehabilitation support for disabled veterans is needed : this might include a special demobilization center and a broader benefit package \. A quick disbursing component against a positive list of imports --amounting to US$120 million in three tranches in this case--can be a good mechanism for providing a timely project cash flow \. Because they may have more marketable skills (e\.g\. nursing) it may be easier to reintegrate female veterans than males\. Decentralized management and decision making using existing regional government structures helps project success and furthers reintegration \. It also enables cash payments to veterans to be made at the time of their effective return to their communities of settlement \. Information should be made readily available to veterans so that they know what to expect from programs like this\. Poorly informed military officers often raised veterans' expectations unduly \. A project's M&E system should focus upon final outcomes, especially upon reintegration in the case of a project like this one\. 14\. Assessment Recommended? Yes No Why? To learn more about the reintegration results and how sustainable they have been \. 15\. Comments on Quality of ICR: The ICR is rated unsatisfactory \. The report does not explain clearly why implementation took more than twice the time initially planned, nor question whether disbursements made 4-6 years after effectiveness still had any emergency role\. It does not fully report the actual costs of this operation, omitting US$ 35 million transferred to the Emergency Recovery Project (P067084), and US$40 million for the Productive Safety Net Grant \. A major point about how cost savings contributed to project efficiency should be highlighted in the main text, and not consigned to a footnote to an annex table (p\. x)\. It does not assess the impact of reassigning US$ 35 million of the Credit to another project\. If original targets were met (or exceeded), the smaller expenditure would imply an efficiency gain \. In response to this point, the Region pointed out later that project cost savings were the result of (i) efficiency gains; (ii) exchange rate gains, and (iii) financing from other sources\. But the ICR does not systematically report (in Section F - Results Framework Analysis) actual figures of the PDO indicators in a logframe format \. The Annex 2 does provide some macro-economic indicators, but the before-project percent of GDP figures are not comparable with the after-project figures given as absolute values in local currency \. Moreover, IEG could not find the ICR making use of these data in its assessment \. It does not assess project efficiency in achieving the objectives of the operation \. The ICR reports cost and credit data inconsistently; a final cost of US$ 98\.76 million, against a final Credit amount of US$170\.6 million\. In the text, however, the ICR does provide considerable information about how many veterans were demobilized, under what conditions and where \. a\.Quality of ICR Rating : Unsatisfactory

REVIEW

P044202

Document of The World Bank 17'C%D ('kEEUTI'T A T T WE CICnXTT XJ FORJL OJFF~TCAL\. USEL O\.NLY Report No: 24368 IMPLEMENTATION COMPLETION REPORT (IDA-29460; T F -2568i) ON A CREPDTT WThT 'T'TrlrY A 1LXd-1T~T1T\. i r%lrC'rVT% 0 17 XXXT Y ifd'%IL I N TLHE AMVIOUNTi ur aSDR 8\.7 ivi\.LLION (US$12 MILLION EQUIVALENT) TO THE RFPuRTIC nF TA TIKTSTAN Tnf-Y" A r %J 1%ti PILOT POVERTY ALLEVIATION PROJECT 06\./24!2002 Human Development Sector Unit Central Asia Country Unit Europe and Central Asia Region liThis document has a restricted distribution and may be used by recipients only in the performance | of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective June 12, 2002) Currency Unit= Tajik Somoni I TJS= US$0\.37 US$ I = 2\.70 TJS FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS AKF Aga Khan Foundation ARSP Agricultural Recovery and Social Protection Project CAS Country Assistance Strategy EpBI) Fiirnnean Ranlc for Recnnstnritinn and Develonment EU European Union FHH FeIm\.-ale HeaAdA H1ousehld FSU Former Soviet Union GBAOX G-orr,o-Badahhshian Autonom,o1L1us ObFlast GGLS Group Guaranteed Loans and Savings GNiPr Gross National Product IBTA Institution Building and Technical Assistance Project iMF international Monetary Fund MIS Management Information System PHRD Population and Human Resources Development (grant) PPAP Pilot Poverty Alleviation Project PRDP Pamir Relief and Development Program SCF-UK Save The Children Fund (UK) SCF-US Save The Children Federation (US) TASIF Tajikistan Social Investment Fund UNDP United Nations Development Program UNHCR United Nations High Commission for Refugees UNICEF United Nations Children's Fund ITSATD I Inited States Agencv for International Develonment WFP World Food Program IT,~ T L\.- T-'--~ rA yn* vice President: junniiiies r\. Liuil, ECAv r Country Manager/Director: Dennis de Tray, ECCO8 Sector Manager/Director: Michal Rutkowski/Annette Dixon, ECSHD I a1 e i 4aiii L,LdUMO siI I aMr ivianlagr:\. MVichael Mills, AECSHD  TAJIKISTAN Pilot Poverty Alleviation CONTENTS age NoIV\. I\. Project Data 2\. Principal Performance Ratings 1 3\. Assessment of Development Objective and Design, and of Quality at Entry 2 4\. Achievement of Objective and Outputs 6 5\. Major Factors Affecting Implementation and Outcome 10 6\. Sustainability 12 7\. Bank and Borrower Performance 13 8\. Lessons Learned 14 9\. Partner Comments 16 10\. Additional Information 18 Annex 1\. Key Performance Indicators/Log Frame Matrix 19 Annex 2 Prniert Costs annd Financing 21 Annex 3\. Economic Costs and Benefits 23 Ann ex 4\. Bank Inpus 24 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 27 Annex 6\. Ratings of Bark ar\.d Bor-nower DPerforr\.ance 2 r-U1LIL;A V\. I%\.4LLib vi\. L,iaiKr aiiu L-PUIJ I I V\.IiIial\. Annex 7\. List of Supporting Documents 29 Annex 8\. neneficiary aurvey Resulis 30 Annex 9\. Stakeholder Workshop Results 31   |roLec ID: P044202 ILProiect Name: Pilot Poverty Alleviation lTon,te 1 nd,r ?xC-1 M; pl Vijlle IITI I/!,, EPCHD-l1 |tCR T e Intensive Learning ICR Iyort Date\. June 24, 2002 1\. Project Data Name\. Pilot Poverty Alleviation L/C/TF ANumber: IDA-29460; TF-25681 Countrv/Degpartmnert: REPUBLIC OF TAJIKISTAN Region: Europe and Central Asia Region Sector/subsector: SF - Social Funds KEY DATES Original Revised/Actutal PCD: 01/26/1996 Effective: 07/18/1997 Appraisal: 021261;997 MTR: VI/0/19 Approval: 04/10/1997 Closing: 6/30/2000 06/30/2002 Bonoier/lImplementing Agency: Republic of Tajikistan/Tajikistan Social Investment Fund (TASIF Other Partners: USAID; Aga Khan Foundation; Save The Children (US); Save The Children (TUI) PresiAden anes _1A App__rais |Vice President\. io Lin ohannes F\. Linn lCountry Manager: ||ennis de Tray ][ shrat Husain jSector Manager: ||Michal J\. Rutkowski I -|| obert Liebenthal P Ata: Laeat________Mi!__________ jICR Priznmmy Aithor: Dinah McLeod, Michael Mills if f 2\. Principal Performance Ratings HS=Highliy Satisi^actory, S=Saiisfiactory, U=Unsatisfiactory, HU=Highly Un\.satus-faCtoyLO Highl Likey L=ikly T\.=nie HUN=Highly Unlikely; H=High, SU=Substantial, M=Modest, N=Negligible Outcome: S Sustainability: L Institutional Development Impact: M Bank Peiformance: U Borrowver Peiforniance: U QAG (if available) ICR Quality at Entry: S S Project at Risk at Any Time: Yes  3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: Taiikistan came to independence with relatively 'well developed human development indicators and individual capabilities, but also with widespread material poverty\. The literacy rates were at the level of highly ind1uctrinli7i7d onirntrii-s infant mnrtnlitv rates were 1nw; mnid access to education and health services was free and almost universal\. However, these standards were l1argelly thC rnesul1t _of substantial bu-Aea- +-r trnfrs frm Mloscow\. Soon alle independence, Tajikistan entered a period of civil conflict and massive economic decline\. The country lost its traditional markets for imports aiiu exports, anu aiso suiifUed IUoIII LIIt eLU oI uUUgeta y litaisifrs from Moscow\. These developments led Tajikistan to economic collapse\. GDP declined precipitously and infiation soared after 1991\. At the same time, the Government budget shrank drastically, and between 1992 and 1997, Government's revenue as a percentage of the GDP was reduced by more than half\. T hese events had an adverse effect on the material welfare of people, and also on their capacity to live a healthy and secure life\. The conflict disrupted people's lives and destroyed the civil society; the economic decline worsened the already high levels of poverty, and created pockets of deep distress and social exclusion; and the sharp decline in public spending reduced the Government's ability to assist needy people and to provide basic services such as education and health to all\. The Bank Group's Country Assistance Strategy (CAS) for Tajikistan, discussed by the Board on May 16, 1996, highlighted the risks associated with political and economic instability in the countrv and called for a flexible approach to the Bank Groun's assistance program\. Its gnals were to arrest the intensification of poverty through measures designed to foster a supply response, based on ermpleyunm,pnt intpnsivep nrrnxxt1-, nombihined with direct stps\. tn protPe-t tbhe country's most vulnerable groups\. The massive problem of poverty was also recognized in the B1ank1 G -ru' seon - Countr;--+ Assistanc Q-teO (AS whic Ia p,-eare --A 199 zdwic IJ &I %\.JIVUUJ 2 D%\.AJLLU_ %\.AU11LLY f"22a1'\.'\. ULaLIr\.~Y I WFJJ 'III~Ll -"a2 y jai11 1U "Mi WIII'\.,1I stated that "\.the problem of poverty remains severe and will be the focus of assistance efforts ior many yea[s Lo UoIIe\. T he design of the Pilot Poverty Alleviation Project (PPAP) was based on the following realities: (a) there was an urgent need to address the poverty problem directly, to revive economic activity at the local level and to get some productive incomes into poor households; (b) there was a severe lack of services and a considerable backlog of maintenance to be carried out on the country's basic infrastructure; (c) the institutional capacity of the Government was extremely weak, and the Govemment budget envelope was so constrained that there would not be more than a marginal impact on the poor from only improved targeting of public resources; (d) both the Bank Groun and other donors had relatively limited onerational exnerience in the countrvy (e in contrast, some international NGOs were already then active in the country and they did have snmor imnlpmpntatinn cpna'itv and ynxpripiinre in drheonnrn\.ent pnr orwmc\.- and (f) there wase need to create indigenous capacity for carrying out poverty-focused development programs, but the cop1ing dIand sur srtge adopted by the peopl ther\.selve b upon\. Tne development o'bjective of tne PPAP was to increase, on a sustainable basis, tne incomes of the poor, and improve their access to essential economic and social services\. The strategy adopted by the PPAP was to: (a) provide support for the scaling-up and replication (over a three-year period) of a few selected programs operated by international NGOs which already had significant poverty alleviation impact; and (b) build up the national capacity for designing, 2  carrying out, and evaluating community-based projects through the establishment of a social investment fund and associated institutional development activities\. This strategy was clearly articulated and was consistent with the CAS\. The targets were for the project to have a modest though relatively quick impact on the incomes of approximately 250,000 people; and to develop capacity at the national and local level to implement participatory approaches to poverty alleviation\. The PPAP was amone the first projects that the World Bank financed in Taiikistan\. Along with the PPAP, the World Bank provided assistance through the Institution Building and Technical Assistanre Proiect (MA 28610) and thR Aarinii1tural Recverv and SOGijl Protection Project (IDA 29170), which aimed to reduce poverty through policy and structural reforns of the onr,rririlfvrp oA scnial tprotmon sctos asnrc ve --11s the business seo+r- The fon-, alcs -r-rnAaA assistance through the Post-Conflict Emergency Reconstruction Project (IDA 30370) to support th oe+\.mn and A Unite T ajik- poI-\ o i \.h_i_;\._eta;o of theI :_-, 1997pec LIl%\. '\.JJUV%1IIIIIIL 411U UK;; %L)IILI-U \.1ajir\. k\.JjPUVILIVII III UIVU 1III1IIemen'Ia-LiIVI VI LIIC; 1771 JUL agreement\. Significant contributions were made by other members of the donor community, in particular, the major uiN agencies i'uiNPI, UINHnCR, wrr, UINLDHA, wriOLu, uINILCEF), as well as a large number of non-governmental organizations (NGOs)\. The PPAP itself received complementary support from a Japanese PHF<D Grant of US$500,000 signed in 1997 to cover technical assistance and training costs associated with project preparation\. The PHRD grant was split into two separate parts, one (TF29682; US$249,000 approved; US$189,500 disbursed) executed by the Bank, and the other (TF29714; US$251,000 approved; US$135,617 disbursed) executed by the Government/Tajikistan Social Investment Fund (TASIF)\. USAID provided US$245,100 for additional micro-projects, as well as support for a long-term management advisor to the TASIF\. These funds were completely utilized\. The project's objectives were fully appropriate given the country's economic outlook, the Government and Bank's develoDment strategies\. the lack of government and local NGO institutional capacity, and most importantly the alarming level of poverty in Tajikistan\. 3\.2 Revised Objective: The original objectives of the PPAP were not revised\. 3\.3 Original Components: The PPAP, at a total cost of US$12\.7 million, proposed to finance the following components: (1) Scaling up of Poverty Alleviation Programs (US$3\.2 million)\. This component had five subcomponents: (a) The Shelter and House Rehabilitation Program (run by Save The Children Federation (US): SCF-US; US$3\.2 million) would assist 2,000 poor and previously displaced families in five districts through self-help reconstruction of their homes devastated by the civil war\. The project would support essential structural repairs (walls and roofs) through the provision of essential roofing materials (timber, nails; tiles)> and through the distribution of fond for work to local work brigades, including home owners\. Local project organizers would target the neediest families with local participation, andl locral communic ws -ould a-sist in the construction monltonn and distribution of food and materials\. 3  (b) The Micro-Credit (Group Guarantee Loans and Savings) Program (carried out by Save The Children Federation (US); US$1\.0 million) would provide access to credit and mobilize savings for 3,750 poor women by supporting existing activities in the Kurgan-Tube district and expanding the NGO's outreach to the Vose district\. Savings would be introduced as a component of the expansion\. The management of existing groups would be restructured into an independent local NGO or financial services institution that could operate a micro finance program independently to sustain noor women's access to credit\. The Droject would sunnort a loan fund of US$300,000; the training of staff in financial management; a management information system (MIS); and the formation and training of 250 gyoups of wornmen clients (!8-20 women in each group) for borrowing and savings\. (c) The Program of Support to Female-Headed Households (Save The Children Fund (UK): SCF-uK; USw$1\.0 million) wouid provide tne provision of agricultural assets and strenginen tne capacity of social services to provide some 3,700 female-headed households (FHHS) with access to, and ownership of, agricultural assets (such as livestock, seed and tools) as well as technical advice\. Approximately 2,100 of the female-headed households would be in Vaksh, and 1,600 would be in four other districts\. The program would also include informing clients of their legal rights, existing social services and assistance programs\. (d) The Agricultural Reform Program (carried out by the Aga Khan Foundation: AKF; US$0\.6 million) would expand the area under food crop production in the Gorno-Badakhshan Autonomous Oblast (GBAO); increase food crop production and productivity in GBAO; establish and support private farm management; and develop human and institutional capacity in the agricultural sector in the oblast\. Some 1\.600 farmers would participate in the construction of irrigation channels and the development of new land in six of GBAO's seven districts\. The construction of 32 irrigation schemes (108 k ilom\.eters of channels) wniild enahle an inrreas in the area of privately managed land by some 3,900 hectares\. (e) Future sponsored activities (US$1\.6 million)\. Additional funding would be allocated to these prOgrams if they contirLued to be successful or to other programs that met the same criteria at the end of the first year of the project\. Some of this additional funding could also be allocated to micro-projects under tne I ASIr, if appropriate\. (2) Tajikistan Social Investment Fund (US$4\.2 million)\. This component had two sub- components: (a) Development of the Tajikistan Social Investment Fund (US$1\.5 million)\. This subcomponent would support the development of the TASIF through the provision of equipment, salaries, training, technical assistance, and financing for monitoring and evaluation\. The project would also enable the TASIF to make available some technical assistance and training to local governments, small contractors- NGTO staff and other active community members to heln them plan, manage, and implement micro-projects and to participate in competitive bidding\. Whenever possible, thedev A eryi of tpch\.nical cimpnprt xurl, b- contrarcted to nqulifiei lgrpa! firme or qualified individuals\. (b) Micro-projects (US$2\.5 million)\. During the first year of the project, 10-15 pilot micro- projects would be implemented in order to train stalf and test and modify the targeting, promotion, appraisal, approval, supervision, monitoring and evaluation procedures that would be elaborated in the operational manual\. Eligible projects would include: (a) social infrastructure, such as waste water canal cleaning, irrigation repair, pump replacement, small water and 4  sanitation stations, public baths and latrines, and reconstruction of kindergartens, schoois and health points (especially in war-affected or remote villages); (b) environmental projects, such as reforestation, terracing, flood and mud-slide prevention; and (c) entrepreneurial activities, such as small loans to micro-enterprises, and processing of fruits and vegetables\. Pending successful results, an additional 50-60 micro-projects would be financed\. The components were adequately designed to achieve the objectives of the project and took into account the initially extremely weak administrative, technical and financial management capacity of the TASIF\. Designing a program that used international NGOs as service providers allowed the nroiect to make full use of the few novertv reduction resources available to deliver assistance quickly to those most in need\. The choice of a social fund, which, in theory, is independent of Goverriimpnt infl\.uence in its day-today activities, as one of the project's main implementing agencies was appropriate given the situation in the country\. Social fund activities werI'\.Le LCG urling proUjectI L Fz ,jaJI anll Lthe desal JI of LaLUL "'oO ULLs lf t ' findings from the field\. Possible risks and problems with project implementation were identified early anu re[iecteu in the p-ruj-ect documLLentatiLon andU design\. 3\.4 Revised Componets: The original components of the PPAP were not revised\. However, there was additional funding provided for micro-projects from the unallocated sub-component for "future sponsored activities"\. With the declaration of "force majeure" by Save The Children-US, it was also agreed that the TASIF would take over responsibility for the implementation of the remaining part of the shelter program\. 3\.5 Qualitv at Entry: The PPAP was prepared in response to the Government's request for poverty alleviation assistance to be delivered urgentlv to the countrv's noorest citizens\. It was undertaken in close collaboration with UN agencies, the representatives of the international donor community in Tajiki'stan, the Aga Khan Foundation and Save The Children fol ndations, and other non- governmental organizations\. An identification mission was carried out in May 1996, a social assessment was then underA-ken And he appraisal mission took place in November !996\. The Bank's Board of Directors approved the operation on April 10, 1997\. The project was declared efi'ectilve on J'uly I18, I19971\. A Quality at Entry Assessment was undertaken in December 1996, and it rated most aspects of project design and supervision as satisfactory or highly satisfactory\. Reviewers noted in particular that there was good use of existing international NGOs, and that the preparation process had been handled well\. It also noted that the project was high-risk for several reasons (including security and political issues), and that the social fund might be subjected to political pressure\. Lack of capacity of the social fund was noted specifically as a risk factor, and the need to build capacity was seen as a priority\. The Quality at Entry Assessment also noted that the Government's commitment to the PPAP was extremely high at project commencement, with the potential for the project to have a significant institutional impact\. 5  4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement ofobiective: The PPAP's goals were for the project to have a modest though quick impact on the incomes of approximately 250,000 neonle\. and to develop capacity at the national and local level to implement participatory approaches to poverty alleviation\. Overall, the conclusion of this rponrt ic that thPre vrac a eticfanrtor, achipvprnmpnt nf the nrnojprt's nhiprthv\.e\. Th\.e nroject met andi exceeded its outreach goals, as it reached over twice the original number of beneficiaries through m1iLWV-pLUJC% adIIU I11LH\.L-I itU1L 1ii\.L1at V%\.a, wILII 1847 1,LIL4UjFtJsJ\.L0 11i1peImenteLdU cLJL1LFQII tL LI\.) target of just 70\. While much remains to be done in building national and local capacity to implement participatory approaches to poverty alleviation, ihe project developed soml1e im,portant initial capacity, particularly in the TASIF, to implement further community-based poverty alleviation initiatives\. Tinese achievements are considerable given the difficulties of the country environment, and the fact that the PPAP was one of the first World Bank lending operations in Tajikistan\. However, there are two major caveats to this conclusion\. First, while the overall outcome anu acuievcmcnl of the ppAD are - atd a saiary, +thee w siliii- vaiation -- n individual subcomponents\. Two of the four international NGO programs financed by the PPAP were highly succssfu:IU LIIC rCIiaIC flaUHe U HdeIUIIUIU HrUgi,IiL iLIpIcHIteneU by SaUve Lith Children Fund-UK; and the Aga Khan's Agricultural Reform Program\. Another of the programs was satisfactory: tne Group Guaranteed Lending and Saving (GGLS) Program implemented by Save the Children-US\. However, the shelter program (SCF-US) was not successful, and the TASIF eventually took over the program after the withdrawal of SCF-US in order to complete it\. Second, TASIF's 4-year history was also one of considerable problems as well as significant institutional achievements\. In 1999, it was increasingly clear that the organization had serious management and institutional problems, and these came to a head in 2000 and continued until early 2001\. After consultations between the President of Tajikistan and the Regional Vice President of the World Bank in late 2000 and early 2001, the TASIF began to tum around and there was a better atmosphere of cooperation between the TASIF, the Govemment and the World Bank\. The project ended with a very encouraging improvement in working relations, commitments to community-hased development a desire to continue the prncess of strengthenino the TASIF further in the future, and the approval of a Second Poverty Alleviation Project on May \. !, I \.VVA I ,Ie,rePPAr Wda a veIy Ud inIgIUIIIr pIrojLe in L14l1n'y Ways, andU mostL LILL; LlengI1sI1 thatL It encountered are now familiar to all World Bank task managers supervising projects in Tajikistan\. For example, the depth of poverty in itseif posed a consideraole chaiienge, aiong with the iack of capacity at all levels to undertake poverty alleviation efforts\. As with many other projects, implementation was particularly difficult because of the Borrower's initial unfamiliarity with World Bank guidelines and procedures, and the shortage of local staff with the necessary knowledge and skills\. The most critical and persistent challenges for the PPAP, however, were the continuing problems of weak, overall and particularly, financial management, including fraudulent disbursement applications, and lack of strong and consistent Government support\. These problems not only severely strained relations between the Bank and the Government, but also hampered the project's ability to address key issues relating to institutional development and community capnnitv hiiildino\. For these reasonn, the fact that the PPAP was ahe to accomnlish as much as it did may be seen as a considerable achievement\. The closing date of the credit was 6  extended four times to June 30, 2002, to allow for the completion of components, to enact improvements in financial management and to allow for a smooth transition to a second poverty alleviation project\. 4\.2 Outputs by components: Two of the four international NGO programs financed by the PPAP were highly successful\. one was successful and one was unsuccessful\. The TASIF's micro-proiect activities were largely successful, though sustainability remains very uncertain\. The impact of the institution hiildincg Pffnrts ws modest andi the sustnirnai1i't nfthe TA\.4TF will reqnuire cnntiniued external support\. (1) Scaling up of Poverty Alleviation Programs (a) The Shelter and House Rehabilitation Program (projected, US$3\.2 million; actual US$2\.7 million) was not successful\. it was piagued by problems from its inception, including due to the choice of tiles as roofing materials during the preparation of the project\. This was a poor decision given the nature of the mud wvalls and the earthquake prone zone\. The component also faced major delays in implementation and lack of counterpart funding\. The responsible international NGO decided to declare force majeure in October 1998, after a long delay in the timber delivery as well as a change in the roofing materials\. The component was subsequently taken over by TASIF, and it was then decided to use the micro project approach to construct the remaining 1,000 houses\. The TASIF then faced an additional problem as the supply of the roofing materials for the houses was constantly delayed by the international supplier under the ICB contract\. Finally the TASIF requested the Bank to allow it to build the first 313 houses with procurement of roof sheets locally through the contractors who were to build the houses\. Roof sheets for another 393 houses were eventuallv procured from another international supnlier\. Some housing, was completed (total 706 houses for 5,500 beneficiaries), although significantly lower numbers than nredirted when SCF-TUS wns supnnnped tn imnlpmnpnt fully this nrniert UTnder the nr:cminal design, it had been planned for only wall renovation and roofing to be undertaken, but it was decided during project implementation that this approach wras insufficient and that m\.ore comprehensive rehabilitation of houses was needed\. The target number of houses was therefore reUUI\. A \.i LU JUl i,UU\. I 1~IIUIk~ VI 11VUUl-- W\.UU1U iiaVV UVE 4II aI'Z;VCU IL 41U~;L4UCILU LWUHIUI~LL reucCd to jus;L 1,100\. Illis numbe of_ hose coul hav been- achieve --aeut cutl, funds had been made available\. Finally, some of the remaining timber was provided to another international INGO, Shelter Nlow- International (SNl), for its nousing program for refugees\. Inis was carried out efficiently: by joint efforts of TASIF and SNI, 56 houses in Kabodien region (Khation area) for iDPs from Gorno-Badakhshan were rehabilitated\. (b) The Micro-Credit (Group Guarantee Loans and Savings) Program (projected, US$1\.0 million; actual, US$1\.1 million) was successful\. Management by the international NGO was successfully turned over to a local NGO, "Sitorai Najot" (SN), which the TASIF continued to support through a grant for overhead costs\. While micro-credit was a small component of the poverty alleviation strategy in terms of overall funding, it achieved some important successes: 30,182 (SC/US- 10\.267; SN - 19\. 915) loans were made to over 8,604 (SC/US- 4,250; SN - 4,354) clients; the loans reached the poor, the very poor and the vulnerable non-poor; SN maintained the lowest average lnan hblance in Taiikistan; there was an impressive level of portfolio quality which was consistently maintained; and SN was almost able to reach operational cii ctaiir,,hili r TTJewolxuv\.r thD~ nprbprhAl onctc nf' th\.a rntp,-nat1irnn, MC\.n mrrl,A tha pnct_f4\.,1- ,tivrvcc ~JOtnnAtJn&nLjs \. * flJ -s v SL tzs 11 v s J Vi7i VL sA,sA sJOt\.,J t*fl\.--- tfllt zfi*%VflIf IA WV \.J '\.> *SflAf\. vfl tWsL%\.ik\. t1 of the program questionable in the initial stage; the capacity of the TASIF to implement and monitor m\.icrocreudi projects remains weakc; andSN's 'lack of financial ma-agemert ca-pacity and7 7  high costs are low points in an otherwise nignly satisfactory component\. un balance, the outcome of the program is considered to be satisfactory\. (c) The Program of Support to Female-Headed Households (projected, US$1\.0 million; actual, US$0\.9 million) was also highly successful\. A total of 3,700 female-headed households received agricultural assistance, and 23 schools and 2 kindergartens were supported with income generation projects\. The program was successful in reaching the poor and vulnerable households and communities, and community participation was particularly high\. The experience of this program led to the TASIF reviewing its own strategies for developing the sustainability of micro- projects, and in cooperating with local govemment authorities\. (d) The Agricultural Reform Program (nroiected- US$0 7million; actual- IS$0\.7 million) was highly satisfactory\. The component financed 52 canals, and reclaimed 2,000 hectares of land for agi\.culural production\. The results were increases in agricultural yields of 8000 percent \.for the area irrigated by the canals\. The level of cooperation between the Mountain Societies De' veloprrI\.ent SUpport Lrograrir and the T w as igh, ainu LtILh A suypporLteU a sLUUy LVLUr fo TASIF staff to its programs in Pakistan\. Cooperation between the TASIF and the MSDSP also leu to thle iniiation ol ihe TASir pilLo 11LrU-prrUJeCs l in GB3AO In Lthe period I999-20 1\. (2) Tajikistan Social investment Fund (US$4\.2 million) (a) Development of the Tajikistan Social investment Fund (projected, US$1\.5 million; actual, US$1\.8 million)\. As noted above, the institutional development of the TASIF was not a straightforward experience\. On the negative side, the organization faced serious problems of financial mismanagement, the irresponsibility of some staff, management weakness, and high staff tumover\. The most serious problem arose when the initial Executive Director was dismissed by the Govemment without consultation with the World Bank, and when a new Executive Director was appointed by the Government without following the required procedures and particularly without any no-objection being given by the World Bank\. This led to a period of severe strain in the relations between the Govemment and the World Bank, which was only resolved after the personal interventions of the President of Tajikistan and the Region2! Vice President of the World Bank\. On the positive side, the TASIF has grown to be a major poverty alleviation organization in lajipPtLaLl, Lth\.eL vvaa a e1newU e-ILViL LU Leroain sLt affU Uan VdIjvp LeIL 01garlL1atiOn' insLiLULtionaUi capacity during Years 2001 and 2002; the TASIF has a relatively capable procurement unit; and tnc staIi nave suostantiai experience in community participation, the targeting of poor communities, monitoring and evaluation, and the design and supervision of micro-projects\. Following the dismissal of the Executive Director who had been appointed in Year 2000 by the Govemment without a no-objection being given by the World Bank, and with the appointment of a new Director in Year 2001 following an acceptable competitive process, there was a major improvement in staff morale and the tum-over of staff has dropped considerably\. (b) Micro-projects (projected, US$2\.5 million; actual, US$3\.9 million)\. Overall, the implementation of the micro-projects is considered to be satisfactory\. The number of successful micro-projects and beneficiaries reached exceeded original exnectations- Originallv US$2\.5 million was allocated to TASIF for micro-project implementation, with an expected 70 micro- nrniprtc fnr 14 0nn npnnlf AftPr n nrniprWt rprPlit rp2l1nrtntinn nf TTRZ1 K millinn 1Q2A n,rnintc covering approximately 600,000 people were implemented\. 8  An extensive evaluation of the micro-project program was carried out in 1999, with independent, external assistance\. It found that: (i) the micro-projects met priority needs and there was a high level of community satisfaction with them; (ii) community participation during the implementation stage of micro-projects was strong, but participation in the other stages was highly variable and appeared to depend on the size of the community, the role of the micro- project committee and the nature of the micro-project; (iii) women tended to lack access to information about the development of the micro-projects and their participation (except during implementation) was particularly poor; (iv) the micro-projects may have contributed to a positive shift in attitudes of communities and their sense of ownership of community projects; (v) even after six months after nroiect comnletion\. most micro-nroiect committees were still meeting regularly and were taking steps (together with their communities) to attempt to address any problems relating to the micro-pnrojerts; (vi) the micro-project committees worked uwith varving levels of success depending on the leadership style of the committee, their working relations with the cotmumuni-, the size of t\.e cotm\.,unity and 'the trUaining thatth\. Liey hIa vIe receivd I,t-\. AS LJ (vii) most beneficiaries appeared to know about the sustainability plan, but less than half of the LoI\.U11MIU1111e hadU 1i1ple,,iI1ILdU a viaUbl plan1 a41LU Lthe cUI1-ptILUII Uo Lthe 1I11%IU-pPojcICL) (viii) 1w0- thirds of the evaluated projects were fully functioning, with an additional 25 percent partially functioning; and (ix) tne Deneficiaries ciearly Delieved tna thne micro-projects were benefiting their lives, both in terms of improvements in living conditions and in freeing up time for other activities\. In Year 2000, there was a further evaluation of 56 micro-projects by the TASIF staff, with the first stage being conducted 1-3 months after the technical hand-over of the micro-project, and the second stage being conducted not earlier than 6-9 months after the first stage had been completed\. The evaluations focused on group discussions with the beneficiaries about the sustainability and impact of the micro-project on the local community\. The main conclusions were that: (i) 98 percent of the community members felt-that the completed micro-project were a priority for them; (ii) 94 percent of the community members were actually using the completed micro-oroject: (iii) 87 nercent of the beneficiaries were familiar with the micro-project sustainability plan; and (iv) 89 percent of the micro-projects were functioning fully after 6-9 months\. rn conclusion, it appears thait t -s-\. technicai tjuLaIlJo tLhe, ,,,icoiojecF-tsLO was gera! sound, though sustainability remains an important issue for future follow-up\. The SIF structure allowed for fast and p-LO processing of mi'crUo-p-1oJects, even in the poores; and also potentially for project sustainability\. The flexibility built into the project design meant that, when unexpected circumstances arose aunng project implementation, ine project was aDie to respona quite quickly\. However, unforeseen difficulties associated with staff management and corruption, tension between the TASIF management and Board, as well as the disagreements between the Government and the World Bank on aspects of project implementation and supervision, led to a slowdown in the implementation of some components\. Nevertheless, despite the project slowdown in Years 2000 and 2001, more micro-projects were implemented, and more beneficiaries were successfully reached, than originally anticipated\. 4\.3 Net Present Value/Economnic rate of return: An economic analysis was not carried out at project appraisal\. 9  4\.4 Financial rate of return: A financial rate of return was not calculated at project appraisal\. 4\.5 Institutional development imlpact: It was envisioned that, by the time of the project's closing, the TASIF would have: (i) developed sigmifiTant policymrmakVing scills; (ii) obtained data that would be helpful to improve the Govemment's ability to design sound policies; and (iii) trained staff in World Bank procurement, financial management, disbursem\.ent, and Admn, p +-+\.-roced\. a as irthe assessment and evaluation of micro-projects, which would in tum assist the Govemment's work in future\. However, as U1S(cUSsU aUove, LhIe tXSLJC 1faUce lidily pro1UlUell\. X I\.e; Uorganization' s miianLagr,\.ent and institutional problems became increasingly apparent in 1999, increased substantially in the following year, and continued untii eariy L200\. Financiai mismanagement, the irresponsibility of some staff and management weaknesses were constant challenges\. Problems became so severe that in December 2000 project cancellation was considered by the World Bank, but it was finally rejected after top-level discussions with the Govemment, which pledged its commitment to the PPAP and to an action plan to improve project performance\. After that point in time, the TASIF began to tum around and there was a better atmosphere of cooperation between the TASIF, the Government and the World Bank\. A new interim Executive Director undertook a vigorous program of actions to revitalize TASIF\. In Years 2001 and 2002, the TASIF largelv adhered to a strict Financial Management Action Plan, resulting in the extension of the project's closing date until the end of June 2002, and a marked improvement in the onernfionn of the organization\. The Acting Executive Director for the TASIF was confirmed in his position in early 2002, after a competitive selection process\. The end result is a ft,gile, but s-UsfMinable, institutinn that tourlde!A ascict t\.hp C\.nupornpmnt ffirther in designingn and implementing its poverty alleviation strategy, provided that the recent management actions can be biuit uporn by the ExIielcutlV- Director, reinfocedw consistent 'v\.J e anBard support\. Continued extemal support will also continue to be needed\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control ofsaovernmnenit or imiplementing agencv: The most critical problems for the project arose from the combined effects of the tense seciiritv situation and Tajikistan's macro-economic difficulties\. The security situation was the major reason for the declaration of force majeure by SCF-US regarding the shelter program, and it also exace\.rbated many of the governnance problems especially in the sioth of the conintrv Security concems made mission planning difficult, as some missions sometimes had to be cancelledu or L'Ie timring clhiangeU at shlort I noticC, adiu smir\.LLL,,es Lthe\.y prLeVented1114 full su \.J 'JIsio ML micro-projects in the field\. Though the Government did its best to ensure the safety of staff and \.~~~~~~~~~~~~~~~~i \. 'F\. \. CIT > o\.rr _ __rl___ : otners, worKing conditions were consistently aangerous ior IA t-I staii\. I nu precarious SecUHLy conditions in Tajikistan made it very difficult to recruit high-quality international consultants to assist TASIF in fhe numbers and length of time that would have been desirable\. Ttose consultants who were able and willing to assist in the project were required to comply with UN travel restrictions, which often meant they were unable to leave Dushanbe, and the quality of their work may have been compromised due to security conditions\. The difficult security situation also made mission planning problematic as arrangements sometimes had to be changed at short notice\. 10  The macroeconomic constraints led to the very tight govemment budget situation and the resulting problem of lack of counterpart funds (see below)\. 5\.2 Within the control of the izovernment: The Government was committed to the implementation of the project at the outset and at the close\. However, the project experienced significant delays midway due to a combination of factors, including serious disagreements with the Bank over project implementation and financial management issues\. Most serious was the failure of the Government to follow the appropriate selection process for the new TASIF Executive Director in Year 2000\. Moreover, even when relations were on a more harmonious footing, delays occurred due to reluctance or inability to take necessar, project decisions in a timely manner\. Board meetings were often dIvelyd due to the unavailability of key members (who occupied extremely senior positions)\. Despite being provideA \.th\. 41,_- dea-1 infor\.nation, many, off the Board membe s did nt ha a -friciently piu V %A\., Wit! Ui3l V fla \.* UP\.,LlhJl 5aft, \.in; 0 A\. \.SO IRI\.ILL\.fl -I L\.-J \.~ Llhf%fLI clear understanding of the workings of a social investmnent fund and specifically the TASIF\. This was parly Ue to *LLe hCea-vy UUIcIhIL1CIILu adIU ULIohI WoIr UU11oblgaUtion V laly ofI u11\.l Chief among the problems was tne issue of counterpart funding, wnicn was slow to materialize and which was effectively halted midway through the project\. As a result, many micro-projects were under- or unfunded\. First to suffer were the small contractors who were not paid in full for their work on TASIF micro-projects\. Nonetheless, the final months of the PPAP saw an improvement in financial management and Government comrnitment to the project, with a solution to the earlier shortfall of counterpart funds and agreement on the appointment of a new Executive Director for the TASIF\. Finally, there was a lack of clarity about the tax obligations of international consultants\. This issue took time to resolve, and IDA agreed to cover some tax payments on a temporary basis pending the introduction of a revised procedure to implement World Bank operational policy\. 5\.3 Within the control of the TASIF: The rnncrpitv nf the TASIF staff atFnd govrnance wrP e i isenu throuahmit miuch of \.-~~~~~ ~ ~ ~ ~ __1_\. _\. \. _\. -- -_ _- _ _-\.-c wer serious--- -- --- the life of the project\. This was evident first in the area of weak financial management, which led t+\.h A4-;-s\. of so\.e of the stff i the Fin-acia! Depat,-\.ent and tho "AAA for corrections to ItO LIII\. tj,aili,aaaIlIIOlfi AIILIS -, 1± III\. ML! \. IfIIIII!-\.-I iItt, L\.---~ t LS t~ltt L~AS be made in disbursement application procedures\. Although these factors were within the control oiL iut - IAS13, \.he siLUa1ion was exae\.-batLeU by Lthe WlUiLage VI L\.VUILklpaLL IUIIUlIar 110in l At\.; Government, which created pressure for inaccurate disbursement claims to be made to the World Bank\. Moreover, staff morale sufrerea adunng tne project-s more diiiicult pnases, and turnover was high\. Although staff and institutional capacity did increase by the end of the project, weaknesses persisted, particularly in the areas of financial management and micro-project and micro-credit monitoring and supervision\. In addition, during Years 1999 and 2000 in particular, there was severe tensions between the TASIF staff and the Board members\. This was the result of the Board members feeling insufficiently informed about the operations of the TASIF, and also the difficulties of arranging Board meetings due to the busy schedules and other work priorities of some of the Board members\. The situation improved considerably towards the end of the project period, especially when Board members were able to learn more about TASIF activities through field trins etc\. 5\.4 onstsc nd fillcngrha\. I \.e\.-e was no cost ove-I Uan and Lthe\. FrUjec-tL is \.Jig c\.IIIIVlted I Lat\. MLh i y agree cost of US$12\.0 million (IDA) equivalent with some US$350,000 undisbursed\. ii  6\. Sustainability 6\.1 Rationale for sustainabilitv rating\. Overall, the sustainability of the project has been rated as satisfactory\. There are two dimensions to this\. First, at the micro-project level, it appears from both the 1999 and 2000 evaluations that the TASTF made a strong effort to achieve good participation of communities in micro-projects, in the identification and selection of a community's priorities and in micro-project imnlementation\. Within those micro-nroiects where communitv involvement and "ownershin" of projects are high, sustainability is likely, with communities highly motivated to maintain micro- projects\. TA Sl's initintive nf tnfe\.fprring the tendenriig process to mic\.ro%roject conmmittees for selecting contractors, and having pre-tendering and bid evaluation and award conferences at the comr\.r\.uni;- sites, is a tagil A-monsatn"n of its work, in -renE,\.hXing, the paricipat-r\. LJIU UI IIL I 3L\.3 I3 Langi1ule\. U-_\.I1JI3 LaLJVll VI 113 YLa WMI III 3U'\.L_ILLl\.111L1a LiI'\. FaI LIC\.LaLuLy processes\. Considering the current and recent social and economic context of Tajikistan, the level P \. \.J 'A C'TT'_ - \. \.,\.--a …_ -- Ir o0 community participation reached in I tASir s micro projecis Ueserves Lo DU noteu as one of iLS most important achievements\. However, not all of the micro-projects achieved sufficient buy-in from the beneficiary communities, and some of the micro-projects are therefore in danger of falling into disrepair\. There is a need for further building up of the capacities of communities to operate and maintain their micro-projects, and to help them to find ways to mobilize resources necessary to operate and maintain them\. There is also a need to clarify the roles and responsibilities of the government, both central and local\. However, some sustainability issues were beyond the scope of the project\. While TASIF-funded schools may be well-maintained by the communities that requested them, for example, school textbooks and teachers, which are supplied by the consistently-underfunded Ministry of Education, are often in short supply\. A re-emergence of threats to security could further compromise the sustainability of some of the micro-projects\. At the institutional level, the PPAP's prospects for sustainability improved considerably t,owrAc thes nA nf the nrnipnt rrinA At thA pnA n- Voor 10M, th rA AiA nnt onnpor tn hi on,, iVETs~~~p- &Je petiod\. At \. end _o V V _ VVxi __MXV F0-- - \.eV V_ I-- "champions" for the TASTE in the senior realms of the Govemment, and project closure (and the collapse ofC t,he TrA QTM ere ,\.ie,\.lJt h esnlitreto A_ the P,-esd c11a3 01 LILI InwwijIL b"~1I1Uk1Z1U LI1J\.IL1V1tL\. VY IUII L11IF 1XI\.t0U1al 1I1L;I V;I1LIU11 0I LIM: 17 1vrMUC1L, however, and with his written endorsement of the importance of the TASIF in the country's poverty reduction strategy, the prospects for the survival and further sirengthening of tne institution increased substantially\. This turn-around was then capitalized upon by the newly appointed interim Executive Director; and by the end of Year Z2I, the sustainability ot the TASTF as an institution had improved enornously\. However, the TASTF is still a fragile institution, and one dependent on a narrow financing base (presently the Government and IDA)\. Staff capacity also remains weaker than might be hoped\. Nonetheless, the project has supported the establishment and building up of an institution that has already shown itself capable of pioneering community-based development in an extremely difficult environment, and which has considerable potential to continue helping the Government to develop and implement its poverty reduction strategy, if continuing attention is given to addressing the outstanding management issues\. 6\.2 Transition arrangement to r egutlar operations\. The PPAP was a pilot project that, if successful, would be followed by a second project to continue financing the TASTi\. it was envisioned inai ine TASir would become a primary 12  instrument in the Govemment's poverty alleviation strategy\. A Second Poverty Alleviation Project, with a second credit of US$13\.8 million for the TASIF, was approved on May 21, 2002\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: The Bank's performance, as observed in the project's 1996 QER, was satisfactory\. The -proUjelct was one ofr the- first lulfegdproje-ctss zin Tajikidstan, and Ah Ban - ae out, project pIUJt\.LW~1 ULI UtLLI~LII~ IU1LI~~U 1UJ~~L ai 1IUL1,Gu Lit%\. LJaILN V-I - UL jJIVJL-%,L identification, preparation, appraisal, and Board presentation in a difficult environment in a comparatively short timeframe\. Project preparation was completed in fiull agreement witi- the Government's development priorities, and in close coordination with the other donors active in Tajikistan, particularly the agencies of the UN system and the NGO community\. 7\.2 Sipervision: World Bank staff made noteworthy and intensive efforts to ensure that the project was implemented according to Bank guidelines and according to the original project objectives\. Many challenges were faced by the team\. Some of these challenges were common to the supervision of other projects in the portfolio: the limited World Bank supervision resources, the lack of intemational technical assistance available and willing to travel to Tajikistan, security concerns, and travel restrictions that prevented more regular visits to the more remote project areas\. However, the World Bank's performance during supervision was also severely strained by a series of misunderstandings and disagreements between the World Bank, the TASTF Board and the Govemment over project management issues\. In particular, the project suffered from a lack of supe\.vision in eVa\. 20AAA vhepn thpre wvas an imancsp hPetxiPpn tlGo ( e\.n\.prnrnp,t ndii the World Bank over the selection of the new Executive Director for the TASIF\. For this reason, even UIhughII reLiUons iiiip\.-veu Vy Lte endU VI the p1rJect"L, Lac,1iLaLting anL aJpJpiVjJaLte level and\.Z LLntes31Ly of supervision again, the Bank's supervision performance is rated as unsatisfactory\. 7\.3 Overall Bank performance: The overall Bank performance is rated as unsatisfactory, despite the sheer difficulty of successfully implementing projects in Tajikistan\. Also despite the genuine commitment that the supervision team made to ensure that the project was implemented according to World Bank guidelines and with maximum community participation, there was a failure to resolve sufficiently quickly the extremely tense relationship between the World Bank and the Govemment, especially in Year 2000\. This stemmed from a lack of adequate communication and understanding between the supervision team and the Govemment and TASIF Board\. The result was a hardening of positions on both sides, to the detriment of the project and its efficient implementation\. The issues were eventually resolved through the nersonal interventions of the World Bank Regional Vice President and the President of Tajikistan\. While it is comnmendable that this led to a satisfactory conclusion to the project, the pesalation nf the issue shnould have hben avoietd and the differences of opinion settled sooner and more amicably\. This failure needs to be balanced against the extreLCmely detailed and highly satisfactory monitoring that was done of the project, but the overall conclusion is that the World Bank's performance was unsatisfactory\. 13  Borrower 7\.4 Preparation: Initial Borrower performance was satisfactorv\. The Quality-at-Entrv review undertaken in 1996 gave the highest rating possible to the category "strength of borrower commitment to the proiect;" as well as to countermart funding arrangements\. The Borrower's contribution to nroiect preparation was rated as satisfactory, as were the project's readiness for implementation with the necessap1C2ry x 7,-rnrmrnt anprnvas1c InIS cLatLgUly IS raLtU UsN UMsU,1cULUYtL0r ior two reasons: (i) the persistent probICm U1 inadequate counterpart funding, and (ii) the Government's failure to follow an appropriate selection procedure for the new TASiw Executive Director in Year 2000, the appointment of an Executive Director without the Bank's "no-objection, and the refusal of the Govemment for several months to correct the situation through an acceptable selection process\. Fortunately, solutions were found to both of these problems towards the end of the project, and even much of the troubled shelter program was implemented by the end of the project\. The country's fiscal situation will inevitably cause continuing difficulties for the Government in making available sufficient counterpart funds for IDA-supported projects in Tajikistan, and this issue should be reviewed carefully as part of the formulation of the next country assistance strategy\. 7\.6 Iinleinentinz Aeencv: TASIF performance is rated a unsatisfactonry, despite good progress in micro-project implementation and other areas, due to persistent problems of poor project management and the irresponsibility, of somre kystaff mrerr_\.br hog \. c \. the - -roec r\.pe\. -o- pe-o\.- At the same time, it again needs to be emphasized that the performance of the TASIF improved substantially aLL%er early 2001 I, andtisu bode veryb V ell W for the LLL\.LUC\. 7\.7 Overall Borrower perfLormance: Since two of the three performance categories are rated as unsatisfactory, the rating for Overall Borrower Performance is rated as nnsatisfh_tory\. 8\. Lessons Learned The project was deliberately designed as a pilot, and it afforded many lessons, both good and bad\. On the positive side, the project confirmed that many communities are motivated to work together in the selection and implementation of small infrastructure micro-projects, and that they are willing to contribute to costs\. Small private contractors emerged in response to the competitive bidding procedure used by the TASIF, even in remote regions, and an acceptable quality of work was produced in most cases\. The most successful projects in terms of quality, imnact and sustainabilitv were those in which the communitv was directlv involved in all sta(es of micro-project design and implementation\. Perhaps above all, the experience of the project shows that the outconmp pupn of "nrohlprn, nrojpt-t" mayu be imprnoed subst,antia11!y txvhen there is top-level focus and joint commitment to resolving sensitive relationship and procedural issues\. 14  Along with these successes, the deep problems within the TASIF provided a wealth of learning opportunities which need to be considered for the future\. The institutional lessons learned include the following: High-level and sustained borrower commitment is of utmost importance\. This appears to have been reasonably strong at the outset of the project, but was not sustained during the course of nroiect imnlementation\. One of the major reasons for this was lack of clarity about the respective roles and responsibilities of the TASIF management, the TASTF Board, the- fg%wsrnrm\.ent and tlhe MTA\. T\.his ic a conm\.licanted issue, epcially'11 whe-n MA funds are provided to a government and are then passed on to a social investment fund focuseA on pov\.-, reA ution, -And,hn - he\.e is ;a B ordA cr\. a l%tI, --oth-gove\.nt LO ULU tn IJV Ly IUUcl4UII, ULIIt VILLIL Llltd'\. *o a -aiant S\.--JL \. lOlil -J\.LZ - \. \. officials and non-government members\. The situation was exacerbated by the fact that Lnc I A>ir was nCwIy U\.IidLU-, MGlov UUVeVIIImntI'llOU LU 1ncllUClnu0atU11 11-i-iiy uOtr ibssuebs of national importance in the post-conflict environment; and the World Bank team staff gave particularly strong emphasis to working with the TASir officials and to focusing on poor communities as the "client"\. This led to a loss of ownership of the project among government officials\. Correspondingly, the Government then did not give high priority to allocating sufficient amounts of its extremely limited budget to the required counterpart funds for the TASIF, which in turn compounded the financial management problems that the TASIF faced\. It also led to a situation in which the issue of the performance of the first Executive Director could not easily be reconciled between the Government and the World Bank\. * The continuing fiscal constraints facing the country will inevitably cause difficulties in the future for the Govemment in making available sufficient counterpart funds for IDA- supported projiets in Tajikisttan This iuiie should, therefore, be reviewed carefully as part of the fornulation of the next country assistance strategy\. * Another institutional lesson learned is that it is also important to involve the local govemment at an early sLage of project UdVe1UPllpl1L LU i IIoUIC n ure 11MMllnI\. eIII-C 15 need to coordinate service improvements with sector ministries to ensure the rationalization and utilization of resources\. * There is continuous danger of corruption, particularly in the financial management of projects, and political interference has to be avoided especially when appointing key TASEF staff\. Although the TASTF followed World Bank procedures for the appointment of its staff, there was a lack of due process in the dismissal of the first Executive Director in Year 2000\. The appointment of a proposed replacement by the Government was not done in accordance with the World Bank guidelines, partly due to the lack of knowledge in the government but also due to the deteriorating relations between the Government, the TASTF Board and the World Bank over the implementation of the nroiect\. The nroblems of financial management became increasingly apparent by 1999, but action by TASTF management to dismiss the staff concernred wvas delayed\. This led to seriousg rnc concerns and only qualified audit reports\. * The TASTF needs strong management and leadership, and training is critically important\. in addition to the need to ensure the selection of the most appropriate staff, training is extremely important at every level: within the TASIF, to build institutional capacity; in the communities, to ensure they are capable of implementing and maintaining projects; 15  and witn intermediary NGOs, if used as implementing agencies, to ensure that tney are equipped to deal effectively with their clients\. In particular, it is necessary to invest in project implementation capacity by financing the training of staff in World Bank procedures\. There is also need for high standard technical assistance to build capacity rather than just carry out functions\. However, at least some of the technical assistance provided to the project may not really have been wanted by the TASIF or the Government\. The reasons for this were complex, but they were partly due to the cost, partly due to mixed performance by some of the experts, and partly due to the feeling that the experts may have been providing too much information directly to the World Bank\. In any event, this led to tension with the World Bank team which was rightly concemed about its fiduciary responsibilities\. In retrospect, it may be concluded that there shoiild have been more training of the TASIF staff nerhanp counled with more imaginative use of technical assistance (for example, through a series of short-term visits Iand~ cor\.bined ,Al,B t sdy~ tor, rahr h\.n\.b;\.rl ogtr\.) Te lnigadric----oetlessons 'camle' nld hefloig IL ILV IKI1U1IIr, 411U I11llLIo-pkuJVL I UI~ Z~1u iIII UU Ll1l~ IVI1UJWIllr\. * Agreed operational procedures need to be followed throughout tne duration of the project\. For example, the investment plan is essential, and it needs to be updated annually\. It is also critically important for procedures regarding community participation and tendering actually to be followed\. All of the requirements for a micro-project need to be fully addressed (for example, providing equipment for a school as well as the building)\. Care should be taken to ensure that timetables are not rushed, simply for institutional reasons, and that genuine community involvement and participation are sought and developed\. Micro-projects should be kept simple enough to be designed and maintained by communities; and in some cases, a phased approach to micro-project lending should be adopted\. T nocal co\.mmunities in Tiilstatnn, even if verv nnnr and dizadv2nvtntged, are ahle and willing to play a major role in the identification, preparation, execution and sustainability ofr micr-oaprojecnt\. HTAlowever, th- ineed tA -e - that \.icroroeA-ts do not ex cludeA UI IQL,trjJIJLt\.I\. flYYtV~1~ l%I\.d~ la U ttt I'\. ~ LfU \. -- \. "flhFu% J1 -aLtJ\.tL SAU \.LU - -LfJ the poorest through an inappropriate level of required community contributions, and for elter tvargeting andU outL[eacLI to ensure ilat projects hIlel p \.Lhe ve 1y pUoUore\. ,III Is LndU to improve initial information and education activities and campaigns, and other public awareness activities\. * The micro-credit component was successful, though the overhead costs were relatively expensive, and it needs to be expanded through the use of cost-effective local NGOs\. 9\. Partner Comments (a) Borrower/inplementing agenca: The following is the text of a letter dated May 7, 2002 from the Prime Minister\. "Let me express our appreciation to the World Bank for the support extended to allocate funds for the implementation of the Pilot Poverty Alleviation Project and joint undertaking of the Project itseylin Tajikistan\. 16  HLlavinlg thoroughly familiarized ourselves with the impleme\.ntation\. Comrpletion Report, we want to underline that this project was amnong thefirst investment projects in the Republic of Tajikistan tnat receivedjinanciai support jrom tne Worla Bank\. Despite the jact tnai the project preparation process and project flexibility envisaged in project components has been carried out by the World Bank at a high level and in fuii compliance with the priorities of thre Tajik Government and guiding principles of the World Bank, several shortcomings and mistakes have been discovered during the course of project implementation which slowed down the pace of implementation of some of the coinponents and affected performance\. We consider the following as the main reasons for this: lack of capacity within TASIF and poor financial management of the Project\. During the implementation of the project, TASIF was faced with serious problems that have been successfully resolved by the country and the World Bank management\. Taking into account that the Pilot Poverty Alleviation Project was one of the first investment nrniect\.v iointlv imnlemented with the World Bank and lack of exnerienoe tn implement these kind of projects, the Government of Tajikistan gives satisfactory assessment of the project imnnlm,na,intin"/ as a whonle startina, from nrniDot nrepnnrtiodn and mption f the nrn;,io, and endorses all efforts on part of the World Bank to complete the above Project\." (b) Cofinianciers: (c) Other partners (NGOs/private sector): The fnllewuina it thts tt't tf ni Pmnil rilterd Mnu 7 9009 frnm th- Aon Kh:,n Fthiinintinn "TrASI vvr'-a ko,'d a,,d i,rp-rta,\.t i,\.oai\. --- E-rl4 Ba,\.k- f ----c,\. ;-- us it\. brouht NGOs into the program, by financing critical aspects of their poverty alleviation projects while at iWe same tiime seking o buil a lUcul lafulftiurl fthut couil leuu ouiaul chua,ge\. in grnrua rhigh marks must be given to the Bank and the Government for designing such a program, at a time when Tajikistan was new to World Bank rules and procedures and still emergingjfrom a daficuit period of civil conflict\. Overall AKF/MSDSP experience was good\. Despite occasional delays in Jundingfrom TASIF, the contribution oj $70),U00 resulted in the construction and rehabilitation of 52 irrigation channels, which in turn has created sustainable farming on some 2,000 hectares of land for some of the poorest farmers in the country\. Village Organizations initiated and supported by AKF/MSDSP have also benefited from direct TASIF support which shows the growing capabilities of TASIF as well as the Village Organizations themselves\. We are pleased to see that many of the difficulties faced in the first phase of the program are being resolved and the TASIF willform part of the Bank's continuing Poverty Alleviation Program\. If well-governed and managed, TASIF could provide a much needed leadership role in the formation of civil society in Tajikistan as well as supporting a better interface between government and civil society from its untniqe position of one foot in hbth c'ampnns" T1\.e following is an extact fro\. a 14-page report sent to the Wor1l -_ nk -- Save T1, a Children Fund (UK) on May 29, 2002\. The extract consists of the opening section and the cnI uS - -- u 1 \. "A Pilot Poverty Alleviation Project (PPAP) was imnpiementea by SrC- UK over a two-year period, fromn August 1997 till July 31" 1999, in Aini, Vahsh, Penjikent, Dushanbe and Shaartuz Districts of the Republic of Tajikistan\. 17  T77is project was a sub component of the overall Pilot Poverty Alleviation Project of the Government of Tajikistan and the World Bank\. Apart from SC- UK other INGOs namely SC-US and the Aga Khan Foundation (AKF) participated in the PPAP\. T7he PPAP was coordinated by Taiikistan Social Investment Fund (TASIF)\. T7he overall budget of the PPAP was $ 12 million\. 7The Propram of Sunnort to Female-Heandd 11nusohnlds was involved in the nrovisinn of agricultural assets and strengthen the capacity of social services to provide some 3, 700 female- headed households (PFHH,) with access to and ounership of agricultural assets (such as livestock, seed and tools) as well as technical advice\. Approximately 2,100 of the female-headed Louse'\.o\.'ds where -- 'akshL -4 d 1A 600 i,_ 4n# Sour othe ;--it\. h rgrma'oi \.c\.uded itJL Is 9&t\.) YVIt &F ill unall31, Uri" I VU,UI CFO J(JL4 Ulr5ic Ugag1 5(4\. 1 S i(5 J l uLI mL( "ULL4SC provision of information to clients on their legal rights, existing social services and assistance programs\. l ne Program of Support to Female-Headed Househoids (projected, i\.0 mitlion; actual, $0\.9 million) was highly successful\. A total of 3,700 female-headed households received agricultural assistance and 23 schools and 2 kindergartens were supported with income generation projects\. The program was successful in reaching the poor and vulnerable households and communities, and community participation was particularly high\. T7he experience of this program led to the TASIF reviewing its own strategies for developing the sustainability of micro-projects, and in cooperating with local government authorities\. Conclusions The PPAP was designed as a very ambitious project which underestimated program develonmnent and research reauired to achieve high level nf institutional development at central and local level\. It had great potential in the experience of INGOs in the country and for its ronnortunih) i eto cf)wich rnt7nhnorntirn" iv;lh Fontr-l1n rs }>r - --\. -- \. \. _\. sa\.5 \.nW The project was implemented under the pressure of many expectations from different partners, which limited opportunities to understand current social policy of the country and WB policy assistance for the social systems\. Some open questions remain: How far are Tajikistan and WB open to let NGOs participate in the policy dialogue? How much does Tajikistan and WB count on international NGOs to implement poverty alleviation interventions? How could rights based programming be experimented in working with WB and the local government? How much are other INGOs interested in developing resources to undertake research for policy development?" The Save The Children Federation (US) was invited to send comments, but none were received\. 10\. Additional Information 18  Annex 1\. Key Performance indicators/Log Frame Matrix Outcome / Impact Indicators: 1 l Indicator/Matrix Proiected in last PSRI Actual/Latest Estimate |Componentl1\. Scaling up ofPoverty |ll I Alleviation Proarams 1 I 1 A\. Shelter and Housse Rehabiliration Unsatisfactory as of end Dec\. Unsatisfactory, despite recent improvement in Progranm 2001 implementation with final partnership with Shelter Now intemationa; \. B\. Micro-credit Program _ T_I Satisfactorily met as of end Dec\. I and the vulnerable non-poor\. However, some concerns 2001\. regarding the sustainability of the program and the Sitorai Najot have arisen\. The SN now has some major financial management problems, and its Director has recently resigned and a new financial manager has been annointed C Program of Stipport to Female- Highly satisfactorily met as of end Highly satisfactory\. The program was successful in reaching the poor and vulnerable households and Dre 200 communities, and community participation was particularly high\. The experience of this program led to the TASIF reviewing its own stratezies for developing the sustainability of micro-projects, and in cooperating with local government authorities\. D Agrictiltural Reforrtl Program lll Highly satisfactorily met as of end Highly satisfactory\. The results were increases in \. Dec\. 2001 ~ ~ ~ ~~to7imilittil vipirkd of Rn-1 00 n rrent fnr then mriam- the canals\. The level of cooperation between the- Mountain Societies Development Support Program and lthe TASiF was high, and cooperation between tne TASiF- and the MSDSP led to the initiation of the TASIF pilot l _______________________________ l ___________________________ | micro-projects in GBAO in the period 1999-2001\. | Component 2: Tajikistan Social Investment Fund (TASIF1 A\. Development of TASIF j Unsatisfactorily met as of end Unsatisfactory\. However, despite the serious problems of Dec\. 2001 I financial mismanagement, the irresponsibility of some } } S ~~~~~~~~~~~~~~~~~~~~stafi- rnanagement weakriess, and' hig,, stftuli- \.uover, the - latest NSIFT management improvements suggest that the TASIF/NSIFT has grown to be a major poverty alleviation organization in Tajikistan; and that there has been a renewed effort to train staff and develop the organization's I I I ~~~~~~~~~~~~~~~~~~~~insti-tioinal capacity\.I B\. Micro-projects | Satisfactonly met as of end Dec\. Satisfactory\. Despite the project slowdown in Years 2000 2001 and 2001, more micro-projects were implemented, and more beneficiaries were successfully reached, than originally anticipated\. The technical quality of the micro- projects is generally sound, though sustainability remains l __________________________ l _______________|_______ an important issue for future follow-up\. 19  Output Indicators: | _ \. _| Indicator/Matrix Projected in last PSR' ActuaVLatest Estimate Component 1\. Scaling up of Poverty A1_evi_ation Progr_rams1 A\. SlIelter and House Rehabilitation Program \. 1\. the quantity of shelter improved as a Unsatisfactory as of end Dec\. Some housing was completed (total 706 houses for result of the project and the number of 2001 5,500 beneficiaries) by TASIF, although significantly households benefitina\. in nrnnortion to the lower numbers than nredicted when SCF-US was overall identified need; supposed to implement fully this project\. Shelter Now 2\. the inclusion of poor and vulnerable Intemational (SNI) and TASIF then jointly built categories of nousehoids as beneficiaries; another 56 houses in Kabodien region, foliowed by 30v 3\. the adoption of tile technology\. more in Khatlon area\. B\. Mi\.^ro-credit Program I\. the active loan portfolio, comprising the Satisfactonly met as of end 30,182 loans were made to over 8,604 clients; SN nimher nfh npfi,cin,ies thp Innn vnhlme Der inl maintained the lnweci avernae tnan hnlanre in and the repayment rates, indicating the Tajikistan; impressive level of portfolio quality extent to which poor women are able to consistently maintained\. access the benefitj 2\. the change in household incomes as a result of the project; 3\. the creation of productive micro- enterpnses\. _ tJu,guitn uJ ouppur/ lu remtO u-M Haou sell olds I \. the number of parolcipang households; Highly satisfactorily met as of Highly satisfactory\. 3,700 female-headed households 2\. household incomes end Dec\. 2001 | received agricultural assistance\. 3\. food productivity l landevelopment potential (length of Highly satisfactorily met as of Highly satisfactory\. The component financed 52 channels constructed and potential end Dec 2001 canals, and reclaimed 2,000 hectares of land for command area realized; agricultural production\. 2\. actual land development (number of hectares develoned for cultivation, number of households benefiting; 3\. actual increase in food production and productivity by family and unit area\. l l Component 2: Tajildstan Social _ Investment Fund (TASIF) l A\. Development of TASIF | Unsatisfactoly metasofend |Unsatisfactory\. However, at the end of the project, Dec\. 2001 there was a major effort made to improve the (managementoft\.heAClurkft cr C\.1\.--i appointment of a new Executive Director in early Year 2002\. A new Regulation on TASIF was approved; a new Board was formed; a new TASIF structure was developed and approved; and the TASIF was renamed I as NSIFT (National Social Inve,tment Fund of Tajikistan)\. The NSIFT Board then approved a training program for the staff that, inter alia, includes training in financial management, procurement, management information system, Social Investment Fund procedures I and development, and community-based develoDment\. These training activities are under way The NSIFT management has made some key promotions among its senior staf, and is cuti-eELt:y rutitiuttg the selectio iI Bl Micro-projects t Satisfactorily met as of end process for new staff\. | B\. Micro-projects | Satisfactorily met as of end I lmplementation of the micro-projects is considered to | | Dec\. 2001 | be satisfactory\. 184 projects covering approximately l ___________________________________ l Dec\. 2001 j 600,000 people were im plem ented\. End of p,ojec2\. 20  Annex 2\. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal [ Actual/Latest Percentage of ___I Estimate Estimate Avoraisal Project Cost By Component US$ million US$ million _ _ _ 1\. Scalina-un of Existina Povertv Alleviation Proarams T 7F5n r 560 74 7 of NGOs\. Total 1a\.hetr anr rnd House Pphabilitation Program\. Tota! 3\.20 28 87\. 1\.a\.1\. SC/US _____________3\.20 1\.90 59\.4 1a\., TAF_ _ _ n_n no nn \.b\. Micro-credit Program 1\.0 1\.1 110\.0 -c Program o,' supor to,eml-eaded househols 4 1\.0 f% 0\. nf 900 II -'%"31 Ul OUPjUiIL LU IWI I dIV-I I ~U U It IU I aiuI 1\.1\. 4 \.V U4\. 1\.d\. Agricultural Reform Program 0\.7 0\.7 100\.0 1 \.e\. ruture Spunsored Programs I\. 0\.V V\.0 Z\. Creation OT ane I ajlKistan :ociai investmen -una 4\.Z 4 1bt\. 2\.a\. Institutional Development of TASIF 1\.5 2\.1 140\.0 I 2\.b\. TASIF Micro-projects 2\.5 1 4\.1 1 164\.0 2\.c\. Integrated Evaluation of PPAP 0\.1 0\.2 \. 200\.0 [ 2\.d\. Audit of thePPAP I 0\.1 | 0\.2 4 142\.9 SDRs/USD rates difference loss | 0\.3 _ _ USD/TJ Somoni rates difference loss I 0\.2 j I TA* _I I A r,A* I CU4 7^ IUC% L O___________ L\.I I 4 U\.^\.0 ^\. I Pyical Contingencies 0\.7 0\.0 0\.0 Total Project Costs 12\.70 12\.70 99\.7 Total Financing Required 12\.70 J 12\.70 | 21  Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) Procurement Method1 Expenditure Category ICB NCB Other2 N\.B\.F\. Total Cost 1\. Works 0\.00 0\.00 0\.00 0\.00 0\.00 I __ ___ ___ ___ ___ ___ __(0OOn (n m { or 4 (0o n Io (o0oo _2\. Goods |_0\.00 |_ 0\.00_ | 0\.00 | 0\.00 | 0\.00 I2 Goods IA r mn I (A AArn nm Innn I m'i nn f3\. Services | (0 00 | 0 00 | 0000 1 4\. Operating Cost 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.0V) k\.u v) (O\. u) k (U\.UU) (U W) Total 0\.00 0\.00 0\.00 0\.00 ? \.00 I__________________I________ (O\.w0) I (0\.00) I (0\.00) 1 (0\.00) 1 (0\.00) Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) r | | ~~~~~~~~Procurement |Method' Expenditure Category I ;CB 1 PoCu n M ithid I N\.B\.r\. I Toial Cost 1\. Works | 0\.00 3\.43 1\.13 0\.00 4\.56 °U\.UU) (2\.9i) -(0\.96j (U\.UU) i (3\.87) 2\. Goods 1\.26 0\.41 1\.02 0\.00 2\.69 (1\.26) (0\.41) (1\.02) (0\.00) (2\.69) 3\. Services 0\.00 0\.00 3\.37 0\.00 3\.37 (0\.00) (0\.00) (3\.37) (0\.00) (3\.37) 4\. Operating Cost 0\.00 0\.00 1\.71 0\.00 1\.71 0\.00) J (0\.00) (1\.36) (0\.00) j (1\.36) Total J 1\.26 | 3\.84 j 7\.23 j 0\.00 12\.33 (1\.26) 1 (3\.32) 1 (6\.71) 1 (0\.00) j (11\.29) I/ Figures in parenthesis are the amounts to be financed by the Bank Loan\. All costs include contingencies\. 2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units\. Project Financing by Component (in US$ million equivalent) Comnnnont AnnrnisaiPEstimfat A f'l~inil 2fact Petim!Xt Percentage of Appraisal | Bank Govt\. | CoF\. Bank Govt\. | CoF\. | Bank | Govt\. CoF\. I _ _ _ _ _ _ _ [ _ _ _ I i _ _ I _ I _ I _ I _ _ 1 1_ _ 1 2 22  Annex 3\. Economic Costs and Benefits Because of the emergency nature of the project the PPAP was not subject to costs and benefits analysis (see paragraphs 4\.3 and 4\.4) 23  Annex 4\. Bank Inputs (a) Missions: Stage of Project Cycle I Performance Rating | ~~~~~No\. of Persons and Spedciaty Ion ~ 1(e\.g\.2 Economists, 1 FMSretc\.) IMond-VVear- Cour\. t Q I Se ci a I !}!re\.ainDvylp\.n _________________________________ ________________ ____________________________ P rogress | O bjective \.il-May 1996 v , ^ , "^^g«u^ \. 8 Task Manager; Economist; Tociak Scieiis; INGO' Specialist; Micro-Project SpCialsi Si As IDP/Refugee Specialist; Specialist June 1996 I TasK ivianager; Suciai Scieinist; Micro-Project Specialist; ________ _______ ______ I_______ ___ ~ H L UU LIUId W M VC HIU __ _ 4 j Specialist; Social Assessment July-August 1996 6 Task Manager; Social Scientisi; Micro-Project Specialist; Procurement; Micro-Finance Specialist; Micro-Project I~~ ~ ~~~~~~~~~ I pecianist September/October 1996 4 | Task Manager; Micro-Project 4 Speciaiist; Economist; Sociai Scientist jAppraisal/Negotiation November 1996 I 4 1 Task Manager; Operations | Analysts; Procurement Analyst; | January 199-7 2 Social Fund Specialists (Consultants) \.1\. April 1997 2 1 Task Manager; Consultant | _I ISu,pervision September 1997 3 Task Manager; Procurement S S Specialist; Social Fund I Specialist _ j October-November 1997 1 / International NGO Programs | S April 1998 2 S ocial Funds (Consultants) | S_| S May-June 1998 I 2 NGO Specialist; | S S Procurement Specialist _ _ | September-October 1998 5 rProp-ram Team Leader; s S S Task Manager; Institutional SDecialist: Micro- projects Specialist; Procurement I ______________________ I __________ I C onsultants I I | November-December 3 1 Program Team Leader; s Ss 24  ISage of rroject Cycle I I rerormance Rating No\. of Persons and Specialty (e\.g\. 2 Economists, I FMS, etc\.) Month/Year Count Specialty Implementation Development Frogress IObjective 1998 Task Manager; Procurement Specialist I February 1999 2 Task Manager; S S Procurement Specialist June-July 1999 6 Task Manager; S S Program Team Leader; Micro- finance/NGO Specialist; Procurement Advisor; Financial Specialist; Procurement Analyst | November 1999 | 2 |Task Manager; |Program Team Leader | January-February 2000 | 4 |Task Manager; Program Team Leader; Financial Management Specialist; I ________ I |___ Procurement Specialist March 2001 5 Task Manager; Operations Analyst; Financial Management Specialist; Procurement Specialist; ____________________________ ___________ _ | D isbursem ent A nalyst j _ _ April 2001 5 Task Manager; U | U Operations Analyst; Procurement Specialist; Financial Management LI I Specialist June-July 2001 Task Manager; S Sector Manager;III ________________________ _________ _ | O perations_A nalyst _ _ _ _ September 2001 4 4 Task Manager; S Procurement Specialist; Financial Management Specialist; | Operations Analyst; November -December P TeTaskManager; 2001 1 Program Team Leader Operations Analyst; Procurement Specialist; Financial Management Specialist; Social Protection Specialist; Sr\. I ___________________________ I ________ I___ O nerations A nalvst _ _ _ _ |ICR \. ICM Tu-mp 2002 1 A r Tsek Manager; Prnrilremrnt I \._,_ _ ___________________ __ I ________ __ [ Specialist; Operations Analyst | 25  (b) Staff: Stage of Project Cycle Actual/Latest Estimate 1 No\. Staff weeks TTUS$ ('000)' A Identificaton/Preparation 14\.80 Appraisal/Negotiation 16\.80 | l l Supervision 149\.31 178\.973\.001 |ICR 16\.34| 36,000\.001 II Total i?9\.25 2 [ Z14,9/7\.U0 $ amount includes onlyFYOO and FY01 expenses\. 26  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Fl Macro policies 1 H I SU I M l N Z NA L Sector Policies El H SU E M O N E NA O Physical C3 H 3 SU O M O N O NA O Financial l H l SU Z M O N l NA E] Institutional Development L H [1 SU Z M l N Io NA L Environmental L H O SU Z M OI N EJ NA Social LI Poverty Reduction El H 3 SU O M O N O NA El Gender O H 3 SU O M O N ONA Z Other (Please specify) L H 3 SUE] M O N o NA Community mobilization L Private sector development L H L SU E M O N O NA El Private sector management L H L SUE] M m N iv NA l Other (please specify) LIH I SU FlM m N E NA 27  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bank performance Rating F Lending E] HS [3 S OU O HU Mi Supe\.rviswin F] I-S ~1F ](JFn 2HU Z Overall I HS E S [DU L HU 6\.2 Rnrrnwer perfonrmnce Rating 1 Preparation nr- HS? 1Ss n u - HiU J Government implementation performance 2 HS O s N u CI1 HU I ImnlmPntntin napgev nprfnrmnnrp Fn iHIS n] S s1 u F-1 HU - Overall -HS E S [U I HU 28  Annex 7\. List of Supporting Documents REPORT "On Support to Female-Headed Households Project under the PPAP, Save Te Children/UK" 29  Annex 8\. Beneficiarv Survey Results 30  Annex 9\. Stakehoider Workshop Results 31  /' Reanort Nn\.: 2 Type: ICR

REVIEW

P083746

 ICRR 13091 Report Number : ICRR13091 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 06/30/2009 PROJ ID : P083746 Appraisal Actual Project Name : Housing Sector US$M ): Project Costs (US$M): 150\.0 158\.5 Development Policy Loan Country : Morocco Loan/ US$M): Loan /Credit (US$M): 150\.0 158\.5 Sector Board : UD Cofinancing (US$M): US$M ): Sector (s): Housing finance and real estate markets (40%) Housing construction (40%) Central government administration (20%) Theme (s): Access to urban services and housing (33% - P) Public expenditure financial management and procurement (17% - S) Regulation and competition policy (17% - S) Other financial and private sector development (17% - S) Social safety nets (16% - S) L/C Number : L7314 Board Approval Date : 06/30/2005 Partners involved : Closing Date : 12/31/2007 06/30/2008 Evaluator : Panel Reviewer : Group Manager : Group : Roy Gilbert George T\. K\. Pitman Monika Huppi IEGSG 2\. Project Objectives and Components: a\. Objectives: (a) to strengthen the institutional, regulatory and fiscal environment for a well -functioning housing market and for the emergence of market-based solutions to the country's housing sector constraints and needs \. (b) to increase the access of low -income and severely disadvantaged households to more affordable and higher quality housing\. [The loan was a DPL in two tranches, the first disbursed after loan effectiveness and the second upon meeting seven agreed triggers: (i) meeting targets in implementation of Cities without Slums (VSB) program; (ii) final restructuring of parastatal companies; (iii) approval of new urban planning legislation; (iv) approval of new residential market legislation; (v) adjustments to charter of FOGARIM housing guarantee fund; (vi) establishment of housing savings schemes; (vii) implementation of agreed reforms of real estate tax system (PD p\.22)] b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): The operation focused upon the following reform actions : (i) Modernizing urban planning standards and regulations (incl: simplification of norms for the site planning and construction of social housing; streamlining of the allocation of land reserves for public facilities; development of the new urban planning code\. (ii) Restructuring and refocusing public sector housing agencies and enterprises (incl: restructuring public housing companies (OPH - Opérateurs Publics de l'Habitat ) into a consolidated public group ))\. (iii) Rationalizing and simplifying real estate taxes subsidies (incl: changes in the fiscal regulations governing real estate investments and subsidies for the construction of social housing units of 200,000 MAD (US$23,000) or less)\. (iv) Expanding urban slum upgrading and social housing programs (Implementation of the national flagship 'Cities without slums (VSB) slum upgrading program; release large tracts of land for the slum upgrading program, social housing and residential development )\. (v) Improving efficiency of the residential rental market (incl: amending the legislation regulating the residential rental sector)\. (vi) Expanding the access to housing finance by households with low and /or irregular earnings (incl: termination of interest rate subsidies on non -targeted housing mortgages; establishment of FOGARIM - Guarantee Fund for Low or Irregular Income Households)\. (vii) Financial incentives for the housing saving schemes included in the Budget Law for 2006 (incl: Establishment of housing savings schemes )\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: This was a Euro-denominated loan in two tranches, US$ 85\.6 million in September 2005 and US$72\.9 million in June 2008\. The planned closing date was extended for six months to get the approval of the Council of the Government of the new Urban Planning Code and new legislation for the residential rental sector --measures that had been delayed by the November 2007 election\. 3\. Relevance of Objectives & Design: high : The operation supported the aims of GOM's housing sector The relevance of the objectives is rated high: programs, from modernizing urban planning to restructuring public sector agencies, and from rationalizing and simplifying real estate taxes and subsidies to improving the residential rental market's efficiency \. Rationalizing housing subsidies, the equivalent of 1\.9% of GDP and poorly targeted, was a priority \. The operation was also consistent with FY2006-2009 CAS focused upon providing quality services for the poor \. The relevance of the design is rated substantial : although it was unduly ambitious in trying to cover such a broad range of activities within one operation \. Design relevance was enhanced by taking into consideration prior AAA work, in particular three housing sector studies carried out between 1998 and 2002\. Also, the Bank's 2004 poverty report provided the detailed background analysis needed for this operation \. A financial sector assessment in 2002 made it clear how Morocco's banks funded only a small proportion of the housing finance needed \. 4\. Achievement of Objectives (Efficacy): (a) stronger and well -functioning housing market, with market -based solutions emerging \. Substantially achieved : Parastatal housing companies were reorganized and given a narrower focus of business \. Their outstanding debts to CIH (Crédit Immoblier et Hotelier) were fully paid off by late 2004, while the agencies themselves were recapitalized to a similar degree to retain their financial viability \. Their financial performance improved, as measured by standard financial ratios \. These early reforms were a condition of Board approval of the loan\. In 2007, seven regional construction companies of the state (ERACs) were dissolved\. Market-driven financial products for housing have become more diversified, stimulating competition among commercial banks \. Social housing remains exempt from the 20% value-added tax (VAT) that applies to other housing (the VAT increase from 14% to 20% may dampen the emergence of market -based solutions)\. The ICR refers to a foreign direct investment (FDI) boom in 2006 of US$454 million equivalent in housing, accounting for 15% of all foreign direct investment\. Although the ICR refers to the "increased prominence" of housing FDI, it does not provide baseline data for 2004 or endline data for 2008, nor does it make a case for the 2006 boom being a result of this operation's intervention \. All this would be necessary to correctly assess the impact and attribute it to this operation \. A new Urban Planning Code, simplifying long and cumbersome planning procedures was approved by the Council of Government in mid -2008, but it still has to be approved by Parliament and Royal Decree, a process that is likely to be completed in 2010 only\. (b) more access by low -income households to housing \. Substantially achieved : The production of social housing increased from 22,000 units in 2004 to 45,000 units in 2006 and low-cost housing increased from 54,000 units in 2004 to 70,000 units in 2006\. Finance for social housing through the Housing Solidarity Fund increased from US$44\.9 million equivalent in 2004 to US$151\.1 million equivalent in 2008\. The operation did not provide targets for these outputs in its policy matrix \. During 2003-2007, GOM helped supply 10,000 ha\. of public land for residential development especially (but the ICR does not tell us what the normal level of supply was prior to this operation )\. While the Cities without Slums program benefited more than 82,000 households--nearly three times the 30,000 target\. But this in itself did not increase housing access since the beneficiary households already had a home, however precarious\. The FOGARIM (Guarantee Fund for Low or Irregular Income Households ) created under the 2004 Budget Law provided 28,700 housing loans to households in the informal sector \. FOGARIM procedures were simplified under this operation, making it easier and quicker for low -income households to obtain finance \. 5\. Efficiency (not applicable to DPLs): ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re -estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The relevant objectives were fully achieved with only minor shortcomings \. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: While most of the project gains can be expected to be resilient over the medium -term, two important aspects of the outcome of this operation might be at risk \. On the institutional consolidation of the housing market, much depends upon the approval of the new Urban Code by Parliament that is hoped for in 2010, but could take a lot longer\. On the access of low-income households to housing, earlier gains could be stalled if house prices continue to rise at an accelerated rate as they have done in recent years in Morocco, thereby making the housing less affordable \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: at -entry : The Bank contributed to good quality at entry by ensuring that the operation's Appraisal and quality -at- objectives took past experience into account and were highly relevant both to GOM's sector policies and the Bank's own sector priorities\. Most importantly, the objectives laid out realistic achievements for a 2-3 year time horizon\. To help ensure Borrower ownership the Bank consulted widely with housing finance and micro -finance stakeholders in Morocco\. The choice of monitoring indicators, according to the Program Document (PD p\. 25) was determined by tracking systems already in place in MHU and MFP \. However, Bank project documentation does not identify M&E baselines and targets for all key performance indicators \. For instance, the ICR (p\. iii) reports an (unspecified) drop in construction costs on new social housing as a target for meeting the project objective of modernizing urban planning standards and regulations \. Furthermore, the relationship of some performance indicators to their respective objective, notably to modernize urban planning standards and regulations and to restructure and refocus public sector housing agencies and enterprises was not always obvious\. Supervision : The Bank made substantial resources available for supervision, equivalent to 76% of preparation and appraisal costs, enabling the Bank to monitor progress closely \. During implementation, the Bank worked in partnership with the IMF and with the Cities Alliance, and cooperated with other donors who brought additional support to the operation\. Consistent supervision was helped by the continuity of the task team that remained the same from loan preparation until closing \. It also enabled the sector policy dialogue with the Borrower to deepen, according the ICR\. In addition to normal supervision practices and reporting, the ICR informs that the Bank task team itself conducted specific monitoring and evaluation to track the project indicators and that the Bank issued a M&E report\. In so doing, the ICR does not explain the failure of the ministry tracking systems identified at appraisal, nor what efforts were made by the Bank, if any, to help identify and fix the problems to enable the Borrower itself to "monitor progress during implementation, and evaluating results on completion ", as foreseen for DPLs under OP 8\.60(16)\. at -Entry :Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Satisfactory 9\. Assessment of Borrower Performance: Starting with its 2002 housing sector reforms, GOM gave strong policy support to the operation, focusing its efforts upon improving the institutional and regulatory environment for the housing sector and expanding its support for low-income households by promoting market -driven interventions\. GOM commitment to the operation continued in spite of a change in the administration \. The two ministries responsible for implementation MFP (Ministry of Finance) and MHUAE (Ministry of Housing and Planning) performed well particularly in MFP's rationalization of real estate taxes and subsidies and MHUAE in reforming the urban code \. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Satisfactory c\. Overall Borrower Performance :Satisfactory 10\. M&E Design, Implementation, & Utilization: Design : Although monitoring indicators were reportedly based upon what ministry systems were able to track, the ministries did not track them in practice, an issue not addressed explicitly by the ICR \. From the ICR, it is not clear if this was a problem of overestimating the M&E capacity of the ministries or whether it was due to the subsequent failure of that capacity\. identified and agreed with GOM, but not all of them explicitly set out the targets to be achieved, nor the related baselines \. The relationship of some performance indicators to their respective objective, notably to modernize urban planning standards and regulations and to restructure and refocus public sector housing agencies and enterprises was not always obvious \. Implementation : M&E was not carried out by the Borrower ministries as originally foreseen for this operation and required of DPLs\. This meant local M&E capacity was weaker than the Bank's positive assessment of it in the PD or substantially weakening of capacity or willingness to undertake M&E had occurred \. Thus, specific M&E to track the indicators was instead undertaken by the Bank's project task team itself, especially to inform the Bank that conditions for releasing the second tranche of the loan had been met \. There is lack of evidence of any efforts by the Bank to help the Borrower undertake M&E\. Utilization : Results of M&E tracking were reported separately and fed directly into the assessment of meeting triggers for the second tranche of the loan that included indicators measuring the achievement of the project objectives themselves\. However, since there is lack of evidence that the Borrower was actively engaged in analyzing M&E data during the course of project implementation, it is likely the Borrower's use of M&E data to make corrections during implementation was modest\. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): The ICR mentions other unintended outcomes of the operation, including : (i) middle class households are likely beneficiaries of the housing subsidies; (ii) financing public housing programs received a boost from soaring proceeds from a cement tax; (iii) construction costs rose as a consequence of increases in labor, material and energy costs; (iv) promoting social housing has drastically reduced the supply of middle class apartments \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Negligible to Low Moderate Risks include increasing construction Outcome : costs, rising house prices, and key legislation not being approved in time \.  Bank Performance : Highly Satisfactory Satisfactory There were shortcomings in M&E (see sections 8 and 10)\. IEG/OPCS guidelines do not admit any shortcomings when a higher performance rating is awarded\. Borrower Performance : Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: A two or more tranche approach to DPLs such as in this case, as opposed to a programmatic single tier loan, can provide institutional and financial incentives for reform \. Even for agencies that receive no direct funding from a Bank -financed DPL, the Bank can and should play a key role in coordination when several ministries and other stakeholders are involved in a sector reform program supported by the Loan \. Reforming land titling can be a necessary condition for housing reform, but as land titling affects all sectors of the economy, and not just housing, it may require support from a stand -alone operation, since it may be difficult to package as part of a housing sector reform program \. For programs such as Morocco's social housing, stakeholders must be vigilant to ensure that resources for the program do benefit the low-income households targeted, and are not captured by those with higher incomes\. A slum upgrading program requires flexibility at the level of individual household beneficiaries in the types of solutions provided, special attention to the most vulnerable groups, extensive social support to the communities affected, and addressing the employment needs of slum householders \. The usefulness of M&E as a development tool depends, to a large extent, upon the degree to which a borrower and its development agencies adopt and implement it themselves in a sustained manner \. 14\. Assessment Recommended? Yes No Why? To extrapolate more lessons for proposed operations in other countries and regions from this positive DPL experience of promoting reform of housing and urban development sector \. 15\. Comments on Quality of ICR: This is a very good ICR that is clear in explaining the objectives of the operation, its implementation and results \. It focuses upon the results obtained, but does not consider causes for them other than the operation itself \. In other words, the ICR's assessment is as if there was no other housing reform activity in Morocco other than this operation's, an unlikely situation \. Attributing reform results to a particularly DPL can be challenging and is more likely to succeed if other possible causes of the good outcomes are considered and convincingly rejected, if the evidence supports such a conclusion \. The ICR provides sufficient information, however, to enable an independent evaluation of the project\. But, as a self-evaluation, the ICR would have been stronger had it critiqued the unclear targets set for some PDO performance indicators\. Later comments by the country department were that such criticism was not warranted, given that the Bank itself conducted project M&E \. Also there are errors in ICR's up-front data sheets that report all the project dates incorrectly except for the closing date \. In its later comments on this, the country department noted that the wrong data was system generated and could not be altered, nor could a footnote be inserted at that point in the report \. IEG's view is that the ICR should attempt to correct the error so that the report presents accurate data\. If such correction is not possible, the report should contain an erratum reference to the inaccurate data, together with the correct values that should have been generated by the system \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P001187

 ICRR 11243 Report Number : ICRR11243 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 06/19/2002 PROJ ID : P001187 Appraisal Actual Project Name : Economic Management TA Project Costs 20\.1 18\.5 US$M ) (US$M) Country : Cote d'Ivoire Loan /Credit (US$M) Loan/ US$M ) 17 16\.9 Sector (s): Board: EP - Central Cofinancing government administration US$M ) (US$M) (85%), Law and justice (15%) L/C Number : C2503 Board Approval 93 FY) (FY) Partners involved : Closing Date 06/30/1999 06/30/2001 Prepared by : Reviewed by : Group Manager : Group : Anwar M\. Shah Ridley Nelson Ruben Lamdany OEDCR 2\. Project Objectives and Components a\. Objectives The project had three major objectives : (i) promoting long-term improvement in economic management; (ii) strengthening institutional capacity in civil service administration and preparing the ground for reducing the Government wage bill; and (iii) strengthening the legal and judiciary apparatus to improve overall economic development\. b\. Components 1\. For promoting long-term improvement in economic management: i) improve planning, programming and budget cycle (providing advisors); ii) strengthen national system of statistics and national accounts; iii ) improve supervision, monitoring and control functions of parapublic enterprises (PE) (prepare inventory of PE legislation, review of cross debts and transfers between PEs and State ), improve collection and circulation of PE information, increase autonomy and accountability of PE executive officers and board members (prepare incentive and penalty system to encourage board members' performance and training program ); iv) upgrade economic management skills of higher level staff of Ministry of Economy, Finance and Plan (MEFP) departments participating in project (training assessment study of 140 staff and support for training program ) 2\. For strengthening institutional capacity in civil service administration and preparing the ground for reducing the Government wage bill: i) initiate civil service reform program with objective of reducing Government wage bill and having more efficient administration (rationalize computer information systems of personnel files and payroll, design and implement systems for control of wage bill, studies for planning of reform of civil service management, assist with "Plan National de Formation" for priority training activities) 3\. For strengthening the legal and judiciary apparatus : i) strengthening judiciary (computers for offices of clerks of various courts, judicial training, collection and dissemination of legal data, training judges ), ii) modernize economic legislation (revision of various laws); iii) introduce arbitration (support creation of arbitration center ) c\. Comments on Project Cost, Financing and Dates Dates: The project closed almost 2 years after the original closing date \. 3\. Achievement of Relevant Objectives: 1\. Promoting long-term improvement in economic management was partially achieved : i) improve planning, programming and budget cycle : A unified budget was achieved in 1999; ii) ii) strengthen national system of statistics and national accounts : Not achieved; iii) iii ) improve supervision, monitoring and control functions of parapublic enterprises (PE) PE): legal framework was revised but not applied, cross -debts were assessed, computer system for managing PE information not yet put into use due to its complexity, incentive and penalty system for board members not implemented, nor was data base of competencies for selection of PE managers implemented; iv) iv ) upgrade economic management skills of higher level staff of Ministry of Economy, Finance and Plan (MEFP) MEFP ) departments : More staff were trained than originally envisaged \. 2\. Strengthening institutional capacity in civil service administration and preparing the ground for reducing the Government wage bill was partially achieved : i) initiate civil service reform program : database system constructed, but never operationalized; system to manage benefits and allowances was designed, but not adopted; the government staff fell, but the reductions were less than the target; wage bill fell; The ICR did not specify if the last two activities of this component were completed (studies for planning of reform of civil service management and assisting with "Plan National de Formation") 3\. Strengthening the legal and judiciary apparatus was partially achieved \. Some activities were dropped (although it is unclear which ones specifically ): i) strengthening judiciary : center set up for juridical documentation and training for staff which were believed to reduce delays in court proceedings and contributed to better dissemination of legislation, some training and equipment was provided; ii) ii) modernize economic legislation : Partially achieved--Standard of the OHADA (Organization pour l'Harmonization des Droits d'Affaires ) were adopted (relating to commercial law and operation of the judiciary in commercial disputes ); iii)ii) introduce arbitration : Not achieved 4\. Significant Outcomes/Impacts: The government's wage bill was reduced (from 9% to 4\.9% GDP or from 49\.6% to 36\.4% of the budget)\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The project encountered significant implementation difficulties and delays and closed two years behind schedule \. The achievement of a unified budget was made less meaningful given that the project failed to achieve its objectives in improving the compilation and reliability of national statistics \. There were serious problems in the operationalization of the computerized database systems due to an underestimation of the complexity of these components\. The components of the project related to parapublic enterprises were for the most part not achieved \. The system designed to manage the benefits and allowances for civil servants was not adopted, and staff reductions were less than anticipated\. The project also did not achieve its judicial strengthening objectives \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Moderately The ICR also rated the project as Unsatisfactory "Moderately Unsatisfactory\." The project achieved wage bill reductions but was less successful in improving the quality and reliability of national accounts and other statistical series\. It was also largely unsuccessful in strengthening judiciary and introducing arbitration\. Institutional Dev \.: Modest Modest Sustainability : Unlikely Unlikely Bank Performance : Satisfactory Satisfactory The Bank's performance was only marginally satisfactory\. The project design did not fully recognize implementation difficulties especially inadequacy of planning and support for IT components of the project\. The project was not re-oriented at the mid-term review even though it was clear that there were problems\. There were 4 different task team leaders during the project\. Borrower Perf \.: Satisfactory Satisfactory The borrower's performance was only marginally satisfactory\. The government commitment for project implementation fell during the course of the project, delaying in the implementation of staff reductions and rationalization of civil servant benefits Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: 1\. Technical assistance should be complemented with an institutional structure that provides the correct incentives \. 2\. Implementation of projects should be flexible so that unmanageable components (such as the joint personnel database) can be dropped\. 8\. Assessment Recommended? Yes No Why? To understand more fully the difficulties in implementing IT projects in this context \. 9\. Comments on Quality of ICR: ICR provided good analysis of the institutional impact of the project (on changing incentives in the country ), but very limited information on the judicial component of the project \. The ICR was not specific about which components of the project were dropped\. The ICR was also in error about the original closing date of the project \. There was no information about compliance with loan covenants in the ICR \.

REVIEW

P036405

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR0000686 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-41790) ON A LOAN IN THE AMOUNT OF US$325 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE WANJIAZHAI WATER TRANSFER PROJECT December 21, 2007 Rural Development, Natural Resources & Environment Sector Unit Sustainable Development Department East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. 1  CURRENCY EQUIVALENTS (Exchange Rate Effective December 20, 2007) Currency Unit = RMB Yuan RMB Yuan 1\.00 = US$0\.135 US$1\.00 = 7\.39 RMB Yuan Fiscal Year January 1 ­ December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CS Consumer Surplus EPB Environmental Protection Bureau GMT General Main Tunnel GW Ground Water ICR Implementation Completion and Results Report IP Implementation progress ISR Implementation Status Report M&E Monitoring and Evaluation MVW Marginal Value of Water MWR Ministry of Water Resources NCP North China Plain NPWT National Programme for Water Transfer PDO Project Development Objective QAG Quality Assurances Group SAR Staff Appraisal Report SMT South Main Tunnel TVEs Township and Village Enterprises UFRBC Upper Fen River Basin Corporation WWP Wanjiazhai Water Program WWTP Wanjiazhai Water Transfer Project WTP Willingness-to-Pay YRCC Yellow River Conservancy Commission YRDPC Yellow River Diversion Project Corporation Vice President James W\. Adams, EAPVP Country Director David R\. Dollar, EACCF Sector Director Christian Delvoie, EASSD Task Team Leader Daniel Gunaratnam, EASRD (1995-2002) Liping Jiang, EASCS (2002-2007) 2  China Wanjiazhai Water Transfer Project Implementation Completion and Results Report Datasheet 1\. Project Context, Development Objectives and Design\.4 2\. Key Factors Affecting Implementation and Outcomes\.6 3\. Assessment of Outcomes\.9 4\. Assessment of Risk to Development Outcome\.14 5\. Assessment of Bank and Borrower Performance\.14 6\. Lessons Learned (both project-specific and of wide general application) \.16 Annex 1\. Project Costs and Financing \.17 Annex 2\. Outputs by Component \.18 Annex 3\. Economic and Financial Analysis\.20 Annex 4\. Bank Lending and Implementation Support/Supervision Processes\.24 Annex 5\. Beneficiary Survey Results (if any)\.25 Annex 6\. Stakeholder Workshop Report and Results (if any)\.25 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR\.26 Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders\.28 Annex 9\. List of Supporting Documents\.28 Maps: IBRD 28136 3  A\. Basic Information Country: China Project Name: CN-Wanjiazhai Water Project ID: P036405 L/C/TF Number(s): IBRD-41790 ICR Date: 04/16/2008 ICR Type: Core ICR Lending Instrument: SIL Borrower: PRC Original Total USD 400\.0M Disbursed Amount: USD 324\.6M Commitment: Environmental Category: A Implementing Agencies: Yellow River Diversion Project Co Cofinanciers and Other External Partners: B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 09/09/1994 Effectiveness: 11/21/1997 11/21/1997 Appraisal: 10/18/1996 Restructuring(s): Approval: 06/03/1997 Mid-term Review: Closing: 06/30/2003 06/30/2007 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Unsatisfactory Government: Moderately Satisfactory Quality of Supervision: Moderately SatisfactoryImplementing Agency/Agencies: Moderately Satisfactory Overall Bank Moderately Overall Borrower Performance: Unsatisfactory Performance: Moderately Satisfactory C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project No Quality at Entry Satisfactory at any time (Yes/No): (QEA): i  Problem Project at any Quality of Moderately Yes time (Yes/No): Supervision (QSA): Unsatisfactory DO rating before Unsatisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 6 4 Sanitation 14 12 Sewerage 20 Water supply 60 84 Theme Code (Primary/Secondary) Land administration and management Primary Primary Other urban development Secondary Secondary Pollution management and environmental health Primary Primary Rural services and infrastructure Secondary Secondary Water resource management Primary Primary E\. Bank Staff Positions At ICR At Approval Vice President: James W\. Adams Jean-Michel Severino Country Director: David R\. Dollar Nicholas C\. Hope Sector Manager: Magdolna Lovei Joseph R\. Goldberg Project Team Leader: Liping Jiang Daniel J\. Gunaratnam ICR Team Leader: Liping Jiang ICR Primary Author: Xueming Liu Ajay Markanday Tao Gu F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project development objectives (PDOs) defined at appraisal were: (a) Reducing the severe infrastructural bottlenecks in water supply that impede economic growth; (b) Increasing employment and incomes by eliminating the paramount constraint to development; ii  (c) Reducing the distress of the urban population caused by insufficient and intermittent water supplies, which are barely enough to meet their basic needs; (d) Improving the environment by ending the over-extraction of groundwater and the subsequent drying of surface streams and land subsidence, and by treating all waste, so as to reduce water pollution downstream; (e) Creating a system to rationalize water use, by sector, and reducing water shortages by managing demand; and (f) Promoting integrated management and financial independence for water institutions\. Revised Project Development Objectives (as approved by original approving authority) No changes were made to the PDOs\. (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : Annual Water from the Yellow River shall be supplied to Taiyuan City Value quantitative or zero 320 million cubic 75 million m³ Qualitative) meters Date achieved 01/31/1998 12/31/2005 12/31/2006 Comments The water demand projection was over-estimated in the Staff Appraisal Report (incl\. % (SAR), based on which works have been constructed\. [See Section 3\.2\.2 ( 23\.4 achievement) percent of original target\.)] Indicator 2 : Reducing overdraft of groundwater in Taiyuan Value quantitative or 644,000 m3 /day 459,000 m3 /day 563,500 m3 /day Qualitative) Date achieved 01/31/1998 12/31/2005 06/30/2007 Comments (incl\. % Accounting for 77 percent of the SAR target achievement) Indicator 3 : Corporatization of major water institutions and formation of the Fen River Basin Commission to maximize the benefits of the project Corporatization of major water institutions was not No changes in Corporatization of achieved by the Value Institutional arrangement major water Closing Date\. The quantitative or were made for unified institutions and unified Fen River Qualitative) water resources formation of the Basin Commission management unified Fen River was established Basin Commission right before the Closing Date\. iii  Date achieved 01/31/1998 12/31/2005 06/30/2007 Comments (incl\. % See ICR Main Text Section 3\.2\.2 achievement) Indicator 4 : Reducing distress to householders by lack of water supply Value quantitative or 45 88 140 Qualitative) Date achieved 01/31/1996 12/31/2005 12/31/2006 Comments (incl\. % The project achieved 159 percent of the SAR target achievement) (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Yellow river water, local water and groundwater shall be utilized in an economic Indicator 1 : and optimal way, and groundwater table shall rise gradually due to closure of groundwater wells\. Value Groundwater table Groundwater table (quantitative Serious overdraft of in Taiyuan starts to continues to rise in or Qualitative) groundwater rise some local areas Date achieved 01/31/1998 12/31/2005 06/30/2007 Comments (incl\. % See ICR Main Text Section 3\.2\.2 achievement) G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived DO IP Disbursements (USD millions) 1 12/22/1997 Highly Satisfactory Satisfactory 9\.00 2 12/13/1998 Satisfactory Satisfactory 63\.29 3 06/23/1999 Satisfactory Satisfactory 86\.80 4 06/28/1999 Satisfactory Satisfactory 86\.80 5 12/30/1999 Satisfactory Satisfactory 106\.57 6 12/30/1999 Satisfactory Satisfactory 106\.57 7 12/30/1999 Satisfactory Satisfactory 106\.57 8 06/28/2000 Satisfactory Satisfactory 140\.75 9 12/29/2000 Satisfactory Satisfactory 188\.97 10 06/26/2001 Satisfactory Satisfactory 232\.45 11 12/18/2001 Satisfactory Satisfactory 264\.49 12 06/28/2002 Satisfactory Satisfactory 272\.19 iv  13 07/01/2002 Satisfactory Satisfactory 272\.19 14 12/20/2002 Satisfactory Satisfactory 274\.53 15 06/10/2003 Satisfactory Satisfactory 275\.55 16 12/16/2003 Satisfactory Satisfactory 302\.42 17 06/22/2004 Satisfactory Satisfactory 311\.93 18 12/10/2004 Satisfactory Satisfactory 313\.09 19 05/30/2005 Moderately Satisfactory Unsatisfactory 314\.43 20 12/30/2005 Unsatisfactory Satisfactory 318\.44 21 05/31/2006 Satisfactory Satisfactory 320\.59 22 01/26/2007 Unsatisfactory Unsatisfactory 320\.59 23 06/25/2007 Unsatisfactory Unsatisfactory 320\.59 H\. Restructuring (if any) Not Applicable I\. Disbursement Profile v  1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\.1\.1 Country and Sector Background: China's impressive economic performance since 1978 with a growth rate of GDP of 9\.5 percent per year has been mainly in the industrial and commercial sectors and is concentrated in urban areas; as a result, urban water demand has increased by over 500 percent\. Available water supplies, however, have met only 20 percent of the increase\. By 1995, 400 of China's 514 largest cities suffered water shortages, with 100 of them, located in the North China Plain (NCP) being characterized as "desperately short" of water\. The economic loss caused by these water shortages is estimated at US$12 billion per year\. Water shortages also affected domestic users, with household consumption in NCP cities averaging between 20 and 50 litres per capita per day (l/c/d) compared to a minimum requirement of 20 l/c/d\. The shortages have also had adverse environment impacts as local surface water was completely exhausted and groundwater seriously over-drawn, leading to land subsidence in some cities and salt water intrusion in coastal areas\. In Shanxi Province, the most important economic impacts of the water shortage were observed in the industrial cities of Taiyuan, Datong and Pingshuo where surface water supplies were virtually non- existent and ground-water has been over-extracted to a degree leading to land subsidence (of over three meters in many places\. As a result, all sectors and population groups have suffered\. The SAR contended that by the year 2000, water demand in these three areas would outstrip supplies by a factor of 70 percent, with the gap growing much wider afterwards\. 1\.1\.2 Rationale for Bank Assistance: Consistent with the 1997 Country Assistance Strategy (CAS), the proposed project supported development efforts focused on: (a) China's poorer interior provinces; (b) alleviating infrastructural constraints to continued economic development; and (c) enterprise reform by commercializing operations and, inter alia, introducing rational pricing and fostering environmental protection for river basins\. In this regard, the project was expected to ease infrastructural constraints in the water supply sector that are now impeding Shanxi's economic and industrial growth, with consequent effects on employment and poverty alleviation\. It was also expected to relieve periodic municipal water shortages and to improve the environment by reducing dependency on groundwater resources and introducing modern water treatment facilities\. By supporting the creation of water resource corporations at various levels and commercializing those operations by enabling them to trade water and set prices at commercial rates, the project was expected to support enterprise reform\. In technology transfer, project tunnels (some of the longest in the world) would be constructed by double-shielded boring machines and the use of a master computer-controlled supervisory system would optimize pumping rates to save energy costs\. Although the Bank has assisted in many water resource and irrigation projects in the Yellow River Basin, the most important lessons for this project were drawn from the Xiaolangdi Multipurpose Project, Shuikou and Ertan Hydroelectric Projects\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 1\.2\.1 The project was seen as important for reducing infrastructure bottlenecks (caused by extreme water shortages), increasing employment and thereby reducing poverty, decreasing human distress caused by intermittent and limited water supplies, and improving river water quality\. The stated project objectives were: a) Reducing the severe infrastructural bottlenecks in water supply that impede economic growth; b) Increasing employment and incomes by eliminating the paramount constraint to development; c) Reducing the distress of the urban population caused by insufficient and intermittent water supplies that are barely enough to meet their basic needs; d) Improving the environment by ending the over-extraction of groundwater and the subsequent drying up of surface streams and land subsidence, and by treating all waste to reduce water pollution downstream; 4  e) Creating a system to rationalize water use, by sector, and reducing water shortages by managing demand; and f) Promoting integrated management and financial independence for water institutions\. 1\.2\.2 The objectives were consistent with the brief description of the project objective in the Loan Agreement (Schedule 2), which states "The objectives of the Project are to assist the Borrower in expanding the water supply in Taiyuan in a manner designed to ensure sustained economic growth in an environmentally sound manner and reduce poverty by increasing employment"\. 1\.2\.3 Key indicators monitored during implementation were: Indicator 1: Annual water supply to Taiyuan City Indicator 2: Reducing the overdraft of groundwater in Taiyuan Indicator 3: Reducing household water use distress Indicator 4: Corporatization of major water institutions and formation of the Fen River Basin Commission\. 1\.3 Revised PDO and Key Indicators, and Reasons/Justification No revisions were made in PDOs or the key indicators\. 1\.4 Main Beneficiaries 1\.4\.1 The SAR identified the direct primary beneficiaries of the project as: (a) urban households, through increased water supply for domestic use; (b) workers in factories and mines, through economic growth and employment; and (c) farmers as indirect beneficiaries through the increased treated water supply for irrigation\. 1\.5 Original Components 1\.5\.1 The project as described in the SAR had three components\. Component 1: Yellow River Diversion Project Corporation (YRDPC) included: (a) the physical river diversion works (construction of tunnels and water delivery structures and equipment); (b) resettlement and compensation for households displaced by the construction of aqueducts; (c) environmental management; and (iv)consultant services\. Component 2: Water Resources Institutional Reform included the reform of all water resources institutions in the Yellow River delivery area through integrating principal institutions (such as the YRDPC, Fen-1 and Fen-2, Fenhe Irrigation Bureau and Taiyuan groundwater institutions) into an Upper Fen River Basin Commission (UFRBC) that would have the responsibility of licensing all ground and surface water extraction in the Upper Fen Basin, and corporatization of the major water institutions\. Component 3: Water Pollution Control and Industrial Waste Water Management included: (a) developing an environment master plan for Taiyuan; (b) training and upgrading the Environmental Protection Bureau (EPB); and (c) administering a fund for cleaner technologies in major polluting industries like steel and coke production\. 1\.5\.2 The main causal links envisaged from various activities under project components were to provide the physical structures needed to transfer water from the Yellow River and support policy and institutional reform to improve economic water pricing and water marketing\. The causal links between component outputs and PDO outcome are assessed in Section 2\.3\. 5  1\.6 Revised Components No changes were made in components during the implementation of the project\. 1\.7 Other Significant Changes 1\.7\.1 There were no significant changes in project design, scope, implementation arrangements or schedule except that a part of the savings made in the use of the Bank loan of US$13\.8 million was used to continue reducing the environment pollution in accordance with the same mechanisms and procedures set out during project appraisal for the B5 sub-loan sub-component of the project and a cancellation of US$75 million from the Bank loan as the result of procurement issues\. The cancellation was based on the request from MOF due to the disagreement between Shanxi Province and the World Bank on the issue of awarding the Lot IV contract for the connecting works\. Afterwards, the province completed the connecting works successfully according to the original design with its internal funds\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design, and Quality at Entry 2\.1\.1 The Quality at Entry of the project is rated as having been "unsatisfactory" for a number of reasons\. 2\.1\.2 Project design was based on the following background analysis: (a) a strong positive growth in overall water demand from water-intensive industries in and around Taiyuan City; (b) a dwindling supply from groundwater; (c) grave environmental (and associated economic) costs related to over- drafting groundwater, which in the "worst-case scenario" could have led to major soil subsidence in Taiyuan and the possible need to relocate the city and the industrial base; and (d) the need to ensure economic efficiency in overall water delivery, markets and pricing\. Although the overall rationale was justified, there were significant weaknesses in the analysis of (a) and (d)\. 2\.1\.3 Industrial Water Demand: The underlying SAR assumption of growth in total water demand was grossly over-estimated\. This was the result of: (a) the high demand projections for water-intensive industries, which did not factor in the (very large) savings that have resulted from the adoption of more efficient water-saving technologies1; over the last decade there has been an inverse relationship between the growth in industrial output (GDP) and overall water demand2 largely resulting from efficiency gains in water use and partly from the move toward a less water demanding service-based economy; and (b) savings in water use due to more stringent environmental regulations and enforcement, which have resulted in the closure of a large number of small and inefficient water-using industries and/or their consolidation into larger and much more water efficient enterprises\. The SAR projections for total industrial water demand compared to ICR estimates are shown in Table 1, which show large differences (actual industrial use in 2005 was less than the half the SAR projection for 2000)\. Table 1: Estimated Total Industrial Water Demand Taiyuan (in million m³) 2000 2005* 2010 2020 SAR 382\.2 NA 565\.9 728\.1 ICR - 177\.8 278\.8 467\.7 1 This was done despite the implicit awareness in the SAR of rapid improvements in the efficiency of water use (SAR, page 7, paragraph 2\.8)\. 2 The SAR claimed the original projections for growth in water demand by government agency were "conservative"\. 6  Difference - - 287\.1 260\.5 Source: SAR Table 7\.1, Annex 7 and ICR mission/YRDPC estimates * Actual use based on Water Resources Department figures\. 2\.1\.4 Efficiency and Pricing: Given the urgent need to avert a potentially disastrous situation, the fundamental objective of the project should have been to supply diverted water to Taiyuan City as rapidly as possible to substitute ground water use\. Accordingly, diverted water from the Yellow River should initially have been priced lower than the prevailing price of groundwater as an entry point to facilitate this critical substitution, and the diversion system should have been operated as a government regulated water utility\. Once this had occurred and the use of groundwater curtailed to safe and sustainable levels, prices could have been increased gradually to cover O&M costs3\. Instead, the commercialization and full-cost pricing of the project design had exactly the opposite effect where significantly cheaper4 ground-water continues to be over-exploited, effectively crowding out the demand for diverted water (Annex 3)\. 2\.1\.5 Lessons learned in physical aspects were highly valuable in enabling rapid progress to be made in procurement, consulting, and construction on schedule to high quality standards\. In marked contrast, however, there were both design and subsequent supervision weaknesses on the Bank's part 5 in ensuring that progress in "hard" infrastructure aspects remained well-synchronized with critical and equally important institutional and pricing reforms\. At appraisal, more attention should have been given to lessons learned in other Bank projects in the water sector, particularly those involving institutional reforms, which would have highlighted the importance of longer-term engagement and commitment\. 2\.1\.6 The rationale for Bank intervention should have been based on a more programmatic and long-term approach with a matching loan instrument that would have better served the client and the Bank than the short-term, "projectized" approach that was adopted, given the extremely long-term vision of the government for the overall Wanjiazhai Water Transfer Programme and its "gradualist" approach to water sector reforms (Section 3\.2\.2)\. 2\.1\.7 Three factors compromised project design: inadequate gauging of the political commitment of water administrative department of the government to institutional reform, the complexity of involving and restructuring multiple water agencies, and highly unrealistic assumptions on the time- frame required for completing key reforms by the end of the Bank project\. This weakness resulted in virtually no progress being made in institutional reforms up to the original project completion date in 2003\. Although overall project design was not unduly complex, the interfaces between components and their outputs (which was crucial for successful implementation) was very weak (Sections 1\.5 & 2\.3)\. 2\.1\.8 In the SAR, physical, financial, implementation, institutional, environmental and economic risks were considered\. However, with the benefit of hindsight the mitigation measures advocated, particularly with respect to institutional reform, were over-ambitious and turned out to be unworkable\. 2\.1\.9 The QAG rating for Quality at Entry was "satisfactory" (see Section 5\.1)\. 3 The emphasis in the SAR on full-cost pricing was unworkable not least because of the very significant investment costs of diverting water from more than 300 km away and factoring the depreciation of this enormous and inordinate cost into water prices\. The continued practice of pricing on the basis of full cost recovery by the YRDPC, moreover, has led to a bizarre situation where the provincial government (having paid for the investment) also provides YRDPC a subsidy for depreciation\. 4 The current water resources fee (tax) on ground-water averages is less than 1 Yuan/m3 depending on user, whilst the average price of diverted water is 2\.5 Yuan/m3\. 5 This was notably true of bank supervisions in the early project years, which focused heavily on physical achievements, though later supervisions (post-2002) attempted to redress the failure in institutional reforms through four loan extensions and agreeing on time-bound plans of action\. 7  2\.2 Implementation 2\.2\.1 In infrastructure aspects, project implementation was highly successful and was completed to a high standard of quality and on schedule\. However, implementation progress in institutional and pricing aspects was slow and problematic\. An opportunity was missed early in implementation to synchronize institutional aspects with construction, whilst the failure to thoughtfully evaluate and revise water pricing principles (away from full cost to competitive prices) led to the serious problems outlined in Section 2\.1\. The repercussions of these shortcomings significantly compromised outcome\. 2\.2\.2 Implementation efficiency was compromised by serious issues identified in Quality at Entry, in particular the failure to ensure that different "hard" and "soft" aspects of the project were coordinated and to implement changes in water tariff pricing when the expected uptake in demand for transferred water failed to materialize\. In addition, in the first three years of project implementation, supervision missions did not sufficiently address institutional reforms whilst commitment on the Borrower's side to follow mitigation measures (such as action plans etc) was weak\. However, in the years after the physical works were completed, the Bank team with a new TTL has made great efforts to refocus on the reform agenda and tried to turn the situation around\. The Bank has been flexible by extending the project four times in order to stay engaged in the dialogue with MOF, Ministry of Water Resources and the provincial government for policy impact\. Despite the great difficulties due to inadequate political commitment to reform and little leverage the Bank had at the time, the Bank team continued to field supervision missions and to have dialogue with the various stakeholders for five years to persistently push forward the institutional and pricing reform\. Due to the joint efforts from MOF, provincial government and the Bank , finally it was encouraging to see that provincial government took some positive measures on institutional and pricing reform shortly before and after the project closure, the river basin authority was established and the regulation for integrated water and environment protection in the basin was cleared by the provincial government right before the project closure and approved by the Provincial People's Congress shortly after the project closure, which was a good start to go towards the ultimate goal of the integrated water and environment management in the basin\. 2\.2\.3 The QAG rating for supervision was "moderately unsatisfactory" (see Section 5\.1)\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 2\.3\.1 M&E design and implementation were weak: Apart from the indicators for PDO (c) and (d), the M&E design and structure cannot be effectively used in assessing project impact and outcome (Section 3\.2\.2)\. Importantly, no physical targets/year for the volume of water transferred from the Yellow River was outlined in the SAR, with the only indications coming from assumptions in the economic analysis that which grossly over-estimated demand\. These demand assumptions, moreover, formed the basis for monitoring in the ISRs\. For individual PDOs, the M&E design was inadequate in the following aspects: a) PDO 1: the indicator should have captured incremental water supply directly attributed to the project\. The efficiency measure (of value-added per m3 of water delivered) was clearly outside the projects control; b) The same rationale applies to PDO 2, where any impact on employment and incomes cannot realistically be attributed to the project alone, especially given the very rapid economic growth in China and the upward movement in high tech (service) industries which are not water-use intensive; c) Indicators for PDOs 3 and 4 were acceptable and relevant; d) PDO 5 is vague and ambiguous, which precludes any meaningful assessment; and 8  e) Although it is recognized that indicators for PDO 6 were difficult to define, some milestones in the complicated process of institutional reform should have been included that could have formed the basis of discussion on progress during supervision\. 2\.3\.2 M&E utilization was inadequate because of: a) The inadequacy of M&E design of indicators for PDO 1 and 2; b) Indicators for PDO 3, 4 and 5 were not effectively used in decision-making as it was known early in project implementation that delivery targets were unlikely to be met; and c) There were no useful milestones outlined for PDO 6\. Had they been included they could have been extremely useful as benchmarks for progress on institutional issues\. 2\.4 Safeguard and Fiduciary Compliance 2\.4\.1 The project triggered OP4\.01 Environment Assessment and OP4\.12 Involuntary Resettlement, which were duly complied with in line with Bank procedural requirements\. The fiduciary aspects of project implementation were in accordance with the Bank's Financial Management (OP10\.02), Procurement (OP11\.00) and Disbursement (OP12\.00) policies\. 2\.5 Post-completion Operation/Next Phase 2\.5\.1 The project was part of a large and continuing national water sector development program in Shanxi Province (Section 3\.2\.2) for which full development will require at least another ten years\. The Bank was a relatively small co-financier (30 percent of Phase 2 costs) of the program, financed by the provincial budget\. There is therefore no issue of "transition to regular operation" per se\. Even under Phase 2, for example, a number of works are still in progress (e\.g\., the construction of the regulation reservoir for the south line)\. 2\.5\.2 Furthermore after closure of the Bank-assisted project, the Provincial Government implemented a number of critical measures (under the August 3, 2007 Provincial Governor's Decree No\. 108)\. These included time-bound targets (over the next two years) for closure of remaining ground-water wells and increasing water resources fees for ground-water from October 2007\. In addition, legislation to establish the Upper Fen River Basin Commission and the law on Upper Fen River Water Conservation and Environmental Protection were reviewed by the Provincial Peoples' Congress on September 24, 2007\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 3\.1\.1 The fundamental objectives of the wider WWTP program of: (a) reducing environmental and associated economic risks of over-extraction of ground-water through its substitution with transferred water; and (b) alleviating structural bottlenecks in water supply in provincial economic growth remain consistent with the emphasis of sustainable economic growth with sound environment and natural resource management in the current CAS, in particular under the third thematic pillar of facilitating environmentally-sustainable development6\. The objectives also remain highly relevant to government priorities related to developing the water sector, general economic growth and sustainable development\. 6 These are reflected in the third thematic pillar in the CAS that aims to facilitate environmentally-sustainable development through: (a) strengthening the effectiveness of environmental institutions; (b) improving air quality; (c) managing water resources; (d) managing land and natural resources; and (e) protecting global environmental commons\. 9  3\.1\.2 As emphasised in various sections of the ICR, it is important to view Bank assistance in the context of the government's continuing longer-term national water sector development program\. To address the over-designed capacity of the south line, the government has initiated a number of remedial measures to expand water transfer coverage to enhance development impact (Section 2\.5\.2)\. 3\.2 Achievement of Project Development Objectives 3\.2\.1 Whilst it is recognized that at appraisal the requirements for the design of the PDO and M&E indicators were significantly different from current (results-based) requirements, there were severe weaknesses in the specification of the PDOs and associated performance indicators that make an ex post evaluation (based on these) incomplete (Section 2\.3)\. PDO 1: "Reducing the severe infrastructural bottlenecks in water supply that impede economic growth" for which the indicators are outlined in Table 1, Annex 12 of SAR\. The design of indicators for PDO 1 was flawed\. The indicators erroneously assumed a strong (almost linear) positive correlation between water use and growth in the value of industrial output by sector\. This causal relationship has been proven to be wrong as it failed to take into account the dynamic changes in the adoption of new technologies, large increases in industry's efficiency of water use (in terms of value of GDP per m3) and stringent enforcement of environmental laws resulting in the closure of a large number of small water-intensive township and village enterprises (TVEs)\. In fact, official statistics show that whilst industrial output increased by 77 percent between 1993 and 2002, the total annual water consumption declined by 40 percent (Table 2)\. Table 2\. Industrial Value Growth and Water Consumption by Sector Industry Item Unit 1993 2002 Annual Rate of Change (%) GDP RMB million 4,524\.34 11,964\.06 9\.2 Water consumption million m3 53\.82 45\.23 -1\.6 Water m3/RMB Iron/steel consumption/GDP million 1\.19 0\.38 -9\.9 GDP RMB million 506\.28 1,252\.98 8\.6 Water consumption million m3 44\.52 53\.63 1\.7 Water m3/RMB Electricity consumption/GDP million 8\.79 4\.28 -6\.3 GDP RMB million 1,887\.84 946\.73 -6\.1 Water consumption million m³ 24\.24 7\.37 -10\.3 Water m3/ RMB Coal consumption/GDP million 1\.28 0\.78 -4\.4 GDP RMB million 2,329\.08 11,930\.29 16 Water consumption million m3 43\.88 36\.72 -1\.6 Water m3/RMB Chemical consumption/GDP million 1\.88 0\.31 -15\.2 GDP RMB million 7,183\.77 11,930\.29 5\.8 Water consumption million m3 65\.48 36\.72 -6\.2 Water m3/RMB Other consumption/GDP million 0\.91 0\.31 -11\.4 GDP RMB million 17,223\.08 30,575\.66 6\.6 Water consumption million m3 273\.53 164\.18 -5\.5 Water m3/RMB Total consumption/GDP million 1\.59 0\.54 -11\.4 Source: Shanxi Provincial Statistics Bureau\. PDO 2: "Increasing employment and incomes by eliminating the paramount constraint to development" (SAR, Table 1, Annex 12)\. PDO 2 is poorly defined and excessively broad\. Although the project may well have contributed to an increase in employment and incomes, the overall growth 10  in these cannot realistically be attributed to the project alone, especially given very rapid economic growth in China and the upward movement in high technology (service) industries which are not labour and water intensive\. PDO 3: "Reducing the distress of the urban population caused by insufficient and intermittent water supplies, which are barely enough to meet their basic needs" (SAR, Table 1, Annex 12)\. PDO 3 was better defined and measurable\. Actual water consumption per household per day (140 l/c/d in 2005) was significantly (60 percent) higher than the SAR target of 88 l/c/d\. This has substantially reduced the distress of insufficient water supplies and improved access to water\. PDO 4: "Improving the environment by ending the over extraction of groundwater and the subsequent drying of surface streams and land subsidence, and by treating all waste, so as to reduce water pollution downstream" (SAR, Table 1, Annex 12)\. In relation to PDO 4 the project has had noticeable impact in reducing the over-extraction of ground water, though not to the level envisaged at appraisal\. Compared to the total target value of 459,000 m3/day (2005) for total extraction, the level achieved was 563,500 m3/day\. This indicates some 104,500 m3/day were extracted more than the target, or conversely the project only achieved 77 percent of the SAR target for total extraction\. Based on surveys by the Water Resources Department, in severely over-drafted areas the water-table has risen by between 7 and 15 meters as a result of the reduction in ground-water over-drafting\. However, the city will still need to use more the Yellow River water to further reduce the extraction to reach the sustainable use of groundwater\. It is difficult to make judgments on the improvements in water quality as no systematic monitoring has been undertaken\. Both PDO 5 and PDO 6 were intended to introduce key institutional and pricing reforms in the water sector\. PDO 5 was partially achieved as the unified Fen River Basin Commission was established immediately before the Loan's Closing Date, while the corporatization (commercialization) of water institutions (PDO 6) had not been accomplished per the design and time-frame set out in the SAR\. 3\.2\.2 Given the limitations of PDO indicator design and bearing in mind that the WWTP is only a slice of a much larger and continuing government program, the evaluation by component is further conducted below: Component 1: Physical Structures under the project were completed on time, to a high standard and to design capacity\. These included: (a) construction of the General Main Tunnel (GMT) and South Main Tunnel (SMT) to Taiyuan; (b) five pumping stations; (c) seven tunnels and aqueducts; and (d) bifurcation structures for the SMT\. There was a cancellation of US$75 million from the Bank loan as the result of procurement issues (Section 1\.7\.1)\. The standards and quality of construction for physical structures have been reviewed by the MWR and were found to be either satisfactory or highly satisfactory (Annex 1, Table 1)\. However, by the time of the ICR mission some supplementary works solely financed by the government were still in progress (e\.g\., the regulation reservoir at the Huyan water treatment plant)\. Component 2: Water Resources Institutional Reform\. Progress in key institutional reforms was difficult and slow, and corporatization of major water institutions was not achieved, which has adversely affected the benefit of the project\. A number of critical measures were taken just before or after project closure (on June 30, 2007) related to further reduction of ground-water extraction and to institutional and pricing reforms\. These have been sanctioned through the Provincial Governor's Decree No 108 (issued on August 3, 2007) that sets out time-bound targets (over the next two years) to close down remaining ground-water wells and raise water resources fees for ground-water from October 2007\. In addition, legislation to establish the Upper Fen River Basin Commission and the law on Upper Fen River Water Conservation and Environmental Protection were reviewed and approved by the Provincial Peoples' Congress on 24 September 2007\. Although it's still a long way to go to reach the goal of the integrated river basin water and environment management, these are seen as extremely important steps in meeting the development objectives of the program which with hindsight 11  should have been included as key milestones in project design to make it happen much earlier\. Given that these key measures will require at least two years for implementation, it is premature to prejudge the effect they will have on the outcome of the overall national program\. Component 3: Water Pollution Control and Industrial Waste Management\. The project achieved the following: (a) the preparation of an environmental master plan (2000); (b) an up-grading of skills in pollution control in the EPB and the establishment of a monitoring system for water and wastewater quality; and (c) under an US$8 million revolving fund for the introduction of cleaner technologies, 13 industries received loans amounting to US$8\.12 million\. By the end of the project, US$7\.99 million had been reimbursed\. Based on the success of the sub-loans under the project, a second revolving fund (from project savings) was established after the Bank-supported project closed\. 3\.3 Efficiency 3\.3\.1 At appraisal, the major project benefits were to be derived from: (a) reducing the severe water distress for domestic consumers in Taiyuan; (b) arresting the grave environmental (and associated economic) costs related to over-drafting groundwater, which in the worst-case scenario could have led to major subsidence in Taiyuan and the possible need to relocate the city and its industrial base; and (c) meeting the growing water demand expected for economic growth\. The SAR estimated an economic internal rate of return (EIRR) of 22 percent with increased urban consumption generating 7 percent of the benefits, industrial consumption 85 percent and irrigation 10 percent\. 3\.3\.2 The economic rate of return for the investment was recalculated following the original SAR approach and parameters (See Annex 7 SAR), using actual project costs, current prices and the volume of water delivered\. The analysis shows that the project is not economically viable (ERR 0\.85% and a negative NPV at an OCC of 12%), which is due to high project costs in relation to severe under-utilization of designed capacity (some 23%)\. 3\.3\.3 The methodology and approach used in the economic analysis at appraisal were not entirely appropriate and contributed to the over-dimensioned capacity, as outlined in Annex 3\. Therefore, the estimates should be treated with caution\. The Government is taking various measures to expand the coverage of diverted water to improve efficiency of the ongoing national programme\. (See Section 3\.5\.3) 3\.3\.4 Financial Analysis\. The YRDPC should not have been treated as a conventional revenue generating and profit making entity\. In fact, over the last ten years the YRDPC has existed only in name and is fully financed by the government as a public institution at the same administrative level as the Water Resources Bureau\. As such, financial analysis at both project and entity level is not applicable (see Annex 3) 3\.4 Justification of Overall Outcome Rating 3\.4\.1 The overall outcome is rated as having been "moderately unsatisfactory" based on the following assessment\. In terms of the achievement of the PDOs, the project: a) was highly successful in increasing the supply of water for domestic use (PDO 3), which reached over 159 percent of the SAR target; b) was moderately successful in reducing the over-drafting of ground water (PDO 4) where 77 percent of the SAR target was met; c) can not be credited for attaining PDO 1, as no causal relationship can be established between incremental water supply from the project and economic growth (see section 3\.2\.1 PDO 1); d) can not be credited for attaining PDO 2, as it is poorly defined and excessively broad (see section 3\.2\.1 PDO 2) 12  e) partially achieved PDO 5 as the unified Fen River Basin Commission was established right before the Loan's Closing Date (but not fully operational yet); and f) failed to achieve the corporatization (commercialization) of water institutions (PDO 6)\. 3\.4\.2 In terms of the relevance of the objectives and the design: a) The project remains consistent with current Bank assistance strategy and government priorities for development of the water sector; and b) The over-dimensioned capacity of the project is being addressed by the government as part of its continuing national programme\. 3\.4\.3 In terms of efficiency, the project is not economically viable given over-designed capacity and low utilisation\. However, in recognition of this the Government is exploring various options for expanding coverage of diverted water to improve efficiency of the investment in the context of an ongoing national programme\. (See Section 3\.5\.3) 3\.4\.4 Based on the Bank's relatively small (time and investment) slice, the ICR team recognizes that it is inappropriate to extrapolate the rating for the Bank-assisted project to the much larger and continuing government program, especially as various remedial measures7 (below) are being put in place by the provincial government (after the closure of the project)\. These are likely to improve the outcome of the program significantly, and include: a) The Regulations on Water Resources Management and Environment Protection in Mid and Upper Fen River Basin (March 2007)8; b) Key price reforms, discontinuing full cost pricing in water tariffs; c) Expansion of the transferred water delivery to cover peri-urban areas in greater Taiyuan and other urban / industrial centres along the line; and d) A detailed plan for closure of ground-water wells\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 3\.5\.1 The project was not specifically a poverty reduction project\. However, there were positive impacts on poverty through increased supply and accessibility of water for domestic use that directly benefited the poorer urban households\. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) 3\.5\.2 Institutional aspects of the project are assessed in Sections 2\.1 and 2\.5 and there are no additional aspects to be included in this section\. (c) Other Unintended Outcomes and Impacts (positive and negative): 3\.5\.3 As a result of the over-dimensioned design of the scheme (Section 2\.1 and Annex 3), the government has recently decided to expand the delivery of transferred water to new areas not 7 Measures are outlined in the Provincial Governor's Decree (108), issued on August 4, 2007\. 8 The regulation includes 29 clauses on various aspects including responsibility, planning and compensation etc\. 13  previously covered (e\.g\., surrounding peri-urban areas around Taiyuan and other industrial and urban centres in central Shanxi along the line)\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 3\.6\.1 No beneficiary survey made and no stakeholder workshop was held\. 4\. Assessment of Risk to Development Outcome 4\.1 At the time of the ICR evaluation, the project is considered to have negligible risks associated with technical, environmental and social aspects\. 4\.2 The major risks to the attainment of development outcome are related to financial, economic and institutional aspects, which became evident in the later stages of project implementation, particularly after the completion of civil works\. These risks still remain highly relevant and include: (a) the incentive pricing of transferred water to replace ground water over-drafting; (b) strict enforcement of ceilings and limits to underground water mining; and (c) the urgent need to complete institutional reforms, especially a functioning Upper Fen River Basin Commission to license the allocation and sale of water from all sources\. In addition, the government has recognised that to achieve greater development and cost-effectiveness (given the over-capacity and very large investment incurred), it is imperative that the coverage of transferred water be expanded to other parts of central Shanxi (Section 3\.4\.2)\. 4\.3 Based on implementation experience the Borrower has gradually internalized key risks and adopted mitigation measures\. The culmination of these measures came in August 2007 (after project closure) through the Provincial Governor's Decree No 108 which sets out time bound targets to specifically address the factors above\. This represents strong commitment at the highest political level in the province and is supported by the laws and regulations (Section 3\.4)\. 4\.4 Taking into account the above, the overall risk to the development outcome is rated as moderate\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry 5\.1\.1 Bank performance in ensuring Quality at Entry is rated as having been "unsatisfactory" (Section 2\.1), compared to a QAG review that rated it as "satisfactory"\. The QAG rating cannot be further discussed as detailed comments supporting the rating were not made available to the ICR team, despite several requests\. (b) Quality of Supervision 5\.1\.2 Overall, the quality of supervision is rated as "moderately satisfactory"\. 5\.1\.3 In the early years of project implementation, supervision was heavily focused on delivery and monitoring of physical aspects of the project, with inadequate attention being given to ensuring that the project moved forward commensurately with key institutional and pricing reforms\. This, coupled with initial design weaknesses in quality at entry (unrealistic timeframe for reform and not incorporating triggers and milestones for the process itself), resulted in de linking the "hard" and "soft" parts of the project; highly satisfactory delivery in infrastructure but unsatisfactory performance in institutional reforms\. This was not fully internalized by the task team until 2002 (when physical works had largely been completed), after which the team made significant efforts to push the reform 14  agenda, albeit with little leverage\. The decision to extend the project's life and provide supervision support was instrumental in keeping institutional reforms in the water sector high on the government's agenda and culminated in the Governor's policy Decree 108 and related legislation that will have significant impact on long-term development effectiveness of the overall national programme\. 5\.1\.4 In October 2006, the QAG rated the overall quality of supervision as "moderately unsatisfactory"\. The Region considered that project supervision should have been rated "moderately satisfactory" for the following reasons: (a) slow progress in institutional reforms was mainly the result of weakness in project design (Section 2\.1) coupled with a lack of political commitment by government to the reforms in the initial stages of the project; (b) during the project extension, supervision missions made significant efforts to push forward the reform agenda which resulted in a series of positive measures taken by the government just before or after project closure (paragraphs 2\.2\.2 and 2\.5\.2)\. The Bank agreed to extend the project by five and half years to engage the Borrower in initiating a complicated reform process\. The active engagement of the Bank in the latter part of the project facilitated the formation of the Upper Fen River Basin Corporation (UFRBC) and the passing of the Provincial Government Decree 108 on August 3, 2008, which will pave the way for future utilization of the currently-unused carrying capacity of the water delivery system created through the project\. The quality of supervision over the entire project implementation period is rated as "moderately satisfactory"\. (c) Justification of Rating for Overall Bank Performance 5\.1\.5 Overall, the Bank's performance is rated as "moderately unsatisfactory" based on the assessment ratings for quality at entry and supervision outlined above\. 5\.2 Borrower Performance (a) Government Performance 5\.2\.1 Within the context of a long-term national program, the Government performance is rated as "moderately satisfactory"\. 5\.2\.2 As indicated above (Section 3\.4), the government has had a long established commitment to the National Programme for Water Transfer (NPWT), dating back to the 1960s\. The Bank only became involved in the second phase of the national programme in the mid 1990s as a relatively small co-financier\. 5\.2\.3 Under the project, the government viewed the Bank as a strategic partner that would bring wide international expertise and know-how into its large and complex water diversion program\. In technical aspects there was strong commitment and "buy-in" from the government in relation to design and international best practices in engineering works\. Even though the government was also committed to institutional and pricing reform (on which they followed the Bank's advice), there was much less appreciation of their complexity and magnitude\. This shortcoming was compounded further by: (a) the absence of a conductive national water sector policy framework on the optimum utilization of surface and ground-water, water resources fees and taxes; and (b) the emphasis on full commercialization (in the Bank's business and water-pricing models) which were poorly conceived and unworkable\. 5\.2\.4 The government, however, remains highly committed to the long-term objectives of the NPWT, is following a constructive "learning-by-doing" approach with regard to institutional reforms, and has put in place key policy measures and legislation to ensure long-term development effectiveness (Sections 3\.4\.2 and 4)\. (b) Implementing Agency or Agencies Performance 15  5\.2\.5 The implementing agency performance is rated as "moderately satisfactory"\. The main works and supplementary works have been completed in time with good quality so that it was highly successful in increasing the supply of water for domestic use (PDO 3), which reached over 159 percent of the SAR target, and was moderately successful in reducing the over-drafting of ground water (PDO 4) where 77 percent of the SAR target was met\. The implementing agency tried its best in pushing forward the institutional reform, although this task was not in its mandates\. (c) Justification of Rating for Overall Borrower Performance 5\.2\.6\. The overall Borrower Performance is rated as "moderately satisfactory" based on the above (a) and (b)\. 6\. Lessons Learned (both project-specific and of wide general application) 6\.1\.1 The project design should have considered how to achieve the project development objectives in the most effective way based on realistic water demand projection\. More careful justification of the investment size should have been undertaken taking into account the water savings from new technologies and more stringent environmental regulations, and possible policy interventions to prevent the serious over-design in capacity from happening\. 6\.1\.2 It is important to ensure that the "hard" infrastructure aspects remain coordinated and synchronized with the equally important "soft" aspects of institutional and pricing reform\. This should have been addressed right from the beginning of the implementation to achieve maximized project benefits and long-term impact\. An opportunity was missed in the early years, which has led to de-linking of the two aspects and less than satisfactory outcome in institutional reform\. 6\.1\.3 To improve the effectiveness and sustainability of public service delivery, it is clearly desirable to incorporate elements of cost recovery in the pricing of the utility, though this should be phased in gradually\. Under the project, diverted water from the Yellow River should initially have been priced lower than the prevailing price of ground-water as an entry point to facilitate this substitution\. Once this had occurred and the use of ground-water had been curtailed to safe and sustainable levels, prices could then have been increased gradually to cover O&M and (possibly) to recover some of the investment cost\. 6\.1\.4 The Bank's involvement in institutional reforms in the water sector needs to be thoughtfully considered, well paced and supported by appropriate loan instrument\. This should have been based on a more programmatic and long term approach rather than short-term projectized approach\. It requires sustained long-term engagement with government (particularly given China's gradualist approach to reforms), an appropriate loan instrument (e\.g\., APL or SAL), and well-defined linkages to sector work and up-stream policy dialogue\. 6\.1\.5 In the institutional set up the Provincial Water Resources Bureau (instead of the Wanjiazhai Yellow River Diversion Project Corporation) should have been put in charge of the institutional reforms as per its mandate stipulated in the National Water Law with strong support and coordination from the Provincial\. It is legally responsible and best positioned to lead the proposed institutional, policy and pricing reform, which deals with large scale water resources administration, allocation and strategy issues in the province\. 6\.1\.6 Project Development Objectives and related M&E indicators need to be well defined\. Under the project, there were too many PDOs, some of which were overly broad and ambiguous, whilst a number of the indicators had no causal effect with project impact or had not target value\. This impeded both project supervision and impact evaluation\. 16  Annex 1\. Project Costs and Financing Project Cost by Component Appraisal Estimate Actual /Latest Components Estimate Percentage of Appraisal (US$ million) (US$ million) A\. Water Transfer 963\.6 994\.23 103\.2 1\. General Main 256\.5 409\.48 159\.8 2\. South main 296\.5 343\.94 116\.0 3\. Automatic Control System 30\.1 29\.88 99\.3 4\. Power Transmission Line 16\.3 43\.63 267\.7 5\. Administration/Management 132\.4 36\.42 27\.5 6\. Connection Works 231\.8 130\.87 56\.5 B\. Institutional Component 7\.7 1\.84 23\.9 C\. Environmental Management 10\.6 24\.4 230\.2 1\. Project B1 2\.6 1\.4 53\.8 2\. Project B2 8\.0 23\.0 287\.5 Total Baseline Cost 981\.9 1020\.86 104\.0 Physical Contingencies 136\.5 - - Price Contingencies 169\.3 - - Total Project Costs 1287\.8 - - Interest During Construction 56\.4 42\.84 76\.0 Commitment Charges 7\.4 8\.81 119\.1 Total Costs to be Financed 1351\.6 1072\.10 79\.4 Financing Appraisal Actual/Latest Source of Funds Estimate Estimate Percentage of Appraisal (US$ million) (US$ million) Government 921\.6 747\.5 81 IBRD/IDA 400\.0 324\.6 82 Loan of Italian Government 30\.0 - - Total Funds 1351\.6 1072\.1 79 17  Annex 2\. Outputs by Component Original Actual Achieved at Percentage Indicator Unit Target Values Competition Values of PAD (PAD) (ICR) Output Indicators A\. General Main Tunnels 1\. Pressure Tunnels Km 3\.19 3\.075 96\.4 Tunnel 1 Km 0\.14 0\.196 140\.0 Tunnel 2 Km 0\.13 0\.214 164\.6 Tunnel 3 Km 0\.76 0\.812 106\.8 Tunnel 4 Km 1\.72 1\.699 98\.8 Tunnel 5 Km 0\.44 0\.154 35\.0 2\. Free Flowing Tunnels Km 42\.26 38\.983 92\.2 Tunnel 6 Km 6\.61 6\.526 98\.7 Tunnel 7 Km 2\.67 2\.685 100\.6 Tunnel 8 Km 12\.19 12\.142 99\.6 Tunnel 9 Km 0\.21 0\.217 103\.3 Tunnel 10 Km 7\.38 7\.379 100\.0 Tunnel 11 Km 10\.01 10\.034 100\.2 Pumping Station/PS No\. 3 3 100\.0 PS (between tunnels 3 & 4) m3 81900 268117 327\.4 PS (between tunnels 4 & 5) m3 81900 305252 372\.7 PS (between tunnels 10 & 11) m3/s 48\.0 48 100\.0 Regulation Reservoir m3 150'000 202'400 134\.9 Aqueducts No\. 4 4 100\.0 B\. South Main Tunnels 1\. Free Flowing Tunnels Km 106\.55 97\.429 91\.4 Tunnel 1 Km 0\.84 0\.866 103\.1 Tunnel 2 Km 1\.87 1\.892 101\.2 Tunnel 3 Km 4\.16 4\.185 100\.6 Tunnel 4 Km 6\.93 6\.882 99\.3 Tunnel 5 Km 26\.48 26\.425 99\.8 Tunnel 6 Km 14\.63 14\.583 99\.7 Tunnel 7 Km 42\.64 42\.569 99\.8 Aqueducts No\. 3 3 100\.0 Inverted siphon No\. 1 1 100\.0 Culverts No\. 2 2 100\.0 Pumping Stations No\. 3 2 66\.7 C\. Connection Works 1\. Pipeline Km 40\.209 42\.79 106\.4 18  Original Actual Achieved at Percentage Indicator Unit Target Values Competition Values of PAD (PAD) (ICR) 2\. Tunnels Km 16\.751 21\.49 128\.3 Tunnel 1 Km 0\.447 3\.486 779\.9 Tunnel 2 Km 1\.000 0\.958 95\.8 Tunnel 3 Km 0\.562 0\.172 30\.6 Tunnel 4 Km 0\.725 0\.094 13\.0 Tunnel 5 Km 0\.795 2\.470 310\.7 Tunnel 6 Km 0\.100 0\.790 790\.0 Tunnel 7 Km 13\.122 13\.520 103\.0 D\. Control System Central dispatching and control station No\. 1 1 100\.0 Levels of control system No\. 3 3 100\.0 E\. Plant and Equipment 1\. Pump unit 15 15 100\.0 Pump power/GMT3&SMT12 MW 10\.8 12 111\.1 Unit capacity m3/s 6\.45 6\.45 100\.0 Static lift capacity M 142 140 98\.6 Pump power/Third level MW 6\.3 6\.3 100\.0 Unit capacity/Third level m3/s 6\.45 6\.45 100\.0 Static lift capacity/Third level M 80 76 95\.0 2\. Synchronous Motors unit 15 15 100\.0 Capacity 6\.75MW No\. 3 3 100\.0 Capacity 12\.5MW No\. 12 12 100\.0 * 1\.The PAD target is cited from the SAR\. 19  Annex 3\. Economic and Financial Analysis Introduction 1\. Shanxi Province is located in north eastern China, bounded by the Yellow River to the west and south\. The province has the least water resources per capita in the Yellow River Basin, and is the second driest province in terms of surface water resources\. These are widely scattered among 15 river basins, which are separated by mountains, making inter basin transfers difficult and expensive\. River flows exhibit a high degree of annual variation, although they are concentrated in the summer\. In most areas, ground-water has been tapped to its limits with serious ecological consequences\. In the province, the most important economic impacts of water shortage are in the northern urban industrial cities of Taiyuan (the capital and largest city), Datong (the second-largest city and mining centre) and Pingshuo (a rapidly-growing mining/industrial region)\. At appraisal, in Taiyuan and Datong surface water supplies had virtually dried up and ground-water had been over-extracted to a degree leading to land subsidence of over 3 metres (m) in many places\. As a result, all sectors and population groups were suffering\. The SAR anticipated that, by 2000, water demand in these three areas would outstrip supplies by a factor of 70 percent, with the gap growing much wider afterwards\. 2\. It was envisaged that the overall National Program would help alleviate water shortages through the construction of a water transmission line from the Yellow River at Wanjiazhai Dam to Taiyuan, and later to Datong and Pingshuo\. Given the large scope and significant cost of the water diversion scheme, the provincial government phased the programme into: (a) the construction of the dam at Wanjiazhai; (b) the construction of the general main tunnel (GMT) and south main tunnel (SMT) to Taiyuan; and (c) construction of the north transmission lines to Datong and Pingshuo\. 3\. The Bank was a relatively small partner under Phase 2 above (around 30 percent of total Phase 2 cost of 8\.7 billion Yuan)\. The main focus area for the project was Taiyuan City, which is located in north-central Shanxi along the Fen River and near abundant raw materials and energy sources\. The city boasts one of the largest concentrations of heavy industry in China\. Per capita water resources were only 51 percent of the provincial and 9 percent of the national average\. As a result of water shortages 50 percent of mines, factories and enterprises periodically remained closed in Taiyuan\. The rationale for the project, presented in the SAR, centred around the impact that large shortages of water would have on key industrial sectors in and around Taiyuan (such as coal and electricity) and ecological degradation\. It was envisaged that the project would deliver up to 320 million m3 per year in 2002, 900 million m3 by 2010 and 1\.2 billion m3 by 2020\. These volumes were considered within the allocations permitted by the Yellow River allocation designated by the State Council (Chinese Cabinet)\. Project Benefits 4\. The major project benefits were derived from: (a) reducing the severe water distress for domestic consumers in Taiyuan; (b) arresting the grave environmental (and associated economic costs) related to over-drafting ground-water, which in the "worst-case scenario" could have led to major subsidence in Taiyuan and the possible need to relocate the city and its industrial base; and (c) meeting the growing water demand for economic growth\. Methodology and Approach Used in Economic Analysis 5\. Based on the benefit streams outlined above, the SAR used the following methods in economic analysis: (a) the willingness to pay (WTP) and consumer surplus (CS) approach in deriving the economic (shadow) price of domestic water use; and (b) input/output models and linear programming to determine the economic value of water for industrial use\. The SAR did not take into 20  account ecological and environmental externalities in economic analysis\. Nevertheless, the economic rate of return for the investment was recalculated following the original SAR approach and parameters (See Annex 7 SAR), using actual project costs, current prices and the volume of water delivered\. The analysis shows that the project is not economically viable (ERR 0\.85% and a negative NPV at an OCC of 12%), which is due to high project costs in relation to severe under-utilization of designed capacity (some 23%)\. (Excel models attached) 6\. There were significant limitations in the SAR methodologies used and in the overall approach to economic and financial analysis as outlined below: Economic Analysis Economic Valuation of Industrial Water Use Based on Input/Output Models and Linear Programming 7\. The economic analysis of water for industrial use was based on the calculation of the marginal value of water (MVW) by sector\. After extensive discussion on the I/O model, the SAR concluded that the input/output model could not determine the MVW and therefore adopted a linear programming (LP) approach\. The implicit assumption in using the LP model to generate the marginal values of water was that water was the only constraint and, if available, then output could increase and generate the values in the model\. In other words, there are no other constraints such as labor or industrial capacity which could prevent these results from occurring\. 8\. This methodology would have been applicable had the principle of ceteris paribus held\. In reality, the rapid adoption of new technologies and innovations quickly overtook the premise that water is the controlling factor\. Data shows that whilst industrial output value increased by over 75 percent from 1993-2002, total water use declined by 40 percent as a result of the adoption of water saving technologies and innovations and the strengthening of environmental controls on water wasting industries (Table 1)\. The highly over-estimated demand projection based on unrealistic assumptions for industrial water use has led to the grossly over-designed capacity, which is the most serious problem in the economic analysis and project design\. The current 23% of the installed capacity or 12% of the total design capacity utilized may increase, but that is likely to require additional investments which themselves would need to be assessed for the costs and benefits\. Table 1: Industrial Value Growth and Water Consumption by Sector Annual % Rate of Industry Item Unit 1993 2002 Change GDP RMB million 4,524\.34 11,964\.06 9\.2 Water consumption million m3 53\.82 45\.23 -1\.6 m3/RMB Iron/steel Water consumption/GDP million 1\.19 0\.38 -9\.9 GDP RMB million 506\.28 1,252\.98 8\.6 Water consumption million m3 44\.52 53\.63 1\.7 M3/RMB Electricity Water consumption/GDP million 8\.79 4\.28 -6\.3 GDP RMB million 1,887\.84 946\.73 -6\.1 Water consumption million m3 24\.24 7\.37 -10\.3 m3/RMB Coal Water consumption/GDP million 1\.28 0\.78 -4\.4 GDP RMB million 2,329\.08 11,930\.29 16 Water consumption million m3 43\.88 36\.72 -1\.6 m3/RMB Chemical Water consumption/GDP million 1\.88 0\.31 -15\.2 Other1 GDP RMB million 7,183\.77 11,930\.29 5\.8 21  Water consumption million m3 65\.48 36\.72 -6\.2 m3/RMB Water consumption/GDP million 0\.91 0\.31 -11\.4 GDP RMB million 17,223\.08 3 0,575\.66 6\.6 Water consumption million m3 273\.53 164\.18 -5\.5 m3/RMB Total Water consumption/GDP million 1\.59 0\.54 -11\.4 Source: Shanxi Provincial Statistics Bureau\. 1Mainly including small scale industries and township and village enterprises (TVEs) 9\. Given the considerable over design in capacity it is obvious that the project cannot be cost effective as capacity utilization is some 23%\. Moreover, more rigorous ex-post cost effectiveness analysis cannot be undertaken as there were no baseline unit rate norms established at SAR to compare with\. However, if the full capacity of the scheme is eventually utilized, a reasonable degree of cost-effectiveness would be achieved as (a) it was selected among numerous alternatives, and (b) the technologies adopted and procurement process were in keeping with best construction practices at that time\. Given the present situation, where the capacity of the SMT is significantly under-utilized due to over estimated demand (23% of installed capacity or 12% of total design capacity), it is essential that the coverage for transferred water be expanded beyond Taiyuan to enhance cost effectiveness\. This has already been recognized by Government and a decision has been made to expand coverage to peri-urban areas around Taiyuan and other industrial and urban centres in central Shanxi along the SMT\. However, no feasibility studies, investment and business plans have so far been developed for the expansion, which makes any further economic analysis impossible"\. Financial Analysis 10\. The methodology adopted at appraisal for water pricing was based on the following: (a) obtaining annual capital requirements; (b) determining financing plans; (c) calculating total project cost by appropriate cost allocations (cost sharing); (d) forming necessary operational and financial assumptions; and (e) setting up water tariffs based on a minimum debt coverage ratio of 1\.2 or a minimum rate of return on fixed assets in service of 2 percent, whichever gives a greater tariff, to make the YRDPC financially sustainable and to provide an assurance of cost recovery and debt repayment\. This clearly represents a fully commercialized business model, which was not workable under the project\. 11\. The prima facie rationale for the WWTP was the provision of water for basic needs and public goods\. As such, the YRDPC clearly should not have been treated as a conventional revenue- generating and profit-making entity and, consequently, the financial analysis at both project and entity level is not applicable\. 12\. In light of this, the business and water-pricing models used at appraisal were not only inappropriate but in fact impeded the achievement of key PDOs\. The practice of pricing on the basis of full cost recovery advocated at appraisal has led to a bizarre situation where the provincial government (having paid for the investment) also subsidizes the YRDPC for depreciation\. 13\. The correct approach, recognizing the "public good" nature of the project, should have been to price diverted water lower than the prevailing price of ground-water as an entry point to facilitate substitution\. Once this had occurred and the use of ground-water had been curtailed to safe and sustainable levels, prices could have been increased gradually to cover O&M costs\. By focusing on commercialization and full cost pricing from the onset, however, the project has had exactly the opposite effect where significantly cheaper ground-water continues to be over-exploited, effectively crowding out the demand for diverted water\. 22  14\. The Government has recognized the apparent anomaly of using full cost recovery as the basis for water pricing and, accordingly, under the Governor's Decree 108, this practice has been abolished\. 23  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending Supervision/ICR Yi Dong Sr\. Financial Management Specialist EAPCO Prem C\. Garg Director QAG Zong-Cheng Lin Sr\. Social Development Spec EASCS Douglas C\. Olson Lead Water Resource Specialist LCSEN Geoffrey Spencer Sr\. Irrigation Engineer EASRE Xiuzhen Zhang Program Assistant EACCF (b) Staff Time and Cost Stage of Project Staff Time and Cost (Bank Budget Only) Cycle No\. of staff (US$ thousands including travel weeks and consultant costs) Lending FY94 1\.31 FY95 174\.26 FY96 246\.60 FY97 155\.26 FY98 3\.93 FY99 0\.00 FY00 0\.00 FY01 0\.00 FY02 1 0\.72 FY03 0\.00 FY04 0\.00 FY05 0\.00 FY06 0\.00 FY07 0\.00 Total: 1 582\.08 Supervision/ICR FY94 0\.00 FY95 0\.00 FY96 0\.00 FY97 0\.00 FY98 157\.50 FY99 102\.88 FY00 16 77\.32 FY01 9 55\.50 FY02 28 77\.95 FY03 23 47\.49 24  FY04 11 19\.10 FY05 9 11\.52 FY06 8 20\.12 FY07 15 32\.74 Total: 119 602\.12 Annex 5\. Beneficiary Survey Results (if any) NA Annex 6\. Stakeholder Workshop Report and Results (if any) NA 25  Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR 26  27  Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders NA Annex 9\. List of Supporting Documents 1\. QAG evaluations of Quality at Entry and Supervision 2\. Aide-Mémoires and related Annexes prepared by the supervision missions 3\. Aide-Mémoire and related Annexes of the ICR mission 4\. Government ICR 5\. Economic Analysis (Excel files) 28  112° 113° RUSSIAN FEDERATION C H I N A WANJIAZHAI WATER TRANSFER PROJECT HEILONGJIANG M O N G O L I A L J I L I N O G N O M LIAONING DEM\. PEOPLE'S N EI REP\. OF KOREA BEIJING N E I Beijing Area SHI TAINJIN SHI of HEBEI REP\. OF map KOREA M O N G O L Datong SHANXI SHANDONG Ye l l o w City QINGHAI NINGXIA S e a GANSU SHAANXI HENAN JIANGSU ANHUI SHANGHAI SHI HUBEI E a s t 40° 40° SICHUAN ZHEJIANG C h i n a XIZANG S e a HUNAN JIANGXI GUIZHOU FUJIAN YUNNAN TAIWAN GUANGDONG GUANGXI HONG KONG, U\.K\. MACAO, PORT\. ANMAR VIET NAM South MY LAO PEOPLE'S China Sea HAINAN THAILAND DEM\. REP\. PHILIPPINES Yellow R\. R\. Sang-Kan Wanjiazhai Dam Pumping Pumping stations station 1 1 and 2 Pumping 2 station 3 Pumping station 2 3 4 GENERAL MAIN 5 Shuozhou PROJECT: PHASE I PIPELINES PUMPING STATIONS AQUEDUCTS TUNNELS (AND NUMBERS) 6 7 PHASE II: Yangfengkao PIPELINES TUNNELS SOUTH SELECTED CITIES AND TOWNS 39° MAIN 39° PROVINCE CAPITAL NATIONAL CAPITAL (INSET) RIVERS 7 EXISTING RESERVOIRS PROPOSED RESERVOIRS (AFTER 2007) XIAN (COUNTY) BOUNDARIES PROVINCE BOUNDARIES INTERNATIONAL BOUNDARIES (INSET) Yuanping Proposed Shijiazhuang Reservoir Hu-t'o R\. Xinzhou R\. Fen Proposed Xiajinyou Reservoir Fen I Reservoir (pipesConnecting This map was produced by the 2\.2-2\.4 Map Design Unit of The World Bank\. Fen The boundaries, colors, denominations 38° works m\.diam\.) Proposed and any other information shown on 38° Fen II R\. this map do not imply, on the part of Reservoir The World Bank Group, any judgment Twintunnels on the legal status of any territory, or any endorsement or acceptance of Gujiao such boundaries\. City Taiyuan City CONNECTING 0 10 20 30 WORKS KILOMETERS IBRD JUL Y 28136 1996 112° 113°

REVIEW

P009102

 ICRR 10665 Report Number : ICRR10665 ICR Review Operations Evaluation Department 1\. Project Data : Date Posted : 08/10/2000 PROJ ID : P009102 OEDID: OEDID : L3728 Appraisal Actual Project Name : Privatization US$M ) Project Costs (US$M) 129 34\.4 Implementation Country : Turkey Loan/ US$M ) Loan /Credit (US$M) 100 30\.0 Sector, Major Sect \.: Privatization , Public US$M ) Cofinancing (US$M) 0 0 Sector Management L/C Number : L3728 FY ) Board Approval (FY) 94 Partners involved : Closing Date 06/30/1998 12/31/1999 Prepared by : Reviewed by : Group Manager : Group : Elliott Hurwitz Luis Ramirez Ruben Lamdany OEDCR 2\. Project Objectives and Components a\. Objectives Objectives were to: promote efficiency and enhance productivity and further development in Turkey's private sector by providing assistance to accelerate privatization, and build institutional privatization capacity in conjunction with the accelerated program; and mitigate the impact of SOE downsizing on displaced workers and their families \. b\. Components (1) Technical and financial support for privatization, including management of SOE liabilities pursuant to privatization; (2) development of a social safety net, including labor adjustment programs and studies to underpin policy reform on social security and pensions; (3) preparation of a regional development program for the Zonguldak region (where a high concentration of layoffs was expected ); (4) analytical work to facilitate further privatization, including regulatory frameworks for telecommunications and private provision of infrastructure \. c\. Comments on Project Cost, Financing and Dates Of the envisioned loan of US$100 million, $30 million was disbursed, and US$70 million was canceled\. The project closed on December 31, 1999 (although most activity was completed well before this date ), compared with an original closing date of June 30, 1998\. The loan was amended 3 times: in 1997, 1998, and 1999\. 3\. Achievement of Relevant Objectives : The main objectives of the loan were not achieved, and little of value was actually realized \. While a few small enterprises were privatized, no large enterprises were privatized as planned\. Privatization transactions , although prepared, were not consummated\. Efforts to build popular support for privatization were not well timed, and became submerged in a general election campaign \. Treasury staff were trained in enterprise financial restructuring , but with few actual transactions it was not clear how effective this training was \. Although significant analytical work was performed on the Zonguldak Regional Plan and for private participation in infrastructure, these efforts were never completed\. 4\. Significant Outcomes /Impacts : There were no significant outcomes or impacts \. 5\. Significant Shortcomings (including non -compliance with safeguard policies ): Main shortcomings were the failure to achieve all major objectives (see section 3, above)\. The major reasons for lack of progress were overly -ambitious and overly-complex project design, ineffective institutions, and lack of sufficient government commitment\. Available technical assistance that might have somewhat facilitated privatization was not used effectively\. In addition, the Government was expected to develop a policy for settling the environmental liabilities of the SOEs privatized, but this was not done \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev \.: Partial Modest Ratings are substantially equivalent \.  Sustainability : Unlikely Unlikely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Deficient Unsatisfactory Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : Privatization is a highly political process; the project did not take sufficient account of the political economy of change\. Before undertaking an ambitious project such as this, the Bank should assure that implementing agencies have the required technical, financial, and legal capabilities \. A successful privatization agency should also have adequate access to decision -making processes concerning large SOEs, and also needs to have (or should contract for) requisite transactional skills \. Loan covenants should not be designed to be dependent on changes in legislation or other measures beyond the control of the implementing agencies \. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : ICR is frank, provides good evidence to document assessments, and tells the project's story effectively \.

REVIEW

P084035

IEG Report Number: ICRR14702 ICR Review Independent Evaluation Group 1\. Project Data: Date Posted: 05/26/2015 Country: Tajikistan Project ID: P084035 Appraisal Actual Project Name: Ferghana Valley Project Costs (US$M): 14\.17 24\.21 Water Resources Management Project L/C Number: Loan/Credit (US$M): 13\.00 23\.45 Sector Board: Agriculture and Rural Cofinancing (US$M): Development Cofinanciers: Board Approval Date : 07/26/2005 Closing Date: 05/31/2011 05/31/2014 Sector(s): Irrigation and drainage (66%); General water; sanitation and flood protection sector (20%); General public administration sector (10%); Agricultural extension and research (2%); Crops (2%) Theme(s): Water resource management (33%); Environmental policies and institutions (17%); Participation and civic engagement (17%); Rural policies and institutions (17%); Land administration and management (16%) Prepared by: Reviewed by: ICR Review Group: Coordinator: Ebru Karamete Ridley Nelson Christopher David IEGPS1 Nelson 2\. Project Objectives and Components: a\. Objectives: The original project development objectives stated in the Development Grant Agreement (p\. 12) is: " (i) to increase the capacity of productivity of irrigated agriculture in the Ferghana Valley by improving land and water management; and, (ii) to improve Kayrakkum dam and reservoir safety and regulation thereby contributing to enhanced water management security and efficiency at the basin level"\. The Project Appraisal Document statement of objectives is slightly different (p\. 6): "(i) to improve the capacity for increased irrigated agriculture productivity in the Ferghana Valley by improving land and water management; and, (ii) to improve safety and regulation of the Kayrakkum Dam and Reservoir, thereby contributing to enhanced water management security and efficiency at the basin level\. This review uses the Development Grant Agreement version for the assessment of the original objectives\. The project objectives were revised at the time of Additional Financing (May 25, 2010) as follows: "to assist the Recipient in: (i) increasing the coverage of drained and irrigated areas in Bobojon Gafurov and Kannibodom raions, respectively; and, (ii) strengthening the early warning system of the Kayrakkum dam as well as carrying out a geotechnical study for assessing the risks associated with said dam" (Financing Agreement p\. 4)\. b\.Were the project objectives/key associated outcome targets revised during implementation? Yes If yes, did the Board approve the revised objectives/key associated outcome targets? Yes Date of Board Approval: 05/25/2010 c\. Components: The project had 4 components\. The actual costs presented below include additional financing\. A\. Irrigation and Drainage Systems Rehabilitation and Improvements (Appraisal Estimate : US$ 9\.02 million, Actual US$ 15\.14 million)\. This component was designed to finance design and works for rehabilitation of pumped and gravity irrigation and drainage I&D systems serving 30,000 ha of farm land in the Kanibodom and Bobojon Gufarov raions\. The work included re-forming and cleaning of main and secondary collector drains, and rehabilitation of associated drainage pumping stations; renovation of I&D tubewell systems; rehabilitation of selected major irrigation pumping station systems; repairs and lining of selected sections of the Big Ferghana Canal (BFC); and improvements to selected inter-farm and on-farm surface and subsurface I&D systems\. B\. Strengthening Kayrakkum Reservoir Dykes and Improvement of Kayrakkum Dam Safety and Reservoir Operation (Appraisal Estimate : US$ 3\.03 million, Actual US$ 5\.66 million)\. This component was designed to fund: design and works related to rehabilitation of the Kayrakkum Reservoir dykes in Kanibodom and Bobojon Gufarov raions; and technical studies, dredging and other equipment and instrumentations, and minor works to increase operational performance and improve management of the Kayrakkum Dam and Reservoir\. The latter was to improve dam safety and to develop dam and reservoir emergency procedures\. C\. Institutional Development and Technical Assistance (Appraisal Estimate : US$ 1\.37 million, Actual US$ 1\.68 million)\. This component was designed to fund the necessary institutional capacity building for establishment of Water User Associations (WUAs); improving agricultural productivity and achieving more efficient water use patterns; and, ensuring proper environmental impact mitigating measures\. Activities planned included training, technical assistance, and demonstration programs\. D\. Project Management (Appraisal Estimate : US$ 0\.75 million, Actual US$ 1\.74 million)\. This component aimed to finance assistance to the central Project Management Unit (PMU) within the Ministry of Melioration and Water Resources Management (MMWRM), and to the regional Project Implementation Unit (PIU) established in Khujand for project implementation\. Funds supported project supervision, monitoring and evaluation (M&E) system, as well as institutional strengthening program that included training and study tours\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Costs: Total costs increased from the appraisal estimate of US$ 14\.17 million to US$ 24\.21 million because additional financing was added to the project to finance cost overrun due to ‘under-design’ during project preparation and significant price increases on most goods and works, to complete additional works identified in detailed designs during implementation, to expand activities to increase the capacity of district Water Departments and WUAs, and to finance an in depth geotechnical study for Kayrakkum dam with a number of measures to improve the safety of the dam\. Financing: The original IDA Grant was SDR 8\.7 million (US$ 13\.0 million)\. Additional financing of SDR 6\.6 million (US$ 10\.00 million equivalent) was added from IDA funds\. By project closing, SDR 8\.65 million was spent (US$ 13\.43 million equivalent) from the original grant and SDR 6\.52 million (US$ 10\.02 million equivalent) from additional financing\. Prior to closure of the project, SDR 0\.12 million was cancelled from IDA funds\. Borrower Contribution : The Borrower contribution was lower than that anticipated at appraisal\. It was expected that the Borrower would provide US$ 1\.17 million, and actual contribution was US$ 0\.76 million\. The ICR reported that an increase to 100 percent financing from grant proceeds was done to alleviate the burden of counterpart financing on Tajikistan’s constrained budget\. Dates: The projects closing date of May 31, 2011 was extended twice\. On May 25, 2010, at the time of approval of the additional financing, the closing date was extended for 2 years to May 31, 2013 and on May 15, 2013, the closing date was extended one more year to May 31, 2014 in order to allow sufficient time to complete remaining project activities (i\.e\. construction works and capacity building of WUAs that had been delayed)\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Original Objectives Substantial The project's original objectives were and remained substantially relevant to the country priorities and strategies\. They were aligned with the Country Partnership Strategy (2010-14), particularly with its second objective of sustained post-crisis recovery through an emphasis on increasing agricultural productivity and maintaining capital assets for power generation\. Ferghana Valley is an important region of Central Asia, and at the time of appraisal, agricultural income from the Ferghana Valley supported about 2 million people and covered approximately 700,000 ha in Tajikistan territory of which about 220,000 ha were suitable for irrigation (ICR p\. 1)\. Since the collapse of the Soviet Union, the irrigation and drainage systems had deteriorated, leading to unreliable irrigation water supplies, drainage and water-logging problems, and reductions in irrigated area, soil fertility, cropping intensity and crop yields\. The actual irrigated area in 2002 was only 134,000 ha\. Efficient agriculture, irrigation and water management remained critical to enhancing the livelihoods of rural households living in the region\. The Government was keen to reduce poverty; however, there were only limited resources available to address many issues including the weakness of the institutional capacity\. The Government's strategy on poverty considered Ferghana Valley as one of the main areas to target by emphasizing the need to involve water users more in resources management and maintenance to enhance sustainability of irrigation systems (ICR p\. 2)\. The project was part of other World Bank projects supporting the sector including the Rural Infrastructure Rehabilitation Project, Farm Privatization Support Project and the Land Registration and Cadastre System for Sustainable Agriculture Project-LRCSP\. The project was particularly linked to LRCSP to enhance the benefits of privatization with the concurrent rehabilitation of basic rural irrigation infrastructure and to introduce water users associations (WUAs), which were nonexistent at the time\. In addition, the project had regional impact, benefiting downstream countries as well as Tajikistan\. Revised Objectives Substantial The revised objectives were also relevant to country priorities and strategies but they were output oriented, i\.e\. they mainly defined the project activities\. They were also a significant retreat from the ambitious original objectives, since there was no longer inclusion of an objective of productivity or improvement of dam safety and regulation but merely inclusion of a study and a warning system\. The second part of the objective, despite being less ambitious as well as more specific, still brought certain risks in terms of not being able to achieve the PDO, a point that is discussed in the following section\. b\. Relevance of Design: Original Design Modest Overall the results framework presented a partial logical causal chain between project activities and expected attainment of the objective\. The first component supported rehabilitation and improvements in irrigation and drainage systems covering 30,000 ha in Ferghana Valley\. Improving the supply of irrigation water and addressing drainage and water logging problems, was expected to increase soil fertility and crop yields and therefore would serve the achievement of the first part of the objective\. Component 2 tried to increase Kayrakkum dam’s operational performance and safety by strengthening the reservoir dykes and minor works and thereby served achievement of the second objective\. However, improving the safety of the dam required more detailed analysis and investigations and a significant amount of resources, as the reliability and stability of the structures were unknown\. Therefore, the activities and funds serving the second part of the objective were very limited and therefore, were not sufficient to achieve the objective\. Another weakness was that although the project provided some resources to the Water User Associations through Component 3, it lacked support to strengthen management and the institutional capacity of WUAs\. Revised Design Modest The project components primarily stayed the same under the revised design\. The new PDO was substantially less ambitious and became more narrowly output-oriented, but it didn't resolve the design issues highlighted above\. It also introduced an additional weakness and risk of failing to meet the PDO in the second part of the objective, it included a complex and costly study (the geotechnical study)\. 4\. Achievement of Objectives (Efficacy): Original Objective (i): to increase the capacity of productivity of irrigated agriculture in the Ferghana Valley by improving land and water management; rated modest due to lack of evidence regarding achievement of the objectives\. Outputs: Several of the original outcome targets were not achieved (See table below)\. Outcomes: According to the PAD, the project identified the following outcome indicators to measure achievement of the outcome: ï‚ 70% reduction of flooded and waterlogged land areas within project perimeters near levees\. The original target was 5,000 ha and end of project achievement was 3,530 ha, less than the original target\. ï‚ 30% improvement in timely water availability in irrigated areas under the project\. The ICR did not report on this outcome indicator\. WUAs established and functioning adequately in Western Kanibodom\. The ICR reported that WUAs are functioning actively, collecting water fees, and making decisions via general assembly meetings (ICR p\. 20-21)\.However, it is not clear from the ICR if these WUAs set up through project support cover Western Kanibodom area\. ï‚ 80% collection of billed water fees from WUAs established for more than a year under the project, for O&M of I&D gravity and pumped systems, particularly tubewell systems\. In 2011, average fee collection rate was 52\.3 %, which increased to 86 % at project completion\. ï‚ 10% increase in crop yields\. The ICR did not report on this indicator\. Original Objective (ii): to improve Kayrakkum dam and reservoir safety and regulation thereby contributing to enhanced water management security and efficiency at the basin level; rated negligible due to lack of evidence on achievements\. Outputs: Outcomes: The outcome indicators identified at appraisal were: ï‚ Dam safety management and emergency action plan\. ï‚ Forecast accuracy for available reservoir storage volumes and inflow/outflow volumes improved to 70% accuracy level\. The ICR did not report on the achievements for these indicators\. Subsequently the project team stated that the dam safety and emergency action plan was in place\. However, no outcome evidence was provided on the achievement regarding the improvement of the dam and reservoir safety\. Revised Objective: (i) increasing the coverage of drained and irrigated areas in Bobojon Gafurov and Kannibodom raions, respectively; rated, substantial\. Outputs: In addition, the project provided training to the 3 established WUAs to increase their capacities on cost recovery, budget preparation\. The ICR reported that WUAs are functioning actively, collecting water fees, and making decisions via general assembly meetings (ICR p\. 20-21)\. Outcomes: The revised outcome indicators were as follows: ï‚ Reduction of flooded and waterlogged land areas within project perimeters (ha)\. The revised target was 3,500 ha and end of project achievement was 3,530 ha (Kannibodom district - 2,330 ha and Gafurov district - 1,200 ha)\. ï‚ Area returned to effective irrigation under the project\. As of end of project, 7,349 ha returned to effective irrigation compared to the 2010 revised target of 6,450\. ï‚ Collection of billed water fees by WUAs\. The target was 80 % and achievement as of end of project was 86 %\. Revised Objective: (ii) strengthening the early warning system of the Kayrakkum dam as well as carrying out a geotechnical study for assessing the risks associated with the dam; rated modest due to partial achievement of the objective\. Outputs: Outcomes: The objective was partially achieved; the geotechnical study was not completed but is planned to be completed with EBRD’s additional resources\. An early warning system was established and operational\. Forecast accuracy for available reservoir storage reportedly improved (ICR page 15)\. 5\. Efficiency: Substantial Ex-ante economic analysis was based on the following assumptions: (i) Benefits of the project were mainly from agricultural productivity increases as a result of improved irrigation water delivery and a reduction of problems caused by flooding and high groundwater levels\. (ii) The project interventions in the Kanibodom and Bobojon Gafurov raions covered an irrigated area of 30,000 ha, main crops being cotton (66 % of area), followed by wheat, apricots and fodder production for livestock\.(iii) Yields would increase by: apricots-22%, wheat, and fodder- between 13 - 17% and cotton yields -10%\. (iv) Project investment costs were US$ 14\.17 million, and additionally working capital costs for farms were considered including costs for fertilizer, chemicals, seeds and labor\. Based on these assumptions, the estimated Economic Rate of Return (ERR) of the project was 20\.0%, which was higher than the 12% discount rate\. The net present value (NPV) was estimated at US$ 6\.1 million\. The Financial Rate of Return (FRR) amounted to 18\.2% and the corresponding NPV was US $ 4\.7 million\. The quite thorough ex-post economic analysis was based on results of: Monitoring and Evaluation data; interviews with farmers by Sugd Oblast Department of Agency of Land Reclamation and Irrigation and Sugd Oblast Department of Agriculture; and the Report of Statistical Agency on Regions of Tajikistan, 2012\. The main benefit assumptions were: (i) additional production on incremental land as a result of reduced flooding, (ii) higher yield levels as a result of better, more reliable and increased water delivery, and improved groundwater control and earlier spring planting, (iii) production of higher value crops as part of a more diversified cropping pattern, and (iv) reduced pumping costs per m3 as a result of reduced losses\. Other assumptions were:(i) Project coverage for irrigated area of 29,874 ha (2013), of which 6,685 ha were located in Bobojon Gafurov raion and 23,188 ha in Kannibodom raion; (ii) Main crops were orchards and cotton respectively with 36% and 32% of the total area; followed by cereals with 12\.5% and fodder crops (alfalfa, maize, including for silage) covering 4%; and others crops (rice, potato, grapes and others crops) with 9\.5%\. (iii) Yield increases between 2006 and 2013 were: raw cotton 23\.5 %, cereals 9\.6 %, vegetables 14 %, orchards (including apricot) 14 %, forage 11\.7 %\. Based on these assumptions, the estimated ERR of the project was 24\.3%, higher than the discount rate of 10% and the NPV was calculated as US$ 28\.43 million\. FRR was 19\.4% and corresponding NPV was US$ 17\.96 million\. The ICR reported the fact that additional financing of US$ 10 million was provided in order to complete the project works that were reduced in terms of scope due to the larger than projected task and input prices and the lack of details in the initial projections\. However, the ICR offered limited explanation of how the ex-post analysis brought higher ERR rates compared to ex-ante calculations despite higher costs and reduced scope\. One reason evident in the data is that the cotton area fell dramatically due to lower prices and reduced competitiveness – from 66% of the total area to 32 %\. The data suggest that it was replaced by higher value more intensive crops\. The project team subsequently verified this result stating that orchards, which is a cash crop increased from a level of 3 percent to 32 percent of total area during the project period\. In addition, unlike the ex-ante analysis, the ex-post analysis estimated incremental returns from project investments on flood protection structures which resulted in freeing 3,540 hectares of agricultural lands from waterlogging and flooding; as well as an additional 7,350 hectares of agricultural lands that returned to production a\. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 20% 100% ICR estimate Yes 24\.3% 100% * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Original Project Outcome : Moderately Unsatisfactory \. Owing to shortcomings in the efficacy of achieving the original project objectives and to a lesser extent in the relevance of design, the pre-restructuring development outcome is rated Moderately Unsatisfactory\. The relevance of the objective is rated substantial but design modest due to the fact that the second part of the PDO was unrealistic and project activities and funds were too limited to achieve that objective\. The efficacy of achieving the first objective is rated modest and the second objective negligible due to lack of results in achieving it\. Efficiency is rated substantial\. Revised Project Outcome : Moderately Satisfactory \. There were moderate shortcomings in the relevance and achievement of the revised objectives\. Relevance of design is rated modest since design issues remained\. Achievement of the first objective is rated substantial due to achievements of indicators based on revised targets; achievement of the second objective, is rated modest due to partial achievement (not being able to complete the geotechnical study)\. Efficiency is rated substantial\. Overall Project Outcome : Moderately Satisfactory \. This is on the basis of a split rating\. Overall, the project exhibited moderate shortcomings\. The combined outcome rating is weighted according to the proportion of the loan that was disbursed before and after the restructuring\. As the original project had disbursed US$ 10\.43 million, or 44\.5 %, the combined outcome rating is moderately satisfactory (i\.e\. rating for moderately unsatisfactory is 3 and moderately satisfactory is 4; the weighted average of the two based on disbursements before and after restructuring, gives (0\.44x3)+(0\.56x4) which rounds to a rating of 4 – moderately satisfactory)\. a\. Outcome Rating: Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The institutional risk is rated Significant\. The ICR (p\. 24)reported that WUA law needed to be revised to make it more effective for resolving some remaining issues such as links between farm restructuring and irrigation management, as well as taxation of WUAs and irrigation and drainage asset transfers to WUAs\. The ICR recommended that the Bank needed to be closely involved to resolve these issues through the PAMP2 project\. A second phase project planned for FY 2016 is going to continue project activities (ICR page 11)\. The financial risk is rated Moderate\. According to the ICR (p\. 24) the increasing WUA membership helps WUAs improve their financial resources, but also brings additional challenges in operating the system\. WUAs need to establish a computer database system to manage water contracts and to monitor the collection of water fees\. The transfer of irrigation assets will require increased budget to cover O&M costs, spare parts and electricity in the future\. So, increased membership needs to be maintained for adequate cost recovery of WUAs\. The environmental and social risk is rated Low\. Environmental issues identified by the Mid-term Review mainly with respect to contractor sites (ICR 2\.4) were mostly resolved since the Mid-term Review\. The project also monitored health and safety measures, including tracking waste generation and monitoring groundwater quality\. In terms of social risks, the project helped to empower the WUAs, however, it appears that they are still not responsible for O&M until the operational structures have been handed over to them, there is therefore a long way to go to full WUA operational sustainability\. It is argued that the higher agricultural productivity and incomes will benefit the poor\. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry: The ICR (p\. 5) noted that the project concept and design drew on lessons from similar projects implemented globally as well as in former Soviet countries\. Main lessons were: the need to address both irrigation (pumping capacity) problems and drainage problems; tackling power system deficiencies; and the need to develop WUAs with system users who are owners or long-term tenants of the lands being serviced\. Project preparation was fast but there was limited availability of data to ensure high-quality preparation due to fragility and post conflict situation of the country and increasing poverty levels\. The deficiencies during preparation were expected to be addressed during implementation\. The ICR reported (p\. 6) the following weaknesses in project design: (i) It failed to properly address some of the key issues/risks that were identified during preparation, including the inadequacy of a single operation to address the complex water management aspects in a country where there is limited local capacity\. There is a valid case made in the ICR that there should have been a phased longer-term program of an Adaptable Program Loan\. Although the WUA development was dependent on land privatization and the project timing had to be closely linked with LRCSP, the risk of delays with the LRCSP were not mitigated by design of preemptive alternative actions should this happen\. Also, the design failed to address sustainability of WUAs as it lacked support to strengthen management and the low capacity of WUAs\. (ii) The PDO was unrealistic in stating that the project would ‘improve safety and regulation of the Kayrakkum Dam and Reservoir"\. Improving the safety of the dam, where the reliability and stability of the structures were unknown, would have involved more in-depth investigations and preparatory expenditure\. (iii) Project costs and the scope of the works were not adequately assessed during preparation\. This led to cost overruns and delays in implementation\. These were significant shortcomings and point to a moderately unsatisfactory rating of Quality at Entry\. Quality-at-Entry Rating: Moderately Unsatisfactory  b\. Quality of supervision: The ICR noted that (p\. 25) supervision had some weaknesses mainly during the initial years of the project, but it improved after Mid-Term Review\. The team decreased the project output targets to attainable levels as well as increased financing of works to 100 percent when counterpart funding was not available\. The inclusion of additional finance was a timely and necessary decision to facilitate achievement of the PDO\. The Bank had regular supervision missions and closely monitored the project during 2012-2013 period\. Despite the delays with the LRCSP restructuring due to the land issue, the team moved Component 3 forward\. In addition, the ICR reported that the safeguards and fiduciary supervision was carried out adequately\. For example, the Bank team and the PMU jointly prepared an action plan in order to resolve the weak compliance in environmental safeguards\. The Bank also provided assistance to the PMU to ensure better control over identified FM issues\. The weaknesses with supervision were the following: (i) According to the ICR, the reporting on the project was not candid particularly during the initial years\. For example although there were significant cost over-runs and the risk of not being able to achieve the PDO, the ISR ratings of the rating of the achievement of the Development Objectives was still at the satisfactory level up until the second half of 2009\. (ii) The reformulation of the PDO during the Additional Financing, brought additional problems, i\.e\. including the geotechnical study into the revised PDO\. The cost and complexity of such a study was underestimated\. On balance, Quality of Supervision is rated moderately satisfactory\. Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The ICR reported (p\. 26), several shortcomings in terms of the Government's performance including lack of timely counterpart funding and lack of timely replacement of the PMU Director, which affected project implementation negatively\. Due to delays in funding from the government, the contractors did not receive payments for completed civil contracts, and project activities were delayed\. The Ministry of Finance also delayed responding to written communication from the PMU\. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance: The ICR noted that the PMU and the regional PIU made good efforts to move the project forward\. However, there were some issues on implementing environmental safeguards as well as delays in submission of financial management reviews and audits\. The PMU followed procurement and FM guidelines in general and maintained a system of accounting and reporting\. In addition to the PMU and PIU, other agencies such as the Ministry of Land Reclamation and Water Resources, the Ministry of Finance, Hukumats, jamoats and Raivodkhoz, Mahalla committees and WUAs made an essential contribution to project implementation\. Nevertheless, delayed reappointments of the PMU Director in 2006 and in 2012/13 had a substantial negative effect on implementation\. Implementing Agency Performance Rating : Moderately Unsatisfactory Overall Borrower Performance Rating : Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: M&E design planned to use the existing data sources, supplemented by regular routine project data collection and special surveys\. The Results Framework was sound, i\.e\. outcome indicators were linked to the objective and intermediate outcome indicators tried to capture the project’s activities under each component\. The monitoring design included a final M&E report on the status of the project implementation and outputs of all components\.  b\. M&E Implementation: The ICR reported that (p\. 9), overall, the M&E system was well maintained\. The M&E Specialist provided regular reports on M&E to the PMU\. However, in the earlier years, M&E reports were more focused on project oversight, procurement and contract status and outputs rather than reporting on emerging project outcomes\. Based on that the Bank team clarified the M&E focus and suggested methods to collect data\. In terms of the independent project impact assessment conducted at project closing, it would have been stronger if the project had identified a control group at project start-up, or obtained a baseline for a sample of representative households in Ferghana Valley, followed by a final survey at the end\. c\. M&E Utilization: The ICR did not report on utilization of M&E data\. M&E Quality Rating: Modest 11\. Other Issues a\. Safeguards: The project was categorized as B in terms of environmental safeguards\. The safeguards policies triggered were: projects on international waterways (OP/BP 7\.60) and safety of dams (OP/BP 4\.37)\.The Environmental Assessment (EA) found no major irreversible, cumulative or longer-term adverse impacts\. It identified a number of positive effects associated with improved irrigated agricultural productivity, improved public health, reduced water losses and enhanced soil fertility\. The Environmental Management Plan (EMP) included a detailed monitoring plan to determine the direct and indirect environmental and social impacts\. The ICR reported that (p\. 9), during the MTR it was identified that safety aspects of rehabilitated works were being inappropriately managed, with no safety signage at on-going works and no delineation of work area\. The mission recommended putting up signs where preparation work was being done for reinforcement of the dam embankment\. Also, it was learnt that chemical/test kits that received ‘No objection’ for purchase were expired for at least four years\. Based on the Bank's request, new chemicals/test kits were procured\. Such issues were a result of a vacant position for the Environmental Specialist\. Monitoring of EMP implementation was regularly performed by the PMU Environmental Specialist (ES) until June 2008, when his contract expired\. Although the project M&E consultant had partially covered these aspects by visual observation, overall implementation lacked consistent reporting and communication by PMU on EMP aspects since June 2008\. At the MTR, it was agreed that the PMU would hire a specialist immediately, and the rating of Environmental Safeguards was downgraded to MS due to weak compliance\. An Environmental Specialist was hired, and the environmental assessment was rated satisfactory by project closing\. However, the overall safeguards rating at project closing was MS, since the outcome indicator on Safety of Dams was not met\. The ICR did not report on the compliance vis-a-vie the safeguard international waterways (OP/BP 7\.60)\. b\. Fiduciary Compliance: The ICR reported that (p\. 10), the Financial Management (FM) review at the time of the MTR identified several weaknesses and FM was downgraded to MS\. The problems included a delay in submitting Financial Management Reviews and the inadequacy of internal controls and untimely availability of counterpart funds\. The Bank requested that the PMU hire an assistant accountant in order to provide better control over FM issues\. Further FM downgrade in August 2012 was due to significant delays in submitting the project audit, and project IFRs for 2011 and 2012, and weaknesses in the implementation of internal control procedures\. In late 2013, FM was upgraded to MS as the Government submitted the project and AF financial statement in a timely manner, and the PMU took steps to implement recommendations\. Overall, the PMU followed the procurement processes based on Bank guidelines and had enough capacity to process all necessary procurement work under the project\. Procurement, however, was downgraded following the Post Procurement Review (PPR) in 2009, due to the processing and award of contracts, which in two instances, deviated from the Bank’s Guidelines\. Overall, procurement performance of the PMU remained satisfactory\. Lack of Government contribution of funds, however, delayed contractual payments to contractors\. c\. Unintended Impacts (positive or negative): d\. Other: 12\. Ratings: ICR IEG Review Reason for Disagreement/Comments Outcome: Moderately Moderately Overall, the project exhibited moderate Unsatisfactory Satisfactory shortcomings\. Owing to shortcomings in the efficacy of achieving the original project objectives and to a lesser extent in relevance of design, pre-restructuring development outcome is rated Moderately Unsatisfactory\. There were moderate shortcomings in the relevance and achievement of the revised objectives, therefore revised outcome is rated as Moderately Satisfactory\. The combined outcome rating of the restructured project, which is weighted according to the proportion of the loan that was disbursed before and after the restructuring, with a larger share post restructuring,, is Moderately Satisfactory\. Risk to Development Moderate Significant Risk to development outcome is driven Outcome: largely by the institutional risk which is rated as Significant due to remaining issues that still need to be resolved such as links between farm restructuring and irrigation management; as well as taxation of WUAs and irrigation and drainage asset transfers to WUAs\. Bank Performance: Moderately Moderately Unsatisfactory Satisfactory Borrower Performance : Moderately Moderately Unsatisfactory Unsatisfactory Quality of ICR: Satisfactory NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: The following lessons were noted by the ICR, the main ones are as follows with some reformulation of language: ï‚ In the absence of detailed calculations at project design on the volume of works , taking into account the seasonal prevalence of work and realistic costing /budgeting, project implementation is likely to face problems \. This is especially important in projects that include large infrastructure building\. The project suffered from cost overruns partly due to ‘under design’ at preparation, resulting in delayed implementation and impact on the project’s reach\. ï‚ When project implementation requires harmonization with the implementation of other projects , it is important to identify alternative actions in case of possible delays in the other projects \. WUA development under the project was highly dependent on land privatization under LRCSP; however, the project was unprepared with alternative measures when land privatization was delayed\. ï‚ Farm restructuring needs to be demand -driven\. The project spent time convincing some less willing farms to implement restructuring, while there were other farms that were keen to restructure\. The project should have prioritized to take advantage of the easier opportunities first and to capitalize on a demonstration effect\. ï‚ PDOs need to capture project outcomes rather than outputs \. In this case, the geotechnical study was unsuitable as an element in the revised objectives and, in the event, there were insufficient funds to complete it\. ï‚ Realistic and consistently applied project ratings during implementation help to address shortcomings promptly\. In this case, management was not well informed by the reporting and ratings during the early years\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR was in many respects well written, with a good narration of implementation progress, challenges and delays\. However, the following points needed attention: (i) The results and achievements under the original objective were not adequately reflected; (ii) The economic analysis, while generally quite thorough did not explore the differences between ex-ante and ex-post analyses which would have provided added evidence on cost effectiveness\. There was no reporting of any action or decisions related to OP/BP 7\.60 on projects international waterways, whether it was later deemed not applicable or whether it was applied or whether it was addressed under one of the parallel projects\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P055472

Document of The World Bank Report No: ICR0000955 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-33540 IDA-3354A) ON A CREDIT IN THE AMOUNT OF 52\.2 SDR MILLION (US$95 MILLION EQUIVALENT) TO THE REPUBLIC OF SENEGAL FOR AN URBAN MOBILITY IMPROVEMENT PROGRAM March 27, 2009 Water and Urban II Country Department AFCF1 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective March 27, 2009) Currency Unit = FCFA SDR 1\.00 = US$1\.51 US$1\.00 = FCFA 485 FISCAL YEAR January - December ABBREVIATIONS AND ACRONYMS AATR Autonomous Road Work Agency (Agence Autonome des Travaux Routiers) AFD French Development Agency (Agence Française de Développement) AFTU Urban Transport Financing Group (Association de Financement des Transports Urbains) AGETIP Public Works Executing Agency (Agence pour l'Exécution de Travaux d'Intérêt Public) APL Adaptable Program Loan CAS Country Assistance Strategy CETUD Executive Council for Urban Transport in Dakar (Conseil Exécutif des Transports Urbains de Dakar) CR Mini-bus (Car Rapide) DCA Development Credit Agreement ERR Economic Rate of Return FDTU Development Fund for Urban Transport (Fonds de Développement des Transports Urbains) GIE Economic Interest Group (Groupement d'Intérêt Economique) IDA International Development Association KPI Key Performance Indicator MECTRANS Mutual Saving and Loan Association for Transport Companies of Dakar (Mutuelle d'Epargne et de Crédit Des Transporteurs de la Région de Dakar) MTR Mid-Term Review NDF Nordic Development Fund PAMU Urban Mobility Improvement Project (Programme d'Amélioration de la Mobilité Urbaine à Dakar) PDO Project Development Objective PTB Suburban Train (Petit Train de Banlieue) SNCS National Railroad Company (Société Nationale de Chemins de Fer du Sénégal) SSATP Sub-Saharan Africa Transport Policy Program TA Technical Assistance TTL Task Team Leader Vice President: Obiageli K\. Ezekweseli Country Director: Habib Fetini Sector Manager: Eustache Ouayoro Project Team Leader: Christian Diou ICR Team Leader: Christian Diou ICR Primary Author: Joseph W\.B\. Bredie ii  REPUBLIC OF SENEGAL URBAN MOBILITY IMPROVEMENT PROGRAM Data Sheet A\. Basic Information\. iv B\. Key Dates\. iv C\. Ratings Summary\. iv D\. Sector and Theme Codes \. v E\. Bank Staff\. v F\. Results Framework Analysis\. v G\. Ratings of Project Performance in ISRs \. ix H\. Restructuring\. ix I\. Disbursement Profile\. x 1\. Project Context, Development Objectives and Design\. 1 2\. Key Factors Affecting Implementation and Outcomes \. 4 3\. Assessment of Outcomes\. 8 4\. Assessment of Risk to Development Outcome\. 12 5\. Assessment of Bank and Borrower Performance \. 12 6\. Lessons Learned\. 14 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\. 15 Annex 1\. Project Costs and Financing\. 17 Annex 2\. Outputs by Component \. 18 Annex 3\. Economic and Financial Analysis\. 22 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 24 Annex 5\. Beneficiary Survey Results\. 26 Annex 6\. Stakeholder Workshop Report and Results\. 27 Annex 7\. Summary of Borrower's ICR\. 28 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders\. 31 Annex 9\. List of Supporting Documents \. 32 MAP IBRD 30877 iii  A\. Basic Information URBAN MOBILITY Country: Senegal Project Name: IMPROVEMENT PROJECT IDA-33540, IDA- Project ID: P055472 L/C/TF Number(s): 3354A ICR Date: 03/25/2009 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: APL Borrower: SENEGAL Original Total XDR 52\.2M Disbursed Amount: XDR 49\.6M Commitment: Environmental Category: B Implementing Agencies: CETUD, SNCS (TRANSRAIL) Cofinanciers and Other External Partners: French Development Agency (Agence Française de Développement - AFD) Nordic Development Fund (NDF) B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 02/02/1999 Effectiveness: 05/14/2001 Appraisal: 01/28/2000 Restructuring(s): Approval: 05/25/2000 Mid-term Review: 01/29/2004 Closing: 12/31/2005 09/30/2008 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Unsatisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Unsatisfactory Government: Unsatisfactory Quality of Supervision: Moderately SatisfactoryImplementing Agency/Agencies: Moderately Satisfactory Overall Bank Moderately Overall Borrower Moderately Performance: Unsatisfactory Performance: Unsatisfactory iv  C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project Yes Quality at Entry None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes Satisfactory time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Unsatisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Railways 21 14 Roads and highways 64 56 Sub-national government administration 15 30 Theme Code (Primary/Secondary) Access to urban services and housing Primary Primary Municipal governance and institution building Secondary Secondary Other urban development Primary Primary Pollution management and environmental health Secondary Secondary E\. Bank Staff Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Callisto E\. Madavo Country Director: Habib M\. Fetini Mahmood A\. Ayub Sector Manager: Eustache Ouayoro Letitia A\. Obeng Project Team Leader: Christian Diou Patrick Bultynck ICR Team Leader: Christian Diou ICR Primary Author: Joseph W\. B\. Bredie F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project Development Objective was to improve the safety, efficiency and environmental quality of urban mobility in the Dakar metropolitan area and road safety in Thiès and Kaolack\. Special attention to improving mobility for the urban poor by: (i) v  promoting public transport services; and (ii) ensuring the safe movement of pedestrians and road users\. Revised Project Development Objectives (as approved by original approving authority) The Project Development Objective remained unchanged throughout the life of the project\. (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : Reduction in traffic congestion and travel time for commuters Amount of time lost in traffic on four selected axes: 1,527\.07 hours /day Value or 16,851 veh\.hour/day: Time lost: - 10% quantitative or A: 3401 A: 3231 A: 4110 qualitative B: 5705 B: 5420 B: 7581 C: 2431 C: 2309 C: 3141 D: 5314 D: 5048 D: 6103 Date achieved 05/04/2000 12/31/2005 05/2008 Comments By these measures commuters lost an average of 30% more hours in traffic in (incl\. % 2008 compared to 2000\. Although the target is not met, the situation improved achievement) after 2005 when urban road upgrading programs neared completion\. Indicator 2 : Increase in market share of public transport and percentage of customers satisfied with service Value quantitative or 73\.1% +5% Declined to 59\.6% qualitative in 2008 (-18\.5%)\. Date achieved 05/04/2000 12/31/2005 05/2008 Target not reached\. The market share of public transport fell short by 18\.5%, Comments compared to the original target (78\.1%)\. However: (i) market share has remained (incl\. % almost stable since end-2005, at which time it was 61\.9%; and (ii) in absolute achievement) terms there is a strong increase of the number of public transport trips in the recent years (+12% from 2007 to 2008)\. Indicator 3 : Reduced levels of air pollution Est\. prod\. CO: 25 223 Est\. prod\. CO: - Est\. prod\. CO: 37 Value T/year (adjusted) 1% 274 T/year (+48%) quantitative or Est\. prod\. NOx : 18 458 Est\. prod\. NOx : - Est\. prod\. NOx: 28 qualitative T/year (adjusted) 1% 955 T/year (+57%) Est\. prod\. HC: 3 932 Est\. prod\. HC: - Est\. prod\. HC : 6 T/year (adjusted) 1% 764 T/year (+72%) Date achieved 05/04/2000 12/31/2005 05/2008 Comments Target not reached\. Estimates of levels of air pollution in 2008 need to take into (incl\. % account the surge in the number of vehicles registered in Dakar (from 40,042 in achievement) 1997 to 98,243 in 2007 or +145%) and the annual increase in the number of vi  kilometers/vehicles (+8\.5% between 1999 and 2008)\. Indicator 4 : Reduced accidents per capita Accidents per 1000 Value Accidents per 1000 veh: veh: 22,6% (GMAT quantitative or61,4% (BAC 97) Accidents: - 5% 08) qualitative Deaths per 1000 veh: 2\.1 Deaths: - 10% Death per 1000 (BAC 97) veh: 0\.56 (GMAT 08) Date achieved 05/04/2000 12/31/2005 05/2008 Comments (incl\. % Target exceeded\. Injuries dropped by 40% and deaths by 68%\. achievement) Indicator 5 : Cost of externalities Direct and indirect costs Value of congestion: CFAF108 Cost of CFAF142\.9 billion quantitative orbillion (3\.5% of 1998 congestion: - 10% +32% qualitative GNP) including (CFAF97\.2 (est\. 2\.2% of 2008 environmental billion) GNP) externalities Date achieved 05/04/2000 12/31/2005 05/2008 Target not met\. Since the methodology used to calculate cost at appraisal was not specified, the use of a different methodology from 2004 onwards makes results incomparable\. The cost of time lost in congestion alone, measured by a well- defined methodology, actually declined by 10% between 2004 and 2008, reflecting a reduction of congestion and a better control over the sector during the Comments time when works were implemented and going back to 2000 level\. However, the (incl\. % overall result for the entire period of the project was an increase in direct and achievement) indirect costs of congestion by 32%, but with the ICR team unable to attribute this increase to either the increase in externalities between 2000 and 2004, during which time no works were completed, or to the changed methodology\. In order to obtain comparable results, the baseline would have to be adjusted using the 2004- 2008 methodology, but the raw baseline data is not available to carry out this analysis\. (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Indicator 1 : Increased throughput (in terms of passengers) of public transport corridors Commercial speed Value Commercial speed Collective (quantitative Collective transport: +10% transport: 8\.18 or qualitative)10\.66 km/h to 23\.23 km/h on selected axes km/h to 22 km/h on selected axes\. Date achieved 05/04/2000 12/31/2005 05/2008 Comments (incl\. % Target not met\. Commercial speed decreased by about 30 %\. vii  achievement) Indicator 2 : Strengthened CETUD management capacity CETUD regulates public transport fares, routes and Value Strengthening of stops, and (quantitative None CETUD as a coordinates policy or qualitative) regulatory institution and financial aspects of public transport with other agencies\. Date achieved 05/04/2000 12/31/2005 03/16/2009 Comments Target partially met\. CETUD has been strengthened in terms of capacity, staff, (incl\. % and mandate\. All planned TA activities were implemented, but further effort is achievement) needed in order to consolidate project achievements\. Indicator 3 : Improved effectiveness and efficiency of the urban roads 50 kilometers of urban road network and infrastructure Urban road including 27 network and urban intersections have transport been rehabilitated, infrastructure in and redesigned\. In addition, two Value Dakar vehicular and 13 (quantitative None rehabilitated, pedestrian or qualitative) maintained, and redesigned to overpasses have promote public been constructed\. transport and Maintenance of the assure pedestrian road network in safety general and that of traffic lights and signs in particular is inadequate\. Date achieved 05/04/2000 12/31/2005 03/16/2009 Comments (incl\. % Target evaluated as 95% achieved, compared to the works program laid out at achievement) appraisal\. Indicator 4 : Urban transport leasing scheme Value 300 new or 600 505 new mini-buses (quantitative None second-hand replacing the same or qualitative) minibuses number of old ones\. Date achieved 05/04/2000 12/31/2005 01/06/2009 Comments 168% achieved, since 505 new mini-buses were provided vs 300 planned\. \. The (incl\. % indicator was flexible to allow mini-bus operators to choose between new and achievement) second-hand mini-buses\. Reimbursement rate is 100% for loans to mini-bus operators\. viii  G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived DO IP Disbursements (USD millions) 1 06/28/2000 Highly Satisfactory Highly Satisfactory 0\.00 2 12/21/2000 Satisfactory Satisfactory 0\.00 3 02/07/2001 Satisfactory Satisfactory 0\.00 4 10/30/2001 Satisfactory Satisfactory 0\.36 5 03/28/2002 Satisfactory Unsatisfactory 2\.18 6 04/30/2002 Satisfactory Unsatisfactory 2\.18 7 12/12/2002 Unsatisfactory Unsatisfactory 2\.31 8 05/30/2003 Unsatisfactory Unsatisfactory 2\.31 9 06/27/2003 Unsatisfactory Unsatisfactory 2\.31 10 12/01/2003 Unsatisfactory Unsatisfactory 3\.05 11 06/02/2004 Unsatisfactory Satisfactory 4\.22 12 11/24/2004 Unsatisfactory Satisfactory 7\.47 13 04/25/2005 Unsatisfactory Moderately Satisfactory 12\.11 14 06/30/2005 Moderately Satisfactory Satisfactory 18\.58 15 12/21/2005 Moderately Satisfactory Satisfactory 29\.12 16 06/22/2006 Moderately Satisfactory Satisfactory 37\.98 17 12/22/2006 Moderately Satisfactory Satisfactory 49\.06 18 06/22/2007 Moderately Satisfactory Satisfactory 57\.96 19 10/29/2007 Moderately Satisfactory Satisfactory 64\.16 20 04/29/2008 Moderately Satisfactory Moderately Unsatisfactory 68\.87 21 09/29/2008 Moderately Moderately Unsatisfactory Unsatisfactory 73\.28 H\. Restructuring Not Applicable ix  I\. Disbursement Profile x  1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. Crisis Level Traffic Congestion, Pollution, and Accidents in Dakar\. At appraisal in early 2000, the Greater Dakar transport system was marked by severe traffic congestion and high levels of pollution and road accidents\. The main causes were lack of investments in road infrastructure in the face of rapid population growth (4 percent annually), very high increase in the number of vehicles (21 percent annually) and informal vendors encroaching on roads, railways, and sidewalks\. Congestion was particularly bad in the narrow Pikine-Guediawaye transit corridor, which connects Dakar city, the port, and the main railway terminal with suburban areas and the rest of the country\. 2\. It was estimated at appraisal that 16,850 hours per day were lost in traffic on many of the most critical road sections in Dakar and that the commercial speed of public transport vehicles had been reduced to 10-20 kilometers per hour\. Pollution from vehicles caused an estimated one third of all air pollution in the city and was further exacerbated by the fact that up to 55 percent of vehicles were more than 15 years old\. The effect on respiratory diseases was evident: Dakar had an annual average of 25,150 cases of respiratory related sickness (excluding tuberculosis) representing 5\.4 percent of the area's total sickness incidence\. Persons living in congested areas such as bus and taxi stations, markets, schools, or near heavily traveled roadways were found at high risk\. 3\. In 1997, almost 2,500 people were injured in traffic accidents brought on by the poor state of maintenance of vehicles, including public transport\. Moreover, there was no separation between fast and slow moving traffic (including along the suburban railway through the densely populated Pikine-Guediawaye transit corridor) and sidewalks were in disrepair or occupied by vendors, who also often shared the railway tracks and right-of- way with the trains\. 4\. At appraisal, these problems substantially affected the productivity and efficiency of the national economy\. It was estimated that reducing Dakar's traffic congestion by 10 percent would result in an increase of the efficiency of the urban transport system valued at US$5\.4 billion annually\. 5\. The Government's Urban Transport Policy was adopted in September 1996, providing a framework for rehabilitating the urban transport sector through a comprehensive approach, which would address institutional, regulatory, financial, managerial, and social aspects of the crisis\. 6\. Bank Support for the Urban Transport Policy\. In early 1997, at the request of the Government of Senegal, the Bank agreed to support the Urban Transport Policy through a Transport Reform and Capacity Building Technical Assistance Project\. At closing in 2001, the technical assistance (TA) project had achieved minor improvements in the institutional and regulatory framework, coordination between national and local 1  government and the private sector, involving stakeholders in decision-making, and developing road safety action plans and improving traffic management\. However, the scope of the TA was not commensurate with the scale of the problems and the Government and the Bank agreed that the severity of the situation warranted the preparation of a free-standing Urban Mobility Improvement Program (Programme d'Amélioration de la Mobilite Urbaine - PAMU)\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 7\. The Project Development Objective was to improve the safety, efficiency, and environmental quality of urban mobility in the Dakar metropolitan area and road safety in the Thiès and Kaolack areas\. Special attention was to be paid to improving mobility for the urban poor by: (i) promoting public transport services, and (ii) ensuring the safe movement of pedestrians and road users\. 8\. The key performance indicators were: (i) Reduction in traffic congestion and travel time for commuters; (ii) Increases in market shares of public transport and percentages of customer satisfaction with services; (iii) Reduction in relative level of emissions generated by motorized vehicles; (iv) Reduction in the number of fatalities caused by traffic accidents along the project's main road corridors; and (v) Decrease in the costs of externalities generated by motorized transport as a percentage of GDP\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised\. 1\.4 Main Benefits and Target Population 9\. Beneficiaries and benefits\. The project aimed at improving the safe mobility and immediate environment of the urban poor, as those most affected by the persistent urban transport crisis in Dakar and mostly relying on collective transport\. Increasing accessibility to public transport services to people living in remote locations from downtown Dakar was going to benefit the poor segments of the population\. 10\. Other Project Benefits\. The society at large would benefit from the economic, social, and environmental benefits of the project through: (i) reduced vehicle operating costs and travel time; (iii) reduced air pollution; (ii) improved pedestrian safety in the Dakar metropolitan area; (iv) improved value-for-money for public spending on roads; and (v) increased employment opportunities in the mass transport industry (mini-buses ­ CR (Car Rapides))\. The overall economic productivity and the quality of life were expected to improve in the Dakar metropolitan area\. 2  1\.5 Original Components 11\. Part A: Road Infrastructure, Road Safety, and Traffic Management\. (i) Rehabilitation and construction of road infrastructure primarily for the development of public transport and pedestrian safety in the Dakar metropolitan area; (ii) design and implementation of a road safety action plan for the Dakar, Thiès, and Kaolack areas (including management of accident-prone junctions, improvement of user friendliness and safety infrastructure, and implementation of awareness campaigns targeted at transport users and operators); (iii) development and implementation of traffic management strategies to improve key transit points for persons and goods, and preparation of a comprehensive Urban Mobility Plan for the Dakar area and a plan to increase public transport services' commercial speed; and (iv) technical and advisory services\. 12\. Part B: Pedestrians' Movement and Traffic Security along the Suburban Railway Line\. (i) Upgrading of suburban railway infrastructure by increasing existing capacity, implementing major security works along the main transport corridors targeted by the project and relocating the freight terminal outside downtown Dakar; and (ii) technical and advisory services to the concessioning of the suburban railway services\. 13\. Part C: Leasing: (i) Implementation of a leasing mechanism to accompany the renovation of mini-buses (CR), including inter alia support for strengthening the technical and management capacity of the operators; and (ii) facilitating access to credit for private transit operators to enable them to renew their fleet, and acquisition, with a view to leasing, by the Urban Transport Financing Group (Association de Financement des Transports Urbains - AFTU) of vehicles that meet safety and emissions standards\. 14\. Part D: Urban Air Quality Management\. Carrying out of a program of actions aimed at improving air quality in the Dakar metropolitan area including: (i) construction of automobile monitoring centers; (ii) establishment of an observatory to track urban pollution; (iii) support for the introduction and supervision of an urban air quality action plan; and (iv) instituting awareness campaigns and consultations with road users and the transport industry\. 15\. Part E: Capacity-Building and Institutional Strengthening\. (i) Technical advisory services and training to strengthen sectoral capacity with regard to air pollution, road safety, inter-modal policy and promotion of mass transport, urban planning, and tools and techniques for evaluating performance; (ii) carrying out ad-hoc studies and assessments consistent with the evolving context, as well as feasibility studies to prepare the second phase of the program; and (iii) carrying out institutional reform of the sector and support to the Executive Council for Urban Transport in Dakar (Conseil Exécutif des Transports Urbains de Dakar - CETUD in its capacity as project executing agency and regulatory authority for urban transport\. 1\.6 Revised Components The components were not revised\. 3  1\.7 Other significant changes 16\. Extensions of the Closing Date\. The Credit closing date was extended three times\. At the third extension, approved on November 21, 2007, the original closing date of December 31, 2004 was extended to September 30, 2008\. The extensions were necessary to make up for delays with (i) the lengthy process of restructuring of CETUD initiated in 2000; (ii) works on the urban railway line and the air quality component; and (iii) the delivery of vehicles under the lease component\. 17\. Amendment of the Development Credit Agreement\. Part B of the project was to be implemented by the National Railroad Company (Société Nationale des Chemins de Fer du Senegal - SNCS)\. In 2003, the Government decided to privatize the SNCS and the Development Credit Agreement (DCA) was amended in October 2004 to enable the new operator, TRANSRAIL, to manage this component\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 18\. Surveys and studies carried out under the Urban Transport and Capacity Building TA project were used to prepare the PAMU\. CETUD, working with stakeholders and the Bank: (i) identified the congestion bottlenecks and accident hot-spots; (ii) determined the improvements necessary to integrate the suburban railway line with other mass-transit systems; (iii) designed the lease scheme for the renewal of the CR fleet; and (iv) prepared the measures to manage traffic and air quality\. These proposals were approved, in principle, by the CETUD assembly (government, local authorities, private sector) and thus had wide support among stakeholders\. The regional experiences from the sub- Saharan Africa Transport Policy Program (SSTAP) were used as to select appropriate technical solutions based on simple technology\. 19\. The PAMU was designed to address the crisis in the urban transport sector in Dakar in a comprehensive manner\. During preparation, the Government and the Bank agreed that, in view of the urgent needs and the incomplete technical readiness of some investments, the PAMU should be designed as the first phase of a two-phase Adaptable Program Loan (APL)\. The indicative cost was US$103 million, of which the Bank was to finance about 68 percent\. The rest would be financed by the French Development Agency (Agence Française de Développement - AFD), the Nordic Development Fund (NDF), the Government, and others (municipalities and transport operators)\. The second phase of the APL, estimated to cost US$31\.4 million, was to be implemented if specific triggers related to satisfactory implementation of activities under the first phase were met\. 20\. Quality-at-entry is rated unsatisfactory as preparation was not sufficiently advanced in relation to procurement and financing of maintenance arrangements\. The preparation had a number of shortcomings in the analysis of the role, capacity, and mandate of CETUD to manage a project of this scale\. These issues were not addressed in the design as a result\. This was highlighted by the Quality Assurance Group in the 4  October 2002 Quality of Supervision Assessment (QSA5) report\. Further, the CR/mini- bus operators were not ready to participate in the leasing scheme\. The involvement of several donors and the resulting complications for project management contributed to increasing the complexity of the project\. This issue was also not sufficiently addressed\. As a result, the project was not ready for implementation at Board approval\. 2\.2 Implementation 21\. Implementation of the PAMU went through three phases\. Implementation was very slow from effectiveness to January 2004 at the mid-term review (MTR), due to delays in: establishment of project management capacity for CETUD, effectiveness of the NDF agreement and fine-tuning the CRs leasing scheme\. Project implementation improved significantly after the MTR when most of the results were achieved\. Bank supervision teams, faced with very low initial disbursement, worked with CETUD to implement road works, get the air quality component on track, and mobilize CR operators\. Unfortunately, implementation went back to a standstill after 2007 due to lack of counterpart funds which prevented the completion of the remaining civil works including the suburban railway line\. 22\. Delays with assuring CETUD's project management capacity\. CETUD had only three technical staff comprising the secretariat when it was made responsible for implementing the PAMU\. The new Government, elected in May 2000, decided to restructure CETUD and this decision delayed the recruitment of project implementation staff\. A new President and Director General were finally appointed in January 2002, but delays in recruiting the technical and financial staff pushed back the launching of the road works until late 2003 and limited CETUD's role in its efforts to privatize the national railway and the Dakar bus company (SOTRAC)\. This in turn delayed upgrading work on the suburban railway line\. The selection of the Autonomous Road Works Agency (Agence Autonome des Travaux Routiers - AATR) and Public Works Executing Agency (Agence pour l'Exécution de Travaux d'Intérêt Public - AGETIP) to oversee procurement of works and goods under the road component was acceptable to the Bank, but took until 2003 to be operational\. 23\. Delays with the NDF-financed air quality activities\. Although the NDF agreement was signed in December 2002, it was not until January 2004 that the Government produced a legal opinion to enable effectiveness of this agreement and the launch of the air quality activities\. Moreover, securing the sites for the automobile monitoring centers took until 2008 and procurement of equipment for the air quality laboratory, initially restricted to Nordic countries, took almost two years to complete\. Because of all these delays, it was decided to scale down proposed activities from three monitoring centers to one, and to drop all five air quality measuring stations and keeping only the central laboratory\. 24\. Delays with the participation of the CR operators in the leasing scheme\. Meetings to mobilize the independent CR/mini-bus operators started in 1999 under the TA project and continued to take place in the early years of PAMU\. In addition, the registration of operators into Economic Interest Groups (Groupement d'Intérêt 5  Economique - GIE) which started early on in the project took longer than anticipated because of the informal nature of the CR operators and their lack of collateral which held up procurement of mini-buses since operators were unable to provide the initial deposits and commercial banks declined to lend funds to these operators\. These deposits were intended to confirm operators' commitment and be part of the financial mechanism to guarantee against operators defaulting on their repayments\. The leasing mechanism took off in November 2003 when the first contract for new mini-buses was signed\. The leasing mechanism operated at full speed after May 2005 when the GIEs created their own micro-finance institution\. 25\. Eventual Acceleration of Activities but Project Closure with Unfinished Works\. Due to tighter supervision and Government engagement, progress with implementation accelerated after the MTR\. By completion (September 30, 2008): (i) most of the improvement works in the roads and intersections in Dakar was completed; (ii) 505 new mini-buses were in operation under the leasing scheme; (iii) the laboratory for air quality was appropriately staffed and had started initial operations; and (iv) 90 percent of the upgrading works on the suburban railway line were completed\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 26\. Design\. The key performance indicators had been selected with the intent to show progress towards achieving the PDO of improving urban mobility\. Specifically, improvements in the quality and use of public transport would be measured by: (i) increased commercial speed of public transport; (ii) reduction in time lost in traffic; (iii) increase in the number of passengers using public transport; (iv) decrease in pollutant emissions; and (v) reduction in accidents\. Other indicators included improvements in the sector's financial capacity and decrease in the costs of externalities\. 27\. However, the selected indicators did not provide a good indication of achievement of the PDO and they were overly complex and difficult to measure\. In addition, the targets were beyond reach\. For instance, it was unrealistic to expect that replacement of part of the fleet of old CRs and suburban railway's rolling stock would reduce the emission of pollutants by one percent for Dakar as a whole\. Similarly, reductions in time- lost-in-traffic, increases in commercial speed of public transport vehicles and in the ridership on public transport, and cost of externalities (the aggregate of the individual indicators), were not only difficult to measure, but unlikely to be achieved in the face of the continuous rapid increase in the number of vehicles\. 28\. Implementation\. The indicator targets were based on a static environment and should have been updated, since they did not take into account e\.g\. the increase in total traffic, which was beyond control of the project\. It was envisaged to change the indicators to make them more relevant to the PDO after the MTR but the operation did not materialize\. While outcome indicators of the project could not be met partially due to overly optimistic targets, it was clear when visiting Dakar that the project has made strides in improving mobility in the city although this could not be captured by the current indicators\. 6  29\. Utilization\. Continuous measurement of the project indicators was not possible due to the lack of specification of baseline methodology, the level of data gathering involved and the cost of monitoring\. As a result, the five indicator measurements carried out (the last time in May/June 2008, just before the closing date of the project) did not allow taking the appropriate corrective measures\. These issues prevented the use of indicators for project management and operational purposes\. 2\.4 Safeguard and Fiduciary Compliance 30\. Safeguard Compliance\. The project complied with Bank safeguard policies\. OP4\.12 on Involuntary Resettlement was triggered mostly due to civil works on the suburban railway component, necessitating the resettlement of informal shops and vendors along the right-of-way of the railway\. Supervision reports confirmed that about 80 people affected by the road component were resettled in compliance with Bank safeguard policies\. Another resettlement operation for the PTB at Thiaroye was adequately prepared, but was put on hold due to lack of counterpart funds needed to implement the resettlement action plan\. The project did not have major negative environmental impacts and environmental related clauses were systematically included in work contracts\. Finally, safeguard policies concerning Cultural Heritage (OP 4\.11) were complied with when the railway station in Rufisque ­a cultural monument from the colonial period­ was rehabilitated\. 31\. Fiduciary Compliance\. The project complied with Bank fiduciary safeguards in spite of problems with the quality of project management\. At appraisal, the financial management, procurement, and reporting capacity of CETUD were in need of strengthening\. A six-month action plan was put together to address the deficiencies which remain difficult to correct despite efforts from Bank supervision teams\. However, financial management and post procurement reviews did not reveal any irregularities\. 2\.5 Post-completion Operation/Next Phase 32\. Post-completion operation remains at risk\. Firstly, municipalities and the Government are responsible for maintenance and periodic cleaning of roads and sidewalks, but lack the technical capacity and funds to do so\. The Road fund which was intended to finance urban road maintenance has not been set up by the Government\. Secondly, CETUD's capacity in the area of coordination and sector financing needs to be further reinforced\. CETUD has prepared a first version of the Urban Mobility Plan for the Dakar area and uses the plan to monitor mobility and identify remaining problems\. Thirdly, uncompleted works due to counterpart funding issues, including upgrading the suburban railway, closing the right-of-way wall, the pedestrian and vehicular overpasses, and access roads to the freight and road/rail feeder stations need to be completed to deliver the full project benefits to the population and it is not clear if resources will be made available considering the current strained fiscal situation of the country\. 33\. The main triggers for the second phase of the APL are not fully met, since appropriate financing for maintenance is not available and CETUD's role as a regulator is not yet firmly established\. 7  3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design, and Implementation 34\. Objective\. The objective of the PAMU remains highly relevant in light of the continued pressure on transport infrastructure in Dakar\. Moreover, urban/rural synergies and growth/wealth creation pillars of the current Country Assistance Strategy (CAS) makes urban mobility improvement in Dakar more relevant than ever\. 35\. Project Design\. The project was not ready for implementation\. PAMU's design was appropriate in that it targeted the major physical and institutional shortcomings of the urban transport system and aimed to improve air quality management and institutional capacity\. However, the design did not sufficiently take into account the existing organizational weaknesses and the need to build on dedicated solutions to these problems\. The risk analysis was a major shortcoming of the project, the M&E framework was not able to provide useful information for project management purposes, and the client was not fully committed to the project as proved by the long delay in the air quality study and the lack of actions to address weak capacity in CETUD\. 36\. Implementation\. Some of the shortcomings were addressed during implementation, but despite concerted efforts, not all problems could be overcome\. The Government and supervision missions initially failed to resolve the issues with CETUD's management capacity, the delayed air quality activities, and the leasing scheme in a timely manner until the new TTL took over at the MTR\. Lack of counterpart funding led to the closure of the project before the completion of works\. 3\.2 Achievement of Project Development Objectives 37\. Achievement of the PDO\. The PDO to improve the safety, efficiency, and environmental quality of urban mobility in the Dakar metropolitan area and road safety in the Thiès and Kaolack areas has been partially achieved\. 38\. Analysis of achievement of each of the PDO's major objectives - safety, efficiency, and environmental quality ­ indicates that while safety objectives were met, those for efficiency and environmental quality were not fully realized\. 39\. Safety\. The PDO indicator relating to safety (reduced accidents) was met\. Injuries per 1,000 vehicles dropped from 61 in 2000 to 23 in 2008 and that of death from 2\.1 to 0\.6 per 1,000 vehicles\. Pedestrian crossings installed with traffic lights at busy intersections and new overpasses now provide safe crossings for pedestrians\. In addition, sidewalks have been constructed, repaired or widened, and road median dividers and speed bumps have been installed at schools, hospitals, and other locations where people congregate\. However, lack of counterpart funds halted work on some of the overpasses which cannot be used and access to several train stations remains inadequate, unregulated, and unsecured as a result\. 40\. Traffic management has improved with the creation of the traffic police corps (not initially planned under the PAMU)\. The 362 agents now employed in metropolitan Dakar 8  to manage traffic have received equipment and training financed under the PAMU\. The corps daily deployment contributes both to improved safety as well as more efficient flow of traffic\. 41\. Efficiency\. Overall efficiency strongly decreased from 2000 to 2004, with increased traffic congestion and delays in investment, but improved slightly after 2004\. Three key performance indicators (KPIs) related to the efficiency of transport include (see project datasheet for details): (i) time-lost-in-traffic actually increased by 30 percent compared to a targeted reduction by 5 percent; (ii) the market share of public transport declined by 13\.5 percent against a targeted 5 percent increase; and (iii) the cost of externalities shows a 32 percent increase\. It is worth mentioning measuring the cost of externalities was difficult to assess accurately, as the methodology used to measure this indicator at appraisal was not available\. As a result, a new methodology was developed at the time of the MTR to measure the cost of time lost in traffic as a proxy of congestion\. On that basis, the economic analysis demonstrates that cost of time lost in congestion alone was stable from CFAF 41\.4 billion in 2000 (base 1998) to CFAF 36-42\.9 billion in 2008\. The lack of achievement of the first two indicators can be attributed in part to the overall increase in vehicle traffic, but the M&E framework does not allow us to attribute specific results to the project interventions\. 42\. The leasing scheme has achieved the objective of partly renewing the aging fleet of CRs, and improving operations and passenger comfort\. This scheme - a first in the Africa Region - replaced 505 old CRs with new, more efficient ones (about one-fifth of the mini-bus fleet)\. Acquisition of these new mini-buses has dramatically changed the face of the urban transport industry in Dakar\. CR routes and stops have been formalized and passengers are satisfied with the quality of transport services (see Annex 5)\. A study of the leasing scheme reports that although the fares for CRs formally increased by 10 percent in 2005, the services of the new CRs are cheaper for the traveler in actual terms, as the practice of charging higher unofficial fares has stopped\. As a result of the new business model implemented for the new vehicles, revenues for owners have increased while fare increases have been kept to a minimum through negotiations with CETUD\. Studies show that the leasing scheme is sustainable and the reimbursement rate is 100 percent\. 43\. Environmental Quality\. The KPI related to environmental quality was not achieved, since air pollution increased rather than declined\. However, the KPI could not fully measure progress made by the project as the end target did not take into account the overall dramatic increase in vehicle-kilometers in the city\. Initial steps have been taken to arrive at a better management of environmental quality with the establishment and staffing of the air quality laboratory and deployment of a mobile measuring vehicle\. The air quality management system needs to be developed and staff trained in use of equipment\. The anticipated reduction in pollution from the mines and cement factory through the use of new and sealed TRANSRAIL freight cars has also not been achieved\. Dust and leaks from freight trains pollute the air and the tracks used by the suburban railway\. However, CETUD has managed the introduction of unleaded gasoline in 9  Senegal supported by the Bank's Clean Air Initiative, which has eliminated lead pollution from traffic\. 3\.3 Efficiency 44\. Cost-Benefit at appraisal and closing\. The economic analysis at appraisal examined the cost-benefit of "without project" and "with project" for: (i) the road rehabilitation; (ii) the leasing scheme; and (iii) the pedestrian and traffic safety along the suburban railway\. 45\. The Economic Rate of Return (ERR)\. At appraisal, the ERR of the road rehabilitation component was estimated at 37 percent\. At closing, the ERR of the road rehabilitation investments under PAMU (vehicle operating cost only) was equal to, or greater than, 67 percent except in one US$800,000 investment in Petit Mbao where it was only 9 percent (small portion with low traffic but high social impact)\. 46\. Benefits from reduced accidents\. At appraisal, the reduction in deaths and injuries to persons and damage to cars was estimated to have a Net Present Value (NPV) of US$7\.58 million\. A full calculation of NPV was not done for the ICR\. However, at closing, the costs incurred from injuries and deaths between 1997 and 2007 were estimated to have decreased by 26\.8 percent, or almost three times the estimate of 10 percent used at appraisal\. 47\. Benefits from Reduced Congestion\. Based on the estimate at appraisal that one million hours were lost in traffic as a result of congested roads, the benefits from reducing the average travel time in Dakar by five percent resulted in a NPV of US$39\.6 million\. The cost of congestion was estimated at CFAF108 billion in 1998\. At closing, a study concluded that the cost of congestion was estimated to CFAF142\.9 million in 2008\. Although this represents an increase of 32\.3 percent, the result at closing cannot be compared to the appraisal estimate as the parameters, especially for health and environmental externalities, were not specified\. 48\. Leasing Scheme\. A study of the leasing scheme reports that the services of the new CRs are cheaper than the ones of the old CRs for most journeys as practices of short- tripping and use of unofficial fare stages stopped\. In the same time, revenues for owners have increased while fares have remained affordable for commuters as a result of the updated business model implemented for the new vehicles\. Studies show that the leasing scheme is sustainable and the reimbursement rate is 100 percent\. 49\. Efficiency loss from incomplete works\. Although the Suburban Train (Petit Train de Banlieue ­ PTB) received new trains and locomotives under PAMU, the incomplete work on the third track and the poor condition of the infrastructure means that the train carries only about a 18,000 passengers a day compared to its potential of 75,000 passengers daily\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Unsatisfactory 10  50\. The outcome is rated moderately unsatisfactory, primarily because the project could not achieve targets for three out of five outcome indicators\. Target indicators were not met for air quality, share of public transport and reduction in time lost in traffic, while the target was met for safety\. The indicator related to the cost of externalities was difficult to assess accurately due to methodological problems\. So while progress has been achieved under the project in resolving part of the severe traffic congestion in greater Dakar, which at the time of appraisal had reached crisis proportions, outcomes are not commensurate with expectations at appraisal\. Further, the capacity of CETUD remains problematic and funding for maintenance of roads is not available, jeopardizing project achievements\. This moderately unsatisfactory rating is further substantiated by the evaluation of project relevance and efficiency\. Although the project objective continues to be highly relevant, the unsatisfactory quality at entry and notably efficiency losses due to incomplete works pull the rating downwards\. 3\.5 Overarching themes, other outcomes and impacts (a) Poverty impacts, gender aspects, and social development 51\. Better public transport for the informal sector\. Many rural-urban migrants initially stake out an economic existence in the rapidly expanding informal markets and shops along the railway or near the rail and bus stations\. Public transport facilitates access to these markets and shops, which provide employment to the poor segments of the urban population\. (b) Institutional Change/Strengthening 52\. Stakeholder participation in urban transport\. CETUD's tripartite plenary has been instrumental in helping renew the fleet of CR, and has improved coordination among the many agencies active in the transport sector in Dakar including DDD, PTB, the municipalities and the mini-buses' operators\. This arrangement has made it possible to rationalize bus routes, achieve some level of integration between rail and road commuter transport, and keep public transport affordable\. (c) Other unintended outcomes and impacts (positive or negative) 53\. In parallel with the PAMU, the Government has financed additional mobility improvements, including major civil works to rehabilitate and expand the primary road network (North highway, Airport access highway and Corniche) and launched the construction of the region's first six-lane toll highway crossing the narrow Pikine- Guediawaye corridor\. The primary network improvements financed by the Government has enhanced the impact of PAMU-funded overpasses and the rail/road feeder stations because these facilities were connected to the six-lane highway\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops NA 11  4\. Assessment of Risk to Development Outcome (Rating: Substantial) 54\. Financial and Economic Risks\. Counterpart funding and financing of maintenance of urban infrastructure, initially planned through the Development Fund for Urban Transport (Fonds de Développement des Transports Urbains - FDTU) was not available\. The Government's inability to pay counterpart funds starting in 2007 and continuing in 2008, as well as the failure of most municipalities and operators to make their contribution to the FDTU, puts the outcomes of PAMU at a significant risk\. The urban infrastructure constructed and or rehabilitated is showing early signs of degradation in some locations for lack of maintenance\. Lack of repair and maintenance of roads, traffic lights, and protective barriers at pedestrian crossings are lessening the recent gains in mobility and safety\. The current level of financing of the FDTU is insufficient to fund infrastructure maintenance and implementation of the formal agreement to fund urban road maintenance from the second generation road fund has yet to take place\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (Rating: Unsatisfactory) 55\. Problems with Readiness and QAE\. Preparation of the project was not totally ready at the time of appraisal\. However, the Bank approved the project in May 2000\. Procurement was not sufficiently advanced, financial management capacity was inadequately assessed and mitigation measures were not in place, and arrangements for the leasing scheme and the air quality management component were not strong enough\. There were real gaps in readiness and as a result effectiveness was delayed until May 2001\. (b) Quality of Supervision (Rating: Moderately Satisfactory) 56\. Ineffective Initial Supervision\. Supervision missions initially did little to get implementation going\. The missions did not effectively address CETUD's inadequate project management capacity in the fiduciary and sector coordination areas, nor did they effectively help the CR operators find ways to meet the conditions of the proposed leasing scheme\. The Government's proposals for restructuring CETUD and for financing the new bus company, Dakar Dem Dikk (DDD), led to discussions to restructure the project in late 2002, due to concerns with the proposed arrangements\. However, this was not done, as no agreement could be reached with the Government\. While the road component took off only after 2003, supervision missions in the first years of project implementation did little to speed up implementation and the reasons for such lack of proactivity from the Bank remain unclear\. 57\. Significant improvements in Supervision\. Even efforts by management had little effect until the replacement of the first TTL and the organization of the well- 12  prepared MTR\. The new TTL, appointed in November 2003, got the supervision team to address outstanding issues with the leasing scheme, the air quality component, and CETUD's capacity\. The bulk of implementation took place after 2004 when fiduciary capacity and compliance improved and supervision missions included safeguard specialists\. Supervision was satisfactory from 2004 till closing in 2008\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory 58\. Uneven Bank Performance\. The Bank did not diligently appraise the project to ensure it was ready and of satisfactory quality\. Furthermore, the first few years of supervision were largely ineffective in solving implementation problems with the majority of the components\. It is worth noting that the appointment of a new Government following the 2000 general elections at the time of effectiveness and several changes in some of the transport and institutional policies were responsible for implementation delays\. The Bank's performance was satisfactory after the MTR when more than 90 percent of the project was implemented\. The issue of counterpart funding begun during the second half of 2007 but became a key structural issue in 2008\. Considering the fiscal position of the country, the Bank decided not to grant another extension requested by the Government to complete the project which closed in September 2008\. 5\.2 Borrower Performance (a) Government Performance Rating Unsatisfactory 59\. Uneven Borrower Performance\. Preparation of the PAMU by the Government was not complete and the capacity of CETUD as the implementing agency was inadequate\. Just when the PAMU was approved in 2000, the new Government began formulating its policies and structuring its institutions in the sector\. CETUD underwent too many changes\. Delays in recruitment of project management and fiduciary staff subsequently delayed project implementation\. The Government was, however, committed to resolving the urban mobility crisis in Dakar by financing the construction of a number of major infrastructure works which led to major improvements in urban mobility in Dakar\. The Ministry of Equipment and Transport was very helpful to get implementation off the ground and provided assistance to CETUD\. However, the Government's inability to provide counterpart funds left PAMU's supported works program incomplete at closing\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 60\. CETUD had gained experience with the implementation of the TA project, but was in need of strengthening when it was given the responsibility of implementing the PAMU\. The new Government's insistence on restructuring CETUD was beyond the agency's control\. Delays with staff recruitment was also mostly beyond CETUD control\. CETUD's management was slow to address the agency's weak fiduciary capacity and it 13  took more time than needed for CETUD to focus on its core planning and coordinating functions\. Procurement, financial management, and reporting remained weak until well into 2004 (the original closing date)\. However, CETUD's management did improve after MTR, its organizational chart was adjusted to its core functions and staff focused more on urban mobility issues\. A good job was accomplished on the urban infrastructure upgrading work, the leasing scheme, and support to the creation of the traffic police\. CETUD has been less effective in assisting with efforts to privatize the former bus company SOTRAC and PTB\. It has also been less effective in ensuring maintenance and in addressing the many issues associated with the upgrading and integration of the suburban railway line ­ a task made difficult by the poor performance of TRANSRAIL\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Unsatisfactory 61\. The Borrower almost achieved full implementation of PAMU with resulting improvements in urban mobility, safety, and air quality\. It used the Credit for the intended purposes, and allocated until 2007 counterpart funds for the project\. The Borrower's commitment to urban mobility went beyond the PDO of PAMU when it made substantial additional investments to improve urban mobility\. Although some of the initial delays with implementation were a normal consequence of the review of policies and institutions by a new Government, the length of the delay and the lingering problems associated with CETUD took too long to be resolved and affected negatively the project\. The lack of counterpart funds, linked to the global financial crisis, was a major set-back to the project and has to be attributed to the Government\. 6\. Lessons Learned 62\. The challenging urban mobility needs of rapidly developing urban centers in SSA require the establishment of well-staffed and well-managed lead agency to coordinate the activities of multiple stakeholders, including the central Government\. In sprawling urban centers experiencing rapid growth of their population and increased poverty, transport needs and management of transport issues can be very challenging in the face of weak capacity at the central and local government levels and a mushrooming informal transport sector\. Fleets of old transport vehicles compounded with lack of investment in the road infrastructure are causes of poor quality of transport services, congestion, increased road accidents and poor safety of the road users\. Having a dedicated agency able to coordinate the needs of all the stakeholders in order to improve urban mobility is a critical step in the right direction for coordinating urban transport management, for policy formulation and implementation, and for consensus building among actors\. 63\. Indicators that are simple and easy to measure are critical for reviewing changes in urban mobility and for crafting effective responses to the urban transport crisis in SSA\. PAMU's key performance indicators were innovative and far- reaching as they included monitoring of congestion, use of public transport, levels of pollution, incidence of accidents and cost of externalities\. But the indicators were sourced 14  from several different studies, the methods and calculations of values were complicated and, in some cases, such as the cost of externalities, were based on untested assumptions\. Other variables related to mobility could not be captured by the indicators, such as major changes in the primary road network or in traffic management regulations\. Baseline values were established at appraisal and agreed upon, but few if any agencies could actually monitor the indicators\. Monitoring over the life of the project became difficult and the findings were contested by transport specialists\. This experience suggests that it is better to select simpler, measurable indicators that have proven to reflect the relevant results to be monitored\. The Bank has financed a large number of urban projects and it should be possible to find effective indicators in these projects\. Capturing these indicators and making them available to staff will improve preparation and supervision of new projects in urban mobility, in particular with regard to realistic targets and their measurement\. 64\. Innovative leasing schemes can address problems created by an aging vehicle fleet of informal urban transport operators\. PAMU took an innovative approach to get informal transport operators to replace their old polluting vehicles with ones that are newer, safer, and less polluting\. The leasing scheme developed under the PAMU was successful because it was designed with operators' input, provided strong TA programs for operators and drivers, and included an operational restructuring of the CR network\. The Bank's leasing scheme achieved the much-needed replacement of about 20 percent of the existing fleet\. The experience has been analyzed in detail in the "Dakar Bus Financing Study" including lessons and potential applications in the region\. Notable in the Dakar experience is the commitment from operators to sign-up, make payments, and organize themselves in mutual benefit associations to spread risks\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 65\. The report prepared by the Borrower was received\. A summary was prepared and is attached in Annex 7\. The quality of the preparation is deemed satisfactory, as well as the implementation phase in spite of the lack of counterpart funds\. Notwithstanding its weaknesses, the project has globally responded to the expectations of the authorities\. (b) Cofinanciers 66\. AFD focused on the construction of Cyrnos and Malick Sy interchanges (est\. US$13\.5 million grant)\. The works started in 2004 and faced important technical difficulties linked to changes in project design and unexpected water and sewerage networks on the sites\. This had negative impact on the implementation schedule and the final cost\. However the positive impact of these investments is important on the quality of life of the population and economic activity, especially in terms of: lower travel cost, lower level of pollution, and improved safety, for both people and goods\. The works implemented under the Project will represent a sustainable contribution to the PDOs only if the progress made under the Project in reorganizing the public transport system is further developed, in particular with an integrated approach combining all modes\. 15  67\. NDF has suggested a number of changes to the write up in the paragraphs dealing with the air quality component\. These have been incorporated\. (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 68\. AFTU was created on April 3, 2001 within the framework of the PAMU and is one of the beneficiaries of the Project\. With the financing provided by IDA through the Government, AFTU was able to set up the mechanism for the minibuses leasing scheme as planned\. Thanks to this achievement, 250 operators were able to replace 505 old Cars Rapides for brand new vehicles, compliant with safety requirements and comfort of users\. The financing conditions, with a low interest rate and simplified guarantee requirements (unlike the usual requirements from the formal banking system), are particularly well received by the operators\. AFTU greatly appreciates the operational support received from stakeholders for better management, monitoring and impact of activities\. AFTU also strongly supports the efforts made by the Government and CETUD to further expand the leasing scheme by using the reimbursements made under the current scheme to finance additional minibuses\. 69\. The new Road Safety Association (Nouvelle Prévention Routière du Sénégal, NPRS) was created in 2002 to develop safety activities against car accidents\. Close cooperation between NPRS and CETUD was developed under the PAMU, with regard to training of professional drivers linked to the new CRs, as well as various sensitization actions in the regions of Dakar, Thiès and Kaolack\. The NPRS thanks the CETUD for its support and wishes that these very constructive actions will be further supported to strengthen the positive impact witnessed on road safety in urban areas\. 16  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal Estimate Actual/Latest Components Percentage of (USD millions) Estimate (USD millions) Appraisal CONSTRUCTION AND REHABILITATION OF ROAD 37\.54 87\.74 233% INFRA\. TRAFFIC SAFETY ALONG THE RAILWAYS 18\.60 22\.22 119% FINANCIAL SUPPORT FOR THE LEASING MECHANISM 21\.90 24\.64 117% URBAN AIR QUALITY MANAGEMENT 7\.50 9\.07 130% CAPACITY BUILDING AND INSTITUTIONAL SUPPORT 4\.80 12\.92 254% Total Baseline Cost 90\.34 156\.59 173% Physical Contingencies 8\.40 0\.00 Price Contingencies 3\.70 0\.00 Total Project Costs 102\.44 156\.59 Front-end fee PPF 0\.56 0\.33 59% Total Financing 103\.00 156\.92 152% (b) Financing (in USD Million equivalent) Appraisal Actual/Latest Source of Funds Estimate Estimate Percentage of (USD (USD Appraisal millions) millions) FRANCE: French Agency for Development 17\.30 13\.52 78% International Development Association (IDA) 70\.00 75\.71 108% Nordic Development Fund (NDF) 7\.60 8\.91 117% FOREIGN SOURCES (UNIDENTIFIED) 4\.50 0\.00 Government of Senegal 3\.60 58\.78 17  Annex 2\. Outputs by Component Part A: Road Infrastructure, Road Safety Outputs and Traffic Management: 1\. Rehabilitation and construction of road 1\. Approximately 27 km of roads have been infrastructure, including drainage upgraded, including resurfacing, installing or improvements, primarily for the development repairing drains, and widening of feeder roads\. of public transport and pedestrian safety in the Work was completed in 2007/8\. Dakar metropolitan area\. 2\. Design and implementation of a road safety 2\. Approximately 50 km of sidewalks have action plan for the Dakar, Thiès, and Kaolack been repaired or constructed\. In addition, areas, including inter alia: (i) management of fences, footbridges, and pedestrian crossings accident-prone junctions identified as traffic have been installed to improve safety\. Works accident hot-spots; (ii) improvement of road also included installing traffic lights and infrastructure, inter alia, through construction lighting of the major thoroughfares in Dakar\. of pedestrian sidewalks, pedestrian bridges At places where people congregate, speed over roads with heavy traffic, installation of bumps, medians and other safety measures have upright and surface signing, lighting, and been installed to slow traffic and improve markings, installation of speed-reducing security\. Safety awareness campaigns have devices at busy locations such as schools and been organized in schools and on the radio\. hospitals, protection of non-motorized traffic through the construction of paths separated from motorized traffic, construction of road median dividers; and (iii) carrying out awareness campaigns aimed at transport users and operators about road safety and the provision of training of traffic police\. 3\. Development and implementation of traffic 3\. Several terminals for busses and mini-buses management strategies to make better use of have been upgraded and equipped with signs\. A existing facilities for movement of persons and number of new stations have been installed in goods including: (i) construction and the outlying suburbs\. Several rail way stations, management support of terminals for mass including the one at Rufisque, have been transit vehicles and road-rail feeder stations at upgraded\. Two railroad feeder stations have selected urban locations; (ii) construction of been constructed and equipped with parking bus stop areas to enable mass transit vehicles to areas for taxies, and overpasses for vehicles and load and unload passengers safely; (iii) pedestrians\. A dynamic version of the urban construction of road terminals for mass transit mobility plan for the Dakar area has been vehicles at selected urban areas; (iv) prepared by CETUD\. The plan is being used to construction of stations on the outskirts of monitor traffic flows and pollution\. Dakar to alleviate downtown congestion from interurban traffic and heavy vehicles; (v) construction of taxi terminals and parking facilities; (vi) preparation of an Urban Mobility Plan for Dakar area (Plan de Déplacement dans l'Agglomération de Dakar) for inter-modal transport, urban planning, and housing, including the purchase of mapping equipment; 18  and (vii) preparation of a plan to increase public transport services commercial speed\. 4\. Provision of technical advisory services for 4\. Studies have been undertaken to analyze the implementation of engineering studies, and traffic flows, vehicle speed, public transport supervision works\. fares, speed of public transport and other vehicles on major roads, time-lost-in-traffic, pollution, evolution of vehicular and pedestrian traffic, and accidents\. Part B: Pedestrian Movement and Traffic Outputs Security along the Suburban Railway Line: 1\. Upgrading of suburban railway 1\. The following upgrading has been achieved: infrastructure through, inter alia,: (i) (i) the third track between Hann and Fass Mbao construction of a third track between the has been constructed; (ii) a wall or fence has localities of Hann and Fass Mbao; (ii) fencing been constructed on both sides of the rails of the railway right-of-way between Cyrnos between Dakar and Rufisque, a length of 24 and Fass Mbao (24 kilometers) as well as in kilometers, as well as 13 footbridges; (iii) only densely-populated areas such as Mbao and one of the four overpasses has been built; only Rufisque and construction of about 15 two of the most-trafficked railroad-level grade footbridges; (iii) elimination of the most- crossings have been repaired; (iv) the freight trafficked railroad-level grade crossings terminal has been transferred/constructed at Bel through construction of four overpasses and Air but can not be used because access roads underpasses in Hann, Marché aux Poissons, have not been built; (v) a few signaling systems Thiaroye, and Rufisque, and the improvement have been rehabilitated; (vi) the Dakar station is of other level grade crossings between Dakar no longer used for rail travel since June 2006 (it and Rufisque; (iv) transfer of the freight is to be converted into a cultural center); the terminal from its present location in Dakar station of Rufisque has been rehabilitated; and center to a new location in Bel Air; (v) (vii) studies have been undertaken and the work rehabilitation of the signaling between Dakar has been supervised\. and Rufisque; (vi) rehabilitation of the central railway station of Dakar and the railway station of Rufisque; and (vii) implementation of studies, engineering, and supervision tasks related to the activities described above\. 2\. Acquisition of technical advisory services 2\. Studies for the concessions of the suburban required for implementing the process of railway line have been done\. Concessioning was concessioning of suburban railway services postponed with Bank agreement to allow for a including, pre-selection of potential strategic full implementation of the upgrading program\. shareholders in the concession company, preparation of Requests for Technical Proposals, preparation of Requests for Financial Proposals, evaluation of technical and financial proposals, and supervision of the implementation of the concession\. 3\. Technical and engineering advisory services 3\. Provision of technical advisory services have been provided\. including studies, engineering, and supervision tasks in connection with the activities carried out under 1 and 2 above\. 19  Part C: Leasing: Outputs 1\. Implementation of a leasing mechanism 1\. The leasing mechanism has been established, necessary for the renovation of mass transit CR operators have organized themselves in vehicles (Car Rapides - CR), including inter economic groups and they have established a alia support to strengthen the technical and savings and association to handle lease and management capacity of the mass transit insurance payments\. About 17% of the CR fleet vehicle operators and their professionalization\. is participating in the scheme\. 2\. Provision of financing to enable mass transit 2\. The Credit has been used to finance the private operators to have access to credit procurement of 505 mini-buses\. Operators facility to renew their fleet, and acquisition by decided to lease only new vehicles\. The the Association de Financement (AF) of reimbursement rate was 100 percent at closing\. approximately 300 new vehicles or 600 rehabilitated and refurbished vehicles which meet safety and toxic emissions standards, for leasing\. Part D: Urban Air Quality Management: Outputs Carrying out a program of actions aimed at Action programs have been conducted to create improving air quality in the Dakar metropolitan awareness of pollution from traffic, including area including: (i) construction of three from unleaded gas, and of the associated health automobile monitoring centers: the Diamniadio issues: (i) only one automobile station at Ex- pilot station, the Keur Massar station, and the TPSOM is in the planning stage, the site has Ex-TPSOM station; (ii) establishing an been acquired; (ii) the observatory has been observatory to track urban pollution; (iii) established at the Ministry of the Environment; support for the introduction and supervision of (iii) the action plan has been prepared and an urban air quality action plan including, but unleaded gasoline has been introduced; (iv) a not limited to, the gradual introduction of few awareness campaigns have been conducted, unleaded gasoline, support for decentralization and consultations with road users and the of some administrative centers to the outskirts transport industry are being held as part of the of the city, public awareness campaigns CETUD's plenary meetings\. targeting users and sector specialists (e\.g\., automobile and fuel distributors), and a toxic emissions control program for motorized vehicles; and (iv) awareness campaigns and consultation meetings with road users and the transport industry, including the fuel dealers\. Part E: Capacity-Building and Institutional Outputs Strengthening: 1\. Strengthening of sectoral capacity with 1\. The capacity for reducing air pollution has regard to addressing air pollution, road safety, been created with the establishment of the inter-modal policy and promotion of mass observatory\. Capacity for addressing road transport, urban planning, and tools and safety, intermodal policy, and promotion of techniques for evaluating performance and mass transport has been created within CETUD\. supervising the project, through the provision Technical assistance for the evaluation and of technical advisory services and training\. supervision of project activities and programs has been provided\. 20  2\. Carrying out ad-hoc studies and assessments 2\. Studies on urban transport, pollution, urban of urban transport, air pollution, urban planning, and to some extent land use have been planning, consistent with the Dakar's growth carried out\. and land-use master plan, as well as feasibility studies to prepare the second phase of the program\. 3\. Carrying out of sectoral institutional reform 3\. Studies analyzing the role and mandates of and support CETUD in its capacity as project CETUD and the government-owned bus and rail executing agency and regulatory authority for companies have been done\. urban transport in the Dakar metropolitan area\. 21  Annex 3\. Economic and Financial Analysis Etude D'Analyse de L'Impact Economique des projets D'Infrastructure Routières du PAMU, Rapport Final Consultant: Ibrahima Ndiaye, Economiste des Transports, Septembre 2008\. 1\. Cost-Benefit at Appraisal and Closing\. The economic analysis at appraisal examined the cost-benefit of without and with the project investments for: (1) the road rehabilitation ­ specifically: (a) the benefits of cost savings resulting from improvements in the transport system; and (b) improvements in health from reduced pollution; (2) the leasing scheme ­ specifically: (a) the value of improved passenger safety; and (b) the actual payments by operators; and (3) the pedestrian and traffic safety along the suburban railway\. 2\. The Economic Rate of Return (ERR)\. At appraisal, the ERR of the road rehabilitation component was estimated at 37 percent\. At closing, the ERR of the urban infrastructure investment under PAMU was equal to, or better than, 67 percent except in one US$800,000 investment in Petit Mbao where it was only 9 percent (small portion with low traffic but high social impact) according to the consultant's economic analysis using the RED model)\. 3\. Benefits from Reduced Accidents\. At appraisal, 10 percent reduction in accidents - specifically from reduced deaths and injuries - and 20 percent in damage to cars from accidents was estimated to have a Net Present Value (NPV) of US$7\.58million at a 12 percent discount rate\. A full calculation of NPV was not done for the ICR\. However, at closing, the costs incurred from injuries and deaths between 1997 and 2007 were estimated to have decreased by 26\.8 percent, or almost 3 times the estimate of 10 percent used to calculate the NPV at appraisal, indicating a substantially higher actual NPV\. 4\. Benefits from Reduced Congestion\. At appraisal it was estimated that people in vehicles were losing 1\.02 million hours as a result of congested roads\. Based on this estimate, the benefits from reducing the average travel time in Dakar by 5 percent - at half the value of the average hourly wage of FCFA246 - resulted in a NPV of US$39\.6 million at a 12 percent discount rate\. At closing, the consultant estimated that the cost of congestion had decreased from FCFA172\.9 million in 2004 to FCFA142\.9 million in 2008, but cost of congestion baseline data was estimated to CFAF108 million for 1998\. However, the benefit can not be compared to the appraisal estimate as it used different parameters\. Similarly, at appraisal the benefits from reduced vehicle operating cost, based on reduced travel time, and maintenance and repair costs, assuming a one percent reduction in operating costs at the end of the project (2004), produced an NPV of US$21\.65 million at a 12 percent discount rate\. However, the consultants did not come up with either a confirmation of this estimate or a new calculation of benefits from reduced vehicle operation cost\. 22  5\. Other Improvements in Efficiency\. Among the project objectives was to keep public transport affordable for the poor\. The affordability of public transport and the ability to pay would be monitored\. A study of the leasing scheme, financed by the Bank1 reports that although the fares for CRs increased by 10 percent in 2005, the services of the new CRs, which issue color coded tickets identifying the stages the passenger paid for, are cheaper for most journeys\. Fares have been kept low through negotiations by CETUD and range from FCFA100 minimum to FCFA240 maximum for a trip from the center to Diamniado\. Although the price of fuel has increased and the operators want a FCFA25 increase per stage, the Government has not yet agreed and CETUD is reviewing the rate structure at this time\. 6\. Technical and Social Efficiency Impacts\. The project used only simple low- technology measures such as traffic lights, markings, sidewalks, and food bridges based on experiences with the Sub-Saharan Africa Transport Policy Program (SSATP)\. These benefits have not been quantified\. However, while the key performance indicators and other assessments of these measures show a positive impact on mobility, the consultant's economic analysis noted problems with the functioning of traffic lights, drainage on low- lying roads, and posters on traffic signs\. These problems, if not resolved, could lower the gains in mobility\. Municipalities responsible for maintenance do periodic cleaning of roads and sidewalks, but seem to lack capacity or funds to maintain traffic lights and signs\. The project improved access to markets, schools, and places of employment, as well as road safety for the poor, especially women\. The evidence for this is the increase in the share of public transportation especially by CRs and buses at affordable costs\. 7\. Environmental Impact\. The project had a positive impact on the environment\. Flora and fauna were protected during construction and afterwards\. Trees, plants and grasses have been planted along some of the strategic thoroughfares upgraded under the project\. Environmental standards had been included and enforced in works contracts\. On the other hand, pollution from the mines and cement factory has not been reduced by using new and sealed freight cars, as dust and powder leaking from trains continue to pollute the air and the tracks used by the suburban railway\. Although some (illegal) structures were taken down when the wall was built along the railway right-of-way and for a few urban roads, resettlement was done in accordance with OP 4\.12\. Where justified, people and businesses have been compensated\. Finally, the rehabilitation of the Rufisque station was done in accordance with the Bank's policy on Cultural Heritage (OP 4\.11)\. 1Dakar Bus Financing Study, IBIS ­ Transport Consultants, Final Report, June 2008\. 23  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending Supervision/ICR Christian Diou Sr\. Municipal Engineer AFTU2 TTL Brahim Ould Abdelwedoud Municipal Engineer AFTU2 Road component Karim-Jacques Budin Sr\. Railway Consultant MNSSD PTB component Bourama Diaite Sr Procurement Spec\. AFTPC Procurement Saidou Diop Financial Management Specialist AFTFM Financial Management Yvette Laure Djachechi Sr\. Social Development Specialist AFTCS Safeguards Osval Rocha Andrade Romao Financial Management Specialist AFTFM Financial Management Fily Sissoko Sr Financial Management Specialist LCSFM Financial Management Claude P\. Sorel Consultant AFTU2 Leasing component (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No\. of staff weeks USD Thousands (including travel and consultant costs) Lending FY99 76\.10 FY00 52 175\.56 FY01 0\.00 FY02 0\.00 FY03 0\.00 FY04 0\.00 FY05 0\.00 FY06 0\.00 FY07 0\.00 FY08 0\.00 Total: 52 251\.66 Supervision/ICR FY99 0\.00 FY00 0\.00 FY01 19 71\.22 FY02 21 154\.76 FY03 25 129\.26 FY04 33 133\.88 24  FY05 20 82\.89 FY06 16 97\.40 FY07 12 89\.13 FY08 10 58\.09 FY09 1 0\.00 Total: 157 816\.63 25  Annex 5\. Beneficiary Survey Results English Summary of two articles from the Newspaper "SOLEIL" of February 10, 2006 concerning the new mini-buses (Car Rapides) introduced under PAMU's Lease scheme\. A conductor interviewed by the reporter states that passengers now purchase tickets that correspond to their trip and then sit down comfortably to be taken to their destination\. He also says that the drivers are no longer asked to bribe police since their permits and routes are regularized and the police have no reason to stop the (new) CRs\. He also says that the use of tickets makes it easier to settle with the owner at the end of the day\. The driver says that the new CR is much easier to drive and that he gets less tired than with the old CRs he used to drive\. A passenger expressed his satisfaction with the service of the new CRs, the use of tickets and fixed routes and would like to see all old CRs replaced with the new ones\. Another passenger also says that the new CRs are more comfortable and faster\. 26  Annex 6\. Stakeholder Workshop Report and Results NA\. 27  Annex 7\. Summary of Borrower's ICR I\. Project Description 1\. Political, Economic, Urban Mobility Status, Problems, and Institutional Context\. As part of the 1996 Letter of Sector Policy, the Government of Senegal initiated four reforms ­ institutional and regulatory, financial, public transport reform, and human resources development ­ to improve the transport system in Dakar\. It created CETUD in 1997, co-financed the Transport Reform and Capacity Building Technical Assistance Project, and beginning in 2001 - the Urban Mobility Improvement Project (PAMU)\. PAMU was to be financed by the Government, the Bank, AFD, and NDF at an estimated cost of US$ 157 million in two phases\. 2\. Project Objectives\. PAMU's long term objectives were: to improve the capacity of transport institutions; the engagement of stakeholders and investments; to develop private sector initiative; and improve the effectiveness of the government's services and infrastructure\. This was to be achieved by institutional, legal, financial, public transport reforms, and human resources development\. In the short-term, PAMU was to: improve the safety, efficiency, and environmental quality of urban mobility in the Dakar, with special attention paid to improving mobility for the urban poor, by promoting public transport services and ensuring the safe movement of pedestrians\. 3\. Project Components\. PAMU's five components were: (i) Road Infrastructure, Road Safety and Traffic Management; (ii) Pedestrians' Movement and Traffic Security along the Suburban Railway Line; (iii) Leasing; (iv) Urban Air Quality Management; and (v) Capacity-Building and Institutional Strengthening\. 4\. Project Implementation\. CETUD was made the implementing agency and signed management contracts with AATR and AGETIP for the road works and with SNCF for the suburban railway\. II\. Design, Implementation and Impact 5\. Assessment of the Project's Design\. The design was satisfactory and addressed the problems identified in sector policy\. The cost of the infrastructure works and the operating costs of CETUD were unfortunately underestimated and corrective measures had to be taken ­ increased Government's financing ­ to achieve the results\. 6\. Major Results Achieved by Component\. The results of the infrastructure works (Component 1) have been evaluated by an independent firm and the economic rate of return has been calculated by a consultant\. The consultant stated that overall mobility has improved substantially because of improved use of road infrastructure, investments in infrastructure, and the increased share and quality of public transport\. Infrastructure rehabilitation in the suburbs, for instance, in Keur Massar, has led to investments in housing\. Economic return on the 24 km of rehabilitated or constructed roads, 40 28  intersections, and 50 km of sidewalks is high, ranging from 160 percent to 75 percent for the five slices of work\. 7\. Other results include the leasing of 505 new minibuses through the PAMU scheme, despite initial delays\. Operators and passengers are pleased with the improvements in quality and services\. Environmental regulations have been enhanced in the transport sector, and the vehicle monitoring station, though delayed, is being planned\. Importantly, road safety has improved, substantially reducing accidents and death\. Returns would have been higher if the Government-financed works on the Baux Maraichers railway station had been completed, rather than halted for lack of funds\. ADF financed two intersections and roads around the port\. Unfortunately, traffic lights are out at most intersections due to poor maintenance\. Most of the work on the suburban railway line ­ 12 km of rails, 24 km of enclosing wall, and 15 overpasses ­ has been done but remains incomplete for lack of funds\. 8\. Project Coordination and Management\. CETUD's project management was globally satisfactory\. It had to deal with cost increases and poor preparation but these were addressed after the appointment of the Director for Administration and Finance\. 9\. Project Impact on Sector Policy and Poverty Alleviation\. Traffic flow has improved in Dakar as a result of the road works under PAMU\. Sector policies have been moved to center stage\. Improvements in the public bus company equipment and services have helped mobility\. III Assessment of the Role of the Bank, the Government, and Executing Agencies a\. Role of the Bank\. The Bank has financed about half of the cost and coordinated works financed by other donors\. The change in task management at mid-term was positive and supervision in general has helped to address implementation constraints\. b\. Role of the Government\. The Government has financed counterpart funds, additional infrastructure works (US$30 million), the deposit for the leasing scheme, and contributed to FDTU for maintenance\. It took additional efforts to improve mobility including ANOCI, PCRPE and the toll road Dakar-Diam Nadio\. The difficulties at the Treasury halted the work on the suburban railway and led to stop the works under implementation byt CETUD\. IV Economic and Financial Evaluation 10\. Project Costs\. Project costs increased by 52 percent to US$157 million\. The Government contribution increased from US$26 million to US$59 million; IDA's contribution grew from US$70 million to US$76 million; and that of ADF and FND grew from US$7 million to US$22 million\. The Government also undertook additional 29  infrastructure works to improve mobility\. Unfortunately it was unable to finance counterpart funds in 2007 and 2008\. 11\. Recurrent Costs\. The works on the classified roads will be transferred to AATR; works on local roads will be transferred to municipalities; and works on the suburban railway will be transferred to PTB\. These agencies will be responsible for recurrent maintenance costs\. 12\. Institutional Impact\. CETUD's continued policy and coordinating role are in danger as a result of the Government's financial crises\. V\. Sustainability of Project Outcomes\. 13\. The results of PAMU need to be safeguarded by an adequate system of maintenance, effective infrastructure management, and further training and improvements in the transport cadre\. To achieve this CETUD needs to be strengthened\. VI\. Conclusions 14\. The infrastructure and leasing scheme of PAMU have been achieved and led to improvements in mobility\. The air quality component has been delayed and that of the suburban railway has not been completed\. The Bank and the Government have done their part even though the lack of counterpart funds led to the incompleteness of the project\. Notwithstanding that, the project has globally responded to the expectations of the authorities\. 15\. CETUD has undertaken five surveys by consultants to measure the Key Performance Indicators\. The findings of each survey have been compared to the 2000 baseline values and the 3rd-year and 4th-year targets, respectively, after project effectiveness\. The findings have been used to decide if and what further improvements need to be undertaken\. 30  Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders In addition to the text in 7(b), AFD provided the following statements: "The PAMU is much more than a technical achievement\. It concerns the daily life of all inhabitants in Dakar and gives them a better access to the economic activities of the capital city\. The impact of the Project is likely to be important on the quality of life of the population, with regard to reduced travel time, increased safety and lower pollution\. Beyond these effects, the expected impact is economic\. The improvement of urban traffic management will ease the transport of people and goods, and will support the development of the economic activity as a whole\. Construction of the interchanges will contribute to meeting the PDOs only if various other actions supporting the urban transport sector are implemented\. Some of them were supported under the Project\. Further strengthening of public transport supply forms and their transformation in a global network integrating all public transport modes are needed for a better efficiency to benefit all users\. The Government confirmed, though the content of the approved Urban Transport Scheme, that priority should be given to the development of a system which should answer mobility needs of the population and answer to economic, social and environmental challenges of an area sheltering one quarter of the total population of Senegal\. Short term decisions by the Government to substantiate this priority are needed, like the confirmation of the location of the Dakar Railway Terminal in the center of the city to fully integrate cultural functions and accessibility to the site\." 31  Annex 9\. List of Supporting Documents 1\. Country Assistance Strategy (CAS), Report No\. 17269-SE, December 29,1997 2\. Development Credit Agreement (Urban Mobility Improvement Project) between Republic of Senegal and International Development Association, dated July 5, 2000, Credit Number 3354-SE 3\. Project Agreement (Urban Mobility Improvement Project), between International Development Association and Société Nationale de Chemin de Fer du Senegal, July 5, 2000, Credit Number 3354-SE 4\. Implementation Completion Report on a Credit in the Amount of US$6\.6 million (SDR4\.9 million) to the Republic of Senegal for an Urban Transport Reform and Capacity Building Technical Assistance Project, December 14, 2001, Urban and Water II, Country Department 14, Africa Region 5\. Quality of Supervision Report (QSA6) 6\. NDF Nordic Development Fund ­ Annual Report 2007 7\. A Methodology for Rapid Assessment of Rural Transport Services, Paul Starkey\. Sub-Saharan Africa Transport Policy Program, SSATP Working Paper No\.87-A, October 2007 8\. Roads Economic Decision Model Software User Guide & Case Studies, Rodrigo Archondo-Callao, Sub-Saharan Africa Transport Policy Program SSATP Working paper No\.78, Africa Region The World Bank, July 2004 9\. Memorandum of the President of the International Development Association to the Executive Directors on a Country Assistance Strategy of the World Bank Group for the Republic of Senegal, December 29, 1997 10\. "Dakar Bus Financing Study" ­ IBIS Transport Consultants, Final Report, June 2008 11\. République du Sénégal, Ministère des Infrastructures, Transports Terrestres et Transports Aériens\. Conseil Exécutif des Transports Urbains de Dakar (CETUD) ­ Programme d'Amélioration de la Mobilité Urbaine a Dakar (PAMU) ­ « Rapport d'Exécution aux 30 Septembre 2008 » Rapport présenté par le CETUD 12\. République du Sénégal, Ministère des Infrastructures, Transports Terrestres et Transports Aériens\. Conseil Exécutif des Transports Urbains de Dakar (CETUD) ­ Programme d'Amélioration de la Mobilité Urbaine a Dakar (PAMU) ­ « Composante 4 du PAMU : Gestion de la Qualité de l'Air : Mission de Supervision du FND, octobre 2008 13\. République du Sénégal, Ministère des Infrastructures, Transports Terrestres et Transports Aériens\. Conseil Exécutif des Transports Urbains de Dakar (CETUD) ­ Programme d'Amélioration de la Mobilité Urbaine a Dakar (PAMU)- «Une Etude sur les Perspectives de Développement de DDD et PTB » Rapport Final de Phase 2, SYSTRA-IDC, Mai 2008 14\. République du Sénégal, Ministère des Infrastructures, Transports Terrestres et Transports Aériens\. Conseil Exécutif des Transports Urbains de Dakar 32  (CETUD), « Mesures des Indicateurs de Performance du PAMU ­ Campagne de mai/juin 2008 ­ PAMU ­ Composante 5 ­ Crédit No3354/SE, Contrat notifie le 14 mai 2008, GMAT, Aout 2008 15\. République du Sénégal, Conseil Exécutif des Transports Urbains de Dakar, Programme d'Amélioration de la Mobilité Urbaine à Dakar (PAMU), «Etude d'Analyse de l'Impact Economique des Projets d'Infrastructures Routières du PAMU » Rapport Final, Consultant : Ibrahima Ndiaye, Economiste des Transports\. septembre 2008 16\. Evaluation Environnementale du Project d'Amélioration de la Mobilité Urbaine à Dakar, Conseil Exécutif des Transports Urbains de Dakar (CETUD), Tractebel, Development Engineering, mai 2000\. 33  IBRD 30877 17°30' 17°25' 17°20' SENEGAL ent Rebbeub oisemeussé URBAN MOBILITY IMPROVEMENT PROJECT P\.de NIAGA du Lac M Lake METROPOLITAN AREA OF DAKAR Mbeubeussé de Malika Youi MALIKA P\. de Reboisement Lake A T L A N T I C O C E A N GUÉDIAWAYE KEUR MASSAR Yoff Island YEUMBEUL CAMBÉRÈNE l l l l l l l l l l l l l l l l l l l l Ngor l P\. de Reboisement l l Island l TIAROYE-GARE l l YOFF l l de Mbao l NGALAP l l l l l l l P I K I N E l l l l NGOR l DIAMMAGUEUN l l l l 14°45' l l 14°45' l l l GRAND l l MÉDINA l l l l Pointe ll l l l l l l l l l l l l l l des l l l l l l l l l Almadies l l l l l l l l l l l l l l l Dakar-Yoff l THIAROYE-MER l l l l Airport l l l l GRAND l l l l l l YOFF l l l l l l l l l l l l OUAKAM Hann l l l Park MBAW l l l l l l l l l l l l Baie de Hann l HANN l l Airport l l l l l l l l URBAN AREAS l l l l ZONES URBAINES l l l l l l l l l Anse de INDUSTRIAL ZONE AND PORT l GRAND l Hann l l l l DAKAR RUFISQUE l QUARTIER INDUSTRIEL ET PORT l l l NIM- l l PARKS AND FORESTS MERMOZ ZATT l l BEL-AIR PARCS ET FORETS l INDUSTRIAL l ZONE l l HIGHWAYS l POINT E\. l KOLOBANE AUTOROUTE l l l l l l l MAIN ROADS l l l l ROUTE PRINCIPALE l l l l l SECONDARY ROADS UNIVERSITÉ l l l 17°30' DE DAKAR MÉDINA l l l ROUTE SECONDAIRE l l l GUELE l l l l l l RAILROADS TAPEE l Former l CHEMIN DE FER l l PORT l Spanish ALGERIA l l l RICE FIELDS Sahara l l RIZIERES l REBEUSSE l l l l l l Ocean l l ADMINISTRATIVE BOUNDARIES l l NIAYER Pointe de Dakar LIMITES ADMINISTRATIVES TIOKER MAURITANIA INTERNATIONAL BOUNDARIES (INSET) 14°40' 14°40' A n s e d e s Gorée FRONTIERES INTERNATIONALES Island M a d e l a i n e s DAKAR Atlantic This map was produced by the M A L I Map Design Unit of The World Bank\. DIAL The boundaries, colors,denominations Dakar DIOP and any other information shown on SENEGAL NIGER 0 1 2 3 4 5 Pointe Bernard this map do not imply, on the part of THE The World Bank Group, any judgment GAMBIA KILOMETERS BURKINA NIGERIA on the legalstatus of any territory,or GUINEA- FASO any endorsement or acceptance of GUINEA BISSAU such boundaries\. TOGO BENIN Cap Manuel GHANA CÔTE D'IVOIRE 17°25' 17°20' APRIL 2000

REVIEW

P086875

 Document of The World Bank Report No: ICR00002069 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-75960) ON A FIRST AND SECOND DEVELOPMENT POLICY LOANS IN THE AMOUNT OF US$ 15\.00 MILLION TO THE REPUBLIC OF NAMIBIA FOR A FIRST EDUCATION AND TRAINING SECTOR IMPROVEMENT PROGRAM January 26, 2012 Human Development Southern Africa 1 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2011) Currency Unit = Namibia Dollar (N$) N$6\.79= US$ 1\.00 FISCAL YEAR: April 1 – March 31 ABBREVIATIONS AND ACRONYMS ABET-LLL Adult Basic Education and Training; and Life-Long Learning ACTET Advisory Committee on Teacher Education and Training APCI Adjusted per capita income BETD Basic Education Teacher Diploma BoN Bank of Namibia CAS Country Assistance Strategy CBET Competency Based Education and Training CER Country Economic Report CIET Centre for Innovation, Entrepreneurship and Technology CIFA Country Integrated Fiduciary Assessment CMA Common Monetary Area COSDECs Community Skills Development Centers CPD Continuous Professional Development DPs Development Partners DPLs Development Policy Loans DVET Directorate of Vocational and Technical Education EC European Commission ECD Early Childhood Development EMIS Education Management Information System ETSIP Education and Training Sector Improvement Program GDP Gross Domestic Product GER Gross Enrolment Ratio GRN Government of the Republic of Namibia HAMU HIV/AIDS Management Unit HDI Human Development Index HIV/AIDS Human Immunodeficiency Virus/ Acquired Immunodeficiency Syndrome HRD Human Resources Development HRM Human Resources Management ICT Information and Communication Technology IMF International Monetary Fund ISC Industrial Skills Committee JAR Joint Annual Review KBE Knowledge-Based Economy KPIs Key Performance Indicators LLL Life-Long Learning MoE Ministry of Education MoF Ministry of Finance MGECW Ministry of Gender Equality and Child Welfare MTEF Medium Term Expenditure Framework MTR Midterm Review NEACB National Examination, Assessment and Certification Board NAMCOL Namibian College of Open Learning NCHE National Council for Higher Education NCRST National Commission on Research, Science, and Technology NDP National Development Plan NER Net Enrolment Ratio NGOs Nongovernmental Organizations NKIS National Knowledge and Innovation System NRSTF National Research, Science and Technology Fund NSFAS Namibia Students Financial Assistance Fund NTA Namibia Training Authority OVC Orphans and Vulnerable Children PAD Planning and Development Directorate PD Project Document PFM Public Finance Management PMRs Program Monitoring Reports PoN Polytechnic of Namibia QA Quality Assurance RACE Regional AIDS Committees for Education SACMEQ Southern Africa Consortium for Monitoring Education Quality SACU Southern Africa Customs Union SP-ETSIP Strategic Plan for Education and Training Sector Improvement Program SRN School Register of Needs UNAM University of Namibia VTCs Vocational Training Centers VET Vocational Education and Training Vice President: Obiageli Ezekwesili Country Director: Ruth Kagia Sector Manager: Peter Materu Task Team Leader: Margo Hoftijzer ICR Team Leader: Tazeen Fasih  Republic of Namibia First and Second Development Policy Loans in Support of the First Education and Training Sector Improvement Program (ETSIP) CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Program Performance in ISRs H\. Restructuring 1\. Program Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 4 3\. Assessment of Outcomes \. 15 4\. Assessment of Risk to Development Outcome \. 21 5\. Assessment of Bank and Borrower Performance \. 22 6\. Lessons Learned \. 26 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 28 Annex 1: DPL Policy Matrix\. 29 Annex 2: Bank Lending and Implementation Support/Supervision Processes \. 33 Annex 3: Beneficiary Survey Results\. 35 Annex 4: Stakeholder Workshop Report and Results \. 36 Annex 5: Summary of Borrower's ICR and/or Comments on Draft ICR \. 37 Annex 6: Comments of Cofinanciers and Other Partners/Stakeholders \. 50 Annex 7: List of Supporting Documents \. 51 MAP A\. Basic Information Program 1 Education and Training Country Namibia Program Name Sector Improvement Program - ETSIP Program ID P086875 L/C/TF Number(s) IBRD-74470 ICR Date 12/22/2011 ICR Type Core ICR GOVT OF THE Lending Instrument DPL Borrower REPUBLIC OF NAMIBIA Original Total USD 7\.50M Disbursed Amount USD 7\.50M Commitment Implementing Agencies Ministry of Education Cofinanciers and Other External Partners Program 2 Support of ETSIP 1 Country Namibia Program Name DPL 2 Program ID P109333 L/C/TF Number(s) IBRD-75960 ICR Date 12/22/2011 ICR Type Core ICR GOVERNMENT OF Lending Instrument DPL Borrower THE REPUBLIC OF NAMIBIA Original Total USD 7\.50M Disbursed Amount USD 7\.50M Commitment Implementing Agencies Ministry of Education Cofinanciers and Other External Partners B\. Key Dates Education and Training Sector Improvement Program - ETSIP - P086875 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 07/25/2005 Effectiveness: 12/20/2007 12/20/2007 Appraisal: 02/27/2007 Restructuring(s): Approval: 05/24/2007 Mid-term Review: Closing: 12/31/2008 12/31/2008 Support of ETSIP 1 DPL 2 - P109333 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 04/02/2008 Effectiveness: 12/16/2010 12/16/2010 Appraisal: 09/22/2008 Restructuring(s): Approval: 11/18/2008 Mid-term Review: Closing: 12/31/2009 06/30/2011 C\. Ratings Summary C\.1 Performance Rating by ICR Overall Program Rating Outcomes Moderately Satisfactory Risk to Development Outcome Moderate Bank Performance Moderately Unsatisfactory Borrower Performance Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Moderately Satisfactory Government: Not Applicable Moderately Implementing Quality of Supervision: Not Applicable Unsatisfactory Agency/Agencies: Overall Bank Moderately Overall Borrower Moderately Satisfactory Performance Unsatisfactory Performance C\.3 Quality at Entry and Implementation Performance Indicators Education and Training Sector Improvement Program - ETSIP - P086875 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Satisfactory Closing/Inactive status Support of ETSIP 1 DPL 2 - P109333 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time Yes None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Moderately Closing/Inactive status Satisfactory D\. Sector and Theme Codes Education and Training Sector Improvement Program - ETSIP - P086875 Original Actual Sector Code (as % of total Bank financing) General education sector 33 33 Primary education 12 12 Secondary education 33 33 Tertiary education 11 11 Vocational training 11 11 Theme Code (as % of total Bank financing) Administrative and civil service reform 16 16 Education for all 33 33 Education for the knowledge economy 17 17 HIV/AIDS 17 17 Improving labor markets 17 17 Support of ETSIP 1 DPL 2 - P109333 Original Actual Sector Code (as % of total Bank financing) Adult literacy/non-formal education 5 5 Primary education 5 5 Secondary education 40 40 Tertiary education 10 10 Vocational training 40 40 Theme Code (as % of total Bank financing) Education for all 50 50 Education for the knowledge economy 50 50 E\. Bank Staff Education and Training Sector Improvement Program - ETSIP - P086875 Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Hartwig Schafer Country Director: Ruth Kagia Ritva S\. Reinikka Sector Manager: Peter Nicolas Materu Dzingai B\. Mutumbuka Task Team Leader: Margo A\. Hoftijzer Mmantsetsa Marope ICR Team Leader: Tazeen Fasih ICR Primary Author: Tazeen Fasih Support of ETSIP 1 DPL 2 - P109333 Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Obiageli Katryn Ezekwesili Country Director: Ruth Kagia Ruth Kagia Sector Manager: Peter Nicolas Materu Christopher J\. Thomas Task Team Leader: Margo A\. Hoftijzer Mmantsetsa Marope ICR Team Leader: Tazeen Fasih ICR Primary Author: Tazeen Fasih F\. Results Framework Analysis Program Development Objectives (from Program Document) DPL2 supports the three pillars of ETSIP1 by reinforcing DPL1 efforts to develop: (i) specific policies, legal and financing frameworks that underpin planned sector reforms; (ii) specific systems and tools required to give effect to policies, legal and funding frameworks intended to improve education access, equity, quality, relevance and efficiency; (iii) specific institutional capacities that are critical for effective implementation of planned sector reforms\. Revised Program Development Objectives (as approved by original approving authority) Project Development Objectives were not revised\. (a) PDO Indicator(s) Education and Training Sector Improvement Program - ETSIP - P086875 Original Target Formally Actual Value Baseline Values (from Revised Achieved at Indicator Value approval Target Completion or documents) Values Target Years Pro-poor and development-relevant expansion of access to post-basic education and training\. Indicator 1 : Seven percentage point increase in grade 11 intake\. Value (quantitative or 16,977 18,208 17376 Qualitative) Date achieved 04/27/2007 12/31/2008 12/31/2008 Comments (incl\. % achievement) Indicator 2 : Proportion of new grade 11 places created in the poorest regions\. 60 percent of new Value places created in (quantitative or 0 percent 2008 should be in 60% Qualitative) the poorest regions\. Date achieved 04/27/2007 12/31/2008 12/31/2008 Comments (incl\. % achievement) Indicator 3 : Percentage point increase in OVCs that successfully complete grade 12\. Value A five percentage (quantitative or 0 percent point increase n/a Qualitative) should be realized\. Date achieved 04/27/2007 12/31/2008 06/30/2011 Comments (incl\. % This information was not collected by EMIS\. achievement) Indicator 4 : Increased pre-entry enrolment in mathematics, science and ICTs\. 150 students enrolled: 50 in Value each of the (quantitative or 0 percent 300 Mathematics, ICTs Qualitative) and Science pre- entry programs\. Date achieved 04/27/2007 12/31/2008 12/31/2008 Comments 100 students were enrolled in each Math, Science and ICTs making a total of (incl\. % 300 students and double the target\. achievement) Indicator 5 : 14 percentage point increase in grade 10 graduates who secure a VET place\. Value (quantitative or 3,000 3,990 21% increase Qualitative) Date achieved 04/27/2007 12/31/2008 12/31/2008 Comments (incl\. % achievement) Support of ETSIP 1 DPL 2 - P109333 Original Target Formally Actual Value Baseline Values (from Revised Achieved at Indicator Value approval Target Completion or documents) Values Target Years Indicator 1 : Percentage point change in Grade 11 intake Value (quantitative or 16977 7% increase 15\.7% Qualitative) Date achieved 12/29/2005 12/31/2008 06/30/2011 Comments enrollment in 2010 was 21054\. The % increase is estimated by taking G11 (incl\. % intake as a percent of population age 17 (pop\. projections, medium growth achievement) scenario) and estimating the percentage change over the 5 year period\. Indicator 2 : % annual change in VET intake Value (quantitative or 3011 14% increase 55\.7% Qualitative) Date achieved 12/30/2005 12/31/2008 06/30/2011 Comments (incl\. % Actual enrollment in 2010 was 4690 achievement) Proportion of new senior secondary education and training places created in the Indicator 3 : poorest regions Value (quantitative or 0 60% 60% Qualitative) Date achieved 12/30/2005 12/31/2008 12/31/2008 Comments The 60% value is given in the Project Document 2008, this value could not be (incl\. % verified by the ICR mission since the MoE said that they do not track student achievement) places created by level of education\. Enrollment in pre-entry: Mathematics; Physical Sciences; Biology; IDCL Indicator 4 : (ICT); English Value 106; 105; 105; 114; (quantitative or 0 50; 50; 50; 50; 50 106 Qualitative) Date achieved 12/30/2005 12/31/2008 06/30/2011 Comments (incl\. % achievement) % of children entering primary education with adequate levels of readiness for Indicator 5 : grade 1 Value (quantitative or 0 20% 16\.9% Qualitative) Date achieved 12/30/2005 12/31/2008 06/30/2011 Comments (incl\. % achievement) % of budget allocation for primary and secondary books and instructional Indicator 6 : materials (primary; secondary) Value (quantitative or 1%; 1% 5%; 5% 1\.3%; 3\.1% Qualitative) Date achieved 12/30/2005 12/31/2008 12/30/2010 Comments (incl\. % achievement) Indicator 7 : National Average SACMEQ test score (Reading; Mathematics) Value (quantitative or 449; 431 497; 473 Qualitative) Date achieved 12/30/2000 12/30/2009 Comments (incl\. % achievement) (b) Intermediate Outcome Indicator(s) Education and Training Sector Improvement Program - ETSIP - P086875 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Improved internal efficiency\. Indicator 1 : Grade 1 repetition rate\. Value (quantitative or 19\.6 16 21\.9% Qualitative) Date achieved 04/27/2007 12/31/2008 10/31/2008 Comments (incl\. % achievement) Indicator 2 : Grade 5 repetition rate\. Value (quantitative or 22\.1 19 25\.7% Qualitative) Date achieved 04/27/2007 12/31/2008 10/31/2008 Comments (incl\. % achievement) Indicator 3 : Grade 8 repetition rate\. Value (quantitative or 23\.1 20 24\.2% Qualitative) Date achieved 04/27/2007 12/31/2008 10/31/2008 Comments (incl\. % achievement) Indicator 4 : Average basic education repetition rate\. Value (quantitative or 15\.5 14 20% Qualitative) Date achieved 04/27/2007 12/31/2008 10/31/2008 Comments (incl\. % achievement) Indicator 5 : Grade 10 push-out rate\. Value (quantitative or 47 40 39% Qualitative) Date achieved 04/27/2007 12/31/2008 10/31/2008 Comments (incl\. % achievement) Support of ETSIP 1 DPL 2 - P109333 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Repetition rate grade 1 Value (quantitative or 19\.6% 16 20\.2% Qualitative) Date achieved 12/30/2005 12/30/2008 12/30/2010 Comments (incl\. % achievement) Indicator 2 : Repetition rate grade 5 Value (quantitative or 22\.1 20 22\.3 Qualitative) Date achieved 12/30/2005 12/30/2008 12/30/2010 Comments (incl\. % achievement) Indicator 3 : Repetition rate grade 8 Value (quantitative or 23\.1 19 26\.4 Qualitative) Date achieved 12/30/2005 12/30/2008 12/30/2010 Comments (incl\. % achievement) Indicator 4 : Average basic education repetition rate\. Value (quantitative or 15\.5% 15% 15\.4% Qualitative) Date achieved 04/27/2007 12/31/2008 06/30/2011 Comments (incl\. % achievement) Indicator 5 : Grade 10 pushout rate Value (quantitative or 47% 30% 32\.6% Qualitative) Date achieved 04/27/2007 12/31/2008 06/30/2011 Comments (incl\. % achievement) Indicator 6 : Primary Learner Teacher Ratio Value (quantitative or 31:1 32:1 29:1 Qualitative) Date achieved 04/27/2007 12/31/2008 06/30/2011 Comments (incl\. % achievement) Indicator 7 : Secondary Learner Teacher Ratio Value (quantitative or 25:1 26:1 24:1 Qualitative) Date achieved 04/27/2007 12/31/2008 06/30/2011 Comments (incl\. % achievement) G\. Ratings of Program Performance in ISRs Education and Training Sector Improvement Program - ETSIP - P086875 Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 01/28/2008 Satisfactory Satisfactory 0\.00 2 01/21/2009 Satisfactory Satisfactory 7\.50 Support of ETSIP 1 DPL 2 - P109333 Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 06/29/2009 Satisfactory Satisfactory 0\.00 2 12/23/2009 Satisfactory Satisfactory 0\.00 3 06/28/2010 Satisfactory Satisfactory 0\.00 4 03/26/2011 Moderately Satisfactory Satisfactory 0\.00 H\. Restructuring (if any) No restructuring was done for this project\. 1\. Program Context, Development Objectives and Design 1\. This Implementation Completion Results Report covers the implementation of a series of two programmatic Development Policy Loans supporting Namibia’s Education and Training Sector Improvement Program\. 1\.1 Context at Appraisal 2\. The centrality of education, skills development and competitiveness for the economic growth of Namibia has been long acknowledged by the Government of the Republic of Namibia and remains central in the policies for national development of the country\. The World Bank started supporting analytical work in the education sector in Namibia to identify the key bottlenecks in skills formation for competitiveness of the economy in the early 2000s\. The Government of the Republic of Namibia formulated the Education and Training Sector Improvement Program (ETSIP) with the support of the World Bank and other Development Partners with the aim to strengthen the quality, efficiency and effectiveness of the education and training system\. ETSIP provided the platform for comprehensive institutional and policy actions in the education and training sector\. Background 3\. Government policies and programs aiming at including previously disadvantaged citizens in Namibia’s economic activities seemed to have a certain degree of success\. Income inequality declined: between 1993/94 and 2003/04 the proportion of poor households1 declined from 38 to 28 percent, and the extremely poor households2 declined from 9 to 4 percent\. Income per capita increased from US$ 2,370 (2005 est\.) to US$ 3,861 estimated in 2008\.3 However, the income share held by the highest quintile was 78\.7 percent, relative to 1\.4 percent for the lowest quintile (2007 est\.)\.4 Poverty was more pervasive in the rural northern and north eastern regions which held 52 percent of households, 60 percent of the population, and a high proportion of female-headed households (which tend to be worst off in terms of food poverty) (NHIES 2003-04)\. A sign of deteriorating poverty was the decline in Human Development Index from 0\.734 in 1966 to 0\.607 in 2004, partially because of the fall in life expectancy at birth from 61 in 1991 to 41 in 2005\. Also, worrisome was the high youth (aged 15 to 19) unemployment rate, estimated to be 64\.6 percent in 2004\. 4\. In 1998 the then President of Namibia instructed the Cabinet to propose a long- term vision for the country’s development\. The review process of the performance of the main sectors of the economy led to the formulation of Vision 2030, which set up a framework for long-term development\. The vision of the country was one of a knowledge 1 Based on the Namibia Household Income and Expenditure Surveys (NHIES) 2 Households spending more than 80% of their income on food 3 IMF (2008) Staff report for the 2007 Article IV Consultation\. 4 IMF (2008) Staff Report for the 2007 Article IV Consultation 1 based society, creating new technologies as driven by a responsive and flexible general education and training system, supported by enabling regulatory and institutional framework\. 5\. To be able to encourage the development and application of Knowledge and Information (K&I) technologies the country needed to raise the quality of middle and high level skilled labor\. The training system needed to be flexible, sustained by an equitable general education system of good quality and efficiency\. But the productivity growth of the country was still hampered by an acute shortage of skilled workers at various levels of training\. Namibia’s education, training and skills development sector was not able to produce the right quality of skilled and technical labor required to facilitate knowledge- and technology intensive production\. Key impediments included poor quality, internal and external inefficiency, inequality in the distribution of education inputs, and limited access to secondary and vocational education\. 6\. The Ministry of Education requested Bank assistance in carrying out the basic analytical work required to define a) the areas where the education system was failing to respond to the priority actions necessary to meet the socio-economic objectives of the Vision 2030, b) the main education issues negatively affecting the education system per se, and c) the remedial measures to be taken\. To address key education sector weaknesses identified in the analysis, the Government developed a 15-year Strategic Plan for Education and Training Sector Improvement Program (SP-ETSIP 2005-2020) to be implemented in three 5-year programs (ETSIP1, 2, 3)\. ETSIP was developed with substantial Bank technical support and in collaboration with 13 international DPs\. A MoU signed on June 28, 2007 outlined the partnership framework\. The World Bank was instrumental in bringing together the DPs\. As early as 2005, the MoE had requested the World Bank and the UN to convene a fund raising roundtable for the ETSIP where the DPs were invited\. Therefore, Bank technical support managed to leverage a total of US$ 406\.9 million external program funding —US$ 371\.9 million in grants and US$ 35 million in loans, of which US$ 15 million was from IBRD in the form of DPL1 and DPL2\. 7\. ETSIP1 was launched in 2006 with the global objectives of i) strengthening quality, effectiveness and efficiency of the system, ii) strengthening the immediate supply of middle to high level skilled labor and, iii) strengthening the policy, legal and institutional set up of the system\. 8\. IBRD financing was delivered through two single-tranche DPLs of US$ 7\.5 million each, totaling US$ 15 million for a program whose total cost was estimated as US$ 488 million\. The first DPL was approved on May 24, 2007, and the second on November 18, 2008\. DPL1 was the first lending instrument to Namibia in support of the first implementation phase of the GRN’s sector reform program (ETSIP 1)\. 1\.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 2 9\. The DPL1 supported the development of: (i) specific policies and policy instruments to guide and give effect to planned sector reforms; (ii) legal instruments to enforce policy implementation; and (iii) institutional capacities required for effective implementation of planned sector reforms\. 10\. DPL2 supported the three pillars of ETSIP1 by reinforcing DPL1 efforts to develop: (i) specific policies, legal and financing frameworks that underpin planned sector reforms; (ii) specific systems and tools required to give effect to policies, legal and funding frameworks intended to improve education access, equity, quality, relevance and efficiency; (iii) specific institutional capacities that are critical for effective implementation of planned sector reforms\. 11\. The single tranche annual series of 2 DPLs supported the above mentioned key objectives of ETSIP1\. A large number of indicators were identified as outcome/output indicators\. These are given in Appendix A\. Table 2 (section 2\.1 below) gives the progress achieved during the DPL period for some of the key indicators\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification 12\. The PDOs were not revised\. 1\.4 Original Policy Areas Supported by the Program (as approved) 13\. Though the ETSIP1 program was subdivided into subprograms for ease of implementation, DPL1 and DPL2 supported the three pillars of ETSIP1 by targeting five main policy areas that were cross cutting across the sub-programs: i\. Equitable expansion of access to post-basic education and training 14\. The sector improvement program, ETSIP1 planned to prioritize supply of middle- to high-level skilled labor by expanding access to post-basic education and training\. A particular focus was underserved and poor regions of the country\. This was planned through more efficient use of existing systems of secondary education by increasing class size to a more optimal level (no more than 35 students per class), better organized scheduling, and extending good performing senior secondary schools\. Construction of new senior secondary schools was also planned by the government\. The preparation of DPL2 included a plan for stepping up the expansion of senior secondary school and VET places\. In addition a quota system for allocating new places for children from low income households was piloted\. ii\. Improving education quality, and equity of learning outcomes 15\. The main objective under this policy was to improve the education quality and effectiveness\. The government planned specific actions at various levels of the sector\. This included revision of curricula to facilitate holistic development, articulation of 3 competencies at various levels for adequate learner readiness, teacher pre-service and in- service training, improved assessment tools, performance targets for schools and school management, and competency-based education and training for vocational education and training\. iii\. Eradicating inequalities in the distribution of resources 16\. The overall policy outlook of ETSIP1 was pro-poor\. The main objective under this policy area was to support pro-poor expansion to access to education at all levels, through input norms for all schools and VTCs, normative per capita financing for schools plus conditional grants to schools that do not meet the norms; in addition, through provision of adult education and training programs for currently neglected areas, as well as conditional grants for orphans and vulnerable children (OVCs)\. iv\. Improving efficiency in resource mobilization and utilization 17\. The aim was to improve efficiency of resources allocated by improving quality (reduce internal inefficiency) and by improving learner-teacher ratio, restructuring of teacher salaries and implementation of staffing norms in all institutions\. v\. Strengthening institutional and management capacity (also described as strengthening delivery capacity and the sector’s response to HIV/AIDS in DPL2 Project Document) 18\. Strengthening delivery capacity and management in education is one of the key policy objectives in ETSP1\. The DPLs aimed to support comprehensive assessment of capacity including lower levels of service delivery\. It also aimed to support the establishment of critical institutions vital for implementing the ETSIP1\. 1\.5 Revised Policy Areas (if applicable) 19\. Policy areas were not revised\. 1\.6 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) 20\. MOE decided to extend the duration of Phase 1 of ETSIP by two years to align it to the National Development Plan 3 timeframe and to the funding cycle of Development Partners\. 2\. Key Factors Affecting Implementation and Outcomes 21\. Implementation of the DPL series was adversely affected by delayed disbursement of the second DPL\. The first DPL was signed and disbursed per the schedule defined during project preparation\. For the second DPL, however, there was a 23 month delay prior to the signing of the loan agreement\. Some apparent reasons for this 4 include concerns by the Government of the Republic of Namibia regarding the negative pledge clause which is a standard condition of all IBRD loan agreements\. The borrower wanted to better understand the implications of the negative pledge clause for Namibia\. Secondly, legal and procurement issues delayed and ultimately prevented reaching agreement on a fee-based service agreement (FBSA) between the Government of the Republic of Namibia and the World Bank which was intended to be a part of the Bank’s engagement in the sector along with the DPL\. The issues around the FBSA were raised during negotiations of the second DPL and continued to be discussed between the GRN and the World Bank until signing of the loan\. For Namibia as a country borrowing for the first time from the World Bank, lack of familiarity with World Bank operational procedures appears to have contributed to misunderstandings and perhaps a lack of trust\. At the same time, the lack of a permanent World Bank presence in Namibia made it more difficult to resolve misunderstandings that arose during the period\. Consequently, over a period of 23 months a number of meetings were held between the officials from Namibia the World Bank Education team and the legal team from the World Bank\. Eventually, an internal agreement was reached within the Government of the Republic of Namibia upon which the legal agreement was signed on Sept\. 17, 2010\. While Government implementation of ETSIP continued throughout this period, in the absence of the FBSA the Bank team was not able to provide the expected level of technical support for ETSIP implementation\. 2\.1 Program Performance (supported by a table derived from a policy matrix) 22\. Overall the ETSIP1 program which was supported by the two DPLs from the World Bank along with 13 donor partners and the Government of the Republic of Namibia has achieved some moderate progress\. The achievements are more evident in i) adoption of new policies, ii) creation of new bodies, to rationalize sectors and improve their efficiencies, iii) curricula development, to introduce new subjects and take into account new educational learning profiles, iv) training activities, in view of the revised curricula, to comply with the needs to upgrade the knowledge level of school administrators, teachers and supervisors, and to raise awareness on some important topics, v) studies, leading to new actions, improved external efficiency, and better assessment of existing programs and, vi) provision of teaching/learning materials, advocacy materials, construction of schools, and various equipment\. When looking at the progress across sub- sectors in the program from 2006 to 2011, some attained most of their objectives (e\.g\. ECD/PPE), some others lagged behind (e\.g\. CD)\. Achievements addressed, in various measures, quality and access, but seem to have had a lesser impact on equity and efficiency\. 23\. In terms of the specific policy areas under ETSIP1 that were supported by the two DPLs, significant progress was seen during the first DPL\. In particular, the first DPL and the analytical work that preceded it developed a strong momentum around the need for reforms\. Within the first year of the DPL a number of policy reforms and cabinet approvals had already been initiated\. These included cabinet approvals for policy to 5 introduce grade 5 and 7 standardized diagnostic tests5, sector specific ICT policy, sector specific HIV/AIDS policy, VET bill and legislation on the National Council for Higher Education\. Improvements in enrolments in VET institutions as well as Grade 11 intake were seen as well\. 24\. The prior actions and triggers for DPL2 were completed on time as well\. Additionally, some progress was also seen on the equity of provision of education and training\. Almost 60% of the new secondary school places were created in the disadvantaged regions, enrollment in VET was increased for the students from the 7 disadvantaged regions of the country and the country had started a process for introducing per capita financing for both equity and efficiency in the education system\. Private schools were being provided subsidies based on a separate formula worked out for private schools\. However, for public schools, the formula was approved but has not yet been implemented\. 25\. During the 23 months period when the loan was approved by the World Bank Board of Governors and the signing of the loan, progress in ETSIP1 continued with GRN funding and support of some development partners and contributions from the Namibian private sector\. 26\. As mentioned above, in some areas of reforms the progress was much faster than in others\. But the pace of the reform, overall, appears to have reduced slightly compared to the first year of the DPL\. However, this can be attributed to the fact that the period of the first DPL was associated with introduction of new policies legislations and bills and with cabinet and Parliament approvals of these\. Since the political will was strong at the time, these policies were formulated and adopted relatively quickly\. The implementation process however, took much longer than anticipated\. This might also be attributed to the non operationalization of systems meant to bring about expected quality and equity changes\. Table 1: Prior Actions and Triggers for the two DPLs Policy area DPL1 Status Equitable Adoption of action plan that enables a 7 Completed expansion of percentage point increase in G11 intake access to post- Agreed and feasible plan for increasing Completed basic education university intake in pre-entry maths\. science, and training and ICT programs Cabinet approval of policy to introduce Completed Improvement of standardized diagnostic tests for G5 and G7 education quality Adoption of plan to enable a 5 percentage Completed and effectiveness point increase in budget allocation for primary and secondary school books and instructional 5 Initially intended for grades 5 and 8\. 6  materials Cabinet approval of a sector ICT policy Completed Eradication of MOE agreement to introduce a policy on per Approved by Cabinet inequalities in capita funding for primary and secondary in Sept 2008 distribution of schools education resource inputs Improved Agreed operational plan for reducing Completed efficiency in repetition, drop-outs, push-outs and for resource increasing LTR in general education mobilization and utilization Cabinet approval of a sector policy on Completed HIV/AIDS Strengthen Cabinet approval of the new VET Bill to Completed delivery capacity allow for the establishment of NTA and response to Adoption of legislation for the establishment Completed HIV/AIDS of NCHE and its secretariat Cabinet approval of transfer of PP education Completed from MGECW to MOE DPL2 Status Equitable Commencement of pre-entry programs Completed expansion of On 24 March, 2008, delivered by NAMCOL access to post- at the Windhoek and Ongwediwa campuses basic education and training Approval of revised lower primary curriculum Completed Improvement of by NAECB and implementation by schools education quality Cabinet approval of textbook policy Completed and effectiveness Assignment of performance targets for each Completed school Establishment and maintenance of a school In progress Eradication of register of needs inequalities in A new formula for determining applicable Completed distribution of levels of subsidies to private schools approved education by the Cabinet and the Cabinet approves the resource inputs phased withdrawal of current subsidies Improved Teacher salary increments de-linked from Completed (incentive efficiency in unnecessary and irrelevant qualifications and now in the form of resource linked to their performance once off bonus rather mobilization and than salary utilization increments) 27\. Details of the progress made under each pillar are given below: Policy Area 1: Equitable expansion of access to post-basic education and training 7 28\. The equity issues in post basic education enrollment had started to be addressed very early in the life of the DPL series\. During the first year of the program a total of 100 new classrooms and one secondary school were constructed, thereby significantly increasing new places for students\. Based on the action plan adopted under DPL1, the government ensured that 60% of all new places were created in 7 most disadvantaged regions of the country\. The number of orphans and vulnerable children (OVCs) enrolled in secondary education increased\. As of 2010, 22\.4% of all students in grade 1-12 were OVCs\. 29\. The quota system for allocation of new places to children of low income households was piloted in 2008\. For now this is operating as a public-private partnership process\. The private schools receive subsidies from the government, provided they have at least 10% of their total enrollment as OVCs\. These schools face a penalty if OVC enrollment is less than 10%\. However, there is no systematic monitoring of the condition\. Certain private institutions provide scholarships to low income household children\. Additionally, quota system for distributing Grade 11 places has also been introduced and is in place\. However, it has been felt that the relocating of students in such cases sometimes creates extra financial burden for the low income families\. 30\. To increase access to enrollment in vocational training centers (VTC), the MoE had planned to “buyâ€? 2000 training places per year\. However, this intervention did not take place due to lack of funding\. At the same time, construction of 4 Community Skills Development Centers (COSDECs) was delayed\. Construction of the COSDECs is now underway, with support from Millennium Challenge Account (MCA)\.6 31\. An important action intended under the DPL was the attempt to boost quality output in science, mathematics and ICT\. The establishment of six secondary magnet (vision) schools in the poorest regions of the country was hoped to help attain this goal\. This action was delayed substantially, first to establish the feasibility of such an investment\. The construction of one such magnet school (now called Vision schools) has started in the Kavango region and is expected to be completed in 2013\. The reason given for only one school being built was lack of funding\. Also, the concept has evolved over time suggesting that some existing schools could become vision schools\. MOE has indicated it will take over funding of any future vision schools which suggests that no further funding from ETSIP will be needed\. 32\. In order to improve student readiness at entry, tertiary pre-entry programs were to be started for ICT, science and mathematics\. The initial target was 50 students in each program\. The enrollment was already at 100 students by the end of DPL1\. These are offered by Namibia College of Open Learning in two campuses: Windhoek and Oshakati (Oshana)\. Policy Area 2: Improvement of education quality and effectiveness 6 One of the Development Partners supporting ETSIP1\. 8 33\. A number of actions were envisioned under this policy area for all subsectors of the education system\. 34\. A major achievement under this area is the policy to introduce standardized assessment tests for grade 5 and grade 7 (initially proposed for grade 8)\.7 This has been fully achieved and implemented, where the assessment for grade 5 has been completed and for grade 7 was undertaken in 2010\. It is planned that the testing will be done for each grade in alternate years\. A specific division under the Directorate of National Assessments and Examination has been created that is responsible for these assessments\. 35\. The Government of the Republic of Namibia started re-orienting the education and training towards a competency based system under ETSIP1\. The National Institute for Educational Development (NIED) defined competencies that reflect school readiness for pre-primary education; lower and upper primary curriculum was revised on a similar basis and the new curriculum was approved by the National Examination Assessment Certification Board; and secondary education curriculum was also revised\. 36\. Competency Based Education and Training (CBET) was also introduced in Vocational Training Centers\. The Zambesi VTC was the first to introduce this approach\. The learners and trainers found it difficult to understand the concept of CBET and held strikes to resist the implementation\. However, the National Training Authority (NTA) held a number of meetings to clarify the value of such an approach and now the model is operating smoothly\. 37\. A number of other actions were also taken under this pillar\. These include, approval of ICT specific policy; provision of ICT equipment to 245 schools, 5 VTCs, 4 colleges of Education, 23 Teacher Resource Centers, 29 libraries and community centers and 13 COSDECS; mainstreaming of ICT in grade 8-12 mathematics, science and English curricula; and classroom support for the ICT teachers\. All these measures have been aimed at improving the learning of students at various levels of education\. 38\. For Early Childhood Development (ECD), a policy was approved by the cabinet in March 2008\. ECD curriculum has been developed, and training of ECD staff was undertaken, with exposure to international experiences including Malaysia and South Africa\. One shortcoming, though, has been the delay in development of the Namibian Holistic Index of Child Development\. And being dependent on the HICD, establishment of the system of competences and professional standards for ECD is still pending\. Key reason for this is the lack of consensus of what constitutes the HICD\. 39\. An important action under the pillar was the phased increase of 5% of the budget share for books and instructional materials relative to teacher salaries\. The action was 7 This activity was to a large extent supported by USAID 9 adopted in 2006, however, the target of 5% has still not been reached and remains at 1\.3% for primary education\. At the secondary education level, the target is much closer to being achieved at 3\.1% in 2009/2010\. 40\. The government under the Vocational Training Act (discussed in policy area 4 below) introduced a number of actions to improve the quality of technical and vocational education which included both the improvement in facilities and equipment as well as instructor training\. 41\. Despite these actions for improving the quality of education, the results appear to be disappointing\. The grade 8 repetition rate in 2010 has increased slightly over the 2008 rate at 26\.4%\. Similarly, the repetition rate for grade 1 and 5 remain much higher than the proposed targets (Table 2)\. The issue of quality of education remains a concern to both the Development Partners as well as the Minister of Education\. Although, with a rapid increase in enrollment in upper grades, the average quality is expected to reduce given the enrollment of the more marginalized students, it was however, anticipated that the comprehensive nature of ETSIP will counter any such problem Policy Area 3: Eradication of inequalities in distribution of education resource inputs 42\. Some of the actions mentioned under the preceding two pillars also contribute towards the objectives of this pillar\. Additionally, introduction of pro-poor pre-primary education has been attempted with first 100 pre-primary classrooms being started in the underprivileged regions\. 43\. A school register of needs is being established under the program to monitor the supply of inputs in the schools – though the process has been stalled for some time\. Once developed, it will be used to establish the norms of school inputs\. This activity has not been completed given its dependence on the school register of needs\. 44\. There is one action that has not been implemented yet, that is the per capita funding formula for primary and secondary education\. At the time of DPL1 the government had agreed to apply a new formula and initiated the necessary analytical work\. At present difficulties arise in choosing a formula mainly due to the population data that are a decade old\. Also, the calculation of unit costs is not finalized yet\. There are also some issues of compensation to regions and the per-capita funding formula has not been adopted but not yet implemented\. 45\. For FY 2009/2010 the recurrent budget has been transferred to the regions excluding the funds for salaries, which will be still paid centrally\. In terms of capital budget a per capita formula is in use for two components namely maintenance and nationwide renovation (of schools and hostels)\. 46\. Similarly, the funding formula for Vocational Education and Training (VET) has not been revised yet and the old system, which appears to be flawed, is still being used\. For both VET and TET funding formulas, analytical work is underway, but the decision 10 making process is taking longer than anticipated\. A payroll levy for firms and industries to contribute to the cost of training is being developed as well\. The design is well advanced and will be introduced soon\. Sector Skills Committees are aware of and in agreement with the concept of a training levy for cost sharing\. Policy Area 4: Improved efficiency in resource mobilization and utilization 47\. Government of the Republic of Namibia invested approximately 9% of GDP in education till the early 2000s\. The proportion of spending on education was reduced gradually and reached 6\.7% during mid-2000s\. Given the push for expansion of post- secondary education and training the allocation was again increased and it stood at almost 8% in 2008\. Additionally, the support from the DPs for ETSIP also increased\. However, the aim has been to reduce education expenditure once the basic infrastructure and other key inputs have been made\. The current total education expenditure stands at 8\.7% of GDP\.8 48\. Improving learner-teacher ratio was planned to improve efficiency in the system\. The MoE had to hold discussions with the teachers union to be able to agree on a higher LTR\. However, the current value suggests that the learner teacher ratio has actually decreased over time\. It is not clear whether this is a result of pressure from the teacher unions or not\. 49\. Similarly, the attempts to reduce grade 8 repetition rates and grade 10 push out rates did not bear fruit, and the current values are even higher than the base values at 26\.4 and 32\.6 percent respectively (Table 2)\. These results reflect the inability of the reforms to improve the standards for the lowest performers, and the internal efficiency of the system remains low\. 50\. In terms of standardized assessments to monitor quality of education, percentage of learners attaining D grade or better both in grade 10 and 12 examination for Mathematics, Science and English improved over time as did the regional assessment SAQMEQ results (Table 2 gives targets and achievements of the key outcome indicators)\. Policy Area 5: Strengthening delivery capacity and the sector’s response to HIV/AIDS 51\. In order to tackle the challenge of HIV/AIDS in the education sector, HIV/AIDs Management Unit (HAMU) was set up in the Ministry of Education\. In addition, Regional AIDS Committees for Education were strengthened and supported\. Through HAMU, the mainstreaming of HIV/AIDS issues was intended to be addressed in all areas of the education system, including the curriculum, teacher training, learning materials and management competencies\. Though progress in life skills studies, teacher training and OVCs access to education is seen, the progress is hard to quantify due to a lack of proper 8 Estimates provided by GRN, MoE officials\. 11 monitoring under HAMUs\. This indicates lack of proper monitoring and evaluation structures\. 52\. In terms of strengthening service delivery for the various subsectors as one of the objectives of this policy area, progress and achievements have been mixed\. A number of policies and Bills were passed to create an institutional setup for smooth achievement of the main objectives under ETSIP\. For instance, pre-primary education was taken away from Ministry of Gender Equity and Child Welfare and placed under the Ministry of Education\. National Counsel for Higher Education (NCHE) was established and a National Training Authority was set up\. 53\. The establishment of the various agencies/authorities did not jump start the process of change and rapid progress\. As new entities, the evolution and establishment of the operational structures of these took a lot more time than anticipated\. For instance, it took almost 3 years to appoint the CEO for the NTA\. Throughout, this period, the NTA was understaffed and absence of the CEO meant that no decisions on staffing could take place\. Similarly, for the NCHE, the Strategic Plan for HEIs was prepared by TA, but was considered unsatisfactory\. So now, a new consultant is to be recruited for the process\. NCHE is also preparing an amendment to the NCHE Bill in view of transforming the Council into an independent body (thus receiving funds directly from Parliament)\. In terms of capacity building for the NCHE, the preparation of guidelines for staff development is still pending\. 54\. Within the Ministry of Education, a draft organizational restructuring plan entailing required staff and resources has been developed and the draft is going through the review process\. Decisions are still pending, in particular as this links to the overall decentralization policy of the GRN\. 55\. Many other capacity development activities were envisaged for the MoE staff, but were not completed\. For instance, as an initial step, assessment of the system’s capacity to implement reforms was planned but not undertaken; a capacity development program was not articulated; strengthening of procurement and financial management capacity did not take place; the core ETSIP team was intended to be trained in Integrated Financial Management and Information Systems (IFMIS) which did not take place; and the training of the management staff in effective leadership was not conducted\. 56\. Consequently, the capacity development area of ETSIP1 supported by the two DPLs was not successfully implemented which had negative consequences on the overall performance of the program\. 12 Table 2: Baseline and Achievements of Key Indicators for ETSIP1 Base year 2005-06 2011 Percentage point change in Grade 16,977 15\.7 11 intake Percentage of OVCs enrolled in N/A 22\.4 grade 1-129 Percentage annual change in VET 3011 55% intake Enrolment in pre-entry: Mathematics 0 106 Physical Science 0 105 Biology 0 105 IDCL (ICTs) 0 114 Percentage of learners who complete 20% 42\.5% lower primary with core skills and competency Repetition rate grade 1 19\.6% 20\.2% Repetition rate grade 5 22\.1% 22\.3% Repetition rate grade 8 23\.1% 26\.4% Average repetition rate for basic ed 15\.5% 15\.4% (1-11) Grade 10 pushout rate 37% 32\.6% Primary LTR 31:1 29:1 Secondary LTR 25:1 24:1 2\.2 Major Factors Affecting Implementation: 57\. The ETSIP1 program has been a flagship of the Ministry of Education in Namibia supported by 13 development partners (DPs) including the World Bank\. As such, it has proved to be sustainable over time\. This report identified certain shortcomings in the implementation of the program that could be attributed to the non-provision of certain expertise associated with the activities under DPL2\. It appears that the construction of the magnet schools and the capacity development component of the program were negatively affected by the absence of the World Bank\. The capacity development subprogram, that should have been a cross-cutting program, was not developed as such\. The DPL2 clearly supported CD as one of the policy areas and it is highly likely that it would have been pushed forward had the loan been signed on time\. The lack of expertise to implement the CD sub-program also negatively impacted the implementation of the program as a whole\. 58\. In the general two key factors affected implementation and the achievement of some outputs of ETSIP1: a) frequent changes in the coordination and management of the program and, b) the absence of a structured M&E system at both the central level of the 9 The original indicator was percentage of OVCs who successfully complete senior secondary education\. MoE informed the ICR mission that this number is not collected\. The individual performance of OVCs is not followed\. 13 MOE and within the sub-programs\. We discuss the issue of implementation here and M&E in section 2\.3 below\. 59\. The overall coordination of ETSIP was initially entrusted to the Undersecretary of Non Formal Education\. The Undersecretary adopted a tight management approach, with strict monitoring of the implementation plans drawn by the managers of the sub-programs\. This approach was deemed necessary for a timely start of a complex program like ETSIP\. In December 2008 the Undersecretary left his post\. Between that date and June 2009 the program was coordinated by the Deputy PS on an interim basis\. 60\. In June 2009 the Undersecretary of Formal Education was appointed the new coordinator\. The new coordinator adopted more of a decentralized approach to program management where responsibilities were shifted to the coordinators of the various sub- programs\. Probably this move reflected the emerging education decentralization policy being adopted by the MOE\. However, in retrospect, it appears that the program was not ready for the shift in management style\. Some management issues already present in the structure were exacerbated\. Issues emerged in areas such as planning, program monitoring, overall management, and budgeting/funding\. More specifically (i) sub- programs managers did not receive clear TOR concerning their responsibilities, authority and expected outputs; (ii) no internal regular review of the program was conducted; (iii) sub-programs were considered as separate: regular meetings between sub-programs managers were not held which would have helped in discussing common issues and overall implementation of ETSIP\. 61\. The presence of the World Bank technical assistance during this period might have helped alleviate some of these issues since the World Bank loan had been designed to support policy areas which cut across the subsectors, in particular supporting capacity development\. A regular presence of the Bank technical expertise for implementation support missions, during the second and third year of implementation of ETSIP might have encouraged cross-sub-program dialogue\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 62\. The implementation structure originally conceived under ETSIP and supported by the DPLs was appropriate\. The coordinator of the program had a proper authoritative position in the Ministry of Education to coordinate activities within the Ministry and liaise with outside stakeholders including other Ministries and DPs\. However, during initial years of ETSIP1 the M&E function was generally disregarded\. MOE did not set up a formal structure, no structure existed at the regional level, and the managers of the sub- programs did not set up a structure for their area of activities\. As a result, process and implementation monitoring has been weak\. The EMIS did not include certain indicators required by sub-programs such as ECD and HIV/AIDS\. The sub-programs did not set up their own internal indicators because of non-existent internal M&E structure despite being envisaged under the program\. As such, the evaluation of certain outcomes could not take place (such as the effectiveness of teachers’ in-service training programs, and the assessment of education achievements as a result of changes in curricula)\. The absence of 14 a M&E system and structure is an important flaw in the ETSIP program and is currently being highlighted in the mid-term review of ETSIP1\. 2\.4 Expected Next Phase/Follow-up Operation (if any): 63\. ETSIP1 is ongoing\. During an implementation support for DPL2, the World Bank team was requested by the Minister of Education to conduct a mid-term review of the ETSIP1 and recommend concrete suggestions for the way forward\. The World Bank invited the DPs mainly, EU, MCC, UNICEF and UNESCO, to be a partner in this exercise given the key role played by them in ETSIP1\. The mid-term review has recently been completed and discussed with the MoE\. Related findings of the review are also reflected in this ICR\. The World Bank team has seen interest from the MoE in engaging their technical assistance in moving ETSIP1 forward, but the modalities of this engagement have not been defined\. Given the issues in the last DPL series, the team has decided support short and targeted TA if requested (such as leading the mid-term review process as mentioned above)\. 64\. Here it needs to be mentioned that the PD for DPL2 mentions that “Beyond the DPLs, the Bank support will be sustained through a fee-for-service arrangement in the amount of US$ 2 million to be used over the program duration as reflected in a MOUâ€?\. An Agreement for Advisory Services was drafted in 2008 10, but the agreement was not signed because the Government objected to: a) the clause of paragraph 8 stating that all the documents produced under the agreement could not be widely distributed without the consent of the World Bank, b) the requirement that all services and consultants were to be exempted from local taxes and, c) the fact that it was not to participate in the selection of consultants\. 3\. Assessment of Outcomes 65\. A number of positive outcomes have been achieved, for instance, important policy measures have been adopted, new bodies have been created that will allow an expansion of the supply of relevantly trained post-secondary graduates, curricula have been revised, ICT has been incorporated into general education, VET and teacher development curricula is developed, the system’s response to HIV/AIDS is being strengthened\. 66\. But there have been some shortcomings as well\. Due to the non performance of capacity development activities, the objective of improving capacity at central and decentralized levels, and the functional review of MOE to take into account the ongoing decentralization process, have not taken place, despite urgent needs\. Also, the key objective of improving internal efficiency in general education has not seen the anticipated results\. 10 Agreement for Advisory Services\. Draft (not for signing) October 25, 2008 15 3\.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) 67\. The objectives of the ETSIP program, which is was supported by the two DPLs, were and still are very relevant to the needs of the Namibian economy\. The essence of ETSIP 1 was to contribute to the attainment of the national objectives contained in the Vision 2030 and in the National Development Plans, and to address the main weaknesses of the education system\. 68\. Mid-term review of the ETSIP1 program was recently completed by the DPs and the MoE\. The strategic objectives of the initial ETSIP were still endorsed and still remain relevant; thus indicating the relevance of the DPLs to the current country and global priorities\. However, it was indicated that till now ETSIP1 had given lower priority to laying the foundations of the system\. Thus, a slight change in strategic direction for the government moving forward is the increased emphasis on primary and secondary education and monitoring and evaluation of the system\. 69\. The Development Policy Operation covered all sectors from ECD to tertiary education\. This is appropriate for a policy operation\. A large number of outcome/output indicators were identified in the policy matrix as the result indicators\. The DPL1 Project Document provides as a policy matrix with Outcome/Output Indicators for the base year and for the years 2007/08 and 2008/09\. The DPL2 Project Document includes an expanded Policy Matrix providing target indicators for the years 2006/07, 2007/08 and 2012/13\. 70\. A number of the indicators used for the DPL policy matrix appear to have been created specifically to monitor the effect of certain policies\. Some information was initially collected and progress was reported in the annual review meetings\. However, follow-up proved impossible because once it was understood what the indicators actually meant, it was realized that the indicators cannot be collected the way originally planned on paper\. Thus the follow-up on these indicators for DPL2 and eventually for the ICR after a 2 year gap proved impossible as no government official was able to provide information on those specific indicators\. 71\. The implementation structure supported by the DPLs, as originally conceived, was appropriate\. The coordinator/manager of the program belonged to the high hierarchical structure of the Ministry, thus had proper authority to coordinate activities within MOE, and to liaise with other ministries, DPs and the Bank\. Also, each sub- program had a designated manager, reporting to the program coordinator for all matters relating to ETSIP\. The central idea in designing the implementation structure was to avoid the creation of a structure additional to the existing one within MOE\. Various MOE departments/units (such as Planning and Administration, General Services, Accounting) were to collaborate in project implementation, by assuming responsibility for specific activities\. This collaborative approach to implementation was a sound one, and was in line with Bank directives\. 3\.2 Achievement of Program Development Objectives 16 72\. The key development objectives of the DPLs were (i) specific policies and policy instruments to guide and give effect to planned sector reforms; (ii) legal instruments to enforce policy implementation; and (iii) institutional capacities required for effective implementation of planned sector reforms\. Table 3: Actions supporting key PDOs Activity Status Comments Specific policies and policy instruments to guide and give effect to planned sector reforms Quota system for Is being applied Intended for students from low distributing G 11 places income families\. Quota system for Has been piloted\. Private institutions For the moment the system is based allocating places to low offer scholarships\. on a public-private partnership, with income children private funds\. Policy to introduce G5 Approved by Cabinet Fully developed G5 standardized test completed in and G8 standardized and running\. Change to G7 instead of 2009\. G7 testing conducted in 2010\. diagnostic testing G8 was made in 2008 A plan for a phased 5% Was adopted in 2006 Gradual increase is taking place increase of the budget share of books and instructional materials, relative to salaries Adoption of policy on Final formula not ready yet\. There are Difficulty arises from the fact that per-capita financing different proposals\. population data are a decade old\. Restructure teachers’ Done as part of re-grading of teachers Job evaluation and grading is still on- salary scales adopted in 2006 going Develop a sector policy Done\. Cabinet Decision No\. for HIV/AIDS 13th/20\.05\.03/002 Revise overall national Education Conference in June 2011 to education policy provide inputs\. Conference took place Plan to establish The Education Sector Policy for OVCs Started in FY 2007/08\. In 2008/09 conditional grants for was approved in 2008 allocated 2\.1 million but they could OVCs Rules of the EDF were issued in 2008 not be transferred to the EDF until the EDF is appropriated by Parliament Government subsidies to By Cabinet Decision 17th/16\.09\.08/010 All private schools, but two, have private schools the formula was approved applied for subsidies\. conditioned on level of participation of low income students Incentive system to attract Approved by the PS on April 1st, 2009\. Task Force Report adopted by MOE teachers of scarce skills to Implemented in FY 2010/11 and NANTU rural areas MOE considering the setting up of a national rewards system NIECD policy Had been approved in 2008; launched implementation plan in 2009; in 2010 translated in seven 17  languages Merging of Teacher Done A study on teachers demand was Training Colleges into Cabinet Decision 1 April 2010 carried out and was the basis for the UNAM decision to transfer the TT colleges to UNAM Legal instruments to enforce policy implementation Vocational Training Act Done\. Establishes the NTA, and the national Act No\. 1 of 2008; Became operational Training Fund (NTF) on 2 June 2008 Establishment of NTA Done, see above Establishment of NCHE Established in 2003 by Act No\. 26\. Transfer of pre-primary Done\. education to MOE Cabinet Resolution 20th/07\.11\.06/010 Devolution of authority Was piloted in 2008 at the Zambesi to VTCs VTC\. Now under consideration by NTA for final policy Institutional capacities required for effective implementation of planned sector reforms Establish a section in Decision of Public Service Commission DNEA for national Ref\. 14/2/3/5 (2007/126) 2008-05-14 assessment for Grade 5 OPM- May 2008\.Memo to Secretary and and 7 to Cabinet 16/05/2008 Undersecretary Public Service Management 02/06/2008 Secretary to Cabinet Development of an Government adopted an action plan to expansion plan for sr\. enable 7 percentage points increase in secondary education and G11 intake, 14% point increase in G 10 training graduates who secure a VET place Expansion of intake in Government adopted an action plan to pre-entry tertiary commence pre-entry programs in tertiary education and training mathematics, science and ICT programs Establishment of fund to Regulations are ready, waiting for promote research in Cabinet approval science and technology Establishment of unit Unit per se was not created because the within MOE dedicated functions are spread within MOE to resource mobilization, strategic deployment and efficient utilization Articulation of a Did not take place because the CD sub- capacity development program did not meet its objectives program Undertake a Did not take place\. See above comprehensive assessment of capacity to deliver education and training services in the 18 medium to long term Strengthen procurement Procurement Unit is not operating and financial management capacity Execute a training plan Staff was trained for procurement staff Core Not done ETSIP1implementation team to be trained in IFMIS Management staff to be Not done trained in effective leadership Establishment of CIET Can be established after the NCRST is operational Establishment of National Commission on RST to be NRSTF established\. Regulations completed, need to be gazetted\. HR manual completed in 2008\. Financial Manual finalized in 2009 EMIS modules for VET Fully developed by NTA The modules belong to NTA and are fully compatible with EMIS 73\. As discussed in detail in section 2\.1 above, the World Bank support in the initial period of the program was instrumental in supporting specific policies and policy instruments to guide the reforms\. The presence of 13 DPs and MoU signed between the DPs with GRN to support ETSIP1 gave a strong signal of the importance of these reforms to the government\. As a result the political will was strong and a number of policies and legal instruments were either signed or approved without much delay\. Therefore objectives 1 and 2 appear to have been achieved to a satisfactory extent, despite delay in adoption of a few policies, such as the VET Act among others\. This is reflected in Table 2 above\. 74\. With regards to the third objective, the achievement is more mixed\. The development of institutional capacity was planned at various levels\. Some of these activities did take place, for instance, procurement staff were trained, but the full extent of the planned CD activities did not materialize\. Although complete attribution is not possible due to nature of the lending instrument used by the World Bank to support ETSIP, it is likely the absence of the World Bank as an active DP for almost 2 years could have contributed to this\. Most of the capacity building components in ETSIP were strongly supported by the World Bank and could have been impacted by the loss of a key supporter of these activities\. 19 3\.3 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs) Rating: Moderately Satisfactory 75\. The program performance has been good in certain areas, for instance, rapid progress was seen in policy areas 1 and 3\. Policies, acts and cabinet decisions were made to support pro-poor expansion of post-basic education, both for general secondary as well as TVET education\. The number of learners enrolled at senior secondary level increased, the enrollment rate for OVCs increased, programs for improving quality of education at pre-tertiary entry level were introduced and implemented, curriculum was revised at all levels to make it a competency based approach and pre-primary education was extended in the previously disadvantaged regions of the country\. But certain actions under policy areas 2, 4 and 5 did not quite achieve the desired outcomes\. This includes the failure to reduce repetition rates at various levels of school, though the achievement in SACMEQ improved over time\. One major shortcoming is the delay in CD programs\. 76\. In spite of the absence of specific PDO indicators, the assessment of achievements is established on strong evidence based on the benchmarks and indicators which are in-built in the DPLs\. Data shows that 83% (65 out of 78) of the main activities supported under the DPLs were completed, the overall outcome rating is justified as Moderately Satisfactory\. 3\.4 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development 77\. The two DPLs have supported pro-poor reforms and activities, but the impact on equity issues has been moderate\. The expansion of ECD/PPE, the expansion of access to secondary education (giving priority to under-represented regions), and of VTC/COSDEC facilities, the provision of incentives to teachers in remote areas (intended to increase their retention), the equitable distribution of textbooks with an increased textbook/learner ratio, the quota system for distributing G11 places, intended for students from low income families, the quota system for allocating places to low income children, the approval of the Education Sector Policy for OVCs are some of the most important activities of ETSIP that have had some positive impact on poverty, but challenges remain\. The DPLs focused on OVCs by assisting the creation of an Education Development Fund (EDF) at secondary level for OVCs, on setting up conditional grants for OVCs, and an OVC register\. However, in terms of follow-up and impact, the EDF is no longer operational and the debate is around abolishing users’ fee in education\. The OVC register has not been successfully used for orientation of policy or planning\. Thus, though the OVCs are gaining access to ECD, pre-primary, and secondary education, the overall improvement in access is moderate at best\. 20 78\. In Namibia there is no gender disparity in enrollments: in primary education ratio of boys and girls is equal, and at secondary level females are over-represented\. Thus, the DPLs did not focus on gender issues in terms of access to education services\. 79\. In terms of equity and resource allocations, great disparities still exist among regions: rural schools receive fewer resources than urban schools, have higher percentage of unqualified teachers (particularly teachers not trained in the subject they are supposed to teach), and have lower representation indexes relating to enrollment\.11 Also the school feeding program (not supported by the DPLs) does not reach the poorest children, mainly due to their remote locations\. Not enough attention was paid by the two DPLs on substantive actions to address regional inequalities (in terms of quality inputs and adequate financing), apart from the support provided to expand access to secondary education (though not comprehensively) and to vocational education\. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) 80\. The DPLs have sown the seeds for institutional strengthening\. Following achievements of Phase 1, all supported by the DPLs, will result in positive institutional changes and/or strengthening: The assignment of performance targets for each school, resulting in better management and quality outputs, The devolution of authority to VTCs, together with the new organizational structure and conditions of service for VTCs, resulting in an improved, more efficient management of these institutions\. The creation of the NCHE which is expected to improve the relationships between the tertiary sector and the labor market (external efficiency) The study on a functional structure of the MOE, taking into account the decentralization, and the MTR proposal to initiate a capacity development program at both central and decentralized levels, if at least initiated during the remaining two years of Phase 1 implementation, will have a noticeable and sustained positive impact on the effectiveness and efficiency of the MOE\. 3\.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) 4\. Assessment of Risk to Development Outcome Rating: Moderate 81\. Many of the achievements of the first five years of ETSIP 1, supported by the DPLs, as described in the previous sections of this report, are still fragile: i) Some actions are not yet totally embedded in the MoE overall conceptual approach to developing its activities\. This includes the absence of an HIV/AIDS 11 EU\. PER, August 2011 21  consciousness within MoE in terms of its negative impact on the education system; the limited attention paid to adequately developing the knowledge and innovation sub-program as an important element to reach the Vision 2030 goal of a knowledge-based economy\. ii) Some actions need continuous follow-up actions to be effective\. For instance, policies that need action plans to be fully implemented, training programs that need an assessment of their efficiency\. iii) Certain activities have been initiated but risk not being fully completed in the absence of complementary actions\. For instance pro-poor expansion of access cannot be completed in the absence of a school mapping exercise; eventual increase in the number of VTCs and COSDECs need a proper study of regional characteristics and local labor market needs\. 82\. Thus the risks to future development outcomes arise from: i) The lack of education planning knowledge at all administrative levels in the MoE which handicaps a balanced development of education services\. ii) The lack of proper monitoring and evaluation system and tools, 12 which makes it difficult to properly assess the efficiency of certain activities (such as teacher training, curriculum development), and to monitor the delivery of the right outcomes\. iii) The absence of monitoring effectiveness of expenditures among the sub- programs, to ensure that the original allocations were made in accordance with education priorities, and funds were disbursed following the agreed priorities\. This issue derives from the absence of M&E and, partially, from the lack of planning capacity\. iv) The still existing disparities among regions in funds allocation\. It is expected that the new funding formula presently under discussion will address the issue of equitable distribution of resources\. This will be a step towards pro-poor delivery of education services, though eradication of inequalities will take longer to resolve\. 83\. Despite the risks mentioned above, a moderate rating is justified by the fact that a number of positive actions have been taken in the last few months\. The current Minister of Education is keen to understand the shortcomings and risks associated with the development outcomes and had requested a Medium Term Review of ETSIP 1\. The MTR suggests concrete measures to address the above risks, mainly to be taken during the remaining phase of ETSIP 1\. Most of these measures have been endorsed by the government as well, thus reducing the risk level\. For instance, the introduction of implementation plans of certain cross-cutting sub-programs such as HIV/AIDs education and Capacity Development together with the other sub-programs receiving inputs; and the introduction of a new sub-program on Monitoring and Evaluation\. 5\. Assessment of Bank and Borrower Performance 12 M&E was an output contained in the activities supported by the DPLs, but was not delivered 22 (relating to design, implementation and outcome issues) 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i\.e\., performance through lending phase) Rating: Moderately Satisfactory 84\. The quality at entry of the project is rated as Moderately Satisfactory\. The World Bank did a thorough review of the sector prior to the DPL series\. The Bank team was proactively involved in supporting the MoE with the design of the ETSIP program and the expected outcomes\. Preparation activities were also very intense, timely, and involved MoE staff of various departments\. The program was ambitious and up to the standard of a middle income country education system\. 85\. The partnership with the government suffered at the beginning from a negative perception of the Bank among government staff and other stakeholders\. This perception changed when the MoE, started to appreciate the high quality technical support provided by the Bank missions\. At the time of appraisal, disagreements on some elements of the program’s content (e\. g\. HIV/AIDS, CD) were finally resolved\. 86\. A Quality Enhancement Review was held on January 25, 2007 and was asked five main questions concerning the appropriateness of: i) a DPL operation, ii) the proposed triggers, iii) the government’s funding of Bank policy and technical support, iv) the overall implementation arrangements and, v) relevance, feasibility and technical soundness of the government’s overall program\. The review panel: a) endorsed the DPL instrument, b) expressed concern at the number of policy and action measures listed in the program document, c) advised the team to prepare detailed TOR identifying the support expected by the Bank following the Government’s agreement to provide funding for US$ 2 million to cover the Bank’s costs of providing policy and technical advice during and after the implementation of ETSIP 1, d) suggested that a list of detailed sector performance indicators be developed to be reviewed at the annual meeting in September, and e) considered ETSIP to be relevant, coherent and appropriate in the context of the country’s education status\. As a result of the panel’s recommendations the team included in the Project Document (PD) of DPL1 as Annex 3 a policy matrix providing Outcome/Output Indicators for the base year and for the years 2007/08 and 2008/09\. The Project Document for DPL2 included an expanded Policy Matrix providing target indicators for the years 2006/07, 2007/08 and 2012/13\. 87\. In hindsight, two issues might have improved the quality at entry\. First, the Bank team did not identify key PDO indicators\. This shortcoming has however been partly overcome by the introduction of a long list of detailed sector indicators\. However, the indicators that were introduced were not the usual ones adopted by the education sector or collected under the EMIS of the country\. 88\. Another aspect that could have improved the overall outcomes, and relates to quality at entry is when preparing the DPL the policy dialogue with key policy makers outside of the education sector was not fostered\. Although the various key ministries 23 were invited in all stakeholders meetings and discussions, some chose not to be a part of the process\. The World Bank team did not see this as a potential problem when preparing the DPLs\. However, this created a sense of unease across key ministries\. Perhaps, a lack of complete buy-in for the DPL series from the Ministry of Finance might have been a contributing cause of the delay in signature of the second DPL\. (b) Quality of Supervision (including M&E arrangements) Rating: Moderately Unsatisfactory 89\. The first Bank assistance mission, as requested by the Government, took place during the period April 26 to May 14, 2004\. Seven additional missions followed, until the Joint Appraisal mission that took place October 1 to 17, 2006\. All the donors involved in ETSIP participated in discussions on the presentations of the sub-programs made by various MOE officials\. 90\. After effectiveness (12/20/2007), the Bank sent one implementation assistance mission in March-April, 2008\. The Aide Memoire of the mission mentioned under paragraph 2\.2 that: In future, Bank missions will focus on the technical support required to resolve implementation issues that the MOE team could not resolve on its own, and In addition, future Bank teams will provide training in areas identified by the MOE team as critical for their capacity development\. 91\. There was no follow-up on these actions\. The preparation for DPL2 took precedence\. 92\. After the delay in signature of the loan documents, the World Bank sector team did not conduct many in country missions\. The focus of discussions at the time was clarification of the issues surrounding the negative pledge clause in the loan agreement and the FBSA as mentioned in section 2 above\. Thus the related missions that visited Namibia during this period, and the discussion held, also via audio and video conferences, revolved around the resolution of the legal issues\. Therefore the policy support for ETSIP from the World Bank was unable to take precedence\. There is also some possibility that the involvement of the World Bank in policy dialogue in Namibia during the period of Oct\. 2008 – Sept\. 2010 suffered because of staff turnover during the latter half of 2009\. The absence of a World Bank office in Namibia and a permanent presence on the ground also appear to be amongst the main reasons for contributing to the misunderstandings with the client country\. 93\. The World Bank participated in the Development Partner’s meeting with the MoE and the new Education Minister in Nov\. 2010\. The final implementation support mission went to Namibia after signature of the second DPL in Feb\. 2011\. The mission monitored the progress of the various activities envisaged under DPL2\. The mission was specifically asked by the Minister of Education to lead a review of ETSIP1\. Upon this request, the 24 World Bank agreed to lead a mid-term review of ETSIP1 with the support of all DPs and identify the way forward for the program\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory 94\. Attribution is always difficult in a Development Policy Operation\. In this particular DPL, the delay in signature of the second loan of the series and the presence of a number of other supporting DPs makes the attribution of results even more difficult\. However, based on the reading of relevant communications staring from 2003 to the signing of the first DPL, it is the view of the ICR mission that the World Bank played an integral role in the design and development of the policies adopted under ETSIP\. The Bank helped ETSIP gain momentum which has been sustained by the DPs and the MoE\. 95\. The rating is based on the good performance in the up-stream activities leading to the approval of the operations\. The technical support from the World Bank has been publically praised by the GRN\. Some issues in the quality of entry, such as wider consensus across key ministries around the DPLs impacted the quality of the final product\. Concerted efforts were put in by the World Bank in trying to resolve the issues that were causing a delay of the signature of the second DPL, including attempts to address the concerns of the GRN on the loan agreements as well as laying out the option of cancelling the second DPL without any subsequent implication for the Government of the Republic of Namibia\. This delay did, however, impact the sectoral dialogue on policy implementation issues with the government during the period that the second loan was not signed thus justifying a rating of Moderately Unsatisfactory\. 5\.2 Borrower Performance NOTE: The government and the implementation agency are the same so the rating and performance are given together below\. (a) Government Performance Rating: Moderately Satisfactory 96\. The government’s performance is rated as moderately satisfactory on the basis of its mixed performance in achievement of PDOs\. 97\. As detailed in section 2\.1 (Program Performance) and 3\.2 (Achievement of Program Development Objectives), the government performed very well in certain activities\. The MoE performed well in adopting the main policies to be developed under the two DPLs, and in areas such as the introduction of standardized tests, curricula revisions, the adoption of standards in IALL, TET, VET and ECD/PPE, the construction of new secondary schools with priority to disadvantaged areas, and the financial assistance for OVCs entering the education system\. Similarly VET Act was promulgated; the NTA Board was appointed; five Industrial Sector Councils (ISCs) have been established and three are functioning; a legal framework for devolution to VTCs was prepared\. These are significant achievements given the short period of time\. 25 98\. There were however, a number of delays and certain targets were not achieved – the most important of which were the improvement of quality of education\. More specifically, the MoE failed to (a) analyze the causes of repetition and drop out, important for taking corrective measures to improve efficiency (b) define and adopt the NHICD for pre-school children, delaying the definition of proper inputs for this age group, (c) set up a proper M&E system and structure, (d) develop the planned activities included in the CD sub-program (e) give proper attention to the cross-cutting significant activities of sub- programs such as CD and HIV/AIDS\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 99\. Since the implementing agency and the Borrower are the same, the same rating applies to both and is the same as discussed in (a) above\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 100\. The ICRR guidelines (Appendix A) identify nine criteria for rating government performance\. The government had a complete ownership of the ETSIP program and was and has remained committed to achieving the development objectives of the program supported by the DPLs\. The enabling environment for the program was conducive to the achievement of the objectives\. Although key staff were appointed, the Ministry of Education in its totality was not ready for implementation of such a complex and large program without extensive implementation support\. Implementation issues were not highlighted and resolved in a timely manner thus leading to a delay in certain activities in the program\. Fiduciary requirements were met satisfactorily\. There was good coordination between the various DPs based on the MoU signed\. Monitoring and evaluation structures were not well established\. 101\. Based on this, satisfactory rating is attributed to ownership of the program, willingness to create an enabling environment, fiduciary requirements, and coordination of DPs\. However, the implementation capacity and delay in introduction of capacity development programs slowed the progress and overall a Moderately Satisfactory rating deems appropriate\. 6\. Lessons Learned (both operation-specific and of wide general application) 102\. Complex program design: Programs/projects with many components are always difficult for the country to implement, particularly when the operation is the first in the 26 sector\. ETSIP included activities aiming at improving all levels and sectors of education, from early child education to the tertiary level, from adult education and lifelong learning to vocational training\. ETSIP was the first program of this magnitude, supported by DPs, to be implemented by the MoE\. It put a strain on the ministry’s staff and resulted in delays in implementation\. It also led to a loss of unified direction in trying to attain the set objectives\. The Bank should avoid supporting complex operations when they are the first such experience for the country\. A leaner first operation, setting the appropriate base, can be followed by a more ambitious one\. 103\. Stakeholder engagement: When engaging in a country with little, or no, experience in dealing with the Bank, sufficient, time should be spent in ensuring that all stakeholders understand and agree on what the proposed cooperation entails (in terms of processes, mutual responsibilities and obligations, and financial support conditionalities)\. This responsibility lies not only on the sectoral TTL, but also on the wider country team who has better access to important relevant ministries such as the Ministry of Finance and Ministries of Planning and Economic Development\. In the specific case of Namibia, the permanent presence of the World Bank in Namibia in the form of an office can also help the clients understand the modalities of operations of the Bank\. Such a presence helps foster relationships with the wider government (rather than sectoral links) and helps clarify misunderstandings as they arise\. 104\. The lack of prior analysis of the implementation capacity of MOE was a noticeable hindrance to a smooth execution of the program activities\. The design of the program did not take in sufficient consideration the execution capacity of the implementers\. It also did not into account the time necessary for the government to adopt important policy measures\. The capacity development sub-program was a late add-on in the preparation process, and was never considered by the MOE as the basic element for a successful implementation\. In such complex operations the Bank should carry out a prior analysis of the implementation capacity of the institutions involved, and an assessment of the bureaucratic procedures for producing certain outputs, and give high priority to the development of the required skills and basic procedures\. The development of the required capacities should have had an upstream preeminent position in the implementation plan of the program\. 105\. Project development objective indicators need to be specified so that the key indicators can be followed up over time\. Additionally, if new indicators are introduced to measure the impact of specific interventions, it should be ensured that the relevant unit in the Ministry is fully conversant with the techniques of collecting those indicators\. Regular follow-up by the implementation support missions, specifically on proper data collection and analysis is integral for efficient monitoring\. 106\. Continuous implementation support: There should be continuity in assisting the implementation of programs/projects\. Long gaps in the timing of assistance inputs cause slow-downs in execution, and the risk of distortions in the attainment of intermediate objectives and outputs as compared to the original ones\. Fully staffed missions are not always required: the visit of a single person, with the specific skills to 27 address key issues, is sufficient enough to provide valuable inputs when required and, in general, is appreciated by the implementers\. 107\. Considerations for working with development partners: Mobilization of development partners around a program is not the end goal of partnerships but a continuous fostering of relationships and transparent interactions is integral for the success and efficiency of the program\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies (b) Cofinanciers (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 28  Annex 1: DPL Policy Matrix Targets Base Policy Area/ Prior actions for DPL1 Prior Actions for DPL2 Results Status Status Year Issue (in bold) (in bold) Indicators 2006/07 2007/08 2011 05/06 Plan Actual Plan Actual Actual Adoption of action plan that enables a 7 percentage point increase in grade C 11 intake Percentage point change in 16,977 7% -4% 7% -2\.5% 15\.7% Optimizing enrolment in existing senior C Grade 11 intake secondary schools Continued implementation Extension of existing senior secondary C of actions that comprise C schools the senior secondary % annual change in VET Construction of new senior secondary C education and training intake 3,011 14% 57% 14% 21% 55% schools expansion plans Optimizing the use of existing private PP and regional VTCs that meet the 2008/9 efficiency, quality, and cost Proportion of new senior 1\. Equitable effectiveness criteria secondary education and expansion of Plan for the adoption of a quota system C Institution of a quota Trial training places created in the access to post- for enabling students from the poorest system for grade 11 tested poorest regions basic education regions to enter grade 11 admission RO in 0 60% 60% 60% 60% 60% and training 2009 Plan for the establishment of Institute conditional grants C Percentage of OVCs that conditional grants to enable OVCs to C for OVCs successfully complete senior 0% 5% 3\.8% 5% N/A N/A13 complete senior secondary education secondary education Develop a feasible action plan for Commence the PP to establishing six magnet schools in the S construction of the first 2009/1 poorest regions three vision schools 0 Adoption of a plan for increasing pre- Tertiary pre-entry Enrolment in pre-entry: entry mathematics, science and ICTs C programs in math, C Mathematics 0 0 0 50 100 106 programs to reach 50 per area by science, and ICTs Physical Science 0 0 0 50 100 105 2008 enrolling 50 students per Biology 0 0 0 0 100 105 area has commenced IDCL (ICTs) 0 0 0 50 100 114 English 0 0 0 0 100 106 Note: Prior actions are in BOLD, C= completed; PP= postponed; S = implementation is continuing satisfactorily, RO= roll out of pilots or trialed actions 13 ICR mission was informed that this information is not available since learners are no individually tracked\. 29  DPL policy Matrix (continued) Policy area/ Prior actions for DPL1 Status Prior actions for DPL2 Status Results Base Targets issue (in bold) (in bold) Indicators Year 2006/07 2007/08 2011 05/06 Plan Actual Plan Actual Actual Adaptation of the international Not Formal adoption of the Not Percentage of 0- to 4+-year holistic early child development done index by the MGECW, Done olds who meet the Namibia- 0% 20% N/A 25% N/A N/A index to the Namibia context MoE, and MoHSS specific index Articulation of learner Elaboration of the current Percentage of children competencies that constitute C 10-week school readiness C entering primary education 0% 15% 7\.1% 20% 11\.9% 16\.9% primary school readiness program into a 1-year with adequate levels of program readiness for grade 1 Definition of core skills and Revision of lower primary competencies to be acquired by C education curriculum to learners at lower primary level reflect agreed skills and C (grade 1 – 4) competencies Percentage of learners who 20% 30% N/A 35% 42\.5% 42\.5%14 complete lower primary The revised lower having acquired core skills primary curriculum and and competencies 2\. Improvement of start of implementation education quality / in schools has been C effectiveness approved by the NEACB Adoption of a policy to Introduction of grade 5 introduce standardized C standardized diagnostic S diagnostic tests for grades 5 tests and 8 Adoption of a plan to enable a The textbook policy has Percentage Budget 5 percentage point increase in been approved by the C allocation for primary and 1% 5% 1% 5% 1% 1\.3% the budget allocation for C Borrower’s Cabinet secondary books and (Primary) primary and secondary school instructional materials books and instructional 3\.1% materials from 2007 to 2008 (secondary) Cabinet approval of a sector Integration of ICTs in core ICT policy C learner competencies at all C levels and in education management Dissemination of adopted The MoE has assigned schools performance standards C academic performance C National average SACMEQ 449 497 to all schools targets to each primary test score (Reading and (200 and secondary school Mathematics)? 0) 473 Placing school principals 431 on performance contracts (200 0) PP 2009 /10 14 This value is the number of students passing the grade 5 national assessments\. These assessments take place biannually so the last value available is for 2008/09\. 30  DPL policy matrix (continued) Policy area/ Prior actions for DPL1 Status Prior actions for DPL2 Statu Results Base Targets issue (in bold) (in bold) s Indicators Year 2006/07 2007/08 2011 05/06 Plan Actual Plan Actual Plan Actual MoE agreement to introduce a policy The baseline survey to Disadvantaged schools N/A on per capita funding for primary and C enable the establishment of C that meet input norms 0 5% N/A 30% N/A secondary schools , and VTCs a SRN has been completed per annum by MoE Agreement to adopt a policy on Articulate minimum input conditional grants for schools that are norms and standards for 3\. Eradication unlikely to meet their performance C primary and secondary C of inequalities standards based only on per capita schools in the funding distribution of Finalization of draft funding formula PP Adoption and PP to education for VTCs and for tertiary education 2008/09 operationalization of funding 2009- resource inputs and training institutions formula 2010 MoE articulation of a phased A new formula for withdrawal of subsidies from private determining applicable profit-making schools S levels of subsidies to private C schools approved by the Borrower’s Cabinet Agreed operational plan for Continued implementation of Internal efficiency: reducing the average repetition, C agreed plan C Repetition rate in the 19\.6% 16% 21\.9% 16% 21% 20\.2% dropouts, push-outs and for first year of each phase 22\.1% 19% 25\.7% 20% 24% 22\.3% increasing LTR in general (grades 1, 5, and 8) 23\.1% 20% 24\.2% 19% 25% 26\.4% education Average repetition rate 15\.5% 14% 20 15% 17\.8% 15\.4% for basic education (grades 1 to 10) Commencement of negotiations with C Grade 10 push-out rate 47% 40% 39% 30% 24\.8% 32\.6% the OPM and teachers’ unions on the 4\. Improved increase of learner to teacher ratio Primary LTR 31:1 32:1 tbd 33:1 21:1 29:1 efficiency in Secondary LTR 25:1 26:1 tbd 28:1 24:1 24:1 resource Cabinet approval of the non- mobilization application of price preferences to C and utilization ETSIP1 tenders Tender Board clearance of ETSIP1 contracts for non-application of price C preferences Establishment of a payroll levy to be PP to applied toward the expansion of VET 2009/10 places Agreed plan to de-link teacher salaries Teachers’ salary increments Primary teachers’ from unnecessary and irrelevant C have been de-linked by the C salaries as a percentage 95% 90% 93% 85% 88% 88\.4% qualifications Borrower’s OPM from share of the recurred unnecessary and irrelevant budget qualifications & linked to Secondary teachers’ performance salaries as a percentage 92% 87% 91% 85% 88% 89\.7% share of the recurred budget 31  DPL policy matrix (continued) Base Targets Policy area/ Prior actions for DPL1 Prior actions for DPL2 Results 2006/07 2007/08 2011 Status Status Year issue (in bold) (in bold) Indicators 05/06 Plan Actual Plan Actual Actual Approval of a sector policy on HIV/AIDS C Adoption of operational plans for C enhanced mainstreaming of HAMU and RACES fully C HIV/AIDS education in all aspects operational Establishment of HAMU and of ETSIP1 RACEs C Establishment of the ICTs Mainstream ICTs in the academic MoE ICT division fully division of the MoE C co-curricular and sector C operational C management programs at all levels of the system Approval of the new VET Ministry of Education’s approval of NTA fully staffed and Bill to allow for the C an operational plan to devolve C operational C establishment of the NTA authority to VTCs (PMU) Adoption of legislation for Adoption of a teacher education PP to NCHE established and the establishment of the C reform plan by the Advisory 2008/9 competent Secretariat staff NCHE with a competent Council on Teacher Education in post C secretariat that is able to fulfill its mandate Establish the NCHE Secretariat C 5\. Strengthen delivery capacity Approval of the transfer of 14 qualified staff seconded and the response to pre-primary education from C in post and NEID pré- HIV/AIDS the MGECW to the MoE primary unit fully C Creation and staffing of a pre- operational primary unit at NIED C Creation and staffing of a All the core staff of the procurement unit of the MoE C MoE procurement unit and 10 support staff completed C basic and advance procurement training on works, goods and services Adoption of a plan to PP to All senior management strengthen MoE leadership 2009/ (from Permanent Secretary PP and management capacity 10 to Directors) of the MoE 2009/ trained in leadership and 10 decision-making skills Cabinet approval of a sector Integration of ICT s in core learner ICT policy C competencies at all levels and in C management 32 Annex 2: Bank Lending and Implementation Support/Supervision Processes (a) Task Team members P086875 - Education and Training Sector Improvement Program - ETSIP Responsibility/ Names Title Unit Specialty Lending Victoria L\. Fofanah Senior Program Assistant ECSO1 AFTOS - Jeanette Marie Mallet E T Consultant HIS Mmantsetsa Marope Sr Education Spec\. AFTED AFTH1 - Debbie Peterson Temporary HIS Ganesh Rasagam Senior Private Sector Developm AFTFE Vanessa N\. Saldanha Program Assistant MIGCO Supervision Henri A\. Aka Operations Officer SASHN Arun R\. Joshi Senior Education Specialist AFTED Luz Meza-Bartrina Senior Counsel LEGAF AFTH1 - Debbie Peterson Temporary HIS HDNGA Cristina Romero Temporary - His Gert Johannes Alwyn Van Lead Financial Management Spec AFTFM Der Linde P109333 - Support of ETSIP 1 DPL 2 Responsibility/ Names Title Unit Specialty Lending Supervision Henri A\. Aka Operations Officer SASHN Andrew Osei Asibey Senior Monitoring & Evaluation AFTDE Faith Babalwa Chirwa Team Assistant AFCS1 Nicolette K\. DeWitt Lead Counsel LEGAF Luz Meza-Bartrina Senior Counsel LEGAF HDNGA Cristina Romero Temporary - His Gert Johannes Alwyn Van Lead Financial Management Spec AFTFM Der Linde 33 (b) Staff Time and Cost P086875 - Education and Training Sector Improvement Program - ETSIP Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY04 4 31\.34 FY05 22 138\.62 FY06 34 238\.05 FY07 28 187\.83 FY08 0\.00 Total: 88 595\.84 Supervision FY04 0\.00 FY05 0\.00 FY06 0\.00 FY07 0\.00 FY08 10 66\.75 FY09 1 0\.00 Total: 11 66\.75 P109333 - Support of ETSIP 1 DPL 2 Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY08 36\.21 Total: 36\.21 Supervision Total: 0\.00 34 Annex 3: Beneficiary Survey Results (if any) Not Applicable 35 Annex 4: Stakeholder Workshop Report and Results (if any) 36 Annex 5: Summary of Borrower's ICR and/or Comments on Draft ICR REPUBLIC OF NAMIBIA MINISTRY OF EDUCATION Implementation Completion Report for DPO in support of ETSIP1 Background In October 2002, Cabinet by Decision 26th/15\.10\.02/0003 authorised the Ministry of Higher Education, Vocational Training, Science and Technology to co-ordinate a study on Human Capital Development and Knowledge Management for Economic Growth and Equity\. The World Bank was invited to undertake a critical analysis of the sector and to advise the government how to best improve the sector and transform it into a better tool for supporting national development\. The study was conducted mainly in response to the Presidential call on all sectors of the economy to effectively contribute to the realization of national development goals and to the actualization of Vision 2030\. Three National Consultative Forums were held\. The First Consultative Forum was held during 29-30 January 2003 and set the scope for study, its methodology and time-frame\. The Second Forum, held during 22-23 May 2003, examined the key findings of the study; corrected misinterpretations and pointed out critical omissions\. The Third Forum was held on 21-22 August, 2003\. This Forum focused on deciding on how best Namibia could apply the findings and recommendations of the Study\. The study was thus conducted through a consultative process\. The analysis pointed towards the need for a comprehensive reform, notwithstanding the substantive gains and progress made by the sector during the period after independence\. The reform was geared towards the improvement of quality and effectiveness, internal efficiency, relevance and responsiveness and redressing the lingering inequalities\. In April 2004 the report on the study was discussed to identify and articulate key components of an improvement programme\. A draft strategic framework was then developed jointly by World Bank experts and a Namibian task force\. This framework used a comprehensive sector-wide approach, taking as point of departure the already existing plans and programmes of the sector Ministries\. As an improvement programme it responded to critical, new and emerging challenges facing the sector\. An intensive planning process ensued with World Bank technical support, resulting, in February 2005, in the adoption by Cabinet of the fifteen-year Strategic Plan for ETSIP, Planning for a Learning Nation\. The Strategic Plan was endorsed by Namibia’s development partners and stakeholders in education and training during the Round Table meeting held in March 2005\. 37 It was agreed that ETSIP would be implemented in three five-year phases\. The first, from 2006 – 2011, coincided with the Third National Development Plan (NDP3)\. It was further decided that the programme would be divided into sub-programmes and work commenced on the development of detailed 5-year implementation plans\. The strategic plans and costed first drafts of the 5-year plans were discussed with various stakeholders, including regional offices of education, teachers, members of school managements, the teachers’ unions, members of regional governance and educational fora in all 13 regions to ensure ownership and collaboration\. Comments were incorporated as far as possible\. The development process was spearheaded by the ETSIP Task Team which consisted of representatives of all the line ministries in the education and training sector, the Ministry of Finance and the National Planning Commission\. This team was replaced by the ETSIP Programme Coordinating Committee, under the chairmanship of the Permanent Secretary of the Ministry of Education, in July 2006 after limited implementation of the programme commenced utilising government funding\. In the development of the 15-year strategic plan, five main strategic objectives were identified: Quality/effectiveness Equity and Access Development relevance and Responsiveness Delivery Capacity and Management Efficiency of resource mobilisation and utilisation\. The set of strategic objectives is common across the sub-programmes, but each sub- programme has determined its own order of priority\. In addition to these objectives, a set of strategic objectives for the first phase of ETSIP were determined\. These are as follows: strengthening the supply of middle to high level skilled labour improving the quality, efficiency and effectiveness of general education systematising knowledge and innovation Improving the effectiveness and relevance of the tertiary education system, and strengthening the policy and legal framework for access to lifelong learning\. These strategic objectives were pursued through nine Sub-programmes, for Early Childhood Development and Pre-Primary Education, General Education, Vocational Education and Training, Tertiary Education and Training, Knowledge Creation and Innovation, Information Adult and Lifelong Learning, HIV and AIDS, ICTs, and Capacity Development\. While the first six sub-programmes focussed on specific areas in the education and training sector, the last three covered cross-cutting issues\. This made of ETSIP a truly sector-wide approach\. A simulation model was developed as part of the development of ETSIP to estimate global resource requirements for the implementation of ETSIP, to identify resource gaps and to investigate savings which could accrue from the different policy choices\. The sector developed an Expenditure Issues Paper which clearly indicated, amongst others, that available funds to the sector had decreased in real terms and that spending trends had become increasingly skewed towards non-discretionary items such as personnel spending\. It was clear that, in order to implement the new activities and the priorities identified as envisaged under ETSIP, critical policy decisions would need to be made regarding core sector policies such as the full implementation of the staffing norms, the introduction of wage restraint to contain wage bill increases (which goes across the public sector), and the 38 introduction of learner unit costs based on the number of learners per region to redress the inequities in resource allocation\. A fund raising round table meeting for ETSIP was held on April 19 and 20, 2006\. This was followed by a positive joint DPs' pre-appraisal of ETSIP in March 2006 which concluded that the proposed programme was adequate to provide a balanced sector development and that it was consistent with its strategic objectives and sub-objectives\. A joint appraisal was conducted by Development Partners' (DPs) in October 2006\. However, in June 2006 the GRN decided to commence with the implementation of ETSIP, using its own resources, ahead of the pledged contributions of development partners becoming available\. In July 2006, the MoE presented a programme inception report to the DPs which met the DPs reporting requirements\. The first quarterly progress report was presented during the joint appraisal\. ETSIP has become a high profile national cause to which the government and many partners are fully committed\. ETSIP is the flagship programme of the Government of the Republic of Namibia and there is strong national ownership and support for its implementation which will improve the education and training system and result in higher economic growth, employment creation and poverty alleviation and help Namibia to leap frog into a knowledge-based economy\. 39 Assessment of Outcomes against DPL Indicators DPL1 Prior actions Proof of Achievement Current Status Policy actions Cabinet approval of a National Policy on HIV and Cabinet Decision No 13th/20\.05\.03/002 Policy being implemented AIDS for the Education Sector “Cabinet approves and direct the Ministries of Higher Education, Training and Employment Creation and Basic Education, Sport and Culture to implement the National HIV/AIDS policy for the education sector, as soon as possible, and to monitor its implementation closely and bring about amendments as requiredâ€?\. Cabinet approval of the Policy on ICT in the Education Cabinet Decision No 5th/08\.03\.05/001 Policy being implemented Sector “That Cabinet approve the ICT Policy for Education Implementation Plan and Guide…\.â€? Cabinet approval of the policy to institute grade 5 and Cabinet Decision No: 4th/o1\.03\.05/002 endorsed the It was decided by MoE to conduct the SATS in grades 5 grade 8 standardized achievement tests, Strategic Plan for ETSIP (2005 – 2020) which listed and and 7\.The first round of grade 5 SATs were conducted detailed a number of policies, including a policy to and 2009 and the first round for grade 7 in 2010\. introduce standardized diagnostic tests for grades 5 and Results for both sets of assessment tests were provided 8\. and presented to stakeholders in education\. Ministry of Education adoption of a policy on per-capita The MoE Budget Committee decided on 8 December The formula is still being adjusted and has not been financing; 2006 to move to per capita financing with effect from implemented\. the 2007/2008 financial year\. This decision was based on two discussion documents and a workshop\. In the 2007/08 financial year 10% of the primary and secondary education budgets was allocated in terms of a per capita funding formula\. The pace for the allocation of the remaining 90%, and the allocation of weightings to be given to certain additional factors, has not yet been decided, but will be the subject of further technical assistance\. Commencement of negotiations with OPM and Unions Negotiations between the Ministry of Education and The new staffing norms, accommodating the cluster on policy, target and plan to increase learner teacher NANTU on staffing norms commenced on 16 October policy, full time life skills teachers and school librarians ratio; 2006\. It was not possible to reach an agreement at this are internally approved at Management Policy level\. It was therefore decided to refer the matter to the Coordinating Committee level\. While job evaluation main negotiation table\. Accordingly, a GRN and re-grading is done this document is ready to be 40  Prior actions Proof of Achievement Current Status negotiating team led by the Secretary to Cabinet was submitted to OPM for approval\. The MoE decided to appointed, mandated by Cabinet, and briefed\. maintain the current staffing norm of 1:35 at primary and 1;#9 at secondary\. Adoption of a policy to introduce conditional grants for On 2 March 2007 the Permanent Secretary of the Though a register for orphans and vulnerable children schools that cannot meet input norms based only on per- Ministry of Education decided, on the basis of a was developed this system does not track learners and capita financing submission from the Directorate PQA, that the said their academic performance\. Directorate should spearhead the formulation of a policy that offers conditional grants to schools that do not meet or achieve certain levels in terms of National Standards and Performance indicators or after the implementation of the per capita funding formula for schools\. Legal actions Cabinet approval of the new VET Bill to allow for the Cabinet Decision No 20th/07\.11\.06/027 approved the VET Act being implemented establishment of the NTA; and Bill\. The Bill was accepted without amendment by the National Assembly on 5 July 2007\. Enactment of the legislation for the establishment of the Higher Education Act, Act No 26 of 2003 proves The second NCHE Council is currently in place and the National Council for Higher Education (NCHE)\. adoption of the legislation\. The Council was committees are functioning\. established and formed committees for its main responsibilities\. Institutional actions Establishment and staffing of a pre-primary education The unit was established at NIED in January 2007 The Unit was disbanded after finalising the preparatory unit at NIED through the assignment of a national coordinator and work and Pre-primary coordinators were appointed in one staff member from each region\. the regions\. Cabinet approval of the transfer of pre-primary Cabinet Decision No 20th/07\.11\.06/010 An implementation plan for full role out of pre-primary education from the MGECW to the MoE\. “That Cabinet approve the amendment to the 1996 is developed and additional budget is requested to build National Early Child Development Policy to make the more classrooms and playgrounds where space allows Ministry of Education responsible for the development it\. GER of PPE is at 8\.1% for 2010\. of a Pre-Primary Education Programme…\.)â€?\. HIV/AIDS management unit (HAMU) established in HAMU is in operation, under the leadership of a Deputy Race Committees are at work in the regions\. HAMU the MoE, and of Regional AIDS committees for Director, and RACE Committees exist in all regions\. has lost its vision and is too involved in the regional education (RACE) set up in respective regions; activities\. HAMU will be revamped\. Establishment of the ICTs division at the MoE An ICT Division exists on the establishment of the The ICT Division is understaffed and lacks capacity\. An Ministry of Education and is staffed\. ICT Advisor has been appointed for a period of 2 years\. Establishment of the NCHE Done Council is functional and operating\. Establishment of an NCHE competent and dedicated OPM approved the creation of four temporary posts for The Higher Education Act is under revision\. After the 41  Prior actions Proof of Achievement Current Status secretariat as stipulated in the Act the appointment of the first secretariat of the NCHE and teacher education reform started in 2010, ACTET ACTET (pending the amendment of the Act to enable ceased to exist with the implementation of teacher the NCHE to appoint its own secretariat independent of education reform\. the public service\.) The positions were filled\. Establishment of a procurement unit in the Ministry of All sub-programmes availed staff for training in Procurement is done haphazardly and procurement Education procurement and created dedicated desk for plans are no longer developed\. The procurement unit procurement\. never functioned due to leadership and capacity problems with the unit\. Upfront actions for improvement of education equity, quality and efficiency Agreed plan for a phased increase of the MoE budget A plan was developed for the planned rate of increase of Decentralisation leaves the decision on amounts to be share for books and instructional materials relative to expenditure on books and on personnel, showing that spent on textbooks in the regions, where they indicate salaries the rate of increase of expenditure on books will be that they spend 5% of their operation budget on higher than for personnel\. materials and supplies of which only 2/3 on textbooks\. Completion of standards on core skills and The new curriculum for grades 1 – 4 was approved\. The curriculum was implemented and is followed\. competencies to be acquired during lower primary education (grade 1 -4) Agreed operational plan for the establishment of six The plan was developed and it was agreed that the In the adjustment of the programme in 2007 it was “comprehensiveâ€? schools in the most disadvantaged schools would be called Vision Schools\. decided to build only one Vision School during ETSIP regions\. 1\. Construction is underway and bids were invited for equipment and furniture\. The school will open in 2013\. An agreed plan of action for a pro-poor expansion of An operational plan was developed\. Under the MCA-N project, 47 schools are being enrolment in high quality senior secondary schools renovated and receiving additional classrooms, science laboratories, libraries, administrative blocks and teacher housing\. The schools were divided into 5 packages and the second has recently been allocated\. The project ends in 2013\. Agreed plan for establishing conditional school grants An operational plan was developed\. The National Conference on Education (June/July 2011) for OVCs strongly recommended free primary education\. Cabinet has directed the MoE to investigate the costs and modalities involved\. Agreed operational plan for improving key internal An operation plan was developed and agreed\. The plan has not been implemented but has been efficiency indicators – repetition, dropouts, LTR, and identified as priority for the 2011/2012 financial year\. use of physical space 42 DPL2 Prior actions Proof of Achievement Current Status Policy Frameworks 1\. Cabinet approval of textbook policy The policy was approved by Cabinet Decision No The Supply Chain Management Unit has been created 5th/18\.03\.08/002 and MCA-N is assisting with the implementation of the policy 2\. Cabinet Approval for Revised ECD Policy Cabinet Decision No 19th/06\.11/07/010 approves the An implementation plan was developed and the policy is revised policy being implemented\. 3\. VET Act Passed and NTA Operational Act No 1 of 2008: the Vocational Education and The NTA is operational and implementing its business Training Act, 2008 was promulgated in Government plan which includes ETSIP activities Gazette No 4042 of 6 May 2008 4\. Draft organisational restructuring plan for the MoE The organogramme was submitted to OPM, but has not The structure of the MoE head office is currently under submitted to OPM yet been finalised, since it was decided to first revision again to take into account the functions that concentrate on the decentralised regional structures\. were decentralised\. The regional structures were submitted to OPM\. 5\. Section established n DNEA for grade 5 and grade The section was established and staffed and is fully The first SATs for grades 5 and 7 were conducted, 8 national testing functional\. The MoE decided to rather do the second reports released and work started on the development of achievement test in grade 5 so that interventions could interventions\. be set in place to prepare learners for the next school phase\. 6\. Develop EMIS modules for vocational education Questionnaires that will be used for VET and HEI were VETMIS was developed, tested and implemented\. and training and tertiary education and training developed HEMIS is still to be done\. 7\. NTA Created with combined employer and The first NTA Board served its term and a second The second Board, appointed in terms of the VET Act, employee majority on board board is in place and functional\. is serving its term of office\. 8\. Definition of competencies that school managers, Lists of competencies for each category were approved Internal assessment of schools informed the school advisory teachers and inspectors require to render by the Permanent Secretary\. development plans for all schools\. A third round of effective teacher professional support and National assessments will commence in January 2012\. development 9\. MoE adoption of a reform plan for pre-service and The reform plan was developed and approved and the All teacher education resort under the University of in-service teacher education as recommended by four colleges of educations were merged with the Namibia\. A Continuous Professional Development Unit ACTET Faculty of Education of the University of Namibia on 1 was created and has started its work\. April 2010\. 10\. Assignment of performance targets for each Targets were set and schools were informed of these Schools are monitored and trained on the importance of school\. targets\. target setting\. 43  Prior actions Proof of Achievement Current Status Upfront Actions to Improve Efficiency 11\. Develop incentive system to attract teachers with The incentive system was approved by OPM The system has been implemented\. scarce qualifications to underserved areas and retain good performers 12\. MoE approval of operational plan to devolve This plan was developed and implementation falls The plan was piloted at the Zambezi Vocational Centre authority to VTCs under the NTA\. and is being taken to scale in other centres\. 13\. Baseline survey for establishing school register of A database of school facilities, equipment, book stock, The items for the School Register of Needs are being needs is completed etc\. is available as result of a mapping exercise\. developed by MoE and its Development Partners\. The possibility of using EduPac as tool for collecting and availing information is being investigated\. Work on school profiling is at an advanced stage\. 14\. Revised formula for providing subsidies to The formula was revised and approved\. The formula is used as basis for providing subsidies to private schools private schools\. 15\. NTA adoption of expansion plan for VET The expansion plan was developed\. The plan will be implemented as part of ETSIP activities for the next phase\. 16\. Commencement of pre-entry programmes for A third cohort of students have just finalised the The next cohort will be enrolled in 2012\. tertiary education programme\. 17\. Conditional grants have been introduced with The policy for orphans and vulnerable children was As yet this system is not operational, but the MoE is appropriate financial provisions to enable OVCs to developed\. investigating free primary education for all as the successfully complete general education recommendation was made at the National Conference on Education in June 2011\. 44 Reporting A substantive and financial reporting mechanism was agreed between the Education and Training Sector and the DPs\. This entails quarterly reports, half-yearly reports and an annual report\. The reports coincide with the GRN/Development Partners joint semi- annual review of programme implementation and the technical discussions\. Sub- programme managers report through the three Under Secretaries and submit monthly commitment registers as well as quarterly financial reports which are used to track expenditure\. Throughout ETSIP1 the depth and substance of reporting from sub- programmes continued to increase resulting in more detailed reporting on specific achievements and problems\. Achievements Relevance of design and objectives Sub-programmes reported that the design responded to most aspects of the specific sections of the sector as well as a number of cross-cutting needs such as those in HIV and AIDS\. It also paved the way for systematic reporting against commonly agreed performance indicators\. Achievement of programme objectives All activities in Pre-primary education are either on track or achieved ahead of time\. In General Education not all activities remained on track as the initial focus on expansion of access to senior secondary education and improved efficiency lost some thrust\. In VET the NTA was established, albeit some three years after the target date, and the NTA has taken over the responsibility for the management and direction of the VET system\. However, the establishment of the levy system was delayed and there was not much progress on the expansion of VET across the country\. There was no increase in the number of graduates with medium and high level skills\. In Higher Education, the National Council for Higher Education was established with a number of sub-committees and is operational\. The teacher education reform is underway and a national quality assurance system was developed for implementation in 2012\. A tracer study on the students from the pre-entry programme shows that 69%of the graduates are enrolled in mathematics and science on higher education level\. The development of the strategic plan, the development of the higher education information management system as well as the funding formula for the higher education sector are delayed\. It is foreseen that the funding formula will be implemented in 2012\. Unexpected Outcomes A new relationship was established with the private sector\. The first result of this is a management development project in the remote Kunene region to improve the performance of a cluster of schools with a lacklustre record\. Other public-private partnerships for diverse projects like improved performance in mathematics and rentable rural teacher housing had mixed results\. Etameko is a public-private partnership that provides exercise books to all learners in Namibia and lap desks/slates to all lower primary learners\. 45 Planning was taken to levels never before reached in the MoE with the design of the programme document and the supporting documents which guided the implementation of the strategic plan\. The team of officials involved in the development of the implementation plans learned skills in manipulating excel workbooks and calculation tables and became familiar with formulas, unit costs and projected costs\. The ambitious targets, which initially seemed out of reach, were accomplished\. The focus on the significance of foundation learning improved greatly\. Risks for future Management of the programme has changed significantly during the first five years of implementation from a tightly controlled management style to one where responsibility is shared and accountability held at different levels\. There is need to take another look at the procedures, especially for monitoring and evaluation\. The financial management needs to be tightened to ensure that all funds requested are spent on the intended activities\. Unless the scope of the programme is brought in line with the available funding, several activities are at risk of non-implementation\. There is also risk of losing strategic focus while responding to legitimate emerging needs\. Assessment of World Bank Performance Quality of supervision and support Supervision under the development period and DPL1 was substantive and contributed greatly to the burst of implementation energy\. The significant and sustained inputs of Dr Mmantsetsa Marope during programme development sparked intense periods of capacity development\. However, the long periods that elapsed when the education sector did not meet deadlines to complete certain parts of the work led to loss of momentum\. The delays in the signing of the loan agreements did not contribute to maintaining momentum either\. The supervision after Dr Marope left was much less substantial, hands-on and direct\. This could probably be attributed to the fact that no agreement could be reached on the procurement of re-imbursable TA and the long period between DPL1 and DPL2\. The support received though the many World Bank consultants was top class and with few exceptions these experts were highly valued and ministry staff were able to develop many new skills in programme development, reporting and implementation\. Challenges during development and Implementation of ETSIP Capacity in the MoE was identified as a possible threat to implementation during the development of the programme and a separate sub-programme was designed\. Unfortunately, this sub-programme did not deliver on its mandate and the only activity that was successfully executed was the advocacy of ETSIP\. Procurement was also identified as a possible problem and a procurement unit was established and trained\. 46 However, this unit, along with the development and implementation of procurement plans for goods and services faded into non-existence and the MoE resorted to its procurement practices before ETSIP\. During the design period it was envisioned that sub-programs would pool resources not only to strengthen programme articulation, but to also realize further efficiency gains\. This did not materialise\. Sub-programme managers did not produce organogrammes of their implementation structures\. They articulated implementation arrangements at the decentralized levels, but not sufficiently\. The scope of the programme over-challenged the implementation capacity of the MoE, especially when strengthening under the capacity development sub-programme did not take place as planned\. The costing of the programme substantially exceeded available resources\. However, the programme was never reduced in scope or reprioritised to match activities to actual funding\. The simulation model was never used as intended to inform decision taking\. Main Challenges in Further ETSIP Development The scope of the programme remains a challenge, while programme management, monitoring and evaluation need to be addressed\. A large number of activities can be removed from ETSIP as they have become routine activities\. The simulation model for ETSIP must updated and used as a tool to help policy makers make informed choices that will enable them to reach the intended strategic goals within the available resource packet\. Costing will have to be revisited to inform the re- prioritisation of the programme\. Better clarification is needed on how the ETSIP will be implemented in the decentralized structures and how funds will flow for activities in the regions\. The implementation structure at the MoE level and regional levels has to be clearly detailed, particularly regarding managing responsibilities; reporting procedures and operational responsibilities/authority\. Implementation capacity, not only of ETSIP, but of all the programmes of the sector remains a challenge\. Special attention will have to be paid to the strategic thrust of the ETSIP which is to immediately increase the supply of middle and high level skilled labor to meet immediate labor market demands and to effectively support the long-term strategic development goal of improving higher value added productivity and consequently, accelerating knowledge-driven economic growth\. Another equally important strategic thrust of the ETSIP is to progress toward equitable socio-economic development\. Neither of these was achieved in ETSIP1\. 47 Lessons Learned Programme development A large number of staff members gained skills in designing plans, budgeting, costing, writing strategic log frames, writing a policy implementation plan, completing and updating commitment registers and financial reports and designing and presenting PowerPoint presentations\. There is better understanding of the need for baseline studies and a variety of surveys to be conducted before a project is started\. Recording progress and doing assessment of activities are some of the skills acquired along with computer literacy\. There is more understanding for the necessity of proper planning, induction, training of implementers and formative and summative planning and evaluation processes\. Reporting The results framework has been reworked and is almost complete\. During the last two ETSIP review meetings, reporting was done against the indicators\. The depth of reporting has increased and the reporting of non-implementation against the reasons for bottlenecks and finding solutions for problems has improved\. Development of Terms of Reference and management of Technical Assistance The procurement of technical assistance went well and inroads were made in capacity development with regard to the design of terms of reference and the management of consultants\. Most sub-programme teams are now able to develop terms of reference for the TA they need and have also learned to project the estimated costs and timing of consultancies\. There is greater involvement in the work of consultants and, through the appointment of counterparts, capacity has been developed\. Development Partner Cooperation (Memorandum of Understanding) Cooperation with Development Partners is more structured with bi-monthly meetings and a Memorandum of Understanding to guide ETSIP implementation\. There is good representation at annual review meetings and technical discussions\. The establishment of a sector coordination forum is at an advanced stage\. 48 Abbreviations ACTET Advisory Council on Teacher Education DNEA Directorate National Examinations and Assessment ECD Early Childhood Development EMIS Educational Management Information System ETSIP Education and Training Sector Improvement Programme GER Gross Enrolment Rate GRN Government of the Republic of Namibia HAMU HIV/AIDS Management Unit HEI Higher Education Institutions HEMIS Higher Education Management Information System ICT Information Communication Technology LTR Learner Teacher Ratio MCA-N Millennium Challenge Account Namibia MGECW Ministry of Gender Equality and Child Welfare MoE Ministry of Education NANTU Namibia National Teachers Union NCHE Namibia Council for Higher Education NIED National Institute for Educational Development NTA National Training Authority OPM Office of the Prime Minister OVC Orphans and vulnerable children PPE Pre-Primary Education PQA Programme Quality Assurance SATS Standardized Achievement Tests VET Vocational Education and Training VETMIS Vocational Education and Training Management Information System 49 Annex 6: Comments of Cofinanciers and Other Partners/Stakeholders The Education and Training Sector Improvement Program of the Government of Republic of Namibia was supported by 13 Development Partners\. Currently the European Union is serving as the Coordinating Agency for the Development Partners for Education the Republic of Namibia\. The draft ICR was shared with the EU for review\. Detailed comments were provided as track changes and comments in the Word version of the draft ICR\. The final version of the ICR incorporates almost all of the comments made by the EU\. The comments were mainly related to factual corrections in the document\. The general impression from the EU was that the report is too positive with regard to equity objectives and achievements\. Many systems are still not in place to prompt a more equitable delivery of quality education\. Impression (in the report) is given that ETSIP was pretty much focusing on equity, while it is not really the case\. But overall the “moderately satisfactoryâ€? rating sounds more reasonable than the “satisfactoryâ€? ratings of the past years\. 50 Annex 7: List of Supporting Documents 1\. Program Document, Proposed First Development Policy Loan in the Amount of US$7\.5 Million to The Republic of Namibia for a First Education and Training Sector Improvement Program, April 27, 2007 (Report No\. 38571-NA) 2\. Program Document, Proposed Second Development Policy Loan in the Amount of US$7\.5 Million to The Republic of Namibia for a First Education and Training Sector Improvement Program, October 8, 2008 (Report No\. 45631-NA) 3\. Legal Agreements 4\. Aide-Memoires (2005-2011) 5\. Mid-Term Review Report (ETSIP) – October 2011 51  IBRD 33453R NAMIBIA SELECTED CITIES AND TOWNS TRUNK ROADS REGION CAPITALS MAIN ROADS NATIONAL CAPITAL DISTRICT ROADS RIVERS RAILROADS REGION BOUNDARIES INTERNATIONAL BOUNDARIES 15°S 15°E 20°E 25°E To ANGOLA ZAMBIA Lubango OHANGWENA OSHANA To Lusaka Kunene Oshikango Uutapi Oshakati Ok Katima I ava AT Ondangwa ng o Mulilo Opuwo Rundu Kongola US OSHIKOTO Bagani K AVA N G O OM Etosha CAPRIVI atako N Pan Tsumeb Om To ts\. a Sesfontein Okaukuejo Maun M m vi Otavi la Grootfontein i b U Tsumkwe KUNENE 20°S Outjo O T J O Z O N D J U PA 20°S D D Khorixas Otjiwarongo e Eiseb Okakarara s e Kalkfeki Ugab Brandberg Epata (2,606 m) r t r t Uis To Omaruru OMAHEKE Livingtsone ERONGO Karibib Okahandja B O T S WA N A WINDHOEK Gobabis Swakopmund KHOMAS To Gaborone Walvis Bay Rehoboth K a l a h a r i AT L A N TIC Kalkrand Aranos D e s e r t N Stampriet osso HARDAP b OCEAN Maltahohe Mariental N N a 25°S 25°S m i m i Fish b Bethanien Keetmanshoop D e Luderitz Great s e KARAS Karas To e r Mts\. Kimberley 0 50 100 150 200 Kilometers r t Grünau Karasburg 0 50 100 150 Miles To Gaborone NAMIBIA Oranjemund Orange This map was produced by the Map Design Unit of The World Bank\. The boundaries, colors, denominations and any other information SOUTH shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any To AFRICA endorsement or acceptance of such boundaries\. Bitterfontein 15°E 20°E MARCH 2007

REVIEW

P074086

IEG Report Number: ICRR14856 ICR Review Independent Evaluation Group 1\. Project Data: Date Posted: 12/15/2015 Country: Madagascar Project ID: P074086 Appraisal Actual Project Name: Irrigation And Project Costs (US$M): 40\.30 36\.05 Watershed Management Project L/C Number: Loan/Credit (US$M): 35\.90 34\.05 Sector Board: Agriculture and Rural Cofinancing (US$M): 0\.0 0\.0 Development Cofinanciers: Board Approval Date : 11/14/2006 Closing Date: 03/01/2011 12/31/2014 Sector(s): Irrigation and drainage (30%); General public administration sector (25%); General agriculture; fishing and forestry sector (20%); Crops (15%); Agro-industry; marketing; and trade (10%) Theme(s): Rural markets (25%); Rural services and infrastructure (25%); Water resource management (24%); Rural policies and institutions (13%); Other rural development (13%) Prepared by: Reviewed by: ICR Review Group: Coordinator: Hassan Wally Ridley Nelson Christopher David IEGPS1 Nelson 2\. Project Objectives and Components: a\. Objectives: This project was the first phase of a 12 year Adaptable Program Loan (APL)\. The Program would support the implementation of the Government’s National Irrigation and Watershed Management Program in six of the country’s main irrigation zones and associated watersheds\. However, the next stages of the APL were cancelled\. The Project Appraisal Document (PAD, p\. vii) stated that the development objective of the project was to: "sustainably increase agricultural productivity in four high potential watershed areas and their associated irrigation schemes\." The PAD (p\. vii) also stated that the Global Environment Objective (GEO) was to: "improve the environmental sustainability of land management practices in four targeted watersheds areas\." According to the Financing Agreement (p\. 6) and the Global Environment Facility Grant Agreement (p\. 4), the objective of the Project was to: "support the Recipient in establishing the basis for viable irrigated agriculture and natural resources management in four of its areas, namely: (a) Andapa (Sava Region); (b) Marovoay (Boeny Region); (c) Itasy Region; and (d) Lac Alaotra (Alaotra Mangoro Region)\." This review assesses the outcomes against the objectives stated in the Financing Agreement\. IEG notes that the Financing Agreement language of “establishing the basis for viable irrigated agriculture" was set at a significantly lower evaluative level than the PAD which called for "sustainably increasing agricultural productivity"\. The Financing Agreement essentially set an output level objective whereas the PAD set an outcome level objective\. This project was originally designed as a fully blended IDA/GEF operation, however, a delay in processing the GEF Grant led to a split approval process\. In a further communication, the project team confirmed that despite the split approval process the project was still considered a fully blended IDA/GEF project\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: 1\. Development of Commercial Agriculture (Appraisal Cost: US$12\.46 million, Actual Cost: US$7\.97 million)\. This component aimed to lay the foundations for improved market access and sustainable intensification and diversification of irrigated and rainfed agricultural systems in the project’s watersheds\. It was planned that the component would include the project area as a whole, both irrigated and upland areas, and would promote an approach focused on market-driven demand, agricultural technology development and dissemination, private sector initiative and vertical integration of supply chains, as well as promotion of partnerships among stakeholders (including public/private partnerships (PPP)\. The component included two sub components: (i) Support to agricultural services, and (ii) Support to private investment, through a cost sharing mechanism\. 2\. Irrigation Development (Appraisal Cost: US$17\.47 million, Actual Cost: US$11\.46 million)\. Includes two sub-components: (i) Management of Irrigation Schemes \. Activities would include: (i) awareness raising and mobilization of irrigation farmers and their associations; (ii) participatory diagnostic of options for management and rehabilitation of the irrigation scheme (Scheme Development Plan); (iii) selection of the preferred option for the mobilization and utilization of water resources; and (iv) preparation of a Performance Contract between water users, Region, communities and the Ministry of Agriculture, Animal Husbandry and Fisheries\. (ii) Irrigation Investments \. The Regional Directorate for Rural Development is responsible for the implementation of the irrigation rehabilitation works\. In each region, specific activities can be outsourced to (i) a national consultant for the technical studies and design of the works, including supervision of the works, and (ii) a contractor for the construction works\. A single contract per region would be signed with a consultant for the duration of the project\. 3\. Watershed Development (US$4\.33 million, Actual Cost: US$6\.71 million)\. This component aimed to lay the foundations for sustainable management of watersheds including irrigated and rainfed agriculture, the conservation of the natural heritage, and improved productivity of the natural resources\. The component included two sub-components: (i) Planning and capacity building for sustainable management of water sheds including (a) preparation, as part of Watershed Master Plans, of Watershed Development Plans in the four project areas; (b) preparation of participatory plans for managing approximately eight sub-watersheds (each of about 10-500 Km; (c)support to communication and negotiation platforms; (d) training and capacity strengthening of SLM groups; (e) support to improvement of land tenure security; and (f) the establishment of an integrated SLM knowledge and information system\. (ii) Sustainable investments in watershed including: (a) determining, through participatory negotiations, local strategies for controlling erosion, arresting gullies and reducing the sediment load of river runoff\. The project would finance investments in strategic anti-erosion works (through, among others, biological methods and technologies); and (b) interventions on communally owned land to improve plant cover, reforestation and pastures through strengthened technologies and management transfer of natural resources\. 4\. Program Management (Appraisal Cost: US$4\.43 million, Actual Cost: US$9\.91 million)\. This component would manage and use resources in accordance with the project’s objectives and procedures, and to put in place a policy framework that is favorable to scaling up of the project at the national level\. It financed the following two sub-components: (i) Management of the project \. This included: (a) provision of technical assistance, training, office equipment and vehicles, minor office upgrading works, auditing and evaluation studies, and incremental operating costs in support of project management; (b) overall project planning, quality oversight, procurement, financial management, and monitoring of project activities; and (c) outsourcing of quality oversight through independent financial and technical audits, and evaluation of project activities\. Project management encompassed all four target watersheds as well as national level coordination\. (ii) Support to national policies \. This included: (a) provision of technical assistance, studies, training, information campaigns, exchange visits and workshops for the development of major national policies, regulations, and plans considered critical to the Government’s National Irrigation and Watershed Management Program; (b) provision of support to emerging professional groups, in particular the Platforme Consultative de Riz and the Association Malgache de Producteurs de Semences; and (c) provision of support to prepare a multi-partner SLM investment development framework, in collaboration with UNDP\. This involved data collection and reporting on key performance output and impact indicators, including targeted data collection, surveys, participatory assessments and mid-term and final evaluations\. Revised Components: While components 1 and 2 were not formally revised, the scope of activities planned under Component 1(Development of Commercial Agriculture) and 2 (Irrigation Development) were adjusted during the two main restructurings of 2011 and 2012\. 1\. The reallocation of funds (first restructuring) from the first two components to the Watershed Development component reduced the number of sub-grants and focused investments under the sub-grants on  production-related activities only\. This included seed production, distribution of inputs and support to community granaries\. Under the second component, the target for rehabilitation of irrigated areas was reduced from 21,000 ha to 15,000 ha\. The reason for the reduction was to free up funds to start the implementation of the Watershed Development Component which was getting pushed back due to the delayed processing of the GEF grant\. 2\. The second restructuring in August 2012, after the GEF agreement had been signed in December 2011, increased the number of sub-grants but did not reintroduce the market access-related and other support investments to avoid the risk of the funds getting too thinly spread over a wide range of activities\. Along the same lines, it was decided that production-related activities in irrigated schemes would focus exclusively on rice, thus leaving out diversification support\. Additionally, the irrigation rehabilitation area target was increased to 19,000 ha\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost\. Total project cost at appraisal was expected to be US$40\.40 million (PAD, Annex 5)\. The ICR (Annex 1) reported that actual project cost was US$36\.05 million\. The difference was mainly due to a cancellation of US$0\.65 million of GEF Grant and a US$2\.4 million shortcoming on beneficiary contributions\. Financing\. The Project was financed through an IDA Credit worth US$30\.0 million; and a Global Environment Facility Grant worth US$5\.90 million\. Actual amounts disbursed were US$28\.80 million and US$5\.25 million for the IDA Credit and the GEF Grant, respectively\. Borrower Contribution \. The beneficiary communities were planned to contribute US$4\.4 million\. Actual amount contributed was US$2\.0 million (ICR, Annex 1)\. No counterpart funding was expected from the Government\. Dates\. The project closed three years and ten months later than its expected closing date\. The project was restructured three times, all Level 2\. The first restructuring was in February 2011 in order to free up funds to start the implementation of the Watershed Development Component which was getting pushed back due to the delayed processing of the GEF Grant\. The second restructuring was in August 2012 where it was decided that production-related activities in irrigated schemes would focus exclusively on rice, thus leaving out diversification support; while the irrigation rehabilitation area target was increased to 19,000 ha\. The third restructuring was in May 2014 in order to complete some critical irrigation activities (Ankaibe weir and primary canal construction) that had been delayed by adverse climatic conditions; also the project closing date was extended by a six month to December 31, 2014\. The Mid-Term Review was conducted on time (September, 2011)\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Substantial\. At appraisal, objectives were substantially relevant to the Government's priorities for irrigation and watershed management but the Financing Agreement objectives used here ("\. establishing the basis for viable irrigated agriculture \.") fell well short of the PAD objective in ambitiousness (\. to sustainably increase agricultural productivity \.")\. There was an evident need for action on rice productivity\. In 2006, about 1\.1 million hectares (about 40% of arable land) was under irrigation in both traditional and more developed schemes\. Rice was the main staple crop and represents about 40% of total gross agricultural production value and 50% percent of total calorie consumption\. Over the period from 1970 to 2004 the area of irrigated rice increased by 0\.4% per year and yields had increased by 0\.7% per year over the same period, much slower than in other major rice producing countries (PAD, p\. 2)\. Objectives were in line with the Government's National Rural Development Program (NRDP, 2005) which called among other things to improve food security and production through increased productivity, diversification, and risk management; and to promote better natural resources management\. Objectives were also in line with the Government's National Program of Watershed Management and Irrigation Improvement (2006), where agricultural development takes into account land management issues at the watershed scale\. Objectives were also in line with the World Bank's Country Assistance Strategy for Madagascar (FY07-11) which had three priorities, (i) improve governance; (ii) promote broad based growth; and (iii) provide human security\. (IEG was not able to locate a 2014 strategy for Madagascar\.) The project was expected to contribute to the second priority by promoting sustainable land management across the watersheds\. Objectives were also in line with the GEF Operational Program 15 concerning the mitigation and prevention of land degradation\. At completion, objectives continue to be substantially relevant as most irrigation schemes are far from being fully operational due to high sedimentation and lack of maintenance\. Objectives continue to be in line with the Government's priorities in irrigation and watershed management\. b\. Relevance of Design: Substantial\. Design included a statement of objectives that explained the aim of the project and specified the project areas, however, it did not mention any specific actions that the project would support nor specify project beneficiaries\. As noted above, the objectives in the Financing Agreement fell well short of the PAD objective\. Better coordination of objective statements would have improved clarity of purpose\. To achieve the stated objective, design featured four components\. In terms of the logical chain, the first would contribute towards achieving the objective through promoting an approach that focused on market-driven demand, dissemination agricultural technology and strengthening the links between producers and markets\. It would also provide demand-based support to private investment by operators, farmers and farmer groups at all levels of the agricultural activity\. The second component would focus on capacity building of Water User Associations and identification and rehabilitation of irrigation sites in addition to improving land tenure security\. The third component would contribute to the objective through supporting watershed management plans and providing the necessary capacity building training in addition to financing investments in strategic anti-erosion works and supporting interventions on communally owned land to improve plant cover, reforestation and pastures through strengthened technologies and management\. The fourth component would focus on project management and supporting national policies\. Design was comprehensive and geared towards tackling multiple constraints in a simultaneous fashion within a given watershed\. However, it was complex, incorporating market, production, infrastructure rehabilitation- and land conservation related investments, all with cost-sharing mechanisms, in addition to capacity and institutional building; and improving land tenure security\. The Results Framework did not provide clear links between the project inputs, outputs and expected outcomes\. Also, the objective to “establishing the basis for viable irrigation” is too vague to be measurable and in particular the measurement basis for “viability” is not clear in the Results Framework\. The matching grants approach promoted by the project was a partial approach towards sustainable adoption of improved technologies\. An alternative might have included a combination of demonstration plots with targeted extension and improved access to microfinance\. 4\. Achievement of Objectives (Efficacy): PDO: support the Recipient in establishing the basis for viable irrigated agriculture and natural resources management in four of its areas\. Modest\. Outputs By project completion the following intermediate outcomes/outputs were achieved:  6,122 ha were cultivated with improved technologies and/or inputs provided through the project compared to a baseline of none, original target of 4,050 ha and a revised target of 5,175 ha\.  7,500 ha were provided with improved irrigation and drainage services which represents 56% of revised target of 13,362 ha, original target was 21,780 ha\. Infrastructure rehabilitation work was 100% completed in one site only while the other sites were 46%, 12% and two sites at 8% completion\.  The area cultivated during the dry season in the irrigation schemes targeted by the project was not measured due to discontinuing the diversification efforts\. (Baseline: 1,120 ha, original target: 3,000 ha, revised target: 4,150 ha)\.  5 agriculture service centers were established and functioning (target achieved), however, with limited impact in linking farmers to suppliers and service providers\.  Between 5900 to 9100 farmers have adopted an improved agricultural technology promoted by the project compared to an original target of 14,810 and a revised target of 32,130 and a baseline of none\.  1,935 sub-projects (target achieved) were financed and implemented compared to an original target of 1,554 and a revised target of 1,560\.  8 new technologies were demonstrated by the project (target achieved) compared to an original target of 9 and a revised target of 6\.  8,300 water users were provided with improved irrigation and drainage services (40% of revised target of 20,278, original target was 10,117)\.  88 Water User Associations were functional (target achieved, revised target: 78, original target: 60, and baseline: none)\. Women represented 27% of the WUA members supported by the project\.  The Agency for irrigation infrastructure management was not established (target not achieved), but the new Law 14-042 that in particular provides for the establishment of the Agency for Irrigation Infrastructure Management at national and regional levels was promulgated in January 2015\.  4 watershed development plans were developed (target achieved) and 17 sub-watershed management plans  were developed and signed (target achieved, revised target: 13, original target: 8)\.  117 anti erosion measures were implemented including: 81 lavaka biological and mechanical stabilization, 14 river banks stabilization, 19 canals and drains reinforcement, and 3 sand deposits stabilization\. (Degree of achievement was 81% against original target of 145 and 183% against a revised target of 64)\. Outcome  The average yield of irrigated rice at the end of the project according to ICR estimates (Annex 3, table 2) was 3\.4 tons/ha, a 41% achievement of the objective of an increase from 2\.7 to 4\.4 tons/ha and a 26% increase in absolute terms\.  While crop diversification and increasing crop intensity are critical components of irrigated agriculture viability in the context of an increasing fragmentation of the land, diversification efforts were abandoned by the project\.  Five Agricultural Service Centers were established, however, their impact on linking farmers to suppliers, produce collectors, and finance institutions was limited\. Activities were mostly focused on collecting and making available to farmers input and output prices in their respective region and assisting farmers in organizing themselves in order to access the project services\.  The management of irrigation schemes by Water User Associations was strengthened as demonstrated by a 30-fold increase on a low base in the collection of irrigation service fees\. However, WUAs remain fragile and in need of further support to be financially viable\. Irrigation service fees collected are still insufficient to cover basic O&M costs despite increasing 30-fold during the project life\. The envisioned Agency for Irrigation Infrastructure Management was not established by project closing\.  The area under Sustainable Land Management practices was less than 5% of the watershed total area (ICR, para 60)\. In addition, the farmers showed little interest in the sustainable land management "under-cover" cultivation sub-projects on upland as demonstrated by a 100% drop-out rate between years 1 and 3\.  While five guichets foncier were established, they were not expected to issue any land certificates until after seven years of project implementation due to delays in the acquisition of aerial photography\.  Overall achievement of the PDO is rated modest due to limited achievements to establish the basis for viable irrigated agriculture and natural resources management\. Also, there are concerns on the accuracy of M&E data which casts doubt on the reported achievements (ICR, p\. 37)\. GEO: the GEF Trust Grant Agreement stated only the project's PDO while the ICR used the GEO as stated in the PAD: "to improve the environmental sustainability of land management practices in four targeted watersheds areas\." While 1,425 farmers adopted SLM activities which represents an achievement rate of 59%, the drop-out rate for under-cover cultivation sub-projects that represented 58% of subprojects on uplands was 100% between Year 1 and Year 3\. This highlights the lack of interest of farmers for this SLM technique\. The impact of anti-erosion measures was unclear due to the lack of any indicators to assess this area\. The project almost achieved its target on afforestion efforts, however, the absence of maintenance arrangements and future exploitation of the newly vegetated areas casts doubt on the sustainability of these activities\. 5\. Efficiency: Economic and Financial Efficiency ex ante  The project investment cost was expected to be around $1,330 per hectare for the four-year period of project implementation, or about $330 per hectare per year\. The economic analysis was carried out separately for each of the four watersheds selected by the project because the initial conditions of the irrigation systems and upper watersheds were different along with the amount and balance between the three components that was applied to each of the watersheds\.  The economic benefits of the project were expected to be: (i) additional paddy production coming from improvement in cropping intensity in well-irrigated areas and in yield linked to introduction of new varieties in partially-irrigated areas, (ii) other additional crop production coming from a reduction in nutrient depletion, and (iii) lower O&M costs coming from a reduction in siltation and in cyclone damages are based on projected agricultural production increases in the four watersheds, compared with agricultural production in the situation without the project\.  Paddy productivity in the irrigated areas was expected to be around 3 tons per hectare per year, with some variability between watersheds\. Andapa had the lowest productivity at 2\.3 tons per hectare per year, while Lac Alaotra had the highest at 3\.3 tons per hectare per year\.  Without the irrigation and watershed management project, the paddy production of the irrigated areas that would have been concerned by the project was expected to decrease from around 54,000 tons per year at the beginning of the period to 43,000 tons by the end of the period (without taking into account the impact of cyclonic damages on productivity), or a loss of 21%\. At the same time, the higher area (tanety area) production was expected to decrease from 35,000 tons to 11,000 tons, or a loss of 69%\. The loss in paddy production alone was expected to be equivalent to the milled rice consumption of 12,000 households for an entire year\. The cumulated difference of production in the situation with the project compared to the situation without the project was expected to be 105,000 tons during the 4 years of project implementation, 55,000 tons of which are paddy, the equivalent of the annual consumption of 355,000 people or around 65,000 households\.   The calculations assumed a real discount rate of 10%, a total life of public investment of 25 years, and use of foreign currency (US$) at the border price level\. Using conservative estimates for the unit rent, the pace, and the quantity of benefits, the investment is likely to increase the welfare of the country by about US$9\.5 million, corresponding to an economic rate of return (ERR) of 14%\. ex post  Economic rates of return (ERR) and Net Present Values (NPV) were computed for each region, as was done at appraisal, using a slightly different methodology to account for the variations between the plans that were made at appraisal and actual implementation\.  The average cost per hectare for irrigation rehabilitation was only US$175 compared to US$704 at appraisal\. In comparison, irrigation infrastructure rehabilitation projects currently funded by the African Development Bank in Madagascar have a cost per hectare of US$ 2,000 to US$ 3,000 and favor concrete coated primary canals on durability grounds (ICR, p\. 22 footnote#14)\. While low costs could be efficient, such a large difference raises some doubt about the quality of works funded by the project and therefore about sustainability\.  Benefits from diversification were not included since diversification activities were discontinued early in the project life\. Only the costs directly related to investments in the irrigated areas were taken into account in the economic analysis\. A 10 year lifespan for project investments (compared to 25 years at appraisal) was used to reflect the much lower intensity of the rehabilitation works that were actually carried out\.  Overall project ERR was estimated at 15% after including the Ankaibe diversion weir and feeder canal construction which were both not envisioned at appraisal\. Ankaibe diversion weir and feeder canal boasts the highest ERR at 27%\. However, without the Ankaibe diversion canal, the overall ERR would drop to 7%\. This reflects the limited results in terms of profitability for farmers and the fragility of the economic viability of most of the irrigation schemes supported by the project\. Also, the high drop-out rates for the uplands intensification sub-projects reflects "lack of attractiveness of the proposed packages to farmers in the absence of a subsidy element (ICR, p\. 61, para 9)\." Administrative and Institutional Efficiency The project closed three years and ten months late (total aggregate implementation period was about 8 years)\. This partially stemmed from a 15 month disbursement freeze due to the political crisis in 2009 which resulted in total suspension of project activities\. Actual spending across components was slightly different from what was originally planned\. Component 4 (Project Management) exceeded its originally planned share by 230% from US$4\.31 million to US$9\.91 million, mainly at the expense of Component 1 (Development of Commercial Agriculture) and Component 2 (Irrigation Development) which both recorded 63% and 66% of their appraisal estimates, respectively\. The ICR (p\. 57) attributed this increment to the extension of project by three years and ten months\. Component 3 (Watershed Development) also exceeded its originally planned share by 155% from US$4\.33 million to US$6\.71 million\. Finally, US$0\.65 million from the GEF Grant were cancelled\. Efficiency is rated modest\. a\. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 14% 72% ICR estimate Yes 15% 100% * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Relevance of objectives and relevance of design were each rated substantial, although design was complex\. Efficacy was rated modest due to limited achievements in establishing the basis for viable irrigated agriculture and natural resources management\. Efficiency was rated modest due to limited results in terms of profitability for farmers, the fragility of the economic viability of most of the irrigation schemes, and questions about sustainability, in addition to significant implementation delays\. a\. Outcome Rating: Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: Risk to development outcome is rated high\. This stems from six main concerns:  By project completion, the water user associations supported by the project were still not fully capable of assuming full responsibility of the O&M of the rehabilitated schemes\. In addition, the fees collected to cover O&M  costs were significantly below the actual amounts needed\. This would undermine efforts to maintain the rehabilitation investments\. Furthermore, the Irrigation Scheme Maintenance Fund which was supposed to take care of non-transferable infrastructure maintenance was not operational yet\.  The absence of a sustainable, affordable and accessible financing mechanism to farmers limits their capacity to purchase fertilizers needed for optimal crop productivity\. This in turn would translate into lower yields and lower profitability to farmers; and would negatively impact water use fees recovery\.  The lack of any maintenance and future exploitation arrangements for afforestation and pasture improvement sites could undermine the sustainability of these areas\.  The low involvement of communal authorities in the project could result in limited support to project activities after completion due to lack of ownership\. Activities that could be impacted include: Water User Associations and Sustainable land management associations, O&M of the various investments, extension, land tenure security and the maintenance and operation of the guichets fonciers\.  There is concern that the Regional Directorate for Rural Development will not have the resources necessary to conduct the very demanding field work of supervising the Organizations of Producers both in irrigated areas and the uplands\. In addition, these organizations should have reached a more advanced level of autonomy at the end of the project compared to where they actually were before leaving them under the distant supervision of the Regional Directorate for Rural Development\.  The deteriorating state of the access roads to some of the project sites (in particular the road leading to the Lac Alaotra area, which is Madagascar’s main rice basket) and of feeder roads within the irrigation schemes may negatively impact achievement on the agricultural productivity side\. However, in a further communication the project team explained that deterioration of rural roads was not seen as a long term risk\. The team explained that there were synergies with other Bank funded projects and that roads were expected to be rehabilitated\. a\. Risk to Development Outcome Rating : High 8\. Assessment of Bank Performance: a\. Quality at entry: The Government of Madagascar requested World Bank and Global Environmental Facility (GEF) funding for an Irrigation and Watershed Management Project to accelerate economic growth in rural areas, through an integrated effort aimed at increasing productivity in high potential production zones\.  The project preparation was long and took 2 years\. Objectives were consistent with the Government's new irrigation strategy\. In a further communication the project team concluded that too much time was spent on studies and that the project should have followed a learning by doing approach\.  During project preparation the lending instrument was changed from a Sector Investment Loan (SIL) to an Adaptable Program Loan (APL) after a reduction in IDA allocation\. This resulted in a shorter four year time frame for a rather ambitious and complex project\.  The project was supposed to be a fully blended IDA/GEF financed operation\. However, changes in the processing of GEF grants related to sustainable land management resulted in a split approval process\. The IDA Credit was first approved in November 2006 while the GEF Grant was processed as a separate package that was approved on November 6, 2008 (ICR, para 22)\.  Design featured a comprehensive approach geared towards tackling multiple constraints in a simultaneous fashion within a given watershed\. However, it was complex incorporating market, production, infrastructure rehabilitation- and land conservation related investments, all with cost-sharing mechanisms, in addition to capacity and institutional building; and improving land tenure security\.  Design benefitted from five lessons described in the PAD (p\. 12) as conditions of success from evaluations of programs and projects in the irrigation sub-sector\. These include: an integrated approach, a conducive economic environment, an unambiguous institutional framework, an approach that emphasizes capacity strengthening and a participatory approach\.  At the preparation stage seven risks were identified, four were substantial and three were moderate\. Overall mitigation measures were adequate, (but according to the ICR (para 29) "the project failed to apply some of these mitigation measures and the failure of the M&E system did not allow the introduction of corrective measures")\.  Two important risks were overlooked at the preparation stage, first was the low rate of adoption of new technologies; and second was the possibility that the project will revert to some of the shortcomings that had characterized previous irrigation development experiences, for example: "focusing on technical extension messages with little attention paid to the economic constraints farmers are facing and little effort to differentiate between farmers in order to develop a range of messages, technologies, and accompanying modes better adapted to each farmer category; insufficient emphasis put on issues such as land tenure security, access to credit and markets and diversification that are critical for sustainable and replicable productivity enhancement; insufficient attention paid to the human and material resources needed, during and after the project, to accompany the beneficiaries and their associations until they can possibly be weaned off  external support without jeopardizing sustainability; and insufficient attention paid to the importance of feeder and main road infrastructure status to maximize project outcomes (ICR, para 32)\."  M&E design suffered from shortcomings (see section 10a)\. Quality-at-Entry Rating: Moderately Unsatisfactory b\. Quality of supervision: The project was implemented under a difficult environment\. It experienced a 15 month disbursement freeze and high political instability during the transition period until elections were held during the final months of the project\. There are five main points on supervision:  Supervision should have paid more attention to several important elements of component design including diversification, value chain approach and land tenure securisation or should have at least offered alternative strategies\. According to the ICR (para 83) these issues "have been largely sacrificed on the altar of implementation simplification and disbursement acceleration due to the delays the project had accumulated\."  More attention should have been given to improving M&E earlier in project implementation;  More attention was needed in the application of risk mitigation measures\.  Supervision missed the opportunity to trigger the Safety of Dams (OP 4\.37) safeguard in relation to the Sahamaloto dam\.  More positively, supervision was regular and took a number of strategic decisions to facilitate implementation\. These included: the introduction of a more realistic "upfront contribution considered realistic" approach which helped implementation by lifting the deadlock created by the original compulsory 20% upfront beneficiary contribution to works\. After the disbursement freeze, implementation benefitted from the recruitment of Strategic Partners with international experience and the use of multiannual Performance Contracts\. An appropriate supervision decision was the use of a significant share of the project resources (21%) to finance the Ankaibe diversion weir and feeder canal\.  In terms of the supervision challenge, the complicated nature of project financing (which was supposed to be a fully blended IDA/GEF project from the start) added extra work to the project team beyond normal supervision\. Quality of Supervision Rating : Moderately Unsatisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The Government was supportive and committed to the successful implementation of the project\. The project received high management support when needed\. The Government also contributed a substantial budget towards the implementation of the Ankaibe weir and feeder canal resettlement action plan (ICR, para 37)\. While political unrest was exogenous to the project, it was nevertheless a fact that negatively impacted implementation\. As a result of political unrest in 2009-2010 the project faced a disbursement freeze for 15 months\. This negatively impacted implementation and contributed to a loss of confidence by the project's beneficiaries\. Finally, the Government did not extend enough resources at the end of the project to the Regional Directorate for Rural Development to enable it to continue, consolidate, and possibly expand the project activities\. Government Performance Rating Moderately Satisfactory b\. Implementing Agency Performance: The project was implemented under the Ministry of Agriculture through a dedicated Implementation Unit and the Regional Directorate for Rural Development\. The project Implementation Unit responded promptly to the supervision missions’ recommendations\. Project implementation also benefitted from Technical Assistance at the regional and national levels\. Also, relying on two Strategic Partners (local consultant firms with international experience) for implementation of activities in the four regions and on an external financial management agency proved to be an efficient arrangement in light of the prolonged disbursement freeze\. Financial Management and Procurement activities were overall successful\. However, the project missed several targets in particular for rehabilitation of irrigation sub-projects\. This casts doubt on the effectiveness of the implementation arrangements and the performance of the implementing agency\. M&E implementation was particularly weak\. More attention should have been given to M&E activities\. (The ICR (para 40) reported that "deficient M&E did not permit a meaningful evaluation of outcomes at project closing\." ) Implementing Agency Performance Rating : Moderately Unsatisfactory Overall Borrower Performance Rating : Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: M&E design suffered from a number of shortcomings:  The project development objective was to"establish a viable basis for irrigated agriculture and natural resources management" which reflected a clear dimension of sustainability and replicability\. However, PDO level indicators were not geared to assess impact or sustainability\. Most outcome indicators were qualitative for example: dissemination of innovative technologies, improved management, and increased support\.  A number of indicators were poorly defined, in particular those expressed as a percentage increase of a baseline situation that was never assessed afterwards\. The indicator related to increase in vegetation cover was dropped after the first restructuring for no apparent reason despite its relevance to assess SLM\.  The revision of the result framework during the restructurings of 2011 and 2012 should have allowed a better quantification of the PDO level results indicators, however, these revisions resulted in PDO level indicators that were redundant with the component outputs indicators; and impact and sustainability continued to be understated\.  M&E design did not include any indicators to capture important aspects of the project including: technology spread-out as a result of the demonstrative effect of the sub-projects on irrigation schemes and uplands; impact of the work of the Agricultural Service Centers; impact of the work of the guichets fonciers on securing land tenure; and the impact of the various anti-erosion measures tested on siltation\. b\. M&E Implementation: M&E implementation was the responsibility of a dedicated unit within the Project Implementation Unit\. Implementation was negatively impacted by a poor design and limited staff capacity\. The M&E unit produced data that was not reliable as figures were collected without double checking and in some cases numbers looked over optimistic\. These issues cast doubt over the reported achievements\. M&E activities focused on quantitative data that pertained to project outputs, however, the qualitative side in terms of project impact and sustainability was overlooked\. c\. M&E Utilization: Out of four project evaluations envisioned at appraisal, only one at the end of the project was carried out\. With poor design and problematic implementation, M&E utilization was deficient\. The ICR (para 40) concluded that "M&E did not permit a meaningful evaluation of outcomes at project closing\." M&E Quality Rating: Negligible 11\. Other Issues a\. Safeguards: The project was classified as a category A under the World Bank environmental screening procedures specified in OP/BP 4\.01\. It triggered the following five Safeguard Policies: Environmental Assessment Policy OP/BP 4\.01, Natural Habitat Policy OP/BP 4\.04, Forests Policy OP/BP 4\.36, Involuntary Resettlement OP/BP 4\.12, and Pest Management OP/BP 4\.09\. Environmental Assessment (OP/BP 4\.01)\. The capacity of the project's team to manage environment and social safeguard activities benefitted from clinics and on-the job training\. This contributed to the successful formulation and implementation of Environment and Social Impact Assessments and Resettlement Plans\. The ICR (para 42) reported that one of the target irrigation schemes (Sahamaloto) was supplied by a dam of less than 15 m in height, but its water storage capacity was more than 3\.0 million cubic meters\. According to the Bank's OP4\.37 "Safety of Dams" the storage volume of this dam puts it under the classification of large dams\. Under the current definition of OP4\.37, the policy should have been triggered even though the project did not undertake any construction works on the dam itself\. The project only rehabilitated an irrigation network of primary and secondary channels that are dependent on the dam; mostly dredging irrigation channels and reinforcing embankments\. The ICR (para 42) stated that "paragraph 8 and subsequent paragraphs of OP4\.37 require an independent safety review and if necessarily, other safety measures\." The ICR noted that OP 4\.37 “Safety of Dams” would be triggered under the ongoing Emergency Food Security and Social Protection Project which would be financing follow-up activities on the same dam and irrigation scheme\. According to the ICR (para 41) "overall safeguard compliance was rated either Moderately Satisfactory or Satisfactory throughout the project life and was rated Satisfactory at the end of the project\." However, there is no further information provided on compliance with the Bank's safeguards policies with regards to the above mentioned triggered policies\. In a further communication the project team explained that there were no issues of non-compliance for any of the safeguards policies triggered by the project\. b\. Fiduciary Compliance: Financial Management \. The project benefitted from hiring an experienced external financial management agency from the beginning of the project\. Also, an internal auditor was hired in 2011\. According to the ICR (para 45) financial management reports were timely and of high quality\. No information was provide on internal or external audits\. In a further communication the project team explained that "all audit reports were clean without any reserve\." Procurement\. While procurement faced some difficulties during implementation, these were swiftly addressed by the project's team and the central administration\. According to the (ICR para 46) "all procurement under the project had complied with the Bank’s rules and procedures\." In a further communication the project team explained that there were no instances of misprocurement\. c\. Unintended Impacts (positive or negative): d\. Other: 12\. Ratings: ICR IEG Review Reason for Disagreement/Comments Outcome: Moderately Moderately Unsatisfactory Unsatisfactory Risk to Development High High Outcome: Bank Performance: Moderately Moderately Unsatisfactory Unsatisfactory Borrower Performance : Moderately Moderately Significant M&E shortcomings and Satisfactory Unsatisfactory missed targets in particular for rehabilitation of irrigation sub-projects\. In addition, per ICR guidelines, where there is a split rating for borrower performance, the Outcome rating determines the rounding above or below the line\. Quality of ICR: Satisfactory NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: The following lessons are emphasized with adaptation of language:  Establishing an adequate M &E system is critical to assessing project achievements \. Establishing an  adequate M&E system is also important when it comes to providing project management with impact and sustainability assessments that may induce shifts in strategies and resources during the project life\. This is particularly the case in complex projects with both productivity and environmental sustainability objectives which interact\.  A farm systems approach to agricultural intensification that accommodates labor and financial constraints and an understanding of incentives is more important than simply ensuring that inputs are readily available \. The project's experience showed that the matching grant approach proved to be less efficient for agricultural intensification with the exception of its initial demonstration effect\. Initially in the first year, farmers took advantage of the opportunity to use heavily subsidized new technologies, but due to risks, lack of labor or lack of access to finance, opted for stepping down to less capital intensive practices in the second and third year\. A more systems focussed approach might have been a combination of realistic demonstration plots exhibiting moderate resource scenarios with parallel targeted extension support and improved and easier access to microfinance\.  Watershed projects should not claim significant downstream impact when it is unattainable \. While broad scale erosion control and soil conservation measures would always be technically desirable, there is an opportunity cost in terms of competing public expenditure\. Unless there is broad coverage of a watershed very quickly, rarely possible, there is unlikely to be significant and quick impact on erosion control, sedimentation and downstream dam life\. A realistic claim with limited resources would be to learn from pilots about how best to do watershed treatment selectively and efficiently to enable strategic thinking for later broader, longer term, interventions\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is well written\. It provided thorough coverage of project activities and reported candidly on shortcomings\. It included several lessons that reflect the project's experience, although some lessons are closer to recommendations\. The ICR provided a logical discussion of outcomes to the extent possible given the weakness of M&E data\. It also included a very good farm management/farm economics analysis\. It reported well on the risks identified at the preparation stage and discussed how effective were the mitigation measures\. There were some weaknesses or missing points that the ICR should have covered including:  Safeguard compliance in particular with regards to: Natural Habitat Policy OP/BP 4\.04, Forests Policy OP/BP 4\.36, Involuntary Resettlement OP/BP 4\.12, and Pest Management OP/BP 4\.09\.  External Financial Audits;  Candor of ISRs;  Lessons that informed the project design; and,  (a smaller point) the ICR reported different time frames for the disbursement freeze, 15 months and 18 months\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P069293

 ICRR 12633 Report Number : ICRR12633 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 06/15/2007 PROJ ID : P069293 Appraisal Actual Project Name : Health Reform Lil US$M ): Project Costs (US$M): 5\.51 5\.37 Country : Azerbaijan Loan/ US$M ): Loan /Credit (US$M): 5\.0 4\.9 Sector Board : HE US$M): Cofinancing (US$M ): Sector (s): Health (73%) Central government administration (20%) Compulsory health finance (7%) Theme (s): Health system performance (40% - P) Other communicable diseases (20% - S) Injuries and non-communicable diseases (20% - S) Rural services and infrastructure (20% - S) L/C Number : C3523 Board Approval Date : 06/12/2001 Partners involved : UNICEF Closing Date : 12/31/2004 09/30/2006 Evaluator : Panel Reviewer : Group Manager : Group : Denise A\. Vaillancourt Ridley Nelson Alain A\. Barbu IEGSG 2\. Project Objectives and Components: a\. Objectives: According to the Development Credit Agreement the objective of the project is to implement alternative approaches to strengthen and reform the Borrower's district primary health care services \. (According to the Project Appraisal Document its objective is to test ways to strengthen and reform district primary health care services \.) The project is a Learning and Innovation Loan (LIL), which places strong emphasis on operational learning and on the integration of lessons of PHC reforms with national health policy -decision-making\. The key performance indicators are grouped around two subobjectives related to the components : (a) to increase the knowledge of the Ministry of Health (MoH) officials in appropriate strategies to strengthen and reform district primary health care services and (b) to strengthen and improve the utilization of primary health care (PHC) services in five target districts\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): 1\. Capacity Building for Health Policy Reform (US$0 millio n or 15\. US$0\.87 million US$0\.69 15\.9 percent of total; actual cost : US$0 12 \.5 percent of total ): (i) Analysis and Planning Development (US$0\.13 million): the development of million or 12\. appropriate models for PHC through technical assistance, training and tours to other transition countries to observe more efficient and cost-effective health care delivery models; (ii) Health Financing Reform (US$0\.34 million): training, survey work and technical assistance in the areas of : health system financial planning (user fees and equity, costs of basic health care package and health financing options ); health insurance feasibility; and private health spending; (iii) Pharmaceutical Policy Development (US$0\.9 million): technical assistance and training to support the development and implementation of policy reforms (essential drugs, national drug formulary, rational drug use and decentralized decision-making) and the analysis of lessons from drug revolving fund pilots supported by UNICEF; and (iv) Health Management Information System (HMIS) Development (US$0\.31 million): development of a HMIS and communications system for improved monitoring, evaluation, and supervision through the provision of technical assistance, training and goods \. 2\. District Level Primary Health Care Reform (US$3 65 \.8 percent of total; actual US$ 3\.55 million or US$ 3\.63 million or 65\. 64 \.4 percent of total ): provision of material support (refurbishment of 16 PHC facilities including a Central District 64\. PHC Center in each district) and training to five districts in order to support and enhance reforms in PHC piloted by UNICEF in other districts\. Project districts are: Goycay, Salyan, Samkir, Sarur (inclusive of Sadarak) and Xacmaz\. Support would rationalize PHC services, implement PHC models, improve the quality and access to PHC services, and strengthen the management and clinical capabilities of district health personnel, all with a view to facilitate learning from experience that would be utilized to strengthen national reform efforts \. Five additional districts (Qusar, Qazax, Sabirabad, Kurdemir and Babek ) would serve as control districts, for which the only activity would be data collection on key project indicators \. 3\. Project Coordination and Evaluation (US$1 18 \.4 percent of total; actual US$ 1\.13 or 111 percent of US$ 1\.0 million or 18\. total ): support of a PCU staffed by consultants (Director, accountant, procurement specialist, training coordinator ); and technical assistance and other support to MoH for project evaluation (series of household surveys and observational studies of clinic operations and physician practices at baseline and end of the project in five intervention districts and five comparison districts \. Project components remained unchanged, with a couple of exceptions \. The project subcomponent, which aimed to develop a management information system, was dropped when the Bank and the Government could not agree on the technical specifications for the procurement of hardware and software associated with this component \. MoH decided to cancel the procurement and used its own resources to this end \. The establishment of revolving drug funds (to overcome the high price and scarcity of drugs in the market ) was discontinued by MoH after a 2003 UNICEF study showed that the price of drugs dropped substantially and were widely available in the market \. Project savings were devoted to other activities (purchase of ambulances and basic furniture for PHC facilities in pilot districts )\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Total project cost was 97 percent of the appraisal estimate \. Government fulfilled its counterpart obligation, although the last payment tranche was late \. IDA financed SDR 3\.5 million or 88 percent of the original credit amount of SDR 4\.0 million\. The original closing date of December 31, 2004 was extended three times and the project closed 21 months later than planned on September 30, 2006\. The original implementation period of 3\.5 years, in retrospect, was too short for implementation, especially for a first project in this country \. The first extension was to accommodate studies, the full implementation of the MIS and civil works \. The second extension was granted to allow the use of remaining funds for consultant services to carry out a final audit, and to secure the services of an architect for the preparation of the follow-on operation under preparation \. The third extension allowed the use of remaining project funds to support other consultant services and investments associated with project preparation \. 3\. Relevance of Objectives & Design: Overall relevance is modest\. Relevance of objectives is substantial \. This first World Bank health operation in Azerbaijan aimed at addressing two of the three program targets of the FY 2000-2002 CAS: to invest in social development, including poverty alleviation measures; and to support radical reform of public sector institutions \. It was also supportive of the CAS ’ health sector-specific objective of addressing the inefficient health financing system and the over -reliance on specialist facilities and physicians\. Relevance of design is modest\. The design was grounded in substantial policy dialogue with the Government between 1992 and 2000 as well as on good analytic work \. The project expanded on a previously successful health pilot program supported by UNICEF and took into account the lessons learned from that operation \. It was designed on the basis of a participatory approach and was limited in its scope (learning-by-doing in five pilot districts)\. It coordinated with UNICEF a continuity of their technical role for coherence across pilots \. The LIL instrument was appropriate for a first-time Borrower looking to undertake radical reform of the health sector \. The design document identifies 13 questions that the learning process would address, of which 5 are presented as "Key LIL Questions" on page 2 of the PAD, and 8 are presented on page 9 specifically for a LIL\. However, the design of interventions and the choice of indicators were not reflective or supportive of a learning process and were not overtly liked to these questions\. (For example, the indicator of "improvements in access, quality and utilization of primary health care services in the targeted districts " does not answer the key LIL question, "How can the existing primary health care services be strengthened? " ) Rather, they were more reflective of a traditional investment loan, aimed at capacity building and health services strengthening, under which learning almost inevitably occurs, but is not always systematically documented\. The monitoring and evaluation plan was well developed to measure health systems strengthening, again, more in line with a traditional investment loan \. Furthermore, the pilot and learning process that was intended was not well defined (what alternatives would be tested to answer each of learning questions posed in the design document)\. In retrospect, UNICEF’s role of monitoring and oversight of implementation of Component 2 (district services) may have prevented MoH from taking the opportunity to assume its responsibility under this project and to build its capacity in the process \. The Region has pointed out to IEG that the project design was relevant to the very challenging country context at the time of project preparation, characterized by weak governance, possible corruption at senior levels of MoH and low commitment to reform \. The LIL was chosen as the appropriate instrument for promoting dialogue, consensus, ownership and broader political commitment among national stakeholders \. 4\. Achievement of Objectives (Efficacy): Overall efficacy : substsantially achieved \. The performance of PHC services in the five pilot districts was rigorously monitored and evidence has been provided that documents the achievement of better coverage and quality of services and better health outcomes, compared with those in control districts\. However, the details are lacking on what was tested, what was learned, how (and which) specific lessons influenced health reform and the extent to which knowledge and capacity were built \. Increased knowledge and capacity of MoH officials to design and implement appropriate primary health care reforms -- modestly achieved An explicit health reform strategy was not issued by the Government, as planned \. A concept paper on "Health Care Reform in the Republic of Azerbaijan " was issued by MoH\. While not a full-blown mid-term strategy, this paper did acknowledge for the first time short -comings in the current system and advocate a comprehensive reform agenda\. However, it did not benefit from a systematic assessment of lessons learned \. District rationalization plans were prepared, but only partially implemented, with no reductions in hospital beds and health personnel, as had been planned \. Nevertheless, the Region has since pointed out that (a) the participatory preparation of these plans is notable, given the hierarchical, corrupt and nepotistic MoH administration and (b) these plans have influenced the design of subsequent health sector reform investments \. Government did not prepare a policy paper on improving health services and access for the poor \. The State Program on Poverty Reduction and Sustainable Development (SPPRED) did emphasize the need to improve social services access, quality and equity, but this does not replace the need for a policy paper \. Knowledge among the staff in the MoH and the targeted districts about strategies for strengthening and reforming PHC services is not documented \. MoH staff participation in national and international training events is expected to have improved their knowledge \. Some 3,000 district staff were trained locally in 23 different PHC delivery topics\. UNICEF pre- and post-training assessments and clinical facilitators document improved knowledge and practice of health personnel in the five districts as a result of clinical training \. Regular meetings of MoH and inter-ministerial colleagues on PHC reforms did not take place, as planned, due to the lack of a clear and unified position within MoH with respect to the project and to the direction of health care reforms\. A National Health Conference was held, which provided for the first time a forum for national stakeholders and external specialists to exchange frankly on sector issues, on which basis a Health Strategy Review note was issued\. No model and plan for PHC reforms was issued by Government, due to the low level of commitment and support to the project by the MoH leadership \. A health sector reform project, including a component on strengthening service delivery was prepared and approved, but this does not fulfill the original intention of this indicator \. MoH officials have become more familiar with health financing issues and options, having received training at local and international levels and been exposed to the results of health care financing studies \. These were, however, resisted throughout the life of the project until, at the project's end, new MoH leadership acknowledged issues and expressed a willingness to reform \. An essential drug list, national drug formulary and standard treatment protocols were developed and adopted, as planned\. During project implementation the Bank galvanized support of key partners (WHO, UNICEF, USAID) for a more united stand on health sector reform and contributing to greater national consensus \. Strengthened PHC services in targeted districts -- substantially achieved The number of patients seen at reformed PHC facilities increased in project districts (by 6\.6, 7\.6, 10\.5 and 29\.6 percent, respectively), but fell short of the 40 percent target (Clinical Service and Practice Style Survey, Baseline and Evaluation)\. DPT3 coverage increased in the project districts by 10\.3 percent (vs\. 20 percent planned), reaching an impressive coverage of 96 percent in 2004\. Coverage of other vaccinations was also high : 96 percent for polio, 94 percent for measles, 95 percent for BCG and 89 percent for Hepatitis B (Household Survey, Baseline and Evaluation)\.  The percent of women with no prenatal visits declined dramatically from 41 percent in 2002 to 15 percent in 2004; and the average number of prenatal visits per pregnant woman increased from 2\.4 (2002) to 3\.9 (2004)\. These gains were in sharp contrast with control districts, where indicators worsened for the most part (Household Survey, Baseline and Evaluation )\. Rural facilities in project districts did not record blood pressure systematically, as is the case for control district \. The only exception in the project districts were the District Polyclinics (Clinical Service and Practice Style Survey, Baseline and Evaluation )\. The proportion of outpatients seen in the reformed PHC facilities who receive antibiotics by means of injection decreased by 23 percent (from 34\.7 to 26\.7 percent), comparing favorably with control districts where rates increased by 6\.2 percent overall (Clinical Service and Practice Style Survey, Baseline and Evaluation )\. The number of hospital beds per 1000 population in project districts did not decrease, as planned, remaining, instead, at the pre-project level of 8\.4 (Clinical Service and Practice Style Survey (Clinical Service and Practice Style Survey, Baseline and Evaluation )\. The increase in patient satisfaction in rural PHC facilities rose by 144 percent (from 21 percent in 2002 to 71 percent in 2004, exceeding the target of a 20 percent increase (Satisfaction Survey, Baseline and Evaluation )\. Overall, while achievements fell short of some targets, deterioration of indicators in control districts highlights the contribution of the project\. Project districts also registered : a decrease in incidence of chronic and acute illnesses, an increase in utilization of rural facilities, a decrease in the number of home deliveries, smaller proportion of pregnancies leading to a miscarriage or still -born birth, and an increase in the use of oral rehydration salts (Baseline and Evaluation surveys )\. 5\. Efficiency (not applicable to DPLs): The efficiency of project support to the five pilot districts is substantial as evidenced by: (i) documented improvements in the utilization and quality of health services and in patient satisfaction, that did not occur in the control districts; (ii) cost-benefit analysis of the follow-on operation, which emphasizes the expansion of PHC interventions to other districts, showing a positive rate of return (The Region has provided supplemental information from the economic analysis indicating that the Net Present Value [NPV], using a discount rate of 5 percent, is US$34\.4 million and the Internal Rate of Return [IRR] is 21 percent\.); (iii) the fact that PHC service delivery addresses the health issues of the majority of the population especially the poorer segments; and (iv) experience in the ECA region, which shows that rationalization of expensive hospital services in post -Soviet health systems cannot be achieved without strong improvement of the PHC network and provision of a cost -effective package of essential services\. The efficiency of the capacity building and learning process is modest, due to (a) low ownership of the project by MoH leadership; and (b) failure of the project design to fully define and underpin the learning process \. Because the new MoH leadership in the last year of the project committed itself to health sector reform, overall efficiency is substantial\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re -estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Based on modest relevance and substantial efficacy and efficiency \. Investments in strengthening of PHC in districts improved service quality, access and equity, but capacity building of MoH for policy and strategy formulation was modest and learning outcomes were not sufficiently documented \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Risks related to financial and social factors are moderate, while risk related to political factors is substantial \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: Bank's performance was good overall, except for the inadequate documentation of the learning objective of this project, both in the design and in the supervision of this project, of particular concern in a LIL \. Nevertheless, IEG acknowledges the enormous effort by the Bank's team (a) to engage with a Minister who, the Region has since noted, was not ready to support project implementation, let alone a learning agenda, and (b) to win the confidence and trust of the new Minister and help his administration to prepare a follow -on health reform project in a short timeframe\. Furthermore, the team's success in stimulating dialogue within the country across a wide range of government officials and stakeholders is noteworthy \. The team's solid monitoring and evaluation of project districts and control districts gave a clear picture of the achievement of the project vis -a-vis the subobjective to strengthen and improve the utilization of PHC services in the five districts \. at -Entry :Moderately Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: The leadership of the MoH up to October 2005 did not exhibit consistent and continuous support for the project or for health sector reforms in general \. The situation changed for the better under the new leadership of the MoH \. a\. Government Performance :Moderately Satisfactory b\. Implementing Agency Performance :Highly Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: Design : The monitoring and evaluation of the performance of project districts was well designed \. Baseline and end-project data were to be collected using four methods : routine project monitoring, household surveys, clinical user surveys and observational studies \. For component 2, there would be a series of household surveys and of observational studies at baseline and at the end of the project in both the intervention districts and in five control districts to assess the impact and outcomes attributable to the project \. International consultants were to help design the surveys and local consultants were to be used to implement the surveys /studies and to collect the data for project evaluation\. The results from the household surveys would be used to validate other sources of data by comparing to similar information collected through official reporting sources \. Evaluation of training was envisaged through pre -testing and post-testing assessments of trainees on knowledge/appropriateness of clinical procedure, and through baseline and end -of-project assessments using direct observation studies and patient satisfaction surveys \. The UNICEF team was to be staffed by a Field Monitor to spend most of his /her time in pilot districts, monitoring and adjusting implementation of reform interventions \. This person was supposed to report to the assistant project officer who would also actively participate in field monitoring as well as be responsible for much of the actual report writing and evaluation of project activities \. The design of M&E neglected to define the pilot and learning process that was inherent in the LIL design and that was the fundamental objective of the project \. Implementation of M&E was carried out as planned \. International and local consultants carried out three types of surveys at two points in time (2002 baseline, and 2004 evaluation): a household survey, a patient satisfaction survey, and a clinical service and practice style survey \. Same team collected secondary data for project and control districts (catchment populations, availability of medical equipment, records, material, training, number of hospital beds )\. UNICEF also conducted an evaluation of Component 2 highlighting major achievements and areas where additional effort is needed\. The ICR does not mention to what extent the HMIS (under Government financing) was established and became functional and whether it contributed to health services M&E and MoH capacity building \. It does not appear that MoH capacity building investments (most notably training) was evaluated\. Utilization \. For the most part, the data collected did not inform policy -making or policy reform, but it was used to prepare a Health Sector Review Note and the follow -on operation (Health Sector Reform Project, approved in June 2006)\. Rationalization plans were not fully implemented, financial arrangements remained the same (with health care facilities receiving financing on the basis of health personnel and number of hospital beds ) and no financial incentives were introduced to enhance the use of knowledge acquired during the on -site in-service clinical training and clinical facilitation\. There is also no indication whether or to what extent the key learning questions posed in the design document were ever discussed and addressed in light of data, studies, training and experience \. What learning may have occurred under this LIL is not systematically documented \. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): 12\. Ratings : 12\. ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately The district component outcome was Satisfactory successful and the capacity building component was modestly successful, but the lessons emanating from this LIL were not sufficiently documented \. Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Moderately The Bank’s performance was generally Satisfactory satisfactory except that it did not, during design and supervision, sufficiently emphasize and underpin the learning agenda of this project \. The testing of approaches, the distillation of studies, and the answers to the learning questions were never systematically and fully documented \. Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: 1\. Politically difficult actions that are crucial to project success risk not being undertaken if they are not underpinned in the legal agreement \. The project envisaged that funds for the refurbishment of facilities would not be available for use until rationalization plans were completed by the districts and approved by the MoH \. As there was no legal covenant attached to this condition, rationalization plans were prepared, but not fully implemented \. As a result, no reductions in the number of hospital beds and in health personnel were achieved \. High -level involvement from the government's side is a necessary ingredient for successful project 2\. High- implementation \. Government ownership not only leads to better implemented projects but also increases the probability of continuing with the reform efforts after project completion \. 3\. The development of a comprehensive M&E system in project design, with control districts, assists in demonstrating the connection between project activities and outcomes and provides valuable input for follow -up operations \. 4\. The testing of alternative approaches for sector reform will not automatically generate or document a learning process, nor will such approaches necessarily lead to a fine -tuning of reforms in light of experience, if they are not well prepared and if they are not fully understood and owned by Government and other stakeholders \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is very systematic in its assessment of project performance by performance indicator, making good use of the rich data generated by this project on project and control districts \. However, it does not systematically assess the testing and learning objective of the project, which the project indicators and M&E system failed to capture \. The 13 learning questions posed in the design document are neither systematically nor sufficiently explored \. For each question the ICR might have documented what alternative strategies, approaches, methodologies were tested, how they departed from the status quo, which ones were most and least effective and why\. A few questions are addressed in the lessons learned section of the ICR, but only in 2-3 sentences\. Neither does the ICR provide any insight on the success (or failure) of the hardware and software purchases, ultimately financed by MoH instead of the project, in support of a Health Management Information System (HMIS)\. A well functioning HMIS is critical to MoH capacity building and to district services monitoring and evaluation, in which the project was investing \. It is also relevant to the discussion of the follow -on health operation, which is slated to support the institutionalization of the health sector M&E\. The Region has since clarified that the procurement of IT equipment was financed under another project and that the Government intends to move forward with E -Government which will have implications for the HMIS\. But no further information is provided on how the HMIS is currently functioning, compared with what was intended under the project and what further strengthening is needed \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P044202

 ICRR 11301 Report Number : ICRR11301 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/22/2002 PROJ ID : P044202 Appraisal Actual Project Name : Pilot Poverty Alleviation Project Costs 12\.7 12\.7 US$M ) (US$M) Country : Tajikistan Loan/ US$M ) 12 Loan /Credit (US$M) 12 Sector (s): Board: SP - Housing Cofinancing construction (31%), Micro- US$M ) (US$M) and SME finance (22%), General agriculture fishing and forestry sector (17%), Other social services (17%), General water sanitation and flood protection sec (13%) L/C Number : C2946 Board Approval 97 FY ) (FY) Partners involved : Closing Date 06/30/2000 06/30/2002 Prepared by : Reviewed by : Group Manager : Group : Robert C\. Varley Soniya Carvalho Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives The objectives were: 1\. To increase, on a sustainable basis, the incomes of the poor \. 2\. To improve the access of the poor to essential economic and social services, through developing local capacity to implement participatory approaches to poverty alleviation \. b\. Components The actual cost of the Pilot Poverty Alleviation Project (PPAP) was $12\.7 million comprising the following:- Scaling up of the Poverty Alleviation Program (44%)44 %) of which: Shelter and House Rehabilitation Program (Save the Children Federation - SCF USA) - 15% Shelter and House Rehabilitation Program (TASIF) - 7% Microcredit Program/ Group Guarantee Loans and Savings or CGLS ( SCF USA) - 9% Program to Support Female-Headed Households (SCF UK) - 7% Agricultural Reform Program (Aga Khan Foundation- AKF) - 6% 56 %) of which: Creation of TASIF (56%) Institutional Development of TASIF - 17% TASIF Microprojects - 32% Integrated Evaluation of PPAP - 2% Audit of PPAP - 2% Adjustments for SDR rates losses - 3% c\. Comments on Project Cost, Financing and Dates The project was almost cancelled in 2000 but after resolution of differences between IDA and the Government, supervision intensity was increased and the project extended by 2 years to permit completion\. SCF-USA declared force majeure for the Shelter and Housing Rehabilitation Program in December 1998, due to delays in implementation and lack of counterpart funds \. This component was later taken over by TASIF with a reduction in the target number of houses\. 3\. Achievement of Relevant Objectives: 1\. A positive impact on poverty may be expected from at least of 3 of the 5 components\. 2\. Local capacity to implement participatory approaches to poverty alleviation, however modest, was developed from a very low base\. Achievements of objectives by component were as follows : - 1\. Shelter and Housing Rehabilitation Program - this component was unsatisfactory \. Although the target was reduced from 2,000 to 1,100 after TASIF took over, only 760 were eventually rehabilitated, although the total expended on the program was $ 2\.8 million compared to the appraisal allocation of $ 3\.2 million\. 2\. Micro -Credit (CGLS) CGLS ) - while a small component in the overall poverty alleviation strategy, the loan operation reached 8604 poor clients\. Portfolio quality was maintained both before and after management was successfully transferred to a local NGO \. Like many microfinance programs this one had high overhead costs and there was weak capacity of TASIF to monitor microcredit projects \. The outcome was on balance satisfactory as the schemes were managed prudently \. 3\. Poverty Support to Female -Headed Households - 3700 female-headed households received agricultural assistance and 23 schools and 2 kindergartens supported with income generation projects \. The outcome was highly satisfactory \. 4\. Agricultural Reform - the outcome was also highly satisfactory with 52 canals constructed and 2,000 hectares of land reclaimed for agricultural production with program funds of $ 700,000\. Agricultural yields for the area irrigated by the canals increased by 80-100%\. 5\. TASIF - (a ( a) Institutional Development of the Fund - this was the largest component and while there were indications of a turnaround in the final year of the project, TASIF faced serious problems from financial mismanagement, irresponsibility of some staff, and high staff turnover \. The ICR key performance indicators show that "Development of TASIF" was rated unsatisfactory as of completion in December 2001\. (b) Microprojects - There were more microprojects than planned; rising from an SAR target of 70 benefiting 144,000 people, to achieving 184 impacting a population of 600,000, with costs increasing from $2\.5 million to $3\.9 million\. An extensive, externally-funded evaluation in 1999, and a TASIF two-stage evaluation of 56 projects in 2000, concluded that the micro-projects met community needs and there was high level of community satisfaction\. A further evaluation based on focus groups showed that 89% of the microprojects were still functioning after 6-9 months\. However the ICR does not provide details of the outcomes, or even the numbers of the different microprojects that had been elaborated at appraisal (within the broad headings of social infrastructure, environmental projects and entrepreneurial activities \. This component is rated moderately satisfactory \. 4\. Significant Outcomes/Impacts: 1\. TASIF showed improved performance in the last year of the project, and although still a fragile institution, now has a relatively capable procurement unit \. Its staff have substantial experience in community participation, the targeting of poor communities, monitoring and evaluation, and the design and supervision of micro -projects\. 2\. In a very difficult social, political and economic context, a high level of community participation was achieved in the implementation stage of TASIF's micro -projects (although in earlier stages, participation was highly variable \.) 5\. Significant Shortcomings (including non-compliance with safeguard policies): 1\. There was no formal measurement or evaluation of poverty impact, even though the project was a poverty-targeted intervention\. 2\. TASIF had serious management and institutional problems, aggravated by lack of counterpart funding (which effectively halted midway through the project ), corruption in the form of fraudulent disbursement applications and lack of strong and consistent Government support \. It took a long time for Government to address these problems adequately\. 3\. At the most critical period in 2000, when the Bank and Government were at loggerheads over both financial management issues and the appointment of a new TASIF Executive Director, the Bank did not provide any supervision for over a year \. There was a failure to resolve sufficiently quickly the extremely tense relationship between Bank and Borrower\. 4\. Women lacked access to information about the development of micro -projects and their participation, prior to implementation, was poor\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory While some of the objectives were achieved there were significant shortcomings\. The most convincing achievements were those of the two highly respected international NGOs, and OED TASIF's performance did improve after 2001\. Institutional Dev \.: Modest Modest Sustainability : Likely Unlikely The ICR admits that sustainability is "very uncertain" but concludes "likely sustainability of social fund operation through continued IDA and/or other donor funding\." This is not sufficient for an OED rating of sustainability  and furthermore the ICR describes TASIF as being a "fragile institution" and one dependent on a "narrow financing base\." Bank Performance : Unsatisfactory Unsatisfactory Borrower Perf \.: Unsatisfactory Unsatisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: 1\. PPAP confirmed that lessons learned in other countries were applicable in a Tajik context \. Many communities, even if poor and disadvantaged, were able and willing to play a major role in the identification, preparation, execution and sustainability of micro -projects, and were also willing to contribute to costs through donated labor\. 2\. Even in remote regions an acceptable quality of work was produced by the small private contracting industry that emerged in response to competitive bidding procedures \. 3\. High-level and sustained borrower commitment and clarity about the roles and responsibilities of the SIF executive, its Board, the Government and IDA, are needed to overcome serious management implementation problems\. 4\. Service improvements with sector ministries must be coordinated to ensure the rationalization and utilization of resources\. 5\. Staff training is important at every level, and in particular it is necessary to invest in project implementation capacity by financing the training of staff in World Bank procedures \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: Satisfactory\. This ICR is well written and both frank and informative \.

REVIEW

P087716

THE WORLD BANK VJORLDBANKGROUP Lao PDR: Kliaimouane Developnient Project (IDA Grant: H-404-LA and H-756-LA) Implementation Stipport Mission and Imiplementation Completion and Result Report Mission February 1-12, 2016 AIDE MEMOIRE ProjeelDehpenObeie To strengthen the planning process and public fimancial management associatedN with the decentralized deliverv of services and infrastructure\. including irrigation development, in Khammouane Province CY Priojcc ata Financing Pmect Number P087716 eletivess 17 June 2008 Closing Date 31 March, Datc 2016 IDA Grant $17\.6 IDA 95% N\ission Start February 1, Amotnt million D11 istrsement Date 2016 Moderately \. Moderately I issioii End February 12, Satisfictor i at Satisfactory Date 2016 A\. Introduction 1\. The implementation support imission of the Lao PDR Khammouane Development Project (KDP), which was also the first miiission for preparation of the World Bank's Implementation and Completion Results Report (ICR), was condueted during February 1-12, 2016\. The imission was led by Mr\. Sybounheung Phandanouvong and Mr\. Sergiy Zorya, Task Team Leaders for KDP, and Mr\. Chaniisom Manytliong, Task Team Leader for ICR\. 2\. The objectives of the mission were to: (i) review the implementation progress, final project outputs, outcones, and achievements vis-å-vis the Project Development Objective (PDO) and eid-targets; (ii) review the financial management and proetrement achievements, and compliance with relevant safeguard policies; (iii) meet with the project's stakeholders at provincial, district, and village levels to discuss, reflect, and verify project achievements deseribed in the draft Project Completion Report; and (iv) provide the guidance to the KDP team on administrative requirements related to the project's closure scheduled for March 3 1, 2016\. 3\. The missioni was conducted jointly with the KDP implementing team and agencies, including Provincial Department of Planning and Investment (DPI), Department of Irrigation, Ministry of Agriculture and Forestry (MAF), Provincial Agriculture and Forestry Office (PAFO) and District Agriculture and Forestry Offices (DAFOs), distriets as weil as beneficiaries of the visited Province\. The mission's findings were discussed at the wrap-up 1 The mission was comprised of Mr\. Sybounheung Phandanouvong (TTL/GUSRR, KDP); Mr\. Sergiy Zorya (co- TTL/GFADR, KDP); Mr\. Chanhsom Manythong (TTL/GFADR, ICR); Mr\. Jean-Paul Chausse (Consultant, GFADR); Mr\. Siliattha Rasphone (Nam Theun 2 Project Operations Officer); Mr\. Khamphet Chanvongnaraz (Procurement Specialist, GGODR); Ms\. Malarak Souksavat (Financial Management Specialist, GGODRI); Mr\. Satoshi tshihara (Senior Social Development Specialist, GUSRR); Mr\. Peter Crawford (Environmenlal Specialist, GENDR); Ms\. Veronica Mendizabal Joffre (Consultant, Local Governance and Capacity Development); Mr\. Garvan Okeeffe (Quality Assurance Advisor); Mr\. Richard Morgan (Consultant, Monitoring and Evaluation, FAO), and Mr\. Tliongklham Chanthavong (Program Assistant, EACLF)\. 1 THE WORLD BANK I wORIOBANKGROUP meeting with the KDP team and at the courtesy meeting with the Provincial Vice-Governor, Chair of Project Steering Committee on February 8, 2016\. The field visits were carried out to the project sites during February 3-7, 2016\. 4\. The mission wishes to express its appreciation for the assistance and hospitality provided by the project team, provincial and district officials as well as villagers in Khammouane Province\. The following represents the key findings and recommendations of the mission, which are the subject to confirmation by the World Bank management\. B\. Mission Findings 5\. As this is the last implementation support mission for the project, this Aide Mnemoire presents the project implementation progress as well as some of its main achievements, 6\. Progress towards achievement of PDO\. The PDO has been largely achieved, and many impacts have been already materialized\. The project is estimated to have directly benefited 232,927 people, exceeding the end-target by 27 percent\. The provincial and district governments of Khammouane Province are now well positioned to better plan, design, and execute public programs and deliver high quality services\. The infrastructutire financed from the Provincial Development Funds (PDF), District Development Funds (DDF) and irrigation component established under the project has been highly appreciated by the beneficiaries due to the transparent and inclusive selection processes and their good quality\. All investments were accompanied by capacity building and trainings to ensure the proper use and maintenance of assets, which is a rare case in other programs\. For example, the irrigation investments were done in tandem with building capacity of water user groups and brining extension services to farmers so they could generate high rates of returns from better water availability and protect capital investments for long periods through better maintenance and cost recovery\. The agricultural grants generated direct benefits to the grant recipients, but more importantly they served as a tool for: (i) improving the outreach and impacts of extension services; (ii) establishing more lead/model farmers who will facilitate farmer-to-farmer extension services and smalilolders networking even after the end of the project; and (iii) strengthening the links of these farmers with the Xebangfai research and extension center\. 7\. The project has, however, experienced a slow start, mainly due to the newness of the concept of decentralized fund management to the Provincial and District authorities\. The implementation has been also negatively affected by a high turnover of staff, availability of qualified consultants to work in the province and moderately satisfactory fiduciary management\. The allocation of agricultural grants was delayed, making it difficult to assess their sustainability and longer-term impacts\. The strategic plan for the Xebangfai research and extension center requires adjustments to better match the projected finds availability with its service delivery plans after the KDP closure\. And, the end-targets for three PDO indicators (out of total ten PDO indicators) were either not or only partially achieved\. As a result of these weaknesses, the ratings for Achievement of PDO and Project Implementation are only moderately satisfactory\. 8\. There are no major implementation issues till the end of the project\. All actions included in the previous Aide Memoire have been completed\. The project is on the track to complete all activities, including DDF subprojects, by March 31, 2016, as descried below\. There are no new urgent actions required in addition to the standard steps to formally close the project, carry out Financial Management and audit activities, and finalize the Project Completion Report (PCR), for which the detailed guidance is provided below\. 9\. Implementation Progress of Component 1\. From the last implementation support mission carried out in September 2015, the main activities identified have been either 2 THE WORLD BANK I wORLDBANKGROUP completed or are projected to be completed by the project closing date\. Following that mission, the World Bank reviewed and approved the final batch of subprojects financed through DDF\. These subprojects are being implemented through the District Planning Teams, who have followed up with each sub-project to compile a list of defects for correction by contractors and certify that these defects were rectified before the end of the liability period before final payment to contractors\. The task force and project engineer also conducted supervision training for the districts before the start of construction\. 10\. Implementation Progress of Component 2\. All actions agreed during the last implementation support mission were taken\. The project team continued to monitor and provide training and coaching support to water user associations and groups on irrigation management and agricultural production while gradually transferring responsibility and project investments to the province and districts\. The project has also sent the list of equipment and spare parts for operation and maintenance of 37 pump irrigation systems to the World Bank for review before procuring them\. And the project team provided the World Bank all required data to conduct economic analysis in the PCR and the ICR\. 11\. Implementation progress of Component 3\. By the time of the mission, all activities for this component were completed\. The agricultural livelihood and entrepreneurial grants have been already disbursed, and the project team carried out the impact assessment of these grants, founding many positive outcomes, although evaluating longer-term impacts was not possible due to the short life periods of these grants, which were largely disbursed during the project additional financing\. The project has also reviewed the operational strategy for the Xebangfai research and extension center, providing options for its operation after the closure of the project\. The Khannouane Province is one of the priority provinces for the Ministry of Agriculture and Forestry (MAF) under the national food security to increase rice and livestock production, so the Center will continue receiving budget funds\. The budget plan [or sustaining the Center was approved by the Government of Lao PDR on August 14, 2016\. Due to the uncertainty of state budget as a result of recent financial crunch, it may experience short-term fund shortfalls after the closure of KDP and it would need to calibrate its activities depending on the projected budget inflows and generated incomes, 12\. Project reporting and M&E\. The draft PCR prepared by the project team was of acceptable quality and submitted to the Bank on time, prior to the mission\. The PCR report builds on the project progress reports, technical audits and impact evaluations, which showed continued quality improvements and emerging impacts over time\. The final PCR that would take into account requests for further information and clarification and revisions made during the mission will be submitted to the World Bank by February 29, 2016\. 13\. Safeguards\. No major safeguard issues were identified during the mission and during the project implementation\. Project financed activities have not caused significant negative environmental and social impacts\. All infrastructure subprojects financed through the project are of small scale and located in communal land and premises reserved for public infrastructure development\. The project did not procure pesticides and it promoted the Integrated Pest Management through farmers' trainings, bio-compost production and application for soil improvement, water management under the rehabilitated irrigation schemes and crop diversification\. All these techniques seek to improve soil condition and enhance biological control, thereby being expected to have positive environmental impacts\. 14\. The project has complied with social safeguard requirements\. A series of free, prior and informed consul tat ion with the beneficiaries and their communities were carried out as integral part of the subprojects' planning and implementation\. This inclusive consultation has resulted in their broad support and participation in the project activities\. The project has focused on 3 THE WORLD BANK WORLD BANKGROUP strengthening capacity of district governments in participatory planning with active comnunity engagement in the process of identifying their development priorities\. The safeguard screening forms were filled and the overall quality of screening was acceptable\. The screening did not find significant negative impact on local people, including minority ethnic groups\. No involuntary loss of land or private assets occurred; all minor land acquisition was conducted as voluntary donations\. Land acquisition report was therefore not prepared\. The Ethnic Group Development Plan (EGDP) was prepared and it is overall compliant with the Bank OP 4\. 10, although its development was significantly delayed\. 15\. The mission has, however, found that safeguard screening was not always properly conducted\. Although the presence of minority ethnic groups was confirmed for some subprojects, the EGDP was not considered necessary for such subprojects since no negative impact was expected and the participatory approach to community planning and engagement was applied under the project\. 16\. Procurement\. The mission already conducted the post review during the project implementation support mission in September 2015\. 2 All packages specified in the procurement plan were already procured and only some individual consultant contracts were extended until March 31, 2016\. The implementation of 27 subprojects under DDF will all be completed before the closing date\. All retention funds shall be paid to the contractors/suppliers, and bank guaranty in the same amount shall be provided by the contractors/suppliers for contracts that their defect liability periods are beyond the closing date\. The Overall Procurement performance rating of the project remained moderately satisfactory\. 17\. Financial Management\. The Overall Financial Management (FNl) performance remained rated moderately satisfactory, due to the continued good performance but with some weaknesses\. Although submissions of the quarterly Interim Financial Reports have been performed regularly, some were submitted late after their due date\. The audit reports have been timely submitted for the past three years, although the auditor's opinion was unmodified (clean) a number of internal control matters recurring from the past year's audit still need to be improved and resolved\. 18\. Disbursement\. Funds are filly disbursed under IDA H4040, but the amount of XDR 1 38,125, representing the Designated Account (DA) balance, still needs to be documented\. The disbursement rate under H-756-LA as of February 5, 2016 was 95 percent, representing a disbursement totaling of XDR 5,310,234 (equiv\. USD 7,420,4693) and leaving an undisbursed amount of XDR 289,765\.16 (equiv\. USD 404,914\.94)\. The mission found that the replenishment to the DA and documentation of the expenditures incurred were not done regularly, i\.e\. at least once a month\. At this point of the project implemented the mission has requested to submit the withdrawal applications as frequently as possible to document the incurred expenditures\. Recovery of the DA account has started and the current DA balance per the client connection account as of February 5, 2016 is noted at XDR 578,460\.56\. 19\. As per the revised expenditure projection of January 22, 2016, the mission was informed that provided that the implementation of all planned activities is on track and will be completed before the closing date, the project plans to have about XDR 80,000 of unused find to be returned to the World Batik\. This amount mainly relates to the Provincial Development Fund (PDF) activities under Category 2\. 2 Since post review is required to be carried out once per fiscal year, this SPN mission has not carried out the post review\. IXDR equivalent to 1\.39739 USD exchange rate as of February 5, 2016 4 ' THE WORLD BANK I wORLDBANKGROUP 20\. As the project closing date is March 31, 2016, the mission wishes to remind that only activities, goods, services rendered and delivered on or before the project closing date will be eligible for financing from the project finds, with exception of the audit work, which by nature is carried after closing of the accounting book\. As the project funds cannot be used to finance FM consultant after project closing date, the project has confirmed that a project staff will be retained and the FM consultant will continued to be hired under the provincial budget to ensure proper FM closure and to work with the external auditor\. 21\. As specified in the disbursement letter, the project has a disbursement grace period of four months, i\.e\. until July 31, 2016\. The deadline for submission of the final withdrawal application is also July 31, 2016\. Payment for goods and services delivered and rendered before the project closing date should be processed and dloctimented with the World Bank prior to this date\. The final withdrawal application should be received by the World Bank Manila office no later than July 3 1, 2016 22\. Designated Account and Operating Account should be closed and the unused funds in such Bank Accounts must be returned to the World Bank\. Instruction for the refund will be provided by the World Bank's Disbursement department in Manila\. 23, Until the project closing date, two remaining IFRs are due for submission\. One, for the period October-December 2015 is due on February 15, 2016, and the other for January-March\. 2016 is due on May 15, 2016\. 24\. Audit report for the fiscal year ended September 30, 2015 is due for submission by March 31, 2016\. Final audit report for October 1, 2015-March 3 1, 2016 is due for submission by September 30, 2016\. 25\. The project is required to report on the assets vith the State Assets Department of the Ministry of Finance before the project closing per State Assets Department Regulation No\. 2695\. 26\. The retention of accounting documentation should be kept for at least 2 years after project closing date or 1 year aflter the World Batik has received the Final audited financial statements\. C\. New Actions Agreed 27\. The new actions agreed are summarized in the below table: 5 THE WORLD BANK I wORIOBANKROUP Recoimendations/Actions Responsible Duc Date Agency/Unit Submit to the Bank the final PCR KDP Mangement February 29, 2016 Team Complete all DDF subprojects KDP Mangement March 31, 2016 Team All listed internal control matters recurring KDP Mangement March 31, 2016 from the past year's audit still need to be Team improved and resolved\. Until the project closing date, two remaining KDP Mangement February 15, 2016 IFRs are duc for submission\. One, for the Team and May 15, 2016 period October-December 2015 is duc on February 15, 2016, and the other for Januaiy- March, 2016 is duc on May 15, 2016\. - Audit report for the lscal year ended KDP Mangement May 31, 2016 and September 30, 2015 is due for submission by Team September 30, March 31, 2016\. Final audit report for October 2016 1, 2015-March 31, 2016 is duc for submission by September 30, 2016\. Send the draft ICR to the project team and World Bank July 15, 2016 Provincial Department of Planning and Investment (DPI) for coninents 6

REVIEW

P085009

Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004564 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-41360) ON A CREDIT IN THE AMOUNT OF SDR 65\.5 MILLION (US$95 MILLION EQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA MINISTRY OF FINANCE AND PLANNING FOR THE PRIVATE SECTOR COMPETITIVENESS PROJECT (P085009) April 1, 2019 Finance, Competitiveness And Innovation Global Practice Africa Region          CURRENCY EQUIVALENTS (Exchange Rate Effective Jan 07, 2019) Currency Unit = Tanzania Shilling (Tsh) Tsh 2305\.00 = US$1 US$1 = SDR 0\.72   FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AF Additional Financing BDG Business Development Gateway BERC Business Environment Roadmap Committee BEST Business Environment Strengthening for Tanzania BOT Bank of Tanzania BRELA Business Registrations and Licensing Agency BRN Big Results Now CAS Country Assistance Strategy CORS Continuously Operating Reference Stations DFID Department for International Development ERR Economic Rate of Return FSDT Financial Sector Deepening Trust GDP Gross Domestic Product GNI Gross National Income GoT Government of Tanzania GPS Global Positioning System IA Implementing Agency IDA International Development Association ISR Implementation Status Reports ILMIS Integrated Land Management Information System IFC International Finance Corporation MDA Ministries Departments and Agencies MSME Micro, Small, and Medium Enterprises MKUKUTA Mkakati wa Kukuza Uchumi na Kupunguza Umaskini Tanzania M&E Monitoring and Evaluation NGO Nongovernmental Organization NKRA National Key Results Area  NPV Net Present Value OSS One Stop Shop PAD Project Appraisal Document PDB President’s Delivery Bureau PDO Project Development Objective PIU Project Implementing Unit PPP Public-Private Partnership PMO Prime Minister’s Office PSCP Private Sector Competitiveness Project SACCOS Savings and Credit Cooperative Societies SDR Special Drawing Rights SME Small and Medium Enterprises TA Technical Assistance TTL Task Team Leader TMX Tanzania Mercantile Exchange TPSF Tanzania Private Sector Foundation   Regional Vice President:  Hafez M\. H\. Ghanem  Country Director:  Bella Deborah Mary Bird  Senior Global Practice Director:  Sebastian‐A Molineus  Practice Manager:  Niraj Verma  Task Team Leader(s):  Moses K\. Kibirige, Mary Agboli  ICR Main Contributor:  Sathyanadhan Achath      TABLE OF CONTENTS    DATA SHEET \. 1  I\.  PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 8  A\. CONTEXT AT APPRAISAL \. 8  B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) \. 12  II\.  OUTCOME \. 18  A\. RELEVANCE OF PDOs \. 18  B\. ACHIEVEMENT OF PDOs (EFFICACY) \. 19  C\. EFFICIENCY \. 28  D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 30  E\. OTHER OUTCOMES AND IMPACTS (IF ANY) \. 31  III\.  KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 34  A\. KEY FACTORS DURING PREPARATION\. 34  B\. KEY FACTORS DURING IMPLEMENTATION \. 36  IV\.  BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 38  A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 38  B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE \. 39  C\. BANK PERFORMANCE \. 39  D\. RISK TO DEVELOPMENT OUTCOME \. 41  V\.  LESSONS AND RECOMMENDATIONS \. 42  ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 44  ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 53  ANNEX 3\. PROJECT COST BY COMPONENT\. 56  ANNEX 4\. EFFICIENCY ANALYSIS \. 57  ANNEX 5\. BORROWER, CO‐FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 62  ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY) \. 63  ANNEX 7\. SPLIT RATING CALCULATION \. 61  ANNEX 8\. SUMMARY OF BORROWER’S ICR AND/OR COMMENTS ON DRAFT ICR \. 92          The World Bank Private Sector/MSME Competitiveness (P085009)          DATA SHEET      BASIC INFORMATION   Product Information  Project ID  Project Name  P085009  Private Sector/MSME Competitiveness  Country  Financing Instrument  Tanzania  Investment Project Financing  Original EA Category  Revised EA Category  Not Required (C)    Related Projects              Relationship  Project  Approval  Product Line  Additional Financing  P145971‐Private Sector  27‐Dec‐2013  IBRD/IDA  Competitiveness  Project Additional  Financing  Organizations  Borrower  Implementing Agency  Ministry of Finance and Planning  Prime Ministers Office, Bank of Tanzania  Project Development Objective (PDO)    Original PDO  The project objective is to create sustainable conditions for enterprise creation and growth\.  The project’s progress  in achieving this objective will be measured by the increase in the number of formal enterprises, the increase in the  value of titled land relative to untitled, and growth in sales and assets of firms participating in the project\.        Page 1 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) FINANCING      Original Amount (US$)   Revised Amount (US$)  Actual Disbursed (US$)  World Bank Financing          95,000,000  95,000,000  100,689,851  IDA‐41360    15,754,000  15,754,000  15,754,000  TF‐94620    60,200,000  60,200,000  52,441,254  IDA‐53260  Total    170,954,000  170,954,000  168,885,105  Non‐World Bank Financing        Borrower/Recipient  62,000,000     0     0  Total  62,000,000     0     0  Total Project Cost  232,954,000  170,954,000  168,885,105        KEY DATES      Approval  Effectiveness  MTR Review  Original Closing  Actual Closing  15‐Dec‐2005  05‐Jul‐2006  29‐Apr‐2009  30‐Jun‐2012  31‐Jul‐2018       RESTRUCTURING AND/OR ADDITIONAL FINANCING      Date(s)  Amount Disbursed (US$M)  Key Revisions  14‐May‐2013  100\.69  Change in Loan Closing Date(s)  01‐Oct‐2015  119\.72  Change in Results Framework  Change in Loan Closing Date(s)  Reallocation between Disbursement Categories  30‐Nov‐2016  133\.08  Change in Results Framework  Change in Loan Closing Date(s)      KEY RATINGS      Outcome  Bank Performance  M&E Quality  Moderately Satisfactory  Moderately Satisfactory  Substantial    Page 2 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) RATINGS OF PROJECT PERFORMANCE IN ISRs      Actual  No\.  Date ISR Archived  DO Rating  IP Rating  Disbursements  (US$M)  01  29‐Jun‐2006  Satisfactory  Satisfactory  0  02  18‐Dec‐2006  Satisfactory  Satisfactory  6\.08  03  28‐Jun‐2007  Satisfactory  Satisfactory  7\.32  04  27‐Dec‐2007  Moderately Satisfactory  Moderately Satisfactory  8\.07  05  26‐Jun‐2008  Moderately Satisfactory  Moderately Satisfactory  13\.11  06  23‐Dec‐2008  Moderately Satisfactory  Moderately Unsatisfactory  14\.43  07  19‐Jun‐2009  Satisfactory  Satisfactory  30\.76  08  29‐Dec‐2009  Moderately Satisfactory  Moderately Satisfactory  68\.08  09  31‐May‐2010  Moderately Satisfactory  Moderately Satisfactory  68\.08  Moderately  10  27‐Mar‐2011  Moderately Satisfactory  91\.05  Unsatisfactory  11  13‐Jan‐2012  Moderately Satisfactory  Moderately Satisfactory  93\.50  12  07‐Jul‐2012  Moderately Satisfactory  Moderately Satisfactory  110\.64  13  05‐Jan‐2013  Moderately Satisfactory  Moderately Satisfactory  110\.64  14  04‐Jul‐2013  Moderately Satisfactory  Moderately Satisfactory  116\.44  15  29‐Mar‐2014  Moderately Satisfactory  Moderately Satisfactory  116\.44  16  11‐Jul‐2014  Moderately Satisfactory  Moderately Satisfactory  121\.74  17  26‐Nov‐2014  Moderately Satisfactory  Moderately Satisfactory  122\.88  18  26‐Jun‐2015  Moderately Satisfactory  Moderately Satisfactory  135\.59  19  31‐Dec‐2015  Moderately Satisfactory  Moderately Satisfactory  142\.84  20  30‐Jun‐2016  Moderately Satisfactory  Moderately Satisfactory  146\.84  21  07‐Jan‐2017  Moderately Satisfactory  Moderately Unsatisfactory  148\.84  22  10‐Jul‐2017  Moderately Satisfactory  Moderately Unsatisfactory  156\.04  23  14‐Mar‐2018  Moderately Satisfactory  Moderately Unsatisfactory  162\.04  24  27‐Jul‐2018  Moderately Satisfactory  Moderately Satisfactory  162\.04    Page 3 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) SECTORS AND THEMES      Sectors  Major Sector/Sector  (%)    Public Administration    25  Central Government (Central Agencies)  25      Education    10  Tertiary Education  5  Workforce Development and Vocational Education  5      Financial Sector    20  Banking Institutions  15  Other Non‐bank Financial Institutions  5      Industry, Trade and Services    45  Other Industry, Trade and Services  45      Themes    Major Theme/ Theme (Level 2)/ Theme (Level 3)  (%)    Private Sector Development  0    Business Enabling Environment  43    Investment and Business Climate  14    Regulation and Competition Policy  29      Jobs  100      Enterprise Development  15    MSME Development  15        Finance  0    Financial Infrastructure and Access  15    MSME Finance  15        Page 4 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) Human Development and Gender  0    Education  16    Access to Education  4    Science and Technology  4    Teachers  4    Standards, Curriculum and Textbooks  4        Urban and Rural Development  0    Rural Development  14    Rural Markets  14          ADM STAFF    Role  At Approval  At ICR  Regional Vice President:  Hafez M\. H\. Ghanem  Hafez M\. H\. Ghanem  Country Director:  Judy M\. O'Connor  Bella Deborah Mary Bird  Senior Global Practice Director:    Sebastian‐A Molineus  Practice Manager:  Demba Ba  Niraj Verma  Task Team Leader(s):  Michael D\. Wong  Moses K\. Kibirige, Mary Agboli  ICR Contributing Author:    Sathyanadhan Achath                   Page 5 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Abstract The Private Sector Competitiveness Project (PSCP) was approved on December 15, 2005 and became effective on July 5, 2006\. The Project provided initial Credit of $95 million equivalent and a subsequent Additional Financing (AF) Credit of $60\.2 million equivalent to the Government of Tanzania (GoT) to support the development of private sector in the country and contribute to the deepening of financial sector\. The Project’s original development objective (PDO) was to create sustainable conditions for enterprise creation and growth through a series of initiatives aimed at reducing the cost of doing business and increasing the capacity of the local private sector to participate in domestic and international markets, and to access relevant financial services\. The success of the Project initiatives is evident by increased number of formal enterprises; increased value of titled land relative to untitled; and the growth of sales and assets of beneficiary firms\. The Project strengthened the business environment by developing an Integrated Land Management Information System (ILMIS); overhauled the geodetic infrastructure for surveying by replacing the outdated one with one based on a modern Global Positioning System (GPS); produced multi-purpose base maps for Dar es Salaam and surrounding areas; strengthened the legal and regulatory framework; and helped land use planning and regularization of tenure rights in the urban areas\. The Project also improved access to financial services which included establishing Tanzania Community Exchange offices and training of staff; and preparation of commodity contract specifications for various crops\. More specifically, four out of five PDO outcome targets were either met or exceeded their targets, i\.e\.: (i) number of new financial products for which the legal/regulatory framework was developed increased from zero to 25 against 2 targeted; (ii) One Stop Shop (OSS) for business registration was established and was made fully functional; (iii) direct Project beneficiaries reached 170,000 against 35,000 targeted; (iv) female Project beneficiaries reached 45% against 41% targeted; and (v) the number of days to complete the registration of a certificate of occupancy reduced from 77 to 67 against 40 targeted\. The Project was originally scheduled to close on June 30, 2012 but was extended to July 31, 2018, to scale up Project activities through AF Credit\. The objective of the AF was to make growth more inclusive and improve shared prosperity\. Towards this end, the AF helped strengthen business environment; improved access to financial services, and helped develop innovative solutions for increased private sector participation and financial sector development\. In keeping with this approach, the Project was restructured during which the PDO was changed from “sustainable conditions for enterprise creation and growth” to “strengthen business environment in Tanzania, including land administration reform, and improve access to financial services”\. The Project was completed in 12\.5 years at the total cost of $170\.35 million\. The Project is rated ‘Moderately Satisfactory\. This rating is derived from the split rating calculation provided in Annex 7\. Page 6 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) The Project also provided effective lessons that may be applicable for similar operations in the sector or in other countries\. Key lessons include: (i) it is beneficial to sequence sector reforms and to use piloting as an approach to prepare for later implementation of other sector activities; (ii) adequate planning is necessary during project preparation to avoid delays\. It is recommended to design the infrastructure at project preparation so that implementation can start as soon as the project is approved; (iii) capacity of the implementing staff needs to be improved especially when multiple agencies are involved; (iv) for projects involving multiple implementing agencies (IAs), procurement function should be centralized in one IA where sustainable procurement capacity should be built at an earlier stage of the project; (v) high number of indicators should be avoided as this creates more complexity for the client and is burdensome for the M&E specialist; (vi) it is important to identify a champion early on who will need to have an overall coordinating responsibility, especially for a project which has a land reforms component, as land is a cross cutting sector which affects all sectors of the economy\. Securing the support and commitment from the executive, the Minister of Lands, and the Permanent Secretary is also very important\. Issues of land tend to be highly emotional and sensitive in Tanzania\. The endorsement and buy-in of the executive branch of government is therefore critical in raising awareness and mobilizing support; and (vii) South-South Cooperation and peer to peer learning are effective means of knowledge exchange and transfer which the Project effectively used in Uganda through Competitiveness and Enterprise Development Project where the Government of Tanzania developed its own ILMIS from Uganda’s Land Information System which resulted in a strong learning relationship of cooperation between the two countries\.     Page 7 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES   A\. CONTEXT AT APPRAISAL Context Country and Sector Context 1\. During the years 2000 through 2005, Tanzania had grown rapidly, albeit from a low base\. Its growth rate of 6\.7 percent was higher than that of South Asia (5\.4 percent) and Southeast Asia (5\.6 percent)1/\. Growth over this period had contributed to reductions in poverty\. Despite this progress, Tanzania remained among the poorest countries in the world with an estimated per capita income of US$330 (Atlas method) in 2004\. Tanzania was still in transition from an economy dominated by the public sector and public enterprises to a dynamic private sector-led economy\. 2\. This increase had been primarily driven by exports, which had grown at an average of 11 percent per year since 2000\. Non-traditional exports (such as fish, gold, tourism, and horticulture) were responsible for this growth\. Although some traditional exports continued to contribute significantly to growth-for example, revenues from cashew nuts increased from US$l5\.5 million in 1990 to about US$48\.6 million in 2004 - the share of traditional exports had more than halved to just 22 percent of Tanzania's total exports\. Gold, tourism, and fisheries were the primary sources of nontraditional export growth\. Gold exports experienced a massive surge since 1997, growing from 1 percent of exports to 47 percent in 2004\. Fish exports also grew strongly from 7\.5 percent of total exports in 1997 to 10\.1 percent in 2004, more than both coffee (3\.4 percent) and cotton (8\.0 percent)\. Since the mid-l990s, tourism had grown an average of 6 percent per year, with the number of arrivals increasing more than fourfold since 1990 and generating receipts of US$497 million\. Sectoral Context 3\. Specific sector issues include the following: 4\. Micro, small, and medium enterprises (MSMEs) dominated Tanzania’s economy\. Microenterprises constituted 98 percent of the 2\.7 million MSMEs, of which over 60 percent exited the business during the first five years of operation\. MSMEs were represented in all sectors of the Tanzanian economy but dominated in trade and services\. Large firms accounted for only 12 percent of all registered firms but contributed 38 percent of gross domestic product (GDP) and generated employment for 20 percent of the workforce\. Informality: A large informal sector accounted for around 70 percent of employment and 58 percent of Gross National Income (GNP)\. The informal sector had assets worth US$29\.3 billion, equivalent to 10 times all foreign direct investment accumulated since independence\. This underlined the fact that economic activity by majority of Tanzanians took place outside the legal framework and was limited\. 1  Robert Utz, Country Economic Memorandum (Background Paper (Washington, DC: World Bank, 1 2005)\.  Page 8 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) 5\. High Cost of Doing Business: In the World Bank’s 2006 Doing Business report, Tanzania ranked 140 out of 155 countries in terms of ease of doing business, highlighting the urgent need for the Government to fast track implementation of reforms to reduce the cost of doing business\. 6\. Property Rights: Most property rights in land were not documented or mapped to facilitate land transactions\. Consequently, about 90 percent of Tanzanians could not be located through the property registry system, which would have allowed them to gain access to collateral-based credit\. 7\. Access to Finance: The existing microfinance nongovernmental organizations (NGOs) were limited in terms of their activities, products and outreach\. Most financial cooperatives (Savings and Credit Cooperative Small and Medium Enterprise, or SACCOs) were operationally weak and needed capacity strengthening and support from commercial banks\. B\. Project Background 8\. The Project supported both the development of the private sector and deepening of the financial sector\. However, it is worth mentioning that during the 12\.5 years of implementation, there were significant changes in the overall policy environment toward private sector development and the Government’s commitments in business environment reforms\. For example: The original Project was appraised at the time the last wave of economic reforms was completed under Benjamin Mkapa’s administration2/\. A good momentum of structural reforms was kept under Jakaya Kikwete’s3/ first administration, including the Business Environment Strengthening for Tanzania (BEST) reform program, which the original Project was aligned with\. However, the reform momentum gradually waned as shown in the underperformance of BEST and introduction of controversial BARA (Business Activities Registration Act) in 2007\. 9\. Similarly, during the second Kikwete administration, the Government adopted the Big Results Now (BRN) initiative to reinvigorate reforms in the National Key Results Areas (NKRAs) including business environment, which the Project’s Additional Financing was aligned with\. But in reality the Government did not adopt the business environment lab report of BRN as a whole although some specific reform actions were taken in rather fragmented manners by individual line ministries\. 10\. In the meantime, the new administration of John Magufuli took office in 2015 and decided to discontinue the BRN initiative, though most of the reform proposals under BRN were carried over into the new initiative of “Blueprint for Regulatory Reforms to Improve the Business Environment” (Business Environment Blueprint, or Blueprint) which managed to obtain Cabinet approval in May 2018\. Even though the speed of implementation had been slow, given the number of reforms achieved, the challenges encountered during implementation did not affect the results achieved\.   2 The third President of Tanzania - in office from 1995 to 2005 3 The fourth President of Tanzania - in office from 2005 to 2015 Page 9 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) Theory of Change (Results Chain) 11\. Various aspects of the project design were taken into account including similar program documents, consultation with a broad range of stakeholders, and analyzing data to understand what had worked before\. During project design, the team described critical activities that would lead to long-term goal of lowering the costs of investment; enhance enterprise competitiveness and improve access to financial services that had inhibited a growing and competitive private sector\. Consequently, a Results Framework was prepared which articulated project’s pathway from planned interventions to the intended outcomes\. See diagram below: Results Chain Activities Intermediate 1\. Outcomes Outcomes Component 1 ï‚ Cost to formally start business reduced as % ï‚ Number of days ï‚ Land Administration of GNI to complete the Reform ï‚ Establishment of an Operational National registration of a ï‚ Support to Business Land Information Center to host ILMIS certificate of Registration Reform ï‚ Establishment of a Customer Service Center occupancy (Min\. of Lands) reduced from 77 ï‚ Support to Big Result ï‚ Number of established Ministry of Lands to 67 days Now Zonal Office with functioning ILMIS ï‚ Percentage of beneficiaries satisfied with ï‚ 25 new financial specified dimensions products, for ï‚ Number of Legal Bills related to land which administration drafted Resources: $170\.35 million  legal/regulatory ï‚ Integrated ILMIS established framework is ï‚ Number of days to formally start a business developed Component 2 reduced ï‚ Number of days to complete the registration ï‚ One Stop Shop ï‚ Strengthening legal and of mortgage reduced established for regulatory framework ï‚ Staff of President’s Delivery Bureau (PDB), business for financial sector MDU and MDA appropriately trained in registration and and capacity of private sector operations fully functional regulators ï‚ Completion of detailed plans for new ï‚ Supporting new NKRA's ï‚ Direct Project products to expand ï‚ PPP projects brought to market through beneficiaries access to finance competitive procurement reached 30,000 ï‚ Tourism sector strategic report ï‚ Creation for frame work for Deposit ï‚ Female Insurance beneficiaries ï‚ Development of Financial reporting standard reached 31% for micro finance institutions Component 3 ï‚ Project Management Underlying Assumption: A substantial transformative impact on the economy over the medium term A reliable national ID system will serve as the basis for efficient and transparent service Page 10 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) Project Development Objectives (PDOs) 12\. The original PDO was to create sustainable conditions for enterprise creation and growth\. This objective was designed to be measured through three indicators, as given below:  Key Expected Outcomes and Outcome Indicators Indicator Name Baseline End Target Outcome Number of formal enterprises increased 50,000 75,000 N/A under original Value of titled land compared to untitled Titled = 7\.76 In 2007: Titled = 1\.2 increased (US$/square meter) Un-titled = 7\.60 Un-titled = 0\.08 N/A under original Increase in sales and assets for firms In 2007/2011: Sales = $562,500,000 supported under the Project (US$) Sales = $188,700 Assets = $70,000,000 Assets = $57,081,000   Components Component 1: Strengthening Business Environment (Estimated cost: $60\.4 million, of which US$41\.4 million IDA) 13\. The component supported the Business Environment Strengthening for Tanzania (BEST4) program to reduce the costs of investing in and operating business in Tanzania by reducing the regulatory and institutional constraints inhibiting a growing and competitive private sector by: (i) achieving better regulation, (ii) improving commercial dispute resolution, (iii) strengthening the Tanzania Investment Center (TIC), (iv) changing the culture of Government, and (v) empowering private sector advocacy\. Based on this approach, the BEST program was refocused into eight main program areas, covering business registration reform, land reform, commercial law and justice, labor law reform, strengthening the TIC, establishment of a National Individual Identification Database, an MSME Policy Unit in the Ministry of Trade and Industry, and a Growth Unit in President’s Office of Planning and Privatization\. Component 2: Enhancing Enterprise Competitiveness (Estimated cost: $48\.5 million, of which US$36\.4 million IDA) 14\. The component aimed at improving the private sector’s capacity to respond to viable opportunities in domestic, regional and international markets, as well as to help strengthen the 4 BEST is a government program supported by four bilateral donors-UK Department for International Development (DFID), the Danish International Development Agency (Danida), the Swedish International Development Agency (SIDA), and the Government of the Netherlands Page 11 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) Tanzania Private Sector Foundation (TPSF)\. It had four sub-components: 15\. Subcomponent A: Cluster Competitiveness and Business School Linkages – focused on strengthening TPSF competencies in monitoring sector developments and in promoting a dialogue between Government and private sector players, via the Tanzania Round Table mechanism; and in collaboration with International Finance Corporation’s (IFC) Global Business School Network Unit, to help local management and financial schools deliver better training to entrepreneurs\. 16\. Subcomponent B: Tanzania Business Development Scheme – facilitated matching grants program and provided technical assistance (TA), know-how and expertise to entrepreneurs as a means of boosting productivity\. 17\. Subcomponent C: Business Development Gateway (BDG) – provided grants to entrepreneurs on the basis of a business plan competition\. 18\. Subcomponent D: Technical Innovation Applied Research Scheme facilitated a program for improving the capacity of technical institutions to provide training and other services to boost private sector’s productivity and competitiveness\. Component 3: Improving Access to Financial Services (Estimated cost: $42 million, of which US$12 million IDA) 19\. The component would increase access to financial services by contributing to the Financial Services Deepening Trust (FSDT) and providing TA and financing for studies\. The FSDT provided financing, through matching grants, for activities such as: (a) training to develop resources and capacity to serve low income groups, (b) developing new financial products addressing the needs of poor households and MSMEs, (c) improving the policy and regulatory framework for delivery of financial services, and (d) improving financial market integration and access to wholesale forms of finance\. The TA and studies component included funding for (i) two long-term technical experts to be part of the trust’s management structure, and (ii) industry assessments and case studies on expanding SME finance on strengthening micro and rural finance   B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Additional Financing (AF) and Project Restructuring: 20\. In December 2013, an AF Credit of US$60\.2 million equivalent was introduced to scale up Project’s activities with the objective of making growth more inclusive and improving shared prosperity\. In keeping with this approach, the Project’s developmental objective was changed from creating sustainable conditions for enterprise creation and growth, to strengthen the business environment in Tanzania, including land administration reform, and improve access to financial services\. 21\. During restructuring exercise, the previous PDO indicators were either modified or Page 12 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) discontinued to (i) strengthen attribution, (ii) reflect completed actions and achieved results, and (iii) align with revisions to the Project design with the AF\. Similarly, a number of intermediate indicators were discontinued from the AF because their underlying actions were already successfully completed under the original project\. For example, the indicator measuring an increase in gross revenue in firms supported by the Project was no longer applicable because the component related to it (Enhancing Enterprise Competitiveness) had been successfully completed and was not continued under AF\. This activity had achieved higher increase in gross revenue of firms against the baseline than what was targeted under the Project (17 percent increase in 2012 compared 15 percent target)\. 22\. In support of its revised PDO, the AF had two main and a new Project Management component\. These were grouped under the same heading as two of the three components under the original Project; however, there were some significant differences in focus, as outlined below: 23\. Component 1: Strengthening Business Environment\. This component, which accounted for the bulk of the funds provided by the AF (US$49\.2 million), focused on a number of subcomponents\. In practice, however, it was dominated by one sub-component, Land Administration Reforms, which accounted for US$35\.2 million or 71 percent of the funding available to the component\. Of this, Infrastructural Interventions accounted for US$25\.5 million, and Strengthening of the legal and regulatory framework, work on land use planning and regularization of tenure rights, and regulatory simplification of land administration processes together accounted for the balance US$9\.7 million\. Also included in the component was Support to Business Registration Reforms, which accounted for US$4 million, and Support to Big Result Now (BRN), accounting for US$10 million\. Each of these subcomponents supported a number of activities: i\.e\.: the major Infrastructural Interventions subcomponent supported efforts to: (a) convert old survey and mapping data to fit new geodetic surveying infrastructure; (b) implement a new surveying and mapping policy; (c) strengthen land use planning through improving the collection, storage and dissemination of geospatial data; and (d) implement the ILMIS\. Similarly, the Business Registration Reform subcomponent supported (i) the design and development of a One Stop Shop for starting a business in Business Regulation and Licensing agency (BRELA), (ii) procurement of necessary hardware, and (iii) capacity building of BRELA staff on the use of the on-line registration system\. 24\. Component 2: Improving Access to Financial Services\. This component, for which US$10 million was allocated, aimed on the one hand to strengthen the legal and regulatory framework for the financial sector, while improving the capacity of regulators, and on the other to support new products to expand access to finance\. The object of the former subcomponent was to fill in gaps in the legal and regulatory framework that hindered the uptake of available financial products, and included a large number of diverse activities, including (i) the establishment of a coordination mechanism for financial protection among financial regulators (Bank of Tanzania (BoT); Social Regulatory Authority; Capital Markets and Securities Authority; Tanzania Regulatory Insurance Agency; Tanzania Communication Regulatory Authority; the Fair Competition Commission and the Ministry of Finance; strengthening of the consumer protection legal and regulatory framework; and capacity improvements for regulators to better monitor compliance of financial institutions with market conduct regulations; (ii) setting up a legal framework for a deposit insurance system in Tanzania; (iii) development of reporting standards for microfinance institutions, (iv) fixing weaknesses in the Page 13 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) collateral system; and (v) developing standards for overseeing mobile financial services infrastructure\. The latter subcomponent was intended to support broadening of the market through development of new financial products, such as leasing finance and M-Akiba savings bonds5/\. 25\. Component 3: Project Management\. Project Management\. Under the original Project design, the President’s Office for Planning and Privatization (POPP) was responsible for the overall project coordination, where a Project coordinator in the department was responsible for growth, reporting to the Permanent Secretary of POPP, and supported the POPP in administering the program, assembling quarterly and annual reports, compiling the annual work plans and procurement plans prepared by the implementing agencies, keeping all institutions involved in the program informed, and informing stakeholders and decision makers of project progress and constraints\. The Project coordinator also ensured that Project activities were aligned with those of other Government programs\. After the AF, a dedicated Project Implementation Unit (PIU) was set up, for which US$1 million was allocated, carried out overall coordination and management activities\. Also, to ensure proper coordination and supervision of the Project, the Business Environment Roadmap Committee (BERC) continued to provide policy guidance and oversight on the Project as it had done under original Project\. The BERC was comprised of eight thematic Task Forces each headed by a respective Permanent Secretary and included private sector representatives\. Involvement of private sector in the Task Team provided field experience and the recipient perspective to the proposals of the required reforms\. The PIU developed and implemented an information, education and communications strategy\. Revised PDOs and Outcome Targets 26\. Revised PDO: The AF included modifications to the PDO resulting in the revisions to the Results Framework\. The original PDO to create sustainable conditions for enterprise creation and growth was modified to strengthen the business environment in Tanzania including land administration reform and improving access to financial services\. The revised PDO reflected more precise targeting of outcomes for improved measurement and attribution under the revised design\. 27\. Revised Results Indicators: The introduction of AF was accompanied by a change in the Project’s results framework – with the dropping of several indicators for activities that had either been completed or were no longer relevant, and the revision of some indicator targets to align with the modified PDO\. Key changes to outcome indicators are highlighted in the Table below\. Three outcome indicators were dropped from the results framework for the AF, two (core) indicators were retained, and three new indicators were added (one of which had been originally utilized as an intermediate indicator)\. Among intermediate indicators, ten from the original framework were dropped, three were continued with, and four new were added\. 5 M-Akiba is a Government of Kenya issued retail bond that seeks to enhance financial inclusion for economic development\. Money raised from issuance of M-Akiba is dedicated to infrastructural development projects, both new and on-going\. Page 14 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) Original Revised Project Outcome Indicator Changes with AF Target Target PDO Level Number of formal MSME increased 75,000 Not an indicator for N/A AF Value of the titled land compared to 7\.76 titled Not an indicator for untitled increased 7\.60 untitled N/A AF Increase in sales and assets for firms supported under the Project: (a) Sales, 562,500,000 Not an indicator for N/A (b) Assets 70,000,000 AF Calculation Number of days to complete the methodology revised6/ registration of a certificate of 20 and indicator moved 40 occupancy from intermediate to PDO level One Stop Shop (OSS) for business registration established and fully N/A New indicator Yes7/ functional Number of new financial products for which the legal/regulatory framework N/A New indicator 2 is developed Direct Project beneficiaries (number) 14,490 Target revised 35,000 Of which female (% of total) 41% Target maintained 41% Intermediate Results Indicators Changes Original (PAD) Rationale for Change Introduced Number of steps to formally start business was less relevant than the number of days required, Number of steps to formally once the OSS was established at BRELA that Discontinued start a business reduced combined steps using technology links with other agencies and thereby streamlined as well as expending the process of business startups\. Number of days to formally Retained No Change start a business reduced 6 When the indicator for the Project was introduced, it measured the days taken to register a certificate of occupancy, excluding the first process to approve a land allocation\. The AF indicator included this first process of approving a land allocation and was consistent with the method used by Doing Business report\. 7 OSS for business registration established and operational, as evidenced by completion of all the following steps: (i) BRELA technology platform connected with TRA and social security funds; (ii) OSS fully staffed; (iii) OSS online registration and payment enabled, and (iv) OSS personnel and key stakeholders trained Page 15 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Cost to formally start a Indicator remained the same but the End Project business reduced (GNI per Retained target was reduced from 60% to 20% to reflect capita) even lower expected costs\. discontinued as This measure was indicative of the regulatory intermediate Number of days to complete and ILMIS activities supported under Land indicator; the registration of a Administration Reform sub-component thereby revised and certificate of occupancy made it PDO-level rather than intermediate used as PDO indicator\. indicator Number of days to complete Indicator remained same but End Project target Retained the registration of a mortgage was reduced from 20 to 4 days\. Number of days to resolve a dispute on the overdue debt Discontinued Indicator not linked to AF investments\. in court reduced Official cost ( as a % of debt) to complete a dispute on the Discontinued Indicator not linked to AF investments\. overdue debt in court reduced Rigidity of employment Discontinued Indicator not linked to AF investments\. index Staff of PDB, MDU and Ministries Departments and Indicator for activities under sub-component 1C: New added Agencies (MDA) trained in Support to BRN private sector operations Completion of detailed plans Indicator for activities under sub-component 1C: New added for new NKRAs Support to BRN added Increase in gross revenue in Discontinued Indicator not linked to AF investments\. firms Indicator for activities under sub-component Creation of the framework Strengthening legal & regulatory structures & New added for deposit insurance Improving Access to Financial Services was added\. Number of active loan Discontinued Indicator not linked to AF investments\. accounts SME Number of active loan Discontinued Indicator not linked to AF investments\. accounts Increase in the volume of Discontinued Indicator not linked to AF investments\. savings Number of active -savings Discontinued Indicator not linked to AF investments\. accounts Active accounts held by Discontinued Indicator not linked to AF investments\. women Development of financial Indicator for sub-component Strengthening legal reporting standards for New added and regulatory structures and Improving Access microfinance institutions to Financial Services added\. Page 16 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) Revised Components N/A Other Changes 28\. Extension of Project Closing Date: The Project was originally scheduled to close on June 30, 2012 but was extended five times (including to process the Additional Financing) at the government’s request and management agreement, for a total of six years as follows: 29\. First Extension (from June 30, 2012 to June 30, 2013): There had been a slowdown in disbursement in the last 12 months due to the slow release of funds as a result of overdrawn status of two categories under the Credit preventing new funds to be disbursed\. As a result, there was a build- up of arrears which needed to be cleared\. Also, no new contracts had been signed in the last eight months and field activities such as rural land titling and formalization of urban informal settlements were temporarily put on hold\. More specifically, the activities included completion of the Cluster Competitiveness Program due to delayed launch, completion of the geodetic network; renovation of office buildings; and preparation of the Dar es Salaam master plan\. The extension was necessary to allow for the implementation of the planned Project activities and in particular, to make up for the delays caused by overdrawn categories which led to non-disbursement of funds\. 30\. Second Extension (from June 30, 2013 to December 2013): In order to keep the momentum going, and at the request of the Government, a six month extension was provided for the Project team to prepare Additional Financing documents to scale up ongoing Project activities and to make growth more inclusive and to improve shared prosperity\. 31\. Third Extension (from December 2013 to November 2015): A two year extension was granted to implement scaled up activities under the AF Credit of $60\.2 million equivalent\. 32\. Fourth Extension (from November 2015 to May 2017): The closing date was extended by 18 months to complete one critical and high priority contract for the Integrated Land Management Information System (ILMIS) that was to run until May 30, 2017 and to prepare Base maps for ILMIS and refurbishment of the national Land Information Center\. 33\. Fifth Extension (from May 2017 to July 31, 2018): To allow completion of the scaled up activities, the closing date was extended by 14 months\. 34\. Change in Component Cost: The changes in total Project cost by component and impact of the AF on the Project by component are shown in table below: ($ Million) Component Original Costs Changes with AF Revised Cost Business Environment Strengthening 51\.8 49\.2 101\.0 Enterprise Competitiveness 38\.9 - 38\.9 Improving Access to Financial Services 5\.0 10\.0 15\.0 Project Management * 1\.0 1\.0 Total 95\.7 60\.2 155\.9 */ Project Management Cost was covered under Business Environment Strengthening Page 17 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) 35\. Cancellation of Funds: Unutilized amount of 1,450,040 was cancelled\. Rationale for Changes and Their Implication on the Original Theory of Change 36\. The above restructurings did not have any major implications on the theory of change; in fact it provided more clarity in measuring the PDO because of the new and modified indicators for activities under AF, and additional time for more effective linkage in the results chain\. II\. OUTCOME   A\. RELEVANCE OF PDOs Relevance of PDO is rated as Substantial\. 37\. The original PDO, to create sustainable conditions for enterprise creation and growth, was considered somewhat broad in relation to the actual focus of the operation, which was to strengthen the business environment in Tanzania, including land administration reform and improving access to financial services\. The revised PDO reflected more precise targeting of outcomes for improved measurement and attribution under the revised design\. 38\. The original PDO to which the Project contributed was to achieve significant and sustainable economic growth in Tanzania (8-10 percent per year), which in turn would lead to sustained poverty reduction\. The Project supported the Government in implementing a set of priorities in the area of private sector development with a particular focus on key reform challenges; weak business environment and poor governance; underdeveloped trade and transport facilitation systems and institutions; closed and overregulated domestic service sectors’ low level of foreign direct investment; rigid factor markets; and barriers to regional integration\. 39\. The original PDO was fully aligned with the Government's national strategy of growth and poverty reduction as outlined in the National Vision 2025 and the MKUKUTA8/\. It was also consistent with the goals outlined in the Africa Action Plan and sector work conducted in preparation for the then forthcoming Country Assistance Strategy (CAS)\. The Project aimed to contribute to increasing non-government sector GDP, along with manufacturing and trade as a percentage of GDP, non-traditional exports as a percentage of total exports, employment in industry as percentage of total employment, the gross capital formation, direct credit to the private sector, and regulatory quality and rule of law\. 40\. The restructured Project, under AF, was also fully consistent with the 2012-2015 CAS which promoted inclusive and sustainable private sector-led growth\. 8 The National Strategy for Growth and Reduction of Poverty, NSGRP – is better known in Tanzania by its Kiswahili acronym MKUKUTA, Mkakati wa Kukuza Uchumi na Kupunguza Umaskini Tanzania  Page 18 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) 41\. The objective, vis-à-vis the Project design, was realistic as it focused on the critical four areas that required improvement for the Government to achieve its ambitious growth targets, both before and after restructuring\. These included the regulatory and legal framework, the financial sector, the capacity of the private sector and infrastructure\. These broad areas were identified as a result of extensive consultation with the business community and analytical work carried out by the GoT and the Bank\. B\. ACHIEVEMENT OF PDOs (EFFICACY) Overall Achievements before Restructuring (July 2006 – December 2013): 42\. In terms of its PDO to create sustainable conditions for enterprise creation and growth, the Project made significant achievements\. All three Outcome indicators exceeded their targets as shown below: (i) The number of formal enterprises increased from the baseline 50,000 to 98,202, exceeding the target of 75,000\. (ii) The value of titled land increased from $1\.2/square meter in 2007 to $31/square meter, far exceeding the target of $7\.76/square meter; and the value of untitled land increased from $0\.08 square meter in 2007 to $21/square meter exceeding the target of $7\.70/square meter\. (iii) Sales for firms supported under the Project increased from $0\.19 million to $627\.3 million exceeding the target of $562\.5 million; likewise asset for firms supported under the Project increased from $57\.08 million to $122 million exceeding the target of $70 million\. PDO Indicators Baseline End Target Actual Status Number of formal Exceeded 1 50,000 75,000 98,202 enterprises increased Target Value of titled land N/A under original compared to untitled Titled = 7\.76 Titled = 31 Exceeded 2 In 2007: Titled = 1\.2 increased Un-titled = 7\.60 Un-titled = 21 Target Un-titled = 0\.08 (US$/square meter) Increase in sales and N/A under original assets for firms In 2007/2011: Sales = $562\.5 M Sales = $627\.3 M Exceeded 3 supported under the Sales = $0\.19 M Assets = $70 M Assets = $122 M Target Project (US$) Assets = $57\.08 M Source: ISR #14 43\. The support provided to the Business Environment Strengthening program resulted in: a\. The Business Registration and Licensing Authority (BRELA) was modernized, by introducing time-saving technologies, streamlining and simplification of the business registration procedures, reorganization of workflow process and integration with other agencies, thereby improving the efficiency of business regulations and spurring new business startups\. Page 19 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) b\. Progress made in initiating the land reforms agenda with four laws enacted - i\. Land use Planning Act 2007, ii\. Urban Planning Act 2007, iii\. Unit Titles (Condominium) Act 2008; iv\. Land Laws Miscellaneous Amendments Act No\. 3 of 2009, and v\. Land Valuation (Bill) 2010\.; c\. Establishment of a geodetic network – This will support modern land surveys to be undertaken\. d\. The Integrated Land Management Information System (ILMIS) and e\. Alternative resolution mechanisms for land disputes being established, thereby improving the efficiency of contract enforcement and facilitating business creation and entrepreneurship\. 44\. Regarding the Enterprise Development Program, all the activities were completed including the larger programs such as the Matching grant programs and the Cluster Competitiveness Program\. 45\. Activities under the Financial Sector Deepening Trust (FSDT) were also completed which led to the increase in access to financial services\. 46\. The achievements of Intermediate Indicators before restructuring: 47\. Five intermediate outcome indicators either exceeded or fully achieved their targets\. One target was not achieved\. For example, the number of days to complete registration of a mortgage was reduced from 61 to 7; the number of days to resolve a dispute on overdue debt in courts was increased from 242 to 260 days against baseline of 242 days; the gross revenue was increased by 17 percent in the firms supported by the Project; the number of active loan accounts reached 380,177; the number of days to complete registration of a certificate of occupancy was brought down to 30 from 61; and finally the official cost to complete a disputes decreased by 40\.4 percent\. As shown below, four indicators exceeded the targets while two fully achieved their targets\. Intermediate Indicators Status 1 The number of days to complete registration of a mortgage was similarly Exceeded reduced from 61 to 7, well in excess of the target of 20 target The number of days to resolve a dispute on overdue debt in court had a baseline 2 Not of 242, whereas the target value (not specified in the PAD) was set at 365 days\. Achieved Actuals achieved in 2012 were 260 days 3 The increase in gross revenue among firms supported by the Project, at 17%, Exceeded exceeded the target of 15% target 4 The number of active loan accounts – Microfinance had reached 380,177 Exceeded against 250,000 targeted (152% higher) target The number of days to complete registration of a certificate of occupancy - when the original indicator for the Project was introduced, it measured the 5 Fully days taken to register a certificate of occupancy excluding the first process achieved to approve a land allocation\. The AF indicator included this first process of approving a land allocation and was consistent with the method used by Page 20 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) Doing Business report\. As a result, the number of days to complete registration of a certificate of occupancy was brought down from 61 to 30 against the target of 30 The official cost (as percentage of debt) to complete a dispute on the 6 Fully overdue debt in court had a baseline of 35\.3%, whereas the target was set at achieved 39\.0%\. Actual value achieved was 40\.4% 48\. As shown below, six indicators substantially (75% and above) achieved their targets, and five indicators were moderately (below 75%) achieved\. One indicator was not measured\. More specifically, the cost to formally start a business, expressed as a percentage of GNI, was reduced from 161 to 80; the number of days to start a business declined from 35 to 28; steps to formally start a business reduced from 13 to 9; the number of active SME loan accounts reached 26,698; the percentage of project supported institutions reporting on SME reached 85; the percentage of Project supported institutions reporting on microfinance reached 80; the number of active micro savings accounts reached 951,404; the percentage of Project supported institutions reporting on active micro savings accounts reached 75; the active micro-savings accounts held by women reached 42; and the percentage of Project supported institutions reporting on accounts held by women reached 80\. Intermediate Indicators Status Substantially The cost to formally start a business – expressed as a percentage of GNI - was 1 Achieved reduced from 161\.30 to 80\.00 over the period, against a target of 60\.00 (80%) Moderately 2 The number of days to start a business declined from 35 to 28 against a target of 20 Achieved (71%) Moderately 3 Steps to formally start a business were reduced from 13 to 9, against a target of 7 Achieved (65%) Substantially 4 The number of active loan accounts SME reached 26,698 against 34,440 targeted Achieved (78%) Substantially Percentage of Project supported institutions that are reporting on this indicator 5 Achieved (SME) was 85 against 100 targeted (85%) Substantially Percentage of Project supported institutions that are reporting on this indicator 6 Achieved (microfinance) reached 80 against 100 targeted (80%) Moderately Number of active micro savings accounts had reached 951,404 against 1,396,000 7 Achieved targeted (68%) Substantially Percentage of Project supported institutions that are reporting on this indicator 8 Achieved (active micro savings accounts) was 75 against 100 envisaged (75%) Percentage active micro-savings accounts held by women was 42 against 58 Moderately 9 targeted Achieved Page 21 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) (72%) Substantially Percentage of Project supported institutions that are reporting on this indicator 10 Achieved (accounts held by women) was 80 against 100 targeted (80%) Not 11 Rigidity of employment index measured Project Achievements after Restructuring: 49\. The Project’s developmental objective was changed from creating sustainable conditions for enterprise creation and growth, to strengthen the business environment in Tanzania, including land administration reform, and improve access to financial services\. In this regard, four out of five outcome indicators were either met or exceeded their targets, i\.e\.: End PDO Indicators Baseline Actual Status Target Number of new financial products for which Exceeded 1 0\.00 2\.00 25 the legal/regulatory framework is developed Target Exceeded 2 Direct beneficiaries 0\.00 35,000 170,000 Target Exceeded 3 Female beneficiaries 0\.00 41 45 Target One Stop Shop (OSS) for business 4 N Y Y Target Met registration established and fully functional Number of days to complete the registration Moderately 5 77 40 67 of a certificate of occupancy Achieved Source: ISR #24 50\. The achievements of Intermediate Indicators after restructuring: 51\. As shown below, eleven indicators either fully met or exceeded their targets: End Intermediate Indicators Baseline Actual Status Target 1 Cost to formally start a business reduced as Exceeded 168\.3 20\.00 42\.90 % of GNI per capita Target 2 Establishment of a Customer Service Center N Y Y Target Met at the Ministry of Lands 3 Customer Service Center at the Ministry of N Y Y Target Met Lands 4 Number of established Ministry of Lands 0 1 1 Target Met Zonal Office with functioning ILMIS 5 Number of Legal Bills (related to land Exceeded 0 2 6 administration) drafted Target Page 22 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) 6 ILMIS established N Y Y Target Met Staff of PDB, MDU and MDA trained in 7 N Y Y Target Met private sector operations Completion of detailed plans for new 8 N Y Y Target Met NKRA's 9 Tourism sector strategic report 0 1 1 Target Met 10 Creation of framework for Deposit Insurance N Y Y Target Met Development of Financial reporting standard 11 N Y Y Target Met for micro finance institutions Source: ISR #24 52\. As shown below, one indicator substantially achieved its target, two indicators moderately achieved the target, and one target was not met\. End Intermediate Indicators Baseline Actual Status Target 1 Beneficiaries satisfied with access, service 0 100 55 Moderately Met quality, responsiveness to needs etc\. 2 Days to formally start a business reduced 35 20 28 Moderately Met Days reduced to complete registration of a 3 61 4 5 Substantially Met mortgage 4 PPP projects brought to market through 0 3 0 Not Met 53\. Project achievements after restructuring are summarized as follows: Component 1: Strengthening the Business Environment A: Land Administration Reform: 54\. Infrastructure Interventions: (a) Computerization and streamlining of land administration services: The Project supported: (a) background studies and land records sorting and consolidation in readiness for design and implementation of a computerized ILMIS; (b) provided technical support to the preliminary design of the ILMIS and (c) prepared a strategy for rolling out ILMIS, once design is completed\. (b) Up-grading infrastructure for surveying and mapping – The Project overhauled the geodetic infrastructure by replacing the outdated colonial geodetic infrastructure with a modern Global Positioning System (GPS) based infrastructure for surveying that is faster and cheaper 55\. Legal and Regulatory Framework Interventions: (a) Development of a number of new laws and regulations for the following acts: ï‚ Land Use Planning Act 2007 - essential for efficient and sustainable use of land\. Page 23 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Unit Titles (Condominium) Act 2008 - essential to promote more efficient housing including apartments and condominiums\. ï‚ Mortgage Financing Act 2008 - essential to promote collateral based lending\. ï‚ Urban Planning Act 2007 - essential for sustainable use of land in urban areas, and Operational Manual with guidelines\. ï‚ The Laws Miscellaneous Amendments Act No\. 3 of 2009 (to extend the duration of residential licenses from 2 to 5 years) - essential to protect land rights for more than 200,000 untitled properties located in urban informal settlements\. (b) Undertook strengthening of dispute resolution mechanisms - Established 22 district housing and land tribunals, of which 12 were given office and operational facilities and supported a special program to reduce backlogs of land cases in key municipalities with the biggest case-loads including Dar es Salaam, Mbeya and Arusha\. 56\. Work on New Approaches: (a) Decentralization of land administration and registration of village land – six zonal land offices covering the whole country were established, and approval authority of Land Commissioner and Directors of Registration and Surveying decentralized to that level; boundaries of 11,000 villages (out of about 12,000) were surveyed, of which more than 7,000 were registered in a national register, thereby empowering their authorities to plan, allocate and manage land; and a low cost and faster demarcation and registration approach (the so-called systematic approach that is a global best practice) was successfully worked upon to replace the traditional high cost registration on demand (sporadic approach that is about ten times more expensive) and more than 100,000 Certificates of Customary Rights of Occupancy (CCROs) issued\. (b) Land use planning in rural areas - Supported the preparation of the National Land Use Framework Plan and worked on a new land use planning model – 1,000 villages were covered with participatory land use planning\. Under the Additional Financing, the following were achieved: 57\. Infrastructural Interventions: a) The design, development and installation of ILMIS at the Ministry headquarters and the Coastal Zonal office in Dar es salaam was completed\. b) The conversion and migration of data was finalized\. c) Improvement of associated infrastructure and purchase of equipment was completed\. d) Capacity development and transfer of skills to ILMIS administrators/users was achieved\. 58\. Surveys and Mapping: Page 24 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) a) The aerial photography and producing multi-purpose large scale base maps for Dar es Salam and surrounding areas for ILMIS were completed\. 59\. Strengthening of legal and Regulatory Framework: a) A review of the 1995 National Land Policy was completed\. b) A new National Land Policy was drafted and submitted to the Cabinet Secretariat (currently under review by Cabinet)\. 60\. Land Use Planning and Regularization of Tenure Rights in Urban Areas: a) This involved implementation of the first phase of 10-year Regularization Program (2013-22) with the aim of scaling up regularization in Dar es Salaam\. The regularizing, surveying and registering the targeted 6,000 plots in Dar es Salaam was competed\. 61\. Notwithstanding the above achievements, a more in-depth review on land/planning, in terms of the impact and value for money is suggested\. This could be taken up as part of further dialogue and engagement on this complex topic in the country\. B: Support to Business Registration and Licensing Reform 62\. The Business Environment Blueprint was printed and shared with the general public for consultations, ultimately approved by Cabinet in May 2018\. The objective of this intervention was to have clear, simple and affordable entry procedures, processes and costs for new companies\. Activities geared towards clarifying, simplifying and reducing costs at point of entry for new companies into the formal business and reduce the number of entrepreneurs operating in the informal sector\. Key achievements at the close of Project included the following: (i) digitization of BRELA's registries was completed - 88,700 files from company registry and 191,243 files from Business Names registry were scanned and indexed; (ii) a records management system was installed; (iii) online names search database for companies and business names was established on the BRELA web site; (iv) registration of companies now takes an average of three days and business names one day; (v) several business acts were amended or enacted to create a more conducive climate for doing business in Tanzania\. Moreover, the Parliament approved amendments to the following acts: (a) Business Names (Registration) Act (Cap\. 213), (b) Companies Act (Cap 212) of 2002, (c) Tanzania Trade Development Authority Act (Cap 155) and (d) Merchandise Act (Cap 85)\. 63\. The main outcomes of the Business Registration and Licensing Reform may be summarized as follows: (i) Business Environment Blueprint (for regulatory licensing reform) was completed and approved by Cabinet in August 2018; (ii) Class A license for investors and their family members was issued by the Ministry of Industry and Trade (iii) the Ministry of Agriculture committed to slashing an estimated 80 fees, permit and levies including licenses that are affecting small scale farmer and private sector at large; (iv) the Government has removed the mandate of inspections by Health, Town and Land Officers as a prerequisite of obtaining Business Licenses\. Page 25 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Now health inspection and town planning for un-regulated businesses is done separately and outside the business licensing and registration procedures\. Health and town planning requirements prior to issuance of a business license has been delinked\. This means health officers and town planning are supposed to inspect business and make sure that all business abides to their mandated laws; (v) companies and business names data capture process has been completed and search for companies/business names are now available on BRELA’s website9/; (vi) digitization was completed for the BRELA’s registries; (vii) officials have accepted to issue TIN at BRELA; (viii) standard format for Memorandum and Articles of Association for incorporation of a company without recourse to lawyers is now available on BRELA’s website; (ix) Direct Banking System (DBS) was set up where BRELA has opted to join other Government institutions to use electronic banking facility where customers will be able to pay fees directly to the designated banks (currently NMB and CRDB); (x) Insolvency Rules of the Company Act 2002 has been gazetted since February 2012 and are in use; (xi) one stop center has been set up for the issuance of building permit under one roof for fast tracking the processes; and (xii) single joint team established in the Local Government Authority (LGAs)’ to deal with post construction inspection\. The inspections after construction include: fire, health, LGAs occupancy permit; final inspection; and occupancy permit\. C: Support to Big Results Now 5\. The Ministry of Tourism submitted the policy for tourism promotion, as a prerequisite for development of a national tourism strategy, both of which were prepared under the Project and disseminated for Parliamentary discussion for approval The Business Enabling Environment Support Program is providing additional support to the GoT to finalize the policy following stakeholder consultations\. Component 2: Improving Access in Financial Services 64\. Our intervention focused on (i) strengthening the legal and regulatory framework, (ii) supporting deposit insurance, (iii) developing reporting standards for microfinance institutions (MFIs), (iv) addressing weaknesses in the collateral system, (v) developing standards for overseeing and supporting mobile financial services infrastructure, and (vi) supporting development of new products to expand access to finance\. 65\. Tanzania Mercantile Exchange (TMX) has been established as a company established under Public Private Partnership (PPP) between the Government, public institutions and the private sector\. TMX was incorporated on 25th August 2014 under the Companies Act, 2002\. The TMX is licensed by the Capital Markets and Securities Authority (CMSA) in accordance with the Commodity Exchanges Act 2015 and Commodity Exchanges Regulations, 2016\. The TMX offices have been established and staff recruited\. Commodity contract specifications have been prepared for the following crops: sesame seeds, sunflower, cashew nut, maize, pigeon peas, and cow peas\. The Exchange would cut out middle men for trading crops, and this would result in 9 Business names are available on the website (www\.brela-tz\.org/company\.php)\. Page 26 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) more transparent business transactions in agriculture produces, thereby leading to more benefits for farmers\. 66\. Development of Financial Markets\. Upgrade of the Dar es Salaam Automated Trading System and Central Depository Security system has been completed\. The two systems were installed in 2006 and used outdated software that requires significant enhancement\. The Dar es Salaam is also in the process of introducing new products in the capital markets such as Derivatives, Real Estate Investment Trusts, and Exchange Traded Fund etc\. 67\. Beneficiary Survey: Consultations with key beneficiary agencies were undertaken during beneficiary survey which provides strong evidence that the Project enabled important reforms that contributed to improved services needed for enterprise growth\. The key findings are as follows: Summary of Key Project Findings ï‚ Several general operational business licenses were reviewed\. The survey found dramatic increase in the number of business licenses and title deeds issued in every Local Government Authority (LGA) visited as a result of the reforms and enabling systems\. On average, the number of business licenses increased by 50 percent annually, and dramatically by 123 percent from 2005 to 2017\. ï‚ Time to issue a license decreased from an average of 3 days in 2005 to 1\.7 days in 2017, while revenue from business licenses increased by 53 percent from an average of Tsh 495 million to Tsh 756 million\. Part of the reason includes significant reduction in time and procedures to start, register, and operate business as well as the establishment of BRELA which brought various positive changes to business registration\. However, participation by rural enterprises is found to be relatively lower compared to urban enterprises\. ï‚ Land title service show even more dramatic growth in performance\. The number of title deed increased by 190 percent from an average of 180 per year to 517, while the time to issue a title deed declined by nearly 90 percent from an average of 340 days in 2005 to 37 days in 2017\. The survey also shows participation of women in land ownership has increased in both urban and rural areas\. Further, in the surveyed LGAs revenue from land property increased seven folds from an average of Tsh 112 million in 2010 to Tsh 792 million in 2018, partly due to increased land titling\. ï‚ With regards to land, over 70 percent of the respondents in sample survey in both Households and firms reported that it is easier to acquire land in 2018 compared to the past 10 years\. The main factor in the increased ease of acquiring land is: (i) decrease in price for getting a title (47\.3 percent), (ii) increased awareness and knowledge (24\.8%), (iii) lower time it takes to secure a title (11\.3%), and (iv) low level of corruption (8\.3%)\. In this regard, the level of satisfaction has also increased, with men showing higher levels of satisfaction (60%), while female (40%)\. Some remaining levels of dissatisfaction relates to perceived continued structural rigidities, including still high cost of acquiring land, delays and inadequate information and knowledge of the land reforms\. Page 27 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ The Project had significant impacts on improving business environment even as some of the interventions recently introduced to increase government revenues and promote domestic industries have had dampening effects on progress achieved over the past 10 years\. However, with regard to above observation, rural enterprises consider business environment to be friendlier, while urban firms, where most of the investment is going and which have the highest potential to spur economic growth, still consider it to be complex and needing further reforms\. ï‚ Financial services have improved in terms of the range of financial institutions and other non- commercial banks, as well the range of services provided both in rural and urban areas leading to greater access to credit\. In particular, the mobile money revolution explains the dramatic leapfrog in financial inclusion, from coverage of 11 percent to 57 percent within the project period\. The main factor explaining the improvement is simplified operation procedures and use of electronic systems (including mobile phone services) that is accessible country-wide all the time\. ï‚ Despite improved access to financial services, the policy environment to increase lending to consumers and businesses remains challenging, with only 27 percent of the respondent firms and 21 percent of the Households surveyed receiving bank loans in the past year – mostly from commercial banks (77%) and Village Community Banks and Savings and Credit Cooperative Societies (11%)\. The main challenges cited by respondents include: high interest rates, lack of collateral and the high cost of procurement of Electronic Fiscal Devices (EFDs) machine for small businesses\. Efficacy Rating Before Restructuring (July 2006 – December 2013): 68\. The pre-restructuring Project efficacy is rated Substantial\. All the three PDO indicators exceeded their targets (para 42)\. Regarding intermediate indicators, out of 19, seven were fully achieved, including five that exceeded the targets while an additional six indicators substantially achieved their targets, and five moderately\. One indicator was not measured (the rigidity of employment index, as indicated in paras 47 and 48)\. Efficacy Rating After Restructuring (December 2013 – July 2018): 69\. The post-restructuring efficacy is rated Substantial\. The implementation performance substantially improved after restructuring\. For example, out of the five PDO indicators, one was partially achieved, one was fully achieved and three exceeded their targets (para 49)\. Regarding the intermediate indicators, out of 15 indicators, eleven fully met the targets, including nine that even exceeded their targets\. Further, one indicator substantially achieved its target, and two indicators moderately achieved the target; only one target was not met (paras 51 and 52)\. C\. EFFICIENCY Economic Analysis 70\. An economic and financial analysis was carried out to estimate the economic rate of return of the overall Project and the specific components\. Across the Project components, the Net Page 28 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Present Value (NPV) is estimated at US$8\.5 million at a 15 percent discount rate10/ with an ERR of 19% for the twelve-year project period\. Since the Project was extended several times, comparisons were not made to those conducted at Project design and AF given those analyses were conducted with different parameters\. 71\. The corresponding Benefit-to-Cost ratio for the project is 118%\. Together with the positive NPV, this BCR over 100% denotes good value for money given that the discounted value of the impact on project beneficiaries (project benefits) exceeds the discounted value of project costs\. For the soft components of the project, Annex 4 includes a further discussion on the literature underpinning the softer activities of the project\. This literature provides strong support for these activities even if the direct benefits are difficult to quantify\. 72\. Component 1: Strengthening the Business Environment focused primarily on two areas, land administration reform and business registration reform\. 73\. For the land administration reform sub-component, the NPV was estimated to be US$4\.6 million with an ERR of 24%\. This estimate is based on the central assumption the process to register for a mortgage reduced from 61 days at the onset of the project to 5 days at closing\. 74\. The analysis of the business registration reform sub-component estimates the NPV to be US$1\.9 million with an ERR of 19 percent\. The central assumption for this estimate is that the cost of business registration was 168\.3% of GNI per capita during Project design and has now reduced to 42\.9% of GNI per capita\. 75\. Component 2: Enterprise Development Competitiveness, the component NPV and ERR was estimated to be US$19\.8 million and 22%, respectively\. This estimate is based on the increase in total gross sales across beneficiaries of this component (including the matching grant and firms trained under the Business Development Gateway and Business Linkage Programs)\. 76\. Because of the TA and capacity building focus of Component 3 Access to Financial Services, a quantitative valuation was not calculated for this component\. Economic literature does however draw strong linkages between access to finance reform and firm performance (Demirguc-Kunt and Klapper, 2012), with the number of financial instruments available to both lenders and borrowers contributing to a higher probability of personal and business investment (Besley, 1995)\. Assessment of Efficiency and Rating 10 Discount rate: Discussions on what discount rates should be used for Bank economic analyses vary widely especially given the low interest rates associated with IDA loans\. However, to account for some of the risk and volatility (i\.e\. Beta) associated with investments in developing countries and taking into account the national inflation rate and opportunity cost as reflected in interest rates in the country, 15% was used for NPV analyses given both the low opportunity cost for Bank capital to be deployed elsewhere and the high risk associated with investments in sub-Saharan Africa\. Page 29 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) The Efficiency is rated as Substantial 77\. The Project was formally revised due to several reasons including: (i) Government’s request for AF to address newly targeted priority weaknesses in key areas of Tanzania’s business environment based on progress achieved and lessons learned from the original Project which was rated successful, and (ii) Revision of the Results Framework to make it more precise with measurable indicators during the design of the AF; thus introducing several new expected outcomes that laid a solid foundation for progressive improvement in the private sector business environment\. For example, the AF enabled development of the ILMIS and its associated ILMIS software which greatly revolutionized the land administration system in Tanzania, scaling up substantially land registration and reducing the time to acquire the right of occupancy both in urban and rural areas\. 78\. External audit of the Project by the Controller and Auditor General consistently awarded “Unqualified” rating to the Project financial management; implying project implementation adhered to international financial management standards\. Further details are summarized in Annex 4\. 79\. As shown by the positive NPV value (US$8\.5 mm) in the economic analysis, the investments from the project demonstrate a substantial degree of efficiency in terms of their outcomes\. The cross-component ERR of 19 percent further underscores this point, which includes the additional financing investments as part of the calculation\. The additional financing investments supported further land administration and business environment reforms, both of which also demonstrate substantial efficiency with ERRs of 24 and 19 percent, respectively, including both the original project and additional financing investments\. 80\. The economic analysis calculations have incorporated the full project period for each of the components across the 12\.5 years, thereby accounting for the time value of money over the full period of implementation\. While some of this extended time period is due to delays, this project length was also due to additional financing; the valuation calculations for the economic analysis have incorporated the extended time period required for the impact quantified in the ERR above\. As such, this time period has been fully factored into both the economic analysis and overall efficiency rating\. D\. JUSTIFICATION OF OVERALL OUTCOME RATING 81\. The overall outcome rating is considered Moderately Satisfactory\. To arrive at the overall Outcome rating, the ICR has used the share of actual Credit disbursements made before and after restructuring, and weighed in the separate outcome ratings\. As a result, the rating is based on: (i) Substantial rating for PDO Relevance before and after restructuring; and (ii) Substantial rating for Efficacy before and after restructuring\. The overall Efficiency for the Project is rated as Substantial\. See Annex 7 (Split Rating calculation)\. Page 30 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) E\. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender  82\. The sub-component “Business Development Gateway (BDG)”, under Enterprise Development component, was designed to strengthen entrepreneurial culture by providing entrepreneurs with business ideas and start-up firms with a small risk grant, which enabled them to start or upgrade their businesses\. The program particularly supported women in business to: (i) attract ideas and innovations from young graduates from university and technical schools; (ii) encourage spin-offs and specialization; (iii) encourage formalization and business expansion of small business; (iv) enable small or young entrepreneurs’ access to a mentoring and professional network; (v) improve their track record and visibility; and (vi) create local successful role models for young Tanzanians\. 83\. Tanzania Revenue Authority worked with the BRELA to simplify procedures for starting companies as a result of which, more women are establishing business enterprises\. Further, the investments made under the Project in digitalization and online facilities has made it possible for women to register their enterprises without leaving their family responsibilities to undertake costly, risky and cumbersome travel to Dar es Salaam, as had been required in the past\. 84\. The Project’s support to development of a new national tourism strategy accentuated the priority issues to strengthen gender parity and empowerment, and recommended specific activities aimed at women to help them get employment and start tourism-related enterprises\. Tourism sector offers vast opportunities for growth in services and products from businesses owned and managed by women entrepreneurs\. 85\. To underscore the gender parity and empowerment agenda, beneficiary surveys (para 56) provided evidence that gender differences in accessing and improvement of various services were insignificant, and where existed, tended to fade away overtime\. For instance, 84 percent of households reported no gender bias in owning land, while 93 percent reported such differences to have substantially decreased compared to the past 10 years\. It was also reported that, there was no bias in obtaining land title, as reported by 87 percent of respondents\. Indeed, 91 percent of respondents reported that procedures for owning land and getting title apply equally between men and women\. Similarly, most households (92%) and firms (79\.2%) report that there was no bias in registering business between men and women, neither in accessing loans from financial institutions (89%)\. Institutional Strengthening 86\. The Project contributed substantially in building the institutional capacity of various agencies within the public sector\. Institutional strengthening was provided mainly in two areas: (i) change in the institutional know-how, efficiency and increased capacity in meeting the mandate of the Prime Minister’s office (PMO); the Ministry of Finance and Planning; and the Ministry of lands; and (ii) overall policy and legal strengthening\. Page 31 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Change in the institutional know-how, efficiency and increased capacity in meeting with the ministry’s mandate: ï‚ The Ministry of Lands has successfully gained exposure and experience in managing donor-funded project – the Project was initially fully managed by the PMO but the responsibility was passed on gradually to the Ministry of Lands (for procurement, financial management, M&E and reporting purposes); in addition, the Ministry of Lands took on other donor projects including Land Tenure Support Project funded by a consortium of donors led by DFID and the United States Agency for International Development-funded Land TA Project; ï‚ The capacity was increased in the ability to hire, supervise and approve work carried out by the private sector, notably of private surveyors, valuers and physical planners in the urban land management and administration; and also management of consortium of firms that are implementing ILMIS; ï‚ Modernization of infrastructure and systems are managed more efficiently, notably (i) development of a geodetic reference framework and its densification with continuously operating reference stations that have reduced costs and time taken to complete land surveying; and (ii) ILMIS that reduces time and cost to undertake land transactions; ï‚ Re-engineering of workflows and business processes as part of the system and process reforms driven by ILMIS; and ï‚ Moving from a manual-based work environment towards a paper-less work environment\. Policy and legal strengthening: The four main policy/strategy undertakings included: ï‚ Preparation and processing of the revised National Land Policy11/ ï‚ The Second 10-year Sector Plan for the Implementation of Land Laws ï‚ Support to a number of land-related laws and bills including: ï‚ Land Use Planning Act 2007 ï‚ Urban Planning Act 2007 ï‚ Unit Titles (Condominium) Act 2008 ï‚ Mortgage Financing Act 2008 ï‚ Miscellaneous Amendments in Act No\. 3 of 2009 and ï‚ Land Valuation Act 2010 11 In the final stages of consideration for approval by the cabinet Page 32 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Support in the preparation of Issue Papers and drafting bills for the following laws: ï‚ Land Acquisition and Compensation Bill; ï‚ Real Estate Agents Bill; and ï‚ Legal instruments to support implementation of computerized land transactions\. Tanzania Mercantile Exchange: See Section II (b) Development of Institutional Capacity to conduct effective evidence-based Public-Private Dialogue and Advocacy\. The Project contributed to developing the capacity of Tanzania Private Sector Foundation (TPSF)\. When the Project started in 2006, TPSF was a small organization with just five employees\. By the end of the Project the staff strength increased 22 employees in procurement, financial management, M&E\. TPSF has now grown to be an influential and credible organization for policy advocacy, and is able to advocate for conducive business environment, even to raise finance on its own\. Mobilizing Private Sector Financing 87\. Not applicable Poverty Reduction and Shared Prosperity 88\. While a poverty/impact assessment is yet to be carried out, the Project is likely to generate benefits for a much larger number of MSMEs, with wider implications for private sector growth, job creation, and poverty reduction\. This was obvious as the Project has contributed to the implementation of the Government’s growth and MSME strategies in three focus areas: (a) business environment improvements, (b) private sector capacity building, including access to business services and business linkages, and (c) access to financial services in particular for MSMEs\. The Project has addressed both supply and demand issues constraining the MSME sector with an expected positive impact on the overall growth of the private sector, employment, and reduction in poverty\. 89\. Commodity Exchange is working with banks which can give loans to farmers and help them expand their agricultural activities\. In addition, the arrangement by agricultural cooperatives to buy, store, and trade farm produces, is expected to reduce the influence of middle men exploiting farmers and this would lead to farmers earning more revenue\. 90\. New tourism strategy has addressed poverty alleviation through product diversification such as cultural tourism\. Under this program, local communities are expected to showcase their cultural aspects and promote tourism and this, in turn, would create jobs in the sector\. For example, tourists can be taken to coffee estates to show how to make coffee powder\. Other Unintended Outcomes and Impacts Page 33 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 91\. The Project outputs led to supporting other projects in Tanzania’s economy with significant payoffs including: 1\. The use of large-scale base maps, produced under the Project, for mapping of several dams for hydropower and irrigation for agriculture\. 2\. The use of Project’s nation-wide horizontal geodetic reference framework and its densification with Continuously Operating Reference Stations (CORS) that has enabled undertaking of uniform, more accurate and cost-effective multi-purpose surveys for national projects including new airport in Dar-es-Salaam, standard gauge railway; oil pipeline; and highways 3\. The use of Project’s nation-wide gravity and height measurement system that enables more accurate measurement of heights and depth that support efficient exploitation of under-surface and under water resources including: Underground mineral exploitation and development; Hydrographic surveying and exploitation of underwater minerals and water resources; and more accurate predictions and assessment of earth movements and earth quakes; their potential and actual damages; and measures to minimize them\. 92\. The project was instrumental in creating a huge demand for trading stocks and shares through mobile phone\. Currently people in rural areas are trading shares through mobile phone on a real time basis\. 93\. The University Challenge program conducted by the TMX has generated a huge enthusiasm among university students on capital markets\. This program has created an awareness on how capital markets function, how to form enterprises, and access capital\. For example, at the beginning it was expected that 2000 university students would be participating in the first phase of the program, but more than 7000 students turned up\. III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A\. KEY FACTORS DURING PREPARATION 94\. In the context of weak public sector governance, the Project preparation team recognized the implementation challenges12/ and prepared the design with sound background analysis and comprehensive assessment of the Government’s commitment\. Lessons learned from similar operations in other jurisdictions were also considered to assess potential risks and mitigation measures\. 12 Weak business environment and poor governance; underdeveloped trade and transport facilitation systems and institutions; closed and overregulated domestic service sectors’ low level of foreign direct investment; rigid factor markets; and barriers to regional integration\. Page 34 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Lessons Learned during Project preparation and reflected in the Design: 95\. More specifically, the Project drew on the studies carried out by the Bank and the Government during preparation, including a Country Economic Memorandum on Growth, Diagnostic and Trade Integration Study, Investment Climate Assessment, Cost of Doing Business Survey, and value chain analysis of four subsectors\. The lessons reflected were drawn from the public-private consultation process and the Investor Round Table\. Key lessons included: (i) Public-private partnership: The importance of building an effective public-private dialogue is a key area in the Africa Region’s private sector strategy, because experience has demonstrated the difficulties in implementing change without ownership by the public and private sector\. The Project design drew on this lesson and made the private-public interface a central feature of the Project\. (ii) Building strong public-private sector dialogue: An important element to successful private-public dialogue is the ability of the private sector to debate, research, and present issues to the public sector\. The Project included capacity building for the Tanzania Private Sector Foundation to enable the apex body to develop clear policy positions and solutions\. (iii) Integrated approach: A principal conclusion of reviews of the past MSME projects highlighted the need for an integrated package of interventions such as access to financial services, business development services, and improvements in the business environment for MSMEs that can address interrelated constraints\. This Project was built on these three complementary pillars\. (iv) Matching grant program: Based on the lessons of matching grant schemes in Africa and elsewhere, the demand-driven approach was designed with attention to achieving a suitable balance between incentives for potential demand to come forward and sufficient co-payment to ensure adequate willingness to pay when assistance was removed\. The design of the matching grant component specifically took into account lessons learned from the first-generation matching grant schemes, including: (i) lack of institution and financial sustainability; (ii) insufficient ownership and involvement of stakeholders; (iii) insufficient independence of the grant management and risk of capture by special interests; and (iv) inadequacies in M&E capacity\. (v) Specialized financial products: There was a growing body of experience in providing small business loans profitably-either through microfinance institutions entering the market or through commercial bank downscaling\. The critical factors underlying these success stories often have less to do with the injection of new liquidity and more to do with the application of new technology, the introduction of new corporate incentives, the development of new staff skill sets, and the provision of institutional support to staff responsible for MSME lending portfolios\. This Project paid particular attention to these capacity-building considerations\. Page 35 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) (vi) Land Reform: The Bank has assisted many land reform and administration projects since the formulation of its Land Reform Policy Paper in 1975\. Significant lessons were drawn from the Bank’s experience with these projects including (i) building on a comprehensive multi-tenure approach to land policy and institutional development; (ii) applying community and participatory approaches to land titling; and (iii) emphasizing sustainable systems for land transactions as much as the building of land registration systems\. 96\. Risks and Risk Mitigation Measures: During Project preparation, the Bank task team carried out extensive risk analysis and identified critical risks and risk mitigation measures\. Risks of Project implementation had been identified in the AF Restructuring Paper as Substantial\. Of particular concern was the coordination and governance challenges likely to arise on account of the existence of multiple beneficiary agencies, many of which had insufficient ownership of their components and followed their own bureaucratic procedures\. The mitigation measures proposed were considered effective and realistic\. Overall, the Project risk was rated medium likelihood and high impact at both preparation and implementation stage\. 97\. Adequacy of Government commitment: The Government demonstrated ownership and strong commitment in developing conditions for enterprise creation and growth by developing major strategic frameworks, including the National Vision 2025, the MKUKUTA, the Tanzania Mini-Tiger Plan; the SME policy and the Trade Policy, all of which reflected Government’s commitment to policy change to a private sector-driven economy\. The Government involved all key institutions relevant to the success of investment climate reforms, together with private sector, in the process of developing each component of the program, which helped ensure ownership of the program and sustainability of the reforms introduced\. As mentioned earlier, the Government installed a Better Regulation Unit to work with the TPSF in ensuring implementation of policy changes and institutional reform to reduce the cost of doing business and enable stronger private sector participation\. In addition, the Government benchmarked all institutions against international standards to be better able to identify actions for change and improvements on an ongoing basis\. B\. KEY FACTORS DURING IMPLEMENTATION 98\. Notwithstanding achievements, the Project faced a number of challenges including: Coordination issues (i) In the aftermath of new Government taking office shortly after the Project was approved in 2005, delays were experienced as the President's Office Planning and Privatization was converted into a fully functional Ministry of Planning Economy and Empowerment\. (ii) Although the Public-Private Partnership (PPP) component was designed, by agreement with the Government, to be implemented through the Prime Minister’s office, following amendments to PPP legislation and establishment of a PPP Unit at the Ministry of Finance, the PMO was not able to disburse funds because there were no approved activities presented to it from the PPP Unit, which was impacted by intra-governmental politics, this impeding performance of this component\. Page 36 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) (iii) While Government support at top leadership levels appeared strong, many problems existed at intermediate levels - including issues arising from lack of coordination\. For instance, despite allocation of priority by the Prime Minister’s Office, lack of cooperation from the BRELA, was reported/ to have been a factor making implementation of the business registration reforms component particularly challenging\. Capacity issues (iv) Despite the fact that the Bank’s procurement procedures were similar to those of the National Procurement processes, developing the Government’s procurement capacity was a major challenge, for virtually all Bank operations including this Project, irrespective of some sentiments that the Bank’s procedures were mainly to blame for slow implementation\. (v) By the end of November 2015, the original closing date of the AF, disbursements had reached only $25 million (46%)\. This relatively poor performance was on account of a four-month delay in effectiveness of the AF, compounded by significant delays experienced in the Government procurement system, especially affecting the procurement of the largest single cost component, ILMIS, which was crucial to the land administration reforms sub-component\. As a consequence the AF had to be extended to May 30, 2017\. (vi) The Project suffered from considerable delays in the implementation of the ILMIS due to limited procurement capacity and long and parallel procedures on the client side\. Specifically, both the beneficiary Ministry of Lands as well as the PIU (under the PMO) were applying their own respective (and different) procurement procedures on the same bid\. In April 2016 the new Government produced a legislation outlining each Ministry’s assignments, functions and responsibilities\. This realignment of the new government process revealed discrepancies in the conflicting use of two different procurement procedures\. Meanwhile, after 12 months of preparation, the ILMIS contract was awarded\. However, the implementation of this contract was to exceed the remaining implementation period which was ending in May 2017\. (vii) Progress during the first half of 2016 was as slow, especially with regard to the sub-objective of land administration reforms, under the Strengthening Business Environment component\. Although the Bank had cleared the ILMIS bid documents to be advertised on February 1, 2015, it took the Government eleven months to submit its bid evaluation report on January 5, 2016\. The contract was issued on January 25, following which the Government requested a further extension of the Project to end-July 2018, in order to complete implementation of the ILMIS\. Portfolio-wide externalities (viii) The Project team stopped all funding to the judiciary/commercial justice sectors due to impropriety in the procurement process where several complaints were registered causing unnecessary delays\. The Project was able to resume funding for these components only after complaints were addressed\. (ix) Since Tanzania had some lapsed loans affecting performance of the Bank country lending portfolio, the Project was unable to make a lump sum Initial Deposit to the Designated Account Page 37 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) under the AF\. This also had an impact on the disbursement levels in the first few months after Effectiveness\. (x) There were periods of lagging political leadership of BEST reforms, especially when beset by intragovernmental political transitions, due in part to the multiple ministries involved (no champion)\. Implementation was also hindered by systemic governance problems that were portfolio- wide\. IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A\. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design: The original Project’s Results Framework was prepared as per the Bank’s guidelines to ensure activities undertaken contributed to achieving the PDO\. However, in retrospect there were weaknesses in the M&E design in terms of specificity of outcomes and measurable indicators\. For example, the second and the third PDO indicators did not originally include a target value, but merely focused on ‘increase the value of the titled land relative to untitled land’ and ‘increase the growth of sales and assets of beneficiary firms’\. Also, the absence of baseline values of these two indicators made it challenging to adequately measure the outcome\. There were also inconsistencies in the M&E indicators used in the Implementation Status Reports (ISRs) and those presented in the PAD\. However, during restructuring exercise (December 2013) the PDO was revised and results framework improved\. Three PDO indicators were replaced with new ones, while two were retained\. Among the intermediate indicators, ten from the original framework were dropped, three were retained, and four new added\. The revised M&E design also included new indicators to monitor deepening of financial sector and the involvement of women as Project beneficiaries\. M&E Implementation: The Project was subject to on average, two implementation support/supervision missions13/ that monitored progress and provided extensive support\. The progress and the guidance were recorded in the Implementation Status Reports and the Aide-Memoires\. Standard formats, guidelines for data collection as well as preparation and submission of monitoring reports to the Project Coordination Committee were established\. The task team regularly collected data, updated current progress against the baseline, and highlighted issues for the Bank management’s attention M&E Utilization: Appropriate data collected from the progress reports was evaluated and used to inform decision-makers on the status and activities that needed attention\. Based on the various aide memoire and project reports, progress on the Project M&E was considered Modest, partly because of the large number of activities, the extensive coordination required to ensure effective and efficient implementation of the many implementing agencies and the inadequate number of project administration, management and M&E staff at the PMO and later at the Ministry of Lands responsible for M&E\. 13 Details in Annex 6\. Page 38 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Justification of Overall Rating of Quality of M&E 99\. The overall quality of M&E is considered Modest\. Given the identified weaknesses in the M&E design at the start of the project, the overall assessment of the M&E is considered modest\. As discussed earlier, it was difficult to adequately measure outcomes due to the lack of baseline values and measurable target values for some the indicators\. For instance, an in-depth assessment of the impact, effectiveness and value for money of the land component would not be backed by data or the indicators in the results framework\. B\. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 100\. Environmental and Social Safeguards Compliance: The Project was classified under category C, as it did not involve any activities that impacted environmental or social safeguards\. 101\. Fiduciary Compliance: The Project complied with all fiduciary requirements during implementation\. Internal control arrangements were in place and adequate financial management, procurement, and disbursement systems were maintained\. 102\. Financial Management: A final financial management (FM) review was conducted for the period covering October 2017 through July 2018 and included assessment of the adequacy of FM arrangements, namely: budgeting, accounting, internal controls, funds flows, financial reporting and auditing\. The review highlighted the following main points: (i) long outstanding staff imprests were retired; (ii) the Tsh 50,000,000 advance borrowed by the PMO in August 2015 for procurement of jet fuel for the government plane had been refunded; (iii) Internal Audit review had been completed and (iv) Imprests advanced to staff on 21 October 2015 for a training that was to be held in Dubai but cancelled amounting to $61,241 had been refunded\. However, only two out of 16 recommendations made by the Controller and Auditor General for the 2015/2016 audit were partially implemented\. Also five observations made by the internal auditors remained outstanding as of close of the Project\. Based on the final FM review the rating is considered Moderately Satisfactory\. 103\. Procurement: Overall the assessment of procurement is considered moderately satisfactory\. Delays in processing procurement can be attributed to insufficient procurement training which resulted in inadequate preparation of bidding documents, procurement specifications, requests for proposals, terms of reference and evaluations, and adjudicating and approving procurement transactions\. Delays were encountered especially under the ILMIS sub- component, because of limited procurement capacity on the government side, compounded by long and parallel procedures by the Ministry of Lands and the Implementing Agency\. It appeared that both the Ministry and the PIU, located in the Prime Minister’s Office, were applying their own procurement procedures for the same bid resulting in some delays\. C\. BANK PERFORMANCE Page 39 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Quality at Entry 104\. The overall quality of the Bank’s performance in ensuring quality at entry was Moderately Satisfactory\. During preparation, the Bank considered relevant aspects of the project, including technical, financial, economic, institutional, and procurement\. Major risk factors and lessons learned from earlier projects were incorporated into the design\. The Project was well grounded on the realities of Tanzania and its problems in the micro and small and medium enterprise finance sectors\. However, there were some inconsistencies in the original results framework i\.e\. the indicators used in the PAD and those in the ISR\. This resulted in revising some indicators that were more realistic to monitor the financial sector\. 105\. An experienced and committed task team was constituted to provide technical support to the Project\. This was critically important, given the challenging business environment Quality of Supervision 106\. The quality of supervision is considered Moderately Satisfactory\. From identification to around 13 years of implementation, three TTLs were changed\. The Bank’s full team included the TTL, technical experts, financial management and procurement specialists, and consultants who consistently engaged closely with the counterparts, particularly with the BEST Steering Committee\. The task team responded appropriately and timely to all reasonable requests of the GoT\. An important intervention apart from the design of AF was related to addressing procurement challenges where the Bank and the PMO implementing unit made provisions to increase the implementation, procurement capacity and disbursements, mostly through streamlining and coordination of procurement functions between participating Ministries, and Departments and Agencies (MDA)\. 107\. The MDAs including Ministry of Lands Housing and Human Settlements Development, Ministry of Finance and Planning, Ministry of Industry Trade and Investment and the Bank of Tanzania, were accorded the function of handling all procurement processes where they would send procurement packages for approval by to the relevant Permanent Secretary for Ministries (or heads of agencies) to the Permanent Secretary, This considerably improved overall implementation of Project activities\. The Bank’s technical and fiduciary teams also provided regular support to focus on maximizing the Project's development impact, which resulted in adjustments, including Project restructurings and extending the closing dates\. With the inclusion of revised indicators, the Project team utilized adequate resources, including technical experts with sectoral expertise\. The task team conducted regular supervision missions, on average twice a year, to take stock of progress\. The ISRs were candid, detailed, and well targeted to outline important events, and formulating clear and complete picture\. The supervision team also produced clear and detailed aide-memoires\. Justification of Overall Rating of Bank Performance Rating: Moderately Satisfactory Page 40 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 108\. Based on the Moderately Satisfactory ratings for both the Quality at Entry and Quality of Supervision the overall rating of the Bank’s Performance is considered Moderately Satisfactory\. Halfway into the implementation, the overall pace of the key activities remained behind schedule in achieving the PDO\. Also, Tanzania had some lapsed loans because of which the Project was unable to make a lump sum Initial Deposit to the Designated Account under the AF which had an impact on the disbursement levels in the first few months after Effectiveness\. The Project team also stopped all funding to the judiciary/commercial justice sectors due to impropriety in the procurement process where several complaints were registered resulting in delays\. Developing procurement capacity remained a major challenge that affected the implementation of the Project\. D\. RISK TO DEVELOPMENT OUTCOME 109\. There has been a significant level of uncertainty in the overall policy environment for the private sector in Tanzania\. Recent legislative changes in mining and PPPs have sent negative signals to foreign investors\. Aggressive tax collection efforts, abrupt policy changes, and introduction of certain policy measures to strengthen state controls over the private sector activities have led to erosion of business confidence and deceleration of growth in the country\. National public-private dialogue processes, such as Tanzania National Business Council (TNBC), have yet to be reinvigorated\. Business environment reforms remain slow, reflected in the weak performance of Tanzania under the Doing Business indicators with the latest ranking of Tanzania being 144 (DB 2019), down from 137 in the previous DB report\. 110\. Despite the current uncertainty in policy environment toward the private sector, the Government is committed to the implementation of the Blueprint and other business environment reform plans of the Government through the Comprehensive Action Plan, led by the Prime Minister’s Office\. The Government’s commitment for business environment reforms is being supported by a IFC trust funded program in business environment\. Further, the Government of Canada is supporting the IFC’s business environment program\. 111\. For specific areas of land management, financial sector, and business registration, the following achievements of the project are likely to be sustained: ï‚ As mentioned earlier, sufficient institutional capacity has been developed in the Ministry of Finance, Ministry of Land, and various agencies within the public sector, which will help sustain the results from this Project\. ï‚ Tanzania Mercantile Exchange, established as a company under PPP between the Government, public institutions and the private sector, is functioning well and is expected to continue its momentum\. Likewise, Dar es Salaam Automated Trading System and Central Depository Security system have been modernized and their sustainability appear to be on firm grounds\. Page 41 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ The design, development and installation of ILMIS at the Ministry headquarters and the Coastal Zonal office in Dar es salaam have been completed; the conversion and migration of data has been finalized; improvement of associated infrastructure and purchase of equipment was completed’ and capacity development and transfer of skills to ILMIS administrators/users has been achieved\. These achievements are likely to stay\.   ï‚ Digitization of BRELA's registries has been completed; records management system has been installed; (iii) online names search database for companies and business names was established on the BRELA web site; several business acts were amended or enacted to create a more conducive climate for doing business in Tanzania\. Moreover, the Parliament has approved amendments to several acts for business promotion\. These achievements are sustainable\. 112\. On the other hand, the government will need to update technology in order to keep pace with the developments in ILMIS and other Information and Communication Technology infrastructure14/\. In addition, the government will need to provide adequate resources for conducting training programs\. 113\. In light of the above factors, the risk to development outcome is rated as Substantial\. V\. LESSONS AND RECOMMENDATIONS   114\. The Project offers several important lessons, some specific to Tanzania and others that are broader and generally applicable\. These are summarized as below: (i) Efficient sequencing of reforms: It is beneficial to sequence sector reforms even within a project framework, and to use piloting as an approach to prepare for later implementation of other sector activities\. The Project chose to focus on the policy and institutional reforms while developing first phases of infrastructure (CORS) and ILMIS, and piloting of systematic/mass registration of land in rural and urban areas\. (ii) Adequate project design, preparation and implementation: (a) adequate planning is necessary during project preparation to avoid delays\. The construction design of buildings on average takes around six months, while the selection of a contractor takes about the same time\. It is recommended to design the infrastructure at project preparation, so that implementation can start as soon as the project is approved; (b) Due to lack of consultations during the design phase, implementation of various sub-components may occur at different pace\. Keeping this in mind, close consultations need to take place with the key stakeholders to ensure implementation starts at an accelerated pace and all sub-components move quickly and efficiently; (c) the capacity of the implementing staff needs to be improved especially when multiple agencies are involved; (d) 14 A larger $75 million Bank-funded project on land reforms is currently under preparation and is expected to be effective around January 2019\. This project would scale up and help sustain the outcomes achieved thus far in the land sector\. Page 42 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) for projects involving multiple implementing agencies (IAs), procurement function should be centralized in one IA\. Each IA should be mandated to undertaking procurement activities to avoid delays and blaming games\. In addition, sustainable procurement capacity should be built in the IAs at earlier stage of the project\. Client’s User Departments should also be aware on the Bank’s procurement procedures and their roles in the procurement cycle especially preparation of Specifications and Terms of References (ToRS); and finally, (e) high number of indicators should be avoided as this creates more complexity for the client and is burdensome for the M&E specialist\. (iii) For the success of a project, it is important to identify a champion early on: The champion will need to have an overall coordinating responsibility, especially for a project which has a land reforms component, as land is a cross cutting sector which affects all sectors of the economy\. Securing the support and commitment from the executive, the Minister of Lands, and the Permanent Secretary is also very important\. Issues of land tend to be highly emotional and sensitive in Tanzania\. The endorsement and buy-in of the executive branch of government is therefore critical in raising awareness and mobilizing support\. The biggest proportion of land is in the rural area, which is home to the majority of the population, and is the biggest source of electoral votes for the ruling government\. Historically, this has made political administrations wary of undertaking serious land reforms, for fear of aggravating the population and losing electoral support\. (iv) South-South Cooperation and peer to peer learning are effective means of knowledge exchange and transfer: The Project effectively used these means with its counterpart project in Uganda: Competitiveness and Enterprise Development Project\. In particular, the GoT developed its own ILMIS from Uganda’s Land Information System which resulted in a strong learning relationship of cooperation between the two countries\.   \.    Page 43 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS          ï‚ RESULTS INDICATORS    A\.1 PDO Indicators            Objective/Outcome: To create sustainable conditions for enterprise creation and growth\.  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Number of days to complete  Days  77\.00  67\.00  40\.00  67\.00  the registration of a  certificate of occupancy    30‐Jun‐2006  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Not achieved\. Please note the Integrated Land Management Information System (ILMIS) has just been  established and its now operational\. This target will be now achieved with ILMIS\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Number of new financial  Number  0\.00  2\.00  2\.00  25\.00  products for which the  legal/regulatory framework is    30‐Jun‐2013  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018  developed    Comments (achievements against targets): Target achieved      Page 44 of 95  The World Bank Private Sector/MSME Competitiveness (P085009)   Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  One Stop Shop (OSS) for  Yes/No  Y  Y  Y  Y  business registration  established and fully    30‐Jun‐2011  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018  functional    Comments (achievements against targets): Achieved\. One Stop Shop (OSS) for business registration established and fully functional      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Direct project beneficiaries  Number  0\.00  170000\.00  35000\.00  170000\.00    30‐Jun‐2013  25‐Jul‐2018  31‐Jul‐2018  25‐Jul‐2018    Female beneficiaries  Percentage  0\.00  41\.00  41\.00  45\.00    30‐Jun‐2013  25‐Jul‐2018  31‐Jul‐2018  25‐Jul‐2018      Comments (achievements against targets): Achieved\.        A\.2 Intermediate Results Indicators        Component: Strengthening Business Environment  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Page 45 of 95  The World Bank Private Sector/MSME Competitiveness (P085009)   Cost to formally start a  Percentage  168\.30  20\.00  20\.00  42\.90  business reduced as % of  gross national income (GNI    30‐Jun‐2018  31‐Jul‐2018  31‐Jul‐2018  25‐Jul‐2018  per capita)    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Establishment of an  Yes/No  N  Y  Y  Y  Operational National Land  Information Center to host    30‐May‐2016  31‐Jul‐2018  31‐Jul‐2018  25‐Jul‐2018  ILMIS    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Establishment of a Customer  Yes/No  N  Y  Y  Y  Service Center at the  Ministry of Lands    30‐Jun‐2006  31‐Jul‐2018  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Page 46 of 95  The World Bank Private Sector/MSME Competitiveness (P085009)   Number of established  Number  0\.00  1\.00  1\.00  1\.00  Ministry of Lands Zonal  Office with functioning ILMIS    30‐May‐2016  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Number of Legal Bills (related  Number  0\.00  2\.00  2\.00  6\.00  to land administration)  drafted    30‐May‐2016  25‐Jul‐2018  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Integrated Land  Yes/No  N  Y  Y  Y  Management Information  System established (ILMIS)    30‐May‐2016  25‐Jul‐2018  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Number of days to formally  Days  35\.00  28\.00  20\.00  28\.00  Page 47 of 95  The World Bank Private Sector/MSME Competitiveness (P085009)   start a business reduced    30‐Jun‐2016  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Number of days to complete  Days  61\.00  4\.00  4\.00  5\.00  the registration of a  mortgage reduced    30‐Jun‐2016  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved        Unlinked Indicators  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Percentage of Beneficiaries  Percentage  0\.00  100\.00  100\.00  55\.00  satisfied with[specified  dimensions e\.g access,    30‐Jun‐2011  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018  quality of services,  responsiveness to needs,  quality of facilities]    Comments (achievements against targets):       Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Formally Revised   Completion  Page 48 of 95  The World Bank Private Sector/MSME Competitiveness (P085009)   Target  Staff of PDB, MDU and MDA  Yes/No  N  Y  Y  Y  appropriately trained in  private sector operations    30‐Jun‐2016  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Completion of detailed plans  Yes/No  N  Y  Y  Y  for new NKRA's    30‐Jun‐2016  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  PPP projects brought to  Number  0\.00  3\.00  3\.00  0\.00  market through competitive  procurement    01‐Jun‐2015  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets):       Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Page 49 of 95  The World Bank Private Sector/MSME Competitiveness (P085009)   Tourism sector strategic  Number  0\.00  1\.00  1\.00  1\.00  report    01‐Feb‐2015  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets): Achieved      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Creation for the frame work  Yes/No  N  Y  Y  Y  for Deposit Insurance    01‐Feb‐2015  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets):       Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Development of Financial  Yes/No  N  Y  Y  Y  reporting standard for micro  finance institutions    01‐Jan‐2015  06‐Oct‐2017  31‐Jul‐2018  25‐Jul‐2018    Comments (achievements against targets):                          Page 50 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) A\. KEY OUTPUTS BY COMPONENT    A\. Key outputs under original Private Sector Competitiveness Project Component 1: Business Environment Strengthening ï‚ Integrated Land Management Information System established ï‚ Alternative resolutions for land disputes established ï‚ Business registration reform; land reform; commercial law and justice; and labor law reform introduced ï‚ Geodetic infrastructure established ï‚ Village titling process improved ï‚ Tanzania Investment Center strengthened ï‚ National Individual Identification Database established ï‚ MSME Policy Unit in the Ministry of Trade and Industry and a Growth Unit in the President’s Office Planning and Privatization established Component 2: Enhancing Enterprise Competitiveness ï‚ All the activities were completed including the larger programs such as the Matching grant programs and the Cluster Competitiveness Program ï‚ Tanzania Private Sector Foundation continued to provided services on advocacy activities ï‚ Financial sustainability analysis was carried out Component 3: Improving Access to Financial Services ï‚ Access to financial services increased ï‚ BEST Zanzibar supported efforts to strengthen regulatory environment for businesses in Zanzibar: i\.e\.: steps reduced to formally start a business; number of days reduced to formally start a business; and number of days reduced to complete mortgage registration B\. Key outputs under Additional Financing Component 1: Strengthening Business Environment Page 51 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Land Administration Reform ï‚ ILMIS developed ï‚ Work at Kinondoni district headquarters finalized ï‚ Migration data conversion completed and a associated infrastructure and equipment completed Surveys and Mapping ï‚ Aerial photography completed ï‚ Multi-purpose large scale base maps for Dar es Salaam and surrounding areas completed Review of the 1995 National Land Policy ï‚ National Land Policy drafted and submitted to the Cabinet Secretariat Land Use Planning and Regularization of Tenure Rights in Urban Areas ï‚ To scale up regularization, first phase ready for 10-year Regularization Program (2013-22) ï‚ Regularizing, surveying and registering the targeted 6,000 plots in Dar es Salaam and Certificates of rights of occupancy (CROs) completed ï‚ Business Registration and Licensing Reform introduced\. The establishment of BRELA has brought various positive changes to business registration, including significant reduction in time and procedures to start, register, and operate business\. ï‚ Business Environment blueprint printed ï‚ Support to BRN and tourism promotion policy was finalized for the Ministry of Tourism\. Component 2: Improving Access to Financial Services ï‚ Tanzania Commodity Exchange offices established and staff recruited ï‚ Commodity contract specifications prepared for the following crops: sesame seeds, sunflower, cashew nut, maize, pigeon peas, and cow peas\. Component 3: Project Management ï‚ The PIU at the Prime Minister’s office implemented the Project with overall responsibility of coordination and management\. During this time, information, education and communications strategy was developed and implemented\. Page 52 of 95  The World Bank Private Sector/MSME Competitiveness (P085009)   ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A\. TASK TEAM MEMBERS Name Role Preparation Supervision/ICR Moses K\. Kibirige Task Team Leader(s) Raymond Joseph Mbishi, Winter M\. Chinamale Procurement Specialist(s) Vida Ndilanha Nkya Financial Management Specialist Neema Mwingu Team Member Alexander Birikorang Team Member Grace Anselmo Mayala Team Member Michael Eriu Okuny Team Member Nozomi Mizuno Team Member Hardwick Tchale Environmental Specialist Andrea Mario Dall'Olio Team Member Andreja Marusic Team Member Denis Maro Biseko Team Member Justina Kajange Team Member Monica Patricia Rivero Riveros Team Member Geoffrey D\. N\. Shoo Team Member Sarah Kitakule Team Member Donald Paul Mneney Team Member Klaus Decker Team Member Edith Ruguru Mwenda Team Member Ravi Ruparel Team Member Arleen Cannata Seed Team Member Gloria Sindano Team Member Jonathan Mills Lindsay Team Member Page 53 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) Andrei Mikhnev Team Member Agata E\. Pawlowska Team Member Vedasto Rwechungura Team Member Klaus W\. Deininger Team Member Peter R\. Kyle Team Member Thomas E\. Walton Social Specialist George R\. Clarke Team Member Frank Fulgence K\. Byamugisha Team Member Sherri Ellen Archondo Team Member      ‐ STAFF TIME AND COST  Staff Time and Cost  Stage of Project Cycle  No\. of staff weeks  US$ (including travel and consultant costs)  Preparation  FY05  47\.795  208,119\.63  FY06  34\.377  220,159\.28  Total  82\.17  428,278\.91    Supervision/ICR  FY06  16\.492  106,319\.60  FY07  44\.789  251,002\.02  FY08  34\.241  166,149\.41  FY09  28\.291  149,182\.83  FY10  20\.820  155,122\.26  FY11  23\.775  96,128\.46  FY12  26\.962  94,246\.78  FY13  34\.128  119,527\.06  FY14  \.875  5,989\.41  FY15  \.450  2,818\.64  FY16  7\.737  22,552\.46  Page 54 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) FY17  27\.207  100,424\.81  FY18  23\.513  116,517\.52  FY19  17\.450  116,612\.02  Total  306\.73  1,502,593\.28               Page 55 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) ANNEX 3\. PROJECT COST BY COMPONENT    Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (US$M) Strengthening the Business 51\.8 101\.0 64\.80% Environment Enterprise Development 38\.9 38\.9 25\.6% Improving Access to Finance 5\.0 15\.0 9\.6% Project Implementation */ 1\.00 0\.6% Total 95\.70 155\.9 100\.00 */ Project Management Cost was covered under Business Environment Strengthening     Page 56 of 95  The World Bank Private Sector/MSME Competitiveness (P085009) ANNEX 4\. EFFICIENCY ANALYSIS    1\. This annex provides an economic and financial analysis for the Tanzania Private Sector Competitiveness Project as part of the ICR\. To the extent possible, this analysis is based on actual data gathered as part of the monitoring and evaluation efforts of the Project\. Since the Project was extended several times, thus modifying the parameters of the original economic and financial analyses developed at Project design and during additional financing, focused remained on the full twelve-year period of project implementation rather than comparing our current estimates for the project valuation with those generated during the design stage\. 2\. Across the Project components as shown below, the total Project NPV is estimated at US$8\.5 million at a 15 percent discount rate15 with an ERR of 19%\. Component 1 - Strengthening the Business Environment: Analysis for this component is separated into two parts: Land administration reform and Support to Business Registration and Licensing Reform\. The impact of other activities supported under this component such as the Big Results Now initiative and commercial law and justice reform are broadly lumped under these two parts given that these activities are primarily TA, making their impact difficult to quantify\. Land administration reform: Financial analysis of land administration reforms is generally not recommended because of difficulties in attribution of specific Project activities to financial gains of direct beneficiaries\. For example, the increase in property values attributed to the Project for both titled and untitled land is likely to increase the costs for beneficiaries in terms of property values\. Systems such as the ILMIS are also likely to increase government costs, although they do improve the overall efficiency and coverage of national land administration\. Follow on benefits however are in the form of more efficient usage of collateral for access to finance, reductions in land disputes and their associated costs, and an increased agricultural yield because of this reduction in disputes\. Additionally, the relationship between stronger property rights and land administration and economic growth factors including labor supply, access to finance, and investment are generally supported in the literature (Field 2007, Johnson et al\. 2002, and Ditella et al\. 2007)\. 3\. To estimate the impact of this component, an illustrative framework was developed that focused on the reduction in costs associated with registration of a mortgage, one of the intermediate Project indicators\. At the onset of the Project, this process required 61 days, and at the ICR stage, this had reduced to 5 days\. Based on this central assumption, we estimate the sub- component NPV to be US$4\.6 million at a 15 percent discount rate with an ERR of 24% for the twelve-year project period\. 4\. The other central assumptions of this analysis are: 15 Discount rate: Discussions on what discount rates should be used for World Bank economic analyses vary widely especially given the low interest rates associated with IDA loans\. However, to account for some of the risk and volatility (i\.e\. Beta) associated with investments in developing countries, we have used 15% for our NPV analyses given both the low opportunity cost for World Bank capital to be deployed elsewhere and the high risk associated with investments in sub-Saharan Africa\. Page 57 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ‐ Cost of each day: Each day associated with registration of a mortgage is estimated to cost US$3\.20 based on a reduced estimate of daily wages\. ‐ Number of properties registered: With the project a 5% annual growth rate was estimated in the number of properties registered over a 5-year period, with growth rates returning to a steady state growth rate of 2%\. We estimate that without the project this growth rate would remain at approximately 2%\. Because this indicator would be difficult to fully attribute to project design, the number of properties registered is not included in the project results framework; however, this assumption is critical to showing the scale of the impact associated with a reduction in property registration costs\. As such we have included this, but kept the project related impact estimate quite low at only an additional 3% in growth despite a 13x reduction in the number of days required to register a mortgage\. ‐ Fee associated with registration: We estimate the fee associated with registration to be 4% of average property value based on the Doing Business Report 2013\. We have selected this year because it falls in the middle of project implementation rather than using estimates from the beginning or end of the project for these fees\. Similarly, we have based average property values on estimates from this year\. ‐ Government costs: We estimate that the government costs associated with land administration increased by 250% with the new systems (as opposed to without), but following this grow at an annual rate of 2%\. While the investment costs will likely be recovered as non-tax revenue (based on implementation of a similar system in Uganda), we have excluded this cost recovery to keep our analysis more conservative\. This is particularly of note given that government receipts are provided by individuals who could potentially be considered end beneficiaries of this component; as such, the inflow and the outflow would net zero for the Tanzanian economy\. 5\. Sensitivity analysis: ‐ Reducing the estimated daily cost of each day associated with mortgage registration from the assumed US$3\.20 to $US2\.80 reduces the ERR estimate to 7%\. ‐ Increasing the estimated daily cost of each day associated with mortgage registration from the assumed US$3\.20 to $US5 increases the ERR estimate to 127%\. ‐ Reducing the estimated growth in number of registered properties from the assumed 5% with the project to 4% increases the ERR estimate to 25%\. ‐ Increasing the estimated growth in number of registered properties from the assumed 5% with the Project to 6% reduces the ERR estimate to 23%\. This increase in number of properties reduces the ERR since the overall cost across the total number of properties increases, while per property cost is lower with the project (and vice versa as noted above)\. Business registration 6\. Because of the difficulties in attribution of business environment reforms, financial analysis of such components is generally not recommended\. Any attempt at identifying specific impacts in this area can often lead to double-counting with other Project interventions or simply over attribution of other economic factors as results of the Project\. For example, growth in the tourism sector in Tanzania could be the primary driver in the number of new businesses Page 58 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) registered rather than simplifications to the registration procedures\. Additionally, the number of new businesses registered does not necessarily imply higher revenues and profits amongst these businesses or the broader economy as a whole\. However, the relationship between the characteristics of the business regulatory environment and the performance of firms has been well documented (Djankov et\. a1 2002, Botero et\. al 2004, Acemoglu and Johnson 2005, Mastruzzi 2006, and Kaufmann et\. a1 2006)\. 7\. To estimate the impact of this component, we have used an illustrative framework that focuses on the reduction in costs associated with registration of a business as a percentage of GNI per capita, one of the intermediate project indicators, along with the number of formal MSME enterprises registered, a PDO indicator\. At the onset of the project, the cost of business registration was estimated 168\.3% and has now reduced to 42\.9%\. While the number of formal MSME enterprises registered is difficult to fully attribute to the project (as noted above), we have used this to help estimate the impact of the reduction in business registration costs\. Based on these central assumptions, we estimate the sub-component NPV to be US$1\.9 million at a 15 percent discount rate with an ERR of 19% for the twelve-year project period\. 8\. The other central assumptions of this analysis are: ‐ Cost of each day: Each day associated with registration of a business is estimated to cost US$3\.20 based on a reduced estimate of daily wages\. ‐ Number of businesses registered: With the project we estimate a 18% annual growth rate in the number of businesses registered over a 5-year period, with growth rates returning to a steady state growth rate of 2%\. We estimate that without the project this growth rate would remain at approximately 2%\. Using this 18% growth rate provides an accurate number of MSMEs registered by 2018 as noted in the results framework as 98,202 MSMEs\. ‐ Fee associated with registration: As noted above, we have used the actual results of 168\.3% of GNI per capita initially with a reduction to 42\.9% as a result of the project\. For GNI per capita we have used US$1,600 which corresponds approximately to the GNI per capita midway through the project in 2013\. We have selected this year because it falls in the middle of project implementation rather than using estimates from the beginning or end of the project for these fees\. ‐ Government costs: We estimate that the government costs associated with business registration increased by 200% with the new systems (as opposed to without), but following this grow at an annual rate of 2%\. 9\. Sensitivity analysis: ‐ Reducing the estimated daily cost of each day associated with business registration from the assumed US$3\.20 to $US2\.80 maintains the ERR estimate at 19%\. ‐ Increasing the estimated daily cost of each day associated with business registration from the assumed US$3\.20 to $US5 reduces the ERR estimate to 18%\. ‐ Reducing the estimated growth in government costs from the assumed 200% with the project to 150% increases the ERR estimate to 34%\. Page 59 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ‐ Increasing the estimated growth in government costs from the assumed 200% with the project to 250% reduces the ERR estimate to 8%\. Component 2 - Enterprise Development Competitiveness: This component is a combination of matching grants and overall support to several sectors (including food processing, tourism, and horticulture) that covered the legal and regulatory environment and provided support to the labor and workforce systems\. Since the specific impact of these broader interventions is difficult to define, we have combined our analysis to focus only on direct beneficiary firms of the project (matching grants and firms trained under the Business Development Gateway and Business Linkage Programs)\. 10\. Based on the project results framework, the baseline value for gross sales in project beneficiaries totaled at US$188,700, which increased to US$627,299,461 at ICR stage\. Using this as the central assumption to calculate the valuation of this component, we estimate the component NPV at US$19\.8 million using a 15 percent discount rate with an ERR of 22% for the 12-year project period\. 11\. The other central assumptions of this analysis are: ‐ Growth rate in gross sales: As noted above, we have used the total sales of project beneficiaries for our estimates with the project, which amounts to a Compounded Annual Growth Rate (CAGR) of 97% for the 12 year period of the project\. To calculate the sales of these beneficiaries in the absence of the project, we have assumed a 10 percent annual growth in revenues\. Since MSME growth rates in Sub-Saharan Africa often range 2-5% based on Enterprise Survey Data, using 10% is actually a more conservative assumption given the large CAGR visible through the project data\. ‐ Profit percentage of gross sales: We estimate that profits are 10% of gross sales for project beneficiaries\. By using profits rather than revenue figures to calculate the NPV and ERR, we focus on the actual income generated for beneficiaries rather than including what they have to spend to maintain this increased income\. 12\. Sensitivity analysis: ‐ Reducing the estimated profit percentage from the assumed 10% to 5% reduces the ERR estimate to 9%\. ‐ Increasing the estimated profit percentage from the assumed 10% to 15% increases the ERR estimate to 29%\. ‐ Reducing the estimated revenue growth rate without the project from the assumed 10% to 5% maintains the ERR estimate at 22%\. ‐ Increasing the estimated revenue growth rate without the project from the assumed 10% to 50% reduces the ERR estimate to 21%\. This is because the 97% CAGR is still so much higher than these estimates without the project\. Component 3:-Access to Financial Services: Activities under this component focused on capacity building and TA to government entities such as the Central Bank and financial Page 60 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) institutions to increase access to finance for MSMEs\. As such, these activities helped increase the number of financial products available and better standards/operations for managing these financial products\. Because the outputs and outcomes of this component are largely qualitative, a specific component valuation was not calculated; however, some literature references is provided in support of the economic impact of these types of access to finance interventions\. 13\. The relationship between access to finance reform and the performance of firms is well supported in the literature\. Greater business opportunities and better access to finance are generally related to a more robust private sector (Demirguc-Kunt and Klapper, 2012)16\. Additionally, at the individual and micro-enterprise level, the probability of making an investment tends to increase with greater access to credit and collateral\. The number of financial instruments available to both lenders and borrowers also contributes to a higher probability of personal and business investment (Besley, 1995)\. As such, the literature supports TA programs with financial institutions to increase the number of financial products offered to MSMEs\. This benefit is particularly large for relatively unbanked populations, where improvements in access to finance and financial development have larger poverty impacts (Burgess and Pande, 2005)\. Access to finance reforms and improvements under the Project are likely to benefit Tanzanian individuals and businesses, particularly within the current unbanked population\. 14\. The data below also show a positive and significant relationship between economic and financial development and entrepreneurship\. The log of GDP per capita and domestic credit to the private sector (as a percentage of GDP) are both positively and significantly correlated with entry rates (see below) and business density\. This suggests that greater business opportunities and better access to finance are related to a more robust private sector (Klapper et al\. 2008), lending further credence to the investments supported by the Project\. Figure 1: Entry rates and GDP per capita and Private Credit to GDP, by country, Average 2003- 2005       16 Demirguc-Kunt, Asli and Klapper, Leora, 2012\. "Financial inclusion in Africa : An Overview," Policy Research Working Paper Series 6088, The World Bank\. Page 61 of 95  The World Bank Private Sector/MSME Competitiveness (P085009)   ANNEX 5\. BORROWER, CO‐FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS    See Appendix 1                  Page 62 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY)  1\. Project Appraisal Document, Report No\.: 34082-TZ, dated November 22, 2005 2\. Project Paper, Report No\.:RES67205, dated March 8, 2012 3\. Project Paper, Report No\. 82483-TZ, dated December 2, 2013 4\. Project Paper, Data Sheet, Report No\. RES23578 5\. Project Paper, Data Sheet, Report No\. RES13154 6\. Implementation Status and Results Reports: 1 through 24 (June 2006 through July 25, 2018) 7\. Mid Term Review Report, dated April 29, - May 17, 2009 8\. Aide-Memories: November 2005 through October 2017 9\. Rapid Impact Assessment Report (by Tanzania Private Sector Foundation), dated Feb\. 2011 10\. Project Review Report, (Consultant’s Report), dated September 2016 11\. Financing Agreement, Report Number 5326-TZ, dated January 17, 2014 12\. Memos regarding amendments to the Grant Agreements and Restructuring Papers 13\. Borrower’s Implementation Completion Report, dated July 31, 2018 Page 63 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ANNEX 7\. SPLIT RATING CALCULATION   Before After Restructuring Restructuring Relevance of Objective Substantial Substantial Efficacy (PDO) Substantial Substantial Efficiency Substantial N/A (for the whole Project) Moderately Moderately 1 Outcome Ratings Satisfactory Satisfactory 2 Numerical Value of the outcome ratings 1/ 4 4 3 Disbursement $100\.6 Million $69\.80 Million 4 Share of Disbursement 59\.05 40\.97 5 Weighted value of outcome rating (Row 2 x 2\.36 1\.63 Row 4) Moderately Satisfactory 6 Final Outcome Rating (2\.36+1\.63 ≃4\.0) Highly Unsatisfactory (1); Unsatisfactory (2); Moderately Unsatisfactory (3); Moderately Satisfactory (4); Satisfactory (5); Highly Satisfactory (6) Page 64 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ANNEX 8: SUMMARY OF BORROWER'S ICR AND/OR COMMENTS ON DRAFT ICR  (if any)  The Bank has provided the Borrower with an opportunity to review and comment on the draft ICR\. No response was provided\. Page 65 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Appendix 1 Borrower’s ICR 1\. INTRODUCTION 1\.1 The Objective and Basic information of the PSCP 1\. The PSCP is a World Bank funded project implemented by the Prime Minister’s Office (PMO) through a number of implementing and beneficiary Agencies\. The project has evolved in two phases: the original PSCP and the Additional Finance (PSCP – AF)\. This assessment covers both phases, although the detailed results are presented for the later phase (AF) phase\. The project development objectives of each phase are as follows: 1\.1\.1 Project Development Objective 2\. Original Project Development Objective (PDO): To create sustainable conditions for enterprise creation and growth\. The project’s progress in achieving this objective will be measured by the increase in the number of formal enterprises, the increase in the value of titled land relative to untitled, and growth in sales and assets of firms participating in the project\. The project supports the government program through three mutually reinforcing components: (i) strengthening business environment; (ii) developing enterprise competitiveness; and (iii) improving access to financial services\. 3\. Following the AF (second phase), the PDO was revised as follows: The Project Development Objective is to strengthen the business environment in Tanzania including land administration reform and improving access to financial services\. This will be achieved through Land Administration Reform, Support to Business Registration Reform, support to Big Results Now and Improving Access to Financial Services\. 1\.1\.2 Key project dates 4\. The original PSCP became effective on March 2006 with expected closing date of June 2012\. The project sought to support Government’s efforts of improving business environment to Tanzania through a credit to the Government of Tanzania amounting to US$ 95,000; covering three key components\. Based on the progress made and emerging needs, the project additional finance was approved on December 27, 2013; signed on January 17, 2014; and became effective on April 15, 2015 and closed on July 31, 2018 after extension\. The project provided an additional credit amount of about US$ 60\.2 million for the period ending May 31, 2017, hence the needed end of the project assessment\. 5\. Overall, the project seeks to achieve its objective by supporting Government efforts in improving environment for private sector to reduce cost of Doing Business (DB) in Tanzania\. Project outputs are expected to contribute in increasing the capacity of the private sector participation in the country’s sustainable and inclusive social-economic development\. 1\.3 Overall Program Performance 7\. Based on the PSCP and PSCP-AF up to closure of the project, substantial achievements have been made on land administration reforms, access to finance and the extent of business enterprise development in Tanzania over time, to warrant project rating as Moderately Satisfactory\. Note however, this rating is preliminary pending completion of consultations with the key beneficiary Agencies and Page 66 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) results of the beneficiary survey (expected to be completed by end of August 2018)\. However, three main observations can be made in the interim\. 8\. First, the Government has taken critical steps in reforming the business environment\. The recent adoption of the Blue Print is a critical step in the Government’s plan to drastically reform the barriers affecting business registration\. Secondly, there are notable substantial progress made on all PSCP and PSCP-AF project components as outlined briefly under the project outputs and outcomes below\. The reforms undertaken in land administration have significantly cut down the number of days for processing land tittles, automated the processes and virtually eliminated critical challenges in acquiring legal land property rights\. In addition, subject to implementation of the blueprint reforms, the number of days for obtaining a building permit is anticipated to go further down\. Supported by the release of recent FSDT’s survey, Tanzania has made substantial progress in improving access to finance, not least given the regulatory measures taken to support interoperability of MNOs and mobile money transactions; and the dramatic growth of microfinance enterprises\. As a result, the number of enterprises (mainly medium and small businesses) and business activities has increased overtime signifying growth of the private sector\. However, a lot needs to be done to improve the environment for small and medium enterprises (SMEs) to grow, given the myriad of challenges they face\. 9\. Third and finally, based on the various aide memoire and project reports, progress on the project management has been less satisfactory, partly because of the large number of activities (190), the extensive coordination required to ensure effective and efficient implementation of the many implementing agencies and the inadequate number of project administration, management and M&E staffs at PMU located at the PMO\. However, in terms of financial management of the PSCP project, the Tanzania Controller and Auditor audited accounts of the PSCP project has awarded an Unqualified rating as attested as follows in 2015: “Unqualified opinion\. In my opinion, the Financial Statements present fairly, in all material respects, the Financial Position of the Private Sector Competitiveness Project (IDA Credit No\. 5326-TZ) as at 30th June, 2015, and of the Receipts and Payments and its Cash Flows for the year then ended in accordance with the International Public Sector Accounting Standards (IPSAS)\. Similarly, the 2017 PSCP-AF audited accounts awards management of project funds unqualified rating as attested in the report: “Unqualified Opinion\. I have audited the Financial Statements of Private Sector Competitiveness Project (PSCP), which comprise the Statement of Financial Position as at 30th June, 2017, and the Statement of Financial Performance, Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and Notes to the Financial Statements\. In my opinion, the accompanying financial statements of the Private Sector Competitiveness Project (PSCP) are prepared in all material respects, in accordance with International Public Sector Accounting Standards (IPSAS) Accrual basis of accounting and in the manner required by the Public Finance Act, 2001 revised 200417\. PROJECT CONTEXT 2\.1 Country Context 11\. Tanzania is a low-income country with a GNI per capita of US$900 in 2016, aspiring to reach a middle-income country by 2025\. However, the path to achieve that country vision is not smooth despite 17 Report of the Controller and Auditor General on the financial statements of the Private sector competitiveness project (PSCP) for the year ended 30th June, 2017; January 2018\. Page 67 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) the economy growing steadily at 6\.7 percent annually compared with an average of 3\.5 percent for Sub- Saharan Africa (SSA) over this 7-year project\. Recent IMF program review report (January 2018) underscores that recent signs of weakening economic activity which might derail the steady growth of the economy\. Tanzania is still faced with the challenge of high poverty levels\. While Tanzania’s Human Development Index improved from 0\.392 in 2000 to 0\.521 in 2014, with some gains in education indicators, the country was unable to achieve half of the Millennium Development Goals (MDGs)\. 12\. With regards to the private sector, since the mid-1980s Tanzania has increasingly relied on the private sector to grow her economy – undertaking economic liberalization, sound macroeconomic policies, expanding the roles of the private sector and fostering institutional reforms\. However, despite the reforms, largely supported by Development Partners (DPs), Tanzania’s private sector is still weak, contributing only 10-12 percent of GDP in the early 2000s, and between 14-18 percent over the past ten years\. Private investments remains small compared to other African countries, largely due to some weaknesses in Tanzania’s business environment; although in recent years, Tanzania moved 12 positions up, from 144 in 2016 to 132 in 2017, in the World Bank (WB) Ease of Doing Business 2017 report\. Much still needs to be done and the World Bank support under this project has been timely and well- conceived to address important weaknesses and challenges in the business environment\. 2\.2Development objectives 14\. As stated in the PSCP document, the Additional Financing (AF) will build upon the original project; it will provide financial support to enable scaling up of work on a number of critical activities and support emerging priorities\. The original project development objective was to “create sustainable conditions for enterprise creation and growth”, while the modified objective was to “strengthen the business environment in Tanzania, including land administration reform, and improve access to financial service”\. Specifically, the additional financing will be provided to support and scale up activities under: ï‚ Component1of the original project to:(i)advance land administration reform; (ii) complete business registration reform; and (iii) support the BRN President’s Delivery Bureau (PDB) initial set up to establish functions, resources and instruments that will be critical to facilitate private sector involvement in NKRAs\. ï‚ Component2oftheoriginalproject to finance additional demand-driven activities to further improve access to finance in the country\. All of the sector cross cutting/horizontal investment climate reforms will help to further improve legal certainty and lower the costs of doing business in Tanzania\. 2\.3 Project Components The main project components and interventions are summarized below\. 2\.3\.1 Project Components under the Original PSCP 15\. The design of the original PSCP included three main components\. Component 1: Business Environment Strengthening This component supports the Business Environment Strengthening for Tanzania (BEST) Program that aims to lower the costs of investing in, establishing, and operating a business in Tanzania by eliminating policy, legal, regulatory, and institutional constraints that inhibit a growing and competitive private sector\. Page 68 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) Component 2: Enhancing Enterprise Competitiveness The objective of this component is to improve the capacity of the private sector to respond to viable opportunities in regional and international markets\. The project would also help strengthen the Tanzania Private Sector Foundation\. Component 3: Improving Access to Financial Services The objective of the component is to increase access to financial services\. The project would support this objective by contributing to the Financial Sector Deepening Trust\. The project would also provide technical assistance and financing for studies associated with the program\. The Additional Finance will cover components one and three\. 2\.3\.2 Project Components under the Additional Finance 16\. The additional finance was built upon the original project by supporting interventions aimed at scaling up a number of critical activities; and support emerging priorities through three main components\. Component 1: Strengthening the Business Environment 1\.1 Land Administration Reform 1) Infrastructural interventions 2) Strengthening of legal and regulatory framework, 3) Work on land use planning in urban areas and regularization of tenure rights, 4) Technical assistance will be provided to advise the government on guidelines in undertaking inventories of government land, 5) Regulatory simplification of land administration process 1\.2 Supports to Business Registration Reform 1) Design and Implementation of an OSS for starting a business in BRELA, 2) Streamlining and simplification of the business registration procedures, 3) Reorganization of workflow processes of BRELA to improve the efficiency of the business registration process and a better service delivery, 1\.3 Support to “Big Results Now” (BRN) 1) Start-up of the PDB with a focus on private sector functions and capacity, 2) Operationalization of the TDC, 3) Train PDB, MDU and other Ministries, Departments, and Agencies(MDA) staff on the requirements to facilitate private sector operations across the BRN delivery system, 4) Identify additional areas for priority interventions and develop detailed plans for further private sector development under BRN, Component 2: Improving Access to Financial Services 1) Strengthening legal and regulatory framework for financial sector and improving capacity of regulators: 2) Supporting deposit insurance 3) Development of reporting standards for microfinance 4) Addressing weaknesses in collateral system Page 69 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 5) Development of standards for overseeing and supporting mobile financial services infrastructure 6) Supporting new products to expand access to finance\. Component 3: Project Management The project documents states: 1) The existing PIU at the Prime Minister’s office will implement the project and be responsible for the overall coordination and management of activities\. 2) To ensure proper coordination and supervision of the project, the Business Environment Roadmap Committee (BERC) in the Prime Minister’s office will continue to provide policy guidance and oversight on the project as it has done under PSCP\. 3) The PIU will develop and implement an information, education and communications strategy\. 2\.4 The design of PSCP and PSCP AF can be described as follows: 17\. The initial PSCP project (2006-2013) and PSCP-AF design was based on sound project footing\. Several important design issues were considered which eventually resulted into successful implementation of the project as follows: ï‚ The PSCP design took into consideration Tanzania’s private sector challenges and the project was aligned with priorities in the government’s five-year strategy (MKUKUTA II) and the concurrent Zanzibar Strategy for Growth and Poverty Reduction (MKUZA II) as well as aspirations of the country to reach a middle income country by 2025\. ï‚ The PSCP project design combined lending and very well undertaken analytical work to underpin the achievement of program objectives by supporting reforms in Tanzania that would be expected to improve the country’s private sector competitiveness\. In this regard, extensive dialogue with the government was undertaken to ensure garnering consensus on project outputs and implementation modalities\. ï‚ The PSCP project also leveraged other Development Partners supporting private sector business environment strengthening, thus avoiding duplication\. ï‚ The Additional Financing was built upon the original project which was rated successful, to address identified weaknesses in key areas of Tanzania’s business environment, ï‚ The design took into consideration lessons learned and incorporated experiential learning from the original project, ï‚ The PSCP-AF design revised the Results Framework to make it more realistic with measurable indicators, and ï‚ Accorded greater emphasis on implementing agencies coordination, reporting and accountability\. ï‚ However, despite the substantial analytical work and extensive dialogue with the Government agencies and implementing Development Partners, the PSCP ended up with too many sub-components and activities and many implementing agencies, severely weakening effective coordination and project management\. Future design should take into account the seemingly weak institutional capacity of the government, take advantage of the large number of development partners in Tanzania so as to allow the WBG to be more selective, with the Bank concentrating on areas where it had agreed to take the lead or where there is a strong potential for achieving development results based on its comparative advantage and the presence of strong government demand\. Page 70 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 2\.5 Implementation of Monitoring and Evaluation (M&E) 18\. The original PSCP design of the project's M&E was rudimentary with identified indicators and targets included in the 2006 results framework, but generally sufficient and consistent with the standards at the time of preparation and Board approval\. Outcome indicators and targets were provided for each PSCP objective\. The PSCP-AF revised the Results framework indicators and targets making them more amenable to M&E tracking of achievement being made over the entire period of the project\. Miner weaknesses were observed in M&E team follow-up with implementing partners to track achievement being made and clearly recording progress over time to enable more informed end-of-project achievements within the PMU offices\. Despite observation made above, the outputs of the PSCP support have been shared widely in Tanzania and many of the reforms and legislations have been translated into Kiswahili to make them more accessible to ordinary citizens; thus enhancing the impact of the project support to Tanzania\. 2\.6 World Bank Performance 19\. Disbursement of funds\. The World Bank performed exceedingly well, exerting flexibility and timely disbursement of all original PSCP (2006-2013) funds in the amount of US$ 95 million\. The project extension during this period facilitated keeping the momentum of the on-going reforms as well as providing room for designing the PSCP-AF support (2014-2018)\. Despite some components being overdrawn, the World Bank was able to exert flexibility and work with project implementing unit to restructure the portfolio to ensure smooth transition from PSCP to PSCP-AF implementation interventions\. With regards to PSCP –AF (2014 to 31st July, 2018) US$ 60\.2 million was provided, of which US$ 45,592,709\.5 had been disbursed and utilized and US$7,000,000 has been committed and disbursement to fund already committed implemented PSCP-AF sub-component is expected to take place soon; which brings the total disbursed and committed to US$ 52,592,709\.5\. Thus the expected undisbursed funds for PSCP-AF are US$ 7,607,290\.5 or 12\.6% of the total PSCP-AF funding – a relatively high performance on the part of the World Bank\. 20\. Quality of supervision was high\. Over 5 World Bank supervision missions were undertaken during implementation of the PSCP project, providing timely and critical advice that translated into achievement of the project outputs and outcomes as outlined below in section 4 of this report\. An important intervention apart from the design of PSCP-AF was related to addressing the challenge the project was facing in procurement of project goods and services\. Having observed procurement challenges in the past, the World Bank and PMO implementing unit made provisions to increase the implementation, procurement capacity and disbursements, mostly through streamlining and coordination of procurement functions between participating Ministries, Departments and Agencies (MDA)\. The MDAs (Ministry of Lands Housing and Human Settlements Development, Ministry of Finance and Planning, Ministry of Industry Trade and Investment and Bank of Tanzania) were accorded the function of handling all the procurement process and send procurement packages approved by the relevant Permanent Secretary for Ministries (or heads of agencies) to the Permanent Secretary - Prime Minister’s Office (PMO) where the Project Coordination Unit (PCU) is located for payment; considerably scaling up implementation of project activities\. 2\.7 Borrower Performance 21\. The Government performed relatively well in implementing the PSCP and PSCP-AF\. Despite structural weaknesses and inadequate institutional capacity, commitment of the Government to effectively implement the project was apparent\. This is evidenced by the passage of over 5 legislations aimed at improving private sector business competitiveness, speedy discussions of the bills in Parliament and final approval, translation of some into Kiswahili and wide dissemination, including using Government web- site\. External audit of PSCP and PSCP-AF by the Controller and Auditor General has consistently Page 71 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) awarded “Unqualified” rating meaning project implementation adhered to international financial management standards\. Weaknesses observed in coordination and procurement of goods and services were largely an outcome of the many sub-activities and many project implementing agencies – an issue observed also by the World Bank missions and addressed to speed up project implementation\. 2\.8 Implementing Agencies Performance 22\. Based on the outputs and outcomes achieved by this project as amplified in Section 4 of this report, the implementing partners performed well\. There was clear demonstration of commitment to the project and they showed persistence and resolve to address implementation challenges\. However, there were issues on M&E, financial management, procurement and contract management throughout implementation that impacted project implementation; but most resolved through amicable consultations between the World Bank, Project implementing unit (PMU) and the various implementing agencies\. In a few implementing agencies, there was a problem of collecting and reporting on outputs and outcomes, despite repeated follow-up by PMU staffs\. 23\. There was also observed weaknesses in implementing some activities\. For example the Bank of Tanzania (BOT) could not implement the activity that relates to coordination mechanism, strengthening legal and regulatory framework and conducting capacity-building for consumer protection sub- component\. The reason provided is that the activity could not be accomplished due to delayed submission of Terms of Reference and the entire length of the procurement process\. However, the BOT is committed to implement this activity under the National Financial Inclusion Framework\. Another example is the BOT planned activity under PSCP-AF to address weaknesses in the collateral system\. According to BOT, this activity could not be implemented as planned due to delays in obtaining the Government’s approval of the Policy Paper for Secured Transaction Law and Collateral Registry\. In the future, sufficient time should be allocated to each activity instead of waiting to implement the activity towards the end of project timeframe to avoid implementation flaws\. 2\. PROJECT PERFORMANCE: ACHIEVEMENTS, CHALLENGES AND RESULTS ANALYSIS 4\.1 COMPONENT 1: BUSINESS ENVIRONMENT STRENGTHENING 32\. This component covers business environment strengthening (BEST) and support to business registration (BRELA) under PSCP-AF\. The objective of the component is to lower the costs of investing in, establishing and operating a business in Tanzania by eliminating policy, legal, regulatory and institutional constraints that inhibit a growing and competitive private sector\. Based on a holistic approach, the interventions cover the following program areas: (1) business entities registration and licensing; (2) land reform; (3) commercial law and justice; (4) labor law reform; (5) Big Results Now, and (6) strengthening the Tanzania Investment Center\. BEST Zanzibar looks at business and regulatory issues on Zanzibar\. 4\.1\.1 Business entities registration and licensing\. 33\. The objective of this intervention is to have clear, simple and affordable entry procedures, processes and costs for new companies\. Activities geared towards clarifying, simplifying and reducing costs at point of entry for new companies into the formal business and reduce the number of entrepreneurs operating in the informal sector\. Key achievements at the close of project include the following: A\. Outputs ï‚ Digitization of the BRELA's registries completed\. A total of 88,700 files from Company registry and 191,243 files from Business Names registry scanned and indexed\. ï‚ A records management system was installed\. ï‚ On line names search data base for companies and business names established on the BRELA web site\. Page 72 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Registration of companies takes an average of 3 days and business names 1 day\. ï‚ Several Business acts amended or enacted to create a more conducive climate for doing business in Tanzania\. Parliament approved amendments to the following acts: (i) Business Names (Registration) Act (Cap\. 213), (ii) Companies Act (Cap 212) of 2002, (iii) Tanzania Trade Development Authority Act (Cap 155) and (IV) Merchandise Act (Cap 85)\. ï‚ The Business Environment Blueprint has been printed and shared with the general public\. Table 2: Starting and operating a Business in Tanzania – Procedure and Time18 Procedure Time to complete19 1\. Apply for clearance of the proposed company name\. Agency : 1 day Business Registration and Licensing Authority (BRELA) 2\. Obtain a notarized declaration of compliance\. Agency : Notary 1 day 3\. Apply for company incorporation and obtain the certificate of 4 days incorporation\. Agency : Registrar of Companies 4\. Apply for taxpayer identification number (TIN)\. Agency : 1 day Tanzania Revenue Authority (TRA) 5\. Apply for a business license\. Agency : Ministry of Industry and 6 days Trade (MIT) or Local Government Authorities (LGAs) 6\. Apply for the VAT certificate (TRA) 4 days 7\. Register for the workmen’s compensation insurance (Agency: 1 day Workers Compensation Fund (WCF) and Tanzania Insurance Regulatory Authority (TIRA) Register with the Occupational Safety and Health Authority 10 days (done simultaneously with (OSHA) above procedures) 5\. Obtain Social Security registration number (Agency : Social 7 days (done simultaneously with Security Regulatory Authority (SSRA) above procedures) 6\. Obtain an official search at the Land Registry\. Agency : 7 days simultaneous with Registry of Titles procedures 2 and 3) 7\. Submit application letter to obtain evaluation at Ministry of 7 days (simultaneous with other Lands or procedures Local Government Authority\. Agency : Ministry of Lands or Local Government Authority 8\. Obtain land rent clearance from the Land Ministry showing 1 day payment of rents 9\. Obtain location plan from City Council - Ministry of Lands 7 days Agency : City Council (Ministry of Lands) 10\. Request and obtain building permit Agency : City Council 38 days (Done simultaneously with (Ministry of Lands) other procedures) 11\. Register project with the Architects Registration Board Agency 7 days : Architects Registration Board 12\. Electricity: Submit application to TANESCO and await 11 days estimate Agency : Tanzania Electric Supply Company Limited - TANESCO 18 Source: World Bank (2018): World Bank Group Flagship Report: Doing Business 2018, Tanzania Economic Profile\.  19 Current business environment allows most of the business procedures to be done concurrently thus improving substantially  the ease of doing business in Tanzania\. On‐line application has eliminated any form of rent seeking behavior\.  Page 73 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 13\. Electricity: Receive external inspection by TANESCO Agency 7 days : Tanzania Electric Supply Company Limited - TANESCO B\. Outcomes ï‚ Blueprint for Regulatory Licensing Reform in Business Environment completed and approved for cabinet discussion\. Some recommendations were implemented through the 2017 /18 finance bill\. ï‚ Class A license which was issued by the Ministry of Industry and Trade\. From July, 20 17 MIT will start issuing Class A license through BRELA Head Office and Zone office\. ï‚ Ministry of Agriculture during financial year 20 17/2018 budget mentioned to slash estimated 80 fees, permit and levies including license that are affecting small scale farmer and private sector at large\. ï‚ Government removed the mandate of inspections by Health, Town and Land Officers as a prerequisite of obtaining Business Licenses\. Now health inspection and town planning for un-regulated businesses is done separately and outside the business licensing and registration procedures\. Health and town planning requirements prior to issuance of a business license has been delinked\. This means health officers and town planning are supposed to inspect business and make sure that all business abides to their mandated laws\. ï‚ Companies and business names data capture process has been completed and search for companies / business names are now available on BRELA’s website\. Business names are available on the website (www\.brela-tz\.org/company\.php)\. Most of Company and Business names are now available on the website and being updated on a weekly basis; about 117,619 customers have visited the website to 8th June 2012\. Taxonomy of acceptable names also on website\. Guidance for choice of names for companies’ available on the website (taxonomy)\. ï‚ Digitization of the BRELA’s registries: Company registry: 85,059 files and for Business Names registry, 178,738 files have been scanned, indexed and digitized\. ï‚ TRA officials accepted to issue TIN at BRELA; Interfacing TIN System with BRELA Registration system after completion of Digitization project in May 2012\. ï‚ Standard format for Memorandum and Articles of Association (MEMARTS) for incorporation of a company without recourse to lawyers is now available on BRELA’s website\. ï‚ Direct Banking System (DBS) where BRELA has opted to join other Government institutions to use electronic banking facility where customers will be able to pay fees directly to the designated banks (currently NMB and CRDB)\. ï‚ Insolvency Rules of the Company Act 2002 has been gazetted since February 2012, and are in use\. ï‚ One – stop centre for the purpose of issuance of building permit under one roof in order to fast track the underlying processes ( that combines Pre – Construction Inspection and combining six separate procedures for inspections under the WB Doing Business i\.e\. (procedures no\. 5, 6, 7, 8, 9 and 10) established in Local Government Authorities (LGAs)\. ï‚ Single joint team in LGAs’ to deal with Post – Construction Inspection and combine seven Doing Business procedures into one i\.e\. (procedures no\. 11, 12, 13, 14, 15, 16 and 17)\. The inspections after construction include: fire, health, LGAs occupancy permit; final inspection; occupancy permit\. 4\.1\.2 Land Reforms 34\. The objective of the land reform under the PSCP including PSCP-AF aimed at achieving the following sub-components: (i) Decentralization of land administration and registration of village land; (ii) regularization of tenure in urban inform settlements; (iii) computerization and streamlining of land administration services; (iv) strengthening dispute resolution mechanisms; and (v) upgrading infrastructure for surveying and mapping\. Key achievements at the close of project include the following: A\. Outputs Page 74 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Upgrading infrastructure for land surveying and mapping completed, ï‚ Improvement of legal framework with introduction of new laws and regulations to complement the basic Land Law and Village Act completed and in use, ï‚ Several regulations and bills enacted to effect implementation of the new laws passed under bullet 2 above, ï‚ Government passed several policies/pronouncements to strengthen land and other property dispute resolutions\. ï‚ Decentralization of land administration and registration of village land has been applauded by many Tanzanians\. ï‚ A low-cost and faster land demarcation and registration system successfully piloted to replace the traditional high cost registration (sporadic approach that is about 10 times more expensive)\. ï‚ Regularization of tenure in urban informal settlements has been approved and is now being effected\. ï‚ Government unveiled a model for land use planning in rural areas\. ï‚ Development of the Integrated Land Management Information System (ILMIS) has made commendable progress\.  System Design activities including Data Modeling completed,  Business process re-engineering and the System Architecture Document completed,  ILMIS Alpha Version Proof of progress delivered and ILMIS System Architecture on Physical View Developed,  Development of ILMIS - The project supported: the design, development and installation of ILMIS at the Ministry headquarters and the Coastal Zonal office in Dar es Salaam\. Work at Kinondoni district headquarters has been finalised\. The conversion and migration of data; improvement of associated infrastructure and purchase of associated equipment has been done\. Capacity development and transfer of skills to ILMIS administrators and users has also been done\.  Surveys and Mapping; The aerial photography and producing multi-purpose large scale base maps for Dar es Salam and surrounding areas for ILMIS has been completed;  Strengthening of legal and Regulatory Framework made commendable progress, including Review of the 1995 National Land Policy: a new National Land Policy has been drafted and submitted to the Cabinet Secretariat, and is currently under review by Cabinet;  Land Use Planning and Regularization of Tenure Rights in Urban Areas - This involves implementing the first phase of the 10-year Regularization Program (2013-22) with the aim of scaling up regularization in Dar es Salaam\. Regularizing, surveying and registering the targeted 6,000 plots in Dar es Salaam and pick- up of certificates of rights of occupancy (CROs) were completed\. ï‚ Data Conversion; including preparation of office accommodation, acquisition of hardware, and personnel completed\. The preparatory works that was on going for the inventory of Data that needs to be converted is completed; the Data convers1on methodology was completed as well as the Data conversion environment set by the closure of the project\. ï‚ Production of Base map for Land Administration in Dar es Salaam\. Base map information is required in town planning, valuations, land management, environment and survey work\. Information is obtained via Ariel photograph or satellite imagery\. A separate base map project is being implemented covering 4,300 KM2 in DSM and Cost Regions in collaboration with COWi A/S of Denmark (July 2016 to March 2017)\. 10 CM Digital Orthorectified Imagery - DOI has been delivered\. The Area covered are Kinondoni MC KM2 37 5) and Other DSM areas (KM2 1861) and Cost Region (KM2 2064)\. Capacity Building of both men and women for Ministry of land staff members has been completed\. ï‚ Field work for Coordinate Transformation and Awareness Campaign to Surveyors on new Geodetic Network undertaken\. ï‚ Establishment of National Land Information Centre (NLIC) has been completed, the rehabilitation of National Land Information Centre (NL/CJ has also been completed\. The centres are now operational\. Page 75 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Preparation of the New National Land Policy and Implementation Strategy has been completed\. The revised National Land Policy, 2016 was completed and produced in English and Kiswahili versions\. Implementation strategy was also completed\. The Land Use Planning Act has already been translated into Kiswahili\. ï‚ Land use Planning Act 2007 as approved by Government now in use\. The law is essential for increasing efficiency and accessibility of the use of land by both men and women and has considerably improved identification of land for further development and better use of land as an important resource\. ï‚ Urban Planning Act 2007 now in use has been essential for sustainable land use in urban areas and all Local Government Authorities (LGAs) have been instructed by the Government to ensure its effective implementation in urban land use planning\. ï‚ Unit Titles (Condominium) Act 2008 now fully operational is essential for promoting more efficient housing, including apartments and condominiums, ï‚ Land Laws Miscellaneous Amendments Act No\. 3 of 2009 extended the duration of acquiring residential licenses from 2 years to 5 years and many of its stipulations are essential for protecting land use rights, especially those for women and more than 200,000 untitled properties located in urban informal settlements\. ï‚ Land Valuation (Bill) 2010 together use of ICT GPS system to demarcate land property and speeded up issuing land titles and rights of occupancy\. ï‚ In an effort to foster amicable property dispute resolutions, the Government established 22 district housing and land tribunals and given office space and operational facilities\. Many disputes have been resolved through these tribunals\. ï‚ In order to improve justice in disputes, the Government has supported a special program to reduce back logs of land cases in key municipalities with the largest number of case-loads, including Dar es Salaam, Mbeya and Arusha\. The back logs have been reduced to a level that can be handled and managed by normal court sessions on a sustainable basis\. The reduction of land disputes is essential to minimize the volume of land that is put out of production due to disputes\. ï‚ In an effort to put into effect the decentralization of land, 6 Zonal Land Offices have been established and currently fully operational\. ï‚ Boundaries of 11,000 villages (out of planned 12,000) or over 90% have been surveyed and demarcated, of which 7,000 have been registered, thus empowering the village authorities to better plan, allocate and manage land use and tenure\. ï‚ More than 100,000 Certificates of customary rights of occupancy (some of which have been offered to women) have been issued\. Scale up is underway country-wide and the Government plan is to register about 25 million unregistered rural land parcels\. This is essential to raise Tanzania’s land registration rate of individually owned land including those of women which currently shows only 5 percent of the land is registered, the lowest rate in the world\. ï‚ In an effort to regularize tenure, Dar es Salaam Master Plan has been prepared and some properties in unplanned areas are being recognized and offered rights of occupancy\. ï‚ Program to scale up participatory land use planning and tenure regularization has been prepared and is currently being scaled up in all urban areas in the country\. ï‚ In an effort to foster better land use in rural areas, a legal framework and piloting a new land use planning system has been unveiled and 1,000 villages have been covered with participatory land use planning and rational land use plans have been prepared for those villages\. Scaling up is underway that has begun in the Southern Agricultural Corridor of Tanzania (SAGCOT)\. ï‚ Land Use Plan in Urban Areas and Regularization of Tenure rights has been scaled up and 4,857 plots have already been demarcated, 4,333 plots coordinated, 17 urban plan drawings approved and 21 survey plans approved in Kilungule A, Kilungule B and Mavurunza Sub-wards of Kimara ward\. Page 76 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ The development of the Integrated Land Management Information System (ILMIS) and its associated ILMIS software has greatly revolutionized the land administration system, not only in terms of land registration and reducing the time it takes to acquire the right of occupancy, but also eliminated rent-seeking behaviour\. It impact on Tanzania’s land administration is substantial, including considerable reduction of double allocation of parcels of land and minimizing land disputes\. ï‚ Dispute resolution mechanisms were strengthened\. Notably 23 district housing and land tribunals were established, of which 12 were given office and operational facilities; and a public awareness campaign on the Dispute Court Act 2002 was carried out in more than 100 Ward Tribunals\. ï‚ With completion of ILMIS, the Directorate of Rural and Town Planning prepared town planning drawings using base maps as inputs and extracts prepared based on changes in TP drawings\. On inventories conducted\. ILMIS project converted 1,500 TP drawings and 2,000 extracts of scales 1:1,000 and 1:2,500 where applicable\. The work involves Scanning, georeferencing and vectorization\. ï‚ Survey and Mapping Division prepared Survey Plan for identified areas based on TP drawings and registers the survey plans as per existing regulation\. There are 14,925 (Scales 1:500; 1:1,000; 1:2,000; 1:2,500 etc\.) that were identified during inventory for the Kinondoni Municipal Council\. There are about 550 other maps; 300 (unknown scales) Restricted/Copyrighted Maps; 70 (of scales 1:250,000) East Africa Map Series; 30 (of scales 1:250,000) Regional Maps; 120 (of scales 1:200,000) District Maps and 5 (of scales 1 :50,000) East Africa Maps Series) that were also identified\. The maps will be Scanned and recognized including (Survey Computation Files - Com files 4,200; Survey Division Files - I 83 and Control Point Descriptions - 300)\. While all datasets will be converted, only the Survey Plans will be vectorised\. Moreover there are 6 transactions that were identified for ILMIS implementation namely: Creating a Survey, Mutation of a Parcel and creating deed plan\. ï‚ Land Administration Division undertook functions such as giving occupiers of the land Certificate Rights of Occupancy (CRO) and setting development conditions\. ILMIS project has identified 23 transactions being undertaken by Land Administration Division\. Data conversion involving entire land administration process will be scanned, indexed and made available to Land Officers based on their roles\. It is estimated that there are 80,000 files at the Ministry and a total of 80,000 for Ubungo and IIala Councils\. ï‚ Participatory land use planning, involving local communities, and regularization of land rights in informal settlements were successfully piloted in Mwanza and Dar es-Salaam\. About 33,627 plots, of which 1,057 are in Dar-es-Salaam City were identified, out of which 25,445 were planned, 10,333 were surveyed, and 2,000 were issued with Certificates of Rights of Occupancy (CROs) in Mwanza City\. ï‚ Registrar of Title currently undertakes certificates and documents registrations based on existing legislation enacted during the project period\. A total of 59 transactions have been identified and they will be implemented in ILMIS\. Data conversion involving these transactions will be scanned, indexed and made available to Registrars and others based on their roles\. It is estimated that there are 80,000 files at Zonal Offices that will be converted into digital formats\. ï‚ Valuation Unit currently undertakes General Valuation and Premium Estimation in relation to land administration functions\. The Valuation unit will be involved with setting premium values in ILMIS as well as providing valuations with regard to subsequent transactions on registered land\. Moreover, the Unit will have access to all ILMIS data including base map and registered occupiers\. ï‚ The Ministry completed the establishment of a new geodetic network comprising of 16 zero points, 72 first order points and 525 second order point\. The new network computation has been recently completed based on the "International Reference Frame of 2014 (ITRF 14 )" with 151January 2011 as the reference epoch and because of that the new network has been named as Tanzania Reference Frame of 2011-TAREF11 "\. Procedures to publish the Zero and First order control points on official government gazette have been completed\. The computation of Second Order points (525) is also completed and results published\. 4\.1\.3 Commercial Law and Justice and Labour Law Reforms 35\. The objective of this sub-component is to (i) Review the legislative framework for the business sector, (ii) Disseminate the legislations, (iii) Contribute to enhance legal education, and (iv) Provide support to the Judiciary\. The Labour laws reform aims at supporting the creation of efficient, Page 77 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) effective, flexible and socially responsible labour market which will generate decent jobs\. These sub- components have achieved the following: A\. Outputs ï‚ High Court of Tanzania (Commercial Division Fees) Rules, 2012 and High Court of Tanzania (Commercial Division) Procedure Rules, 2012 enacted and gazetted\. ï‚ Electronic case management system installed, ï‚ E-library linking Commercial Court sub-registry installed, ï‚ Commercial Court website upgraded and made operational\. ï‚ Labour laws reform completed include: (i) Social Security (Regulatory Authority) Act 2008 (SSRA No\. 8 of 2008), Employment and Labour Relations Act, (iii) Worker Compensation Act 2008, (iv) Occupational and Safety Health Policy, and (v) National Employment Promotion and Services Policy\. B\. Outcomes ï‚ Dissemination of all legislations undertaken to inform the general public as well as lower courts dispensing justice, ï‚ Legal education undertaken in all institutions empowered to offer legal services training, including the faculty of law in the University of Dar es Salaam, ï‚ Electronic case management system has reduced back log cases facilitating normal case management in regular court sessions, ï‚ The Social Security (Regulatory Authority) Act 2008 (SSRA No\. 8 of 2008) has empowered authorities to offer better and legislative-rooted benefits to their members, ï‚ The Occupational and Safety Health Policy unveiled in this sub-component support has improved worker’s safety and Government agencies close follow-up to protect the safety of workers, ï‚ The Worker Compensation Act 2008 enacted as part of this sub-component has mandated all employers – private and public to ensure enrolment and inclusion of all workers into social security fund and compensate workers where applicable according to the regulations, ï‚ The National Employment Promotion and Services Policy unveiled as part of this sub-component has empowered employers, both public and private to ensure workers who deserve promotion actually get their rights as rooted in the policy and legislation, ï‚ The Employment and Labour Relations Act enacted as part of this sub-component has provided more cordial relationships between employers and employees and better recourse to justice in case of employee- employer disputes\. 4\.1\.4 Strengthening Tanzania Investment Centre (TIC) 36\. The objective of this sub-component is to support TIC’s corporate plan which is built around six strategic objectives\. The main achievements up to the closure of this project have included the following: A\. Outputs ï‚ Raised the profile and image of Tanzania as a business location, ï‚ Increased FDI flows in strategic sectors, ï‚ Maximized the impact of new investments on the Tanzanian economy, ï‚ Facilitated creation of a business competitive environment in Tanzania, ï‚ Facilitated development of site and infrastructure that meets investor’s needs, and ï‚ Built capacity for TIC to provide better services to investors\. B\. Outcomes ï‚ 434 projects registered between 2006 to 2013 employing 82,892 people, with a total investment of Page 78 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) US$ 2,770 million, ï‚ According to Tanzania Investment Report 2012, Tanzania has made headway in attracting foreign private investment (FPI) at an impressive annual growth level of 10\.3 percent between 2008 and 2011 despite global financial turndown\. The FPI increased to $ 10,393 million in 2011 from $ 7,751 million in 2008\. The report findings were based on the surveys conducted by Tanzania Investment Centre (TIC) in partnership with Bank of Tanzania (BoT) and National Bureau of Statistics (NBS) focusing on Foreign Private Investment and Investor Perspective\. 4\.1\.5 Big Results Now (BRN) 37\. Tanzania’s BRN initiative of the government aimed at establishing a strong and effective system to oversee, monitor and evaluate the implementation of its development plans (particularly the Five-year development plans and programmes) based on Malaysia’s Big Fast Results approach, which hinges on: prioritisation; detailed monitoring tools; and accountability for performance\. 38\. Phase 1 of BRN consisted of an intense planning process (“Labs”), in February- April, 2013 covering six National Key Results Areas (NKRAs): Agriculture, Education, Energy, Water, Transport, and Resource Mobilization\. Phase 2 operationalizes the Labs' implementation plans -- while future labs on new NKRAs would be identified in later years to complement interventions and enhance growth\. An important objective of the BRN initiative is to facilitate greater private sector involvement in the priority result areas\. 39\. Under PSCP, the project aims at supporting the BRN President’s Delivery Bureau (PDB) initial set up20 to establish functions, resources and instruments that will be critical to facilitate private sector involvement in NKRAs, and under Component 3 of the original project -- to finance additional demand-driven activities to further improve access to finance in the country\. All of these cross- cutting/horizontal investment climate reforms will help to further improve legal certainty and lower the costs of doing business\. The main achievements at the closure of the project shows 5 out of the 8 key BRN key results areas or 63% of the expected planned results have been achieved, namely: A\. Outputs ï‚ Strategic direction: Done through Multiple Cabinet retreats, finally 6 NKRAs picked for greater focus in implementation, ï‚ Lab: Established in detail what needs to be done; conducted in capacity building and training at White Sands Hotel, 22/02 – 5/04/2013 ï‚ Shared lab output with general public and got feedback- 24/05/2013 at National Museum Grounds, ï‚ Conducted sensitization and capacity building to managers implementing government development plans for 6 key Ministries (as shown on POPC website www\.mipangotz\.go\.tz) ï‚ Project Preparation Advance (PPA) supported the work under the BRN sub-component with commendable contribution to improve implementation, ï‚ Legislative amendments related to PPPs completed to facilitate private sector investment in the economy\. For example, private sector in funding improvement of railway infrastructure (Ministry of Finance, June 2012)\. 20 The BRN delivery system is structured as follows: at the center, there is the PDB and in each NKRA lead Ministry, there are the MDUs\. Throughout the year the PDB and MDUs will ensure that progress is regularly monitored and fed up the system, delivery bottlenecks are speedily identified and if necessary escalated and ultimately results delivery is kept on track\. They will be supervised by the TDC and the NKRA Steering Committee respectively Page 79 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Built capacity of PDB through private sector-related capacity, equipment, resources, and instruments to enable it to deliver its mandate during the start-up phase, including activities related to establish the Transformation and Delivery Council (TDC)\. ï‚ PDB undertook analysis to identify additional strategic areas (in addition to the 6 KRAs) where results can be delivered through private sector interventions and developed the associated action plans and solutions\. ï‚ Promotion of Tourism – The Ministry of Tourism finalized the Tourism policy\. ï‚ PPP - Government decided not to implement this activity and but plans to implement PPP activities under another source of funding\. B\. Outcomes ï‚ Transformation and Delivery Council (TBC) established and operational\. TBC has reviewed NKRA progress and advanced solutions, including addressing challenges encountered by NKRA ministries – thus improving private sector involvement in the economy\. ï‚ Capacity building and training provided to PDB, MDU and other Ministries, Departments, and Agencies (MDA) staff on the requirements to facilitate private sector operations across the BRN delivery system has clearly contributed to improving the overall business environment and the overall transformation of government delivery capacity; although much remains to be done\. ï‚ Despite closure of PDB in 2016, the Government is committed towards moving the PPP agenda forward, including strengthening the legal and institutional frameworks for PPPs, which has recently been placed under the custodian of the Ministry of Finance and Planning (MoFP)\. Accordingly, in April 2016 accountability for all PPP initiatives and related activities was transferred to the MoFP which is now also responsible to identify appropriate funding for PPP projects and coordinate with all other Ministries; including the establishment of a dedicated PPP Center\. The MoFP has begun to develop action plan to start work on PPP activities taking into consideration Government priorities which will enhance private sector participation in partnership with Government\. 4\.1\.6 Business Environment Strengthening - Zanzibar 40\. The objective of this sub-component is to improve the business and regulatory reforms in Zanzibar\. The main achievements up to the closure of this project have included the following: A\. Outputs ï‚ Report prepared on Business Entry, Exit, Security and Registration applicable to Zanzibar\. ï‚ Several legislations enacted by the Revolutionary Government of Zanzibar, including the following:  Business Registration Act,  Secure Transaction of Movable Properties Act,  Insolvency Act,  Companies Act ï‚ Consolidation of Zanzibar Laws from 1980 to 2010 completed ï‚ New Commercial Court Bill enacted to establish the Zanzibar Commercial Court, ï‚ A Corporate Plan of Zanzibar Investment Promotion Agency prepared\. B\. Outcomes ï‚ 32 advocates and legal officers trained in the areas of commercial laws, alternative dispute resolutions and key legal case management in courts, ï‚ Zanzibar Law Society provided with capacity building, training and equipment, ï‚ Review and reduction of levies and taxation of SMEs which is under the President’s office, Finance, Economy and Development Planning completed successfully and applauded by SMEs\. Page 80 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 4\.2 COMPONENT 2: ENTERPRISE DEVELOPMENT COMPETITIVENESS 41\. The objective of this component is to improve the capacity of the private sector in Tanzania to respond to viable opportunities in domestic, regional and international markets\. To achieve this objective the Tanzania Private Sector Foundation (TPSF) leads the implementation of four major sub-components, namely: 1\. Cluster Competitiveness Program, 2\. Matching Grants Programme (comprised of Technical Innovation Scheme (TIAS) and the Tanzania Business Development Programme (TBDS), 3\. Tanzania Business Gateway Programme, and 4\. International business School Linkage Program\. 42\. Achievements observed for this component are as follows: 4\.2\.1 Cluster Competitiveness Program\. This sub-component focused on food processing, horticulture and tourism clusters\. The achievements are as follows: A\. Outputs ï‚ Legal and regulatory environment for food processing, horticulture and tourism has been improved, ï‚ Labour and workforce system in the sub-sectors of food processing, horticulture and tourism has been improved\. ï‚ Productivity of farmers engaged in horticulture and food processing has been improved\. ï‚ Report on Tourism developed in 2015 and in circulation B\. Outcomes ï‚ 1,000 farmers trained in farming as a business and their productivity has increased, ï‚ 550 farmers and 16 local consultants have been trained on global GAP Standard thus enhancing competitiveness in the industry, ï‚ 500 taxi drivers certified in tourism friendly services, thus enhancing their capacity to provide better services to the tourism sub-sector, ï‚ 10 tour guides trained and certified, thus offering better services to tourists, ï‚ Established the Association of Women in Tourism, thus increasing women participation in the tourism industry\. 4\.2\.2 Matching Grant Program 43\. This sub-component implemented by the Tanzania Business Development Programme (TBDP) aimed at improving the competitiveness of private firms\. A\. Outputs ï‚ 910 grants provided to MSMEs, ï‚ 16,784 men and women trained in various business-related skills (Target was 1,000 people), ï‚ 2,010 microenterprises and their employees trained in entrepreneurship (target was 1,000 microenterprises)\. B\. Outcomes ï‚ 7,100 new jobs created, ï‚ 69% of the enterprises reported increase in sales, ï‚ 39% of the enterprises achieved new export sales, ï‚ 23% of the enterprises developed new products\. 44\. The Technical Innovation and Applied Research Scheme (TIAS)\. This sub-component aimed at Page 81 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) improving the capacity of technical institutions to provide training and other services that help boost productivity and competitiveness of the private sector\. A\. Outputs ï‚ Capacity development training provided to technical institutions, ï‚ Various types of machinery and equipment provided to the training institutions\. B\. Outcomes ï‚ 50 new degrees and diploma courses established in the various technical institutions, ï‚ 9,240 students enrolled in the various technical institutions, ï‚ 16,784 men and women trained on various technical skills, ï‚ Over 10,304 people employed in the beneficiary companies and institutions\. 4\.2\.3 Tanzania Business Development Gateway (BDG) Programme 45\. The objective of this sub-component was to strengthen the entrepreneurial culture of Tanzanians by providing entrepreneurs with business ideas and start-up firms with risk grants, thereby enabling them to either start or upgrade a business\. Achievements include: A\. Outputs ï‚ US$ 13\.89 million worth of grants provided to SMEs, ï‚ Entrepreneurial skills training provided to SMEs, ï‚ Business clubs established in each region of Tanzania to provide additional business support services to entrepreneurs\. B\. Outcomes ï‚ 11,000 MSMEs members trained in capacity building that has empowered both men and women trained with new business ideas, ï‚ 8,736 MSMEs provided with entrepreneurship training that has increased their productivity, ï‚ 5,994 MSMEs provided with grants that has enabled some to upgrade their businesses and others to use the training offered to start own businesses\. ï‚ 26 business clubs established in the regions are fully operational providing much needed business support, including sourcing markets for the entrepreneurs\. 4\.2\.4 Business Linkage Programme 46\. This sub-component aimed at enhancing the training capacity of local training institutions to ensure a sustainable increase in the supply of quality managers in Tanzania\. Achievements during implementation of this subcomponent include the following: A\. Outputs ï‚ 32 faculty staffs in various institutions trained as trainers in entrepreneurship, ï‚ 2 faculty staff trained in Teaching the Practice of Management, ï‚ 24 faculty staff trained in curriculum development and research\. B\. Outcomes ï‚ Faculty staffs trained as trainers imparting the skills to other faculty members and students, ï‚ 13 curriculum case studies developed, ï‚ Students now invited to apply a course on curriculum development and research methodology\. 4\.3 COMPONENT 3: ACCESS TO FINANCIAL SERVICES 47\. This component aimed at increasing access to financial services initially implemented under the Financial Sector Deepening Trust (FSDT)\. Under PSCP-AF this component aimed at supporting Page 82 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) access to financial services through: (i) strengthening the legal and regulatory framework, (ii) supporting deposit insurance, (iii) developing reporting standards for microfinance institutions (MFIs), (iv) Addressing weaknesses in the collateral system, (v) developing standards for overseeing and supporting mobile financial services infrastructure, and (vi) Supporting development of new products to expand access to finance\. 48\. The institutions supported by the PSCP-AF include Bank of Tanzania, Dar es Salaam Stock of Exchange (DSE), Capital Market and Securities Authority (CMSA), Tanzania Insurance Regulatory Authority (TIRA), National Board of Auditors and Accountant (NBAA), Tanzania Warehousing Licensing Board (TWLB) and TIB Development Bank (TIB-DB)\. \. 49\. The main achievements of PSCP and PSCP-AF up to the closure of the project are as follows: A\. Outputs ï‚ Facilitated improvement of policy, institutional, legal and regulatory framework and data for delivery of financial services, ï‚ Provided increased wholesale financial service provision to support retail financial service providers (financial linkages) ï‚ Facilitated enhanced appropriate business services for SACCOS and other MF providers (capacity building) ï‚ Facilitated availability of more and better financial services to meet the needs of urban and rural enterprises (MSMEs), including those for women\. ï‚ Facilitated availability of more and better financial services to meet the needs of poor urban and rural households and individuals (retails customers)\. ï‚ Drafting of regulations that allow for the effective functioning of the Deposit Insurance Board had already been done by M/s Aries under a different project\. Therefore this sub-component can be considered completed\. ï‚ Specifications for the Enterprise Resource Management System (ERMS) were developed as part of the consultancy funded through PSCP-AF project\. However, the Bank of Tanzania is waiting to make the system functional due to ongoing discussion by the Government on transformation of the ERMS Board into an autonomous institution\. ï‚ Reporting standards for microfinance institutions (IFRS) have been completed\. IFRS for Tanzanian micro entities were developed by M/s Cadogan in 2017 under the auspices of the Bank of Tanzania PSCP-AF support\. ï‚ Developing standards for overseeing and supporting mobile financial services infrastructure has been done under a separate funding support to the Government of Tanzania\. Therefore, this sub- component can be considered completed\. ï‚ New products have been developed by Tanzania’s financial institutions and approved by the Bank of Tanzania, including for example Tanzania Mercantile Exchange (TMX) which started implementation with cashew nuts\. Warehouse Receipts System (WRS) improved and equipped to function as intended\. ï‚ The Tanzania Commodity Exchange offices have been established and staff recruited\. ï‚ \.Commodity contract specifications have been prepared for the following crops: sesame seeds, sunflower, cashew nut, maize, pigeon peas, cow peas, chick peas, and paddy rice\. B\. Outcomes ï‚ The ninth edition of the World Bank “Tanzania Economic Update” which focuses on the special topic, “Money Within Reach: Extending Financial Inclusion in Tanzania\.” It analyses the country’s extraordinary Page 83 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) progress in bringing financial services to 62% of its population today compared to 11% in 2006, making it a regional leader in the use of digital financial services and putting it on a solid footing to achieve Universal Financial Access by 2020\. ï‚ New financial products progress has been credited to money transfer services that were introduced by mobile network operators in 2008 through approval of the Bank of Tanzania\. These are operated by a network of agents across the country offering a range of services and products, whereas the traditional bank-dominated financial system remains mostly urban-based and is still unaffordable for the vast majority of Tanzanians and their businesses\. ï‚ New financial products have also reached ordinary citizens who once had to enter into risky arrangements to send money urgently to their families, the mobile money services have almost eliminated this risk and drastically reduced the time and cost transactions used to take\. They have moved further to offer products at affordable cost, such as insurance and credit, as well as offering platforms for paying utility bills such as water and electricity as well as various taxes\. ï‚ Proportion of adult population that uses financial services provided by formal financial service providers increased from the base value of 9% (2006) to 56\.8% (2013) exceeding the target set at 18%\. ï‚ Proportion of adult population classified as unserved/excluded reduced from 54% (2006) to 27\.4% (2013 against a target of 48\.5%\. ï‚ Credit extended to the private sector as a percentage of GDP increased from 8\.9% (2006) to 16% in 2009 against a target of 13\.1%\. ï‚ Volume of deposits mobilized by a cross section of microfinance providers from MSMEs and poor people (TZS billion) increased from TZS 40\.5 billion (2006) to \. (Target 162\.1) ï‚ Volume of non-directed finance from commercial banks available to MFPs increased TZS 5\.2 billion (2006) to TZS 85\.3bn in 2009 (Target 21\.0 billion) ï‚ Proportion of micro entrepreneurs with investments valued at TZS 5 million in assisted MFPs who are women] increased from 1\.3% (2006) to (target 30%) ï‚ Proportion of micro entrepreneurs with investments valued at TZS 5 million in assisted MFPs who are youth (aged 18-25) increased from 0% (2006) to (Target 5%) ï‚ Number of poor people accessing financial services from assisted financial institutions increased from 171,898 (2006) to 744,418 in 2009 against a target of 687,592\. ï‚ Number of women and youth accessing financial services from assisted financial institutions increased from 92,678 (2006) to (Target 370,713) 4\.4 PROJECT MANAGEMENT 50\. General: Despite some delays in procurement of some PSCP and PSCP-AF planned activities, due partly to the need to garner consensus with the large number of implementing agencies and the legal time required to effect a public procurement service, the overall management of the project has been fairly good\. Project reports overall have been comprehensive and the monitoring and evaluation table was prepared, including results framework with expected yearly targets and end-of-project targets which have facilitated implementation and tracking of achievements\. 51\. The closing date for the initial PSCP support was extended from June 30, 2013 to December 31, 2013 to provide necessary period to sustain momentum during preparation of the PSCP Additional Financing\. In order to keep the momentum, the World Bank and the Government proposed an additional financing which would support (i) the land component of PSCP, which will "bridge" land administration activities while a new private sector operation was still being designed, (ii) regulatory reform and (iii) improving access to financial services\. An additional extension was requested during implementation which brought the PSCP-AF and therefore the entire project to closure on 31st July, 2018\. Page 84 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 52\. Financial Management: Overall, the PSCP and PSCP-AF have been financially managed well according to international standards as attested by external PSCP audits by Tanzania Controller and Auditor General – who have consistently issued ‘Unqualified’ rating indicating proper management of funds in terms of adhering to proper disbursement and utilization of project funds21\. Due to unavoidable circumstances that necessitated additional funding to get some sub-components implementation momentum, some categories were overdrawn hence requiring reallocation of funds\. The World Bank and project implementation staffs worked together to come up with a proposal for reallocation of the existing funds so as to meet the existing outstanding obligations and proposed commitments\. 53\. Funds disbursement and utilization\. The PSCP and PSCP-AF have performed well in terms of funds disbursement and utilization\. As of the closure of the project, 31st July 2018, all the initial PSCP IDA 41360-TZ, 2006 to 2013 of US$ 95 million had been fully disbursed and utilized\. With regards to PSCP –AF IDA 53260-TZ, 2014 to 31st July, 2018 of US$ 60\.2 million, US$ 45, 592,709\.5 had been disbursed and utilized and US$7,000, 000 has been committed and disbursement to fund already committed implemented PSCP-AF sub-component is expected to take place soon; which brings the total disbursed and committed to US$ 52,592,709\.5\. Thus the expected undisbursed funds for PSCP-AF are US$ 7,607,290\.5 or 12\.6% of the total PSCP-AF funding\. Overall, the total project funding was US$ 155,200,000 of which only US$ 7,607,290\.5 will be undisbursed or 4\.9%, implying very good disbursement and utilization of project fund on both the World Bank and Government project implementing agencies\. 4\.5 54\. The PSCP and PSCP-AF indicator, targets and actual achievements of the targets is shown on Table 3\. Overall, most of the planned targets were met, despite many challenges in the Tanzania business environment including: (i) Nearly three decades of economic growth reliance on public sector as the “engine’ of that growth, thus marginally involving the private sector, which should have been the main actor in the growth drive; (ii) The need to garner consensus due to the many PSCP implementing agencies, (iii) Coordination of many sub-project components exceeding 120 activities with few staffs at the PIU located in the PMO’s office, and (iv) the need to put in place systems of project implementation, including inadequate supportive public service procurement systems that tend to take longer time due to the legal procedural requirements\. 5\. Assessment of PSCP and PSCP-AF Performance: The Results Framework analysis shown above indicates substantial achievement of the planned indicators and targets (Green colour)\. Overall, only one indicator was not achieved and 0ver 85% of the 28 indicators assessed on the Results Framework above were achieved fully\. Given the high achievements of the PSCP and PSCP-AF as outlined in Section 4\.1 and combined with the performance of the Results Framework indicators, the project should be ranked “Satisfactory”\. However, given observed implementation inadequacies such as delays in procurement of goods and services, management of the entire project, and several other issues narrated in World Bank Aide-Mémoires and project implementation review reports, many of which, cannot be quantified; the rating proposed for this PSCP is “Moderately Satisfactory”\. See Report of the Controller and Auditor General on the financial statements of the Private 21  sector competitiveness project (PSCP) for the year ended 30th June, 2015 and June 30, 2017; January 2018 Page 85 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 3\. BENEFICIARY SURVEY 2\.1 Introduction 56\. This section provides a summary of the beneficiary survey undertaken as part of this ICR\. The results and methodology used for the survey are detailed in Annex 1\. Overall, despite observing that attribution is not direct or straightforward due to existence of other stakeholders; the results of the beneficiary survey provides strong evidence that the Private sector competitiveness project enabled important reforms that contributed to improved services needed for enterprise growth\. The key findings are as follows: 5\.2 Key Findings ï‚ The survey found dramatic increase in the number of business licenses and title deeds issued in every LGA visited as a result of the reforms and enabling systems\. On average, the number of business licenses increased by 50 percent annually, and dramatically by 123 percent from 2005 to 2017\. ï‚ Time to issue a license decreased from an average of 3 days in 2005 to 1\.7 days in 2017, while revenue from business licenses increased by 53 percent from an average of TZS 495 million to TZS 756 million\. Part of the reason includes significant reduction in time and procedures to start, register, and operate business as well as the establishment of BRELA which brought various positive changes to business registration\. However, participation by rural enterprises is found to be relatively lower compared to urban enterprises\. ï‚ Land title service show even more dramatic growth in performance\. The number of title deed increased by 190 percent from an average of 180 per year to 517, while the time to issue a title deed declined by nearly 90 percent from an average of 340 days in 2005 to 37 days in 2017\. The survey also shows participation of women in land ownership has increased in both urban and rural areas\. Further, in the surveyed LGAs revenue from land property increased seven folds from an average of TZS 112 million in 2010 to TZS 792 million in 2018, partly due to increased land titling\. ï‚ With regards to land, over 70 percent of the respondents in sample survey in both Households and firms reported that it is easier to acquire land in 2018 compared to the past 10 years\. The main factor in the increased ease of acquiring land is: (i) decrease in price for getting a title (47\.3 percent), (ii) increased awareness and knowledge (24\.8%), (iii) lower time it takes to secure a title (11\.3%), and (iv) low level of corruption (8\.3%)\. In this regard, the level of satisfaction has also increased, with men showing higher levels of satisfaction (60%), while female (40%)\. Some remaining levels of dissatisfaction relates to perceived continued structural rigidities, including still high cost of acquiring land, delays and inadequate information and knowledge of the land reforms\. ï‚ The project has had significant impacts on improving business environment, although most (70%) of respondents reported that recently, business climate has deteriorated, reporting that it is now difficult to do business compared to the past 10 years\. However, with regard to above observation, rural enterprises consider business environment to be friendlier, while urban firms consider it to be complex and needs further reforms\. ï‚ Financial services have improved in terms of the range of financial institutions and other non- commercial banks, as well the range of services provided both in rural and urban areas leading to greater access to credit\. In particular, the mobile money revolution explains the dramatic leapfrog in financial inclusion, from coverage of 11 percent to 57 percent within the project period\. The main factor explaining the improvement is simplified operation procedures and use of electronic systems (including mobile phone services) that is accessible country- wide all the time\. ï‚ Despite improved access to financial services, access to loans is still low\. Only 27 percent of the respondent firms and 21 percent of the Households surveyed received loans in the past year – mostly from commercial banks (77%) and VICOBA/SACCOS (11%)\. The main challenges cited by respondents include: high interest rates, lack of collateral and the high cost of procurement of Electronic Fiscal Devices (EFDs) machine for small businesses\. Page 86 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ The survey probed on the gender differences in accessing and improvement of various services\. The findings shows the gender differences were insignificant, and where existed, have tended to fade away overtime\. For instance, 84 percent of households reported no gender bias in owning land, while 93 percent report such differences to have substantially decreased compared to the past 10 years\. It is also reported that, there is no bias in obtaining land title, as reported by 87 percent of respondents\. Indeed, 91 percent of respondents reported that procedures for owning land and getting title apply equally between men and women\. Similarly, most households (92%) and firms (79\.2%) report that there is no bias in registering business between men and women, neither in accessing loans from financial institutions (89%)\. 5\.3 Challenges 57\. Despite the substantial achievements made in implementing the project, some challenges still exist, limiting full realization of the project’s intended outcomes\. The major challenges can be summarized as follows: ï‚ Lack of financial and human resources to sustain the huge demand for the project services\. ï‚ Weak institutional framework where the land office is not accorded sufficient space and attention at the LGA level, and the fact that Trade office is wrongly placed under Treasurer’s department thus compromising the trade facilitation objective; and ï‚ Low level of awareness and capacity of the beneficiaries limiting their ability to navigate through a difficult but improving business environment\. ï‚ Some obstructive legislation and regulations on trade, commerce, employment and resource utilization, despite many reforms and supportive legislations since the mid-1980 and the support provided under PSCP and PSCP-AF\. ï‚ Costly and complicated procedures to establish and run a business, despite substantial improvement in recent years\. The number of days to achieve most of the procedures can still be reduced considerably, compared with other countries with a better rating on the World Bank cost of doing business\. ï‚ Streamline further the land acquisition process, despite commendable progress in recent years to automate most of the procedures and clearly eliminating rent-seeking behavior\. ï‚ Support further improvement to formal and non-formal financial service providers, particularly for men and women MSMEs to ensure greater inclusion in the country’s financial system\. ï‚ Address remaining challenges in business labour laws which still persist despite recent enactment of several more responsive labour laws and regulations as outlined in the preceding sections\. ï‚ Review further the dispute resolution mechanism, despite recent reforms and legislation to address this challenge\. Much remains to be done in this area, not-with-standing the good progress made in recent years under to the land administration reforms\. ï‚ Continue to address the limited entrepreneurship and business skills challenge, despite much improvement in recent years to revamp vocational training institutes and capacity building and training offered and supported by Development Partners, including the PSCP project support\. ï‚ Facilitate private sector to enhance their capacity to respond to opportunities in Local and Regional Markets, as well as access to information and provide more support to the private sector by Government agencies working closely with national and regional business councils\. Page 87 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Continue to address the issue of the large unorganized and informal sector22 despite efforts to address informality through a program such as luring informal entrepreneurs to become formal, register their businesses and pay relatively low taxes to the Government coffers (dubbed in Kiswahili MKURUBITA)\. 3\. ECONOMIC AND FINANCIAL ANALYSIS 6\.1 Introduction 58\. This section provides a summary of the project economic and financial analysis\. Further analysis and methodology used is shown on Annex 2\. Overall, despite some few challenges encountered during implementation, the PSCP and PSCP-AF project was cost effective and efficiently implemented as outlined below\. 6\.2\. Key Findings ï‚ The project experienced substantial financial management efficiency\. Over 94% of the loan/credit was disbursed and utilized to implement over 190 project sub-activities\. PSCP Project PO85009 IDA - 41360 of US$95 million was fully disbursed and utilized\. PSCP Project PO85009 IDA- 53260 of US$60\.2 million, 82% of the loan/credit was disbursed and utilized\. PSCP Project PO85009 TF- 94620 of US$15\.75 was fully disbursed and utilized\. The cumulative disbursement trend is shown on Figure 1\. Figure 1: PSCP project cumulative disbursements ï‚ External audit of PSCP and PSCP-AF by the Controller and Auditor General consistently awarded “Unqualified” rating to the project financial management; implying project implementation adhered to international financial management standards\. ï‚ The ex-post Cost-Benefit analysis vindicated the good analysis conducted at appraisal\. The appraisal net benefits (NPV) of the overall project were estimated at US$56 million for a 12 percent discount rate while it’s ERR was estimated at 27 percent\. In contrast, the ex-post analysis using also 12 percent discount rate yielded NPV of US$110 and ERR of 35 percent, indicating the benefits and viability of the project at appraisal period were well anticipated\. 4\. LESSONS LEARNED 64\. The following are the main lessons learned and factors affecting development outcomes during implementation of the PSCP and PSCP-AF project: ï‚ Design of future projects should limit the number of priority actions on planned reforms in order to maximize their impact and achieve results in time\. There is a tendency of planning many activities (for example by June 2015 PSCP project had 190 activities of which 116 had been committed (contracts signed and activities ongoing/closed) which is 61% of all activities\. A fewer number of activities would have been implemented more cost effectively and efficiently to maximize positive impact\. 22 According to informal sector study done in Tanzania, the informal sector has assets worth 29\.3 billion dollars, equivalent to 10 times all foreign direct investment (FDI) accumulated since independence and four times net financial flows from multilateral institutions in the same period\.(Hemando De Soto, Empowering the Disadvantaged towards Expanded Market Economy September 2005)\.   Page 88 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Project design need to garner the highest level of political support for the reform effort through consultations and dialogue\. Reforms designed around sensitive sectors such as lands require a champion at the high level, since such sectors or reforms cut across all other sectors and touches majority of the population\. A strong champion at high political level would also enhance project’s success and sustainability of the outcomes\. ï‚ In the future, there is need to follow-up on business registration process validation and involvement of key private-sector representatives\. Often what officials have in their books as the registration process and what is experienced by the applicant are different\. Prior to reforming the system, it is necessary to do a detailed mapping of the current procedures (process mapping) involving key stakeholders (especially the private sector) so as to enhance traction, relevance and impact of project activities\. ï‚ The beneficiary survey found that use of online and electronic systems has dramatically increased results and impacts\. In the case of business registration, future project design should take into account the need to invest more resources into maintaining such systems\. Often time the project implementers are satisfied with successful installation and establishment of the system but to sustain the impact, more resources need to be spent on maintenance and troubleshoot\. For instance, the major cause of delay in issuing business license and land title is system outage\. If more efforts could be put into mitigating such risks, then the reforms would be much more impactful\. ï‚ In the case of business liencing and registration, One-Stop-Center branded as One Stop Business Center has huge potential to bring about much more dramatic impact and results\. The ongoing pilot project funded by DANIDA provides initial signals that the project will have much greater impact\. Similarly, in the case of land reforms, the pilot of ILMS in Kinondoni Municipal Council has produced notable results, which indicates potential for it system to transform land titling process once rolled out\. ï‚ The desire to realize efficiencies and comprehensiveness with a large project such as the PSCP should not over- ride the risks inherent in a complex project design with many beneficiary implementing agencies and activities\. Moreover, the implementing agencies’ institutional preparedness and strong governance framework should be considered paramount, especially the capacity to handle complex project issues such as preparing draft legislations and regulations\. ï‚ Need to align project design with the “implementing agency challenges” at the local level so as to increase effectiveness\. Most of the challenges affecting delivering of the land and business registration services at the local Government level were not addressed by the project\. While this level of intervention could be a logical follow up phase for the project, this review provides important lessons and areas for informing its design\. The future project could aim to improve the working environment and equipment for land and trade officers, boost the functioning of payment system, introduce records management and retrieval system, build capacity of the officers and support the institutional reforms at the national level\. ï‚ Institutional reforms could aim to unlock the functions of trade officers from purely fees/tax collection and inspection agents to trade facilitation agents\. Indeed, the districts/town trade officers could be empowered to be BRELA Agents at the LGA level, and empower small businesses to grow by providing necessary BDS services\. On land, the reforms could enhance a more effective functional relationship between land office and the LGA, and unlock the potential for land reforms to drive local economic development and revenue generation of the LGAs\. Page 89 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ï‚ Finally, most of the recommendations made by the LGA officials should provide a rich menu of low hanging fruits reforms at the LGA level that can be taken on board in designing future projects\. 5\. SUMMARY OF THE ASSESSMENT AND RECOMMENDATIONS 66\. The Government of Tanzania recognizes that rapid, private sector-led growth is essential for ending the country’s extreme poverty and boosting shared, inclusive prosperity\. As such, the World Bank and other donor’s support to improve private sector competitiveness are critical towards creation of vibrant private sector business environment\. 67\. The assessment conducted and discussed in the preceding sections, including the beneficiary survey conclusively shows that PSCP and PSCP-AF achieved substantially the intended development objectives\. The project has enabled Tanzania to create sustainable conditions for enterprise growth, especially due to the sound legislative, regulatory, institutional and ICT systems put in place with support from the project\. In particular, the project facilitated increased number of formal enterprises, enhanced value of titled land relative to untitled due to improved land demarcation and titling, and growth in sales and assets of firms participating in the project; as well as strengthening the business environment in Tanzania, especially through the support in land administration reform and improvement of access to financial services country-wide\. 68\. Key achievements in the strengthening of business environment include: ï‚ Substantially improved land administration system that has enhanced land ownership security through titling to foster inclusive productive land tenure systems, increase agriculture productivity and reduce land conflicts\. In particular, facilitation that enabled introduction of the New National Land Policy and five new land laws to provide the legal framework for implementation of the land development policy and strategy\. As a result, during the project period, boundaries of 11,000 villages (out of planned 12,000) or over 90% have been surveyed and demarcated, of which 7,000 have been registered, thus empowering the village authorities to better plan, allocate and manage land use and tenure, including reducing land conflicts\. More than 100,000 Certificates of customary rights of occupancy (some of which some have been offered to women) have been issued\. ï‚ Establishment of the Land Information Centre (NLIC), which provides access of land information to private and foreign investors as well as ordinary citizens who are interested in purchasing land but would like assurance of land property ownership, ï‚ Development of the Integrated Land Management Information System (ILMIS) which has revolutionized land administration in Tanzania by sustainably providing capacity to produce Base maps for Land Administration which started in Dar es Salaam and expected to be scaled up country-wide\. Base map information is required in rural and town planning, valuations, land management, environment and survey work\. Other powerful key features of ILMIS are critical to support the new land policy, legal framework and on-going land reform implementation strategy\. ï‚ The reforms supported several implementing agencies, including those responsible for enhancing tourism (MNRT), foreign investment (TIC), private sector facilitation (Private sector foundation), business registration (BRELA), and several others\. PSCP and PSCP-AF aimed at reducing the costs of investing in, establishing, and operating a business in Tanzania by eliminating policy, legal, regulatory, and institutional constraints that inhibit a growing and competitive private sector\. In this regard, Tanzania has made substantial progress in reducing the burden on businesses by eradicating as many procedural and administrative barriers as possible, and improving the quality of services provided by Government to the private sector\. The reforms have laid a solid foundation for sustained improvement in Tanzania’s private sector competitiveness\. For example business registration time has been reduced from 90 days to 3 days during the project period; tourist visits and tourism earnings are increasing; foreign direct investments (FDI) is increasing, creating much needed jobs and bringing Page 90 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) in new technology and foreign exchange; the business legal and regulatory framework is improving, creating an enabling environment for facilitating a growing, vibrant private sector capable of identifying market opportunities, take initiatives, innovate and compete at regional and global markets\. 69\. Similarly, the key achievements of PSCP and PSCP-AF in improving Tanzania’s citizens’ access to financial services include: ï‚ Substantially increased financial inclusion during the project with 2017 available information showing 62% of the 55 million Tanzanians have access to financial services compared with 11% in 2006, making it a regional leader in the use of digital financial services and putting it on a solid footing to achieve Universal Financial Access by 2020, ï‚ Tanzania made commendable progress in the establishment of formal and non-formal providers of financial services\. In 2017, there were 56 banks of which 22 banks are offering microfinance products and services that include 8 commercial banks, three microfinance banks and 11 community and cooperative banks\. The number of non-financial institutions has also increased substantially from 803 in 2006 to 133,134 in 2017\. ï‚ With increased financial service providers and mobile-phone based electronic payment systems; access to finance by MSMEs has also increased; facilitating private enterprise development, creating jobs and incomes; which is essential for improving the livelihood of the majority of Tanzanians\. The reforms supported under PSCP and PSCP-AF apart from improving financial access inclusiveness, provided matching grants to MSMEs which succeeded in their drive to build productive capacity, to compete, to create jobs and to contribute to poverty alleviation\. Without finance, MSMEs cannot acquire or absorb new technologies nor can they expand to compete in global markets or even strike business linkages with larger firms located in Tanzania or take advantage of the large East Africa Community market, especially taking into account recent improved border trading\. 9\.2 Recommendations 70\. Tanzania Government recognizes the good progress that the country has made in creating an enabling environment for enhanced private sector competitiveness and the challenges still ahead to reduce further the cost of doing business to increase investment profitability and create more amicable equitable business playing field\. In this regard, the Government is committed towards continuing to improve private sector competitiveness through the following actions: ï‚ Scaling up implementation of the successful land administration reforms, through speeding up land surveying, demarcation and titling of formal private and public village land to ensure all land in Tanzania has legally certified land property ownership\. In this regard, ILMIS will facilitate achievement of this resolve as well as the other land policy and legislative frameworks put in place under the reforms\. ï‚ Making further improvement to reduce the costs of investing in, establishing, and operating a business in Tanzania by continuing to eliminate challenges still existing in policy, legal, regulatory, and institutional areas that inhibit a growing and competitive private sector\. In this regard, the Government is committed to further reduction in the burden on businesses by eradicating remaining procedural and administrative barriers, and improving the quality of services offered to domestic and foreign investors\. ï‚ In recognition of vital role MSMEs play in building economy-wide productive capacity, to compete domestically and globally as well as to create much needed jobs and contribute to poverty alleviation; the Government is committed to explore mechanisms for reducing high risks and costs of lending to MSMEs; including imploring formal and non-formal providers of financial services to increase credit to MSMEs at Page 91 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) reduced interest rates, take initiatives to develop mechanisms for reducing risks and costs of MSMEs financing such as credit scoring systems which automate MSMEs lending and improve credit risk management\. ï‚ Continuing to scale up the successful reforms made under PSCP and PSCP-AF to revamp Tanzania’s tourism sub-sector, attract more foreign direct investment and scale up activities under the Dar es Salaam Stock of Exchange (DSE) and Capital Market and Securities Authority (CMSA) in order to increase domestic and foreign investment, create jobs, earn greater revenue for the country as well as anchor private sector as the main driver of poverty reduction in Tanzania\. Page 92 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) ANNEX 8\. COMMENTS ON THE DRAFT VERSION   Comments for Draft Version of the Project Implementation Completion and Results Report of the Tanzania Private Sector Competitive Project Tanzania is already implementing the above project with the initial credit from the World Bank of USD 95 Million and subsequent Additional Financing (AF) credit of USD 60 Million\. The aim of the project is to support the development of the private sector in the country and contribute to the deepening of the financial sector\. The project original development objective was to create sustainable conditions for enterprise creation and growth through a series of initiatives aimed at reducing the cost of doing business and increasing the capacity of the local private sector to participation in domestic and international markets and access to relevant financial services\. The project development objectives were later changed from sustainable conditions for enterpriese creation and growth to strengthen business environment in Tanzania including land administration reform and improve access to financial services\. From our side the project had strengthen the business environment by establishing a One Stop Shop (OSS) for business registration at BRELA which is fully functional\. This means that digitization of BRELA's registries has been completed; records management system has been installed; online names search database for companies and business names has been established on BRELA's website; several business acts have been amended or enacted to create more conducive climate for doing business in Tanzania\. As a result of these achievements, the parliament is now able to approve amendments of several acts for business promotion\. The World Bank has also been supporting MSMEs through addressing some of its key constraints hindering its development such as unfavourable legal and regulatory frameworks, undeveloped infrastructure, poor business development services, limited access to financing, and ineffective and poorly coordinated institutional support framework\. Among these constraints, access to finance is the most critical one\. As such, the government of Tanzania has been working with the World Bank on a new US$150 million financial intermediary lending operation designed to increase access to finance for MSMEs\. The growth of MSMEs has been hindered by several factors such as market access, legal and regulatory frameworks, infrastructure, human capital, technology including access to finance\. Some of these constraints have been intervened by the World Bank support through financing, advocacy, advisory, training and other forms of technical assistance activities\. One of the key output that is yet to be addressed is the establishment of MSME Policy Unit at the Ministry of Industry and Trade (Refer Component 2: Enhancing Enterprise Competitiveness on page 46 of the draft report)\. This activity/output has not yet been implemented under the project initiative apart from the existing Ministry's policy unit\. There is still a need to strengthen the Policy Unit dealing with MSME policy issues\. This activity/output still needs to be addressed\. The MSME Policy Unit if established, will be able to oversee the implementation of the following policies related to MSMEs: Page 93 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) 1) The Sustainable Industrial Development Policy-SIDP (1996-2020), which places specific emphasis on the promotion of SMEs through the following measures: supporting existing and new promotion institutions, simplifying taxation, licensing and registering SMEs, and improving access to financial services\. In addition, SIDP encourages informal sector businesses to grow and become formalized and identifies measures that would enable indigenous entrepreneurs, women, youth and people with disabilities to take part in economic activities\. 2) Small and Medium Enterprise Development Policy (2003), which outlines strategies for implementing the SME development policy, which focuses on three main areas: creating an enabling business environment, developing financial and non-financial services, and putting in place supportive institutional infrastructure\. This includes strategies for a legal and regulatory framework, physical infrastructure, business development services (including entrepreneurship development, business training, information, technology, marketing and access to finance), and an institutional framework for SME development\. The World Bank has also supported us in the formulation of the Blueprint which elaborates challenging areas in policies, laws, regulations, levies, taxes that require reforms aimed at reducing the cost of doing business in the country\. It also covers regulatory issues that require reforms, fiscal implications of the reforms and recommendations necessary for improving the business environment in Tanzania\. Specifically the Blueprint discusses issues faced during business registration (such as Permits, licenses and inspection) and issues faced during business operations (such as taxes, levies and registering products and inspections)\. The analysis covers six economic sectors (agriculture, natural resources and tourism, construction, health, energy and minerals and transportation) that are prioritized in Tanzania’s Five Year Development Plan\. The Blueprint for regulatory reforms also provides the government’s main framework for enabling a holistic review of business environment in order to improve the business climate in Tanzania\. It presents the key challenges affecting the private sector development in Tanzania as well set recommendations for reform to put in place a more friendly business environment\. It covers regulatory issues at different level namely, at national level and local government level, at sectors level\. The blueprint propose reforms to reduce regulatory burden by: 1) Adopting and implementing mechanism that will promote and ensure an efficient regulatory policy\. This will guarantee that the gains arising out of the reforms are not eroded by the introduction of new regulations of low quality; 2) Simplifying the business-regulatory regime to avoid duplications and overlaps of mandates within the regulatory institutions; 3) Promoting transparency of the regulatory regime by using information and communication technology (ICT) platforms that provide information on regulatory processes to the general public\. The World Bank has also supported the social security pension fund reforms which brought Page 94 of 95 The World Bank Private Sector/MSME Competitiveness (P085009) about the merging of five (5) pensions funds institution into two major entities through the Public Service Social Security Act of 2018 which sought to merge all the pension funds into just two major entities namely; the Public Service Social Security Fund (PSSSF) and the National Social Security Fund (NSSF)\. The NSSF would now cater for the public and private sectors while the Public Service Social Security Scheme, would now serve all employees in the public service sector by taking in all employees in other pension funds\. Formally, there were five (5) social security funds in the country, with almost similar benefits\. They were the National Social Security Fund (NSSF), PPF Pension Fund(PPF), Public Service Pension Fund (PSPF), Local Authorities Pension Fund (LAPF), and Government Employees Provident Fund (GEPF)\. Currently there are only two pension funds namely, Public Service Social Security Fund (PSSSF) and the National Social Security Fund (NSSF)\. The reasons for merging the above pension funds was to reduce the costs of pension benefits and operating costs due to the fact that by having many pension funds institutions would reduce their ability to offer quality services efficiently and effectively\. The Social Security Regulatory Authority (SSRA) has been mandated to oversee, supervise and regulate the provisions of social security services in the country\. The business environment legal and regulatory reforms have been implemented in order to increase job creation potential of the Tanzanian private sector by reducing the overall cost of doing business and by creating an enabling environment for selected labour-intensive industries\. The World Bank has supported reforms in three thematic policy area namely: 1) Making the regulatory environment (for business registration, licensing, trade, and taxation) more business friendly; 2) Improving the functioning of factor markets (labour, land, and capital) and; 3) Establishing an enabling environment for competitive, job-creating industries (in particular for agribusiness and tourism)\. Any strategy to support employment creation by the private sector in Tanzania should be anchored on the need to eliminate or reduce barriers to growth for small and informal businesses which represent approximately 90 percent of existing operators, and on fostering investments in labour-intensive sectors\. The policy reforms supported by the World Bank will help remove critical business environment constraints in Tanzania \. Page 95 of 95

REVIEW

P095575

 Document of The World Bank Report No: ICR1761 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-H2620) (IDA-4520) (IDA-46610) (IDA-47750) ON A GRANT AND THREE CREDITS IN THE AMOUNT OF SDR 24\.3 MILLION (US$37 MILLION EQUIVALENT) TO THE REPUBLIC OF SIERRA LEONE FOR A SERIES OF GOVERNANCE REFORM AND GROWTH OPERATIONS GOVERNANCE REFORM AND GROWTH GRANT-1 AND GOVERNANCE REFORM AND GROWTH CREDITS 2-3 AND A SUPPLEMENTAL January 31, 2012 Poverty Reduction and Economic Management 4 Country Department AFCW1 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective as of January 30, 2012) Currency Unit = Leone US$1 = Le 4,421 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AGD Accountant General’s Department AfDB African Development Bank BSL Bank of Sierra Leone CAS Country Assistance Strategy DfID Department for International Development (United Kingdom) EC European Commission FSAP Financial Sector Assessment Program GRG Governance Reform and Growth GRGG-1 First Governance Reform and Growth Grant HIPC Highly Indebted Poor Countries ICR Implementation Completion and Results IDA International Development Association IMF International Monetary Fund ISR Implementation Status and Results JAS Joint Assistance Strategy M&E Monitoring and Evaluation MDAs Ministries, Departments and Agencies MDBS Multi Donor Budget Support MDGs Millennium Development Goals NPA National Power Authority NPPA National Public Procurement Authority PDO Program Development Objective PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper Vice President: Obiageli Katryn Ezekwesili Acting Country Director: Sergiy Kulyk Sector Manager: Miria Pigato Task Team Leader: Douglas Addison ICR Team Leader: Cyrus Talati  REPUBLIC OF SIERRA LEONE IMPLEMENTATION COMPLETION AND RESULTS REPORT ON THE GOVERNANCE REFORM AND GROWTH SERIES (GRANT-1, CREDIT 2-3 AND SUPLLEMENTAL CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Program Performance in ISRs H\. Restructuring 1\. Program Context, Development Objectives and Design \. 21 2\. Key Factors Affecting Implementation and Outcomes \. 28 3\. Assessment of Outcomes \. 46 4\. Assessment of Risk to Development Outcome \. 52 5\. Assessment of Bank and Borrower Performance \. 52 6\. Lessons Learned\. 54 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\. 55 List of Annexes Annex 1: Bank Lending and Implementation Support/Supervision Processes \. 56 Annex 2: Beneficiary Survey Results \. 60 Annex 3: Stakeholder Workshop Report and Results\. 61 Annex 4: Summary of Borrower’s ICR and/or Comments on Draft ICR \. 62 Annex 5: Comments of Cofinanciers and Other Partners/Stakeholders \. 70 Annex 6: List of Supporting Documents \. 71 List of Tables Table 1: GRG Series Tranche Amounts and Release Dates \. 28 Table 2: Prior Action and Status for GRCG-1, GRGC-2 and GRCG-3 \. 29 Table 3: Comparative M&E Framework ofdraft agenda\. GRG Operations \. 44 Table 4: Budgetary Performance on Poverty Reducing Programs under HIPC, 2005-10 Leone Billion \. 45 Table 5: ICR Rating Scale for Objective 1: Preserving the Fiscal Space Needed for Poverty Reduction \. 50 Table 6: Rating of Key Risks Likely to Affect Outcome of GRG Series \. 52 MAP 74 A\. Basic Information Program 1 Programmatic Country Sierra Leone Program Name Governance Reform & Growth Program ID P095575 L/C/TF Number(s) IDA-H2620 ICR Date 02/21/2012 ICR Type Core ICR GOVERNMENT OF Lending Instrument DPL Borrower SIERRA LEONE Original Total XDR 6\.80M Disbursed Amount XDR 6\.80M Commitment Implementing Agencies Ministry of Finance and Economic Development Cofinanciers and Other External Partners Program 2 Second Government Country Sierra Leone Program Name Reform & Growth Credit Program ID P102040 L/C/TF Number(s) IDA-45200 ICR Date 02/21/2012 ICR Type Core ICR GOVERNMENT OF Lending Instrument DPL Borrower SIERRA LEONE Original Total XDR 6\.40M Disbursed Amount XDR 6\.40M Commitment Implementing Agencies Ministry of Finance and Economic Development Cofinanciers and Other External Partners Program 3 Governance Reform Country Sierra Leone Program Name and Growth Grant - 3 Program ID P107335 L/C/TF Number(s) IDA-46610,IDA-47750 ICR Date 02/21/2012 ICR Type Core ICR GOVERNMENT OF Lending Instrument DPL Borrower SIERRA LEONE Original Total XDR 6\.40M Disbursed Amount XDR 11\.10M i Commitment Implementing Agencies Ministry of Finance and Economic Development Cofinanciers and Other External Partners Program 4 GRGC-3 Supplemental Country Sierra Leone Program Name Credit Program ID P121056 L/C/TF Number(s) ICR Date 02/21/2012 ICR Type Core ICR REPUBLIC OF Lending Instrument DPL Borrower SIERRA LEONE Original Total USD 0\.00M Disbursed Amount USD 0\.00M Commitment Implementing Agencies Ministry of Finance and Economic Development Cofinanciers and Other External Partners B\. Key Dates Programmatic Governance Reform & Growth - P095575 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/10/2005 Effectiveness: 12/21/2006 Appraisal: 06/26/2006 Restructuring(s): Approval: 12/14/2006 Mid-term Review: Closing: 06/30/2007 06/30/2007 Second Government Reform & Growth Credit - P102040 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 08/10/2007 Effectiveness: 12/11/2008 12/11/2008 Appraisal: 09/02/2008 Restructuring(s): Approval: 10/07/2008 Mid-term Review: Closing: 06/30/2009 06/30/2009 ii Governance Reform and Growth Grant - 3 - P107335 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 09/01/2009 Effectiveness: 12/11/2009 Appraisal: 09/28/2009 Restructuring(s): Approval: 11/24/2009 Mid-term Review: Closing: 07/15/2010 06/30/2011 GRGC-3 Supplemental Credit - P121056 Revised / Actual Process Date Process Original Date Date(s) Concept Review: Effectiveness: 06/23/2010 Appraisal: 05/18/2010 Restructuring(s): Approval: 06/11/2010 Mid-term Review: Closing: C\. Ratings Summary C\.1 Performance Rating by ICR Overall Program Rating Outcomes Satisfactory Risk to Development Outcome Substantial Bank Performance Satisfactory Borrower Performance Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance Performance iii C\.3 Quality at Entry and Implementation Performance Indicators Programmatic Governance Reform & Growth - P095575 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Closing/Inactive status Second Government Reform & Growth Credit - P102040 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Satisfactory Closing/Inactive status Governance Reform and Growth Grant - 3 - P107335 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Closing/Inactive status iv  GRGC-3 Supplemental Credit - P121056 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Closing/Inactive status D\. Sector and Theme Codes Programmatic Governance Reform & Growth - P095575 Original Actual Sector Code (as % of total Bank financing) Central government administration 60 60 General industry and trade sector 10 10 Mining and other extractive 20 20 Sub-national government administration 10 10 Theme Code (as % of total Bank financing) Decentralization 20 20 Other environment and natural resources management 20 20 Public expenditure, financial management and 40 40 procurement State-owned enterprise restructuring and privatization 20 20 Second Government Reform & Growth Credit - P102040 Original Actual Sector Code (as % of total Bank financing) Central government administration 50 50 General finance sector 10 10 General industry and trade sector 10 10 Mining and other extractive 20 20 Sub-national government administration 10 10 v Theme Code (as % of total Bank financing) Administrative and civil service reform 17 17 Decentralization 17 17 Other public sector governance 17 17 Public expenditure, financial management and 33 33 procurement Regulation and competition policy 16 16 Governance Reform and Growth Grant - 3 - P107335 Original Actual Sector Code (as % of total Bank financing) Central government administration 66 66 Power 17 17 Sub-national government administration 17 17 Theme Code (as % of total Bank financing) Administrative and civil service reform 17 17 Legal institutions for a market economy 17 17 Municipal finance 16 16 Public expenditure, financial management and 50 50 procurement GRGC-3 Supplemental Credit - P121056 Original Actual Sector Code (as % of total Bank financing) Central government administration 66 66 Power 17 17 Sub-national government administration 17 17 Theme Code (as % of total Bank financing) Administrative and civil service reform 17 17 Legal institutions for a market economy 17 17 vi Municipal finance 16 16 Public expenditure, financial management and 50 50 procurement E\. Bank Staff Programmatic Governance Reform & Growth - P095575 Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Obiageli Katryn Ezekwesili Country Director: Sergiy V\. Kulyk Ishac Diwan Sector Manager: Miria A\. Pigato Robert R\. Blake Task Team Leader: Cyrus P\. Talati Douglas M\. Addison ICR Team Leader: Cyrus P\. Talati ICR Primary Author: Yusuf Bob Foday J\. Matthew Mitchell Second Government Reform & Growth Credit - P102040 Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Obiageli Katryn Ezekwesili Country Director: Sergiy V\. Kulyk Ishac Diwan Sector Manager: Miria A\. Pigato Antonella Bassani Task Team Leader: Cyrus P\. Talati Douglas M\. Addison ICR Team Leader: Cyrus P\. Talati ICR Primary Author: Yusuf Bob Foday J\. Matthew Mitchell Governance Reform and Growth Grant - 3 - P107335 Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Obiageli Katryn Ezekwesili Country Director: Sergiy V\. Kulyk Ishac Diwan Sector Manager: Miria A\. Pigato Antonella Bassani Task Team Leader: Cyrus P\. Talati Douglas M\. Addison ICR Team Leader: Cyrus P\. Talati ICR Primary Author: Yusuf Bob Foday J\. Matthew Mitchell vii Second Government Reform & Growth Credit - P102040 Positions At ICR At Approval Vice President: Obiageli Katryn Ezekwesili Obiageli Katryn Ezekwesili Country Director: Sergiy V\. Kulyk Ishac Diwan Sector Manager: Miria A\. Pigato Antonella Bassani Task Team Leader: Cyrus P\. Talati Cyrus P\. Talati ICR Team Leader: Cyrus P\. Talati ICR Primary Author: Yusuf Bob Foday J\. Matthew Mitchell F\. Results Framework Analysis Program Development Objectives (from Program Document) The program development objectives were to: (i) preserve fiscal space for poverty reduction; (ii) promote efficiency, transparency and accountability in the use of public resources; and (iii) improve the investment climate and promote exports\. Revised Program Development Objectives (as approved by original approving authority) The third element was revised in GRGC-3 in light of the severe fiscal challenges imposed by the rental of emergency electricity generators to state, “improve the investment climate through provision of electricity in a fiscally sustainable manner\.â€? (a) PDO Indicator(s) Programmatic Governance Reform & Growth - P095575 Original Target Formally Actual Value Baseline Values (from Revised Achieved at Indicator Value approval Target Completion or documents) Values Target Years Indicator 1: 1\. Deviation between planned and actual expenditures for poverty reduction\. Value (quantitative or 9% 11% Qualitative) Date achieved 12/31/2005 12/31/2006 Comments Calculation excludes personnel and development expenditures financed from (incl\. % abroad\. Across the board shortfalls in budgetary receipts in 2006 led to achievement) increase in deviation\. viii Indicator 2: 2\. Number of HIPC AAP benchmarks met\. Value (quantitative or 7 Qualitative) Date achieved 12/31/2004 Comments (incl\. % HIPC AAP discontinued, and new PEFA based indicators adopted (see below)\. achievement) Indicator 3: 3\. PEFA PI-1 Aggregate Expenditure Out-turn\. Value (quantitative or 7\.6% 1\.1% Qualitative) Date achieved 12/31/2004 12/31/2006 Comments Not strictly comparable to HIPC AAP\. In 2004, actual expenditures were lower (incl\. % than budgeted expenditures, and in 2006 actuals were higher than budgeted\. achievement) Indicator 4: 4\. PEFA PI-2 Composition of Expenditure Out-turn\. Value (quantitative or 5\.7% 13\.3% Qualitative) Date achieved 12/31/2004 12/31/2006 Comments (incl\. % Not strictly comparable to HIPC AAP\. achievement) 5\. Number of public entities producing procurement plans for MOF approval Indicator 5: (2006)\. Value (quantitative or 0 23 23 Qualitative) Date achieved 12/31/2005 12/31/2006 12/31/2006 Comments (incl\. % achievement) 6\. Percent share of funds actually expended for the purposes designated in Indicator 6: approved plans\. Value (quantitative or Qualitative) Date achieved Comments (incl\. % Indicator was abandoned as monitoring this exceeded existing capacity achievement) ix  7\. Percent share of actual procurement using the procurement methodology of Indicator 7: the proposed plans Value (quantitative or Qualitative) Date achieved Comments (incl\. % Government systems for monitoring not operational in time\. achievement) 8\. Actual procurement no more than 15 percent higher than in the procurement Indicator 8: plan\. Value (quantitative or Qualitative) Date achieved Comments (incl\. % Government systems for monitoring not operational in time\. achievement) Indicator 9: 9\. Number of qualified staff at Accountant General’s Department\. Value (quantitative or 0 15 8 Qualitative) Date achieved 12/31/2005 12/31/2008 12/31/2006 Comments (incl\. % achievement) 10\. Reduction of backlog in production of public accounts (most recent Indicator 10: accounts completed)\. Value (quantitative or Accounts for 2001 Accounts for 2005 Qualitative) Date achieved 12/31/2005 12/31/2006 Comments (incl\. % achievement) Indicator 11: 11\. Timely publication of transfer formulas and transfers\. Value (quantitative or Not published\. Published\. Qualitative) Date achieved 12/31/2005 12/31/2006 Comments (incl\. % Gazetted\. achievement) x Indicator 12: 12\. Clear, transparent procedures for privatization\. Value Procedures (quantitative or No procedures in place established\. Qualitative) Date achieved 12/31/2005 12/31/2006 Comments National Commission for Privatisation established clear procedures for sale, (incl\. % transfer, or disposal of equity assets\. achievement) Indicator 13: 13\. Exports of rutile (thousand tons)\. Value (quantitative or 0 70 Qualitative) Date achieved 12/31/2005 12/31/2006 Comments (incl\. % achievement) Indicator 14: 14\. Exports of bauxite (thousand tons)\. Value (quantitative or 0 971 Qualitative) Date achieved 12/31/2005 12/31/2006 Comments (incl\. % achievement) Indicator 15: 15\. Number of mining licenses\. Value (quantitative or 0 10 Qualitative) Date achieved 12/31/2005 12/31/2006 Comments (incl\. % achievement) Indicator 16: 16\. Number of operating rutile mines\. Value (quantitative or 0 >0 1 Qualitative) Date achieved 12/31/2005 12/31/2006 12/31/2006 Comments (incl\. % achievement) Indicator 17: 17\. Number of operating bauxite mines\. Value (quantitative or 0 >0 1 Qualitative) Date achieved 12/31/2005 12/31/2006 12/31/2006 Comments xi (incl\. % achievement) Indicator 18: 18\. Number of operating gold mines\. Value (quantitative or 0 >0 Qualitative) Date achieved 12/31/2005 12/31/2006 Comments (incl\. % achievement) 19\. Revenues collected from mining licenses, fees and surface rents Indicator 19: ( US$ million)\. Value 4\.2 (2006) (quantitative or 4\.7 6\.0 (2007) Qualitative) Date achieved 12/31/2005 12/31/2007 Comments (incl\. % achievement) Second Government Reform & Growth Credit - P102040 Original Target Formally Actual Value Baseline Values (from Revised Achieved at Indicator Value approval Target Completion or documents) Values Target Years The difference between the ratio of actual to budgeted spending on Indicator 1: HIPC/PRSP priorities and the ratio of actual to budgeted e xpenditures for all other discretionary primary expenditures\. Value HIPC: 57% HIPC: 101% (quantitative or Other: 72% >=0 Other: 114% Qualitative) difference: -15% difference: -13% Date achieved 12/31/2007 12/31/2008 12/31/2008 Comments (incl\. % achievement) Number of HIPC PFM benchmarks met using HIPC AAP scoring\. Indicator 2: Note: This indicator not well designed\. HIPC AAP has been repla ced by PEFA\. Value In 2004, Sierra Leone >7 HIPCC AAP (quantitative or met 7 HIPC AAP Benchmarks Qualitative) benchmarks\. Date achieved 12/31/2004 12/31/2008 Comments (incl\. % HIPC AAP was replaced by PEFA system\. achievement) xii  Percentage of funds that are expended for the purposes in the approved plans\. Indicator3 : Note: This indicator exceeded authorities cap acity to monitor\. Value (quantitative or >=65% Qualitative) Date achieved 12/31/2008 Comments (incl\. % This indicator exceeded authorities capacity to monitor\. achievement) Indicator 4: Percentage of procurements that use the methodology in approved plans\. Value (quantitative or 59% >=65% Qualitative) Date achieved 12/31/2006 12/31/2008 Comments (incl\. % This indicator exceeded authorities capacity to monitor\. achievement) Percentage of procurements that are no more than 15% higher than amounts in Indicator 5: approved plans\. Value (quantitative or n\.a\. >=50% n\.a\. Qualitative) Date achieved 12/31/2005 12/31/2008 12/31/2008 Comments (incl\. % This indicator exceeded authorities capacity to monitor\. achievement) Number of public entities producing 2009 procurement plans for MOF Indicator 6: approval\. Value (quantitative or 18 23 43 Qualitative) Date achieved 12/31/2004 12/31/2008 12/31/2008 Comments (incl\. % achievement) Share of total procurement above the national small purchase threshold that Indicator 7: was conducted through open competition in 2007\. Value (quantitative or >=10% >30% 69% Qualitative) Date achieved 12/31/2004 12/31/2008 12/31/2008 Comments (incl\. % achievement) xiii Indicator 8: Ability to verify payroll entries\. 100 % verification, 95 % of payroll led to reduction of Value entries in the 2008 2,302 entries (quantitative or 0 civil service to be (14 %) resulted in Qualitative) authenticated\. savings of Le 0\.5 billion monthly\. Date achieved 12/31/2004 12/31/2008 12/31/2008 Comments (incl\. % achievement) Budgetary funds actually transferred to local councils, expressed as a share of Indicator 9: total discretionary non-salary, non-interest recurrent spending\. Value (quantitative or 62% 15\.8% 13\.3% Qualitative) Date achieved 12/31/2005 12/31/2008 12/31/2008 Comments Note, the target was designed only to measure performance through first three (incl\. % quarters of 2008\. achievement) Indicator 10: Percentage growth in number of new firms registered annually\. Value (quantitative or 41% >5% annually\. 14% Qualitative) Date achieved 12/31/2005 12/31/2008 12/31/2008 Comments The baseline figure for 2005 represents the so-called “Post conflict bounce- (incl\. % backâ€?\. achievement) Indicator 11: Exports, Rutile ('000 mt) Value >70 ('000 MT) (quantitative or 70 71 annually Qualitative) Date achieved 12/31/2006 12/31/2008 12/31/2008 Comments (incl\. % Target introduced under GRGC-2\. achievement) Indicator 12: Exports, Bauxite ('000 mt)\. Value 1,000('000 MT) (quantitative or 971 815 annually Qualitative) Date achieved 12/31/2006 12/31/2008 12/31/2008 Comments (incl\. % Target introduced under GRGC-2\. achievement) xiv Indicator 13: Exports, Gold ('000 ounces) Value (quantitative or 2\.6 >=6 10 Qualitative) Date achieved 12/31/2005 12/31/2008 12/31/2008 Comments (incl\. % Target introduced under GRGC-2\. achievement) Governance Reform and Growth Grant - 3 - P107335 Original Target Formally Actual Value Baseline Values (from Revised Achieved at Indicator Value approval Target Completion or documents) Values Target Years Planned vs\. actual expenditures: The difference between the ratio of Indicator 1: actual/budgeted spending on HIPC/PRSP priorities and the ratio of actual to budgeted expenditures for all other discretionary primary expenditures\. Value HIPC: 101% HIPC: 102% (quantitative or Other: 114% >=0 Other: 114% Qualitative) Difference: -13% Difference: -12% Date achieved 12/31/2008 12/31/2009 12/31/2009 Comments (incl\. % achievement) Indicator 2: Number of public entities producing procurement plans for MOF approval\. Value (quantitative or 23 43 45 Qualitative) Date achieved 06/29/2007 12/31/2009 12/31/2009 Comments (incl\. % achievement) Share of total procurement above the national small purchase threshold Indicator 3: conducted through open competition, with the share defined in terms of number of procurements or value of procurements\. Value (quantitative or 69% >=75% 58% Qualitative) Date achieved 12/31/2008 12/31/2009 12/31/2009 Comments (incl\. % achievement) xv  GRGC-3 Supplemental Credit - P121056 Original Target Formally Actual Value Baseline Values (from Revised Achieved at Indicator Value approval Target Completion or documents) Values Target Years Indicator 1 : Public provision of electricity to Freetown (GWH)\. Value Generation: 174 Generation: 138 GWH (quantitative or GWH Sales: 79 GWH Qualitative) Sales: 102 GWH Date achieved 12/31/2008 12/31/2010 Comments (incl\. % achievement) Indicator 2 : NPA sales collection (Le billion) Value (quantitative or 46 60 88 Qualitative) Date achieved 12/31/2008 12/31/2010 12/31/2010 Comments (incl\. % achievement) (b) Intermediate Outcome Indicator(s) Programmatic Governance Reform & Growth - P095575 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : n\.a\. Value (quantitative or Qualitative) Date achieved Comments (incl\. % achievement) xvi  Second Government Reform & Growth Credit - P102040 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : n\.a\. Value (quantitative or Qualitative) Date achieved Comments (incl\. % achievement) Governance Reform and Growth Grant - 3 - P107335 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : n\.a\. Value (quantitative or Qualitative) Date achieved Comments (incl\. % achievement) Governance Reform and Growth Grant - 3 - P107335 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : n\.a\. Value (quantitative or Qualitative) Date achieved Comments (incl\. % achievement) xvii G\. Ratings of Program Performance in ISRs Programmatic Governance Reform & Growth - P095575 Actual Date ISR No\. DO IP Disbursements Archived (USD millions) Moderately Moderately 1 07/21/2007 10\.23 Unsatisfactory Unsatisfactory Moderately Moderately 2 02/11/2012 10\.23 Unsatisfactory Unsatisfactory Second Government Reform & Growth Credit - P102040 Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 06/18/2009 Satisfactory Satisfactory 9\.97 2 02/11/2012 Satisfactory Satisfactory 9\.97 Governance Reform and Growth Grant - 3 - P107335 Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 02/11/2012 Satisfactory Satisfactory 16\.99 H\. Restructuring (if any) xviii All fields in the Data Sheet could not be completed as the IT System would not permit it\. This includes: DO rating in Section C3 for the First (Moderately Unsatisfactory), Third and Supplemental Operations (both Satisfactory); and the Closing Date for the Supplemental Credit which was 06/30/2011\. xix 1\. Program Context, Development Objectives and Design 1\.1 Context at Appraisal Background The Governance Reform and Growth (GRG) operations supported Sierra Leone’s transition from post-conflict recovery to a major drive for poverty reduction\. By 2006, when the Bank appraised the first GRG operation1, the country had successfully restored peace and security following a decade of armed civil conflict that had resulted in more than 50,000 deaths, displaced one-third of the country’s population, and destroyed much of the nation’s infrastructure\. Prior to the GRG operations, the Bank had financed four policy-based operations supporting the post-conflict recovery process through Sierra Leone’s National Recovery and Rehabilitation Program\. Notably the GRG series of operations came to be designed and implemented during an unexpectedly challenging and uncertain period for Sierra Leone\. Economic prospects were adversely affected by a weakening of international commodity prices, especially for diamonds, the principal export, and other minerals which are the principal foreign exchange earners for the country\. Deferred and delayed investments in the minerals sector aggravated the situation and coincided with declines in remittance income\. Exchange rate pressures emerged which were compounded by inflationary pressure due to rapidly rising prices of key imports including food and fuel\. This in turn placed considerable pressure on the fiscal position\. Sierra Leone looked to high economic growth to achieve the Millennium Development Goals (MDGs)\. In 2006, Sierra Leone ranked near the bottom of the Human Development Index, with about 70 percent of Sierra Leone’s total population of 5\.5 million living below the national poverty line, defined at Le 2,111 (less than US$1) per day\. The Government’s overarching MDG was to reduce this share to 40 percent by 2015\. The Government’s First Poverty Reduction Strategy Paper (PRSP), prepared in 2005, had indicated that in order to meet this MDG by 2015, the economy would have to grow by about 8-9 percent annually from about 7\.4 percent in 2004\. In addition to higher economic growth, poverty reduction required better public financial management focused on priority “pro-poorâ€? expenditures\. Government 1 In this report, GRG refers to the series of three growth and reform operations and a supplemental credit for the third operation, which took place between 2006 and 2011\. The first operation, referred to as GRGG-1 was a grant\. The second and third governance reform and growth operations were credits, the Second Governance Reform and Growth Credit (GRGC-2) and the Third Governance Reform and Growth Credit (GRGC-3), including the supplemental credit for the GRGC-3\. 21 capacity to protect these expenditures had weakened, according to a review of public expenditures between 2001 and 2004\. The weighted average of the absolute deviation between actual and planned spending was high, having increased from 12 percent in 2001 to 16 percent in 2004\. Most of the variance had resulted from under-spending due to shortfalls in external budget support\. In contrast, spending in other categories was consistently over budget\. The inability to meet expenditure targets threatened to impede progress in poverty reduction\. Economic growth estimates referenced in GRG operations were lower than in the PRSP and declined substantially between the first and third operation\. When the Bank appraised GRGG-1, average real GDP growth rate was forecast to start out at 7\.4 percent in 2006 and gradually taper off to 6\.1 percent by 2008\. This rate, though strong by international standards, was far below what the PRSP had determined necessary to meet the MDGs\. And prospects worsened due to the global economic recession\. By the time of the appraisal of the Supplemental Credit for the GRGC-3 in early 2010, economic growth had declined to 5\.5 percent in 2008 and plummeted further to 3\.2 percent in 2009\. Nevertheless, Sierra Leone was, by and large, able to meet its obligations with respect to policies and targets agreed to under an arrangement with the IMF through its Poverty Reduction and Growth Facility (PRGF), designed to maintain macroeconomic stability\.2 At the outset of GRGC-3, shortfalls in domestic revenue and delays in the disbursement of budget support had begun to challenge fiscal policy\. As a result, the fiscal outcome in 2008 had departed from an improving trend, with the growing negative balance reaching -4\.8 percent of GDP compared to -2\.7 percent in 2006\. The decline had resulted from lower economic growth and diminished collection of import duties, excise taxes, mining taxes, and non-tax revenues\. Also, only 71 percent of programmed budget support was disbursed in 2008 (a shortfall of 1\.8 percent of GDP) due to delays in meeting agreed benchmarks associated with budget support\. These shortfalls prompted the authorities to curtail recurrent expenditures by 0\.6 percent of GDP\. Key Issues Addressed The lack of a transparent, competitive procurement process was inhibiting the efficiency of public resource management\. An expenditure review had shown that between April 2003 and January 2004, only 10 percent of contract awards had been subject to an open-tender process\. With about 90 percent of government procurement not subject to competitive bidding and widespread perceptions of corruption, lack of transparency was a major impediment to efficient public resource management\. By the time of the appraisal of the first GRG operation, however, the Government had demonstrated its commitment to address this by approving interim rules and regulations 2 The GRG grants/credits were prepared in a manner consistent with IMF’s PRGF, following the agreed institutional division of labor with the IMF taking the lead on the macroeconomic issues while the Bank took the lead on structural and social issues\. The IMF agreed in May 2006 on a medium-term economic program which was supported under the PRGF in an amount equivalent to SDR 31\.11 million (30 percent of quota)\. 22 for procurement and established the National Public Procurement Authority (NPPA), responsible for procurement reform under the then Ministry of Finance\.3 The Government had determined that decentralization of budget authority was a key element of good governance and peacekeeping\. A major concern of the Government was that a key factor leading to the civil war was the disaffection of a large segment of the rural population, essentially cut-off from political representation as a result of the elimination of local government which had occurred in 1972\. In particular, rural areas were physically isolated from Freetown, the capital, by the lack of a functioning road infrastructure\. Furthermore, there was an enormous disparity in the level of poverty in rural areas compared to Freetown\. An analysis of a 2003 household survey had shown that 79 percent of the rural population was living below the poverty line compared to 22 percent in Freetown\. Therefore decentralization was seen as a fundamental element in poverty reduction\. Compared to most other countries, the business environment in Sierra Leone ranked low, constraining opportunities for growth to meet development objectives\. According to the World Bank’s Country Policy and Institutional Assessment (CPIA) for 2005 65 out of 76 International Development Association (IDA) member countries scored higher than Sierra Leone on the quality of the regulatory environment for business\. And Doing Business 2006, a World Bank Group publication that focuses on business law and regulation, had ranked Sierra Leone 136 out of 155 countries surveyed\. This unfavorable business environment was likely responsible for the fact that nearly 80 percent of all economic activity was in the informal sector\. Dependence on an insufficiently diversified mining sector with structural constraints was impeding potential export revenues\. Sierra Leone depended considerably on diamond exports for foreign exchange\. The production of other minerals and metals had ceased during the conflict period\. Under normal industry practice, exploration licenses are gradually converted to production licenses or withdrawn for lack of results\. However, in the non-competitive framework that had prevailed in Sierra Leone, a single firm had obtained exclusive prospecting licenses covering nearly half of the country\. These holdings had neither been officially converted to production, nor reduced\. The Government was collecting about US$3-4 million in annual license fees, far below what a competitive fee structure would have generated—an estimated US$16 million annually\. Limited access to electric power, due in part to the high cost, and unreliable power supply were constraining economic activity and poverty reduction\. In 2005, there were no more than 44,581 registered customers for the National Power Authority (NPA), most of them in Freetown\. Electricity consumption in 2004 from the NPA was estimated to be only 55 kilowatt-hours per-capita compared to the regional average of 495 kilowatt- 3 In early 2010, the Ministry of Finance became known as the Ministry of Finance and Economic Development, following its merger with the Ministry of Economic Planning\. 23 hours per-capita and 8,503 kWh per capita in member countries of the Organization for Economic Cooperation and Development\. Yet Sierra Leoneans were paying some of the highest tariff rates per kilowatt-hour in the region, between US¢19 and US¢28\. And even with such high tariffs, revenues were insufficient to cover the system costs of US¢37 per kilowatt-hour and contribute to investments in the expansion of the power system\. Rationale for Bank Assistance The Program supported the Government’s poverty reduction strategies, the foundation for all development assistance\. GRGG-1 and GRGC-2 took place within the framework of the first PRSP, which had established three pillars to support higher growth: (i) good governance, security and peace building; (ii) pro-poor, sustainable growth for food security and job creation; and (iii) human development\.4 GRGC-3 also supported the second PRSP (2008 to 2012), which maintained the same pillars as the first, but focused more on development of infrastructure and priority productive sectors\. The Bank had committed, together with other development partners, to help Sierra Leone improve governance and enhance growth prospects\. In July 2006, the Bank had entered into the Improved Governance and Accountability Pact with three other development partners: the African Development Bank (AfDB), the European Community (EC) and the United Kingdom’s Department for International Development (DfID)\.5 This Pact reasserted the commitment of the Government to good governance and defined a number of activities to enhance government transparency and accountability, create a more conducive investment climate for private sector development and improve public service delivery in the health and education sectors\. For the monitoring and evaluation of budget support activities, the four development partners had agreed to multi-donor budget support (MDBS) framework which set out clear goals and monitorable performance indicators\. The Pact also committed the four development partners to harmonization of their activities with government programs\. The World Bank and AfDB focused on 4 The program for good governance consisted of a strengthened anti-corruption agenda; improved public financial management, better public service delivery through capacity building, decentralized service delivery, and better statistics for monitoring outcomes\. To support sustainable growth, the PRSP emphasized maintenance of macroeconomic stability through appropriate fiscal and monetary policies and effective debt management; support for key productive sectors and investments in infrastructure needed for these sectors to thrive\. Finally, the pillar for advancing human development covered improvements in health and education services along with affordable housing, greater gender equality and improved environmental management\. 5 This Pact asserted the Government’s commitment to good governance, establishing three sets of activities based on each of the three pillars in the first PRSP\. In support of PRSP Pillar One, the activities included: free and fair elections, anti-corruption, anti-money laundering, procurement reform, strengthening the Office of the Auditor-General, civil service reform, and decentralization in the management of public resources\. The activities under Pillar Two activities focused on creating a conducive investment environment and greater transparency in Sierra Leone’s extractive industries\. Under Pillar Three, activities focused on better public service delivery in health and education\. The Pact also committed the four donor agencies to harmonizing their budget support with the Government's program\. This was subsequently superseded in 2010by a revised framework for harmonizing budget support with the Government’s program\. 24 different policy areas of public financial management while DfID and EC gave particular attention to policies and actions concerning human development, particularly improvements in health care and education\. The Bank had financed four policy based operations for the recovery and rehabilitation of the economy, contributing to the restoration of the country’s platform for growth\. These operations, which took place between 2001 and 2006, had financed imports of essential commodities, enabling the Government to channel resources to priority expenditures for the rehabilitation of physical, social and economic infrastructure\. The provision of financing for imports under these operations was linked to policy actions designed to improve governance, enhance macroeconomic stability and advance human development\. Implementation completion and results reports (ICRRs) had rated the performance of all of these operations as satisfactory\. The Government of Sierra Leone had shown substantial commitment to governance reform to support economic growth and human development\. Government commitment to reform was firm as evidenced through implementation of the previous series of operations, which had supported economic recovery and rehabilitation\. The Government had also recognized the need for budget support to uphold its commitment to poverty reduction and maintain macroeconomic stability\. The Government also planned a gradual increase in poverty-related expenditures from three percent of GDP in 2007 to six percent of GDP by 2010\. The Bank joined other donors in coordinating a program of budget support linked to achieving the MDGs\. 1\.2 Original Program Development Objectives (PDO) and Key Indicators Objectives The development objectives, directly aligned with the policy areas, were: (i) preserve fiscal space for poverty reduction; (ii) promote efficiency, transparency and accountability in the use of public resources; and (iii) improve the investment climate and promote exports through policies for the development of mining sector (GRGG-1 and GRGC-2) and the provision of electricity in a fiscally sustainable manner (GRGC-3)\. Outcome Indicators The outcome indicators listed below, by objective, were used to access the results of the policy actions taken\. The Datasheet provides the details on results compared to benchmarks and targets\. Section 3\.2 discusses the extent to which the program achieved the objectives taking account of prior actions and actual results for outcome indicators\. Objective 1: Preserve the fiscal space needed for poverty reduction ï‚ Ratio of actual to planned expenditures for poverty reduction compared to a similar ratio for other expenditures\. ï‚ Reduction of non interest-bearing securities at the Bank of Sierra Leone (BSL)\. 25  ï‚ Poverty-reduction expenditures not to fall below the floor set by IMF\. Objective 2: Promote efficiency, transparency and accountability in the use of public resources ï‚ Number of Highly Indebted Poor Countries Assessment and Action Plan (HIPC AAP) Initiative benchmarks met\. ï‚ Number of public entities producing procurement plans for Ministry of Finance approval\. ï‚ Percent share of funds spent for purposes designated in procurement plans\. ï‚ Actual procurement no higher than 15 percent of plan\. ï‚ The number of qualified staff in the Accountant General’s Department\. ï‚ Reduced backlog of public accounts not published\. ï‚ Timely publication of budget formulas and transfers\. ï‚ Share of procurement above the national, small-purchase threshold subject to competitive bidding\. ï‚ Ability to verify government payroll entries\. ï‚ Budgetary funds transferred to local councils as a percent share of discretionary, non-salary, non-interest spending\. Objective 3: Improve the investment climate and promote exports ï‚ Clear, transparent procedures for privatization\. ï‚ Exports of rutile\. ï‚ Exports of bauxite\. ï‚ Exports of gold\. ï‚ Number of operating rutile mines\. ï‚ Number of operating bauxite mines\. ï‚ Number of operating gold mines\. ï‚ Revenues collected from mining licenses, fees and surface rents\. ï‚ Growth in the number of new firms registered annually\. ï‚ Amount of electricity provided by the NPA to Freetown\. ï‚ NPA’s sales collections\. 1\.3 Revised PDO and Key Indicators, and Reasons/Justification There was no revision of the Program’s development objectives\. 1\.4 Original Policy Areas Supported by the Program GRGG-1 covered a subset of the policy areas supported by the Multi Donor Budget Support (MDBS) partners, comprising the African Development Bank (AFDB), European Commission (EC), the United Kingdom’s Department for International Development (DfID) and IDA\. These consisted of macroeconomic risk management, 26 monitoring and evaluation of the poverty reduction strategy, and the three pillars of the PRSP: Good Governance (Pillar 1), Pro-Poor Growth and Job Creation (Pillar 2) and Human Development (Pillar 3)\. The subset, under the governance and growth pillars, were to: (i) preserve the fiscal space needed for poverty reduction; (ii) promote efficiency, transparency and accountability in the use of public resources; and (iii) improve the investment climate and promote exports\. The GRG operations grouped all prior actions for tranche release and related impact indicators under these policy areas, which also became the common objectives\. Policy Area 1: Preserve the fiscal space needed for poverty reduction The priority action for all three operations was to improve the ratio of actual to planned priority expenditures for poverty reduction\. Also, GRGG-1 required the Ministry of Finance to adopt regulations to protect poverty-reduction expenditures in the event of budget shortfalls\. Complementing these regulations was Government agreement to strengthen the portfolio of the BSL by converting non-interest bearing securities to interest-bearing assets\. Policy Area 2: Promote Efficiency, Transparency and Accountability in the use of public resources The focus of GRG actions was on improving procurement planning and building government capacity for better public resource management\. Policy actions called for increasing the number of ministries producing approved procurement plans\. Under GRGG-1, NPPA was required to hire qualified core staff\. GRGC-2 and GRGC-3 provided for actions to reform the civil service\. Both GRGC-2 and GRGC-3 established benchmarks for the share of procurement conducted through open competition in order to enhance transparency\. Finally, all three GRGC operations contained prior actions to decentralize government operations for greater efficiency and local autonomy, through the transfer of budgetary resources to local councils\. Policy Area 3: Improve the Investment Climate and Promote Exports GRG operations focused on policies to enhance prospects for expanding private sector development, privatization, improve infrastructure and support the development of key extractive industries\. Policy actions supported an improved legal framework for privatization and business start-ups\. The operations also promoted the advancement of the cadastral system for expanding mining licenses along with increased staff for extension services in the mining sector\. Regarding infrastructure for growth, GRGC-3 included a policy action to improve revenue collection by the NPA in order to enhance the financial viability of the utility and increase electricity supply, particularly in Freetown\. 1\.5 Revised Policy Areas There were no revisions in policy areas supported\. 27 1\.6 Other significant changes GRGC-3 required additional financing to meet objectives, as discussed in Section 2 below\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Program Performance All GRG programs were single-tranche operations, with a total disbursement of US$37 million over a four-year period (2006-2010), as shown in Table 1\. Table 1: GRG Series Tranche Amounts and Release Dates Operation Tranche Amount Tranche Release Date (US$ million) GRGG-1 10\.0 December 21, 2006 GRGC-2 10\.0 December 18, 2008 GRGC-3 10\.0 December 17, 2009 GRGC-3 Supplemental 7\.0 June 28, 2010 Table 2 shows the prior actions and implementation status for the release of funds for all three GRG operations\. While a number of prior actions were modified relative to the original wording of triggers to take account of various operational difficulties encountered during implementation that could not have been anticipated, it should also be noted that a few were modified to give credit for better than anticipated performance\. 28  Table 2: Prior Action and Status for GRCG-1, GRGC-2 and GRCG-3 Table 2 : Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 GRGG-1 Prior actions Status Adoption of a satisfactory implementation plan for Implemented\. Government adopted an acceptable revision of regulations in conformance with the implementation plan for the revision of regulations Government Budgeting and Accountability Act in conformance with the new legislation in April (2005)\. 2006\. Core staff with acceptable functions and Implemented\. NPPA provided the Bank with qualifications have been hired by the National acceptable terms of reference, letters of Public Procurement Authority to serve the appointment and letters of acceptance for 4 core Authority, its Secretariat and the Independent positions and 7 additional positions 2006 in Review Panel\. September 2006\. The ministries responsible for agriculture, defense, Implemented\. Acceptable procurement plans for education, health, mineral resources and transport as 2006 were completed by each of the required well as the Sierra Leone Police have adopted ministries and agencies by May 2006\. Additional acceptable procurement plans for the 2006 budget plans were completed by the Ministry of Works year that have been approved by the MOF\. and by the SLRA\. Acceptable procurement regulations have been Implemented\. Acceptable procurement adopted and published in the Sierra Leone Gazette\. regulations were adopted by the NPPA in April 2006\. The regulations were published in the Sierra Leone Gazette in September 2006\. Government has appointed a qualified Accountant- Implemented\. The MOF sent letters of General and at least one qualified deputy\. appointment to the best candidates for Accountant General and two deputies\. The new Accountant-General accepted\. One Deputy accepted and one declined, citing inadequate remuneration\. MOF reported seeking a second Deputy\. Government has adopted acceptable procedures Implemented\. MOF adopted acceptable protecting priority poverty reducing expenditures procedures that protect priority poverty reducing while restricting non-priority spending in the event expenditures in September 2006\. that revenues or net external assistance fall short of budget targets\. Government has adopted acceptable regulations Implemented\. The regulations were adopted by governing local government transfer formulas; and Government and subsequently published in the published in the Sierra Leone Gazette the details of Sierra Leone Gazette in May 2006\. the transfer formulas and the details of the central government transfers to each local council\. The NCP has published acceptable clear and Implemented\. The procedures were adopted by transparent procedures to be followed for the sale, the Commission of the NCP in March 2006 and transfer or disposal of public equity\. published in the Sierra Leone Gazette in April 2006\. 29  Table 2 : Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 GRGG-1 Prior actions Status Government has implemented the action plans for Implemented\. The Ministry of Mineral Resources the cadastre and extension services in a satisfactory began to administer mining licenses through the manner\. The Ministry of Mineral Resources has: (a) cadastral system in Kono District in late July 2006\. begun to administer mining licenses in the Kono MMR has provided evidence that the number of District through the cadastre system and (b) has mining extension staff serving the Kono District increased the number of mining extension service have been increased to 37 in 2006\. staff, relative to the 2005 baseline of 7, to 37 in the Kono District 2006\. 30  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 (continued…) GRGC-2 Prior actions Status Development Objective One: Preserve the Fiscal Space Needed for Poverty Reduction Minimize risk to BSL and Government Implemented\. A MOU was signed in October 2006\. The first phase of Trigger specified in GRGG-1 implementation was completed in the fourth quarter of 2006 when Le50 billion in non- interest The government will agree on an acceptable plan bearing securities were converted into that minimizes adverse fiscal and monetary treasury bills\. Another Le2\.5 million were consequences for converting non- interest bearing converted in May 2007\. securities held by the BSL to interest bearing assets\. Agreed Prior Action: Same as trigger\. Improve budget execution Implemented as revised\. The ratio of actual to budgeted spending on HIPC PRSP priorities for Trigger specified in GRGG-1 poverty reducing programs in the second half of The Government will ensure that the weighted 2007 was 69 percent compared to 59 aggregate variance between planned and actual percent for all other discretionary primary spending for HIPC PRSP priorities, excluding spending\. Section 25(4) of the GBAA was wages, donor financed development expenditures complied with for the first quarter of 2008\. and debt service, will improve relative to the 2005 baseline of 10\.5 percent\. Agreed Prior Actions The ratio of actual to budgeted spending on HIPC PRSP priorities in the second half of 2007 is not smaller than the ratio of actual to budgeted expenditures for all other discretionary primary expenditures\. In addition, any spending from miscellaneous budget head 501, or any other budget head for unallocated expenditures, will be made in full conformity with sections 25(4) and 25(5) of the Government Budgeting and Accountability Act (2005) starting from January 2008 and verified on a quarterly basis\. Reason for change: excessive spending through the miscellaneous budget (head 501) and delayed donor financing resulted in below target expenditures on poverty reducing programs\. The revised prior action reflects improved protection of poverty reducing expenditures in the second half of 2007\. 31  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 (continued…) GRGC-2 Prior actions Status Development Objective Two: Promote Efficiency, Transparency and Accountability in the Use of Public Resources Strengthen fiduciary standards Implemented\. The regulations were adopted by Parliament and were published in the Sierra Leone Trigger specified in GRGG-1 Gazette on 7 June 2007\. Adoption and implementation of new regulations in conformance with the Government Budgeting and Accountability Act (2005)\. Agreed Prior Action Same as trigger\. Deepen procurement reform Implemented as revised\. MOFED has reviewed procurement plans for 2008 from 23 entities Trigger specified in GRGG-1 compared to 18 in 2007\. Results presented by the The government will have met, or made substantial National Public Procurement Authority show that progress towards, the following benchmarks: the shares of total procurement conducted through open competition in 2007, for 12 reporting (i) The following public entities will produce 2007 ministries (6 failed to report), were 29% by number procurement plans approved by the MOFED: the of contracts, and 30% by value\. ministries responsible for agriculture, defense, education, health, internal affairs, mineral resources, transport and works; the Sierra Leone Police; Guma Valley Water Company; the Maritime Administration; the National Power Authority; the Port Authority, the Road Authority and the Town Councils or Bo, Freetown, Kenema and Makeni\. (ii) At least 65 percent of expenditures for goods and services are actually used for the purposes stated in the approved 2006 procurement plans; (iii) At least 65 percent of all procurements use the methodology in approved 2006 plans\. (iv) At least 50 percent of all procurement costs are no higher than 15 percent of the amounts in approved 2006 plans\. Agreed Prior Actions The government will have met, or made substantial progress towards, the following benchmarks: (i) At least 23 ministries, departments, or agencies will produce 2008 procurement plans for the approval of the MOFED or other appropriate statutory bodies; (ii) For at least 12 entities with approved 2007 procurement plans, the share of total procurement that was conducted through open competition is at least 25 percent of the total of procurements above 32  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 (continued…) GRGC-2 Prior actions Status the national small purchase threshold, whether the share is defined in terms of number of procurements or value of procurements\. (iii) If the shares fall below the minimum, an acceptable explanation and justification should be provided, including references to any applicable data on resource availability and/or regulatory requirements\. Reason for change: The action was simplified to focus on only two indicators in light of technical difficulties encountered by the new National Public Procurement Agency in monitoring the four original indicators\. Initiate public service reform Implemented\. The Cabinet approved the conversion of the ESO to a HRMO in February Trigger specified in GRGG-1 2006\. A detailed work plan for the HMO and other The Government will replace the Establishment civil service reform measures was adopted by Secretary's Office with a Human Resource Cabinet in March 2008\. The formal launch took Management Office\. place on August 7, 2008\. Agreed Prior Action Same as Trigger\. 33  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 (continued…) GRGC-2 Prior actions Status Strengthen implementation of decentralization Implemented as revised\. The budgetary funds actually transferred to local councils in the first Trigger defined in GRGG-1 three quarters of 2007 was 13\.7 percent of total Funds for Local Councils will be released in full no discretionary non-salary, non-interest recurrent later than the last day of each quarter such that the spending compared to the budgeted share of cumulative amounts released will meet the 16\.1 percent\. following targets: 100 percent of the amount due in 2006 by 31 December 2006 and 25 percent of the amount due in 2007 by 31 March 2007\. Agreed Prior Action The budgetary funds actually transferred to local councils in the first three quarters of 2007, expressed as a share of total discretionary non-salary, non- interest recurrent spending, will be within four percentage points of the budgeted share for the first three quarters of 2007\. Reason for change: The trigger requiring timely transfer of resources to local councils in 2006 was modified to focus on 2007 and accommodate budgetary uncertainties while still maintaining the intended relative improvement in resource transfers\. MOFED did not have full information about 2006 when the policy action was discussed but believed the transfers had been made in full\. Subsequent estimates revealed that they were wrong\. By the time of Appraisal, data for the first three-quarters of 2007 had become available and was substituted\. The unit of measurement was changed to budgetary shares because nearly all spending was reduced when revenues and grants fell well below budget targets\. (See 2010 PEFA report, indicators PI-2 and PI-3\.) 34  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 (continued…) GRGC-2 Prior actions Status Development Objective Three: Improve the Investment Climate and Promote Exports Advance financial reforms Trigger defined in GRGG-1 The Government will submit to Parliament an acceptable package of revised financial sector legislation informed by FSAF' findings and stakeholder consultations\. The minimum package would include the Companies Act and the Payment Systems Act\. Agreed Prior Action Adoption by Cabinet of an acceptable package of Implemented\. The draft Payments Systems Act revised financial sector legislation informed by was submitted to, and approved by, the Cabinet on FSAP findings and stakeholder consultations\. The February 20,2008\. The draft Companies Act was minimum package would include the Companies submitted to, and adopted by, the Cabinet on Act and the Payment Systems Act\. May 20, 2008\. Reason for change: The trigger specifying full national coverage by the cadastral system for mining rights was divided into a target that was to cover the two most important mining regions as a first step (GRGC-2 prior action) and a final target for seeking full national coverage for artisanal and industrial mining through establishment of new offices in Kenema and Bo (GRGC-3 trigger)\. This change was made because of reduced fiscal resources in the first half of 2007 and because the original trigger was too optimistic with regard to ministry capacity\. Improve mining services Implemented as revised\. The premises of the new offices in Kenema and Bo are ready for the Trigger Defined in GRGG-1 installation of mining cadastre system: electrical The government will ensure that all mining licenses and security work was completed by the MMR\. will be administered through the cadastral system Thirty field staff have been trained in GPS skills\. with monthly reports issued to the MOFED, NRA, chiefdoms, local councils and the environmental agency\. Agreed Prior Action The government has continued to advance the planned expansion of the cadastral system for the administration of mineral licensing by preparing new offices for installation of the cadastral system in the remaining key mining areas centered around Kenema and Bo\. 35  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 (continued…) GRGC-2 Prior actions Status Improve the fiscal regime for mining Dropped\. More time was needed to build technical capacity, conduct technical studies, and Trigger Defined in GRGG-1 engage stakeholders\. This effort was be supported The general fiscal regime for the mining sector by a new World Bank Mining Technical Assistance reflected in the Mines and Minerals Act, the Income Project under preparation at the time, now under Tax Act, the Customs Tariff Act, and other relevant implementation\. legislation would be updated in line with recommendations from the IMF Fiscal Affairs Department, regulate coltan mining and taxation, and introduce elements of EITI principles\. Agreed Prior Action Not applicable\. Reduce the cost of doing business in Sierra Leone Implemented\. The General Law on Business Start-ups (2007) and the Registration of Business Trigger Defined in GRGG-1 Act (2007) were adopted by Parliament in July, None\. 2007\. Agreed Prior Action The Government will submit to Parliament, the General Law on Business Start-ups (2007) and the Registration of Business Act (2007)\. Note: This prior action was introduced to give credit for faster than anticipated progress on an important policy front\. 36  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 GRGC-3 Prior actions Status Development Objective One: Preserve the Fiscal Space Needed for Poverty Reduction Ratio of Actual Spending to Budget Implemented as revised\. The average variance between budgeted allocations and expenditure Trigger Defined in GRGC-2 commitments for the 20 largest budget heads was The ratio of actual to budgeted spending on 14 percentage points\. The overall deviation in HIPC/PRSP priorities in 2008 is not smaller than the domestic primary expenditures was four percentage ratio of actual to budgeted expenditures for all other points\. discretionary primary expenditures\. Agreed Prior Action The variance in expenditure composition in 2008 for the 20 largest budget heads will not exceed the overall deviation in domestic primary expenditures by more than 10 percentage points\. Reason for change: The list of poverty reducing programs includes local council transfers with the consequence that a substantial shortfall in transfers would also induce a shortfall in spending on poverty reducing programs\. Thus, this trigger was replaced by an alternative prior action drawn from the MDBS PAF that focused on variances in expenditure composition in the 20 largest budget heads in excess of the aggregate variance in spending induced by shocks to net resource availability\. While there is a strong overlap between the list of the 20 largest budget heads and the list of poverty reducing programs, this alternative measure had the advantage of explicitly accounting for aggregate shocks such as the shortfall in fourth quarter 2008 external aid\. In addition, it is noteworthy that the share of discretionary spending allocated to poverty reducing priorities increased over time, from 32 percent of the total in 2001 to 64 percent of the total in 2009\. 37  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 GRGC-3 Prior actions Status Development Objective Two: Promote Efficiency, Transparency and Accountability in the Use of Public Resources Improvements in the Procurement Process Implemented\. 45 MDAs submitted standard procurement plans in early May 2009\. The NPPA Triggers Defined in GRGC-2 published them on its homepage\. Based on initial The government will have met, or made substantial findings from 23 entities with approved 2008 progress towards, the following benchmarks: procurement plans, 120 tenders were conducted by open competition out of 173 above the small (i) At least 29 major public entities will produce purchase threshold (69%)\. The value of the 2009 procurement plans, for approval by the competitive tenders was 95 percent of the total MOFED or other appropriate statutory body\. value above the national threshold\. (ii) The share of total procurement that is conducted through open competition is at least 30 percent of the total for procurements above the national small purchase threshold, whether the share is defined in terms of number of procurements or value of procurements, for at least 23 entities with approved 2008 procurement plans\. (iii) If the shares fall below the minimum, the donors of budget support donors should be provided with an acceptable explanation and justification, including references to any applicable data on resource availability and or regulatory requirements\. Revised Prior Actions Same as trigger but without action (iii)\. 38  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 GRGC-3 Prior actions Status Improved Human Resource Management Implemented\. Between September 2008 and September 2009, the HRMO administered 514 Trigger Defined in GRGC-2 appointments, 39 promotions, and 1,052 MOU is signed between the Public Service retirements for Commission and the HMO for the management of civil service staffing grades 1 through 5\. civil service grades 1-5\. Agreed Prior Action The Human Resource Management Office has demonstrably discharged its responsibilities for the recruitment, promotion, and retirement of civil service staff in grades 1 - 5 between September 2008 and September 2009\. Reason for change: A third trigger, for the HRMO to commence its work, was met as originally intended in substance and in spirit\. A more substantive prior action, demonstrating that HRMO had been actively performing its new duties was substituted for the original trigger\. Progress Toward Decentralization Trigger Defined in GRGC-2 The budgetary funds actually transferred to local councils in 2008, expressed as a share of total discretionary non-salary, non-interest recurrent spending, will not be less than 98 percent of the budgeted share\. Implemented\. The budgetary funds actually transferred to local councils in Revised Prior Action the first three quarters of 2008, expressed as a share The budgetary funds actually transferred to local of total discretionary, non-salary, non- interest councils in the first three quarters of 2008, expressed recurrent spending, were 2\.5 percentage points less as a share of total discretionary non-salary, non- than the budgeted share\. interest, recurrent spending, will not deviate by more than three percentage points from the budgeted share\. The fourth quarter 2008 transfers to local councils could not be met due to substantial shortfalls in donor aid and over-spending in budget head 501\. Consequently, the same wording adopted for the GRGC-2 prior action based on 2007 outcomes was applied to 2008 outcomes, confining the prior action to the first three-quarters of the year\. 39  Table 2: Prior Actions and Status for GRGG-1, GRGC-2 and GRGC-3 GRGC-3 Prior actions Status Development Objective Three: Improve the Investment Climate Implemented\. All elements of the tariff structure Improved Revenue Collection at the National were raised by 50 percent\. The average price in Power Authority (NPA) US$ increased from an average of 0\.28kWh to 0\.43/kWh\. The cost of own-generation is roughly Trigger specified in GRGC-2 $0\.50/kwh\. The following averages for the period Revenue collection will be improved by September 2008 through April 2009 all increased implementing a tariff increase in the second half of by roughly 50 percent relative to the averages for 2008\. January through August 2008: value of NPA monthly sales, Leones/Kwh billed per month, and Agreed prior action monthly revenue collection\. Same as trigger\. 40 2\.2 Major Factors Affecting Implementation Revenues consistently fell below budget targets, while external grants did not make up the resultant shortfalls (Table 4)\. Toward the end of the program, the global economic downturn eroded fiscal space required for poverty reduction expenditures, necessitating supplemental financing\. As indicated above, GDP growth during GRGC-3 plummeted to 3\.2 percent in 2009, at the outset of GRGC-3, due in large part to the impact of the global economic downturn, which diminished export earnings of the country’s mining sector, primarily diamonds\. The decline in exports combined with higher levels of spending led to a financing gap of $27\.5 million for priority expenditures under the PRSP\. The Supplemental Credit for GRGC-3 provided US$7 million to close the gap and other donors provided the additional US$20\.5 million (DfID, US$7\.5 million and the EC, US$13 million)\. Closing this gap helped ensure continued commitment to priority expenditures under PRSP-2\. The Government demonstrated a high level of commitment to Program objectives through major policy actions necessary to support expected outcomes\. A key element of Program success was the Government’s high-level ownership of policy, evidenced by their willingness to embed them in its reform agenda\. The staffing of NPPA and regulations for increasing the number of ministries, departments and agencies (MDAs) submitting procurement were major steps toward greater efficiency and transparency in government procurement\. The restoration of local government after 30 years and the transfer of budgetary resources to local councils were major advancements in the Government’s commitment to decentralization\. The Parliament’s passage of the General Law on Business Startups, the Registration of Business Act resulted in lower business costs and encouraged enterprises to join the formal business sector\. It is likely that this legislation played a major role in the increased number of new businesses during the GRG operations\. The GRG operations benefitted from substantial analytical work, with each successive operation incorporating lessons from the previous operation\. The initial operation provided the foundational analysis for the entire program with updates of the areas common to all three operations—improvements to the business climate and financial sector as well as the key areas of governance covered—procurement reform, capacity building, transparency in government accounting, etc\. Several documents provided the analytical foundation for the focus on better efficiency and transparency in governance: Country Financial Accountability Assessment, the HIPC Assessment and Action Plan, public expenditure reviews, and the corruption surveys used in the Governance Report\. The annual Doing Business Report and a special report on unemployment identified constraints in the business climate requiring reform\. The GRG operations also required specialized analytical work to support policy actions in the mining sector and the power sector\. 41 An analysis of the (2003) household survey available at the inception of the GRG series found deep poverty and identified artisanal miners among the poorest groups, motivating support for mining sector reform\. A mining and minerals sector review pointed out the need for additional extension services for enhanced production, safety and environmental protection\. In determining policy actions in the power sector, the GRG series relied on the background papers from the preparation of the Power and Water Project, which established the need for financial reforms\. In addition, the 2009 Poverty Diagnostic helped guide the decision to raise tariffs\. It found that the planned tariff increase would not adversely affect vulnerable groups and that it could in fact be “pro poorâ€? if it expanded public resources targeted to help the poor\. The program documents, recognizing Sierra Leone as a fragile state, contained detailed risk analyses and mitigation measures\. The most significant risks identified were exogenous shocks to the economy, failure to secure timely adequate funding for the budget and fiduciary risk of weak institutional capacity and governance\. All three of these conditions materialized during the GRG operations under review\. For exogenous shocks, the mitigation was the government’s track record of macroeconomic stability\. The country has absorbed the exogenous shock of the global recession since 2008, developing a response plan to protect stability\. There were delays in donor funding for which the mitigation measure was essentially continuous dialogue with donors committed to working with the country\. The Government’s response was to reduce planned PRSP related expenditures\. Fiduciary concerns were responsible for the delay in release of donor funds early in the program (2007)\. The mitigation measure for fiduciary risk was the strengthening of the fiduciary environment, which took place; a key action was reducing the backlog of published public accounts\. The result was increased donor confidence and eventual release of funds\. In addition, the appraisal of GRG operations identified political risks; however, throughout the Program, the political environment remained stable and the Government stayed committed to achieving the objectives\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The M&E for the GRG operations took place within the context of the MDBS framework of the four development partners\. Through the Memorandum of Understanding noted above for the MDBS, the development partners agreed to a harmonized framework of monitorable performance indicators\. Each donor reserved the right, however, to maintain its own conditions for the release of funds\. Key conditions for continued support from the development partners consisted of: the maintenance of an appropriate macroeconomic framework, satisfactory progress in poverty reduction policies, and continued improvements in adhering to fiduciary standards\. The donor group was to meet annually to evaluate progress under the MDBS framework\. 42 The design of the M&E framework evolved over the course of the three GRG operations\. The framework consisted of outcome indicators to assess the impact of the policy actions implemented for tranche release\. As Table 3 shows, the indicators evolved over time to be more measurable and were reduced in number\. GRGG-1 and GRGC-2 had 19 and 13 indicators, respectively, some of which had no targets or benchmarks associated with them\. Under GRGC-3, however, there was a substantial reduction in the number of indicators to nine, all of which had measurable targets\. This reduction reflected the decision of the donors participating in the MDBS group to streamline the indicators, taking account of the capacity to evaluate them\. 43  Table 3: Comparative M&E Framework of GRG Operations OBJECTIVE 1 OBJECTIVE 2 OBJECTIVE 3 Results Preserve fiscal space needed for Promote efficiency, transparency Improve investment climate, Measurement poverty reduction and accountability promote exports, and increase electricity provision GRGG1 GRGC2 GRGC3 GRGC1 GRGC2 GRGC3 GRGC1 GRGC2 GRGC3 No\. of 1 1 1 11 8 2 7 4 2 indicators Target 0 0 0 2 3 1 2 3 1 achieved Target not 1 1 1 0 2 1 0 1 0 achieved No target but 1 1 0 1 0 0 1 0 0 worsened performance compared to benchmark No target but 0 0 0 4 0 0 3 0 1 better performance compared to benchmark No target or 1 0 0 4 3 0 1 0 1 benchmark No 0 0 0 4 3 0 1 0 0 information to evaluate performance relative to target or benchmark The Bank implemented the M&E framework through status reporting and the data was utilized to facilitate performance discussions\. The Bank reported on performance indicators in the Implementation Status and Results (ISR) reports\. Based on the ISRs available for the Implementation Completion and Results (ICR) report, the quality of information was fair\. The main sources of information were the reviews under the Progress Assessment Framework (PAF), prepared jointly with the MDBS partners\. The aide memoires of supervision missions and management letters for GRG operations indicate the M&E framework was used to evaluate progress and adapt the performance measures to evolving concerns\. For example, initially the Program tracked the share of actual to budgeted expenditures for poverty reduction\. However, given the findings that the Government was consistently under-spending for poverty reduction activities due to shortfalls and delays in disbursements of donor support as well as over-spending in other categories of discretionary expenditures, subsequent operations shifted the measure from a, “weighted average absolute deviation between planned and actual spending, expressed as a percentage of the budgeted amounts, for all HIPC/PRSP spending by budget head, â€? which did not take into account shocks to revenues and grants, to “The difference between the ratio of actual to budgeted spending on 44 HIPC/PRSP priorities and the ratio of actual to budgeted expenditures for all other discretionary primary expenditures\.â€? The indicators measuring the preservation of fiscal space for poverty reduction proved to be both too ambitious in their complexity and subject to shocks beyond government control\. Despite this, the data indicate that an effort was made to protect the fiscal space for poverty reducing activities (Table 4)\. Table 4: Budgetary Performance on Poverty Reducing Programs under HIPC, 2005-10 Leone Billion 2005 2006 2007 2008 2009 2010 Revenue and Grants Budget 778\.1 920\.4 1,178\.6 1,055\.3 1,249\.9 1,411\.6 Revenue 435\.0 538\.8 674\.9 692\.7 824\.0 844\.1 Grants 343\.1 381\.6 503\.7 362\.6 425\.9 567\.5 Actual 762\.7 842\.2 776\.2 926\.8 1,239\.4 1,551\.6 Revenue 410\.8 495\.6 536\.9 662\.1 739\.0 1,007\.6 Grants 351\.9 346\.5 239\.3 264\.6 500\.3 544\.0 Actual as % Budgeted 98% 92% 66% 88% 99% 110% Poverty Reducing Expenditures Budget 166\.3 208\.1 258\.9 326\.7 330\.6 402\.0 Actual 151\.7 186\.0 147\.9 330\.4 337\.5 635\.1 Actual as % Budgeted 91% 89% 57% 101% 102% 158% Total Actual Discretionary Spending* 260\.2 299\.0 237\.3 420\.5 524\.0 946\.7 Poverty Reducing as % Discretionary 58% 62% 62% 79% 64% 67% * Excluded expenditures encompass interest, statutory payments other than local council transfers, wages, and development expenditures funded by donors\. Revenues and grants exclude medium term debt relief that were to be used exclusively to reduce debt service obligations\. Several of the PFM indicators originally specified in GRGG-1 were discontinued, notably those from the HIPC AAP which were later superseded by the PEFA indicators\. Thus, although the original outcome indicators cannot be measured, the general intent of the PDO can still be tested, i\.e\., whether there was adequate promotion of efficiency, transparency and accountability in the use of public resources\. The 2010 PEFA indicates solid progress, noting that “The regulatory framework for PFM has been positively transformed by the adoption of a number of new laws\.â€? There were improved scores for 10 of the 28 indicators under government control, with only four downgrades\. Several of the procurement indicators proved too ambitious for the newly established NPPA to track\. The NPPA had a limited number of staff, who had to attend 45 to all aspects of procurement work in addition to tracking outcomes\. As a result, the number of indicators was reduced and focused on the two goals of increased use of procurement plans and open competitive bidding\. Although not all of the investment environment indicators could be measured, the annual Doing Business report shows clear gains between outcomes in 2006 and those reported in 2010\. The number of procedures, days required and costs are generally reduced while some investor protections improved\. The number of documents and time required to export and import have also been reduced\. Thus, the PDO to improve the investment climate and promote exports was clearly met\. 2\.4 Expected Next Phase/Follow-up Operation The Supplemental Credit for GRGC-3 was the final operation of the first GRG series, designed to support the first PRSP\. In 2010, the Bank approved the initial credit for a second series of GRG operations (GRGC-4) supporting the second PRSP\. Its objectives are to: (i) improve the allocation and efficiency of public spending to support poverty reduction; (ii) strengthen domestic resource mobilization and management; and (iii) increase provision of electricity\. The operation is fully consistent with the new Joint Assistance Strategy (JAS), covering FY10-13 and its pillar to promote inclusive growth\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation Sierra Leone continues to rely on budgetary finance from its development partners to protect expenditures on poverty reduction\. The country has depended significantly on external development partners, which have provided financing for 25-35 percent of budgetary expenditures during the period under review, though most recently that has begun to decline\. This level of dependence may continue, in the foreseeable future, particularly given the global economic downturn\. In 2010, the Bank and the MDBS partners entered into a new, more comprehensive Memorandum of Understanding governing the provision of budgetary financing\. Provision of budgetary financing is a key element in the Joint Assistance Strategy of the Bank and the AfDB6 in Sierra Leone for FY10-FY-13\. Complementing policy based lending were investment projects in other key sectors of the PRSP—notably agriculture, the management and development of transport infrastructure, health, education, etc and a better investment climate\. 6 Joint strategy with the African Development Bank\. 46 3\.2 Achievement of Program Development Objectives Objective 1: Preserve the Fiscal Space Needed for Poverty Reduction The Program improved the overall preservation of fiscal space for poverty reduction expenditures but performance in meeting targets for improved budget execution was mixed\. The Government exceeded the benchmark floor in 2005 (Le 202 billion) but at Le 311 billion for 2008, fell slightly short of the target for that year (Le 327 billion)\. Regarding budget execution performance, prior actions for the Program improved the ratio of actual to budgeted expenditures for priority poverty-reduction measures compared to expenditures on the miscellaneous budget head\. And by the end of the Program, actual Government expenditures on priority poverty-reduction activities amounted to 102 percent of budgeted expenditures\. The Program did not, however, meet the target (set for GRGC-2 and GRGC-3) of the difference between the ratio of actual to budgeted expenditures on poverty-reduction priorities compared to a similar ratio for other discretionary primary expenditures greater than or equal to zero percent\. Objective 2: Promote Efficiency, Transparency and Accountability in the Use of Public Resources The performance in achieving this objective was impressive for some important indicators but there were also some shortcomings\. The performance measures were heavily weighted in support of this objective\. For example, GRGG-1 had eight outcome indicators of which six had no targets and thus were not measured\. Of the two targets with measurable indicators, the program met the target number of public entities producing procurement plans for Ministry of Finance approval but fell short of hiring the target number of staff for Accountant General’s Department (AGD), hiring eight staff instead of 15\. By contrast, GRGC-3 had seven performance indicators, of which six had measurable targets\. The achievement of three very important indicators for improved transparency and efficiency in government was quite high\. First, 43 government entities produced procurement plans for 2009 compared to a target of 23 entities\. Second, the share of total procurement above the national, small-purchase threshold for competitive bidding amounted to 69 percent in 2008, compared to a target of 30 percent or greater\. Third, the program authenticated 100 percent of civil service payroll entries in 2008 compared to a target of 95 percent\. The Bank was unable to obtain information on the achievement of two indicators: (i) the percent share of funds spent for the purposes stated in procurement plans; and (ii) percent share of procurements no higher than 15 percent of the amounts in the procurement plans\. Progress was made in decentralization of authority to local government but it was less than planned\. The indicators for decentralization concerned the share of funding transferred to local councils for management\. Performance in this transfer fell slightly short of target with budgetary funds transferred to local councils, as a share of total, 47 discretionary, non-interest recurrent funding, at 13\.3 percent compared to a target of 15\.8 percent\. Objective 3: Improve the investment climate and promote exports The Government made substantial progress in developing policies and procedures conducive to expanding private sector development\. Sierra Leone’s National Commission for Privatization established transparent procedures for the sale, transfer or disposal of equity assets\. The Parliament, in July 2007, approved legislation that significantly reduced the complexity and cost of business registration (the General Law on Business Start-Ups and the Registration of Business Act)\. This law was designed to help stimulate private investment and encourage firms to join the formal sector\. Complementing reforms for private sector development, the Government also made major improvements in the development of the financial sector\. In August 2009, the Government adopted a full Financial Sector Development Plan, the Companies Act (2009), the Bankruptcy Act (2009), the Payment Systems Act (2008), and the Securities Act (2008), a venture capital scheme, based on the recommendations from the 2006/07 Financial Sector Assessment Program (FSAP)\. Linked to policy actions for private sector development and in the financial sector were indicators for the growth of new firms\. The growth of new firms was substantially higher than the target, greater than or equal to 14 percent instead of the planned five percent\. The growth was lower than the benchmark (41 percent)\. A better measure of the impact may, however, be in the actual number of firms registered, which increased from 2,226 in 2005 to 3,705 in 2008, an increase of 66 percent\. Government revenues from the mining sector increased with the implementation of mining sector policies under the GRG operations\. Policy actions focused on expansion of a cadastral system for the administration of mineral licensing and increasing the number of mining service extension staff in the key mining regions\. Government revenues from mining licenses, fees and surface rents increased from Le 4\.7 billion in 2005 to Le 6\.0 billion in 2007\. The production of key extractive industries, dormant during the conflict period, resumed operation but production performance compared to plan was mixed\. Under GRGG-1, there were no targets for exports of the principal extractive industries monitored (bauxite, gold and rutile)\. Exports of rutile (from one operating mine) remained fairly constant between 2006 and 2008, at around 70,000 tons\. Information on actual gold production was not available for GRGG-1 but under GRGC-2 gold output (from one mine), at 10,000 ounces in 2008, was significantly higher than the target for that year (6,000 ounces)\. The production of bauxite in 2008 (815,000 tons) was about 18 percent lower than the target for that year (1,000,000 tons)\. The performance indicators for the NPA during the period of GRGC-3 showed an improving trend\. The main policy action in the power sector was the implementation of 48 a tariff increase in the second half of 2008\. Both power generation and sales exceeded their respective benchmarks between 2008 and 2010, with generation increasing from 138 GWH to 174 GWH and NPA Sales from 79 GWH to 102 GWH\. Collection by NPA also improved from Le 46 billion in 2008 to 88 billion in 2010, surpassing the target of Le 60 billion\. 3\.3 Justification of Overall Outcome Rating Rating: Satisfactory The objectives of the GRG operations remain highly relevant for Sierra Leone\. Sierra Leone depends considerably on the Bank and other donors for financing its budget, equivalent to as much as 7-8 percent of GDP\. In 2010, this is estimated to have totaled about US$80 million, with an additional US$110 million being provided through project support\. Protecting poverty-reduction expenditures, continued improvements in governance improvements and measures to expand growth and exports remain highly relevant to the country’s development and attainment of the MDGs\. The Bank has already financed the first operation in a new series of budget support programs, discussed in Section 2\.4\. The achievement of governance and growth objectives was satisfactory but the protection of fiscal space for poverty reduction was only moderately satisfactory\. The Government made great strides in improving efficiency and transparency in procurement, with relatively minor shortcomings\. The program also made substantial progress in improving the investment climate for growth, with some positive developments in the output of important extractive industries and improved performance of the power sector\. It fell short, however, of meeting the main indicator for protecting poverty-related expenditures, continuing the past trend of under-spending for HIPC priorities and over-spending for non-HIPC priorities\. In the final operation of the series (GRGC-3), actual poverty-reduction expenditures were reported as 102 percent of the budgeted amount (for 2009), considerably higher than the 57 percent in the benchmark year (2007)\. Nevertheless, the Bank and other donors considered a comparative measurement with other budget categories important because of a past trend to over spend in these categories and under-spend for poverty-reduction\. In the absence of detailed evaluation criteria, a rating scheme and scale has been constructed in Table 5 below, covering several possible outcomes for the performance in protecting poverty-reduction expenditures\. Combining the actual outcomes with the criteria in the table, spending 102 percent of budgeted amounts but with a negative divergence (12 percent) of more than 10 percent from a similar measure for other expenditures, the rating is moderately satisfactory\. 49  Table 5: ICR Rating Scale for Objective 1: Preserving the Fiscal Space Needed for Poverty Reduction Actual expenditures as a Actual/planned percent share of budgeted expenditures on poverty Outcome Rating expenditures on poverty reduction divided by reduction Actual/planned expenditures in other areas Equal to or higher than Greater than or equal to Highly Satisfactory target zero Equal to or higher than Negative divergence Satisfactory target between 0 and ten percent (minor shortcoming)  Equal to or higher than  Negative divergence  Moderately target greater than ten percent Satisfactory (moderate shortcomings) Less than target Negative divergence less Moderately than 10 percent Unsatisfactory Less than target Negative divergence greater Unsatisfactory than 10 percent Weighing the three objectives along with relevance, external factors, institutional development, and implementation evaluations, the overall outcome was satisfactory\. The overall outcome is difficult to evaluate because of the lack of priority ranking among objectives and performance indicators for each objective\. Despite the moderately satisfactory rating for protecting the fiscal space for poverty reduction, the ICR has rated the overall outcome satisfactory because: (i) the other two objectives were satisfactory and resulted in considerable institutional development; (ii) actual poverty reduction expenditures exceeded the budgeted amount; and (iii) in intermediate years, external factors outside the Government’s control adversely affected the availability of funds for these expenditures—the global economic downturn and uncertainties in donor funding, played a role in the shortfalls\. The ICR report’s rating also took into account the Program’s supervision ratings\. Based on the ISRs available, the GRG ended with a satisfactory rating\. Early in the Program, the Bank had rated GRGG-1 as moderately unsatisfactory due to delays in meeting triggers, poor economic management and fiduciary concerns\. In doing so, however, the Bank noted that it considered this rating an aberration in a record of good performance and the two subsequent operations received satisfactory ratings\. 3\.4 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 50 Despite some poverty reduction over the GRGC series, without a return to high levels of growth, the country will not meet the MDGs by 2015 as planned\. The GRGC program tracked as part of the M&E framework, expenditures on poverty reduction, not actual changes in the percentage of the population living in poverty\. Each successive operation, however, reported on changes in the poverty headcount, depending on the availability of information\. According to the 2009 Sierra Leone Poverty Diagnostic, the poverty headcount decreased to an estimated 62 percent in 2007 compared to 70 percent at appraisal of the initial GRG operation\. The global economic recession as well as the food and fuel crises, however, could easily have eroded these gains and despite improvements the level of human development remains quite low\. For example, in 2010, Sierra Leone ranked 158 out of 169 countries in the United Nations Human Development Index, an improvement over a bottom ranking out of 179 countries in 2008\. The planned rate of economic growth for achieving the target reduction of the population living below the poverty line to about 40 percent was between eight and nine percent\. With growth less than half that rate and 2015 only three years away, it appears likely that the country will have to adjust the timing of this achievement\. (b) Institutional Change/Strengthening The program contributed to substantial institutional strengthening in the areas of public financial management, procurement, mining sector development, and power system management\. Section 2\.2 discusses the institutional development and its impact on program implementation\. (c) Other Unintended Outcomes and Impacts There are no other such outcomes that have not been discussed elsewhere\. 3\.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable to the programs evaluated\. 51 4\. Assessment of Risk to Development Outcome Rating: Significant Table 6: Rating of Key Risks Likely to Affect Outcome of GRG Series Risk Category Rating Macroeconomic Performance Significant Fiduciary Performance Significant Political Factors Significant The ICR finds the risk to development outcome significant in all three categories of risk evaluation\. The key factors that could impede macroeconomic performance are a prolonged global recession, dampening growth as well as a rapid rise in international commodity prices for food and/or fuel\. The resulting impact could be a further deterioration in the terms of trade and setbacks in the Government’s ambitious program for infrastructure development necessary to spur growth\. These factors threaten macroeconomic stability and significantly reduce the fiscal space for poverty reduction expenditures\. Regarding fiduciary risk, although public financial management has improved, there remains the possibility that continued deficiencies in institutional capacity or corruption could adversely affect fiduciary performance\. In particular, while strong gains have been documented in the PEFA and elsewhere with regard to internal accountability, the political leadership (regardless of party affiliation) is only slowly embracing the concept of external accountability for good results in public service delivery\. For this reason, the risks remain high\. The mitigating factors are the strong commitment of the Government to projects to support capacity building and public financial management reform, and the continued growing involvement of civil society in oversight activities\. On the political side, as the 2012 elections draw closer, there is the risk of an adverse impact on economic management and public finances\. It is worth noting, however, that whatever the outcome of the elections, there seems to be only a moderate risk of a substantial reversal of the country’s improving trend in governance\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance Rating: Satisfactory Bank performance was satisfactory in both ensuring quality at entry and in implementation support, with only minor shortcomings\. 52 (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The program’s design benefited from substantial analytical work (Section 2\.2) with the participation of specialists in the various governance areas, such as public financial management and institutional reform, as well as related to growth— private sector development, mining sector planning and operations, and power sector development\. The design also reflected several of the key factors highlighted subsequently in the World Development Report, 2011, regarding the transformation of institutions in fragile, post-conflict states: a systematic program of phased capacity building and expanded accountability, anti-corruption measures (through actions/performance indicators for increased transparency of procurement) and decentralization for greater inclusion of the population, thus strengthening peace and security\. The main shortcoming was the performance measurement for the objective of preserving fiscal space for poverty reduction\. As discussed in Section 3\.3, the main indicator of achievement for this objective could have been improved with more calibration in the measurement of the extent of the deviation between actual and planned expenditures on poverty reduction\. The design and implementation period of this operation, coincided with the introduction of the new results framework into these operations\. (b) Quality of Supervision Rating: Satisfactory The GRG Program benefited from consistency in team leadership of supervision over all three GRG operations, which was the same as at appraisal of the initial operation and at the end of the previous operations focused on post-conflict recovery\. The appraisals of the second and third operations were cumulative, reviewing progress in the previous operations and incorporating lessons learned in program design and implementation\. The supervision of the Program included at least one mission annually and one ISR report was prepared for each operation\. Bank management also did not hesitate to rate the initial GRG operation moderately unsatisfactory, to call attention to and rectify, problems that threatened a satisfactory outcome for the GRG series of operations, pressing the IMF to rethink an overly ambitious framework under the Poverty Reduction and Growth Facility then underway\. The donors participating in the MBDS forum met annually in June to assess performance of the entire program including the relevant GRG operation\. Donor coordination resulted in improved performance measurement, by reducing the total number of performance indicators and enhancing specificity, as noted in Section 3\.3\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 53 A satisfactory rating in both dimensions—ensuring quality at entry and supervision— results in an overall satisfactory rating\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory The Government showed substantial commitment to the GRG Program and a major contributing factor to this success was embedding the operations in the Government’s reform program\. While there were some temporary distractions from the first operation in the series due to elections, the Government worked with the Bank to get the program back on track and made significant progress with daily cash-flow monitoring, new revenue efforts, and reforms in public financial management\. Also considerable institutional development took place, over the course of the program, as noted in Section 3\.4 (b)\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory The Ministry of Finance and Economic Development, the implementing agency prepared comprehensive, detailed letters of development policy containing clear strategies for improved governance and growth policies leading to poverty reduction\. The Ministry gave particular attention to anti-corruption efforts, citing both successes and shortcomings\. Officials at the Ministry of Finance and Economic Development were consistently accessible to the Bank and engaged in following up on progress in meeting triggers for GRG operations\. The main shortcoming was the lack of formal monthly reporting to the Bank, as indicated in the implementation framework of the GRG program documents\. Given capacity constraints, however, such frequency of reporting may have been excessive\. (c) Justification of Rating for Overall Borrower Performance Ratings: Satisfactory A satisfactory rating in both dimensions—Government performance and Implementing Agency performance—results in an overall satisfactory rating\. 6\. Lessons Learned ï‚ In the case of Sierra Leone the GRG series helped to consolidate and entrench the local councils which were re-established after a 30 year absence\. This resulted from a strong shared understanding—between Government and many external stakeholders—about the importance of re-establishing government presence 54  around the country, and the role that the lack of such a government presence played in the conflict\. ï‚ For a post-conflict country in a fragile, state-building process, the benefits of a programmatic approach to policy operations are likely to outweigh the risks, particularly the opportunity to revaluate progress before each successive operation\. ï‚ If the timing of the approval process of donors for budget support is not well aligned with the Government’s budgetary process, the program support for poverty reduction risks shortfalls due to uncertainty in funding\. ï‚ Embedding policy reforms in the Government’s reform agenda instills greater government ownership of the program, diminishing the risk of delays or shortcomings in achieving objectives\. ï‚ For an operation that involves coordinating actions in several sectors, outside the authority of the main implementing agency, the achievement of targets is more likely if disaggregated into a set of measurable indicators with clearly-defined administrative responsibilities in a given ministry, department or agency\. ï‚ In a country short of management capacity, a detailed M&E framework is not likely to be sustainable without intensive donor inputs and supervision\. Also the requirement for monthly reports to be provided by the Ministry of Finance may have been onerous and excessive, discouraging any reporting\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies N/A (b) Cofinanciers N/A (c) Other partners and stakeholders N/A 55  Annex 1: Bank Lending and Implementation Support/Supervision Processes (a) Task Team members P095575 - Programmatic Governance Reform & Growth Responsibility/ Names Title Unit Specialty Lending Supervision Ferdinand Tsri Apronti Procurement Specialist AFTPC Procurement Trichur K\. Balakrishnan Manager, Financial Management LCSFM Financial Mgmt\. Christopher Juan Costain Principal Regional Team Leader TWISA Private Sector Paivi Koljonen Lead Energy Specialist AFTEG Energy Sector Ekaterina Mikhaylova Senior Mining Specialist SEGOM Mining Sector Michael C\. Stanley Lead Mining Specialist SEGOM Mining Sector Amadou Tidiane Toure Lead Procurement Specialist SARPS Procurement Yongmei Zhou Sr Institutional Dev\. Specialist\. SASGP Institutional Dev\. 56 P102040 - Second Governance Reform & Growth Credit Responsibility/ Names Title Unit Specialty Lending Supervision Ferdinand Tsri Apronti Procurement Specialist AFTPC Procurement Trichur K\. Balakrishnan Manager, Financial Management LCSFM Financial Mgmt\. Judite Fernandes Language Program Assistant AFTP4 Yusuf Bob Foday Economist AFTP4 Macroeconomist Sabine Hader Senior Country Officer LCC1A Manush A\. Hristov Senior Counsel LEGAF Lawyer Sergiy V\. Kulyk Country Program Coordinator AFCGH Ekaterina Mikhaylova Sr Mining Spec\. SEGOM Mining Sector Mohua Mukherjee Senior Energy Specialist SASDE Energy Sector John Nyaga Sr Financial Management Specialist EAPFM Financial Mgmt\. Laura L\. Rose Sr Economist (Health) AFTHE Health Sector Kavita Sethi Senior Transport Economist AFTTR Transport Sector Rajiv Sondhi Senior Finance Officer CTRFC Disbursement Michael C\. Stanley Lead Mining Specialist SEGOM Mining Sector Yongmei Zhou Sr Institutional Dev\. Spec\. SASGP Institutional Dev\. 57 P107335 - Third Governance Reform & Growth Credit Responsibility/ Names Title Unit Specialty Lending Supervision Ferdinand Tsri Apronti Procurement Specialist AFTPC Procurement Christopher Juan Costain Principal Regional Team Leader TWISA Private Sector Yusuf Bob Foday Economist AFTP4 Macroeconomics Manush A\. Hristov Senior Counsel LEGAF Lawyer Mudassar Imran Senior Energy Econ\. AFTEG Energy Sector Sebastian S\. James Senior Investment Policy Officer CICRS Tax Specialist Maiko Miyake Sr Private Sector Development CICAF Private Sector Mark M\. Moseley Lead Counsel LEGPS Infrastructure Lawyer John Nyaga Sr Financial Management Specialist EAPFM Financial Mgmt\. Kavita Sethi Senior Transport Economist AFTTR Transport Sector Rajiv Sondhi Senior Finance Officer CTRFC Disbursement Vivek Srivastava Senior Public Sector Specialist PRMPS Public Sector Cyrus P\. Talati Senior Economist AFTP4 Macroeconomics Maria Vagliasindi Lead Economist SEGEN Energy Sector 58 (b) Staff Time and Cost P095575 - Programmatic Governance Reform & Growth Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY06 24 109\.25 FY07 27 120\.65 FY08 17\.62 Total: 51 247\.52 Supervision FY06 0\.00 FY07 5 41\.22 FY08 0\.13 Total: 5 41\.35 P102040 - Second Government Reform & Growth Credit Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY07 8 45\.39 FY08 21 102\.62 FY09 0\.00 Total: 29 148\.01 Supervision Total: 0\.00 59  Annex 2: Beneficiary Survey Results N/A 60  Annex 3: Stakeholder Workshop Report and Results N/A 61  Annex 4: Summary of Borrower’s ICR and/or Comments on Draft ICR MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT This report provides the Government of Sierra Leone’s perspective to the implementation outcome of the World Bank’s series of Governance Reform and Growth Grant/Credit (GRGG/C) received over the period 2006 through 2010\. It covers a brief assessment of the institutional impact in terms of the extent to which the project has improved the economy and the country's ability to enhance public service delivery within the context of structural and institutional reforms undertaken, sustainability, lessons learnt and conclusions\. Introduction: The World Bank’s GRGG/C programme, packaged in series, comprised components of grants and credit\. The packages were delivered as a development policy operation facility designed to support the Government of Sierra Leone refocus its economic and social development policies from post-conflict emergency recovery and state building to a more broad-based programmatic development strategy within the framework of the country’s Poverty Reduction Strategy (PRS)\. An earlier four series of the World Bank Economic Rehabilitation and Recovery Credit (ERRC) programme provided strong support to the post-conflict recovery efforts, and subsequently required consolidation and deepening to sustain economic development\. The GRGG/C series provided critical foreign currency for imports of essential commodities, preserve the fiscal space needed for poverty reduction, promote efficiency, transparency and accountability in the use of public resources, improve the investment climate and promote exports, and achieve progress in the poverty reduction strategy against a slow down associated with the global economic and financial crises\. Government implemented a wide range of structural and institutional reforms within the framework of the Multi-Donor Budget Support (MDBS) Progress Assessment Framework (PAF) to bolster capacity and harmonize systems to optimize service delivery\. The strong and combined support of the Multi-Donor Budget Support partners was critical to successfully conclude the GRGG/C operations\. Institution Development Impact Achievement The GRGG/C programme was delivered at a very challenging time when the global economic down-turn was severally weakening the economic prospects in 2007 through 2009 thereby putting pressure on the fiscal position\. The mining sector, which is the country’s major foreign exchange earner, was particularly hard hit with declines in world market prices, delayed investments, and scaled back production\. Remittances were declining and the exchange rate of the Leone was eroding in value terms against the 62 major international currencies\. The foreign exchange resources of the GRGG/C operation enabled Government to provide for the importation of essential commodities including food products, petroleum products, raw materials and intermediate goods\. Through the Bank of Sierra Leone Weekly Foreign Exchange Auction window foreign exchange funds were made accessible to meet private sector requirements for the import of essential commodities\. The local currency proceeds of the funds facilitated, in part, to finance priority public expenditures, including funding the implementation of activities within the scope promoting good governance, decentralization of government, management of public resources and private sector-led economic growth, and to close the financing gap for the maintenance of macroeconomic stability while keeping inflation low\. Despite the challenges posed by the global economic downturn, the country made substantial progress in sustaining the growth trajectory, maintaining macroeconomic stability and helped reduce the number of the population living below the poverty line of US$1 per day from 70 percent in 2004 down to about 50 percent in 2010\. Macroeconomic Performance GDP Growth Rate Achieving economic growth and maintaining macroeconomic stability through prudent and effective management was the thrust of government’s macroeconomic management strategy over the GRGG/C operational period\. In 2008, economic activity slowed down in the latter part of the year, particularly in the mining sector, although agricultural production and the service sector remained buoyant\. Sector wise government spending was re-oriented in favor of the main drivers of growth\. Real GDP averaged 6\.7 percent in 2006-2008\. Subsequently, high public expenditures on the main growth drivers including roads, energy, water supply and agriculture stimulated growth to average almost 6 percent in 2007-2010 despite the global economic downturn\. Sierra Leone’s main export earner, diamonds, as well as remittances from abroad were adversely impacted\. The growth trajectory was supported mainly by increased activities in manufacturing and agricultural output, mining, public investment in basic infrastructure, housing and the services sector\. Inflation Rate The resources provided under the GRGG/C operation came at a time when food prices were escalating, and the pass-through effects of the increases in oil prices resulted in an acceleration of inflation in 2007 and 2008\. End of period inflation rates for food were 15 percent and 19 percent respectively for 2007 and 2008\. However, the GRGG/C operations provided partly the needed foreign exchange resources required by the private sector to import essential commodities and fuel inducing inflationary pressures downward toward the end of 2008 due to the steep decline in import prices (mainly fuel)\. Thus, the average end of period inflation rate fell to 12\.2 percent at end-2008, compared to 13\.8 percent for the previous year\. Inflation declined to 7\.5 percent at end-March 2009, 63 driven mostly by lower food prices\. However, the inflation rate was further fuelled on account of the introduction of the Goods and Services Tax (GST) in January 2010\. However, end of period inflation rose 17\.8 percent in 2010\. Prices of the local and imported varieties of the major staple food, rice, increased by 12 percent and 14 percent between 2010 and 2011 alone\. The prices of a number of other food items also increased sharply, notably bread, eggs, beef, edible oils, sugar, onions and flour\. Price hikes for food items and fuel drove inflation to reach high 17\.82% in May 2011, but slowed down to 15\.7% in September 2011 on account of prudent fiscal and proactive monetary policies undertaken by both Ministry of Finance and Economic Development and the Bank of Sierra Leone\. On the other hand, Interest rate on government securities gradually fell, although commercial banks’ interest rates on overdrafts remained unchanged\. Revenue and Expenditure Performance The GRGG/C operations came at a time when realistic domestic revenue projections were marred by unpredictability as the global economic crisis loomed high\. Due to lower imports, a decline in mining activity, weaker corporate income, and revenue policy slippages, the funding under the operations gave significant external boost to the ability of NRA to generate domestic revenues\. As a result, government domestic revenues as a proportion of GDP increased to 11\.7 percent of GDP in 2009 down from 10\.8 percent in 2007 and subsequently rose to 13\.3 percent of GDP in 2010\. The overall fiscal balance in 2009 fell to -4\.0 percent of GDP against the budget target of -3\.5 percent of GDP, while the domestic primary fiscal balance fell to -3\.3 percent of GDP compared to the budget target of -1\.4 percent of GDP\. The increased revenues were necessary as government aimed to maintain macroeconomic stability while also expanding investment spending to support the implementation of the Agenda for Change\. The NRA was enabled to undertake broad-based reforms, harmonized tariffs, reviewed the fiscal regime including the introduction of the ASYCUDA ++, the Goods and Services Tax (GST) in January 2010 and the establishment of the Domestic Tax Department, among several others\. The GRGG/C funds enabled Government to provide moderate stimulus in 2009 to 2010 to increase investment spending in improving urban and township roads and local council infrastructure\. Additional resources were given to NaCSA under the World Bank cash- for-work program, including increased outlays under the counterpart contribution window from the budget to help stimulated youth employment\. Government was enabled to increase investment under the Bumbuna Hydroelectric Power (BHP) programme to improve the supply of low cost electricity generation, which in turn reduced urban expenditures on fuelling generators, and spurring, as a secondary effect, increase urban demand for rural products and help spur job creation\. External Sector Performance The increased foreign exchange funds at BSL were made accessible to the private sector through the Weekly Action window to support exports and imports of goods\. As a result, exports grew strongly, jumping from 2\.9 percent in 2007 to 33\.5 percent in 2010\. However, the value for mineral exports declined by 21\.2 percent in 2008 and further by 64 18\.5 percent in 2009\. Export earnings, especially diamonds, dampened due to the global economic and financial crises and the fall in output\. Imports growth ebbed and fell reflecting the wide movements in the international prices for food and fuel products\. The US$ value of total imports increased by 2\.2 percent and 24\.8 percent in 2007 and 2008 respectively, and dropped by 2\.6 percent in 2009, following a sharp fall in the value of food and fuel imports as prices moderated in the year\. Imports grew by 12\.3 percent marked by higher fuel imports and the import of machinery and transport equipment to support the increased agriculture and mining activities\. A noticeable drop in inward remittances and exports created a short supply in foreign currency in 2009\. Consequently, the Leone recorded 28 percent depreciation between December 2008 and December 2009, but moderated by 2010\. Thus, the nominal exchange rate remained relatively stable during the program operational period of 2007- 2010\. A healthy reserves position was attained at 6\.5 months of import by end 2009 from 4\.5 months of import in 2007\. In 2010, gross reserves increased in nominal terms to US$338\.5 million but in months of import, it declined to 5\.2 months\. Progress achieved in structural reforms As part of the multi-donor program support, Government pursued the implementation of a number of structural and institutional reforms under the GRGG/C programme\. This includes the following: Public Financial Management The GRGG/C operations enabled Government to intensify efforts to develop and strengthen the legal and regulatory framework governing public financial management\. In this regard, a comprehensive review of Integrated Public Financial Management Reforms Project (IPFMRP) was undertaken, including review of the National Public Procurement Act (2004) and the Government Budgeting and Accountability Act (2005) and their constituent regulations to maintain them at speed with emerging developments and challenges\. An external assessment of the our public financial management (PFM) systems in the Central Government and local councils conducted in 2010 using Public Expenditure and Financial Accountability (PEFA) methodology revealed that significant improvements have been made in PFM systems in Sierra Leone\. As part of these reforms, the public procurement process has significant improved\. Good quality procurement plans are being prepared by MDAs; public procurements that go through competitive bidding have increased exponentially, providing better opportunity for increase volumes and value\. Equally, a cadre of procurement professionals has been established in the civil service and procurement specialists have been recruited and deployed in key MDAs\. 65 In a bid to foster commitment controls and ease processing public financial transactions, the roll-out process of the Integrated Public Financial Management Information System (IFMIS) has covered up to 11 MDAs\. Training and support to IFMIS users across MDAs continue to be provided\. To strengthen the financial management capacity in the local councils, the PETRA Accounting package - a financial management information system - has been rolled out to 8 local councils\. Mayor/chairpersons and Chief Administrators together with their respective Deputies have received training in executive financial management practices\. The Auditor-General’s report on Public Accounts for both the central and local governments is now laid in Parliament on record time\. Government has made significant headway in strengthening internal audit functions and the deployment of personnel qualified auditors across government\. Government has been implementing the Public Expenditure Tracking Surveys (PETS) to ascertain the proportion of disbursed public resources that reach the intended beneficiaries, resulting in remarkable improvement in the efficiency of public service delivery\. Public Sector Reforms Major reforms geared towards increasing effectiveness and productivity in the public service was undertaken in the period under review\. Government launched the Multi- Donor Funded Public Sector Reform Programme Phase II with the overarching objective of strengthening and improving capacity in the public service\. The Human Resources Management Office (HRMO) has been created to replace the Establishment Secretary’s Office\. HRMO implements strategies to achieve comprehensive pay reforms, obtain a lean, performance-oriented, well-motivated, modern and efficient civil service to optimize public service delivery\. The outdated General Orders has been replaced with the revised Codes, Rules and Regulations of the Civil Service, including new Administrative Manual comprising regulations\. Government has introduced bio-metric verification of payrolls in MDAs to address the problem of incomplete and inaccurate personnel records and database, and drastically reduce the opportunity for payroll fraud\. The measure has so far resulted in the reduction of the civil service payroll from 16,000 to 12,000 and associated salary savings of Le500 millions per month\. The verification of the health sector payroll has also been successfully completed\. The issue about lack of integrity in the teachers’ payroll which constitutes 50% of public employees and incomplete personnel records and personal database as well as the existence of anomalous files is also being addressed\. Files have been created for all 35,505 teachers\. A physical verification of all teachers is underway aimed at bringing credibility in the teachers’ payroll and updating records in teachers’ files and reconciling all files with the master file held by HRMO and with the IFMIS\. Stocked with the perennial problem of provide reliable electricity and water at affordable cost, Government embarked on capacity building in the Ministry of Energy and Water Resources through donor assistance\. The reform include revision of the tariff structure for electricity, as well as unbundling the services provided by the Ministry to include the 66 creation of the Electricity and Water Regulation Commission (EWR), an Electricity Generation Company, an Electricity Distribution Company and an Energy Asset Commission\. The reform aims at removing the technical and administrative rigidities that debar effective service delivery of electricity and water supplies in the country\. Business Environment Reforms Government over the years took proactive steps to introduce policy-oriented initiatives to improve the business regulatory environment and remove administrative barriers to attract domestic and foreign investors\. To help boost private investment and encourage firms to join the formal sector, Parliament, in July 2007, approved legislation that significantly reduced the complexity and cost of business registration (the General Law on Business Start-Ups and Registration of Business Act)\. In order to modernize the financial transactions, Government adopted the Payment Systems Act (2008), the Securities Act (2008), the Companies Act (2009),the bankruptcy Act (2009), a venture capital scheme, and the Anti-Money Laundering and Criminalization of Terrorism Act (2011)\. In 2009, the Private Sector Development Strategy was launched aimed at unleashing the potential of indigenous enterprises to take advantage of the county’s economic growth\. In 2010, His Excellency, the President launched the National Export Strategy prepared by the Sierra Leone Investment and Export Promotion Agency (SLIEPA) with the sponsorship of the Commonwealth Secretariat\. The Public-Private Partnership (PPP) law was also passed into law in 2010 which aims at encouraging private sector participation in the delivery of public services\. A fast-track commercial court was established to settle commercial disputes in courts quicker and easier\. A comprehensive National Land Policy has been formulated to reform the regulatory and administrative systems surrounding land tenure, ownership and sale\. Significant investments have also been made in improving basic infrastructure and social services to reduce the costs of doing business\. Consequently, Sierra Leone today has steadily moved up the rankings in the influential World Bank “Ease of Doing Businessâ€? Index\. Sierra Leone is on record as one of the top four countries for ease of doing business in ECOWAS and among the only 10 economies globally that have made significant improvements in four areas of regulation, i\.e\. getting credit (credit information), trade across borders, enforcing contracts, and resolving insolvency\. Sierra Leone’s doing business ranking for 2012 rankings has markedly improved by 11 points to 141 out of 183 countries, up from 150 in 2011, making it an investment destination\. Financial Sector Reforms A Financial Sector Development Plan (FSDP) was adopted by Government in August 2009 upon the recommendation of 2006/7 IMF World Bank Financial Sector Assessment Program (FSAP)\. This plan repositioned Bank of Sierra Leone in its rightful place in financial sector reforms to respond to government vision outlined in the Agenda for Change\. 67 As part of the FSDP, a Credit Reference Bureau was established in 2011 in an effort to reduce credit risks in the banking system and increase the chances for bank lending to the public for investment activities\. Rural financial intermediation has received significant boost as a number of deposits and non-deposit taking Micro Finance Institutions have been licensed, including the increasing number of Financial Services Associations involved in agricultural credit\. Effective banking supervision is underway in BSL substantiated by the revision of the banking Act (2000) and the Bank of Sierra Leone Act (2000) to ensure compliance with international standards\. Overall Impact Macroeconomic performance has been strengthened on several fronts except for achieving lower inflation rate due largely to the adverse impact on the domestic economy of the global economic and financial crises\. Interest rates and the exchange rate remain market-driven\. Real interest rates are positive while the exchange rate remains relatively stable\. While prospects for mining revenues remain bright, continued development partners’ assistance in relative terms remain strong to support the availability of official foreign exchange through an auction system by the Bank of Sierra Leone to provide for private sector-led investment activities\. The government budgeting and planning exercise includes factoring an estimated programme external budget support inflows in the nation budget profile following discussions with donors\. As stated earlier, Government domestic revenues as a proportion of GDP have steadily increased from 10\.8 percent of GDP in 2007, 11\.5 percent of GDP in 2008, 11\.8 percent of GDP in 2009, 13\.3 percent of GDP in 2010 and estimated to rise further to 14\.9 percent in 2011\. Total Expenditures and Net lending have trended upwards from 20\.7 percent of GDP in 2008, 22\.9 percent of GDP in 2009, 24\.5 percent of GDP in 2010 and estimated to rise to 25\.8 percent of GDP in 2011\. Sustainability Backed by continuous and sustained donor budget support in the medium term and the prospect of increase revenue in-take from the mining sector by the 10 largest mining companies operating in the country, the availability of foreign exchange made available through the BSL auction system to provide for private sector-led investment activities will be sustained\. Major Factors Affecting Implementation and Outcome The technical delays in the disbursement of programmed external inflows led to a substantial reduction in the orderly supply of foreign exchange to the weekly Foreign 68 Exchange Auction\. Nonetheless, as stated above, increased foreign reserves coupled with prudent economic policies moderated pressure on the exchange rate\. On the domestic front, weak capacity in the implementing agencies including domestic revenue shortfalls by NRA affected the desired impact on the economy\. Lessons Learnt Communication through regular monthly meetings with ministries, departments and agencies (MDAs) and visitations made strengthened and deepened commitment to provided information for reporting purposes on agreed benchmarks\. The catalytic role of the Economic Policy and Research Unit of the Ministry of Finance and Economic Development in monitoring, implementation and reporting of agreed reforms with development partners was able to largely give desired outcomes\. Conclusion In conclusion, the GRGG/C helped to make available foreign currency for imports of essential commodities, preserve the fiscal space needed for poverty reduction while limiting domestic bank financing that should have occurred had the funds not been received, promote efficiency, transparency and accountability in the use of public resources, improve the investment climate and promote exports, and achieve progress in the poverty reduction strategy against a slowdown associated with the global economic and financial crises\. The GRGG/C also helped to create the room for the reduction in the tariff rates for essential commodities like rice, wheat, flour, sugar and fuel which ensured that pass- through effect of higher international commodity prices was lower than the counter- factual\. The implementation of the agreed structural and institutional reforms strengthened government’s capacity in optimizing public service delivery\. Ministry of Finance and Economic Development January 2012 69  Annex 5: Comments of Cofinanciers and Other Partners/Stakeholders N/A 70  Annex 6: List of Supporting Documents I\. Background and Macroeconomic References A\. Related Prior Operations World Bank, Implementation Completion Report on a Credit in the Amount of US$ 30\.0 Million to the Republic of Sierra Leone for the Economic Rehabilitation and Recovery Credit, December 27, 2001\. World Bank, Implementation Completion Report on a Credit in the Amount of US$ 39\.4 Million to the Republic of Sierra Leone for the Second Economic Rehabilitation and Recovery Credit, November 5, 2003\. World Bank, Implementation Completion Report on a Credit in the Amount of US$ 30\.0 Million to the Republic of Sierra Leone for the Third Economic Rehabilitation and Recovery Credit, July 12, 2005\. World Bank, Implementation Completion Report on a Credit in the Amount of US$ 30\.0 Million to the Republic of Sierra Leone for the Fourth Economic Rehabilitation and Recovery Credit, June 6, 2006\. B\. International Monetary Fund (IMF) Reports IMF, Sierra Leone: Article IV Consultation, First Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, etc\., February 2007\. IMF, Sierra Leone: Article IV Consultation, Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, etc\., July 2008\. IMF, Sierra Leone: Article IV Consultation, Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, etc\., January 2009\. IMF, Sierra Leone: Fourth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, etc\., July 2009\. Sierra Leone: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding, December 7, 2009\. Sierra Leone: Letter of Intent, Memorandum of Economic and Financial Policies, and Technical Memorandum of Understanding, December 17, 2010\. C\. Other Relevant Reports 71 Republic of Sierra Leone, Public Financial Management Performance Assessment for 2010\. World Bank, Doing Business 2006: Creating jobs\. World Bank, Doing Business 2012: Doing business in a more transparent world\. II\. Poverty Reduction and Assistance Strategies A\. Government of Sierra Leone Republic of Sierra Leone, First Poverty Reduction Strategy (2005-2007)\. Republic of Sierra Leone, Second Poverty Reduction Strategy (2008-12)\. B\. Development Partners African Development Fund, Mid-Term Review of the 2005-2009 Results-Based Country Strategy Paper and Request for Access to the Fragile States Facility, November 2008\. DFID, Evaluation of DFID Country Programmes, September 2008\. DFID, Operational Plan 2011-2015, DFID Sierra Leone, April 2011\. International Development Association (IDA) International Finance Corporation (IFC), and African Development Bank, Joint Assistance Strategy, FY 10-FY-13, March 4, 2010\. IDA, IFC and AfDB Sierra Leone: Joint Assistance Strategy, 2009-2012, November 2009\. World Bank, Sierra Leone Poverty Diagnostic, October 30, 2009\. World Bank, Sierra Leone: Joint IDA-IMF Staff Advisory Note on the Second Poverty Reduction Strategy, September 17, 2009\. Program Appraisal Reports International Development Association Program Document for a Proposed Programmatic Second Governance Reform and Growth Grant in the Amount of SDR 6\.8 Million (US$ 10 Million Equivalent) to the Republic of Sierra Leone, November 10, 2006\. International Development Association Program Document for a Proposed Second Governance Reform and Growth Credit (GRGC-2) in the Amount of SDR 6\.4 Million (US$ 10 Million Equivalent) to the Republic of Sierra Leone, September 5, 2008\. International Development Association, Program Document for a Proposed Third Governance Reform and Growth Credit (GRGC-3) in the Amount of SDR 6\.4 Million (US$ 10 Million Equivalent) to the Republic of Sierra Leone, October 22, 2009\. 72 International Development Association, Pilot Crisis Response Window Program Document for a Proposed Supplemental Financing in the Amount of SDR 4\.7 Million (US$ 7\.0 Million Equivalent), for the Third Governance Reform and Growth Credit, May 25, 2010\. Selected Program Preparation and Review Documents (chronological order)7 Multi-Donor Budget Support (MDBS) framework for 2006\. Report on a supervision mission for HIPC relief, multi-donor budget support, and appraisal mission for the successor to the Fourth Economic Recovery and Rehabilitation Credit, February 14-24, 2006\. Aide Memoire of a supervision mission for next credit, HIPC relief, and multi-donor budget support, June 13-26, 2006\. Management Letter of May 28, 2007 reviewing progress toward meeting conditions of budget support\. Program Information Document (Concept Stage) for the Third Governance Reform and Growth Supplemental Credit\. Comments from the ROC on the preparation of the Second Governance Reform and Growth Credit\. Minutes of a video conference of October 14, 2009 regarding the Supplemental Credit for the Third Governance Reform and Growth Credit\. Management Letter on a mission of February 16 to March 5, 2010 to review progress towards triggers for World Bank Budget Support in 2010\. Back-to-Office Report of August 5, 2010 reviewing progress within the MDBS framework\. Implementation Status Reports ISR for GRGG-1, 2007\. ISR for GRGC-2, 2009\. ISR for GRGC-3 & Supplemental, 2012\. 7 Based on dated documents and approximation for undated documents 73  IBRD 33478 SIERRA LEONE SELECTED CITIES AND TOWNS MAIN ROADS DISTRICT CAPITALS RAILROADS NATIONAL CAPITAL DISTRICT BOUNDARIES RIVERS INTERNATIONAL BOUNDARIES 13°W 12°W 11°W GUINEA To Ouré-Kaba 10°N 10°N To To Faranah Kindia Falaba s\. Yana Yana Mon go a Mt ar ies W Kabala arc a ra Bendugu t Sc W KOINADUGU GUINEA Grea Kamakwie i S el Fadugu To Bagbe Kamaron Forecariah Madina Junction BOMBALI Bintimani ts\. KAMBIA (1948 m) M Kurubonla cies Pendembu a Kambia m car Lo le S Batkanu Alikalia Bumbuna Litt 9°N 9°N Mange Gbinti Makeni Binkolo Kayima ana Pamp Port Port Loko Tefeya Tefeya Lunsar Magburaka KONO Matotoka Lungi PORT LOKO Yengema Yengema ills l Pepel R oke Sefadu T O N K O L I L I Masingbi ri H FREETOWN Masiaka Njaiama- Sewafe Go Gandorhun Koindu Yonibana Yonibana Yele Yele Songo oa WESTERN M To Mongeri Kolahun Waterloo Waterloo Buedu AREA F\.R\. F\.R\. Kailahun Panguma Rotifunk Moyamba Dambara KAILAHUN Banana Islands Yawri BO KENEMA Pendembu Bay M O YA M B A YA Mano Lago 8°N Bo 8°N Daru g Sembehun Jon Shenge Blama Kenema wa Se Kribundu LIB E R I A a Sherbro Mo Joru Momaligi Sumbuya Turtle Sherbro Matru Islands Island Bonthe Potoru B O N TKH E ittam Pujehun PUJEHUN Zimmi o ATLANTIC OCEAN Lake Mabesi M an Lake Fairo Mape SIERRA 7°N LEONE Sulima To Monrovia 0 20 40 60 Kilometers 0 20 40 50 Miles This map was produced by the Map Design Unit of The World Bank\. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries\. 12°W 11°W NOVEMBER 2004

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Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 20570 PERFORMANCE AUDIT REPORT PAKISTAN THIRD PRIMARY EDUCATION PROJECT (CREDIT 1821-PAK) June 12, 2000 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. Currency Equivalents (annual averages) Currency Unit = Rupees (Rs) US$1\.00 = Rs 40\.0 (January 1996) Abbreviations and Acronyms ADPI Additional Directorate of Public Instruction CEC Civil Works and Engineering Cell CIDA Canadian International Development Agency DPI Directorate of Public Instruction GER Gross Enrollment Ratio ICR Implementation Completion Report OED Operations Evaluation Department PAR Performance Audit Report PEP Primary Education Project SAR Staff Appraisal Report Fiscal Year Government of Pakistan: July 1-June 30 Director-General, Operations Evaluation Mr\. Robert Picciotto Director, Operations Evaluation Department Mr\. Gregory Ingram Acting Manager, Sector and Thematic Evaluations : Mr\. Ridley Nelson Task Manager Ms\. Linda A\. Dove FOR OFFICIAL USE ONLY The World Bank Washington, D\.C\. 20433 U\.SA\. Office of the Director-General Operations Evaluation June 12, 2000 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Performance Audit Report on Pakistan Third Primary Education Project (Credit 1821-PAK) IDA financed the Pakistan Third Primary Education Project (PEPIII) in FY87 in response to the Government of Punjab's request after the province had declined to participate in PEPII approved the previous year\. Total estimated cost was US$233\.91 million and the IDA credit was US$143\.35 million\. The credit was closed in FY96 after an extension of 30 months\. Based on a single province, the project set the pattern for four similar operations in the 1990s\. From 1994, the first Social Action Program Project (Cr\. 2953), the pioneer of IDA-assisted programmatic operation in Pakistan, also supported primary education with policy, budgetary and management interventions\. Objectives were relevant to the Bank's mission to reduce poverty and to the goals of the federal and provincial governments to improve educational quality, access and equity, especially for girls and rural populations\. The project supported activities to: develop institutional capacities; develop and institutionalize policy; and introduce innovations that would influence demand, access, quality and costs\. It supported a large school building and maintenance component; a large study program to advance national and provincial policy and innovation strategies; and new forms of curricula, assessments, in- service teacher training and more affordable textbooks\. CIDA was to have financed textbook paper and community participation components but the agency withdrew following differences of view on changes in design and scope\. The Implementation Completion Report (ICR) shows that implementation was slow and achievements were far below expectations\. It attributes the project's failure to meet its objectives to the extremely challenging environment, weak borrower commitment and capacity, delays and problems with TA from non-IDA sources, deficient preparation, and the lack of flexible lending instruments\. The ICR is thoughtful in its analysis of the issues but, while it comments on some deficiencies in Bank performance at appraisal, some important gaps in reporting bias the ICR's overall evaluation in the Bank's favor\. The weight the Region gave to relevance and responsiveness in justifying the project was disproportionate to implementation realities\. The concerns voiced internally--concerns about project size, complexity and risks-were overshadowed by the IDA strategy to support basic and girls education in a poor but strategically important country\. OED concurs with the Region that weaknesses in borrower commitment, capacity and institutions (weaknesses identified in internal reviews) should have been more carefully appraised\. The Bank's decision to go ahead is a concern because staff considered the project unready for implementation and of high risk\. The ICR argues that the investment instrument was not a sufficiently flexible instrument to overcome problems but, in fact, during preparation, more flexible instruments were considered\. Staff proposed tranching disbursements based on satisfactory borrower performance but (the proposal) did not go forward after internal review\. Instead, in final form, the legal 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 agreement signed by federal and provincial governments included annual reviews of a mandated action program that would allow the Bank and borrower to adjust implementation mechanisms as needed\. However, the Bank compromised its capacity to supervise implementation from a position of strength by making concessions to the borrower's objections to legal conditions at appraisal, at negotiations and at credit effectiveness\. Supervision was further compromised because of Bank staff turnover, lax monitoring of compliance with the legal agreement and patchy supervision of technical components\. The ICR points out that the components chosen to achieve project objectives were insufficiently prepared and tested\. An example is the phased approach to the policy studies program which proved ineffective\. However, the ICR fails to question why the Bank had allowed these activities to continue so long without restructuring the component\. The staff argued that the project's emphasis on policy became less important relative to the huge investment in school construction activities\. But this does not justify the lack of proactivity in revamping a costly component and redefining project objectives\. The Bank failed to attend sufficiently to the incentives and linkages inherent in the education system\. In introducing an innovation to employ low-cost assistant teachers, many of them women, the Bank took a risk to advance an important initiative but failed to address the lack of policy, institutional and cultural supports in this area\. In establishing independent management of primary education, it ignored the tight structural links that bind primary education to more advanced levels and require coordination\. In addressing challenges of project size and complexity, it decided that the assessment component was the most likely candidate to drop\. Unfortunately, this was a key to incentive for teachers and students to adopt the new curriculum\. In de-linking issues of teacher employment and teacher pay at the borrower's request, the Bank side-stepped critical issues of teacher management and high recurrent budgets for teacher remuneration\. A fundamental flaw exacerbated these weaknesses-the absence of clear policies and procedures agreed between federal and provincial authorities to govern their authority and responsibilities\. Punjab's vision of greater autonomy promoted local ownership and effort, which the Bank supported\. But the province was limited by federal laws, policies, budgets and control of project funds\. The lack of clarity and resulting tensions adversely affected project coordination and implementation\. The project found itself entangled in a much broader issue for federal-provincial relations than it was able to handle\. The audit reaffirms the conclusions of OED's previous review of the Region's ICR\. The main disagreement is on Bank performance which OED rates as unsatisfactory (ICR unsatisfactory only at appraisal)\. The Bank used poor judgement in recommending the project as ready for IDA assistance when it considered the risks insurmountable\. During supervision the Bank failed to ensure that project resources were used efficiently or to take remedial action when they were not\. OED agrees with most other ICR ratings\. Outcomes are rated as unsatisfactory because many components were not implemented and those that were implemented did not achieve targets set or results intended\. Institutional development is rated as negligible and borrower performance as unsatisfactory\. OED rates sustainability as unlikely (ICR uncertain) because the government's plans for future project operation are unformed and under-funding of recurrent budgets continues\. Perhaps the most positive result for the Bank was that it reinforced the Bank's appreciation of the need for a new strategy for social sector development in Pakistan\. Several lessons are worthy of broad dissemination: * When a project proposal has serious flaws, the Bank should not proceed under the assumption that trouble-shooting action during implementation will be effective or without cost\. If the view is that more preparation would be unlikely to improve implementation readiness, as in the PEP III case, the project should not go forward for Board approval\. Experience shows that turnaround is difficult to achieve during implementation without major review and borrower commitment to restructuring\. 3 * Relevance, responsiveness and high levels of investment inputs do not ensure good progress and results\. In the PEP III case, the project's relevance to the Bank's mission in poverty and basic education, and its responsiveness to the Punjab's request IDA assistance, were necessary but not sufficient conditions for success\. * Rigorous appraisal of the borrower's statement of commitment and capacity are required to inform project design\. Experience in Pakistan indicates that government habitually overpromises and underperforms\. This is the Region's insight with which OED concurs\. * OED supports the ICR's insight that policy is not advanced when the Bank provides financing for large investment activities before the borrower has begun to improve the enabling environment\. When budgets are tight, institutions are weak, and ownership uncertain, investment activities such as the large school construction component in PEPIII, are likely to attract most attention, reducing the focus on policy and qualitative outcomes\. * When the Bank favors a shift to decentralization of education, it should avoid championing the stakeholder who is the major beneficiary while failing to ensure that other stakeholders' concerns are adequately addressed\. In retrospect, it is clear that the Bank's implicit strategy in favor of the province was ill-prepared, a consensus among stakeholders was absent, and the Bank found itself uncomfortably placed to advance the project\. * Rigorous self-evaluation and disclosure helps foster confidence among stakeholders, partners and Bank staff that the institution is directing scarce IDA funds to interventions that have been carefully selected because they will directly benefit the poor\. In the PEP III case, the Bank could have done better in balancing risks and benefits by additional high quality review of technical and institutional components prior to Board presentation\. During implementation, Bank managers need to encourage staff and government officials to review all objectives and components realistically and candidly and not to hold back from advising on drastic remedial action when appropriate, even if that means restructuring or cancellation\. * In primary education which is localized, yet geographically dispersed, support to the many related local institutions with diverse specialized functions is critical but difficult to achieve\. The Bank is now doing more to foster strong institutions at national level but it also needs to foster education sector institutions locally\. While it may lack the capacity to do this directly, it is well positioned to achieve partnership with locally-based change-agents to help sector institutions "learn by doing\." Attachment  CONTENTS Ratings and Responsibilities \.m\.1 Preface \. \.v 1\. Introduction\. \. 1 Objectives \."\.- Institutional Development\. \.1 Policy Reform \.2\. \.2 Innovation \.2\. \.2 Project Rationale\. \. \. \. 2 2\. Project Implementation\.5 Federal-Provincial Relations\.5 Policy Development \. \.6 Institutional Development\. \.7 School Construction and Maintenance\.9 Innovation Objectives\. 10 3\. Outcomes\. 10 Access\. 10 Quality\. 10 Institutional Development\. 11 4\. Issues and Findings\. \. 12 Ratings\. \. \. 13 5\. Lessons \. 13 Annexes A\. Basic Data \. \. 19 B\. Comments from the Borrower\.23 This report was prepared by Linda A\. Dove (Task Manager) and Angela Ransom (Consultant)\. William Hurlburt edited the report\. Marie Daramy provided administrative support\.  Ill Principal Ratings ICR PAR Outcome Unsatisfactory Unsatisfactory Sustainability Uncertain Unlikely institutional Development Negligible Negligible Borrower Performance Unsatisfactory Unsatisfactory Bank Performance Satisfactory Unsatisfactory Key Staff Responsibilities Task Manager Division Chief Country Director Appraisal R\. Cambridge W\. Rees D\. Haynes (Actg) Midterm D\. Viens R\. Cuca D\. Haynes (Actg) Completion B\.Parvez B\.Herz M\.Nishimuzu  V Preface This is an Operations Evaluation Department (OED) Performance Audit Report (PAR) on the Third Primary Education Project in Pakistan\. PEPIII provided assistance to the province of Punjab for primary education, promoting education of the poor and girls in rural areas, and capacity-building to enhance delivery of quality primary education\. The project was estimated cost to US$233\.91 million and an IDA credit (Cr\.1821-PAK) for US$143\.35 million was targeted to finance a portion of the provincial government's five-year investment program\. The credit was approved on June 16, 1987, and closed on June 30, 1996 after an extension of two and a half years\. The project was an immediate precursor to a new sector-wide approach to lending in Pakistan\. OED selected it for audit as a building block for a review of social sector assistance \. That review was under discussion with the Region in 1998/99 following OED's evaluation of the Implementation Completion Report (ICR) for the first Social Action Program Project (SAPP I, Credit 2593-PK)\. This PEP III review focuses primarily on filling gaps in the Implementation Completion Report while painting a more complex picture than the ICR of the factors leading to disappointing outcomes\. The additional source material in OED's review focuses almost entirely on the Bank's role and some of the factors that prompted the Region to change its approach\. A mission to Pakistan was not mounted because the ICR's self-evaluation on other aspects is based on convincing evidence\. Sources included interviews with Bank staff involved at various stages of the project and documentary sources including the ICR (no\. 16831, June 27, 1997), the Staff Appraisal Report (no\. 6492-PAK, May 28, 1997), and project files\. ICRs consulted include the related Second Primary Education Project (no\. 14218, April 3, 1995) and SAPP I (no\. 18043, June 22, 1998)\. Following customary procedures, copies of the draft audit report were sent to the relevant government officials and agencies for their review and comments\. A number of observations were made, which have been incorporated into the PAR as Annex B\.  1 1\. Introduction 1\.1 OED validates the Bank's assessment in its Implementation Completion Report that the results of the Third Primary Education Project (PEPIII) in Pakistan were unsatisfactory\. Going beyond the ICR, the audit illustrates the complexities and dilemmas facing the Bank when strategic priorities conflict with considerations of implementation readiness and capacity\. OED underscores the need for rigor by Bank management in scrutinizing rationales for IDA and Bank lending when project goals are consistent with Bank priorities and country strategies but risks are extremely high\. OED also points to how transparency in reporting-or the absence of it-affects the quality of Bank performance\. 1\.2 The project supported the Pakistan govemment's effort to translate ambitious goals and targets into the political commitment, policy decisions, and resources necessary to achieve universal primary education\. Successive five-year plans had fallen far short of expectations-only 50 percent of school-age children were in primary schools\. Low budgetary allocations to primary education and under-spending of available resources resulted in inadequate infrastructure for basic education (schools, competent teachers, and good quality, affordable learning materials)\. Inadequate infrastructure and low quality were associated with low community demand and support for primary education and low enrollments and high dropout rates, especially in rural areas and for girls\. 1\.3 Two previous projects addressed these demand and qualitative issues\. The First Primary Education Project (PEPI) aimed to determine which inputs had the greatest impact on access and quality\. It covered selected districts nationwide, the Second Primary Education Project (PEPII) drew upon lessons learned to provide a range of inputs to primary education\. It covered the same districts in Baluchistan, North-West Frontier Province (NWFP) and Sind, three provinces with high poverty profiles\. PEPIII covered Punjab only, a province that was relatively well-endowed\. 1\.4 PEPIII resulted from a separate request by the government of Punjab for IDA assistance on primary education\. IDA agreed to finance virtually all elements of the province's five-year investment program\. As the borrower, the federal government signed the Development Credit Agreement (DCA) with IDA and channeled project funds to the province accordingly\. The project supported the government's broad goals of improving education quality and increasing equity for rural populations and girls\. It drew from the previous projects' experience and shifted IDA strategy to directly address systemic policy, organizational and managerial constraints on basic education development\. It was to achieve results through a range of studies and follow-up action mandated in a Project Agreement signed by the Punjab government\. Objectives 1\.5 The project's objectives were highly relevant to the issues facing-primary education in Pakistan\. The project supported activities to: a) develop and strengthen institutional capacity to plan, manage, and implement Punjab's investment program; b) develop and institutionalize policy reform; and c) introduce innovations in the investment components that would have an impact on demand, access, quality, and costs\. The operation concentrated on Punjab, but had national aspects\. Components covered three areas of emphasis\. 2 Institutional Development * Create the Additional Directorate of Public Instruction (ADPI) * Strengthen the Civil Engineering Cell (CEC) in the Punjab Education Department * Strengthen the National Bureau of Curriculum and Textbooks (NBCT) * Strengthen the Curriculum Research and Development Center (CRDC) * Strengthen the Punjab Provincial Education Extension Center (PEEC) Policy Reform * Strengthen the career development of primary school teachers * Develop and implement a plan to recruit, train, and appoint more female teachers * Improve the incentive package to encourage more teachers to serve in rural areas * Improve the maintenance of public primary school buildings * Increase parental and community involvement in school management Innovation * Introduce a two-stage primary school curriculum with affordable materials * Reform pre-service and in-service teacher training and development * Develop a communication and demand-generation program Project Rationale 1\.6 In its analysis of project rationale and quality at entry, the ICR omits significant information which downplays the project's lack of readiness for implementation\. The omission appears to follow a pattern established during preparation\. Staff correctly stressed the pressing need for primary education investment in Pakistan\. But the Punjab project also arose from the province's strong requests for a separate operation\. The Bank had expected Punjab to participate in PEPII but at appraisal of that project, the government declined to do so\.' The project brief stated, "This project is essentially the Punjab component of PEPII\. The issues are similar and have largely been resolved\." In fact, this statement misleadingly under-estimated issues that were specific to the Punjabi context and that would affect the project's quality at entry if unattended to\. 1\. Project Completion Report: Pakistan Second Primary Education Project, April 3, 1995\. 2\. Memo dated June 3, 1986 on Proposed Third Primary Education Project, Project Brief Second Update\. 3 1\.7 Staffs' eagerness to be responsive to the Punjab government and to secure the project for IDA assistance overrode internal concerns that surfaced throughout preparation-practical concerns about project size, complexity and financial affordability, the Punjab's poor implementation capacity as demonstrated in PEPI, and the appropriateness of technical components\. Before the appraisal mission, in a note to project staff, a senior Education and Training Department education specialist put on record concerns about the project's feasibility\. "The scope of the project is staggering\. The proposed construction of 13, 000 new classrooms and rehabilitation of 8, 000 existing classrooms is - to my knowledge - the most complex construction program ever financed by the Bank\. Yet the procurement and management arrangement for this massive operation remain nebulous\. Project management in the Punjab in the first project (PEPI) was very unstable and the implementation record was barely adequate\. The second primary education project is barely underway and already problems are cropping up\. There seem to be major questions in respect of the specifications of the bidding documents, the implications of the tranching method, and the outcome of the bidding process\. All this demonstrates that we have not yet developed a demonstrably efficient approach for large scale primary school construction in Pakistan\. Under these conditions, the risks involved in embarking on a construction program double the size of PEPII seem to me unacceptably high\. "3 1\.8 The review questioned the capability of the Federal Coordinating Unit (FCU) and the Punjab Project Implementation Unit in managing the construction component (by far the largest expenditure category under the credit)\. It recommended scaling down the program and experimenting in building design and construction techniques\. It also questioned other aspects: the prospects for sustainability, given the high recurrent costs implications for provincial and federal governments; the wisdom of providing IDA funds for incremental recurrent costs given Punjab's past negligence in complying with audit covenants; and the design assumptions inherited from the previous projects\. On this, the note stated that experience "had not yet yielded a demonstrably effective and replicable project model," and that evidence was lacking that improved physical facilities and better teaching significantly reduced parent's unwillingness to send children to public schools in the absence of policies to mobilize demand in rural areas\. In addition, the note said, provincial educators doubted the effectiveness of the learning modules as tools for improving educational quality\. The review stopped short of recommending that staff redesign the project but did recommend establishing institutional mechanisms for monitoring and adjusting interventions\. 1\.9 Within the Bank, questions about size, affordability, feasibility and the short implementation period continued right up to Board approval\. To its credit, the Bank responded to some key concerns\. It reduced the construction component by one-quarter; dropped an important but difficult student assessment component; and obtained assurances from the federal government that it would provide counterpart funds during implementation and meet recurrent costs for the primary schools after project completion if the Punjab government was unable to do so\. But the degree of commitment to, and consensus on policy development, and weak system capacities were problems that preoccupied staff\. They tried to compensate during appraisal by proposing an innovation first introduced for PEPII-that the credit should be disbursed in tranches when the government satisfied important legal conditions\. But they abandoned the proposal at negotiations when the government delegation strongly objected to the imposition of conditions\. It argued that IDA already had the authority to delay disbursements under section 6\.02 of the General Conditions\. The minutes show that the Bank persevered in trying to compensate for the weaknesses\. The Bank affirmed that it viewed the policy, institutional and innovative components 3\. Memo dated June 3, 1986 on Proposed Third Primary Education Project, Project Brief Second Update: Comments\. 4 as of paramount importance and would regard progress on them as a particular focus of mandatory annual reviews\. Progress would be assessed against review criteria and an "Action Program Summary" attached to the legal agreement, but sanctions for non-compliance were not individually identified\. The federal and the provincial government supported and agreed to the proposed action program\. ICR acknowledges that the final arrangements left the Bank with reduced power to leverage progress during implementation\. That the Bank was willing to go ahead with the project despite the strong evidence of commitment to implement the project as designed may have also signaled that the Bank was unlikely to take strong action if progress proved slow\. 1\.10 The Bank's completion reporting, like its project brief, is thoughtful about many issues but does not take account of the depth of rivalry and poor coordination between the federal and provincial governments\. The ICR limits its analysis to the weaknesses in the horizontal structures that hampered the coordination required to successfully implement the project\. However, serious tensions existed vertically also between the federal and provincial governments\. Conflicts arose over their authority and roles in primary education policy and over control of the project\. The central government traditionally played a prominent coordination role through the FCU in the two earlier projects\. Early on, its officials asked IDA for clarification on the unit's role in PEPIII\. They expressed concerns that the precedent of greater autonomy and new approaches to policy in Punjab would erode the federal authority since other provinces might well demand similar treatment\. They saw that Punjab's own program challenged the federal authority in several areas, such as curriculum and materials, teacher training, programs for increasing rural demand, and monitoring and evaluation\. Even as late as appraisal, the federal authorities were still raising questions about the large size and scope of the project relative to the other provinces\. The IDA task manager mediated the dispute, arguing that the potential benefits would feed back to the other provinces in better monitoring and evaluation, curriculum development and textbook provision and that this justified the project's complexity\. Bank staff say that they favored strengthening of provincial capabilities\. Centralized policy and management had proven weak and inefficient, and the dispersed nature of primary schools clearly required local handling\. Staff indicate that the issues of central and provincial control were so complex and sensitive and that they aimed to intervene only modestly through the project\. However, by downplaying these critical problems, the Bank set up unrealistically positive expectations for project implementation progress and successful results; made it easy during implementation for policy aspects to be given lower priority relative to investment inputs; and discouraged a frank analysis at project completion of the project's failure to build on a solid agreement about federal and provincial authority and responsibilities\. The absence of agreement proved to be a critically important factor accounting for slow progress and poor results\. 1\.11 The notes which staff prepared for their use at Board presentation show that they expected questions on the justification for the project\. "Why is the Bank undertaking a project of this size and complexity (it will be the largest credit or loan the Bank has ever extended for primary education) in a country and sector where previous Bank group projects have suffered implementation problems and where there have been doubts with respect of the Government's commitment to the sector and to the education of women in particular?' 1\.12 The project won Board approval with little but positive comment on the importance of IDA's assistance to basic education for girls in Pakistan\. The pre-approval briefing note shows 4\. Memo from Chief, Pakistan Country Department to Senior Operations Adviser, Europe, Middle East and North Africa Department\. June 15, 1987\. 5 that Executive Directors did not raise any major issues\. In their presentation, staff said that the Punjab government had demonstrated improved commitment through its latest five-year education plan which would double the level of resources allocated to the education sector and would emphasize primary education\. They underscored that the magnitude of educational problems in Pakistan required a major effort and that major donors (USA, UK, Canada, and the European Union) agreed\. They underscored the fact that project design included institutional arrangements to reduce the risk of implementation problems including annual reviews\. 1\.13 When OED asked staff about the project risks and lack of readiness for implementation, they said that delay had not been a viable option\. The project never would have been ready even with delay\. Considerations underlying this strongly held view included the perception of an institutional imperative to foster relations with an important, low-income country and to ensure disbursement of hard-fought-for IDA funds on poverty-targeted operations\. However, in an exchange of views not long into implementation, a project officer who had been with the project during preparation wrote, "\.we need to lower our sights and incrementally redesign this project\."s This evidence is clear that staff recommended to the Board that the investments should go ahead despite the project's highly unsatisfactory quality at entry\. 2\. Project Implementation 2\.1 The ICR assesses the degree to which planned project activities were implemented\. It shows that many components were not implemented and those that were proved unsatisfactory\. OED focuses its assessment on those project activities in which quality of supervision was compromised or in which the effective use of covenants to leverage implementation progress was compromised\. The project was implemented in phases\. The first phase, from appraisal to midterm (1986-89), would focus on completing policy studies, developing institutions, implementing existing policies and developing new policies that affected the operation of the primary school system\. The major expansion activities were to take place during the second phase, from midterm to credit closing (1990-93)\. Policy development required the studies to be started and completed, the results to be reviewed and the recommendations to be agreed on\. Administrative and legal actions and implementing and monitoring mechanisms had to be established\. This meant that project studies and investment activities needed careful sequencing, good coordination, and timely implementation by all concerned agencies and institutions\. The SAR argued that a phased approach, with its emphasis on strengthening the institutional capacity of all agencies during the first two years, would overcome the risks\. This was optimistic given Punjab's record of delayed, slow and poor implementation\. The ICR assesses the phased strategy as overly ambitious and too structured to be easily implemented given poor provincial capacity, resistance to change within the provincial government, and the limited decision-making power of the provincial Education Department\. However, it does not explore why the Bank downplayed these risks at the design stage since they were evident from the experience of the previous projects; nor why the Bank failed to produce alternatives to the phased approach when it stalled in implementation\. Federal-Provincial Relations 2\.2 Because important constraints were not fully explored and addressed at appraisal, the consequences were serious for implementation\. Ignoring tensions between federal and provincial authorities over their roles and responsibilities proved costly\. Provincial authority over education was limited by federal laws and authority over policy, planning and resource allocation including 5\. Memo dated December 9, 1987\. 6 the project funds\. This created tension when Punjab tried to take initiatives in the project and in the provincial education system\. Successive supervision missions raised the problem, according to the files\. They recommended that federal and provincial officials agree on guidelines defining communication, coordination, reporting authority and the responsibilities of the agencies involved in project implementation\. But neither the files nor the completion report say whether action was taken over the nine years of implementation\. Policy Development 2\.3 Apart from federal-provincial problems, little progress was achieved with the policy and related institutional developments because the study program was completed nearly seven years late, not in the project's first phase\. The program was expected to provide guidance on innovations planned for the second phase\. The studies eventually succeeded in generating information on significant issues relevant to demand, access, quality and costs but follow-up action did not result\.' By the first supervision mission, the baseline study against which project effectiveness was to be measured had not been designed or contracted\. By 1992, only one study had been commissioned\. Most were completed between 1994 and 1996, after the original completion date\. 2\.4 The ICR correctly states that delays in completion of the studies seriously undermined achievement of the policy objectives\. One factor in the delays was the discontinuity in the Bank's management of the project-between project preparation and credit effectiveness\. Project officers changed four times during this period, according to the files\. Another factor noted in supervision reports was the absence of mechanisms in the project for announcing the availability of study funds and for soliciting and reviewing proposals\. The studies were contracted in individual institutions, the national agencies such as the CDRC, the Institute of Educational Research and the Academy for Educational Planning and Management, but with little horizontal coordination\. These institutions were not aware of the categories of expenditures (personnel, equipment, supplies, etc\.) that could be funded from the project\. Supervision staff recommended that the Punjab Education Department establish a research review committee to appraise proposals and decide on how funds would be spent\. Supervision reports show that the committee was established in 1989 but that it was not effective\. The ICR does not mention the committee at all\. A Bank project officer interviewed said that, overall, a mechanism to address policy issues in a coherent way was never established in PEPIII (or in subsequent education projects)\. 2\.5 OED has comments on other implementation shortcomings pertaining to strengthening policy and sector development identified in the ICR\. * The ICR states that the borrower agreed during negotiations that spending on quality inputs would be increased to about 7 percent of the recurrent budget\. The amount was to be met from project funds up to fiscal 1993\. Afterwards the cost was to be borne by the recurrent budget at a level acceptable to IDA\. It is unclear why the agreement was not implemented\. * Funds for the textbook subsidy were not provided by the government due to the withdrawal of the Canadian International Development Agency (CIDA) financing for paper\. The ICR fails to explain fully CIDA's grounds for withdrawal\. The project files indicate that the agency withdrew its funding because import tariffs on the paper would undermine any cost 6\. Studies sought ways to improve the career development of primary school teachers and the supply and competency of women teachers; attract teachers to rural areas; sustain textbook financing and primary school maintenance; and encourage parental and community involvement in school management\. 7 saving intended as a subsidy for textbook users\. As a result, textbook prices rose with the introduction of new books\. * The study on teacher incentives was critical\. The component designed to deploy teachers more efficiently included the creation of a new category of assistant teacher in rural areas, especially women, to accept posts in rural areas\. The level of teacher pay in an expanding teaching force was an issue identified as critical for cost and sustainability\. But at negotiations, the Bank granted Punjab's request to limit the policy study to teacher employment policies and not to cover issues of teacher pay\. This, presumably, was a necessary trade-off for successful negotiations but the limitation on the study's scope seriously flawed the design and usefulness\. Institutional Development 2\.6 In hindsight, it is evident that the project tried to create new institutions to fill gaps in national or provincial capacity without paying sufficient attention to how they might fit into the established institutional dynamics\. The project also paid insufficient attention to supporting the many different types and levels of institution expected to adopt new ways\. 2\.7 Canada withdrew its support for the demand-generation and community participation components\. Originally, a National Institute for Communication through Education was to be established under federal auspices\. The Bank had imposed a condition for credit effectiveness that the Punjab should confirm agreement for CIDA financing of the Institute\. But when discussions on the component's design threatened to delay the overall project, the Bank waived the condition\. Staff pointed out that Punjab had begun its own program to increase demand for primary education in eight districts and had questions about the role of federal institutions in this area\. In Punjab's view, the role of the Institute needed to be redefined to take account of decentralization in progress\. As a result of the Bank's waiver, CIDA withdrew and the Institute was not established\. The ICR affirms that "in retrospect, [the Institute] was a non-starter," because it focused on the supply of trained teachers and took little account of demand\. It does not say whether CIDA shared this view\. The files report that CIDA withdrew its support because "available funds would not permit achieving satisfactorily the objectives of the component originally envisaged during project appraisal and negotiations\." Whether the failure to establish the Institute would have made a difference in the project is an issue beyond the scope of OED's review to assess\. 2\.8 The ICR discusses problems experienced in implementing a key institutional component that would separate the management of primary education in Punjab from secondary education\. The case for separate management was based on evidence that rigorous competition for a limited number of school places at more advanced levels of the education ladder distorts the content of the primary education curriculum and limits scope for effective organization and deployment of resources to benefit primary education\. To ensure proper funding and management priority for primary education, the project relied on the establishment of the new Additional Directorate for Primary Education\. But the ADPI did not develop a distinct focus on primary education; it did not develop a specialized cadre of primary education managers and it had little autonomy in choosing and deploying its own staff\. The ICR reports that, as a result, staffs project activities were never fully integrated at the national, provincial and district levels with key agencies such as the 7\. In an exchange of memos six months after Board approval, IDA project staff expressed concern about the project's prospects\. One staff wrote, "I don't think there is any way that [Punjab] will be able to implement the immense institutional development\. program\." Memo dated December 9, 1987\. 8 national curriculum agency and the Punjab's textbook and education extension agencies\. It is difficult to reconcile these deficiencies with the ICR's claim that the ADPI attracted resources to primary education and improved sector coordination, including with donors, unless it was taking a short-term view\. Moreover, an additional problem was the institution's low level of real autonomy, since DPI retained overall authority in the administrative hierarchy\. The ICR's explanation of the failure of the component is that the unified management of education was too deeply entrenched in Punjab to easily change\. While no doubt accurate, this serves to assign all responsibility for failure to the Punjab alone\. It fails to ask whether the Bank's support for establishing the ADPI was an appropriate way of generating a better appreciation for the benefits of primary education in itself and drawing more resources to it\. In OED's view, given the need for deeper changes in the attitudes and behavior of the education establishment, the bureaucratic approach chosen was at best only a partial solution and at worst missed the mark\. It ignored critical conditions for behavioral change such as the incentives and linkages built into the education structure which drive the behavior of administrators and teachers in primary education and which require more sophisticated, long-term strategies\. 2\.9 In a similar fashion, the ICR attributes weak implementation of teacher training activities to the government's inconsistent performance while it neglects to explore fully the Bank's responsibility\. The ICR states that none of teacher training activities were implemented on schedule, and those that were implemented did not have the intended impact on teacher quality and supply\. It attributes the unsatisfactory implementation to inadequate recurrent funding and administrative support, and excessive rates of transfer for teachers once trained\. To its credit, the ICR candidly states that confidence placed in the Primary Training Units proved misplaced and that the project's reliance on these bodies meant that the distance education program designed for unqualified women teachers was not implemented\. It also states that new schools, which were mainly for girls, could not operate because of a freeze on teacher recruitment arising from the unplanned expansion in the graduation of trained teachers\. And it admits that the Bank does not know whether the policy of preferential recruitment of female teachers was implemented or not\. But, the evidence available strongly suggests that the failures are not only attributable to borrower performance but also to poor judgements by the Bank at the design stage\. In its eagerness to promote in-service training on grounds of quality and cost, the Bank appears to have ignored Punjab's plans to expand pre-service training\. This negatively affected the coherence of teacher development strategies and implementation priorities\. The Bank had all the information it needed to make the necessary adjustments\. The files describe Punjab's plans to double the intake of the pre-service teacher training program through the introduction of the Primary Training Units in secondary schools\. According to the ICR, the program resulted in a massive oversupply of about 100,000 teachers\. The quality proved poor because the units were poorly staffed and equipped\. Consequently, Punjab had to close down all teacher training programs from 1992 onwards (including programs to enhance the quality of PEPIII pre-service training)\. 2\.10 The project supported the establishment of a provincial Primary Education Unit in the Curriculum Research and Development Center and a federal unit in the National Bureau of Curriculum and Textbooks\. The Punjab unit was established and carried out development of the new two-stage curriculum and supporting materials\. The ICR reports that the activities were delayed but that the CDRC eventually functioned as intended\. It does not discuss project documentation which clearly shows that Punjab was developing an alternative to the national integrated curriculum and planned to adopt it if a trial in 120 schools proved successful\. The record shows that the Punjab authorities acknowledged to Bank staff that the actions and plans contravened the provisions of the legal agreement and infringed on the constitutional authority of the federal government to prescribe national curriculum\. At the federal level the counterpart unit was not established which the ICR attributes to insufficient ownership of the new concept of primary-level subject specialization among curriculum development staff\. While curriculum staff 9 may well have been unfamiliar with the innovation, the ICR fails to consider whether implementation shortcomings were also the result of the struggle for control between federal and provincial authorities\. Also, it is reasonable to suggest that the widely-held belief that the content of primary education is valuable to students only if it helps them pass examinations required for secondary level may also have been a factor in reducing federal support for the project's curriculum interventions\. School Construction and Maintenance 2\.11 The ICR reports that the major cause of disbursement delay was the slow implementation of the school building component\. Less than a quarter of the construction was completed by the original project closing date\. Finally the appraisal target was met but the quality of construction was poor\. The bulk of construction occurred during the three-year period after 1993\. The documentation shows that inadequate counterpart funding and irregular supervision of architectural and engineering work were serious institutional weaknesses on the government's side\. The government lacked appreciation of the value of supervision in ensuring the quality and soundness of school structures and was not committed to funding technical supervision\. One Bank staff member said that involving local communities who were stakeholders and beneficiaries would have been more effective\. The approach was not common at the time but has been used in subsequent education projects in Pakistan\. 2\.12 CEC was established under the project to do school maintenance\. The rationale for a separate institution was that maintenance of valuable school building investments was essential and that a dedicated agency was needed because the Department of Communication and Works specialized in new construction which required different capacities\. According to the ICR, the CEC did not become effective in maintenance because new construction received more attention and appreciation of the costs of neglecting maintenance was low\. But the new agency did not receive enough skilled staff or equipment to carry out a major construction program and the Punjab government closed it down after project completion\. The ICR does not explore other factors that appear to have led to this failure\. Once again, these stem mainly from the Bank's decision to include a new institution in the project design\. The Punjab government was openly opposed to establishing any agency competitive with the Works department\. Appraisal documents commented on the problem this raised\. Nevertheless, the Bank went ahead with the strategy, presumably because it was anxious to protect the long-term value of the large investments in infrastructure for the beneficiaries\. Unsure of government commitment, the Bank made adequate staffing of the new agency a condition for credit effectiveness and actually postponed effectiveness twice before satisfied that the government had complied\. This firmness was appropriate\. However, the government appointed Works Department staff who were seconded to the CEC, thus undermining the CEC's authority as a separate maintenance agency\. In the absence of information to the contrary, it is reasonable to assume that this action reflected severe shortages of skilled personnel available to work in a junior government agency and reluctance to offend the Works department\. Innovation Objectives 2\.13 OED agrees with the ICR's assessment that the innovative components were not fully defined and thoroughly appraised\. Nor were they adequately supervised\. This contributed to poor implementation\. * Project activities to generate demand for primary education and to increase parental and community participation in school management were not successful\. The component aimed 10 to build institutions to support the objectives through the National Institute for Communication and Education at federal level and participatory school management committees at local level\. CIDA withdrew its support because it failed to reach agreement with Punjab on the component's content and organization\. As a result, the funding for the Institute was not forthcoming and it was not established\. The Bank decided to lift agreement with CIDA as a condition for credit effectiveness in the interests of avoiding delay\. In OED's view, this action may have inadvertently signaled to the government that the Bank did not give high priority to the community element and undermined the prospects for progress during implementation\. The ICR does not explain the nature of the disagreement with CIDA\. It may well have been that Punjab resisted the establishment of a federal institution to guide grassroots activity in the province\. If so, the ICR might have assessed more critically the Bank's handling of yet another federal-provincial issue, especially because an important bilateral partner was involved\. * Teachers did not receive adequate training in new curricular philosophy and methodologies\. The ICR does not say, however, whether all teachers received copies of the teacher guides\. * Learning coordinators were appointed as planned\. But their numbers were too few to meet the needs of schools, the content of their training was poor and transportation to schools was scarce and costly\. The ICR might also have mentioned that the bureaucratic culture created disincentives for personnel to choose a career path that valued advisory and technical skills over positions that carried administrative authority\. 3\. Outcomes Access 3\.1 In 1985-86 the gross enrolment ratio (GER) was 55 percent (45 percent for girls and 63 percent for boys)\. The 1992-93 target was gender parity at a GER of 74 percent\. The 1995-96 school census data indicate a public sector GER of about 60 percent (51 percent for girls and 68 percent for boys) indicating only a 5 percentage point increase over 10 years and no progress on reducing the gender gap\. This lends some credence to earlier staff concerns about the need for so large a school building program\. 3\.2 Sixty percent of the original target of providing 10,300 schools accessible to girls was achieved\. This achievement was less remarkable than it appears because it was accomplished in part by making boys' schools also eligible for project funds, a concession the Bank made during negotiations\. * Inadequate data, political interference on site selection, and limited planning capacity at the district level make it unclear whether the schools built met local need and demand\. A verification survey that sampled 303 sites found that half did not meet all the criteria established for needs-based resource use\. * The incentive package to attract more teachers to rural areas was not developed, and teachers in rural areas still have lower housing and transportation allowances\. Quality 3\.3 According to the ICR, the under-funding of quality inputs continues and is a major obstacle to sustained improvements in teaching and learning\. 11 * The two-stage curriculum was developed and introduced in schools for grades 1-5, along with new textbooks and other supporting materials reflecting the new curricular objectives\. But teacher training was not effective with the result that teachers did not understand new teaching concepts and could not apply new methods\. Learning coordinators were ill-equipped to advise teachers and develop their skills\. For these reasons, the project had weak effects on teaching and learning\. * An independent panel of practicing teachers assessed teacher guides as a substantial improvement over the past, of good quality, and having the potential to positively influence teaching behavior if used as recommended\. * The new textbooks received below average ratings for physical quality and teaching-learning content\. Those for classes 1-3 were considered only marginally better than the books they replaced\. Those for classes 4-5 had received only minor revisions and were rated about the same as their predecessors\. In this context, the Bank's decision to drop the student assessment component from the project was near-sighted because changes in the content of tests and examinations create powerful incentives for parallel changes in textbooks\. When the examinations do not change, new curriculum content hinders students' chances of promotion to the next level of the education system, even though the new content may be educationally more sound\. * Most primary school administrators continue to be selected from personnel with secondary or college level backgrounds\. * The ICR reports that Punjab has taken two steps to begin to raise the quality of the primary teaching force: raising the minimum entry qualification for recruitment and hiring more teachers with graduate-level qualifications; and developing hiring policies based on criteria of merit\. Nevertheless, career opportunities remain restricted for primary school teachers within primary education\. The excessive rate of staff transfer, often to positions outside primary education, continues to be a barrier to improving teaching quality in primary education\. Institutional Development 3\.4 While institutional strengthening occurred that resulted in some modest improvement in school facilities and instructional materials, severe shortcomings in institutions managing primary education limited planning and monitoring capacities\. * Punjab closed down the CEC but the scope of construction and school maintenance was expanded\. Community and teacher involvement in school maintenance became the most important institutional development contributing to the sustainability of the civil works component\. Under the Social Action Program, the government decided to release funds for school maintenance directly to communities\. * The National Curriculum Center was successful in developing textbooks and teacher guides but the institution is under-utilized\. * Little progress was made on establishing a monitoring and evaluation unit in ADPI, in part because of unclear federal and provincial responsibilities\. Punjab's management information system became the victim of political interference resulting in management discontinuity and inappropriate staffing\. Punjab is still without accurate and up-to-date information for planning and evaluation\.  13 4\. Issues and Findings 4\.1 The weight the Bank gave to relevance and responsiveness in justifying the project was disproportionate to implementation realities\. The concerns voiced internally-concerns about project size, complexity, commitment and risks-took second place to extending IDA were overshadowed by strategy to support basic education for girls in a poor and important country\. OED concurs with the Region that weaknesses in borrower ownership, capacity and institutions, (many of them identified in internal reviews), should have been more carefully appraised\. The Bank's judgement in going ahead is a concern because staff considered that the project was unready for implementation and high risk\. 4\.2 The ICR emphasized that the absence of more flexible lending instruments in the mid- 1980s circumscribed IDA's room to maneuver\. But this is hardly a sufficient justification for the Bank's inability to ensure compliance and effective implementation\. Staff actually did explore flexible methods with the available instruments \. One device involving the tranching of disbursements based on satisfactory performance was proposed but not chosen, though the reasons why are unclear\. The final legal agreement included annual reviews of a mandated action program to allow for Bank approval of adjustments needed during implementation\. However, in its eagerness to avoid delay, the Bank made concessions to the borrower's requests to remove legal conditions at appraisal, negotiations and credit effectiveness\. This compromised its capacity to supervise implementation from a position of strength\. Supervision was further compromised because of discontinuity in task management\. 4\.3 The ICR points out that the means chosen to achieve project objectives were under- defined and of uncertain potential\. In this context, the phased approach to the study program was ineffective and wasteful\. The program lacked clear sequencing, well-defined mechanisms for implementing activities in the first phase, and procedures for applying the results of the first phase during the second phase\. Yet when the program stalled, the Bank allowed it to continue\. The rationale provided by staff is that, with the advent of the first Social Action Program Project, the policy emphasis for PEPIII became less important, and that supervision was thus able to focus on the huge investment in school construction activities, is not supportable\. It does not explain why the Bank failed to restructure when the component became redundant\. By action to limit the project's scope, the Bank could have dampened expectations about outcomes on policies and strategies to realistic levels and could have reduced expenditures on unproductive components\. 4\.4 On a related issue, OED agrees with the ICR that the policy reform agenda was insufficiently formulated, agreed, and disseminated\. Since the studies were only completed 4-7 years after effectiveness, any modest policy development arising from the project inevitably had to proceed without the support anticipated from empirical and analytic work\. 4\.5 OED's review confirms that the design of the innovative components was not sensitive to the country's institutional and organizational setting and incentive system\. This insensitivity was a shortcoming that seriously undermined the project's likelihood of success\. The Bank also failed to attend to the incentives and linkages inherent in the education system\. In trying to establish independent management for primary education, the Bank ignored the tight structural links that bind primary education to more advanced levels of education\. In attempting to address issues of project size and complexity, IDA dropped the assessment component so critical to changing the behavior of teachers and learners\. In de-linking issues of teacher employment and pay during implementation at the borrower's request, it avoided sensitive policy and budgetary issues\. 14 4\.6 These defects were aggravated by a fundamental design flaw-the absence of clear policies and procedures agreed between federal and provincial authorities which would govern their authority and responsibilities\. The project was correct to promote shared responsibility in many domains where federal agencies had a dominant role-in monitoring and evaluation, curriculum innovation, textbook subsidies and provision, teacher training and demand-generation\. Punjab's vision of greater autonomy promoted local ownership and effort\. But the province was limited by federal laws, policies and control of budgets and project funds\. The lack of clarity and resulting tension adversely affected project coordination, implementation and outcomes\. The project found itself entangled in a much broader struggle between federal and provincial governments for control of primary education than it was able to handle\. In retrospect, it is clear that the Bank should not have chosen to pursue the goal of greater provincial involvement in primary education in an indirect and inadequately-prepared manner\. In the short-term, the project unintentionally aggravated already tense relations between Punjab and the federal government\. 4\.7 It is strictly beyond the scope of OED's review of the project to assess the Bank's broader performance in Pakistan education (paras\. 5\.2-3)\. 8 But balance and fairness call for mention of the Bank's efforts to do better in supporting the borrower's Social Action Program and involving other partners and stakeholders\. Through the novel programmatic instrument used in these operations, the Bank is now addressing more directly how to improve federal-provincial management of primary education in order to ensure that the poor have access to better quality services\. It is, however, too early to judge whether over a longer period the new approaches will succeed where the investment project could not\. Ratings 4\.8 OED agrees with the ICR's rating of overall project outcome as unsatisfactory\. Some project activities were not implemented, and those that were implemented did not have the results intended\. OED rates sustainability as unlikely (the ICR uncertain) because the government's plans for future project operation were unformed and under-funding of quality inputs continues\. OED agrees with the ICR's rating of institutional development as negligible and with its rating of borrower performance as unsatisfactory\. OED rates IDA performance as unsatisfactory (ICR unsatisfactory only at appraisal) because the Bank did not use its expertise and influence assertively enough to reduce the project's very high risk of failure\. It is doubtful that it could have done so at the time, given the constraints\. The Bank's diffidence in using to full advantage the quality assurance mechanisms and sanctions at its disposal during supervision exacerbated the design flaws and allowed project funds to be spent unproductively for the sake of meeting project targets\. Perhaps the most positive outcome was that the negative experience led the Bank to reassess its strategy towards social sector development in Pakistan\. 5\. Lessons 5\.1 Several lessons are worthy of broad dissemination\. The audit points to areas of Bank performance where changed behavior would help ensure that only those projects in social sectors that meet high standard of efficacy in advancing development objectives are selected\. In cases similar to PEPIII, extremely difficult and complex issues in the country and in education systems challenge the Bank to exercise discrimination in deciding whether projects-however relevant 8\. Pakistan Education: Issues for a Divisional Strategy\. January 31, 1996 (revised July 18, 1997)\. 15 5\.2 and responsive-should receive IDA financing-and if they do, how performance issues should be addressed\. * IDA financed the Pakistan Third Primary Education Project (PEPIII) in FY87 in response to the Government of Punjab's request after the province had declined to participate in PEPII approved the previous year\. Total estimated cost was US$233\.91 million and the IDA credit was US$143\.35 million\. This audit was closed in FY96 after an extension of 30 months\. Based on a single province, the project set the pattern for four similar operations in the 1990s\. From 1994, the first Social Action Program Project (Cr\. 2953), the pioneer of IDA-assisted programmatic operation in Pakistan, also supported primary education with policy, budgetary and management interventions\. * Objectives were relevant to the Bank's mission to reduce poverty and to the goals of the federal and provincial governments to improve educational quality, access and equity, especially for girls and rural populations\. The project supported activities to: develop institutional capacities; develop and institutionalize policy; and introduce innovations that would influence demand, access, quality and costs\. It supported a large school building and maintenance component; a large study program to advance national and provincial policy and innovation strategies; and new forms of curricula, assessments, in-service teacher training and more affordable textbooks\. CIDA was to have financed textbook paper and community participation components but the agency withdrew following differences of view on changes in design and scope\. * The Implementation Completion Report (ICR) shows that implementation was slow and achievements were far below expectations\. It attributes the project's failure to meet its objectives to the extremely challenging environment, weak borrower commitment and capacity, delays and problems with TA from non-IDA sources, deficient preparation, and the lack of flexible lending instruments\. The ICR is thoughtful in its analysis of the issues but, while it comments on some deficiencies in Bank performance at appraisal, some important gaps in reporting bias the ICR's overall evaluation in the Bank's favor\. * The weight the Region gave to relevance and responsiveness in justifying the project was disproportionate to implementation realities\. The concerns voiced internally- concerns about project size, complexity and risks-were overshadowed by the IDA strategy to support basic and girls education in a poor but strategically important country\. OED concurs with the Region that weaknesses in borrower commitment, capacity and institutions (weaknesses identified in internal reviews) should have been more carefully appraised\. The Bank's decision to go ahead is a concern because staff considered the project unready for implementation and of high risk\. The ICR argues that the investment instrument was not a sufficiently flexible instrument to overcome problems but, in fact, during preparation, more flexible instruments were considered\. Staff proposed tranching disbursements based on satisfactory borrower performance but (the proposal) did not go forward after internal review\. Instead, in final form, the legal agreement signed by federal and provincial governments included annual reviews of a mandated action program that would allow the Bank and borrower to 16 adjust implementation mechanisms as needed\. However, the Bank compromised its capacity to supervise implementation from a position of strength by making concessions to the borrower's objections to legal conditions at appraisal, at negotiations and at credit effectiveness\. Supervision was further compromised because of Bank staff turnover, lax monitoring of compliance with the legal agreement and patchy supervision of technical components\. The ICR points out that the components chosen to achieve project objectives were insufficiently prepared and tested\. An example is the phased approach to the policy studies program which proved ineffective\. However, the ICR fails to question why the Bank had allowed these activities to continue so long without restructuring the component\. The staff argued that the project's emphasis on policy became less important relative to the huge investment in school construction activities\. But this does not justify the lack of proactivity in revamping a costly component and redefining project objectives\. * The Bank failed to attend sufficiently to the incentives and linkages inherent in the education system\. In introducing an innovation to employ low-cost assistant teachers, many of them women, the Bank took a risk to advance an important initiative but failed to address the lack of policy, institutional and cultural supports in this area\. In establishing independent management of primary education, it ignored the tight structural links that bind primary education to more advanced levels and require coordination\. In addressing challenges of project size and complexity, it decided that the assessment component was the most likely candidate to drop\. Unfortunately, this was a key to incentive for teachers and students to adopt the new curriculum\. In de- linking issues of teacher employment and teacher pay at the borrower's request, the Bank side-stepped critical issues of teacher management and high recurrent budgets for teacher remuneration\. * A fundamental flaw exacerbated these weaknesses-the absence of clear policies and procedures agreed between federal and provincial authorities to govern their authority and responsibilities\. Punjab's vision of greater autonomy promoted local ownership and effort, which the Bank supported\. But the province was limited by federal laws, policies, budgets and control of project funds\. The lack of clarity and resulting tensions adversely affected project coordination and implementation\. The project found itself entangled in a much broader issue for federal-provincial relations than it was able to handle\. * The audit reaffirms the conclusions of OED's previous review of the Region's ICR\. The main disagreement is on Bank performance which OED rates as unsatisfactory (ICR unsatisfactory only at appraisal)\. The Bank used poor judgement in recommending the project as ready for IDA assistance when it considered the risks insurmountable\. During supervision the Bank failed to ensure that project resources were used efficiently or to take remedial action when they were not\. OED agrees with most other ICR ratings\. Outcomes are rated as unsatisfactory because many components were not implemented and those that were implemented did not achieve targets set or results intended\. Institutional development is rated as negligible and 17 borrower performance as unsatisfactory\. OED rates sustainability as unlikely (ICR uncertain) because the government's plans for future project operation are unformed and under-funding of recurrent budgets continues\. Perhaps the most positive result for the Bank from the project's serious shortcomings was that it reinforced the need for a new strategy for social sector development in Pakistan\. Several lessons are worthy of broad dissemination: * When a project proposal has serious flaws, the Bank should not proceed under the assumption that trouble-shooting action during implementation will be effective or without cost\. If the view is that more preparation would be unlikely to improve implementation readiness, as in the PEP III case, the project should not go forward for Board approval\. Experience shows that turnaround is difficult to achieve during implementation without major review and borrower commitment to restructuring\. * Relevance, responsiveness and high levels of investment inputs do not ensure good progress and results\. In the PEP III case, the project's relevance to the Bank's mission in poverty and basic education, and its responsiveness to the Punjab's request IDA assistance, were necessary but not sufficient conditions for success\. * Rigorous appraisal of the borrower's statement of commitment and capacity are required to inform project design\. Experience in Pakistan indicates that government habitually overpromises and underperforms\. This is a Regional insight with which OED concurs\. * OED supports the ICR's insight that policy is not advanced when the Bank provides financing for large investment activities before the borrower has begun to improve the enabling environment\. When budgets are tight, institutions are weak, and ownership uncertain, investment activities such as the large school construction component in PEPIII, are likely to attract most attention, reducing the focus on policy and qualitative outcomes\. * When the Bank favors a shift to decentralization of education, it should avoid championing the stakeholder who is the major beneficiary while failing to ensure that other stakeholders' concerns are adequately addressed\. In retrospect, it is clear that the Bank's implicit strategy in favor of the province was ill-prepared, a consensus among stakeholders was absent, and the Bank found itself uncomfortably placed to advance the project\. * Rigorous self-evaluation and disclosure helps foster confidence among stakeholders, partners and Bank staff that the institution is directing scarce IDA funds to interventions that have been carefully selected because they will directly benefit the poor\. In the PEP III case, the Bank could have done better in balancing risks and benefits by additional high quality review of technical and institutional components prior to Board presentation\. During implementation, Bank managers need to encourage staff and government officials to review all objectives and components realistically and candidly and not to hold back from advising on drastic remedial action when appropriate, even if that means restructuring or cancellation\. 18 In primary education which is localized, yet geographically dispersed, support to the many related local institutions with diverse specialized functions is critical but difficult to achieve\. The Bank is now doing more to foster strong institutions at national level but it also needs to foster education sector institutions locally\. While it may lack the capacity to do this directly, it is well positioned to achieve partnership with locally-based change-agents to help sector institutions "learn by doing\." Bank Response * The subsequent round of IDA-funded projects have remedied some of the deficiencies noted in the Audit Report and ICR, but some persist\. Those that continue to negatively affect Pakistan education Projects include: overly ambitious agendas that do not satisfactorily take into account deficiencies in the technical and institutional capacity of the client; the difficulties for maintaining a consistent policy dialogue in the face of frequent changes of government and key policy and technical staff; creation of enabling environments that are based on long-term government vision of sector reform and growth; and construction efforts still plagued by delays, poor quality and governance issues despite substantial efforts by Bank staff to remedy these problems\. * However, the provincial projects formed in the wake of PEP III, including the 2nd Social Action Program Project, have profited from the PEP III experience\. Specific actions and activities reflected in these projects include: * Focus on province-based initiatives that are largely independent of federal regulatory frameworks and interference except where mandated by law (e\.g\. curriculum content); * Emphasis upon annual Operational Plans and budgets to ensure that government monitors its own progress against stated and agreed annual goals; * Broad consultation with stakeholders in project design, down to the school and village level; * Use of sector focus to ensure integration of instruction and infrastructure into a continuous cycle of schooling; * Insistence that the client initiate requests for development assistance and that the client take lead responsibility, with IDA technical support as required, in defining project elements and modalities; * Expanded network of stakeholders and institutions involved in project implementation including district level officials, community level organizations including PTAs and head teachers; * Decided shift away from large-scale projects with heavy emphasis on construction to policy and reform-based lending that is linked to specific 19 outcomes such as enrollment increases, improvement in student performance, teacher attendance, and transparent adherence to governance criteria; * Creation of non-line agencies to implement projects only where no capacity exists or intractable problems in the use of available agencies; * Reform of IDA-funded in-service teacher training efforts, with heavy emphasis on reduction in number of transfers and inclusion of teacher assessment of materials in design and production  21 Annex A Basic Data Sheet PAKISTAN-THIRD PRIMARY EDUCATION PROJECT (CREDIT 182 1-PAK) Key Project Data Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total project costs (US$) 207\.87 233\.91 89% Loan amount (US$) 145\.00 143\.35 99% Cancellation (US$) 3\.8 NA Date physical components completed 06/30/93 12/31/95 NA Cumulative Estimated and Actual Disbursements (US$ million) FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 Appraisal estimate 5,600 24,200 56,880 95,360 126,920 140,260 145,000 145,000 145,000 145,000 Actual 0 10,170 10,170 19,810 41,590 74,290 105,310 121,640 132,320 134,460 Actual as % of estimate - 42% 18% 21% 33% 53% 73% 84% 91% 93% Date of final disbursement: November 14, 1996 Project Dates Steps in project cycle Original Actual Identification (Executive Project Summary) January 1986 January 27, 1986 Preparation March 1986 March 26, 1986 Appraisal August 1986 September 15, 1986 Negotiations January 1, 1987 April 20,1987 Development Policy Letter NA NA Board presentation March 31, 1987 June 16, 1987 Signing September 1987 September 10, 1987 Effectiveness March 1988 April 25, 1988 1st Tranche Release (if applicable) NA NA Midterm review (if applicable) NA NA Project completion June 30, 1993 December 31, 1995 Credit closing December 31, 1993 June 30, 1996 Staff Inputs (staff weeks) Stage of project cycle Planned Revised Actual Weeks US$000 Weeks US$000 Weeks US$000 Preparation n\.a\. n\.a 20\.2 45\.9 20\.2 45\.9 Appraisal- Board n\.a n\.a 120\.5 257\.3 120\.5 257\.3 Board- Effectiveness n\.a n\.a 15\.4 28\.3 15\.4 28\.3 Supervision n\.a n\.a 124\.2 240\.8 124\.2 240\.8 Completion n\.a n\.a 4\.0 13\.7 4\.0 12\.5 Total 284\.3 586\.0 284\.3 584\.8 22 Mission Data Stage of project Date No\. of Duration of Specialized Performance rating cycle (monthlyear) persons mission (# staff skills Implement\. Development Types of problems of days) represented* status objectives Identification August 1985 2 12 ES; E - - Preparation March 1986 5 15 ES; A; E - - Appraisal Sept\. 1986 11 20 ES; E; GE; A; CS; MS Post-appraisal February 1987 4 10 ES; E; A, MS - - Supervision I January 1988 4 23 ES; A; 00; 2 2 - Effectiven\. DO Budget Funding Supervision II October 1988 4 16 ES; A 2 2 - Proj\. Mgt\. & Coordin\. Supervision III June 1989 4 26 EP; ES; A 2 2 Supervision IV December 4 21 EP; ES; A 3 2 - Funds flow 1989 TA program delay Procurement embargo on durable goods Supervision V June 1990 3 7 ES; A; TS 2 2 - Slow budget transfers to executing agencies Supervision VI December 4 23 EP; ES; TS; A 3 2 - Fund flow 1990 Implement\. Delays Project Mgt\. Supervision VII May 1991 4 23 EP; ES; TS; 3 2 - Construction IS delays Funds replenish\. Foreign TA delays Supervision VIII Nov\. 1991 5 13 EP; ES; IS; A 2 2 - Minor problems Supervision IX June 1992 2 17 ES; A 2 2 - Minor problems Supervision X Dec\. 1992 2 17 ES; A 2 2 - High teacher vacancy rates Project Mgt\. Supervision XI April 1993 3 4 IS; AP 2 2 - Limited scope supervision Project Mgt\. Supervision XII August 1993 5 8 ES; IS; DO; 2 2 - Minor problems TS; A Supervision XIII April 1994 5 11 IS; E; ES; FA; 2 2 - Slow school A construction Disbursements Credit closing ext\. Supervision XIV Nov\. 1994 3 3 IS; 00; ES S S - Slow impl\. Progress on school completion and reform measures\. Supervision XV April 1995 4 9 ES; E; A S S - Slow disbursements Mgt\. Staffing Supervision XVI October 1995 4 12 ES; E; A S S - Teacher trg\. Delays due to delay in new materials develop\. Completion March 1997 4 7 ES; SSS; A S S A = Architect; CS = Communications Specialist; DO = Disbursement Officer; E = Economist; EP = Education Planner; ES = Education Specialist; fa = Financial Analyst; GE = General Educator; IS = Implementation Specialist; MS = Management Specialist; 00 = Operations Officer; P = Planner; SSS = Social Sector Specialist; TS = Textbook Specialist\. 23 Annex A Other Project Data Borrower/Executing Agency: Government of Pakistan and Government of Punjab Related Bank Credits Year of Status Closing date Credit title Purpose approval Preceding operations Credit 892-PAK Experimental primary education project with 1979 Closed Unsatisfactory\. Project Fourth Education the objectives of increasing access, reducing was completed on time in Project wastage and costs, and improving the quality 1985\. Out of the Credit of of instruction\. US$10\.0 million, US$3\.0 million was cancelled\. Credit 1602-PAK Second primary project which built up on 1985 Closed Marginally satisfactory\. Second Primary experiences under previous Credit 892-PAK, Out of the Credit of Education Project which was limited to the Sindh, NWFP, US$72\.5 million Baluchistan Provinces\. It focussed on the US$16\.3 million was same objectives as the previous project\. cancelled\. Following Operations Credit 2102-PAK Enhance access to and delivery of primary 1990 Ongoing Satisfactory\. Being Sindh Primary education and improve the students' restructured under social Education Project achievements through classroom instructions, sector portfolio enhanced teacher recruitment (especially for restructuring exercise\. female teachers), training for teachers and managers, scholarships and textbooks provided for girls\. Credit 211 8-BD Increase equitable access to primary and 1990 Closed Satisfactory\. ICR under General Education secondary schooling; improve education on preparation\. Project quality; strengthen institutional capacity of 12120196 subsectors; and prepare needed reform policies and programs at post-secondary levels\. Credit 2534-PAK Implement restructuring of education into 1992 Ongoing Unsatisfactory\. Being Punjab Middle elementary (years 1-8) and secondary (years restructured under social Schooling Project 9-12); increase access particularly for girls; sector portfolio improve quality and efficiency of education; restructuring exercise\. support decentralization and expansion of private education\. Credit 2357-NEP Improve quality of basic and primary 1992 Ongoing Satisfactory Basic and Primary education; increase access to primary Education project schooling; and strengthen institutional capacity of the subsector\. Credit 2482-PAK Improve (a) access, equity and efficiency; (b) 1992 Ongoing High satisfactory Balochistan Primary quality of learning environment; (c) Education Program organizational framework, planning and Project management\. Credit 2661-IN At district and sub-district level, improve 1994 Ongoing Satisfactory District Primary access to primary education, reduce dropouts Education Project and increasing leaming achievement, and strengthen institutional capacity\. Credit 2680-PAK Improve (a) access, equity and efficiency; (b) 1995 Ongoing Satisfactory North-West Frontier quality of learning environment; (c) Province Primary organizational framework, planning and Education Program management\. Project Credit 2876-IN At district and sub-district level, improve 1996 Ongoing 10-month old Second District Primary access to primary education, reduce dropouts Education Project and increasing leaming achievement\.  25 Annex B Theisen comments on OED audit of PEP III Preface: end of para one (and elsewhere) more approp\. To say that the project was closed after an "extension" not a delay???? Cover Memo: * Para 1: "delayed" problem * Para 3, line 2\. \.modify to read"\.failure to achieve all of the objectives to the\." * Para 4, 1st 2 sent\. Not clear\. Relev\. and resp\. not misplaced-- just weighted disproportionately to implem realities\. 2nd sent\. Clarify that Bank's desire to support basic educ\. etc\. overshadowed the realities of govt\. inability to implement a project of this size, \.etc\. * Same para, line 7, change to "high risk" * Same para, line 10, "\.was not agreed\. [by whom????]" * Top para, pg\. 2, line 4, which staff? * 1St full para pg\. 2, meaning of Is' sent is not clear * para st 2 sent\. Important to recognize that the bank and govt\. had to engage in some risk taking to get more girls' into school\. Yes, the program might have worked as planned, but credit has to be given also for the effort to find a way through\. Too one sided a stint\. * Same para, re: assesment\. Not quite fair to just criticize for dropping; it is imp\. but requires capacity, and time to develop\. In order to sharpen focus perhaps this was the most likely candidate to drop during restructuring\. Give balanced view of dilemma\. * Para 4, pg\. 2, line 4; were they really considered "insurmountable" or very difficult to overcome\. Word choice here is very important\. * Same para line 5, "OED agrees\. \.other ICR (something is missing here???) * Same para last sent\. I think this is an unjustified and harsh over statement\. Suggest re-writing to " Perhaps one of the most important positive lessons from the PEPIII experience was that\." * Pg\. Bullet at bottom, I would recommend dropping "without cost" in line 2\. That is a false assumption, if remediation is part of proj\. design\. * Pg\. 3 either add to top bullet or add new bullet: " Careful, realistic assessment of governments' statement of capacity and commitment are required as a precursor to project design\. Experience in Pakistan indicates that government habitually over promises and under performs on projects, especially ones of this complexity\." * Pg\. 3, 4th bullet, line 5, add "\.managers need to encourage staff and government officials to review\." * * Audit Report: * * pg\. 10 sec\. 2\.4, line 8, change to "Academy for Educ\. Planning and mgmt\." (no research) \. * pg\. 11, 1st bullet, last sentence\. Conclusion unsubstantiated and needs clarification or addition\. Issue is not teacher pay, but underutilized staff who are mis-deployed\. Therefore the focus was correct\. * See earlier comments on need for balance, esp\. on those items specifically noted\. Mention needs to be made that decisions were not made without thought but often involved tradeoffs\. The tone of the draft seems to emphasize negligence as opposed to what might more realistically be 26 Annex B described as difficult choices and multiple attention grabbing problems that often diverted attention from most important project objectives\. Paras on lessons learned and implemented in subsequent projects\. The subsequent round of IDA-funded projects have remedied some of the deficiencies noted in the Audit Report and ICR, but some persist\. Those that continue to negatively affect Pakistan education Projects include: overly ambitious agendas that do not satisfactorily take into account deficiencies in the technical and institutional capacity of the client; the difficulties of maintaining a consistent policy dialogue in the face of frequent changes of government and key policy and technical staff; creation of enabling environments that are based on long-term government vision of sector reform and growth, and construction efforts are still plagued by delays, poor quality and governance issues despite substantial efforts by Bank staff to remedy these problems\. However, the provincial projects formed in the wake of PEP III, including the 2nd Social Action Program Project have profited form the PEP III experience\. Specific actions /activities that are reflected in these projects include: * Focus on province-based initiatives that are largely independent of federal regulatory frameworks and interference except where mandated by law (e\.g\. curriculum content); * Emphasis upon annual Operational Plans and budgets to ensure that government monitors its own progress against stated and agreed annual goals; * Broad consultation with stakeholders in project design, down to the school and village level; * Use of sector focus to ensure integration of instruction and infrastructure into a continuous cycle of schooling; * Insistence that the client initiate requests for development assistance and that the client take lead responsibility, with IDA technical support as required, in defining project elements and modalities; * Expanded network of stakeholders and institutions involved in project implementation including district level officials, community level organizations including PTAs and head teachers; * Decided shift away from large-scale projects with heavy emphasis on construction to policy and reform -based lending that is linked to specific outcomes such as enrollment increases, improvement in student performance, teacher attendance, transparent adherence to governance criteria, etc\.; * Creation of non-line agencies to implement projects only when there is no existing capacity or when problems associated with using existing agencies are intractable; * Reform of IDA-funded in-service teacher training efforts, with heavy emphasis on reduction in number of transfers and inclusion of teacher assessment of materials in design and production\.

REVIEW

P000217

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 23355 IMPLEMENTATION COMPLETION REPORT (IDA-22880) ONA CREDIT IN THE AMOUNT OF SDR 24\.2 MILLION (US$32\.7 MILLION EQUIVALENT) TO THE REPUBLIC OF BURUNDI FOR A WATER SUPPLY SECTOR PROJECT December 27, 2001 Water and Urban 2 Africa Region This document has a restricted distribution and may be used by recipients only in the performnance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2001) Currency Unit = Burundi Franc FBu 1 = US$ 0\.001226 US$ 1 = FBu 815\.5 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AGCD Belgian Aid Agency/Administration generale de la cooperation et du developpement ASBL Non-profit Organization/Associations sans but lucraif CERDA Center for Studies and Research-Development on Agro-economics/Centre universitaire d'etudes et de recherche-developpement en agro-economie DCA Development Credit Agreement/Accord de credit de developpement DGHER General Directorate of Rural Water and Energy/Direction generale de V'hydraulique et des \.nergies rurales ERR Economic Rate of Return EU European Union/Union Europeenne FRR Financial Rate of Return ICB Intemational Competitive Bidding IDF Institutional Development Fund KMW Kreditanstalt fur Wiederaufbau MDCA Ministry of Communal Development and HandicraftlMinistere du developpement communal et de l'artisanat MoP Memorandum of the President MDR Ministry of Rural Development/Ministere du developpement rural NGO Nongovernmental Organization/Organisation non gouvemementale NPV Net Present Value O&M Operation and Maintenance/Exploitation PAEMR Rural Water Supply Project/Projet d'alimentation en eau en milieu rural PSAE Water Supply Sector Project/Projet sectoriel d'alimentation en eau PSP Private sector participation/Participation du secteur prive RCE Communal Water Board/Regie communale de l'eau REGIDESO National Water and Electricity Authority/Regie de production et de distribution d'eau et d'electricite RWS Rural Water Supply/Alimentation en eau en milieu rural SDR Special Drawing Right SAR Staff Appraisal Report/Rapport d'evaluation TA Technical Assistance/Assistance technique Vice President: Callisto Madavo Country Director: Emmanuel Mbi Sector Manager: Letitia A\. Obeng Task Team Leader: Richard Verspyck  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT BURUNDI WATER SUPPLY SECTOR PROJECT CONTENTS Page No\. 1\. Project Data 1 2\. Principal Perfornance Ratings 1 3\. Assessment of Development Objective and Design, and of Quality at Entry 2 4\. Achievement of Objective and Outputs 5 5\. Major Factors Affecting Implementation and Outcome 9 6\. Sustainability 10 7\. Bank and Borrower Performnance 10 8\. Lessons Learned 12 9\. Partner Comments 13 10\. Additional Information 13 Annex 1\. Key Performance Indicators/Log Frame Matrix 14 Annex 2\. Project Costs and Financing 15 Annex 3\. Economic Costs and Benefits 17 Annex 4\. Bank Inputs 18 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 19 Annex 6\. Ratings of Bank and Borrower Performance 20 Annex 7\. List of Supporting Documents 21 Annex 8\. Borrower's Contribution 22 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\.   Project ID: P000217 Project Name: WATER SUPPLY SECTOR Team Leader: Richard Verspyck TL Unit: AFTU2 ICR Type\. Core ICR Report Date: December 2 7, 2001 1\. Project Data Nanae\.: WATER SUPPLY SECTOR L/C/TF Number\. IDA-22880 Country/Departnient: BURUNDI Region: Africa Regional Office Sector/subsector: WR - Rural Water Supply & Sanitation KEY DATES Original Revised/Actual PCD: 11/15/1989 Effective: 02/03/1992 02/03/1992 Appraisal: 09/25/1990 MTR: 12/31/1994 02/12/1995 Approval: 07/16/1991 Closing: 06/30/1998 06/30/2001 Borrower/lImplementing Agency: REPUBLIC OF BURUNDI/DGHER Other Partners\. KfW, AGCD, NGOs STAFF Current At Appraisal Vice President: Callisto Madavo Edward V\. K\. Jaycox Country Manager: Emmanuel Mbi Francisco Aguirre-Sacasa Sector Manager: Letitia A\. Obeng Marc Blanc Team Leader at ICR: Richard Verspyck Jean-Francois Dreau ICR Primary Author: Christophe Prevost 2\. Principal Performance Ratings (HS=Highly Satisfactory\. S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely\. HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Instituitional Development Impact: M Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: Yes  3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: As stated in Section III of the Staff Appraisal report (SAR, report no\. 91 85-BU), the objectives of the Water Supply Sector Project (PSAE as it is known in Burundi from its French acronym) were (a) to improve the living conditions of the [rural] population by increasing the quantity and quality of potable water; (b) to implement the policy of payment for water in urban and rural areas; (c) to enhance responsibility of local governments for maintaining [rural] water supply facilities; (d) to strengthen the institutions involved in water supply; and (e) to help the government develop and implement appropriate institutional arrangements in the water supply sector\. It is interesting to note that the Project and Credit Summary included in the SAR gives a different definition of the objectives and that the Memorandum of the President (MoP) uses another wording\. As the language of Schedule 2 to the Development credit Agreement (DCA) is quite similar to the one of Section III of the SAR, one may assume that the definition of Section III sets the objectives as shared by the Borrower and the Bank\. Even though the objectives were not perfectly clear, they were comprehensive\. They recognized the need for clarifying the delineation of institutional responsibilities among the national power and water utility, Regideso, the General Directorate of Rural Water and Energy (DGHER) and the communes\. The emphasis put on the sustainability of basic rural services and cost recovery was consistent with the approach defined in the Country Assistance Strategy (CAS) of "designing social and economic infrastructure operations that will lay the groundwork for improving long-term development prospects while introducing more financially sustainable funding mechanisms for providing social services and maintaining public assets\." The objectives were not overly ambitious or unrealistic in view of the achievements of the previous Second Water Supply Project (PAEMR, Cr\. 1625-BU)--rated highly satisfactory by OED--which the PSAE aimed to replicate at a greater scale\. The SAR rightly identifies the risks associated with the implementation of the policy of payment for water in rural areas\. The Government's reluctance to enforce this policy had already led the Bank to suspend disbursements of the previous credit, but the issue was rapidly settled\. The first year of operation of the local water boards (regies communales de l'eau, RCEs) showed some promising results in collecting user fees\. The objectives of the project were nevertheless risky in respect to the country circumstances\. The successful establishment and operation of the RCEs largely depended upon the continuation of the reconciliation process initiated after the 1988 ethnic violence\. The CAS acknowledged the risk of "renewed political difficulties" and provided an altemative scenario, whereas the Bank "would remain flexible and allow the govemment time to build a consensus on politically sensitive reforms, but would limit the lending program to investment projects only\." However, the PSAE lacked a similar exit strategy\. 3\.2 Revised Objective: Restructuring the project after the 1993-1995 crisis and ethnic violence led to the cancellation of 75 percent of the credit amount and a substantial revision of project components (see below)\. It was estimated at the time that "if fully implemented, remaining project activities would contribute to initial objectives\." The latter were not modified, but the Borrower and the Bank agreed to modify their priorities\. The establishment of cost recovery had been the primary objective at project inception\. The objective of increasing water quality and quantity took precedence after project restructuring\. 3\.3 Original Components: The project consisted of three components: -2 -  * Component A (US$43\.85 million or 82 percent of total project costs, excluding PPF refinancing): Construction of new rural water supply (RWS) systems in nine provinces (out of a total of 15)\. This component was cofinanced by Kreditanstalt fir Wiederaufbau (KfW) of Germany (US$6\.2 million for 13 systems in the provinces of Muyinga and Ngozi), AGCD, the Belgian Aid Agency (US$ 11\.25 million for 12 systems in the provinces of Bubanza, Cibitoke, and Makamba) and IDA (US$24\.40 million for 65 systems in the provinces of Gitega, Karuzi, Kayanza and Muramvya)\. The Project Unit, set up in DGHER to execute the PAEMR, was to implement this component in two phases\. Studies and supervision were to be carried out by international consultants\. Supply contracts (mainly pipes and ancillary equipment) and works contracts were to be procured through International Competitive Bidding (ICB)\. * Component B (US$2\.11 million or 4 percent of total project costs): Development and protection of about 3,000 springs in the same nine provinces\. This component was to be executed by Non Governmental Organizations (NGOs)\. * Component C (US$7\.74 million or 14 percent of total project costs): Institution Building for (a) DGHER within the Ministry of Rural Development (MDR), through the provision of 48 person-months of technical assistance (TA), equipment and staff training (11 person-months); (b) the Project Unit through TA (156 person-months), acquisition of equipment and staff training (26 person-months); (c) the communes and the RCEs, through the provision of training (178 person-months) of RCE staff and water supply attendants and sensitization of rural population on issues of water use and cost recovery; and (d) Regideso, through provision of studies, including a study of urban water tariffs and a water supply master plan for Bujumbura\. Components A and B were in line with the development objective of improving the quantity and quality of water in rural areas\. Component A relied exclusively on foreign providers to ensure swift execution and the quality of water systems\. The institution building component was expected to help achieve the other four project objectives and also relied heavily on external TA\. Project design was not particularly innovative or demand-driven, but replicated (to a larger scale) the design and implementation procedures of the ongoing PAEMR\. It would be unfair to assess a project designed in 1990 against the criteria developed later in the demand-responsive and community-driven approaches\. Still, there was a disconnect between the decentralization goal supported by the project, the allocation of project resources and the institutional/legal arrangements for its implementation\. For instance, RCEs were created and organized not by law, but by a simple executive order of the Ministers to communal authorities (who were not elected representatives, but appointed civil servants)\. Those arrangements actually weakened the legitimacy and accountability of the RCEs\. The central government agency remained the sole decision-maker and implementer of rural water investments\. Communities were not involved in the choice of service options, nor in the design of facilities\. Community participation consisted of contributing five percent towards the costs of facilities (excluding pipes, which in fact amounted to an even more symbolic contribution equivalent to less than three percent of the investment costs) and paying user fees covering operation and maintenance (O&M) costs and part of renewal costs\. Even though the achievement of several development objectives depended on the performance of the RCEs, 76 percent of the financing under component C were allocated to the Project Unit and two percent to the RCEs\. The portion of the credit allocated to Regideso may appear modest in view of the institutional strengthening objective\. Actually, a parallel Energy Sector Rehabilitation Project (Cr\. 2230-BU) comprised a substantial component to improve Regideso's performances as a whole (including a management assistance program in - 3 -  partnership with a professional operator)\. Therefore, it was not necessary to duplicate those efforts in the PSAE, all the more as the water activities of Regideso represented less than 25 percent of the total turnover of the utility\. 3\.4 Revised Components: A major revision of project components followed the interruption of project activities resulting from the political crisis and ethnic violence that culminated after the October 1993 coup d'Etat\. In several target areas of the project, particularly the north of the country, communication between local authorities and the rural population broke down\. All field activities stopped for about one year\. The local administration was absent and no longer credible\. Maintenance of existing infrastructures and cost recovery arrangements collapsed\. International contractors, suppliers and consultants left the country\. IDA suspended credit disbursements in May 1995\. The Government agreed to downsize the project, and proposed to adapt it to what was achievable under the circumstances\. The suspension was lifted and SDR 18 million were canceled from the original SDR 24\.2 million credit amount on August 18, 1995\. The Board was notified of the partial cancellation and of the reallocation of the funds on August 21, 1995\. The rural water systems component was canceled\. The institution building component was significantly reduced\. The Government dismantled the Project Unit, and canceled the TA contracts\. The remaining funds were reallocated for: (a) constructing at least 1,000 protected springs through UNICEF and NGOs; (b) the Bujumbura Water Supply Master Plan; (c) the water tariff study for Regideso; and (d) preparing a new water project compatible with the prevailing situation in the country\. Component B (protected springs) was largely emphasized as (i) the population could easily participate in design, construction, and cost recovery; and (ii) NGOs had the required skills and experience, not only to construct facilities, but also to mobilize and train communities\. Local contracting and consulting industries were either nonexistent or not interested in carrying out such activities\. The revision of the components resulted in an amendment to the DCA on February 5, 1996, which also modified the disbursement percentages (see below para\. 5\.4)\. A minor revision took place on June 22, 2000, to include the technical audit of Regideso in the description of component C\. This audit was part of the studies required to assist in the privatization of Regideso\. 3\.5 Quality at Entry: As noted above, the project objectives were fully consistent with the CAS\. Project preparation did a creditable job in: (i) developing a comprehensive investment program for the rural water supply sector by building on the achievements of the previous operation; (ii) helping to develop the institutional framework and finalize cost recovery policies; (iii) assisting the Government to formulate a detailed and dated sector policy letter; and (iv) securing donors' support to the sectoral strategy, either through direct participation to project financing or through parallel operations following the same principles\. In accordance with the practice prevailing at the time of appraisal for RWS projects, the economic analysis identified health and time savings benefits without quantifying them\. The SAR included detailed financial forecasts for the RCEs and Regideso\. For the first time in the Africa Region, the project offered an opportunity to apply the newly issued OD 7\.50 "Project on International Waterways\." Several piped systems were to abstract water from small tributaries of the Nile and the Congo rivers (Burundi spreads over the continental divide that separate the two basins)\. The Bank decided, in view of the limited impact of the project on water resources (less than 0\.02 percent of the average flows was at stake), not to request the Borrower to seek agreements with eighteen riparians, but simply to inform them through their respective ministries of Foreign Affairs\. None of the riparians voiced objections\. -4 -  The project files evidence that the Government initially disagreed with the cost recovery principles\. Several meetings of the council of ministers debated the issue of the rural population having to pay for water The Government eventually issued a satisfactory sector policy letter in May 1991, shortly after project negotiations\. Several key policy measures included in that letter were in fact carried over from the previous project\. With the benefit of hindsight, and notwithstanding the commendable efforts of the project team to bring a consensus with the Government, one may wonder why the Bank did not insist that those measures be taken up-front\. Against this background, the absence of public consultation, social assessment or baseline studies during project preparation deprived the project team from information about the socioeconomic implications of the policy measures\. The first supervision missions developed a set of monitoring indicators, which was missing from the SAR A final question is whether the project was ready for implementation at the time of Board approval\. The major investments to be financed by IDA were still at the preliminary design stage\. Actually, it took more than two years after Board approval to finalize the technical design and to award the first civil works and pipe supply contracts\. Given the above shortcomings of project preparation and readiness, the quality at entry is rated marginally satisfactory\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: The achievements of the project are assessed in view of the initial objectives, of the priority order of those objectives agreed by the Bank and the Borrower at project restructuring, and also of the lengthy interruption (almost four years) of project activities\. The assessment takes into account: (i) the outcome indicators (see Annex 1) defined in the first supervision missions; and (ii) the findings of the impact survey and technical audit that were carried out at the end of the project\. The impact survey collected data from 550 households on water use and hygiene, the participatory process and the functioning of water committees in 19 communes in seven provinces\. The technical audit covered two provinces (Muramvya and Mwaro)\. The degree to which the initial project objectives have been achieved is summarized below\. The objective of improving the living conditions of the rural population by increasing the quantity and quality of potable water has been successfully achieved\. About 670,000 people have access to safe water through over 4,600 springs and eight piped systems financed by the project\. The impact survey found that: (i) 85 percent of the respondents obtained their drinking water from protected springs (against 32 percent before the project); (ii) only 2 percent still used unprotected supplies (against 44 percent before the project) for their drinking water; (iii) 85 percent were satisfied with water quality; and (iv) 25 percent increased their water consumption\. This outcome is remarkable as the project originally forecasted to spend ten times as much money to deliver water to 1,150,000 people by the year 2010\. The objective of implementing the policy of payment for water in urban and rural areas has been substantially achieved in the rural areas covered by the project\. The revenue collection rate of the RCEs fell from about 40 percent at the time of credit approval to 20 percent in 1992 and almost to zero from 1993 to 1997\. The community mobilization efforts carried out by NGOs after 1997 allowed 66 RCEs to resume revenue collection\. The impact survey found that 91 percent of households pay annual user fees in the case of protected springs and piped systems and that they significantly contributed to investments in the case of protected springs\. Still, actual revenue collection cannot cover O&M costs and renewal costs of the piped systems, and more than 40 percent of those systems need rehabilitation\. In urban areas, the decision to - 5-  terminate the policy of free water for urban standpipes users--already delayed in the previous project--never materialized\. The average urban water tariff increased from 40 FBu/m3 in 1991 to 130 FBu/m3 in January 2001, but decreased in dollar terms (from 24 cents to 16 cents) and falls short of the SAR target of 34 cents/m3\. The average tariff cannot cover the average operating costs (excluding depreciation) of 160 FBu/m3 and the electricity activities of Regideso finance the shortfall\. The objective of enhancing responsibility of local governments for maintaining water supply facilities has been achieved in the areas covered by the project through: (i) the elimination of overlapping responsibilities between Regideso, DGHER and the communes; (ii) the establishment of 66 RCEs; and (iii) the selection and training of RCE staff and communal attendants paid from the proceeds of user fees\. The objective of strengthening the institutions involved in water supply has been achieved at the local level\. The intervention of NGOs helped reactivate 66 of the 101 RCEs that were set up in the first three years of the project\. At the central level, however, the support functions initially envisioned for DGHER (centralized coimmunity mobilization, back-up maintenance and financial supervision of the RCEs) are not operational\. The performance and capacities of Regideso have not markedly improved\. The PSAE helped develop appropriate institutional arrangements in the water supply sector\. They are somewhat different from the ones envisioned at the beginning of the project\. Regarding rural water services, the Government now recognizes that: (i) the status of the RCEs place them in a situation of excessive dependency on communal authorities; and (ii) DGHER cannot carry out its back-up and monitoring responsibilities without a substantial effort towards decentralization and without the assistance of NGOs and the private sector\. Based on the experience of the PSAE and the Energy Sector Rehabilitation Project, the Government also agreed to reform Regideso by introducing private sector participation in the delivery of water and electricity services\. The Government has adopted the necessary legal framework and asked for Bank assistance for designing and carrying out the PSP process\. The Bank agreed to include part of the PSP studies in the PSAE and set up an IDF grant\. Further progress of the PSP process will depend on the restoration of peace and security conditions throughout the country\. Overall, the outcome of the restructured project is rated satisfactory in view of (i) the successful achievement of its priority objective; (ii) the high cost-effectiveness of physical investments; and (iii) the recognition by all stakeholders that genuine decentralization and demand-driven approaches are key to the development of rural water services\. Also, by helping the Government to reformulate its strategic vision of the institutional framework and by demonstrating the potential of local actors in the development of the sector, the project had a substantial impact on sector policies\. 4\.2 Outputs by comnponents: The Rural Water Supply Systems Component (actual cost: US$5\.93 million) was abandoned in July 1995\. The corresponding portion of the IDA credit was canceled and the cofinanciers (AGCD and KfW) withdrew from Burundi\. The PSAE envisaged to construct 90 systems for a total length of 1,134 km At the time of project restructuring, only eight systems (100 km of pipes) had been completed, all in the provinces of Ngozi and Muyinga under KfW financing\. DGHER awarded the works and pipe supply contracts for 29 IDA-financed systems in September 1993, but never signed them because of the security situation, The AGCD portion of the component only financed detailed design studies\. About 40,000 people may get water from the systems that were built\. Follow-up projects might efficiently use the impressive quantity of design studies that were prepared\. However, this does not amount to a significant output and the component is rated unsatisfactory\. -6 -  At the time of project restructuring, the implementation procedures (ICB/international consultants) left no alternative, but to cancel this component\. Facing identical country circumstances, a similar project in Rwanda (Second Water Supply Project, Cr\. 1783-RW) sought in 1995 to proceed with the construction of piped systems\. It achieved very little at a high cost\. Conversely, the Burundi Social Action Project (Twitezimbere, Cr\. 2494-BU) --which, in a demand-driven approach, used NGOs and local contractors--helped construct 52 piped systems after 1996\. This begs the question whether a more ambitious revision of the design of this component would have allowed to reach the initial target\. The answer is a qualified no, as Twitezimbere financed water schemes that were on average ten times smaller than the ones envisioned in the PSAE, and the sustainability of those schemes is uncertain\. The Protected Springs Component (actual cost: US$ 3\.41 million) is rated highly satisfactory\. The physical output (4,669 springs constructed) went well beyond initial and revised targets\. The planning process was not entirely demand-driven\. Thirty-two percent of the respondents of the impact survey identified local authorities or NGO teams as the promoters of the springs\. Sixty percent mentioned the community as a whole or a sub-group of the community\. Communities agreed on the location of the spring in 65 percent of the cases and the local authorities or the technical staff of the NGOs proposed a location when multiple sites were available\. The construction phase was more participatory than the planning phase\. The NGOs trained and supervised communal attendants (fontainiers) who developed the springs with local masons and the population and provided the construction teams with cement, pipes and all other imported materials\. More than 90 percent of the households contributed to develop the springs, by supplying and transporting building materials and by providing unskilled work to dig trenches and arrange the catchment area\. The average household contributed 10\.8 days to those tasks\. Once translated into monetary terms, the contribution of the communities amount to about US$460,000 or 14 percent of the cost of the component (almost three times the percentage expected in the SAR)\. Arrangements for the construction phase were quite effective\. The NGOs successfully addressed logistical challenges created by the scattered location of the sites and the impact of the regional embargo on the availability of imported materials\. It is unlikely that local contractors would have been able to deliver in those circumstances\. The technical audit found that the quality of the works was correct and that the unit costs (about US$5 per person served) were lower than the ones registered by Twitezimbere (they were actually 70 percent lower than the ones observed in Rwanda)\. The results of the impact survey witness the success of this component\. The springs constructed under the project have become the major source of drinking water for the rural population\. While they provide a lower level of service than the standposts installed on the piped systems, water users appreciate the improved convenience of use and availability of the springs\. They are also reliable throughout the year: only 13 percent of the respondents of the survey reported interruptions of service of more than three days since their construction\. Those interruptions were a result of the exceptional drought that affected the project area in the year 2000\. The scope and approach followed by the Institution Building Component (actual cost: US$4\.05 million) were substantially modified at project restructuring\. Initially, this component was devoted to providing TA and equipment for DGHER and the project unit and finance the operating costs of the latter\. The three teams (community mobilization, maintenance and accounting, with a total staff of 45 people), set up in the project unit to assist the RCEs, were unable to deliver services from 1993 onwards\. They were disbanded when the piped systems component was canceled\. Apart from the preparation of training tools, the establishment of about 101 RCEs at the end of 1993 and the carrying out of the sensitization campaign, those efforts had not measured up to SAR expectations\. - 7 -  The revision of the component embraced a totally different approach by focusing on the water points and RCEs rather than on DGHER\. The NGOs in charge of implementing the Protected Springs Component trained: (i) 244 staff (president, treasurer and members of the executive committee) of the RCEs in general and financial management and planning; (ii) 218fontainiers in springs construction and maintenance; and (iii) 132 mobilization workers in functioning of water committees, cost recovery and hygiene\. The NGOs also helped to re-establish the RCEs by mobilizing the population to elect water point committees, who in turn elected members for the executive committees of the RCEs\. The output of those activities is rated satisfactory in view of: (a) the demonstrated capacity of thefontainiers who led the spring construction teams; (b) the improved revenue collection performance; and (c) the improved capacity of the RCEs to manage and plan facilities\. Each of the 66 communes prepared its own water supply master plan with the support of the NGOs and DGHER, through a process involving local authorities, local technical staff and commnunity groups\. The hygiene program appear to have been less successful and certainly requires continuous efforts\. The impact survey found that 80 percent of the respondents use closed containers to carry and conserve water (which is rather attributable to the hilly terrain), but also that half of the springs were not properly cleaned\. The results of the studies sub-component are mixed\. Two major studies were not carried out: (i) the organization study of DGHER--that would have helped to integrate the project unit into DGHER--was no longer justified after 1995; and (ii) the urban water tariff study, which was eventually awarded, but never launched (see Section 5\.1)\. The two studies completed for Regideso (Bujumbura Water Supply Master Plan and the technical audit) have no direct institution building impact, but they provide a comprehensive assessment of rehabilitation and investment needs that will be included in PSP bidding documents\. 4\.3 Net Present Value/Economic rate of return\. The SAR did not include NPV or ERR calculations\. As protected springs usually provide a basic and identical service to all users, the best indicator of the cost-effectiveness of the project is the investment cost per person served\. In that respect, the restructured project is highly effective, with an average cost of about US$5/person served, which reflect the competitive costs achieved by the NGOs (see Annex 3)\. The SAR also pointed to health and time savings as potential benefits of the project without quantifying them\. The impact survey provides an interesting assessment of those benefits, as perceived by the users of protected springs\. Eighty-one percent of the respondents observed a reduction of diarrhea and parasitic diseases\. In addition, while springs are usually not expected to generate major time savings (in any case much less that the piped systems), their actual impact was higher than anticipated\. Respondents mention that protected springs save some travel time (they are on average 10 to 15 percent closer to their homes that the previous source of supply), and more importantly, that they substantially reduce queuing times (69 percent of the respondents wait less than 15 minutes to be served and 44 percent wait less than five minutes)\. 4\.4 Financial rate of return: The SAR, in accordance with the practice prevailing at that time for RWS projects, did not include FRR calculations\. However, it provided detailed financial forecasts for the RCEs, which reflected essentially the costs and revenues to be generated by the piped systems\. Since the piped systems component was canceled, it is not possible to provide a meaningful comparison of actual and forecast financial statements\. 4\.5 Institutional development impact: The project had a substantial impact on the local institutions (RCEs and water point committees) and also on the NGOs\. First, the RCEs, which were created under the project, benefit from trained human resources - 8 -  and have established a (still modest) financial resource base\. Second, communal master plans provide an efficient programming tool for future interventions\. The master plans allow local decisionmakers to consider a set of demand-driven RWS subprojects, which are more realistic than those formerly prepared by international firms\. They will be particularly useful when CDD-type projects are developed in the RWS sector in Burundi\. Conversely, the conditions prevailing in Burundi during implementation undermined the central government agencies, and nullified the project efforts to strengthen DGHER\. In view of this contrasted performance, the institution building impact of the project is rated modest\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of governmnent or implementing agency; Outside factors dictated project implementation\. During the early years of the project, Burundi experienced turmoil and a high level of insecurity, with the death of two Presidents of the Republic, one during an attempted coup in October 1993 and the other in Rwanda in April 1994\. The October coup attempt was followed by widespread massacres and the collapse of the Executive Branch at central and local levels\. The situation was characterized by a large number of administrative and professional staff absent from rural areas, including members of RCEs, a paralysis of the economy due to the destruction of social infrastructure, including water facilities, and involuntary displacement of people and refugees\. Those factors made it impossible for the actors (project unit and TA staff, consultants; contractors and NGOs) to reach most of the project areas and carry out their activities\. Bank supervision missions were interrupted\. Halfway through the project life, only 12 percent of the initial credit amount had been disbursed\. The first suspension of disbursements (from May 17 to July 26, 1995) took place at a time when project execution had virtually stopped\. The suspension had no direct impact on implementation, but essentially accelerated the restructuring of the project\. The project was again affected by the July 25, 1996 coup\. Disbursements were suspended for the second time on October 10, 1996, pursuant to Section 6\.02 of the General Conditions, because the conditions for project implementation and supervision were impeded by the situation of insecurity prevailing in the country, and the trade embargo and economic sanctions imposed by neighboring countries\. The second suspension was lifted on May 14, 1997\. Thus, again the project remained almost inactive during the year 1997\. Country circumstances also influenced the external partners of the project\. Cofinanciers suspended their participation in 1996\. The firm that had been awarded the contract of the urban tariff study declined to sign it\. As only one proposal had been received, the study was postponed indefinitely\. 5\.2 Factors generally subject to government control: The exceptional situation described above hinders the assessment of the factors that were really under government control\. On the positive side, the 1993 transformation of the Ministry of Rural Development (MDR) into a Ministry in charge of Communal Development (MDCA) should have facilitated the collaboration between the RCEs and communal authorities, but the administrative collapse largely prevented this from happening\. On the negative side, the frequent changes of senior staff and the inability to provide counterpart funding are mostly attributable to outside factors, while the reluctance of the Government to apply the cost recovery policy stipulated in the Sector Policy Letter denotes a lack of genuine commitment (see "Borrower Performance" in Section 7)\. 5\.3 Factors generally subject to implementing agency control: During the periods when outside factors were not overwhelming, the management performance of the successive project coordinators appears as a key factor of implementation progress, particularly after the restructuring of the project (see "Implementing Agency Performance" in Section 7)\. -9-  5\.4 Costs andfinancing: The final costs and financing of the project deviate substantially from the SAR estimates\. The final project costs (US$13\.7 million or 25 percent of the SAR estimate of US$54\.7 million) reflect the cancellation of 75 percent of the credit amount at project restructuring and the revision of the components\. Accordingly, less than US$6 million were spent on rural water supply systems (against US$44 million forecast in the SAR), while the final cost of the springs is 60 percent higher than expected\. Project financing was significantly affected by the withdrawal of the cofinanciers who contributed US$5 million (or 27 percent of the SAR estimates of US$18\.8 million)\. The February 1996 amendment of the DCA acknowledged the inability of the Government to provide significant counterpart funding by increasing the disbursement percentages to 100 percent for those categories cofmanced by the Government\. Finally, rural households, and to a lesser degree, NGOs, were the only project partners to deliver more than expected\. In-kind contributions of rural communities (US$0\.5 million) compensated the defaulting communes and NGOs contributed US$0\.11 million in back-up support and management costs\. 6\. Sustainability 6\.1 Rationale for sustainability rating: The major achievements of the restructured project, which resulted from the development and protection of springs, are likely to be sustained\. First, the spring development technology is simple, appropriate, replicable and affordable; all maintenance materials and skills can be found locally\. Second, according to the impact survey, beneficiaries seem to really appreciate the service delivered, which has improved their living conditions and health\. Finally, despite the fact that activities of the RCEs were severely undermined during the sociopolitical crisis, the RCEs are still functioning\. They were reactivated and trained during the later years of the project\. They have hired the required skilled staff to manage and maintain existing water facilities and resumed collecting tariff among water users\. Nevertheless, they will need adequate support to improve their performance, which is planned by DGHER\. 6\.2 Transition arrangement to regular operations: The springs constructed under the project are already in operation\. Arrangements for their maintenance through thefontainiers are in place, as well as arrangements for collecting user fees\. The Borrower's assessment (Annex 8) elaborates on arrangements to improve the accountability and performance of RCEs\. They comprise the following: (i) establishing, before the end of the year 2002, RCE coordinators in all provinces with the support of UNICEF, AGCD and various NGOs (three coordinators are already active in Karuzi, Makamba and Ruhigi); (ii) changing the legal status of the RCEs into associations (ASBL) to reinforce their autonomy, vis-a-vis, the communal authorities (this change already occurred in Karuzi and Makamba); and (iii) improving the monitoring capacities of DGHER\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: The project was a logical follow-up to the PAEMR, which had helped formulate and test a new sector strategy\. As mentioned earlier, the project was fully consistent with the CAS\. The preparation team, also in charge of supervising the PAEMR, was familiar with the country and the sector\. The team rightly developed the concept of a nationwide operation, based on an adequate institutional and policy framework that would mainstream the experience of the ongoing operation and devoted substantial time and resources to market the project concept among the donors' community\. The Bank's performance at this stage was fully satisfactory\. The Bank team delivered a solid performance at the preparation stage, but would have likely benefited from - 10 -  a wider skills mix\. The strong points of the preparation work comprised the identification of a comprehensive sector investment program and the finalization of the institutional framework for the RCEs\. The team must also be credited with convincing the Government to include the construction of protected springs in the IDA-financed components, whereas the Government had insisted earlier to reserve such facilities for grant financing\. A weaker point was the conviction--acquired in the implementation of the PAEMR--that the deployment of cost recovery policies depended exclusively on Government decisions\. The involvement of social specialists in the team would have brought a better understanding of the issue\. Project appraisal and negotiations offered a last opportunity to verify the Government's commitment to policy reforms\. The institutional reforms included in the Sector Policy Letter were found to be adequate by the appraisal mission, but another Bank mission had to visit Burundi before negotiations to reach a consensus on cost recovery measures\. Those efforts were not entirely successful, and finally, the signing of a satisfactory policy letter became a condition for Board presentation\. It is surprising that Bank management did not insist, prior to negotiations, to make the completion of the unfinished business inherited from the PAEMR a condition for credit effectiveness\. Therefore, and in line with the assessment of the quality at entry, the Bank's lending performance is assessed as marginally satisfactory\. 7\.2 Stupervision: Supervision initially focused on the technical aspects of the project and on procurement issues\. Aide-memoires and follow-up letters sent to the Government in 1992-1993 also pointed to the delayed implementation of the cost recovery measures\. Project ratings, however, remained satisfactory against the overwhelming evidence that the project objectives were jeopardized and that implementation was lagging\. No remedies were invoked, but it is doubtful they would have had any beneficial impact at that time, beyond causing an indefinite suspension of disbursements\. The Government was indeed facing much more pressing issues\. The supervision perfornance improved markedly when missions resumed in February 1995\. After briefly considering the cancellation of the project, the Bank concluded that a downsized project should be the right instrument to assist a rural population in dire need of basic services\. Management support, and particularly the dedication of the sector manager expedited the restructuring of the project\. The Bank team should also be commended for redesigning the implementation process and for packaging a wide range of tasks (springs development, reactivation of RCEs, training and planning assistance) into a comprehensive contract for the NGOs\. As external factors delayed the actual restart of project activities and reduced the frequency of headquarters missions, the Country Office played an increasing role in addressing procurement and financial management issues and assisting the Government to improve the performance of the project coordination unit\. The Bank showed flexibility by approving three successive extensions of the closing date that were necessary to complete the protected springs component and by agreeing to finance the technical audit of Regideso under the credit\. 7\.3 Overall Bankperformance: The flexibility and innovation demonstrated at project restructuring, which allowed the project to achieve high impact on the ground, largely overcome the shortcomings of the earlier supervision and the overall Bank performnance can be assessed as satisfactory\. Borrower 7\.4 Preparation: The Borrower's performance in lending is assessed as satisfactory\. The sectoral agencies, particularly the - 11 -  PAEMR unit, closely cooperated with the Bank team to design the components, the implementation arrangements and most of the policy reformns supported by the project\. However, the final agreement with the Government on the sensitive cost recovery aspects appears to have resulted more from the desire to come to a closure than on a genuine conviction\. 7\.5 Government implementation performance\. Facing the perspective of implementing difficult policy measures in the politically charged environment of the 1993 elections, the Government decided to delay them indefinitely\. Actually, many candidates campaigned on the theme of "Free water for all\." As the country situation worsened, the failure of the Borrower to comply with many provisions of the DCA became meaningless in comparison with the extent of the crisis\. In 1995, and following the first suspension of disbursements, the Government agreed on the restructuring concept\. Once restructured, the project received the full support of the Government, including the provincial authorities, which facilitated the field activities of the NGOs without interfering with them\. The swift reimbursement to the Special Account of the ineligible expenditures incurred by the project coordinator and the immediate termination of the latter also evidenced the Governmuent's commitment to the successful implementation of the restructured project\. 7\.6 Inmplementing Agency: The performance and the role of the implementing agency, DGHER, greatly varied over time\. In the first years of the project, the Project Unit actually carried out most of the implementing responsibilities\. Its performance was satisfactory, albeit slightly inferior to the one observed in the PAEMR, and characterized by procurement slower than expected and some internal friction\. As mentioned earlier, the technical assistance team was forced into inactivity after October 1993, but its effectiveness had been reduced before that date by the lack of Government support to the viability of the RCEs\. At restructuring, DGHER proceeded in an orderly fashion to terminate the remaining contracts and Project Unit staff\. The project coordinator recruited afterwards to manage a much smaller coordination unit delivered a sluggish performance and delayed the signing of the first NGO contracts until the end of 1997\. He was eventually tenninated in February 1998 when a SOE review, carried out by the Country Office, evidenced the payment out of the Special Account of about USS32,000 of ineligible expenditures\. Drawing the lessons from those unfortunate experiences, the Minister of Communal Development decided to repatriate the project coordination responsibilities into DGHER\. The General Manager of DGHER took over project management and put the restructured project back on track, while the NGOs assumed most of the implementing responsibilities\. Project implementation improved markedly, thanks to the dedication of the General Manager--who unfortunately passed away in August 1999\. Implementation remained satisfactory afterwards, with the exception of one procurement issue which was promptly solved\. Audit reports were timely issued, without qualifications\. Progress reports were well documented and completed by detailed information provided by the NGOs and the RCEs\. The five NGOs delivered an impressive quantity of work and a variety of services under challenging circumstances\. 7\.7 Overall Borrower performance: The highly satisfactory record of the NGOs, which actually implemented the project from 1998 onwards--and the strong support provided by the Government after the restructuring--are key to the satisfactory outcome of the project and offset the chaotic coordination performance\. Therefore, the overall performance of the Borrower is assessed as satisfactory\. 8\. Lessons Learned The most important lesson to be drawn from the difficult history of the PSAE is that even in conflict situations, it is possible to restructure projects and to achieve high impact by concentrating on the most - 12-  basic level of services and using adapted and low-cost solutions\. Another related lesson, confirmed by the experience of the Burundi Social Action Project and a contrario by the Rwanda Second Water Supply Project, is that in crisis situations, a bottom-up approach is more likely to succeed, even if the social cohesion has failed\. Delegating implementation responsibilities to dedicated NGOs also may restore a degree of trust that governmental bodies are unable to inspire and also ensure the quality of execution, whereas foreign and local contractors may be reluctant to intervene in a challenging work environment\. A second lesson is that building on the achievements of a "highly satisfactory" project does not by itself warrant the success of a follow-up operation and does not automatically warrant that the quality at entry will be satisfactory\. This is particularly true if the assessment of the achievements emphasizes technical performance and there is no proven record of sustainability\. The preparation team of the follow-up operation has to exercise particular caution and demonstrate the replicability of the initial operation\. A final lesson is that the design and implementation of cost recovery policies for rural water services requires much more than mechanically assessing costs and tariffs and reaching an agreement with the central government\. This lesson has been already integrated in the current practice, which brings water users in the picture through willingness-to-pay studies and social assessments and recommends to closely link cost recovery and service levels\. 9\. Partner Comments (a) Borrower/implementing agency: The Borrower's assessment (in French) of the implementation of the project is attached as Annex 8\. (b) Cofinanciers: No comments from the cofinanciers are available\. (c) Other partners (NGOs/private sector): The ICR mission interviewed three of the five NGOs which implemented the restructured project\. All mentioned that the springs constructed (with the population) are really appreciated and used\. They outlined that, after the difficult times endured by the population, trust was the key factor of community participation, and that trust could only be built on the basis of a continuous relationship\. Trust is also a key element of the sustainability of the RCEs\. All NGOs mentioned that the contract period was too short to ensure the full development of the capacities of the RCEs, with the notable exception of the fontainiers\. They support the concept of regional coordinators of the RCEs, which DGHER is deploying (one of the NGOs finances a regional coordinator)\. They also support the transformation of the RCEs into ASBLs, but some doubt whether this change of status would ensure autonomy vis-a-vis, the local authorities\. All NGOs consider that the RCEs are able to maintain and also develop protected, springs\. However, the adequate maintenance of piped systems would require at least one technical staff per commune, paid by the RCE\. Some NGOs recommended to separate clearly the representative functions in the RCE committee from the financial management and technical functions\. Regarding the technical options, one NGO mentioned that low-yield springs should be systematically associated with a small masonry tank that would reduce queuing times\. None of the NGOs mentioned any problem with the management and timely payment of their contracts\. One of them mentioned that the fixed prices contract were problematic in the context of high inflation prevailing in Burundi\. 10\. Additional Information - 13-  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome/lmpact Indicators: ?1~Idctr~Reie fe\. cullLatet'!\. Population served by piped systems 750,000 40,000 40,000 (activity canceled) Population served by springs 400,000 150,000 630,000 Total population served 1,140,000 190,000 670,000 Cost recovery: - percentage of rural population paying 100% N/A 91% user fees for water (all facilities) (protected springs) - level of urban water tariffs: FBu/m3 55 N/A 130 (equivalent US$1m3) (0\.34) N/A (0\.16) - free water at urban standpipes Policy terminated N/A Not done Improved donors' coordination Annual donors' Activity suspended Activity suspended meeting Improved sector institutional setting Regideso no Regideso no Done longer involved in longer involved in RWS RWS utput Indicators: No\. of piped systems constructed 90 8 8 Total length of networks 1,134 100 100 (activity canceled) No\. of springs constructed 3,000 1,000 4,669 No\. of r6gies communales established 113 N/A 66 Community contribution to investment: - percentage of contributing communities 100% 100% 90% - contribution as percentage of costs 5% 5% 14% Training (person-months): - DGHER higher-level staff 29 N/A 4 - Accountants 8 N/A 1 - Communal attendants 138 N/A 116 - RCE staff 40 N/A 61 Total 215 N/A 182 Technical assistance (person-months) 204 96 96 (activity canceled) Studies: - Sector organization study Study completed Activity canceled Not done - Tariff study (Regideso) Study completed Study completed Not done - WS Master plan for Bujumbura Study completed Study completed Done - Technical audit of Regideso (water and Not included Not included Done power) - 14-  Annex 2\. Project Costs and Financing Project Costs by Component (US$ million equivalent) Project Cost by Component Appraisal Revised Actual/Latest Percentage Percentage Estimate Estimate Estimate of Appraisal of Revised US$ million US$ million US$ million A\. Rural water supply systems 43\.85 5\.93 5\.93 14% 100% B\. Protected springs 2\.11 3\.50 3\.41 162% 97% C\. Institution building 7\.74 4\.42 4\.05 52% 92% D\. Refinancing of PPF 1\.00 0\.34 0\.34 34% 100% Total 54\.70 14\.19 13\.73 25% 97% Costs of revised components after project restructuring Project Financing by Component (US$ million equivalent) Component Appraisal ActuallLatest Percentage of Estimate Estimate Appraisal US$million US$million A\. Rural water supply systems: IDA 24\.41 0\.92 4% Co-financiers 17\.45 5\.00 29% Government 1\.28 0\.00 0% Communes & communities 0\.71 0\.01 1% Sub-total 43\.85 5\.93 14% B\. Springs: IDA 2\.00 2\.77 138% Government 0\.00 0\.00 N/A Communes & communities 0\.11 0\.46 418% NGOs 0\.00 0\.18 N/A Sub-total 2\.11 3\.41 162% C\. Institution building IDA 5\.28 3\.56 67% Co-financiers 1\.35 0\.00 0% Government 1\.10 0\.49 45% Sub-total 7\.74 4\.05 52% D\. Refinancing of PPF 1\.00 0\.34 34% Total Project IDA 32\.70 7\.59 23% Co-financiers 18\.80 5\.00 27% Government 2\.38 0\.49 21% Communes & communities 0\.82 0\.47 57% NGOs 0\.00 0\.18 N/A Grand total 54\.70 13\.73 25% - 15-  Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) Procurement Method Expenditure Category ICB NCB Other' N\.B\.F\. Total Cost 1\. Works 14\.30 0\.80 1\.80 9\.80 26\.70 (12\.90) (0\.70) (1\.60) (0\.00) (15\.20) 2\. Goods 8\.40 0\.80 0\.20 5\.30 14\.70 (8\.40) (0\.80) (0\.20) (0\.00) (9\.40) 3\. Services 0\.00 0\.00 5\.60 4\.20 9\.80 (Consultants & TA) (0\.00) (0\.00) (5\.60) (0\.00) (5\.60) 4\. Training 0\.00 0\.00 0\.40 0\.00 0\.40 (0\.00) (0\.00) (0\.40) (0\.00) (0\.40) 5\. Incremental operating 0\.00 0\.00 2\.10 0\.00 2\.10 costs (0\.00) (0\.00) (1\.1 0) (0\.00) (1\. 1 0) 6\. Refinancing of PPF 0\.00 0\.00 1\.00 0\.00 1\.00 (0\.00) (0\.00) (1\.00) (0\.00) (1\.00) Total 22\.70 1\.60 11\.10 19\.30 54\.70 _ (21\.30) (1\.50) (9\.90) (0\.00) (32\.70) Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) Expenditure: Category Procurement Method Expenditure C:ategoryr 0 ICB NCB Other2 N\.B\.F\. Total Cost 1\. Works 0\.00 0\.00 3\.41 1\.68 5\.09 (0\.00) (0\.00) (2\.77) (0\.00) (2\.77) 2\. Goods 0\.31 0\.08 0\.02 1\.44 1\.85 (0\.30) (0\.08), (0\.02) (0\.00) (0\.40) 3\. Services 0\.00 0\.00 3\.13 1\.89 5\.02 (Consultants & TA) (0\.00) (0\.00) (3\.13) (0\.00) (3\.13) 4\. Training 0\.00 0\.00 0\.25 0\.00 0\.25 (0\.00) (0\.00) (0\.25) (0\.00) (0\.25) 5\. Incremental operating 0\.00 0\.00 1\.18 0\.00 1\.18 costs (0\.00) (0\.00) (0\.70) (0\.00) (0\.70) 6\. Refinancing of PPF 0\.00 0\.00 0\.34 0\.00 0\.34 (0\.00) (0\.00) (0\.34) (0\.00) (0\.34) Total 0\.31 0\.08 8\.33 5\.01 13\.73 (0\.30) (0\.08) (7\.21) (0\.00) (7\.59) "Figures in parenthesis are the amounts to be financed by the IDA Credit\. All costs include contingencies\. I lncludes civil works and goods to be procured through national shopping, consulting services, services of contracted s-aff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units\. - 16-  Annex 3\. Economic Costs and Benefits Cost-Effectiveness 0 By focusing on the development of protected springs, the restructured project financed highly cost-effective investments\. The actual unit cost of a protected spring amounts to an average US$640 (i\.e\. US$5 per person served)\. This compares favorably with the SAR estimates of US$700/spring\. One may note that the bulk of investments forecast in the SAR was devoted to piped systems with a substantially higher unit cost of US$58 per person served\. Piped systems provide a superior level of water service, including the possibility of private connections\. They require less effort than springs, which are located in the bottom lands while the population usually resides in the upper part of the hills and are the most suitable solution to serve agglomerated groups of population\. Still, the low-cost springs serve four times as many people than expected at the time of project restructuring\. The unit costs also compares favorably with the unit costs observed in the Burundi Social Action Project (UJS$720/spring) and in the Rwanda Second Water Supply Project (US$2,100/spring)\. The latter employed local contractors, supervised by foreign consultants, while the former employed NGOs\. Benefits In the absence of baseline studies on benefits identified in the SAR, it may be useful to provide the findings of the impact survey regarding health and time savings\. Percentage of respondents mentioning a reduction of diseases after development of the spring: 81 percent Distance to drinking water point (percentage of households) Before the project After the project Less than 100m 10% 15% 100m- 500m 53% 53% 500m - 1,000m 23% 22% More than 1,000m 15% 10% Waiting time at the spring (percentage of households): Less than 5 minutes 44% 6 - 15 minutes 25% 16 - 30 minutes 10% More than 60 minutes 5% - 17 -  Annex 4\. Bank Inputs (a) Missions: Stage of Project Cycle No\. of Persons and Specialty Performance Rating (e\.g\. 2 Economists, I FMS, etc\.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 10/88 2 Sanitary Enginee, Financial\. Analyst 05/90 3 Mun\. Eng\., San\. Eng\. (Cons), Fin\. Analyst (Cons) Appraisal/Negotiation 10/90 4 Mun\. Eng\., San\. Eng\., Fin\. Analyst, San\. Eng\. (Cons) 01/91 1 Municipal Engineer Supervision 12/91 2 Mun\. Eng\., Fin\. Analyst HS HS 05/92 2 Mun\. Eng\., Fin\. Analyst HS HS 11/92 2 Mun\. Eng\., Fin\. Analyst HS HS 05/93 2 Mun\. Eng\., Fin\. Analyst S HS 10/93 3 Mun\. Eng\., Fin\. An\., Research S S Assistant\. 02/95 3 Mun\. Eng\., Fin\. Analyst, U U Highway Engineer 07/95 1 High\. Eng\. U U 09/95 2 High\. Eng\., Fin\. Analyst S S 02/96 1 High\. Eng\. S S 03/97 1 High\. Eng\. U U 03/98 2 Water Specialist, Economist S S (Cons) 06/99 1 Water Spec\. S S 04/00 2 Econ\. (Cons), Op\. Officer S S ICR 04/01 2 Water Spec\., Proc\. Spec\. S S 11/01 2 Water Spec\. San\. Eng\. (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation 9\.60 18\.80 Appraisal/Negotiation 42\.50 98\.40 Supervision 126\.88 281\.19 ICR 7\.71 29\.10 Total 186\.69 427\.49 - 18 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating IMacro policies O H OSUOM O N * NA lISector Policies OH *SUOM ON O NA Z Physical O H *SUOM O N O NA H Financial O H OSUOM * N O NA O Institutional Development 0 H O SU * M 0 N 0 NA O Environmental O H OSUOM O N O NA Social O Poverty Reduction O H OSUOM O N O NA Z Gender O H OSUOM * N O NA 0 Other (Please specify) O H OSUOM O N O NA • Private sector development 0 H O SU O M 0 N * NA F Public sector management 0 H O SU O M 0 N 0 NA • Other (Please specify) 0 H O SU O M 0 N 0 NA NGO involvement - 19-  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bankperformance Rating N Lending OHS *S C U O HU N Supervision OHS *S C u O HU M Overall OHS *S C U O HU 6\.2 Borrowerperformance Rating F Preparation OHS OS C U O HU 2 Government implementation performance O HS * s 0 U C HU E Implementation agency performance OHS OS C u C HU Z Overall OHS *S C U C HU - 20 -  Annex 7\. List of Supporting Documents Etude d'impact des sources amenagees\. CERDA, juin 2001 (29 pages et annexes) Audit technique des sources amenagees/Provinces de Muramvya et Mwaro\. Consultant Bemd Dobberstein, juin 2001 (37 pages et annexes) Rapport d'evaluation des travaux d'amenagement de 500 sources dans la Province de Gitega\. Terre Sans Frontieres, septembre 1998 (9 pages et annexes)\. Rapport de cl6ture de l'amenagement de 700 sources d'eau potable dans la Province de Makamba\. Communaute des eglises de Pentecbte au Burundi (CEPBU), septembre 1999 (35 pages et annexes) Rapport final des travaux d'amenagement de 300 sources d'eau souterraine et remise en place des regies communales d'eau en Province de Cibitoke\. Developpement et Habitat Rural (DHR), decembre 1999 (9 pages) Rapport de cl6ture de l'amenagement de 700 sources dans la Province de Karusi\. Communaut&-Engagement-Service-Volontariat (CISV), mars 2000, (13 pages et annexes)\. Enquete nationale sur la couverture en eau potable et assainissement\. DGHER, Juin 1999 (32 pages et annexes) Rapport de synthese des journees de reflexion sur la gestion communautaire des infrastructures hydrauliques en milieu rural en faveur des provinces de Kirundo, Muyinga, Kayanza et Ngozi\. - 21 -  Additional Annex 8\. Borrower's Contribution RAPPORT D'ACHEVEMENT DU PROJET SECTORIEL D'ALIMENTATION EN EAU (PSAE) Credit IDA 2288-BU Contribution de I'Emprunteur A\. INTRODUCTION 1\. Le Gouvemement du Burundi et l'Association Intemationale de Developpement (IDA) ont conclu en date du 7 aout 1991 un Accord de Credit pour le financement d'un Projet Sectoriel d'Alirnentation en Eau pour un montant initial de 24,2 millions de DTS\. 2\. Les objectifs du Projet etaient: a) d'amrliorer les conditions de vie de la population en accroissant la quantite d'eau potable disponible et en ameliorant la qualite, b) de mettre en ceuvre une politique de recouvrement des cofits dans les zones urbaines et rurales, c) de responsabiliser les autorites locales en matiere de maintenance des installations d'alimentation en eau, d) de renforcer les institutions du Burundi intervenant dans le secteur de l'alimentation en eau, e) d'elaborer et d'appliquer des dispositions institutionnelles appropriees dans le secteur de l'alimentation en eau\. 3\. Le projet comprenait les parties suivantes: * Realisation de nouveaux reseaux d'AEP dans neuf provinces avec le concours d'autres bailleurs de fonds, * L'amenagement et la protection de 3000 sources dans les neuf provinces, * Le renforcement des institutions, * La sensibilisation de la population sur l'utilisation de l'eau potable, * L'execution de deux etudes dans le secteur de l'eau pour le compte de la Regideso\. 4\. La crise socio-economique qu'a connu le Burundi depuis octobre 1993 a conduit a une insecurite generalisec dans le pays et les objectifs du Projet ont te reorientes\. C'est ainsi qu'en 1995, le Projet a connu une premiere suspension et par suite, le Gouvemement du Burundi et l'Association ont convenu de restructurer le projet et de revoir a la baisse le montant du cr6dit\. 5\. Apres la restructuration d'aou&t 1995, trois objectifs principaux ont ete retenus, a savoir: * L'amenagement de quelques 1000 (ou plus) sources d'eau dans neuf provinces retenus pour le projet, * La Redynamisation des Regies Communales de l'eau (RCE), * L'appui a la Reforme institutionnelle de la Regideso\. - 22 -  B\. EXECUTION DU PROJET 6\. L'Accord de Credit a ete signe en aouit 1991 et le projet a demarre ses activites en Janvier 1992\. La date de cl6ture qui 6tait initialement prevue pour le 31 decembre 1997 a ete prorog6e au 30 juin 2001\. Le projet a connu une premiere suspension en 1995, tout le personnel du Projet PSAE a ete licencie\. En aouit 1995, il y a eu une restructuration du Projet, ce qui a conduit a une mise sur pied d'une cellule du Projet avec un personnel reduit\. Une autre suspension a eu lieu en 1996 suite a 1'embargo impose au Burundi\. Toutes ces deux suspensions ont eu des repercussions negatives sur l'execution du projet\. Les objectifs du Projet ont e revus, et une bonne partie des fonds du credit alloues au Projet ont ete annules passant de 24,2 millions de DTS a 6,2 millions de DTS\. Le volet Adductions d'eau prevues dans quatre provinces: Kayanza, Karuzi, Gitega et Muramvya a ete supprime tout en laissant beaucoup de dossiers d'etudes d'execution et de projets de dossiers d'appels d'offres sans etre realises\. pres la restructuration du projet, les volets amenagement des sources et redynamisation des Regies Communales de 1'eau ont ete realises avec le concours des ONGs ceuvrant dans le secteur de l'alimentation en eau\. De meme, deux etudes ont pu etre menees pour le compte de la Regideso : 1'etude du Schema Directeur de l'Approvisionnement en Eau de la ville de Bujumbura jusqu'en l'an 2010 et l'Audit Technique des installations de la Regideso en vue de realiser la reforme de cette institution\. C\. REALISATIONS DU PROJET lRalisations avant la restructuration 8\. Les realisations avant la restructuration ont e les suivantes * Projet de construction de vingt cinq reseaux d'AEP dans les provinces de Kayanza et Karuzi: ce projet a ete arrete suite A la crise d'octobre 1993, le marche pour les fournitures et 1'execution des travaux ainsi que celui relatif A la mission de surveillance et de contr6le des travaux n'ont pas ete notifies aux attributaires\. * Realisation de treize reseaux en provinces de Ngozi et de Muyinga (Financement : KfW) : ce programme a e arret egalement comme le precedent\. Les realisations se linitent A la mise en auvre de huit reseaux d'AEP ; 60 % des couts previsionnels du programme ont e decaisses\. Notons que toutes les foumitures de tuyauteries et accessoires etaient dejA livrees au moment ou: les travaux ont ete arretes\. * Programme de couverture maxiinale des besoins en eau en provinces de Gitega et de Muramvya: I'etude de faisabilite a demarre en mars 1991 sur une partie de financement du Credit IDA 1625-BU\. L'etude d'execution a commence fin septembre 1993, elle a donne lieu A une projection de 40 reseaux d'AEP pour un lineaire de 540 km\. Cette etude a 6te achevee en 1995\. Ces deux etudes n'ont pas pu etre mises en ceuvre suite A la crise d'octobre 1993\. * Programme de couverture maximale des besoins en eau des provinces de Bubanza, Cibitoke et Makamba (Financement : AGCD) : des etudes d'identification et d'execution ont ete menees dans des provinces de Bubanza, Cibitoke et Makamba\. Ces etudes n'ont pas pu etre mises en ceuvre, A l'instar du programme precedent\. * Amenagement des sources: initialement, il avait ete prevu que le PSAE amenage environ 3000 sources avec le concours des ONG et de 1'UNICEF\. Aussi, en novembre 1992, un Protocole d'Accord avait ete conclu entre le Ministere du Developpement Rural et 1'ONG AFVP pour realiser 900 sources dans la province de Kayanza Le programme s'est arrete au mois de mai 1995 suite A la crise, apres avoir realise 184 sources amenagees\. Au mois de juillet 1993, un autre protocole a ete conclu avec l'ONG LVIA (Italie) pour realiser 450 sources dans la province de Cibitoke, seules 176 sources ont ete realisees jusqu'A la fm du mois de mai 1995\. - 23 -  Les deux provinces totalisent ainsi 360 sources amenagees et receptionnees\. * Interventions d'urgence : suite aux evenements d'octobre 1993, des interventions d'urgence ont et realisees sur recommandation de la Mission Residente de la Banque Mondiale et du Chef de Projet\. Ces interventions ont concemr essentiellement des reseaux en panne qui devaient alimenter des camps de refugies et ou de deplaces pour un cout global d'environ 14 millions de Francs Burundais\. * Encadrement des Regies Communales de l'Eau: la mise en place de l'organisation du secteur de 1'alimentation en eau potable en milieu rural selon la <( Note d'Instructions aux Gouvemeurs des Provinces et Administrateurs communaux)) du mois de Novembre 1990 a constitue une activite importante pour le bureau du PSAE\. Malheureusement les resultats atteints en 1992 se sont degrades A partir de 1993\. * Assistance technique : en conformite avec l'Accord de Credit, deux assistants techniques ont e mis A la disposition du Projet; un Expert en Developpement Communautaire et un Conseiller Technique et en meme temps Coordonnateur du Projet\. * La mission du premier assistant a pris fin en decembre 1994 et celle du Coordonnateur du Projet le 31 juillet 1995, suite A la premiere suspension des decaissements du Credit qui avait ete decidee le 17 mai 1995\. Le couit global pour les deux assistants etait evalue a environ 328 millions de francs Burundais\. * Acquisition des equipements: des equipements (vehicules, micro - ordinateurs,\.) ont 6te acquis avec les fonds du Credit, soit pour le compte du Projet lui - meme, soit pour le compte de la DGHER\. Le montant de ces acquisitions pour les deux entites s'eleve A environ: 108 millions de francs Burundais\. * Actions de Fonnation: des cadres du Projet, de la DGHER et de la Regideso ont pu participer a des seminaires de fonnation qui se tenaient A l'etranger\. Le cofit de ces actions de fonmation s'eleve A environ: 14 millions de francs Burundais\. RWalisations apres la restructuration 9\. Apres la restructuration intervenue en Aout 1995, le Projet a concentre ses activites sur la construction des sources amenagees dans Neuf provinces : Gitega, Muyinga, Kayanza, Makamba, Cibitoke, Ngozi, Muramvya, Karuzi et Mwaro\. Ces travaux etaient egalement accompagnes par differents volets : la relance ou la mise en place des Regies Communales de 1'eau (RCE), la confection des plans hydrauliques communaux, la formation des cadres des RCE, des animateurs communaux et des fontainiers communaux\. L'ensemble de ces realisations est repris dans l'annexe\. 10\. Pour l'amenagement des sources, plus de 4300 sources ont e amenagees, la population desservie par ces nouvelles sources amenagees (avant et apres la restructuration du projet) s'eleve A environ 126\.000 menages ; soit une amelioration du taux de desserte en eau potable de 11 % sur l'ensemble de la population du Burundi\. Soixante six (66) plans hydrauliques communaux ont e confectionnes, plus de 210 fontainiers et 132 animateurs communaux ont ete formes\. 11\. De meme, 66 regies communales de l'eau ont ete redynamisees ou mises en place, Le Gouvemement du Burundi devrait poursuivre cette action en appuyant financierement la DGHER car ces RCE sont encore jeunes et ont besoin d'un encadrement pendant un certain temps\. Le delai consacre A l'animation - sensibilisation devrait etre plus long pour accompagner les RCE\. 12\. D'autres activites ont ete realisees A savoir: La formation des cadres du projet et de la DGHER A l'etranger dans des secteurs axes principalement sur la viabilite des programmes d'eau et d'assainissement en milieu rural, I'approche participative dans l'execution des projets, la gestion des projets, la passation des marches finances par l'IDA, la decentralisation dans l'execution et la gestion des projets - 24 -  d'AEP et d'Assainissement\. * Deux etudes ont ete menees pour le compte de la Regideso, a savoir: (a) I'actualisation du schema Directeur de l'alimentation en eau de la ville de Bujumbura jusqu'a l'horizon 2010 et (b) I'audit technique de l'outil de production de la Regideso dans le cadre de la privatisation de la Regideso * Pour la DGHER, deux etudes ont ete realisees: (a) I'etude d'impact des sources amrnagees a e realisee a partir des enquetes aupres des menages utilisateurs des sources amenagees et des comites de point d'eau mis en place et (b) l'audit technique des sources amenagees dans les provinces de Muramvya et Mwaro a e execute en vue de faire le point sur la qualite, le cofit et la cadence de realisation des travaux d'amenagement des sources d'une part et de faire une proposition sur des ameliorations &ventuelles dans 1'execution des ouvrages et la participation des beneficiaires\. 13\. Le projet a ete mis en vigueur dans les delais ; il a demarre en janvier 1992\. Avec l'annee 1993, les problemes ont commence a se manifester, etant donne que cette periode coincidait avec des activites politiques intenses sur le terrain ; les populations et les autorites administratives avaient d'autres preoccupations\. Avec la crise d'octobre 1993 ; la partie Realisation de nouvelles AEP etait pratiquement impossible a executer ; I'insecurite ne le permettant pas ; cette composante a ete annulee lors de la restructuration\. En effet: * Les RCE etaient aussi presque partout dissoutes avec la crise, Les differents bailleurs de fonds ont dfi suspendre leur cooperation\. Apr&s la restructuration en 1996, la cellule du Projet a demarre tres difficilement pour des circonstances multiples\. Bilan des sources amenagees 14\. La construction des sources amenagees appelle les remarques suivantes: * L'apport des materiaux locaux par les populations n'a pas toujours ete facile ; d'ofi certaines sources identifiees ont ete parfois abandonnees\. • La participation des autorites locales n'a pas toujours et bonne, certains responsables ne se sont pas impliques dans le programme d'amenagement des sources ; car ils preferaient de grandes infrastructures telles que les adductions d'eau\. * La rarete des devises sur le marche local a occasionne la penurie des materiaux locaux, du carburant sans oublier des retards de paiement par le biais de la Banque Centrale\. * L'insecurite a fait que les travaux pouvaient etre realises dans une province donnee et pas dans une autre\. * Malgre les difficultes susmentionnees, le Projet a pu depasser de loin les objectifs fixes passant de 1000 sources a plus de 4000 sources amenagees\. * Les ouvrages construits sont en bon etat et sont utilises par les populations beneficiaires, les Comites des points d'eau sont mis en place ; le probleme majeur etant l'emplacement des sources qui est generalement situe dans les vallees entramant des distances importantes a parcourir par rapport au service foumi par les bomes-fontaines\. Redynamisation des RCE 15\. Suite a la crise d'octobre 1993, bon nombre de Regies Communales de l'eau (RCE) ont ete dissoutes, le bureau de la RCE (structure) n'etant plus en place, les batiments d'exploitation ont e, soit occupes par l'administration communale, soit detruits par le vandalisme genere par la crise d'octobre 1993\. Aussi, lors du demarrage des travaux dans les differentes provinces, c'etait pratiquement une reprise au - 25 -  debut\. 16\. Actuellement, dans 1'ensemble des neuf provinces oui le Projet a fait des realisations, les RCE ont et mises en place, leur fonctionnement est satisfaisant\. Le constat est que dans les provinces ou l'on dispose d'un encadreur provincial, la situation est meilleure, le taux de collecte des redevances est assez eleve (cf\. cas des provinces de Makamba et de Karuzi) et on enregistre de nouveaux investissements finances par les RCE\. Pour les autres provinces, malgre la relance des RCE, on note le besoin d'un encadrement pour une plus grande periode (deux ans, par exemple)\. 17\. Par ailleurs, la dotation des RCE d'une personnalite juridique est plus qu'une necessite, car on a observe le poids de la tutelle de l'autorite administrative communale ainsi que la non-poursuite des detourneurs des fonds en provenance des redevances-Eau\. D'une maniere generale, on note l'imperieuse necessite de la mise en place des RCE dans toutes les communes du pays, en vue de perenniser les actions realisees en matiere d'alimentation en eau potable\. C'est pour cela que le Gouvernement du Burundi va poursuivre cette action de mise en place et / ou de relance des RCE ainsi que leur encadrement sur tout le territoire national\. Cellule du projet 18\. Les requisitions des moyens logistiques du Projet (vehicules) par differents intervenants exterieurs ont eu une influence sur le rythme d'execution du Projet ; cette situation a perturbe le suivi sur terrain de la supervision des travaux et des RCE\. 19\. Concemant la structure de la cellule du Projet, pour l'avenir, la cellule du projet devrait etre autonome et dotee d'un personnel complet sans devoir recourir aux autres departements techniques\. Rsforme de la Regideso 20\. La Reforme de la Regideso a e entamee avec le Cr&dit IDA 2230-BU\. Cette action n'a pas ete achevee, elle s'est poursuivie avec les fonds du Credit IDA 2288-BU et le don IDF TF 0273250\. L'aboutissement de cette activite risque d'etre freine par le contexte socio-economique qui ne favorise pas encore suffisamment l'interet de beaucoup d'investisseurs etrangers a s'installer dans le pays\. D\. RELATIONS AVEC L'IDA 21\. Les relations entre l'Emprunteur et l'IDA ont ete d'une maniere generale jugees satisfaisantes\. La Mission Residente de la Banque a joue un role appreciable pour l'execution du Projet\. Signalons toutefois que: a) Avec la crise d'octobre 1993 ; le projet a connu plusieurs changements au niveau du Chef de Projet ayant en charge le suivi du Projet\. b) Le nombre de missions de supervision a diminue suite a la crise et a 1'embargo qu'a connu le pays\. c) Le delai pour l'obtention de la non-objection devrait etre plus court\. d) Pour le service des decaissements ; suite aux depenses ineligibles qui ont e enregistr&es en 1997; le remboursement de ces depenses n'a pas ete percu directement par ce service; ce qui a occasionne parfois des blocages dans le fonctionnement du Projet\. En dehors de ce cas, les delais pour l'approbation des depenses et de reapprovisionnement des comptes sont acceptables\. - 26 -  E\. DISPOSITIONS POUR LA PHASE OPERATIONNELLE 22\. Dans le cadre du PSAE, 66 RCE ont et relancees et / ou mises en place; elles disposent d'une structure (President, Vice-President, Tresorier et Tr6sorier - Adjoint)\. Le service Assistance aux RCE de la DGHER est invite a suivre l'encadrement des RCE lors de l'etablissement des budgets annuels, assurer le contr6le de la comptabilite; le contr6le technique de la qualite des infrastructures hydrauliques en vue d'assurer la maintenance et la rehabilitation en cas de necessite\. 23\. En vue de perenniser ces actions, le Gouvemement est en train de doter les differentes provinces d'un encadreur provincial des RCE avec le concours de certains bailleurs de fonds et ONGs ceuvrant dans le secteur de l'eau (UNICEF, Belgique, C\.I\.S\.V, etc \.)\. Les missions confiees a l'encadreur des RCE sont entre autres: appuyer techniquement le bureau de la RCE, aider les RCE dans la sensibilisation pour l'utilisation de l'eau potable, F'hygiene en general, le recouvrement des redevances Eau, la confection des budgets (frais de fonctionnement, investissements, etc\.) ainsi que la maintenance des infrastructures hydrauliques realisees\. La couverture nationale devrait etre assuree d'ici la fm de l'annee 2002\. 24\. Sur le plan juridique, les RCE seront erigees en ASBL avec un statut juridique et un reglement d'ordre interieur ; ceci permettra aux RCE de poursuivre en justice entre autres les detourneurs de fonds et de chercher des financements aupres des bailleurs de fonds potentiels\. Le calendrier previsionnel est de couvrir 80 % du pays A la fin de l'annee 2002 et d'atteindre 100 % A la fin de l'annee 2003 ; car en dehors du p&rimetre couvert par le PSAE, il existe bon nombre de communes sans RCE\. F\. COMMENTAIRE GENERAL 25\. D'une maniere generale, la Banque Mondiale, la cellule du Projet et le Gouvemement du Burundi ont travaille dans un climat de collaboration totale malgre la conjoncture qui a prevalu dans le pays de l'Emprunteur\. 26\. Le Gouvemement du Burundi souhaiterait poursuivre le programme d'alimentation en eau potable avec la Banque Mondiale, ce qui contribuerait A la perennite des realisations du projet qui s'acheve et aussi de mettre en valeur les etudes d'execution disponibles qui ont ete financees notarmment par les fonds du Credit IDA 2288-BU\. - 27 -  ANNEXE REALISATIONS PHYSIQUES DU PROJET APRES LA RESTRUCTURATION ONG Province Objectifs Realisations au 30 juin 2001 TSF Gitega Sources amdnag&es 500 509 Plans hydrauliques Communaux 10 11 Fontainiers form6s 30 32 Animateurs Communaux 20 22 Regies Communales I10 11 TSF Muyinga Sources amrnnagees 50 517 Plans hydrauliques Communaux 7 Fontainiers formrs 21 20 Animateurs Communaux 1 14 Regies Communales _ 7 CEPBU Kayanza Sources amenagees 50 512 Plans hydrauliques Communaux 9 Fontainiers formrs 2 24 Animateurs Communaux I IS Regies Communales 9 CEPBU Makamba Sources amenag6es 70 700 Plans hydrauliques Communaux 6 Fontainiers formes 1 41 Animateurs Communaux 12 1 Regies Communales 6 6 CISV Karuzi Sources amenagees 70 701 Plans hydrauliques Communaux Fontainiers fornm6s Animateurs Communaux1 Regies Communales 7 7 CARE Ngozi Sources amenagees 50 50 Plans hydrauliques Communaux Fontainiers formes 2 2 Animateurs Communaux 1 | I Regies Communales DHR Cibitoke Sources amenagees 30 300, Plans hydrauliques Communaux x 6 Fontainiers formms Animateurs Communaux Regies Communales 6 DHR Muramvya & Sources amenagees Mwaro 60 60 Plans hydrauliques Communaux 11 Fontainiers formes 33 33 Animateurs Communaux 2 22 Regies Communales II 11 TOTAL Sources amenag6es 4 300 4 339 Plans hydrauliques Communaux 65 66 Fontainiers formrs 192 213 Animnateurs Communaux 130 132 Regies Communales 65 66 - 28 -

REVIEW

P044852

 ICRR 12745 Report Number : ICRR12745 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 08/22/2007 PROJ ID : P044852 Appraisal Actual Project Name : Enterprise Incubator US$M ): Project Costs (US$M): 7\.57 9\.90 (LIL) Country : Armenia Loan/ Loan /Credit (US$M ): US$M): 5\.00 5\.47 Sector Board : PSD US$M ): Cofinancing (US$M): Sector (s): Information technology (86%) Telecommunications (14%) Theme (s): Infrastructure services for private sector development (29% - P) Small and medium enterprise support (29% - P) Other financial and private sector development (28% - P) Education for the knowledge economy (14% - S) L/C Number : C3580 Board Approval Date : 11/29/2001 Partners involved : Closing Date : 06/30/2005 12/31/2006 Evaluator : Panel Reviewer : Group Manager : Group : Peter Nigel Freeman Ridley Nelson Alain A\. Barbu IEGSG 2\. Project Objectives and Components: a\. Objectives: The project's overall objective was to pilot innovative private -public mechanisms for providing business services to nascent enterprises and continuous education and training to professionals in the field of information technology (IT)\. In support of the overall objective the project had three interlocking subordinate objectives which were to : 1\. Provide a demonstration effect of company formation in an inhospitable business environment; 2\. Provide a demonstration effect of the positive impact of foreign direct investment (FDI) on the IT industry; and 3\. Pilot demand-driven mechanisms for the continuous upgrading of IT skills of professionals, third -year students, and work force and enterprise managers and employers \. The above represents the wording in the PAD, but there is a degree of vagueness as to the exact intent \. In the credit agreement the words "by accelerating business linkages with foreign companies " is added to sub objective 1, which is not pursued in the subsequent project design which focuses on nascent rather than start -up companies\. The nascent enterprises described in the overall objective included some 50 already existing companies mentioned in the PAD\. Reflecting this vagueness, the key indicators had to be considerably tightened at the Mid Term Review (MTR) as the original indicators lacked specification and were unmeasurable as framed \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): 1\. Managed Workspace\. Included provision of the telecommunication infrastructure (local area networks, communications hardware and software, computers, furniture and workstations ) and office space to lease to interested IT companies \. Appraisal estimate (including contingencies) US$2\.23 million; actual US$1\.68 million\. 2\. Business Services (linkages) Center\. Provided business development services such as management and marketing skills to interested clients \. The component included the establishment of business connections among local IT companies, foreign investors, and clients; assistance in the development of proposals and management of human resources; special training of specialists in Armenian -owned software companies\. Appraisal US$3\.90 million; actual US$6\.25 million\. 3\. Skills Development Facility\. Provided training for enterprise incubator tenants and other interested clients including undergraduate and graduate university students \. Also knowledge support and pre -seed money to assist in turning ideas into business ventures \. Appraisal US$0\.99 million; actual US$1\.43 million\. 4\. IT Business Surveys\. To monitor areas of reform progress in improving the business environment \. Appraisal US$0,33 million; actual US$0\.11 million\. 5\. Project Implementation and Monitoring Unit \. Appraisal US$0\.22 million; actual US$0\.43 million\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The credit became effective two and a half months after planned effectiveness due to the government's approval processes\. The original closing date was June 30, 2005, but was extended by 18 months primarily because of the protracted period it took to find a suitable building for the Managed Workspace component \. An additional US$900,000 became available during implementation due to the appreciation of the SDR relative to the US dollar \. 3\. Relevance of Objectives & Design: The latest CAS supports the promotion of private sector led economic growth because Armenia has a potential comparative advantage in this field \. The development of IT in support of the private sector is a key factor in achieving success in this area\. The Government fully supported the project, declared the development of information and communication technologies as a priority and took steps to improve the business policy environment such as reducing the number of steps necessary to register a business \. The objectives were sound in this context but could have been framed with more rigor and with an explicit objective to learn, demonstrate and adjust, especially as this was a Learning and Innovation Loan (LIL)\. The project's design did not sufficiently incorporate information for the creation of suitable baselines for a monitoring framework\. This was only rectified at the MTR after which quantitative indicators were introduced \. In hindsight a LIL was probably not the most appropriate instrument for launching a future enterprise incubator project because of the diversity of needs and because there already existed considerable global knowledge on such incubators, so there was not much that was truly innovative \. A normal technical assistance project might have been more appropriate \. As it was, the project's design involved a considerable amount of background work, exceeding the guidelines for LILs for preparation, supervision and implementation period \. 4\. Achievement of Objectives (Efficacy): Provide a demonstration effect of company formation in an inhospitable business environment (Substantial) The project resulted in 20 sales/outsourcing contracts exceeding the target of 14\. Sales due to the project amounted to US$307,000 against a target of US$300,000\.Three start up companies were established against a target of two companies and 50 people were employed in these companies against a target of 30\. The number of jobs created may actually have been higher since this does not take into account jobs created to service the new companies \. In addition the project generated 92 contracts for its consulting services compared to a target of 56\. Foreign representatives followed up on 121 business opportunities against the number planned of 60\. All the business space was successfully rented out compared to a target of 90 percent\. However, since these indicators were introduced more than half way through the project, achievement is rated substantial rather than high since it would have been possible to set targets which were eminently achievable by this point \. It remains questionable as to whether the targets were sufficiently stretching \. Provide a demonstration effect of the positive impact of foreign direct investment (FDI) on the IT industry (Substantial) The project resulted in six foreign investment projects exceeding the planned target of four \. The dollar value of these investments was US$1\.97 million against a target of US$1\.80 million\. In addition certain unquantifiable benefits undoubtedly flowed from proportional events and the placing of foreign representatives \. Pilot demand-driven mechanisms for the continuous upgrading of IT skills of professionals, third -year students, and work force and enterprise managers and employers \. (Substantial) 121 consultations were held with enterprises concerning skills improvement compared to 99 planned\. Training programs had a total of 262 participants representing 92 companies against a target of 210 participants involving 47 companies\. The target number of applications planned for contests was supposed to be greater than 500\. In the event there were 1,438 applications\. The number of students benefitting from new university courses was 452 compared with 400 planned\. targets for training programs, seminars /roundtables, and contests were also exceeded \. 5\. Efficiency (not applicable to DPLs): The PAD did not attempt any form of cost benefit or cost effectiveness analysis for lack of data, but relied instead on proposing direct and indirect economic and financial benefits, though without any quantitative targets \. For example, a direct benefit was to attract enough FDI to increase knowledge exports and reduce the "brain drain"\. The project did indeed attract approximately US$ 2 million in FDI, but it is not possible to ascribe how exactly it affected knowledge and skills\. A possible indirect benefit would have been to stimulate economic activity in the IT sector and thus encourage restructuring in other sectors, but this was beyond the scope of the project's monitoring system \. Similarly, increased tax revenues to Government were anticipated, but without access to company tax information this could not be measured\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Despite shortcomings in project design the Enterprise Incubator Project met or exceeded all of its objectives based on the key quantitative indicators established at MTR \. At appraisal some 50 IT enterprises were expected to benefit - the final figure was 109\. The project although intended as a pilot in the end assisted nearly three quarters of Armenia's active IT companies\. Taking all factors together the outcome is deemed to be satisfactory \. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Given the increasing importance of IT in the private sector in Armenia and the high priority accorded by the government as well as the financial structure of the model set up between the Bank and the incubator, the risk to the development outcome rating, at first sight, appears limited, but a "low" rating may be somewhat optimistic\. The sustainability will still to a large extent depend on the ability of the spin -off company for business services to raise funds for enterprise assistance \. Future training will still be dependent on donor assistance \. Although this funding model is in line with international best practice there is still a degree of risk in achieving long -term financial sustainability\. QAG, in a supervision review, has also indicated that the sustainability of the project is uncertain \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: Quality at entry was a problem\. On the positive side the background studies were satisfactory and the components were aligned with both the development objectives and the learning experiment \. However, there were also some serious shortcomings that were not given sufficient weight in the ICR \. The project risk level was given as moderate which was unrealistic since a new institution was being created consisting of three relatively complex facilities in a tight time frame of three years \. The project preparation did not meet several of the requirements for a LIL, which may have been the wrong financial instrument to have used \. In a LIL a clear monitorable results framework is expected, the budget for preparation should not exceed US$ 100,000 and the time for preparation should be in the range from three to six months \. In this case the results framework was inadequate and had to be revised after the MTR, the preparation cost was four times the supposed ceiling and the project took ten months to prepare \. Moreover, in IEG's view the project's design did not sufficiently utilize the substantial information in the background studies for the creation of the baselines, and lastly, the quality control of the final appraisal report was inadequate as also indicated by QAG \. Despite the project's strategic relevance and institutional content the overall rating of quality at entry is moderately unsatisfactory \. Supervision prior to MTR was moderately unsatisfactory \. This was due to insufficient urgency by the supervision team to resolve the lack of progress in finding a suitable building for the workspace component - a factor that largely caused the 18 month overrun in the time to complete the project \. The ratings in the project status reports did not reflect the real situation on the ground \. By the mid point of the project only 15% of the credit had been disbursed\. During the MTR the Bank and the Borrower agreed a set of desired outcomes and a consultant was hired to belatedly define quantitative indicators \. Although there was a significant improvement it was impractical to revisit the learning hypothesis embedded in the LIL and the disconnect between the indicators in the design summary and those specified elsewhere in the PAD could not be resolved \. Efforts were, however, made to improve the sustainability of the financial model, though not to the point where risk was minimal \. Supervision after MTR is rated satisfactory, and overall given the importance of M&E in a LIL the rating is moderately satisfactory \. at -Entry :Moderately Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: The Government of Armenia showed considerable commitment to and ownership of the project \. This was exemplified through its strong policy support, creating an appropriate enabling environment \. The PIU also demonstrated that it was able to overcome the initial delays and produce a successful project \. Performance by the foundation (EIF) was diligent and had a higher than eexpected impacct on the IT sector \. However, the borrower performance was not without flaws \. The lengthy time before the finding of a suitable building for the workspace component and the co -responsibility with the Bank for establishing a proper M&E framework for the project at its outset, point to a moderately satisfactory overall performance \. a\. Government Performance :Moderately Satisfactory b\. Implementing Agency Performance :Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: As indicated in section 3, M&E design was seriously flawed since the indicators were not measurable which is unacceptable in a LIL\. This inadequate results framework was only addressed after the MTR \. The revisions during implementation introducing quantifiable indicators during the second period of supervision were a substantial improvement, but as indicated in section 8 above there were still some shortcomings \. The original learning hypothesis was not prominent with no visible structure supporting it, such as the designation of control and beneficiary groups\. This meant that the LIL had in reality become a regular technical assistance project with a detailed monitoring system\. In practice, utilization eventually improved, but there was still a fuzzy relationship between outputs and outcomes and between final outcomes and intermediate outcomes \. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): No issues of note were identified \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory On balance satisfactory, but lack of focus on the learning objectives (given the learning intent) leaves some doubts about relevance\. Also, the instrument used was probably not the best choice \. Risk to Development Negligible to Low Moderate Future funding requirements of the Outcome : incubator are downplayed in the ICR \. Bank Performance : Moderately Moderately  Satisfactory Satisfactory Borrower Performance : Satisfactory Moderately The Borrower also shares in the Satisfactory responsibility for the project delays and poor M&E framework\. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: The main lessons largely derived from the ICR are : 1\. A LIL is probably not the best instrument for launching enterprise incubators since there has already been considerable global experience with them \. 2\. In defining a monitoring framework it is important to clarify the hierarchy and interrelationships of the final outcome indicators, and intermediate indicators \. There should also be a clear link between the monitoring indicators and the learning hypothesis to be tested and not just the general overall objectives \. 3\. Where an incubator project includes a building to be purchased or rented, there must be a clear arrangement in place to ensure this will be available in a timely manner \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: In accordance with guidelines those interventions with an explicit objective of learning are expected to have higher M&E standards on the prima facie grounds of particularly high relevance of M&E to the explicitly declared learning objectives of the project\. While this is acknowledged in the ICR text, it is not reflected in the ratings given \. Otherwise, however, the ICR is well-prepared\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P071505

 ICRR 13126 Report Number : ICRR13126 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 09/10/2009 PROJ ID : P071505 Appraisal Actual Project Name : HIV/AIDS Prevention US$M ): Project Costs (US$M): 30\.0 30\.0 & Control Proj\. Country : Dominican Republic Loan /Credit (US$M): Loan/ US$M ): 25\.0 25\.0 Sector Board : HE US$M): Cofinancing (US$M ): Sector (s): Health (87%) Central government administration (13%) Theme (s): HIV/AIDS (33% - P) Participation and civic engagement (17% - S) Child health (17% - S) Population and reproductive health (17% - S) Gender (16% - S) L/C Number : L7065 Board Approval Date : 06/28/2001 Partners involved : Closing Date : 12/31/2006 07/31/2008 Evaluator : Panel Reviewer : Group Manager : Group : Judyth L\. Twigg Roy Gilbert Monika Huppi IEGSG 2\. Project Objectives and Components: a\. Objectives: a\. Objectives: Following two formal amendments, three sets of objectives applied over the following periods during project : First period: Jan 31, 2002 to Sept 17, 2004, covering 24\.4% of disbursements • To assist the Borrower in reducing the spread of the HIV/AIDS epidemic\. Second period: Sept 18, 2004 to July 28, 2006, covering 23\.5% of disbursements • To assist the Borrower in reducing the spread of the HIV/AIDS epidemic • Carrying out emergency projects Third period: July 29, 2006 to July 31, 2008, covering 52\.1% of disbursements • To assist the Borrower in reducing the spread of the HIV/AIDS epidemic • To reduce the risk of HIV transmission and improve the quality of life of those infected and affected by the HIV epidemic\. The second restructuring was introduced to align the project and its objectives with new country needs stemming from changes in the financing and management of the national response to the epidemic (new Government administration, new management team in charge of the HIV/AIDS Presidential Council (COPRESIDA), and new resources (grant from the Global Fund to Fight AIDS, Tuberculosis, and Malaria (GFATM))\. b\.Were the project objectives/key associated outcome targets revised during implementation? Yes If yes, did the Board approve the revised objectives /key associated outcome targets? Yes Date of Board Approval: 07/29/2006 c\. Components (or Key Conditions in the case of DPLs, as appropriate): First and second periods: Jan 31, 2002 to July 28, 2006, covering 47\.9% of disbursements A\. Prevention/Promotion Activities to Reduce HIV/AIDS Transmission (original, US$ 17\.2 million; actual US$ 3\.2 million), including design and implementation of information, educational, and communication (IEC) programs; design and implementation of programs to promote the use of condoms, their distribution, access to condoms, and quality control related to condoms; a program for the promotion, administration, and distribution of pre-packed treatments for syndromes associated with sexually transmitted infections (STIs); a pilot program in at least six of the Borrower’s provinces to provide nevirapine to pregnant women and newborn children, advice to mothers with respect to breastfeeding alternatives, and baby formula supplements to newborn children whose mothers are infected with HIV/AIDS; and strengthening of the technical capacity of public and private laboratories and blood banks in the Borrower’s territory\. B\. Diagnosis and Basic Care of Individuals Affected by HIV/AIDS (original US$ 4\.8 million; actual US$ 4\.3 million), including design and implementation of a program that will promote voluntary testing and counseling for HIV/AIDS; design and implementation of a program on home care of HIV/AIDS patients; establishment of basic AIDS health care units in local and provincial basic health care facilities located in areas with the highest prevalence of HIV/AIDS cases; implementation of a directly observed treatment national response for tuberculosis patients; and carrying out of a program for children orphaned by HIV/AIDS\. C\. Strengthening of HIV/AIDS Surveillance, Project Coordination, Monitoring and Evaluation, and Research (original US$ 7\.75 million; actual US$ 6\.3 million), including strengthening of the Ministry of Health’s (MOH’s) disease surveillance system; carrying out a research program on HIV/AIDS; strengthening the capacity of the Project Coordination Unit (PCU) to assist the Borrower in implementation, monitoring, and supervision of the project; and carrying out of annual technical evaluations to monitor and evaluate the implementation of the project\. Third period: July 29, 2006 to July 31, 2008, covering 52\.1% of disbursements A\. Strengthen the Coordination and Management of the National Response (original US$ 3\.3 million; actual US$ 6\.3 million), including activities to strengthen the coordination of the National Response, including those required to reorganize it and to develop a new ten-year National Strategic Plan (PEN) and a corresponding monitoring and evaluation system\. Activities included consultancies, training, administration, and management\. B\. Support Public Sector Organizations in the Prevention and Control of HIV/AIDS (original US$ 4\.6 million; actual US$ 6\.8 million), aimed at reducing the risk of HIV transmission and improving the quality of life of PLWHA through the provision of technical assistance to line ministries and other public organizations in the planning and implementation of both the PEN and its first two-year operational plan\. This component also included the rehabilitation and refurbishment of HIV/AIDS Health Care Units, and the purchase and distribution of pharmaceuticals, reagents, and other medical and non-medical supplies\. C\. Support Civil Society in the Prevention and Control of HIV/AIDS (original US$ 5\.2 million; actual US$ 2\.8 million), aimed at supporting the participation of civil society in general and grass-roots organizations in particular in the planning and implementation of the PEN and the first two-year operational plan\. This component featured a new model of civil society engagement involving grass-roots partnerships, Alianzas de Base Poblacional (ABP)\. This second revision of the objectives also changed all of the project indicators to match the changes in the objectives\. There were no components designed to implement the second-period objective of carrying out emergency projects\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Costs/Financing: The first amendment of the project (December 4, 2002), provided for retroactive financing of US $250,000 for eligible expenditures already incurred by the Government for prevention and control of HIV /AIDS\. The second amendment (August 18, 2004) added a new expenditure category, “Emergency Projects,â€? in the amount of US $200,000 for goods, civil works, and services for rehabilitation of health facilities in the Jimani Region affected by natural disaster\. Ultimately, the Government used only US $ 92,850 for this purpose\. The third amendment (July 29, 2006) included an arrangement where loan and counterpart funds were used to fully finance distinct and separate project activities\. This arrangement simplified payment procedures and facilitated the decentralization of some project activities to civil society and public sector organizations using the new ABP model \. The third amendment also introduced a new disbursement category, “Grants to Eligible Civil Society Organizations \.â€? The fourth amendment (December 19, 2007) reallocated funds from the third to the first component, shifting funds from civil society activities that could not be completed prior to the closing date and for which other donor funds had become available, to the completion of baseline studies on high risk groups \. Disbursement during the economic crisis of 2003-2004 was slow, with irregular allocations of counterpart funding limiting project implementation\. In March 2005, more than three years after project effectiveness, only about US$ 7 million, of less than 30% of the loan amount, had been disbursed \. The third amendment (July 29, 2006) allowed for faster disbursement and sped project implementation \. US$ 13\.4 million (43% of the loan) was disbursed in the first three years of the project, and US$ 17\.1 million (57% of the loan) was disbursed during the two years after the third amendment\. By March 2008, three months before project completion, all loan funds were disbursed \. Dates: The third amendment extended the closing date by 12 months to December 31, 2007, in order to provide additional time to achieve the revised objectives \. The fourth amendment extended the closing date by an additional six months to July 31, 2008, mainly to complete a baseline study \. 3\. Relevance of Objectives & Design: 24\.4% of disbursements, 1/31/ First period (24\. 17/04) 31/02 – 9/17/ 04) is rated Substantial : Objectives - Substantial \. The objectives are consistent with the 2005 Country Assistance Strategy and with the country’s efforts toward achievement of the Millenium Development Goals \. They are also consistent with the country ’ s Poverty Reduction Strategy for the 2003-2015 period\. The HIV/AIDS epidemic remains one of the most important challenges for public health and the fight against poverty and inequality in the country \. The adult HIV prevalence rate was 1\.1% in 2008 (UNAIDS data), and prevalence among the poorest income quintile in 2007 was 1\.8%, compared with 0\.4% for the richest quintile (DHS, 2008)\. The Dominican Republic has a concentrated HIV /AIDS epidemic, with higher HIV rates among risk groups than in the general population \. HIV prevalence among MSM in 2004 was 11%, and among primarily Haitian residents of informal settlements was 3\.2% in 2007\. However, the speed of initial project preparation, prompted by the perceived urgency of addressing the epidemic, meant that there was insufficient collection and analysis of country -specific data for adapting a general model of a national response to the specific needs of the Dominican Republic\. As a result, the project’s targets were overly ambitious \. Design - Modest \. The project was prepared on a fast track and was based on needs and goals proposed in the HIV/AIDS Caribbean Task Force (CARICOM) Caribbean Regional Strategic Plan , endorsed by Caribbean governments\. The project’s original design appropriately contained interventions specifically geared toward prevention of HIV infection among groups practicing riskiest behaviors (and therefore most likely to spread HIV and generate a larger number of secondary infections ), which include young women, migrants from Haiti, residents of bateyes (primarily Haitian communities where sugar workers live ), sex workers, men who have sex with men (MSM), and residents of provinces with high rates of tourism \. Project design underestimated the complexity of coordinating efforts in the public sector\. The HIV/AIDS Presidential Council (COPRESIDA) lacked the necessary leadership to coordinate efforts of the ministries of health and education and other ministries \. The line ministries lacked the experience and resources to engage civil society effectively \. Institutional arrangements did not encourage broad stakeholder participation, in particular the engagement of civil society \. 23 \.5% of disbursements, 9/18/ Second period (23\. 28 /06) 18 /04 – 7/28/ 06 ) is rated Modest : Objectives - Substantial \. The project’s objective to assist the Borrower in reducing the spread of HIV /AIDS remained relevant in this period\. The added objective to carry out emergency projects to rehabilitate health facilities in the Jimani region was relevant, as this area was one of the poorest in the country and the natural disaster was hindering access to basic health services \. Design - Modest \. Project design for the objective to reduce the spread of HIV /AIDS did not change significantly under this revision of objectives and therefore remains substantial \. It should be noted, however, that project documents contain minimal information on activities to be financed under the added objective related to emergency projects, including no indication that any components were added to achieve this objective \. 52 \.1% of disbursements, 7/29/ Third period (52\. 31 /08) 29 /06 – 7/31/ 08 ) is rated Substantial : Objectives - Substantial \. The revised objectives remained relevant as discussed previously, with enhanced relevance based on the revised objectives adding care and treatment for those affected and infected by the epidemic as appropriate based on new country needs and new possibilities for treatment \. The design of the project after the second revision of objectives harmonized the project ’s objectives and targets with those of the country ’s strategy, filling funding and technical assistance gaps and permitting the Government to establish nationwide priorities and identify the most appropriate source of funding \. Design - Modest \. This amendment introduced a revised design that included a good model of civil society engagement that was new to the Dominican Republic, including a new disbursement category in the Loan Agreement, although there were no provisions explicitly designated to provide incentives for civil society organizations to focus on prevention interventions among these high -risk groups\. There is no indication that the line ministries were responsible for activities with high -risk groups under the third amendment \. This amendment complemented appropriately the availability of other sources of financing (primarily the Global Fund to Fight AIDS, Tuberculosis, and Malaria)\. However, the revised project design under this amendment was less explicit than the original project design in matching activities to objectives, reducing the clarity of the results chain \. None of the project’s main indicators incorporated a focus on high -risk groups\. 4\. Achievement of Objectives (Efficacy): Following IEG/OPCS guidelines, this review will assess the achievement of each objective separately, noting the percentage of project disbursements and time period that apply to each objective AIDS /Reduce the Risk of HIV Transmission (objective applies to 100% Prevent the Spread of HIV /AIDS/ 100 % of disbursements, throughout the entire project ): Substantial Outcomes : Data on indicators commonly used as proxies for HIV incidence (behavioral data, syphilis rates, etc \.) were not available at the time the ICR was written, but the TTL provided a recently -published article with additional data (Daniel T\. Halperin, et al\., “Understanding the HIV Epidemic in the Dominican Republic : A Prevention Success Story in the Caribbean?â€? Journal of Acquired Immune Deficiency Syndrome , Vol\. 51, Supplement 1, May 1, 2009)\. According to this newly-provided information, reported condom use at last sex with a non -married or non-cohabitating partner increased from 51% among men and 25% among women in 2002, to 68% among men and 40% among women in 2007 (DHS)\. The percentage of men paying for sex in the previous year decreased from 8% to 4% between 2002-2007, and the percentage of male clients reporting using condoms during their last commercial sex act increased from 74% in 2002 to 83% in 2007 (DHS)\. However, the percentage of sexually active men reporting two or more sex partners in the previous year remained constant at 29% between 2002 and 2007 (DHS)\. There are still no data on high-risk groups not explicitly surveyed by the DHS \. HIV prevalence among adult men (aged 15-49) declined from 1\.1% in 2002 to 0\.8% in 2007, and declined from 0\.9% to 0\.8% among adult women over the same time period \. HIV prevalence among adults aged 15-49 living in bateyes declined from 5\.0% to 3\.2% from 2002 to 2007\. Prevalence, however, is not an accurate indicator of the spread of HIV, as it includes both incidence and mortality \. Outputs : • Civil society was engaged in interventions that should have had an impact on the prevention of HIV /AIDS\. 10 ABPs were formed to engage over 300 civil society organizations \. Inter-Alianza, a national-level organization representing all ABPs, was established to coordinate the multisectoral involvement of civil society, grass roots, and community-based organizations\. Eleven pilot projects (seemingly a small number) focusing on prevention and behavior change were conducted by 30 civil society organizations, with three of these projects deemed “best practiceâ€? cases for their innovative approach to prevention among four groups defined by the project as at -risk: children, men who have sex with men (MSM), young people, and people living in bateyes \. More than 2 million condoms, a substantial percentage of total distribution in the country, were distributed by a strategic partnership between public sector organizations and civil society, using the ABP framework \. Unspecified new approached to behavior change among MSM were introduced by NGOs working with MSM \. • The number of organizations providing technical and financial support for prevention interventions among high-risk groups increased from 70 to 102; the ICR does not provide information on these groups, their activities, or their coverage\. • Male and female condoms were distributed in increasing number : approximately 1\.6 million total in 2006, and over 8 million in 2008; no target was specified\. • The Ministry of Education trained 11,000 teachers on the HIV/AIDS epidemic and its prevention and control \. An 8-credit diploma degree in HIV counseling was established at the Universidad Aut ó noma in Santo Domingo\. The number of schools with teachers who were trained in life skills and taught the subject increased from 214 to 835; the ICR does not provide data on coverage, and no target was specified \. • The percentage of health facilities providing birth attendance that provided prophylactic treatment for HIV according to national norms increased from 60% in 2005 to 78% in 2008 (target was 80%)\. • The number of patients with sexually transmitted infections (STIs) who are appropriately diagnosed and treated according to national guidelines increased from approximately 46,000 in 2005 to 158,000 in 2008; the ICR explains that percentage figures are not given because data are not available to produce an adequate denominator (total number of individuals with STIs )(target was 90%)\. 23 \.5% of disbursements, 9/18/ Carry Out Emergency Projects (objective applies to 23\. 28 /06): 18 /04 – 7/28/ 06 ): Negligible The ICR does not provide information on outputs or outcomes related to this objective \. The TTL explains that these data are not available\. Improve the Quality of Life of Those Infected or Affected by the Epidemic 52 \.1% of (objective applies to 52\. 29 /06 – 7/31/ disbursements, 7/29/ 08 ): Modest 31 /08): Outcomes : The percentage of people needing ARV treatment who received it increased from 14% in 2005 to 52% in 2008 (target was 85%; data from the Sexually Transmitted Infections and AIDS Control General Directorate )\. No other information on the effectiveness of activities for the care and support of PLWHA is offered by the ICR, and no effort is made to determine the extent to which this outcome is attributable to Bank -financed interventions as opposed to interventions financed by other donors \. Outputs : US $2 million was spent on anti-retroviral medications (ARVs) covering approximately 20,000 people\. Financing was coordinated with the GFATM to ensure continuity of access for PLWHA \. US $2 million was spent on refurbishing facilities to establish more than 25 HIV/AIDS health units for specialized ambulatory care across the country, reaching an estimated 19,500 people\. An unspecified amount of laboratory reagents were purchased to support the Government’s introduction of a large-scale program for monitoring CD4 counts and viral loads from 2005-2008, benefiting more than 20,000 people\. (The ICR does not specify, but it is assumed that the same 20,000 people benefited from these three activities; no target for these activities was specified \.) The number of people ages 15-49 who voluntarily requested an HIV test, received the test, and received the results within the preceding 12 months increased from approximately 83,000 in 2005 to almost 920,000 in 2008 (target was 250,000)\. The ICR does not specify if other kinds of support for PLWHA were provided by the project \. 5\. Efficiency (not applicable to DPLs): Overall efficiency is rated Modest\. According to the ICR, the project funded a series of activities recognized as cost-effective in preventing HIV/AIDS, but it does not provide detailed information on amounts spent on these specific activities\. The ICR reports that 58% of total project spending was on prevention activities, but data are not provided on specific activities nor on the amount of this spending that was targeted at high -risk groups, and the breakdown of spending by component does not appear to indicate that over half of project funds were allocated to prevention; UNAIDS and other sources have indicated that resources are most efficiently spent on prevention interventions targeted at high-risk groups\. Under the first project design, only 18\.6% of planned spending was spent on the prevention component, compared with 90% of planned spending on the treatment /care component (with absolute spending of US $3\.2 million on prevention and US $ 4\.3 million on treatment/care); of that spending on prevention, it is not known how much was focused on high -risk groups\. The ICR cites eleven pilot projects conducted by 30 civil society groups that focused on prevention, with three cited as “best practiceâ€? for work with high-risk groups, but this is out of 300 total civil society organizations involved in the project \. The TTL explains that the civil society organizations did not report their spending or activities specifically on prevention as opposed to treatment /care\. Support for the line ministries appears to have been focused on treatment /care and on prevention interventions among the general population (women and youth), rather than more efficiently among groups at highest risk \. ERR/FRR, Appraisal and ICR Estimate: N/A Appraisal: Net Present Value USD , IRR: 22\.5% ICR estimate: N/A ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope*  Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Period Objectives Relevance Efficacy Efficiency Outcome Weight Multiply (convert (based on outcome into share of number x number disbursem wt and from 1 to ents for add 6) each period) 1/31/0 Prevent Substantial Substantial Modest Moderately \.24 \.96 2– spread of Satisfactor 9/17/0 HIV y (4) 4 9/18/0 Prevent Substantial Substantial Modest Moderately \.23 \.92 4– spread of Satisfactor 7/28/0 HIV y (4) 6 Carry out Negligible Negligible Negligibl Unsatisfact \.01 \.01 emergency e ory (1) projects 7/29/0 Prevent Substantial Substantial Modest Moderately \.26 1\.04 6– spread of Satisfactor 7/31/0 HIV y (4) 8 Improve Substantial Modest Modest Moderately \.26 \.78 quality of Unsatisfact life of ory (3) those affected or infected a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Budget funding will finance several activities that had been financed by the Bank through the project, including the expansion of mandatory universal health insurance to cover ARVs for PLWHA\. In addition, another round of GFATM funding has been approved\. However, additional resources are no guarantee of sustainability\. NGOs have become dependent on international funds, and the ICR indicates that the Government may reduce its commitment to funding prevention activities carried out by civil society\. The direction and management of COPRESIDA is still volatile, with staff selection not always based on technical criteria\. The staff of health care units for PLWHA is now financed by the Government, increasing the possibility that MOH human resource regulations will erode gains achieved in care for PLWHA\. The ICR does not address directly the issue of political commitment by the Government to the fight against HIV/AIDS\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: at -Entry is rated Moderately Unsatisfactory \. Project preparation took place on a fast track, Ensuring Quality -at- due to an estimated insufficiency of government funds to prevent and control what seemed to be an epidemic that could easily spread beyond high -risk groups\. Because of accelerated preparation, many elements of the project (in particular, the M&E system) were not ready for implementation at the time the project became effective \. There was insufficient capacity in the line ministries to engage civil society organizations effectively, and in COPRESIDA to coordinate the activities of the line ministries \. Project preparation focused on too few and too narrow risks, particularly with regard to project management and administration \. Risk mitigation measures were either too general (for example, “continuous monitoringâ€?) or did not address the most important risks that could affect implementation (for example, using the PCU from another Bank project for financial management support )\. Quality of Supervision is rated Satisfactory \. The Bank worked closely with the implementing agency to overcome significant challenges throughout the life of the project, including low counterpart funding, weak project management, and M&E challenges\. The four amendments to the Loan Agreement, according to the ICR, are indications of continued effort to be responsive to changing country needs \. Bank resources and technical assistance contributed significantly to the overhaul of the M&E system \. The Bank aligned its activities well with other donors, particularly GFATM; for example, Bank resources financed rehabilitation of mobile health units to provide care for PLWHA and HIV counseling and testing, while GFATM funds provided and rehabilitated medical equipment for those same units\. at -Entry :Moderately Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: Government Performance is rated Moderately Satisfactory \. The country experienced a major economic crisis and social unrest in 2003, limiting the Government’s capacity to support planned project activities and discont inuing counterpart funding\. A new administration took office in 2004, replacing COPRESIDA’s top management and reinvigorating the national response \. However, this new leadership focused at first on securing GFATM grant disbursements, and did not focus on the Bank -financed project until late 2005\. The National Planning Agency and the Presidency ’s Technical Secretariat demonstrated a strong commitment to effective restructuring of the project during the third amendment \. Eventually, the Government developed a comprehensive ten -year National Strategic Plan that aligned project design to the country ’s emerging needs and the new national response\. Implementing Agency Performance is rated Moderately Satisfactory \. Early in the project, implementation delays were caused not only by lack of counterpart financing, but also by limited PCU technical and administrative capacity\. In 2005-2006, however, COPRESIDA’s performance improved considerably, including enhanced transparency and accountability \. There was tension between COPRESIDA and the MOH ’s unit in charge of epidemiological surveillance and health care for STIs (DIGECITSS), as the latter lacked sufficient Government funding and frequently did not coordinate its search for additional funding sources with COPRESIDA\. At the beginning of the project, there were frequent delays in financial management procedures, but these were corrected after the third amendment \. The procurement unit experienced significant problems in planning and execution of procurement activities, including two cases of misprocurement in 2006 for a total amount of US $15,300; this resulted in the execution of all procurement activities with prior review until the Bank approved an updated procurement plan \. a\. Government Performance :Moderately Satisfactory b\. Implementing Agency Performance :Moderately Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: M&E Design : Modest \. The project’s original M&E system design was overly complex and failed to identify clear roles and responsibilities for the input and flow of information \. The capacity of the PCU to coordinate and conduct the complex studies required for this planned system was underestimated \. As part of the third amendment, a plan for M&E development was developed that reflected the changes to the Project and the new National Response \. The new plan consolidates and integrates data collection and analysis activities into a single unified system \. M&E Implementation : Substantial \. Before the third amendment, data was periodically collected on project activities and compiled into quarterly or semi-annual progress reports\. DIGECITSS developed an innovative web -based database on PLWHA\. The project assisted in the conducting of two Demographic and Health Surveys (DHS) in 2002 and 2007, with the latter survey including oversampling of one key high -risk group (people living in bateyes)\. An effective M&E system, however, was not put in place until after the third amendment, including a new conceptual framework, establishment of baselines, and steps for implementation \. The Bank’s Global AIDS Monitoring and Evaluation Team (GAMET) contributed financial and technical support to this new Conceptual Framework of the National System of Monitoring and Evaluation \. Project indicators were aligned with indicators from UNGASS and the GFATM\. According to the ICR, an innovative, participatory approach to analysis of three high -risk populations (MSM, sex workers, drug users) was developed and conducted, although results of this approach are not presented in the ICR\. M&E Utilization : Substantial \. Even before the 2006 project restructuring, some of the line ministries involved in the project (Education and Youth) used the project’s M&E data to inform decision making on specific interventions; for example, data on age of sexual debut was used to determine the grade in which to being HIV /AIDS education\. In addition, DIGECITSS data were used to determine services and treatment for PLWHA \. After the third amendment, M&E data, particularly the data from the HIV /AIDS module of the 2007 DHS, have been used extensively to develop the operational plans of the new National Response \. The first annual report for UNAIDS was produced with the new system in 2008\. a\. M&E Quality Rating : Substantial 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Safeguards: Another Bank project, the Dominican Republic Provincial Health Services Project, already included support for activities to improve biomedical waste management \. This project therefore focused on select complementary activities, including the revision of an operational manual for medical waste disposal based on an environmental assessment of waste generated by HIV /AIDS programs and activities\. About 70% of health personnel were trained on biomedical waste management for delivering HIV /AIDS prevention and care services \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Satisfactory Moderately Insufficient attention to risk Satisfactory identification and mitigation during project design led to considerable challenges throughout the life of the project\. Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: Institutional coordination is necessary as Bank -financed projects build more capacity in some agencies than in others \. In this case, the strengthening of the institutional capacity of COPRESIDA sometimes created friction with DIGECITSS\. When constructing project indicators, it is important not only to align indicators consistently with those of the national response, but also to make it possible to collect data sufficient to assess the specific and unique contributions of the project to that national response \. In an environment increasingly crowded with other donors, there must be sufficient attention paid to assessment of attribution of outcomes specifically to Bank -financed interventions\. There are clear trade -offs between a fast -track approach to project preparation during a time of perceived crisis, and a more time -consuming approach based on in -depth country analysis \. In the long run, it is likely that better results will be achieved when preference is given to the latter approach \. Even when there is seemingly relevant international experience from which to draw lessons, every project requires appropriately careful situation-specific analysis to ensure proper understanding of country needs \. Well-intentioned but too-hasty rushing of a project into implementation can ultimately prove counterproductive, requiring costly delays and restructurings later on\. 14\. Assessment Recommended? Yes No Why? TThis is one of the first Caribbean MAP projects to close, and it would be useful to understand how targeting and coverage of prevention interventions was affected by the project ’s revisions\. 15\. Comments on Quality of ICR: The ICR provides a very clear description of the complex set of amendments throughout the project\. It includes an important discussion of attribution of observed outcomes to Bank-financed interventions, in an environment with significant contributions from other donors (particularly the GFATM)\. However, the ICR does not clearly link outputs to outcomes, discussing primarily outputs when assessing the achievement of the project’s development objectives\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P103631

 ICRR 13390 Report Number : ICRR13390 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 06/30/2010 PROJ ID : P103631 Appraisal Actual Project Name : Sixth Poverty US$M ): Project Costs (US$M): 100\.0 98\.1 Reduction Support Credit Country : Ghana Loan/ US$M): Loan /Credit (US$M): 100\.0 98\.1 Sector Board : EP Cofinancing (US$M): US$M ): Sector (s): General public administration sector (40%) Health (20%) Primary education (20%) Forestry (10%) General water sanitation and flood protection sector (10%) Theme (s): Public expenditure financial management and procurement (25% - P) Education for all (25% - P) Health system performance (24% - P) Environmental policies and institutions (13% - S) Decentralization (13% - S) L/C Number : C4430 Board Approval Date : 06/03/2008 Partners involved : Closing Date : 06/30/2009 06/30/2009 Evaluator : Panel Reviewer : Group Manager : Group : Rene I\. Vandendries Kris Hallberg Ismail Arslan IEGCR 2\. Project Objectives and Components: a\. Objectives: The outcome of a first series of three PRSCs for Ghana (PRSC 1-3) over the period 2003-2006 was rated satisfactory by IEG\. The objective of the second series of a proposed four PRSCs (PRSC 4-7) over the period 2006-2009, and of this PRSC 6, was to support implementation of Ghana's second Growth and Poverty Reduction Strategy (GPRS II), covering the same period, with focus on accelerated private sector-led growth, vigorous human development, and good governance and civic  responsibility\. By 2008, however, fiscal mismanagement aggravated by the global financial crisis derailed the program and led to cancellation of the proposed PRSC 7\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): There were three components\. 1\. Promoting private sector -led growth \. The prime objectives were consolidating macro -economic stability and removing constraints to private sector development \. Policy areas focused on improved fiscal management, removing barriers to business development, energy sector reform, and rural development and natural resource management\. 2\. Human resource development \. The prime objective was to assist Ghana in reaching the MDG goals through measures to improve service delivery in education, health, social protection, and water and sanitation\. 3\. Good governance and public sector management \. The prime objective was public sector reform through measures aimed at decentralized delivery of public services, improved payroll management, more comprehensive and effective budget management and procurement reform\. There were 8 prior actions for each of PRSC 4 and PRSC 5, and 11 for PRSC 6\. The prior actions were evenly spread over the three components\. For PRSC 4, the prior actions included ensuring that government agencies pay their electric bills, reducing the time to register a business, providing capitation grants for education, health subsidies for the poor, anti -corruption measures, procurement and budgetary reforms\. For PRSC 5, the prior actions included increasing private sector management of the social security system, measures to strengthen the financial viability of the energy sector, laying the basis for improved forestry exploitation, reducing teacher vacancies, increasing health spending, computerizing payroll management, and rationalizing government accounting systems \. For PRSC 6, the prior actions included improved monitoring of obstacles to business development, forest management, increased education and health spending, provision of insecticide treated bed nets (ITNs) to combat malaria, a new water policy, formulation of a decentralization policy, and further measures to improve public sector financial management \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: PRSC 4 was approved on June 15, 2006 for US$140 million equivalent (IDA), disbursed upon effectiveness and closed on schedule on June 30, 2007\. PRSC 5 was approved on May 24, 2007 for US$110 million equivalent (IDA), disbursed upon effectiveness and closed on June 30, 2008\. PRSC 6 was approved on June 3, 2008 for US$100 million equivalent (IDA), disbursed upon effectiveness and closed on schedule on June 30, 2009\. There was no cofinancing\. Differences between appraisal and actual disbursement are due to exchange rate changes \. 3\. Relevance of Objectives & Design: The objectives of the PRSCs were relevant as they paralleled the objectives and components of the government's strategy in the GPRS II, and thus reflected the government priorities and circumstances\. The design of the operations was also relevant as it was consistent with the Bank's strategy as laid out in the CAS, and complemented Bank investment lending in a number of sectors, including private sector development and energy, education and health, and public sector capacity  building\. The operations were also well designed and sequenced in the sense that there was continuity from the policy actions and reform proposals from one operation to the next \. 4\. Achievement of Objectives (Efficacy): All prior actions were complied with \. There was, on the whole, a smooth transition, well documented in the ICR, from the triggers in one operation to prior actions for the next \. The Program Development Outcome (PDO) indicators cover all three of the objectives with baselines, targets and values at completion: however, the latter are not always available for the intermediate years, only at the end of the series, i\.e\. for PRSC 6; in addition, PDO coverage of the objectives is often partial \. Thus, for the purpose of rating efficacy by the end of PRSC 4 or PRSC 5, information is obtained from the Program Documents for PRSC 5 and PRSC 6, because not enough is available in the ICR\. Achievements at completion of PRSC 6 (and at the end of the program as a whole) are well covered in the ICR and PDO indicator outcomes are well quantified \. Achievements for the three program development objectives at completion of PRSC 4 were as follows\. In the area of private sector-led growth, progress was made in increasing private sector management of the social security system and there was some reduction in power system losses; but little progress was made in reforming the energy and forestry sectors, and the fiscal deficit grew \. Efficacy for this objective is rated modest\. In the area of human development, progress was made in staffing vacant teacher positions (the number of teacher vacancies in deprived areas was estimated to have declined by 40-50 percent), and the 2007 budget allocation for the health sector was increased by an estimated 18 percent\. Efficacy for this objective is rated substantial\. In the area of governance, progress was made in operationalizing a new payroll management system, and budget coverage was broadened especially to include more externally funded activities \. Efficacy for this objective is rated substantial\. Overall, efficacy for PRSC 4 is rated substantial\. Achievements for the three program development objectives at completion of PRSC 5 were as follows\. In the area of private sector-led growth, a customized ease of doing business survey was developed to measure progress in improving the business climate including data on the time required to register new businesses\. At the same time, the two power utility companies continued to be unable to operate commercially and carry out needed investments without government support, and the fiscal deficit grew further\. Efficacy for this objective is rated modest\. In the area of human development, there were continued efforts to improve national gross primary enrollment rates, per student expenditure in public primary education rose to US$ 101 in 2006 from US$90 in 2005, utilization of ITNs by children under 5 increased to 21\.9 percent, there were further increases in health spending, and a new national water policy was adopted\. Efficacy for this objective is rated substantial \. In the area of governance, a comprehensive decentralization policy was formulated, and progress was made in implementing the provisions of the public procurement act \. Efficacy for this objective is rated substantial\. Overall, efficacy for PRSC 5 is rated substantial\. Achievements for the three program development objectives at completion of PRSC 6 (and at the end of the program as a whole) are as follows\. In the area of private sector-led growth, PDO indicators show that losses of the Electricity Company of Ghana (ECG) were reduced from 25 percent in the base year to 12 percent by 2008, that the time required to register a business was reduced from 81 days to 34 days over the same period, and that the time required to trade across borders also declined \. But the indicators chosen covered the objective only partially \. While there was improvement in the Ease of Doing business indicator, it was not dramatic: Ghana's rank improved from 94 out of 175 countries in 2007, to 87 out of 181 countries in 2009\. In the energy sector, the two power companies, ECG and the Volta River Authority (VRA),  remained unable to operate commercially and carry out investment without government support because of inadequate tariffs\. Above all, in spite of substantial debt relief in 2005-06 (HIPC and MDRI) macro-economic stability weakened throughout the period covered by PRSC 4-6: the fiscal deficit grew from 4\.9 percent of GDP in 2005 to 9\.2 percent in 2007 and exploded to 14\.5 percent in 2008\. Efficacy for this objective for PRSC 6 is rated negligible \. In the area of human resource development, PDO indicators suggest good progress across the board, made possible partly by the budgetary resources provided by the PRSCs \. Between the base year and the conclusion of PRSC 6, gross primary enrollment increased from 88\.5 percent to 95 percent, gender parity improved from 0\.93 to 0\.96, the percent of supervised births grew from 49 to 59, the use of insecticide treated bed nets increased from 22 percent to 28 percent, and access to safe water/sanitation grew from 55/10 percent to 75/18 percent\. On the other hand, a plan to raise water tariffs on commercial and industrial users was replaced by a government plan to absorb the higher tariffs\. Efficacy for this objective of PRSC 6 is rated substantial\. In the area of good governance and public sector management, WBI indicators suggest very gradual improvement overall and there was slow progress in decentralization efforts as well \. A modern payroll management system was set up but because of political pressure it could not prevent substantial increases in the public sector wage bill, following debt relief, which went from 8\.5 percent of GDP in 2005 to 11\.3 percent in 2008\. The budget has become more comprehensive over time: the PDO indicator suggest that the share of public funds presented in the budget rose from 50 percent in the base year to 83 percent by 2008\. Several steps were taken to strengthen public procurement, including the creation of a Public Procurement Authority, which has been focused on enforcing the use of open competition but, in the absence of a monitoring system, compliance is unclear \. Efficacy for this objective for PRSC 6 is rated modest\. Overall, efficacy for PRSC 6 is rated modest\. 5\. Efficiency (not applicable to DPLs): N\.A\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The objectives and design of all three PRSCs were relevant \. Good progress towards the objectives was made during PRSC 4 and PRSC 5 and efficacy was substantial, with the exception that no progress was made in reforming the energy sector, which continued to require substantial budgetary subsidies\. The outcome of both PRSC 4 and PRSC 5 is therefore rated moderately satisfactory \. In the case of PRSC 6, in addition to the lack of progress on energy sector reform, the fiscal deficit grew excessively, threatening macroeconomic stability : the outcome of PRSC 6 is rated moderately unsatisfactory\. a\. Outcome Rating : Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating:  The ICR contains a good overview of the risks to the development outcomes, but IEG finds that the risk rating is too generous for a couple of reasons which will continue to challenge macroeconomic management\. First, following debt relief in 2005/06 the public wage bill expanded rapidly contributing to major fiscal problems by the end of the PRSC program, while external public debt also rose again \. Second, the drain on the budget from energy subsidies has been substantial, yet energy sector reform has not succeeded over the PRSC period\. The start of oil production in 2010/11 is unlikely to make energy sector reform easier\. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: The PRSCs were well designed and consistent with the Bank's country assistance strategy as well as with the government's own priorities\. They were also based on a substantial body of analytical work, and made to complement other Bank investment operations in the country\. PRSC 6 however did not adequately account for increasing risks associated with the continuing resistance to energy sector reform and excessive public sector current spending \. Supervision was well-aligned with the activities of other donors and with the government's monitoring of the GPRS\. Supervision took place regularly but less so during PRSC 6, when the deteriorating macroeconomic situation would in fact have warranted increased supervision \. at -Entry :Moderately Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Unsatisfactory c\. Overall Bank Performance :Moderately Unsatisfactory 9\. Assessment of Borrower Performance: The government's commitment to the PRSC's reforms was reflected in the close alignment of the program with the GPRS\. In developing its strategy the government consulted closely with key stakeholders, including civil society \. It also disseminated its M&E findings widely, even though because of tardiness and incompleteness they ended up having limited impact on policy formulation\. The government's commitment, however, was mixed as witnessed by its inability to achieve energy sector reform\. Furthermore, the severe macroeconomic deterioration in 2008 warrants a harsher rating for borrower performance for PRSC 6 than that provided in the ICR\. a\. Government Performance :Unsatisfactory b\. Implementing Agency Performance :Not Applicable c\. Overall Borrower Performance :Unsatisfactory 10\. M&E Design, Implementation, & Utilization: A comprehensive monitoring and evaluation (M&E) system was designed as part of Ghana's Poverty Reduction Strategy (GPRS) to track progress of policy implementation and effectiveness \. This included setting up institutional arrangements and developing indicators, and provided a sound framework for monitoring progress\.  Regarding implementation output of the M & E system is documented in the government's annual progress reports on the GPRS\. These reports are widely disseminated so as to obtain feedback \. Preparation of these reports has taken place with considerable delay, however, and the information contained therein has been of varying quality\. Because of this, utilization of M&E findings has been fragmentary and their influence on policy-making has been limited\. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): The following is a summary of the ratings for all three PRSCs \. Ratings ICR IEG Review Reason for Disagree - ments /Comments Outcome PRSC 4 Moderately Satisfactory Moderately Satisfactory PRSC 5 Moderately Satisfactory Moderately Satisfactory PRSC 6 Moderately Unsatisfactory Moderately Unsatisfactory Risk to Development Outcome PRSC 4 Moderate Significant See Section 7 PRSC 5 Moderate Significant See Section 7 PRSC 6 Moderate Significant See Section 7 Bank Performance PRSC 4 Moderately Satisfactory Satisfactory IEG rating same as rating PRSC 5 Moderately Satisfactory Satisfactory in ICR text, which differs from data sheet\. PRSC 6 Moderately Unsatisfactory Moderately Unsatisfactory Borrower Performance PRSC 4 Moderately Satisfactory Moderately Satisfactory PRSC 5 Moderately Satisfactory Moderately Satisfactory PRSC 6 Moderately Unsatisfactory Unsatisfactory See Section 9 ICR Quality PRSC 4 Satisfactory PRSC 5 Satisfactory PRSC 6 Satisfactory 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Unsatisfactory Unsatisfactory Risk to Development Moderate Significant See Section 7 Outcome : Bank Performance : Moderately Moderately Unsatisfactory Unsatisfactory Borrower Performance : Moderately Unsatisfactory See Section 9 Unsatisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: One major lesson is that the dialogue in the context of PRSCs was clearly ineffective in influencing the government's policy of subsidizing electricity \. Energy subsidies, including to the state-owned aluminum smelter, are a major drain on the budget, and other means will have to be found to strengthen this dialogue\. A second lesson is that the PRSCs, although to a lesser extent than the debt forgiveness in the mid-2000s, while providing resources for social development, were counterproductive in their objective of promoting macroeconomic stability \. The provision of generous budget support encouraged excessive public spending which eventually threatened fiscal sustainability \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: While the ICR provides ample information to evaluate progress of the program of three PRSCs as a whole, it does not allow for an adequate review of the contributions of the first two PRSCs in the series\. Yet it is quite long, partly because it provides a wealth of not always needed information, and partly because some of the information on PDO and intermediate indicators, which is elaborated upon in the text, should have been included in the data sheets instead\. On the more positive side, the ICR gives an excellent overview of the transition from triggers to prior actions from one operation to the next, which helps in understanding overall progress \. There are a number of instances of discrepancies between ratings in the text and in the data sheets, as well as within the text (e\.g\. page 67)\. The lessons are a bit opaque\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P101508

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) Report Number: ICRR0021715 1\. Project Data Project ID Project Name P101508 BR-RJ Sustainable Rural Development Country Practice Area(Lead) Brazil Agriculture and Food L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IBRD-77730,IBRD-82000 30-Nov-2015 89,253,818\.25 Bank Approval Date Closing Date (Actual) 10-Sep-2009 30-Nov-2018 IBRD/IDA (USD) Grants (USD) Original Commitment 39,500,000\.00 0\.00 Revised Commitment 98,735,596\.11 0\.00 Actual 89,253,818\.25 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Ebru Karamete J\. W\. van Holst Christopher David Nelson IEGSD (Unit 4) Pellekaan 2\. Project Objectives and Components DEVOBJ_TBL a\. Objectives The formulations of the project development objectives (PDO) for the Rio de Janeiro: Sustainable Rural Development Project were identical in the Project Appraisal Document (page 5) and in the Loan Agreement (page 5), which were “to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory, thus contributing to the higher-order objective of increasing small- scale farming productivity and competitiveness in those areas\.” Page 1 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) This review will assess the project’s achievements by determining the extent to which it was able “to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory” (which will be referred to as Objective 1 in Section 4 of this review), and “to increase small-scale farming productivity and competitiveness in specific areas of the Borrower’s territory”(which will be referred to as Objective 2 in Section 4 of this review)\. The project’s PDO was amended during implementation by adding an objective\. This will be discussed under the heading of “Restructuring” in Section 2e of this review\. The additional objective will be referred to as Objective 3\. b\. Were the project objectives/key associated outcome targets revised during implementation? Yes Did the Board approve the revised objectives/key associated outcome targets? Yes Date of Board Approval 27-Oct-2011 c\. Will a split evaluation be undertaken? Yes d\. Components The Project had three components: 1: Supporting Rural Production and Competitiveness (Appraisal Estimate: US$66\.1 million, Additional Financing: US$108\.1million, Actual Cost: Not Available*)\. This component supported rural beneficiaries via the following: (i) pre-investment activities to strengthen capacity of rural beneficiaries to prepare investment proposals; and (ii) grants to eligible beneficiaries and communities to implement approved investment proposals to improve productive farming systems; as well as compliance with environmental regulations and adoption of agro-ecological and environmentally sound practices; and erosion control, rural roads rehabilitation and maintenance activities\. In October 2011, through a Level I restructuring, emergency rehabilitation activities were included to support the areas affected by the natural disaster in January 2011 and a reallocation of US$18\.77 million under this component to emergency recovery activities in the Serrana Region was carried out\. In October 2012 an Additional Financing of US100 million was approved to restore the portion of the original loan amount that had been used for the emergency rehabilitation activities, as well as to scale up the project scope into new municipalities (13 new) and micro-catchments (166 new)\. *The actual cost by component at project closing was not clear in the ICR but when asked by IEG, the Bank project team did not clarify this issue\. Page 2 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) 2: Strengthening Institutional Frameworks (Appraisal Estimate: US$5\.2 million, Additional Financing: US$4\.84 million, Actual Cost: Not Available)\. This component supported market-driven agricultural development by (i) strengthening rural institutions to provide better services and coordination with other public and private sector stakeholders through implementing specific activities (institutional sub-projects) identified in an institutional sustainability plan and contributing to the implementation of a national policy in support of territorial development; (ii) improving public and private financial support mechanisms through the enhancement of links between the supply and the demand of financial resources for sustainable rural development activities; and (iii) carrying out participatory research to establish a new and effective Sustainable Services Research Network System to conduct agriculture-related research and induce innovation\. As mentioned above, additional financing in 2012 scaled up project activities into new municipalities and micro catchments 3: Project Coordination and Information Management (Appraisal Estimate: US$7\.6 million, Additional Financing: US$10\.5 million, Actual Cost: Not Available)\. This component supported the project management and coordination functions, including monitoring and evaluation (M&E), and dissemination of key sustainable rural development information before and after restructuring in October 2011\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: Total project costs estimated at appraisal was US$79\.0 million, and the actual cost at project closing was US$89\.3 million\. Financing: The project was financed by an IBRD loan (IBRD-77730) of US$39\.5 million, and an additional financing loan IBRD-82000) of US$100\.0 million\. At project closing disbursement under the IBRD loan US$38\.7 million and the additional financing loan was US$50\.5 million\. In September 2017, US$ 40 million from the additional financing was canceled as a result of the delays due to the acute financial crisis faced by the State of Rio de Janeiro, which blocked project implementation for almost one year\. The remaining US$9\.5 million was canceled at project closing, as some of the planned roads tenders could not proceed due to delays in procurement procedures\. Beneficiaries would provide US$18\.1 million at appraisal, but the ICR did not report on the final beneficiary contribution and the project team did not clarify this point to IEG\. Borrower Contribution: The borrower planned to provide US$39\.5 million but ended up not providing any funds\. The reason for lack of borrower contribution was not reported by the ICR\. The project team subsequently stated that Borrower contribution was zero due to the financial crisis\. Dates: The project was approved on September 10, 2010; and it became effective in about six months (March 8, 2010)\. The project planned to close on November 30, 2015 but closed 3 years later, on November 30, 2018\. The reason for the extension was to facilitate first the emergency recovery efforts, as Page 3 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) well as expansion of project scope to new areas via an Additional Financing\. In addition, delays occurred after the financial crisis that led to judicial power seizure of the project’s designated account for about a year\. Restructurings: The project went through one Level I restructuring on October 27, 2011, to amend the PDO, the allocation of US$18\.77 million within Component 1 to a separate activity called “Emergency Subprojects”, and revision of the results framework to reflect the introduction of new activities to support emergency recovery efforts after the flooding disaster that affected the Serrana Region which was part of the “specific areas” covered by this project\. This restructuring also authorized a one-year extension of the closing date\. On October 1, 2012 an Additional Financing of US100 million was approved to: (i) enable the completion of original project activities (19 percent of the proposed additional loan amount) by restoring the portion of the original loan amount that had been used for the “Emergency Subprojects” namely rehabilitation activities; (ii) scale up the project scope into new municipalities (13 new) and micro-catchments (166 new); (iii) two-year extension of closing date\. Three level II restructurings that didn’t require board approval were made under the project\. The first two restructurings (on May 22, 2013 and June 29, 2015) both included revisions in components and costs, reallocation between disbursement categories and change in institutional arrangements\. The last restructuring that was approved on September 1, 2017, was done to cancel US$40\.0 million from the additional financing loan, reduce some indicator targets, change the implementing agency to the newly created State Secretariat of Agriculture, Livestock, Fisheries, and Supply, and reallocations between disbursement categories\. This review is carrying out only one split rating based on the PDO revision on October 27,2011\. While a second split could also be appropriate because of the reduction in most PDO indicator targets with the restructuring in 2017, the reduction in the ambition of already weak indicators for the PDO was not significant\. 3\. Relevance of Objectives Rationale The project’s original development objectives were substantially relevant to the World Bank and the Brazil country strategies in general at appraisal and closing\. However, the original PDO was vague in terms of what an “increase in integrated and sustainable farming systems approaches” meant in terms of scale, the extent to which these farming systems were expected to be “approached” by small-scale farms which the PDO explicitly stated were the group that more efficient farming systems should benefit\. At the same time the PAD and the original PDO indicators proposed in the results framework provided some, albeit different, clarity on the meaning of the original PDO\. Specifically, the PAD (page 5) defined the farming system as: ”a population of individual farms systems that have broadly similar resource bases, enterprise patterns, household livelihoods, and constraints, and for which similar development strategies and interventions would be appropriate\. Their analysis emphasizes horizontal and vertical integration, multiple sources of household livelihoods, and the role of the community, Page 4 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) the environment and support services\.” The ICR (page 3, footnote 2) defined “improved production systems” as those that resulted in sustainably better agroforestry, crop, or livestock quality and yields\.” These objectives were relevant because they addressed the challenges facing the agricultural sector the State of Rio de Janeiro\. While agriculture is important in general in the state, agriculture is especially vital to economic and social well-being in the three administrative regions: the North and Northwest and the Serrana administrative regions\. During the time of appraisal these three regions housed more than half of the state’s rural population and were responsible for 60% of agricultural employment, as well as the largest concentration of family owned small farms in the state (PAD page 2)\. Despite its importance, the agricultural sector faced the challenges of low productivity, poor linkages to markets with high demand for agricultural products, a weakened natural resources base, poverty, and the inability of public institutions to adapt to the evolving demands of the rural sector\. The factors contributing to these issues included weak farmers’ organizations; the widespread use of inefficient and unsustainable agricultural practices; poor infrastructure, markets, and agro-industrialization processes; and the limited reach of public policy in rural areas (PAD page 2-3)\. The project's original development objectives were relevant to country strategies and priorities\. During the time of appraisal Brazil’s state and federal governments had established a policy agenda that supported rural poverty reduction by integrating sustainable environmental and social practices and increasing the agricultural production and diversification of family farming\. The government of Rio de Janeiro granted increasing supply of agricultural credit and agricultural TA to these regions\. The state government was implementing a number of other programs in support of its rural development strategy, including: (i) the State Credit Program for Agricultural Production and Diversification (Moeda Verde), (ii) the State Microcatchment Program for Sustainable Rural Development (Rio Rural), and (iii) the National Smallholder Agriculture Program (PRONAF)\. The project complemented and built around the ongoing activities of the state\. These included pilot activities supported under the Global Environment Facility (GEF) that promoted the long-term conservation and rehabilitation of agro-ecosystems, implementation of sustainable land management practices; and other donor-funded rural and environmental operations (i\.e\., KfW’s Pro-Atlantic Forest Program, SOS Mata Atlântica Foundation, Conservation International-Brasil, and the Critical Ecosystem Partnership Fund), and state-funded programs (i\.e\., Rio Rural and Frutificar e Cultivar Orgânico\. Arguably this project’s PDO was therefore also relevant to other development partners\. Overall the relevance of the original PDO was substantial but marginally so because it was vague, although clarified by the indicators proposed to measure whether or not the PDO was achieved\. Addition to project objectives\. As noted already in Section 2a of this review, in October 2011 the PDO for this project was amended “to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory and help re-establish an agricultural productive environment in areas of the Serrana Region affected by the January 2011 natural disaster, thus contributing to the higher-order objective of increasing small-scale farming productivity and competitiveness in those Page 5 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) areas\.” Based on the urgency of providing support for the flooded areas in the Serrana Region, along with the temporary reduction in support for the achievement of the original objective, the revised objectives were substantially relevant to pursuing the strategic development objectives of the government and the Bank and safeguarding those objectives in the face of a natural disaster\. At the project's close the project’s development objectives were and remained relevant to the Bank country partnership strategies, specifically the third pillar - a more competitive Brazilian economy - of the World Bank’s Country Partnership Strategy (FY 08–11); as well as third focus area of the Country Partnership Framework (FY18-23) on inclusive and sustainable development that plans to promote socio economic development of small rural producers and vulnerable groups\. The relevance of this project’s objectives before and after restructuring in October 2011 are rated substantial by this review\. Rating Relevance TBL Rating Substantial 4\. Achievement of Objectives (Efficacy) EFFICACY_TBL OBJECTIVE 1 Objective “To increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory” Rationale Theory of Change: The project’s activities on productive planning, training and capacity building as well as investments in agro- ecological and natural resource management activities targeting farmers under component one as well as extension and adaptive research activities under components one and two would contribute to achieving this objective\. Coordination and alignment of public policies in support of territorial development, rural sector institutional changes, the creation of a long-term financing mechanism for sustainable rural development Page 6 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) activities and a state-wide participatory research network under component two would improve the ability of public institutions to adapt to the evolving demands of the rural sector; which would also contribute to the achievement of the objective\. To measure the achievement of this objective, the PAD had proposed three PDO indicators: (a) number of farmers transitioning to more productive farming systems; (b) land under improved production systems; and (c) improved product quality (measured in terms of number of beneficiary farmers adopting Good Agricultural Practices (GAP), number of small scale farmers or enterprises certified’ as agro-processing and artisanal enterprises adding value)\. In terms of defining and measuring the adoption of sustainable farming system, one would expect both environmental sustainability parameters such as recovering the productive capacity of soils, the protection of water resources, or the conservation of biodiversity\. However, none of these aspects were monitored by the project\. The indicator recording the number of farmers adopting good agricultural practices (GAPs) was monitored with data for a year only and then dropped as part of the October 2012 restructuring according to the ICR (page 73), although the Project Paper on this restructuring states that the indicator was moved to be an intermediate outcome indicator\. Outputs: ï‚ 7,127 km of rural roads were rehabilitated and/or maintained corresponding to 119 percent of the revised target of 6,000 km (original target was 1,300 km and additional financing target was 2,500 km)\. ï‚ 75 participatory research projects supporting sustainable rural development were carried out, representing 150 percent of the target\. State Agriculture Research Enterprise operated in 30 municipalities and 35 hydrographic micro-basins, involving 52 direct beneficiaries (experimental farmers), 3,939 indirect beneficiaries (farmers), and 28 researchers\. ï‚ 38,221 environmental and productive investment proposals (subprojects) were financed (6 percent above the revised target)\. The original target was 24,400 proposals\. ï‚ 59,651 beneficiaries were trained on key concepts of integrated and sustainable farming systems, exceeding the target of 50,000\. The number of women beneficiaries trained was 13,670 compared with a target of 7,800\. ï‚ 3,870 stakeholders were participating in development committees across all levels equal compared to a target of 4,000 ï‚ 370 Micro Catchment Development Committees were established, accounting for 3,870 stakeholders\. ï‚ 370 micro-catchment development plans were prepared as against the 366 for original target\. ï‚ A strategy and action plan (ISP) formulated to strengthen rural institutions in the State of Rio de Janeiro meeting the target\. Outcomes ï‚ 223,152 ha of agricultural land under improved production systems was below the original target of 266,000 ha but exceeded the final target of 160,000 ha\. ï‚ 37,172 small-scale farmers and family farms adopted more productive and sustainable systems exceeding the target of 35,000 farmers\. Page 7 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) ï‚ 5,280 small-scale family farms adopted more productive and sustainable systems were headed by women (less than the target of 6,000)\. This indicator was included during the 2017 restructuring\. ï‚ One important caveat was that there was no breakdown of the above figures in terms of type of adopted farm or improved system\. The ICR dropped this indicator and therefore there was no discussion of number of farmers adopting good agricultural practices\. ï‚ In terms of client satisfaction, a Practices Evaluation Survey was carried out in 2018 with among 61 beneficiaries in the Northwest region and 42 in the Serrana\. A 91\.8 percent satisfaction rate was achieved in the first region and 100 percent in the second\. These results exceeded the target of a 75 percent satisfaction rate\. Due to inadequate progress in terms of achievement against the original PDO indicators the efficacy of this objective is rated modest\. Rating Modest OBJECTIVE 1 REVISION 1 Revised Objective “To increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory” Revised Rationale Theory of Change: This did not change because neither the objective nor the activities designed to achieve the objective changed\. While the original Objective 1 did not change, some of the outcome targets were modestly revised and new indicators were included in the results framework after restructuring "to monitor the implementation and results of the emergency activities" (Restructuring Paper, September 2\. 2011, para 13) \. The outputs and outcomes listed above indicate all the achievements towards Objective 1 before and after restructuring in October 2011\. The efficacy of achievements against the revised indicators is rated by this review as substantial\. Revised Rating Page 8 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) Substantial OBJECTIVE 2 Objective “To increase small-scale farming productivity and competitiveness” Rationale Theory of Change Increased productivity and competitiveness (leading to improvements in the livelihoods of small-scale farming) would be achieved through investments in improved technology in small-scale farming, as well as improvements in rural roads to reduce transport costs for inputs and outputs, and linking small-scale farmers to at least one marketing chain based on a certification program that identified small-scale farmers producing high quality agricultural products\. Outputs The same outputs discussed under Objective I also contributed to the achievement of this objective\. Outcomes No PDO indicator was designed to measure increased productivity such as crop yields, thus no robust information on "increased small-scale farming productivity" was reported by the ICR\. The economic analysis section of the ICR (page 56), however, reported yield results stemming from the participatory research activities but it was not clear if these were statistically significant or representative figures for small-scale farmers\. In addition, no control group comparisons were included in the analysis\. The Bank project team did not elaborate on this issue\. The Impact Assessment mentioned statistically significant positive impacts on income but the ICR did not provide any figures\. The economic analysis covering 155 sub-projects, found an annual incremental net income per hectare of US$275 on average (ICR page 55), without any information on the average incremental income to be able form any conclusions on the relative importance of this income increase\. Also there was no control group comparisons mentioned in the ICR\. The project initially included the PDO indicator "improved product quality in at least 50 percent beneficiaries receiving investment support, measured by farmers adopting good agricultural practices, farmers/enterprises certified, agro-processing and artisanal enterprises adding value”\. The ICR did not report on these indicators\. It was not clear at which point during implementation these were removed from the results framework\. The project team did not elaborate on this issue\. Other data reported by the ICR on the achievement of competitiveness part of the objective was that a total of 3,359 small farmers were included in (or with improved links to) at least one productive chain as a direct result of the project, corresponding to 129 percent achievement of the target (2,050)\. After the additional financing the target was 2,600\. It was not clear what “improved links“ meant, for example whether these farmers established market access via new contracts with processing companies or larger buyers\. Due to lack of sufficient evidence this objective is rated modest\. Page 9 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) Rating Modest OBJECTIVE 2 REVISION 1 Revised Objective "To increase small-scale farming productivity and competitiveness” Revised Rationale The Theory of Change, outputs and outcomes for this objective were the same as before restructuring in 2011\. Revised Rating Modest OBJECTIVE 3 Objective “Help re-establish an agricultural productive environment in areas of the Serrana Region affected by the January 2011 natural disaster”\. This additional objective was introduced at the project’s restructuring in October 2011\. Rationale Theory of Change: Heavy rains and floods in 2011 caused substantial destruction in rural areas of the Serrana Region\. This additional objective was aimed at temporarily redirecting some of this project's resources to affected rural areas and providing an immediate response to restore physical access through rural road rehabilitation, restoration of damaged houses, and the restoration of productive assets\. All those activities were within the scope of the original project\. It was expected that including geographical targeting and the prioritization of productive activities in the project's PDO would allow the financing of emergency flood recovery activities managed by the local authorities in the Serrana region\. No specific PDO indicators were included in the Results Framework; nevertheless, the corresponding intermediate outcomes were consistently monitored by the M&E system\. Outputs: ï‚ 2,277 emergency subprojects were financed (99 percent of the target) reaching a coverage of 1,908 farmers affected by the natural disaster (95 percent of the target)\. ï‚ 890 km of roads (111 percent of the target) and 46 small bridges (115 percent of the target) were rebuilt Page 10 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) ï‚ 34 communities were served with soil conservation patrols assisting 4,858 beneficiaries\. ï‚ Producer associations were supported with the acquisition of ‘mini-patrols’10 responsible for the management of small machines and equipment made available to small producers to rehabilitate roads and other public infrastructure\. Technical assistance was reinforced, operators of such equipment trained, and associations qualified The Participatory Research Units in the Serrana region was strengthened where restoration of degraded areas was taking place, emphasizing agroecological transition, organic production, and the adoption of new technologies by experimental farmers\. Outcomes: The ICR reported that (para\. 30) 89 percent of the beneficiaries stated that as a direct results of project support, they were able to recover from the damage caused by the catastrophe within six months\. The ICR also noted that most technicians and beneficiaries interviewed recognized positively the role of the emergency committees in local social organization\. Rating Substantial OVERALL EFF TBL OLD Rationale OVERALLL EFFICACY The achievement of the first objective, to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory, is rated modest before the project's restructuring in 2011 and substantial after restructuring due to meeting or exceeding indicators and targets\. The achievement of the second objective, to increase small-scale farming productivity and competitiveness, is rated modest before and after restructuring due to lack of robust evidence on either small-scale farmer productivity increases or evidence of increased competitiveness\. The achievement of the third objective, to help re-establish an agricultural productive environment in areas of the Serrana Region affected by the January 2011 floods, is rated substantial after restructuring as a result of positive impacts reported by the ICR\. No overall rating is given here as there is a split between the two periods\. This is illustrated in Section 6 in reaching an overall rating for Outcome\. Overall Efficacy Rating Not Rated/Not Applicable 5\. Efficiency Economic Efficiency: The ex-ante economic and financial analysis covered all project activities and assumed three main benefit streams: increase in yields\. Thirty-three farm models representative of the most prevalent Page 11 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) small-scale farming activities in the focal and replication areas of the Project were identified and used to estimate the impact of project-supported activities on farm profits\. The per hectare farm profit increase ranged from 9% to 182% depending on the product\. The economic Internal Rate of Return (EIRR) for the Project at appraisal was estimated at 33\.6%\. The ex post analysis randomly selected 155 sub-projects representing 1 percent of total sub-projects implemented\. In terms of value chains, the sample included 54 sub-projects for horticulture; 51 PIDs for milk production; 31 PIDS for; 11 PIDs for coffee production; 6 PIDs for raising small animals; and 2 PIDs for forestry (palmito)\. The results generated by the various investments were increased production, lower production costs, and increased incomes\. The average annual incremental net income per hectare was estimated as US$275, but its significance is unclear because it is not compared to any baseline for income per hectare\. IRR of the improvement of two sample roads evaluated (around 7–9 km improved) ranged between 20 percent and 280 percent but the ICR provides no assessment of the reasons for the wide distribution of IRR results\. The ICR reported, however, that based on the roads evaluated, there was; (a) a 92 percent reduction of days of non- trafficability; (b) in reduction of production losses (20 percent in the case of milk and 36 percent in the case of vegetables); (c) reduction of 50 percent of travel time due to increased traffic speed; (d) reduction of 40–60 percent in the average cost of vehicle maintenance; and (e) 20–50 percent reduction in average fuel consumption\. Nevertheless, the basis for this information and its veracity was not clarified in the ICR\. The ICR, based on these results, along with other project costs and carbon co-benefits (without evidence in the ICR) concluded that the economic net present value (NPV) and economic internal rate of return (IRR) were respectively US$301 million and 36 percent (ICR, para 38)\. The ICR noted in the same paragraph that "These results are similar to the indicators of the economic analysis carried out for the project at appraisal"\. Overall the economic analysis of the project in the ICR had a number of shortcomings and was hence not convincing\. The shortcomings included (a) average annual incremental net income per hectare for sample beneficiary farms with individual development plans (PIDs) was not compared to a baseline nor to a counterfactual; (b) the economic analysis of the more than 7,000 km road rehabilitation program was based on a sample of two roads "(around 7-9 km improved)" raising questions about the veracity of the conclusions; (c) the efficiency of the disaster relief program was not assessed by the ICR\. It was also unfortunate that the impact assessment did not provide any information on the efficiency of the project\. Administrative and Operational Efficiency: The project closing date was extended for 3 years mainly due to external events including floods and the resultant emergency recovery efforts included in the project, a strike of employees of the implementing agency for about a year, an increase of project scope through an additional financing, and a financial crisis that led to judicial power seizure of the project's designated account for about a year\. There were acute capacity constraints, governance issues and bureaucratic obstacles particularly due to the various crisis\. In particular the PIU’s chronic inability to overcome procurement weaknesses made the procurement function especially challenging\. PIU’s procurement capacity problems contributed to cancelation of some large size contracts\. In addition, major delays in procurement review and approvals by the State Court of Accounts (Tribunal de Contas) negatively affected the efforts to maintain timely procurement processing and the scope and quantity of procurement packages; in particular planned road works and bridges were especially negatively impacted\. Page 12 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) Due to shortcomings in the economic analysis and administrative and operational inefficiencies, the project's efficiency is rated modest\. Efficiency Rating Modest a\. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) 0 Appraisal 0  Not Applicable 0 ICR Estimate 0  Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome As mentioned in Section 3e this review is carrying out only one split rating because of the PDO revision in 2011\. A second split on account of subsequent relatively small changes in indicators was not considered necessary\. The following table provides the basis for the overall outcome for the project of moderately satisfactory based on the previous assessments of relevance of objectives, efficacy and efficiency\. Derivation of Overall Outcome Rating\. Rating Dimension Original Objective Revised Objective Relevance of PDO Substantial - PDO 1: To increase the adoption of integrated Modest Substantial and sustainable farming systems approaches - PDO 2: To increase small-scale farming Modest Modest productivity competitiveness - Additional PDO: help re-establish an agricultural productive environment in areas of the N/A Substantial Serrana Region affected by the January 2011 natural disaster Efficiency Modest Moderately Moderately Outcome Rating Unsatisfactory Satisfactory Outcome Rating Value 3 4 Page 13 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) Disbursement (%) 10\.7 89\.3 Weight Value 0\.3 3\.6 Total weights 3\.9 Overall Outcome Moderately Satisfactory a\. Outcome Rating Moderately Satisfactory 7\. Risk to Development Outcome Institutional Sustainability: The ICR argued (paras 96-97) that the decentralized approach adopted by the project, which is the transfer of powers from State Secretariat of Agriculture, Livestock, Fisheries and Supply’s (SEAPP) center to its regional and sub-regional offices, including to State Rural Extension Agency (EMATER-Rio) and State Agricultural Research Enterprise (PESAGRO) ensured increased local capacity building and outreach\. The project also developed partnership models with NGOs, farmer/producer organizations and cooperatives, demonstrating how smallholder producers could develop and maintain market links\. Thus the sustainability of the institutional approach was ensured despite the fiscal constraints\. Financial Sustainability: The project financed sub-project proposals in a demand driven fashion; funds came from various resources including public funds, payment for environmental services (in carbon, water, and biodiversity), agricultural credits, and private partnerships in the areas of sustainable business and socioenvironmental responsibility\. The project team did not clarify if there would be additional funds provided by the government or another program to continue the project’s approach to provide financing for investment proposals in the future\. The ICR also reported the unfavorable fiscal situation of the State Government that may potentially affect the sustainability of the outcomes\. In addition, the market risk (prices, quality of products, honoring contracts) is another risk that could impact profitability of beneficiaries particularly for exported products\. 8\. Assessment of Bank Performance a\. Quality-at-Entry The project was the successor of the GEF funded Integrated Management of Agroecosystems Project and was designed to build on the existing productive and social base\. The aim was quite ambitious and complex as it tried to incorporate three aspects: to execute a strongly market oriented agricultural operation to simultaneously support farmers’ competitiveness and protection of global biodiversity resources\. According to the PAD (page 9) the design drew on the lessons from other Bank projects in the rural sector in other states in Brazil, as well as on the global lessons compiled in the Bank’s 2008 World Development Report focusing on agriculture\. In addition, the project took certain features from the “productive alliance” model which was expanding under World Bank-supported rural operations in Latin America at the time\. The main lessons from those projects were on decentralization (implementation and Page 14 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) supervision responsibilities at the municipal level supported by adequate institutional support); and one- time matching grants as incentives for technology adoption and innovation with a multi-sectoral focus\. As mentioned earlier, the weaknesses of the results framework included a vague statement of PDO in terms of what an “increase in integrated and sustainable farming systems approaches” meant in terms of scale, the extent to which these farming systems were expected to be “approached” by small-scale farms\. In terms of defining and measuring the adoption of sustainable farming system, one would expect both environmental sustainability parameters such as recovering the productive capacity of soils, the protection of water resources, or the conservation of biodiversity\. However, none of these aspects were monitored by the project\. No indicator was included to measure the quality and effectiveness of institutional capacity building, particularly at the local level\. Project’s M&E framework included an Impact Evaluation (IE)\. The project mainly supported sub-project investments financed through a matching grant mechanism with beneficiary contribution, while retaining the micro-catchment as the organizing unit and geophysical location\. However, as noted in the ICR (para 91), this complex structure was particularly challenging for a state with limited experience with such market-oriented methodologies and approaches, in addition to limited institutional capacity, which became evident during implementation\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision According to the ICR (para 93) the supervision team worked in a difficult operating environment trying to find quick solutions to natural disasters and financial crises, and in that respect the team was quite effective\. In addition, fiduciary and safeguard issues were managed by experienced specialists, and particularly the procurement issues were ) addressed in general given the acute capacity constraints, governance issues and bureaucratic obstacles\. One area that the supervision team could have addressed was the adequate revision of the results framework and outcome indicators particularly during the Additional Financing (see Quality at Entry for lacking PDO indicators)\. In addition, the Additional Financing amount proved to be extremely ambitious, much larger than the state could absorb\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. M&E Design, Implementation, & Utilization Page 15 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) a\. M&E Design Contrary to the broad statement of the PDO, the PDO indicators demanded that (a) “at least 50% of farmers in the project area had transitioned towards more productive farming systems” and (b) “improved product quality” (assessed by three measures namely “number of farmers adopting good agricultural practices”, “number of farmers or enterprises certified” for something undefined, and “number of agro- processing and artisanal enterprises adding value”), and (c) “number of farmers linked to at least one value chain”\. None of these indicators made any reference to their relationship to integrated or sustained farming systems\. To the extent that these achievements could be assessed the vague PDO was given a specific meaning but that meaning contrasted significantly with the intent of the original PDO\. There was also lack of clarity on the design and methodologies to collect and process data\. The Management Information System was conceptually ambitious and based on participatory principles that would build on existing information systems and databases from the Rio GEF project to monitor the project’s physical and financial progress\. Baseline surveys and evaluation studies would be outsourced/shared, with some coordination activities and field surveys to be conducted by state and federal institutions (with recurrent costs covered)\. b\. M&E Implementation During implementation, development of the originally planned Management Information System was abandoned due to restrictions established by the state government on hiring of consultants\. The shortcomings with the M&E indicators were not resolved during the various restructurings\. In the event an Impact Evaluation (IE) was the main M&E function carried out using treatment and control groups and randomized sampling, covering 120 micro-basins in 35 municipalities\. Given that the project’s objectives were vague and not measurable, the IE used economic indicators for micro-basins based on information from agricultural producers\. Based on information that economic indicators in micro-basins differed between the treatment and control groups due to the project’s investments, but that differences between the treatment and control groups may also be due to other factors, the contrasts due to the other factors were also taken into account in the impact evaluation (ICR, Annex 5, para 6)\. The results for indicators that were statistically different and for those that were not statistically different were presented in Annex 6 of the ICR\. c\. M&E Utilization Project monitoring data and periodic progress reports were used as inputs to management decision making as well as key research and reporting deliverables\. M&E Quality Rating Modest 10\. Other Issues a\. Safeguards Page 16 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) Environmental Safeguards: The project was classified Category B, which required an Environmental Management Framework\. The project triggered six safeguard policies: Environmental Assessment (OP/BP 4\.01), Natural Habitats (OP/BP 4\.04), Pest Management OP/BP 4\.09), Physical Cultural Resources (OP 4\.11/BP), and Forests (OP/BP 4\.36)\. Involuntary Resettlement (OP 4\.12) was triggered on a precautionary basis\. The project did not lead to any involuntary resettlement\. The Environmental Assessment (EA) and Environmental Management Framework (EMF) had been prepared by the Borrower, and the final versions were approved before appraisal\. The EA described the organizational framework for safeguards, which built on the capacity established within the implementation agency for the ongoing Rio GEF Project\. It also listed all activities with potential negative impacts\. The EMF proposed a plan for avoiding, minimizing, and mitigating negative impacts identified in the EA\. The EMF also included a framework for screening project activities in relation to potential negative impacts on cultural property, as well as a Resettlement Policy Framework (RPF)\. The ICR reported (para\. 80) that environmental impacts were in general positive, including enhanced soil nutrition and reduced erosion through improved cropland and grazing management; rehabilitation of degraded forest areas, sustained conservation of natural resources, leading to improved biodiversity; reduced use of pesticides in croplands; and water conservation benefits and climate co-benefits, although no evidence was provided supporting these claims\. No measures were needed to preserve physical cultural resources because no project activity placed cultural assets at risk\. The ICR reported that (para\. 79), environmental safeguards compliance was rated satisfactory throughout the project’s life\. b\. Fiduciary Compliance Financial Management: Financial management performance was rated moderately unsatisfactory mid- 2018 (after that moderately satisfactory), due to late submission of interim financial reports (IFRs) and project financial data being registered in two separate systems that required constant reconciliations\. Then the rating was upgraded to Moderately Satisfactory after mid-2018\. Except for the 2014 audit report, all other audit reports were submitted late\. Apart from the 2012 and 2014 audit reports which expressed qualified opinions, all other audit reports expressed unqualified opinions, but no ineligible expenditures were identified\. The ICR did not describe why those reports had qualified opinions\. The last audit report was not ready at the time the ICR was written\. Procurement: The PIU’s continuing inability to overcome procurement weaknesses made the procurement function especially challenging, as did major delays in procurement review and approvals by the State Court of Accounts, which negatively affected the efforts to maintain timely procurement processing\. Planned road works were particularly affected by that\. The World Bank responded through repeated procurement training, frequent adjustments to procurement strategy and planning, more frequent procurement supervision, and contracting a consultant familiar with World Bank procurement rules to support the PIU\. Thus, procurement ratings were mostly in the unsatisfactory range throughout until restored to Moderately Satisfactory in the final year\. Page 17 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) c\. Unintended impacts (Positive or Negative) No unintended impacts were reported by the ICR\. d\. Other --- 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Outcome Moderately Satisfactory Satisfactory Moderately Bank Performance Moderately Satisfactory Satisfactory Due to shortcomings with the Quality of M&E Substantial Modest M&E framework Due to weak TOC and results Quality of ICR --- Modest framework and limited evidence under efficacy 12\. Lessons The ICR provided several lessons, many of which overlapped and mainly related to demand driven approaches for mobilizing investment support in rural areas\. Such lessons have already been learnt under many projects in the past\. However, one lesson that stands out relates to the importance of accurately assessing the impact of project benefits\. Thus IEG concluded that the following was a key lesson: M&E design needs to be adequate to accurately capture project benefits\. The project supported rehabilitation of more than 7,000 km of rural roads rehabilitation, which is known to be a crucial precondition for market access in rural areas\. Based on two roads 7-9 km long the project estimated that the benefits of the road rehabilitation program were a 92 percent reduction of days of non-trafficability, a reduction of production losses (20 percent in the case of milk and 36 percent in the case of vegetables), reduction of 50 percent of travel time due to increase in traffic speed, reduction of 40–60 percent of the average cost of vehicle maintenance, and 20–50 percent reduction in average fuel consumption\. This review questioned the veracity of these benefits determined on the basis of information from only two stretches of roads of 7-9 km underlines the lesson that a project's M&E program needs to be designed to accurately assess project outcomes\. IEG also concluded the following related lesson: A complex project requires a clear Theory of Change and a robust results framework\. This project included many aspects ranging from environmental sustainability to productivity as well as marketing linkages, road infrastructure and decentralization, and local capacity building\. When such complexity is introduced this should be supported by a very clear objective and well-defined Page 18 of 19  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review BR-RJ Sustainable Rural Development (P101508) theory of change as well as a robust results framework as a basis for measuring outcomes\. Unfortunately, the project failed to do that\. Even though the project financed numerous investment proposals, sufficient outcome evidence on increased productivity and improved competitiveness was not collected\. 13\. Assessment Recommended? Yes ASSESSMENT_TABLE Please Explain To retrospectively assess achievements of this project on the ground which were not measured for the ICR and were therefore not taken into account in assessing this project's overall outcome\. 14\. Comments on Quality of ICR The report followed the guidelines in general but had significant weaknesses; (a) the efficacy section was weak, some results were presented in an anecdotal manner with no or limited discussion of attribution issues; (b) the project’s theory of change was weak (c) the presentation of the impact evaluation in the ICR provided little quantitative data on the project's impact; (c) some of the ICR’s lessons were unclear and not based on project actions or results presented in other parts of the report\. The project team provided incomplete responses to some of IEG’s queries related to project costs, indicators, efficacy and efficiency \. a\. Quality of ICR Rating Modest Page 19 of 19

REVIEW

P152440

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) Report Number : ICRR0021241 1\. Project Data Operation ID Operation Name P152440 Energy Sector DPO Country Practice Area(Lead) Kyrgyz Republic Energy & Extractives L/C/TF Number(s) Closing Date (Original) Total Financing (USD) IDA-55830,IDA-D0280 31-Jan-2016 24,000,000\.00 Bank Approval Date Closing Date (Actual) 29-Jan-2015 31-Jan-2016 IBRD/IDA (USD) Co-financing (USD) Original Commitment 24,000,000\.00 0\.00 Revised Commitment 24,000,000\.00 0\.00 Actual 23,313,675\.00 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Dileep M\. Wagle John R\. Eriksson Christopher David Nelson IEGSD (Unit 4) 2\. Project Objectives and Policy Areas a\. Objectives The main objectives of the Energy Sector Development Policy Operation, as stated in the Program Document (p\.4) and consistent with the objectives set out in the Government's Letter of Development Policy, were "to improve the financial viability of the energy sector, enhance its governance and accountability, while managing the impact of shortages on poor regions"\. (The Financing Agreements do not mention Program Development Objectives)\. Page 1 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) b\. Were the program objectives/key associated outcome targets revised during implementation of the series? --- c\. Pillars/Policy Areas The operation was intended to support the government through the following pillars/policy areas (as formulated in the Program Document, p\.6): Pillar 1: Improving financial viability: Reforms under this pillar were built on prior actions to adopt the Medium-Term Tariff Policy (MTTP) for Power & Heating for 2014-17; as well as to approve changes in end- use tariffs for electricity and district heating/hot water, in December 15, 2014 and April 1, 2015, and introduce a tariff-setting methodology for power companies, which would be applied to the power plants supplying the national electricity grid\. The earlier absence of such a clearly-defined methodology had made it difficult (given the exceptionally low end-user tariffs) to allocate revenues between power companies without the need for frequent negotiations between Government and the sector companies, making it difficult for the latter to realistically budget operating and maintenance expenses, or to plan on capital expenditures\. Pillar 2: Enhancing sector governance: Reforms under this head were supported by prior actions to establish a regulatory framework to clarify the functions of the State Regulatory Agency of the Fuel and Energy Complex, together with a performance reporting and monitoring framework for the power sector, involving the publication of quarterly service quality indicators, which would be used as the basis for setting a baseline against which power companies would be held accountable\. The reforms also included establishment of a working group to conduct public outreach campaigns and institutionalize the process of public hearings for important decisions\. Pillar 3: Managing Impact of power shortages on poorer regions: Given that energy shortages appeared inevitable in the short run, the Government would - as a prior action - establish monitoring and communication arrangements in regional power supply management plans, consistent with the Fall-Winter Preparedness Plan, 2014-15\. The Plan, which included power system management plans for each region, would in this way facilitate the task of ensuring that power rationing was equitable act=ross regions\. d\. Comments on Program Cost, Financing, and Dates Financing: Financing for this project took the form of an IDA credit of SDR 9\.1 million (US$13\.2 million equivalent), and a IDA grant of SDR 7\.4 million (US$10\.8 million equivalent)\. The project took the form of a stand-alone, single-tranche operation, and the entire financing amount was 97 percent disbursed\. Dates: The project was approved on January 29, 2015 and declared effective on October 12, 2015\. It was closed on January 31, 2016, on schedule\. 3\. Relevance of Objectives & Design Page 2 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) a\. Relevance of Objectives The project's objectives were substantially relevant to the Government's objectives for the power sector, as laid out in its Power Sector Development Strategy 2012-17, the detailed Action Plan for reforming the Energy Sector 2013-14, and the sector laws amended in July 2014\. They were also substantially relevant to the objectives outlined in the World Bank's Country Partnership Strategy for 2013-17, the third pillar of which placed emphasis on ensuring energy security through efficiency, governance and transparency, especially (p\.27) through reducing system losses, modernizing the financial and operational management of state-owned enterprises responsible for generation, transmission and distribution of electricity\. The objectives of energy sector financial viability and governance continue to be integral to the Bank Group's priorities, as outlined in the Country Partnership Strategy Framework for 2018-23\. Rating High b\. Relevance of Design The design of the program was consistent with its developmental objectives\. As confirmed by a diagnostic analysis of the energy sector prepared by the World Bank Group's Public Private Infrastructure Facility (PPIAF), the financial viability of the sector suffered from a severe revenue shortfall on account of tariffs that were below cost-recovery (even of recurrent costs and debt-service), as well as on account of technical and non-technical losses\. The Kyrgyz Republic had the lowest electricity tariffs in the Europe and Central Asia Region (and among the lowest worldwide), and in 2016, tariff losses were estimated as high as 1 percent of GDP\. As a consequence, 45 percent of the country's electric generating capacity had been allowed to deteriorate beyond its useful life and was in dire need of replacement\. The report pointed to the need for appropriate tariff-setting procedures, combined with stronger governance and regulation, in addition to planning to address the growing winter demand gap\. Against this background, the policy areas chosen under the project were appropriate\. The reforms being supported, if properly implemented, could be expected to lead to at least a partial reduction in the revenue shortfall, together with improved governance and accountability, and an ability to plan for seasonal shortfalls in power availability\. The results indicators adopted were consistent with the project's objectives, and relatively straightforward to measure\. That said, the proposed reforms (and corresponding prior actions) addressed only a part of the problem facing the sector\. As pointed out by the PPIAF analysis, the consumer threshold of 700kWh per month for subsidized electricity was too high to be sustainable; cutting it by half (to 300kWh) would result in a nearly 20 percent reduction in the cost-recovery gap\. Achieving full-cost recovery would require increases in the residential tariff at all levels of consumption\. Secondly, it should be noted that while the policy actions involving tariff setting were based on adoption of the Medium Term Tariff Policy (MTTP), which had envisaged tariff specific increases for different consumer groups, the internal design of the MTTP was not part of the indicators for the operation, so there was nothing to prevent the relative increases for individual groups to be subsequently altered - as indeed happened\. Thirdly, from the perspective of financial viability, and notwithstanding the gains made through the Electricity Supply Accountability and Reliability Improvement project (ESARIP) with its' focus on the improvement of operational performance and targeted investment in the distribution network of Severelectro to install modern substations and smart meter, the focus was exclusively on the Page 3 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) revenue side, through cost-recovery tariffs, with no emphasis whatsoever on the cost side, in terms of providing incentives to the power companies to achieve improvements in administrative and operational efficiency\. In this way, the important issue of reducing technical and non-technical losses - which were as high as 7 percent for transmission and 12-13 percent for generation, and exacerbated by lack of metering - was not addressed in any way\. At appraisal, the macroeconomic policy framework had been considered to be adequate for the proposed operation\. Macroeconomic performance during 2014-17, covering the period of implementation of the operation, was however mixed (see International Monetary Fund: Fourth and Fifth Reviews under the Three- Year Arrangement under the Extended Credit Facility)\. On the positive side, reserve money was expanding rapidly, with relatively subdued pressure on inflation and exchange rate\. Total external debt declined from 57 percent of GDP in 2016 to 54 percent in July 2017, as a result of the appreciation of the currency, rephrasing of public investment projects and writing off of Russian debt ($240 million)\. The current account deficit narrowed on the backs of surging exports of gold and remittances, mostly on account of better access of the Kyrgyz labor force to the Russian market following accession to the Eurasian Economic Union (EEU)\. On the other hand, actual program performance under the ECF was mixed, with six structural benchmarks being missed, of which five were likely to be postponed or modified at the time of the fourth review\. These included the liquidation of banks under the Debt Enterprise Bank Enterprise Agency, signing of the terms of reference for the Financial Management Information System, and identification of quantitative measures to reduce the wage bill\. In addition, considerable risks remained in the medium term, mostly tilted to the downside\. A slowdown in China or economic setbacks in Russia could very easily dampen external demand and depress remittances\. The tension with Kazakhstan could have adverse effects on the Kyrgyz economy and undermine EEU integration efforts\. Any backsliding on reforms could also undermine fiscal sustainability and economic stability\. Rating Modest 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective “To improve the financial viability of the energy sector" Rationale Some progress was made towards improving the financial viability of the energy sector\. The Government approved the Medium Term Tariff Policy for the power and heating sectors for 2014-17, committing to annual increases in tariffs for different consumer groups, so as to allow for recovery of recurrent expenses by power and heating companies, as well as the debt service by mid-2017\. With the objective of introducing some incentives to reduce consumption, the MTTP also imposed a 700kWh monthly threshold for residential electricity consumers, beyond which they would be charged the full short-term cost recovery tariff\. Tariff Page 4 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) increases for heating were introduced by the Government for 2014 and 2015; however, no increases were imposed on electricity consumers falling under the 700kWh threshold, even in a scenario where those above the threshold did see significant tariff increases\. The Regulatory Agency implemented a mechanism to allocate revenues to power companies and took steps by December 2014 to develop a methodology for setting tariffs\. The results indicators had focused somewhat narrowly on cash collection outcomes resulting from the tariff hikes, and these were over-achieved by 45 percent in the case of power generation, and by 16 percent for district heating\. That said, the tariff reform actually implemented by the Government in 2014-16 did not follow the principles originally outlined MTTP, in so far as the increases were levied almost entirely upon large and industrial consumers, with residential consumers being completely exempted from any increase\. Though this allowed immediate cash collection targets to be achieved, residential consumers, who received a sizeable cross-subsidy, were left with no incentive whatsoever to economize on their consumption\. For a sector in which residential users accounted for over 50 percent of total electricity consumption, while recovering less than 40 percent of costs (less than 25 percent of costs in the case of the heat and hot water sector; ICR, p\.21), this could only have a negative impact on sector sustainability over the medium to long term\. Rating Modest PHREVDELTBL PHEFFICACYTBL Objective 2 Objective “To enhance governance and accountability of the energy sector” Rationale The Government implemented reforms to clarify policy roles and regulatory responsibilities, and strengthen sector governance\. Amendments in July 2014 to the existing laws on energy, electricity and on natural monopolies led to the establishment of the overall legal framework; and a resolution passed in July 2014 led to the State Regulatory Agency of the Fuel and Energy Complex being established as the single economic regulator in the energy sector, with responsibilities for licensing, tariff setting and performance monitoring\. As part of the Prior Actions, the Agency developed performance reporting and monitoring framework, with service quality indicators, and also set up a working group to initiate public outreach campaign on reforms panned for 2014 and 2015\. The above actions complied with the formal targets established in the results indicators for the objective of enhancing energy sector governance and accountability\. The publication of service quality indicators on a quarterly basis demonstrated a degree of commitment on the part of the agency to fulfilling its mandate\. That said, challenges persisted in the timeliness of data availability and its completeness, apart from which no follow-up actions could in practice be taken by the agency, in cases of non-performance - its mandate being restricted to collection and disclosure of information, which somewhat restricted its usefulness\. The agency's activities did contribute towards raising the public's awareness of reform measures, as evidenced by a survey of respondents\. Page 5 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) Rating Substantial PHREVDELTBL PHEFFICACYTBL Objective 3 Objective “Managing the Impact of power shortages on poor regions” Rationale Following upon the release of the Fall-Winter Preparedness Plan and two subsequent decrees in 2014, the Ministry of Energy and Industry issued an order in November 2014 that defined how regional energy consumption would be monitored and how power rationing would be enforced\. The objective of equitable load rationing was largely achieved\. The reduction in regional consumption in 2014-15 in relation to the previous three years had a standard deviation that worked out to 3\.52 percent, against a target standard deviation of 5 percent across regions\. Rating Substantial PHREVDELTBL PHREVISEDTBL 5\. Outcome Though the project's relevance of objectives was high, relevance of design was found to be modest on account of shortcomings in design, which had the potential to undermine project outcomes\. Project objectives in terms of governance and ability to manage power shortages, were substantially achieved in the context of the targets set in the results indicators\. However, the project's achievement of its first objective is rated modest on account of sustainability concerns\. The Government was able to maintain adequacy of the macro-economic framework during 2015-16, though performance was mixed and risks remained\. Overall outcome is assessed as moderately satisfactory\. a\. Outcome Rating Moderately Satisfactory 6\. Rationale for Risk to Development Outcome Rating Page 6 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) As emphasized by the ICR, the overall risk to development outcomes was high\. The main risks to the sustainability of the operation were political/governance risks, macroeconomic risks, institutional capacity risks and stakeholder risks\. Political and governance risks arose from the possibility of changes in senior staff positions within government, a reshuffling of government, parliamentary elections and possible reorganization of the institutional framework of the energy sector\. Macroeconomic risks, as discussed earlier, increased in 2015-16 on account of lower growth in Russia and Kazakhstan, leading to reduced remittances and pressures on the exchange rate\. These pressures could very easily increase over the medium term, especially if accompanied by any backsliding on reforms\. Institutional risks arose from budgetary and staffing pressures impacting the capacity of the entity in charge of economic regulation of the sector\. Stakeholder risks arose from the resistance to tariff increases experienced in the past, especially in the absence of consultation and communication, and lack of confidence that increases in revenue of the energy sector would benefit the broader population\. This risk remained high notwithstanding increased outreach efforts\. a\. Risk to Development Outcome Rating High 7\. Assessment of Bank Performance a\. Quality-at-Entry The design of the energy sector reform program, supported by the Energy Sector DPO, was built on a broad analytical base and substantive dialogue with the Government\. The Government itself had developed the Power Sector Development Strategy and the Energy Sector Reform Plan through extensive consultation with stakeholders and public\. The Bank, on its part, prepared a Power Sector Policy Note in 2014, analyzing the principal challenges to the power sector in the country and identifying possible solutions for overcoming them\. These helped shape a set of prior actions for the operation that were meaningful and had the Government's ownership\. In addition, the earlier-referenced "State of the Kyrgyz Republic's Energy Sector" analysis was a complement to its technical assistance to the State Regulatory Agency of the Fuel and Energy Complex in designing a tariff methodology and performance-monitoring framework\. One unanticipated risk to the operation did however materialize after Board approval - in the form of a request from government to modify the prior actions (on account of a deterioration in the economy during 2015), which led to a delay in effectiveness and a reduction in the initial step increase for household tariffs\. The Bank closely coordinated the design of the operation with the energy sector working group, with the Asian Development Bank (ADB), Japan International Cooperation Agency (JICA), German Development Bank (KfW), and the US Agency for International Development (USAID) as its other members\. Coordination with the International Monetary Fund (IMF) also took place: the Fund having completed a three-year Extended Credit Facility in mid-2014, and having initiated discussion of a new program in October 2014\. Quality-at-Entry Rating Moderately Satisfactory Page 7 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) b\. Quality of supervision During implementation of the project the Bank maintained an active dialogue and engagement with sector stakeholders, from high-level government counterparts to the technical officials (ICR, p\.20)\. According to the ICR, the Bank team provided extensive complementary technical assistance (TA) to the Energy Regulator and mobilized expertise to review and provide inputs across a range of technical reports and assessments\. The team was also responsive to the requests of the Government to modify the prior actions, immediately after project approval, and to the changes proposed by the Government in the tariff schedule for household vis-a-vis industrial consumers - which, while allowing the project to achieve its short-term objectives, may however have compromised its longer-term sustainability objectives\. The Bank's convening and coordination role among development partners strengthened over the course of the operation, helping to provide consistent development partner input to the reform process\. The ICR does not provide any information on supervision missions undertaken\. Quality of Supervision Rating Moderately Satisfactory Overall Bank Performance Rating Moderately Satisfactory 8\. Assessment of Borrower Performance a\. Government Performance The Kyrgyz authorities embarked upon a serious reform process in 2014, to address the challenges facing the energy sector, and they built a degree of consensus among stakeholders\. However, after economic conditions deteriorated in 2015, resulting in - among other things - a drop in remittances, and the Government resigned in April 2015, implementation of the MTTP was delayed and a series of amendments to the Plan were introduced whereby tariff increases to the residential sector were entirely suspended in the electricity, heating and hot water sectors after effectiveness of the DPO\. Within the context of the project, the new Government asked for and introduced a change in the tariff path originally agreed to under the MTTP 2014-17, which resulted in an increase in the cross-subsidy from large/industrial consumers to households below the 700kWH threshold\. But on account of the weak commitment of the authorities to the reform process, Government Performance is rated as Moderately Unsatisfactory\. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance The Ministry of Energy and Industry and the State Regulatory Agency of the Fuel and Energy Complex were jointly responsible for monitoring and evaluation of the operation\. After the Ministry was abolished in November 2015, following Parliamentary elections, the policy functions were initially subsumed by the Ministry of Economy, and transferred to the newly established State Committee for Industry, Energy and Subsoil use in July 2016\. Once the end-user tariffs were reduced in January 2015, as a result of active Page 8 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) involvement of Parliament, and the tariff increase planned for April 1, 2015 was delayed until August 1, 2015 (with no subsequent increases for the residential sector allowed thereafter), the need for monitoring of the tariff setting methodology was mostly eliminated\. On other fronts, the Energy Regulator undertook a number of public information activities from 2014 onwards, through 2015, including TV interviews, roundtables and press conferences, to increase public awareness about energy sector issues and reforms\. The effectiveness of this messaging was however diminished by the fact that tariff increases initially announced were walked back by high-level Government officials\. The Ministry of Energy and Industry did however meet its commitment to ensure that power rationing was equitable across regions\. Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Moderately Satisfactory 9\. M&E Design, Implementation, & Utilization a\. M&E Design The project's seven outcome indicators were a mix of quantitative and qualitative, and the link between indicators and prior actions was fairly straightforward\. Baseline data were provided for the indicators relating to cash collection targets\. Most of the indicators were easily measureable, being based on technical and economic indicators collected by the Regulatory Agency\. For indicator 6, the level of public awareness about the country's energy sector challenges was based on survey data, to be collected by an independent professional firm that would support the Regulatory Agency with the public communications campaign\. b\. M&E Implementation Reliability and timeliness of data remained an issue, on account of weak overall governance and inadequacy of information management systems\. The results indicators for the project were based on data that - for the most part - were easy to monitor and verify\. These were supplemented by the above- mentioned survey of public awareness of the Government's reform efforts\. Conducted during 2014-15, the survey covered some 800 respondents, who provided mostly qualitative responses on their awareness of the reforms being implemented: the percentage of respondents claiming to know "a little" or "a lot" about the reforms rising from a baseline of 49 percent in December 2014 to 62 percent in June 2015, when the survey was finalized\. c\. M&E Utilization The technical and economic indicators had been collected by the Energy Regulator in a systematic manner Page 9 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) since 2014\. The Regulator produced official data on sector performance and financial viability of energy companies on the basis of this information\. The data were regularly shared with the World Bank and provided the basis for sector/analytical work\. M&E Quality Rating Substantial 10\. Other Issues a\. Environmental and Social Effects The operation did not trigger any safeguards policies\. No significant impact on the environment, forests and natural resources was expected as a result of project implementation\. To the extent that the project was (originally) expected to correct distortions in price signals via energy tariff reforms, which would encourage greater energy efficiency, the project would be expected to generate overall environmental benefits\. b\. Fiduciary Compliance Not applicable\. c\. Unintended impacts (Positive or Negative) The ICR reports that during preparation of the project the World Bank had estimated the potential poverty impact of the intended increase in end-user household tariffs, and had found it to have been regressive, but to relatively limited extent (an estimated 0\.5 percent impact for a 20 percent increase in electricity prices and a 44 percent increase in district heating tariff, for the bottom 40 percent)\. In actual practice, this impact did not take place, as tariffs for most households did not rise\. d\. Other --- 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Moderately Outcome Moderately Satisfactory --- Satisfactory Page 10 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) Risk to Development High High --- Outcome Moderately Bank Performance Moderately Satisfactory --- Satisfactory Moderately Borrower Performance Moderately Satisfactory --- Satisfactory Quality of ICR Substantial --- Note When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 12\. Lessons The main lessons, taken from the ICR are: (a) Sustained engagement in a sector, over a period of time, is necessary in order to generate a momentum for reform and to maintain commitment to the reform process\. In the case of the Kyrgyz Republic, the main impetus to reform the energy sector arose out of an anticipated supply crisis in the winter season 2014-15\. The lessening of this urgency after the heating season, combined with a change in government, led to a backtracking of earlier-agreed reforms in politically sensitive residential sector, for fear of an anticipated public backlash\. By shifting the burden on commercial and industrial consumers allowed the targets in the results indicators nominally to be met, the failure to address the issue of below-cost recovery tariffs for a household sector that accounted for more than half of total electricity consumption could only undermine the sustainability of the sector over the medium term\. (b) Communication about the facts of the sector and outreach to the general public can play a vital role in explaining and expanding the public's understanding of the need for reform\. The communication campaign launched by the Government under the project in regards to the energy sector led to some increase in public awareness about the reforms, though public interest in the topic waned somewhat after the critical winter season of 2014-15\. However, had a strategy of pubic outreach been launched well prior to the project, it may have been useful in promoting a greater understanding of the precarious nature of the energy sector's finances and the need for tariff increases all round, to achieve cost recovery\. 13\. Assessment Recommended? No 14\. Comments on Quality of ICR The ICR is concise and generally clearly written\. Its discussion of the project's relevance is however not sufficiently informative\. Insufficient detail is provided on the alignment of the project's objectives with the Page 11 of 12  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Energy Sector DPO(P152440) Country Assistance Strategy, or on the manner in which the design of the program contributed to an achievement of its objectives\. The section on M&E design could also have been more informative, especially in assessing the design of the results framework, including appropriateness of indicators and data\. Subject to these caveats, the quality of the ICR is rated Substantial\. a\. Quality of ICR Rating Substantial Page 12 of 12

REVIEW

P073427

 ICRR 13350 Report Number : ICRR13350 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 03/19/2010 PROJ ID : P073427 Appraisal Actual Project Name : Revenue US$M ): Project Costs (US$M): 63\.00 59\.22 Administration Reform Project Country : Bulgaria Loan/ US$M): Loan /Credit (US$M): 34\.15 28\.80 Sector Board : PS US$M): Cofinancing (US$M ): Sector (s): Central government administration (85%) Compulsory pension and unemployment insurance (10%) Sub-national government administration (5%) Theme (s): Administrative and civil service reform (33% - P) Tax policy and administration (33% - P) Law reform (17% - S) Participation and civic engagement (17% - S) L/C Number : L4699 Board Approval Date : 06/05/2003 Partners involved : Parallel financing from Closing Date : 06/30/2009 06/30/2009 IMF, EU-PHARE, Japan, Netherlands, UK, DfID, and US Treasury Evaluator : Panel Reviewer : Group Manager : Group : Clay Wescott Gita Gopal Ismail Arslan IEGCR 2\. Project Objectives and Components: a\. Objectives: The project development objective was the implementation of a sustainable revenue collection system for Bulgaria through the establishment of an economically efficient public revenue collection system that facilitates private sector development and complies with requirements for EU accession \. A complementary objective was the separation of central and municipal revenue collection functions as an integral part of the institutional rationalization and modernization process \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): Component 1 - Policy Support (appraisal cost US$ 1\.5 million; actual cost US$ 1\.04 million ): This component aimed at ensuring that the National Revenue Agency (NRA) fully complied with the tax policy framework developed by the Ministry of Finance and provided useful feedback on the administrative arrangements and requirements to implement the Tax Code \. It financed capacity building for policy reviews, compliance and revenue estimation, improvement to NRA's legal framework, strategic and operational planning, improved NRA interaction with the court system, and helped develop fair and impartial appeals processes \. Component 2 - Organization and Management Development (appraisal US$ 8\.05 million; actual cost US$0 US$ 0\.49 million ): This component aimed at developing the capacity of NRA in two major areas : Organizational Development (organizational structure for the NRA, a management system governing accountability, internal control and integrity, including a management information system deployed throughout the NRA ) and Human Resources and Training (modernizing recruitment, selection, compensation, performance incentives, workforce planning and career development, HRM policies and procedural manuals, a code of ethics and conduct prepared and disseminated to all NRA staff; establish a training center )\. Component 3 - Increasing Operational Efficiency (appraisal cost US$ 18\. 29 \.25 18 \.80 million; actual cost US$ 29\. million ): This component supported activities required to implement the core business processes of the NRA by : (a) establishing an Information and Communications Technology Department; (b) strengthening basic areas of revenue administration, such as audit, enforcement, appeals, and internal audit; (c) implementing an Integrated Revenue and Registration Management System (RMS), with access to third-party information, to increase efficiency and compliance; (d) implementing a Human Resource, Financial Management, and Management Information System, respectively, providing for sharing information through a Data Warehouse \. Component 4 - Outreach and Participation (appraisal cost US$ 1\.70 million; actual cost US$ 2\.93 million ): This component developed and implemented a Taxpayer, Insurer, and Contributor Charter of Rights; assuring citizen voice and participation in shaping the NRA, creating mechanisms for transparency and accountability, such as oversight panels, community surveys; participation in improving the appeals procedures to ensure fair community input; creation of a"call center" to provide information and services to taxpayers and contributors; and external and internal communications plans aimed at the community and NRA staff \. This component also promoted the development of private taxpayer advisory services \. Component 5 - Office Upgrading (appraisal cost US$ 30\. 23 \.88 million ): This 30 \.80 million; actual cost US$ 23\. component financed civil works to establish an adequate working environment for the NRA --staff, taxpayers, and contributors\. This was achieved by the rehabilitation of buildings currently owned by the General Tax Directorate (GTD) or newly acquired buildings, where necessary \. Appropriate workspaces were to be established at headquarters and the regional offices, including power, network, physical, telecommunications security, appropriate functional/spatial separation, and other necessary features often adopted by modem tax offices \. Priority was assigned to the Directorates of Sofia, Plovdiv, Vama, Burgas, and the Large Taxpayer Directorate \. Component 6 - Project Management (appraisal cost US$ 1\.80 million; actual cost US$ 1\.19 million ): This component financed a structure for implementing the project, including : a Project Coordination and Administration Unit and a Change Management Unit, which provided direction and lead the integration of the Social Security collection area of the National Social Security Institute (NSSI) and GTD into the NRA, as well as take responsibility for managing the incremental changes necessary to effect the implementation of each component and related activities of the project \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The project was approved on June 5, 2003 for US$63 million, and closed on schedule on June 30, 2009\. There was a partial cancellation of US$ 9\.38 million effective May, 2009 due to: an aborting of the bidding process for office upgrading under component 5, and decision to finance with government funds; delays in delivered modules of the RMS, and decision to finance remaining modules with government funds; and savings made in project implementation\. The share of costs under Component 3 was increased to purchase software licenses\. Component 4 was also increased because of the importance of communications in achieving improved taxpayer compliance\. All other component shares were reduced due to reasons mentioned above \. There were no extensions\. 3\. Relevance of Objectives & Design: The objectives were relevant to the Country Assistance Strategy FY 03-FY05, with strengthening public administration and anti-corruption in support of the EU accession process as key areas of focus, and to the FY07-FY09 Country Partnership Strategy priority of fiscal sustainability and absorption of EU funds \. The objectives were also aligned with, and reinforced by, a series of three, concurrent programmatic adjustment loans\. The project design was relevant to achieving the objectives, covering the full range of policy, management and citizen outreach activities needed \. The results framework is broadly satisfactory, though it had too many monitoring indicators, and needed to be streamlined during project implementation to make it manageable\. 4\. Achievement of Objectives (Efficacy): 1\. Implementation of sustainable and economically efficient public revenue collection system \. Overall achievement is judged to be substantial, based on achievement under these sub -objectives: Improved taxpayer compliance: Compliance rates exceeded target values for Value Added Tax, and Corporate Income Tax (CIT), and improved to nearly meet targets for Personal Income Tax (PIT) and Social Security Contributions\. There was also an increase in tax declarations received on time (to 99\.4 percent)\. New legislation eliminated the problem delays in resolving taxpayer disputes \. Improved administrative efficiency : Performance improved for total tax revenue collected, and municipal taxes and fees, with targets exceeded for total tax and social contribution revenues, PIT, CIT, and nearly met for social contribution revenues\. Targets were exceeded for reducing collection costs, revenue to revenue staff, quality of audit selection, and reduction of amount of tax arrears at year end \.The number of complaints over an anti-corruption hotline was reduced, and regular perception surveys are being carried out to ascertain reduction in corruption\. While progress on reducing other complaints is unknown, there are signs of perceived administrative improvement; for example, firms seeing tax administration as a problem declined from 34 percent in 2002 to 15 percent in 2009\. Provision for electronic filing has been introduced \. E-filing increased, but the ICR states implementation has been slower than expected (no target set)\. Progress on two other PDOs is unknown, including average number of days to process tax declarations, to identify and notify non -filers and/or non-payers, and to process VAT refund; performance for responding to inquiries, and time taken to respond with formal written rulings\. Promote a professional workforce: Performance only marginally improved on perception survey data on professionalism, and worsened regarding perception of integrity \. However, a 2009 Enterprise survey found that less than 7 percent of firms reported bribes were necessary to tax officials in Bulgaria, compared to a regional average of nearly 13 percent\. Improved equity and fairness: There was a reduction in percent of cases lost in court \. The target was exceeded for forced VAT registration\. 2\. Prepare for separation of central and municipal revenue collection functions \. Overall achievement is judged to be substantial\. Municipal revenues as a percentage of GDP increased by 25 percent between 2004 (when the separation started) to 2008\. The ICR indicates that there was a transfer of 1310 tax staff to municipalities, and this and other measures contributed to improved efficiency by allowing for reduction in the number of field offices from 340 in 2002 to 29 in 2008, thus contributing to the PDO on reducing the cost of collection \. 5\. Efficiency (not applicable to DPLs): The ICR states that it is not possible to verify the appraisal estimate because of NRA's change in responsibilities over the project period\. Instead, the ICR gives indicative data on the project's contribution, including expansion of the tax base, reduction in the compliance burden and costs, increased revenue generation, and savings from administrative efficiency\. These data indicate that project costs were easily recovered, though the rate of return is indeterminate\. One point needs to be made on the revenue generation result \. The ICR points out that revenues collected by GED and NSSI (and from 2006 by NRA) have more than doubled over the period 2002-2008, and increased as a proportion of GDP from 18 percent to nearly 24 percent\. This needs to be seen in the overall context of total tax revenue collected by all authorities, which increased from 29\.2 percent of GDP to 32 percent in 2008\. Finally, a shortcoming was that the procurement for rehabilitating the NRA offices in Sofia, as called for under Component 5, was cancelled, to be rebid and financed with government funds \. The  main reasons for the failure were delays in the process, at a time when construction costs were rapidly escalating; by the time the bidding took place, the estimated cost was more than three times that estimated at appraisal\. Another reason for the cancellation was that the lowest bidder was found to have used falsified information\. This is part of a broader pattern of corrupt practices, also evident in the worsening integrity perception rating, and in the EU's freezing in 2008 of pre-accession funds because of corruption concerns \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 70% 100% ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The relevance of the project objectives was substantial \. The objectives were aligned with Bank strategies, and reinforced by complementary operations \. The design was relevant to the objectives \. There was substantial achievement of both objectives, with many PDOs achieving or exceeding target values \. There is evidence of close cooperation with other donors, in particular with the IMF and EU -PHARE, but because of the close cooperation, it is not always clear what the Bank's contribution was to results achieved relative to that of other key donors\. There is considerable private sector support for the reforms due to provision for their participation in the Steering Committee overseeing the reforms, to the reduction in the tax burden, and to treatment of taxpayers in an equitable manner\. The reforms also brought Bulgaria ’s tax administration into compliance with EU guidelines, helping to pave the way for accession in January, 2007\. Minor shortcomings included: too many monitoring indicators to effectively monitor; and the failed bidding process and loan cancellation for rehabilitating the NRA office in Sofia\. a\. Outcome Rating : Satisfactory 7\. Rationale for Risk to Development Outcome Rating: The many documented successes of improved tax administration are likely to be maintained as the improved fiscal space achieved is key to meeting expenditure targets, which are in turn jeopardized by the global financial crisis\. The need to meet EU guidelines on tax administration is another positive factor, reinforced by the demonstrated willingness of EU authorities to take action on corruption allegations \. However, this Review concurs with the ICR that negative publicity could undermine taxpayer confidence \. The drop in the integrity perception survey rating is an early warning that greater efforts are needed \. Even if the tax administration itself is relatively corruption free, corruption prevalence in other parts of government and the private sector can mean that development opportunities are wasted, and the improved taxpayer compliance achieved to date could be undermined\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: The Bank designed this project in close collaboration with other key donors, based on a comprehensive institutional analysis, and taking into account critical risks \. Most team members continued throughout the project, helping ensure a coherent approach to project implementation, and good counterpart relationships \. ISRs were timely and comprehensive \. The institutional and process improvements achieved in revenue administration are comprehensive, and considered best practice in the ECA Region \. Minor shortcomings included an over ambitious set of PDOs, weak monitoring of two PDOs, and provision of insufficient support for the client to manage the bidding challenges of NRA headquarters rehabilitation \. at -Entry :Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Satisfactory 9\. Assessment of Borrower Performance: The Government’s commitment is evident in its preparation, approval by Council of Ministers, and enactment by Parliament of the new laws (NRA, income tax of individuals and corporations, VAT and excise ) and revised procedural code in and adoption of the detailed reform strategy in the tax administration strategic plan 2004-2008, all developed with assistance from the IMF \. The Ministry of Finance played an effective role during design and implementation\. A shortcoming concerned the failed bidding process for NRA headquarters rehabilitation, resulting in part from delays within the Ministry of Finance \. The ICR also points out that the Ministry of Finance could have taken more steps to protect the NRA from negative publicity \. The implementing agency’s performance was also at a high standard, playing a key role in the successful conclusion of this complex project \. The fact that the authorities took action to cancel suspect bidding is encouraging, but continued vigilance will be needed in the rebidding process \. A shortcoming is that the Project Coordination Unit could have taken on expertise to better support the weak Government capacity for managing civil works procurement\. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Satisfactory c\. Overall Borrower Performance :Satisfactory 10\. M&E Design, Implementation, & Utilization: The institutionalization of M&E is a strength, with the establishment of Policy Analysis and Support Department at NRA in 2003, and a complementary monitoring role for the National Social Security Institute until social contributions were merged with other taxes \. The results framework enumerated a comprehensive set of measurable indicators linked to project components at both intermediate and outcome levels, although the ICR admits that the initial set of over 150 indicators proved not possible to fully monitor \. The ICR states that revisions leading to a “more manageable and meaningfulâ€? indicator set were needed because of policy changes such as the transfer of local tax collection to local government, and the transfer of excise tax collection to Customs \. However, the former change was both foreseen at appraisal, and could have been incorporated in the results framework design\. Further, two PDOs at appraisal were never monitored in ISRs, even before the streamlined set of indicators was agreed with the Bank in 2008\. Finally, given the key role of other donors, particularly the IMF and EU-PHARE, it is not always possible to determine the attribution of results achieved \. a\. M&E Quality Rating : Substantial 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): None identified\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Highly Satisfactory Satisfactory Minor shortcomings noted above Borrower Performance : Highly Satisfactory Satisfactory Minor shortcomings noted above  Quality of ICR : Exemplary NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: This review supports most of the lessons cited in the ICR \. The need for measurable, realistic targets is crucial, avoiding indicators not under control of the implementing agency \. A related lesson is that one should avoid an excessive number key indicators : they should be sufficient to ascertain that project objectives are on track to be achieved, without placing an undue burden on available capacity to monitor \. This review would rephrase the ICR’s last lesson that construction /works should be avoided in institutional development projects \. Instead, the lesson should be that the Bank team and implementing agency should ensure that it has the substantial expertise available to it to execute such an activity \. 14\. Assessment Recommended? Yes No Why? Yes, to ascertain the relative attribution of PDOs to the Bank and other key donors involved \. On the Bank side, take into account not only this project, but the three concurrent, programmatic adjustment loans \. 15\. Comments on Quality of ICR: The ICR is of a high standard\. It is unusually comprehensive, and frank in pointing out challenges as well as accomplishments\. It could have been improved by including the actual Bank costs for each component in Annex 1, and giving values in US$ as well as Euros to facilitate comparison with US$ estimates at appraisal \. a\.Quality of ICR Rating : Exemplary

REVIEW

P054238

 ICRR 13292 Report Number : ICRR13292 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 03/29/2010 PROJ ID : P054238 Appraisal Actual Project Name : Second Gazelle US$M ): Project Costs (US$M): 39\.5 65\.4 Restoration Project Country : Papua New Guinea Loan/ Loan /Credit (US$M ): US$M): 25\.3 25\.3 Sector Board : TR US$M ): Cofinancing (US$M): 3\.2 23\.8 Sector (s): General transportation sector (29%) General water sanitation and flood protection sector (21%) Power (17%) Other social services (17%) General public administration sector (16%) Theme (s): Other social development (29% - P) Access to urban services and housing (29% - P) Infrastructure services for private sector development (28% - P) Natural disaster management (14% - S) L/C Number : L4525 Board Approval Date : 12/09/1999 Partners involved : Australian AID, Closing Date : 06/30/2003 12/31/2007 European Commission, Papua New Guinea (PNG)Sustainable Development Fund, PNG Harbor Fund, PNG Cocoa and Coconut Institute, Rabaul Volcanological Disaster Relief Committee\. Evaluator : Panel Reviewer : Group Manager : Group : Robert Mark Lacey Kris Hallberg IEGSE ICR Reviews IEGSE 2\. Project Objectives and Components:  a\. Objectives: The project was initially designed as the first in a programmed series of two loans (APL 1 and APL 2)\. According to the PAD for APL 1, the program objectives to be supported by the two loans were "to restore the economic and social well-being of the East New Britain people that prevailed prior to the 1994 volcanic eruption, which devastated much of the then provincial capital (Rabaul Town) and surrounding villages\. Furthermore, the program aims to ensure sustainability of outcomes and minimize adverse impacts of future volcanic eruptions on lives, property and livelihood\." These are also the objectives of the Medium Term Restoration Program (MTRP) of the East New Britain Provincial Administration (ENBPA) -- the Gazelle Peninsula being located in the Province of East New Britain -- and the Government of Papua New Guinea (PNG)\. Within this program, the PAD (Annex 1) states three project development objectives (PDOs) for APL 1: "(a) to upgrade existing facilities and transportation infrastructure to support a shift in the location of settlement and economic activity towards lower risk areas centered on the new provincial capital and Kokopo; (b) to consolidate relocation sites in safe zones for evacuation of displaced communities from devastated and high risk areas; and (c) restore such infrastructure and services in Rabaul as are needed primarily to ensure the effective operation of the port as a major economic facility for the Gazelle Peninsula and the Eastern Region of PNG \." The statement of project objectives in the Loan Agreement (LA) is as follows:"to (i) provide the people of the Gazelle Peninsula with government services similar to those that were destroyed by the volcanic eruption in 1994; and (ii) ensure sustainability of social and economic well -being and minimize adverse impacts of future volcanic eruptions on lives, property and livelihood in the Gazelle Peninsula \." This ICR review uses the program objectives as stated in the PAD (the Loan Agreement does not mention program objectives), and also the project objective for APL 1 from the PAD since it is more specific and linked to APL 1\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): The MTRP was divided into two phases -- Phase I: stabilization, including completion of emergency restoration works, relocation of displaced communities, and provision of services in and around the newly designated provincial capital; and Phase II: consolidation and normalization of the long term development process \. APL 1 -- the project -- was to support Phase I and APL 2 Phase II\. There were five components: A\. Improving the quality of life for displaced communities (US$2\.4 million at appraisal, US$6\.9 million at closure) including resettlement and rehabilitation, provision of relocation sites, agricultural land, infrastructure services, and economic and community support services (for example, agricultural extension and vocational training )\. B\. Upgrading of the town of Kokopo as the new provincial capital (US$14\.9 million at appraisal, US$31\.2 at closure), including urban infrastructure and utilities, solid waste disposal, provision of back -up generating equipment, construction of educational and community facilities, an administrative center and a commercial center \. C\. Restoration of Rabaul as a regional port ((US$3\.5 million at appraisal, US$8\.6 million at closure), including rehabilitation of port-related infrastructure and essential utilities, urban infrastructure and public services \. D\. Development of support infrastructure and social services for the Northeast Gazelle Peninsula (US$5\.4 million at appraisal, US$12\.1 million at closure), including establishment of a less concentrated human settlement pattern through development of provincial townships in the Northeast area of the Peninsula \. E\. Economic diversification and long term development planning (US$1\.6 million at appraisal, US$0\.2 million at closure), including development of institutional capacity in land use, water resources and waste -water management, as well as strengthening the administration of the ENBPA especially with regard to planning and development \. The project was implemented by the Gazelle Restoration Authority (GRA), which was specially created to respond to the emergency and is currently being integrated into the provincial administration \. GRA was also the implementing agency for the Immediate Term Restoration Program (ITRP), supported by the Bank with the First Gazelle Restoration Project\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: There were three extensions to the closing date and four formal restructurings (but PDOs or key associated outcome targets did not change )\. These were rendered necessary by lower than anticipated counterpart financing from the PNG Authorities, delays and changes in the available cofinancing from partners other than the Bank, design upgrading of some sub-components, the bringing forward of some Phase II investments, changes in the sequencing of investments, higher than expected bid -prices, and inflation during implementation \. Overall project costs at closure were 66% higher than the appraisal estimate \. In the case of the EU-financed components, there was a particularly damaging link between the lack of counterpart funding and the availability of foreign financing \. The EU financed only construction -- design was meant to be paid for by the PNG counterparts \. When the designs failed to materialize, the construction was unable to proceed before the grant's time period ran out \. Other co-financiers, notably the Australian aid agency AusAID, stepped into the breach, while the EU eventually came forward with new money \. The Bank increased its share of financing for civil works from an average to 78% to 90%\. Despite these and other measures, lack of counterpart funding remained a constraint throughout implementation, though the situation did improve in the later stages as higher commodity prices increased fiscal resource availability \. 3\. Relevance of Objectives & Design: The project's objectives were highly relevant\. Direct and timely support was provided to the implementation of the MTRP of the ENBPA\. The PDOs were also fully consistent with the priorities of the Bank's assistance strategy for PNG, key elements of which are enhancing service provision capacity and strengthening the resilience and self-protection of local communities in areas threatened by natural disasters \. The relevance of project design was modest t\. Extensive consultations were undertaken with local communities and with a wide range of other stakeholders to ensure that the strategy and measures proposed were both acceptable as solutions and relevant to present and future needs \. Area and regional development plans were devised in such a way as to present national and local policy makers with clear alternatives and with the consequences of each alternative fully delineated; they also charted a path towards achievement of the individual goals \. Key risks were appropriately identified, the first of which was the lack of adequate and timely counterpart funding \. However, given the high risk that this problem would indeed materialize plus the involvement of several donor agencies, each with its own procedures, the implementation timetable was over -optimistic\.The Critical Risk table in the PAD suggests the establishment of an "Executing Agency Trust Fund " to mitigate the counterpart funding risk, but there is no further discussion of this in the text of the PAD and the idea is not mentioned in the ICR \. Design might also have mitigated the risk of delays arising from multi -donor involvement by incorporating the channeling of other donor financing through the Bank\. No quantitative targets were developed to measure attainment of the program objectives of restoring economic and social well -being, sustaining outcomes, and minimizing adverse impacts of future volcanic eruptions on lives, properties and livelihoods \. Overall relevance of objectives and design is rated as substantial \. 4\. Achievement of Objectives (Efficacy): Upgrading existing facilities and transportation infrastructure to support a shift in the location of settlement and economic activity towards lower risk areas centered on the new provincial capital and Kokopo \. Highly achieved \. The electric power grid has been extended to relocation sites and piped water supply provided to 10,000 people\. Health posts have been upgraded to full health centers and a rural hospital constructed \. Community resource centers have been built and access roads rehabilitated to facilitate food and cash crop marketing in relocation areas \. The target of 80% occupancy by displaced communities at relocation sites has been attained indicating more settled communities and improved livelihood\. Consolidation of relocation sites in safe zones for evacuation of displaced communities from devastated and high risk areas\. Highly achieved \. The MTRP Phase I target of 75% completion of other infrastructure, utilities and social services, focusing especially on Kokopo as the new provincial capital was fully met \. This included town roads and other local transportation infrastructure, as well as the reconstruction of the Rabaul -Kokopo road\. The project leveraged additional substantial foreign and domestic financing for these works \. In addition, the first phase of the new Kokopo market was completed, and a new community school for 880 pupils was constructed as well as a new provincial administrative center \. Overall, Kokopo has been transformed from a small village of about 1,100 people prior to the eruption into a township with a population of over 15,000\. Apart from Kokopo itself, the project supported a number of initiatives to establish a more dispersed pattern of settlements in the Gazelle Peninsula including upgrading of roads, provision of water supply, improving power supply infrastructure and constructing /rehabilitating a wide range of community services \. A spatial and economic strategy framework and longer -term development institutional plan have been formulated, covering, inter alia, coastal zone management and mitigation of coastal hazards in East New Britain\. Detailed arrangements for the integration of the GRA into the provincial administration have been prepared, though they are still awaiting approval \. Restoring such infrastructure and services in Rabaul as are needed primarily to ensure the effective operation of the port as a major economic facility for the Gazelle Peninsula and the Eastern Region of PNG \. Highly achieved \. The port-related protection works in Rabaul (port roads, erosion control, silt traps and dredging ) have been fully completed, and a zoning plan has been prepared and made into law \. The port itself has been rehabilitated and a management contract prepared for outsourcing its operation and maintenance \. The port is now functioning at pre-eruption levels\. To serve the small remaining population of Rabaul (the town plan prohibits resettlement in vacated areas), the water supply system has been rehabilitated and a market constructed \. Not only were the targets for APL 1 achieved, but some of those originally designated for Phase II of the MTRP, to be supported by APL 2, were also reached\. Partly because of the success of APL 1, the PNG Authorities decided not to proceed with APL2, but rather to direct Bank support to what had become higher development priorities including restoration in other areas affected by natural disasters \. Although the overall program goal of restoring the social and economic well-being of the people of East New Britain is not backed with any quantitative performance indicators, it is reasonable to assume, given the attainment (and in some cases surpassing ) of the project's output targets, that the project would contribute to the program objectives \. Similarly, the actions to consolidate resettlement in safer areas -- including restricted activities at Rabaul, prohibition of resettlement in vulnerable areas, establishment of a Village Development Fund to finance community -based infrastructure and services, community development, and the promotion of economic activities, and preparation of a comprehensive development plan for the Province -- should contribute to the program objectives of ensuring sustainability of outcomes and minimizing the negative impact of future eruptions\. 5\. Efficiency (not applicable to DPLs): No economic or financial rates of return were calculated at appraisal, although the benefits at least in some cases are measurable\. They include provision or improvement of infrastructure services to populations resettled in areas less vulnerable to volcanic eruption, reasonable access to increased livelihood opportunities, ensured continued operation of Rabaul port (a vital economic asset for the Gazelle Peninsula ) and an important shift towards a sounder framework for planning development in East New Britain \. No attempt is made in the ICR to measure at least some of these benefits or to compare the project's cost effectiveness with other, similar post -disaster operations\. The importance of the benefits must be set against the major delays suffered by the project as a result of differing donor procedures and the need to finance the gap in counterpart funding \. Taking account of these delays, and of the substantial increase in project costs during the prolonged implementation period, IEG rates project efficiency as modest \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re -estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: With weaknesses in the relevance of design and efficiency, project outcome is rated moderately satisfactory \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: There are two principal risks to the project's development outcome : (a) pressure to redevelop Rabaul township rather than relocate populations to less vulnerable areas (there is a vocal minority in favor of this ); and (b) under-funded maintenance of the new and already existing infrastructure and equipment \. Of these, the first presents the lesser risk\. The ENBPA continues to demonstrate strong commitment to PNG government policy prohibiting redevelopment in devastated areas through ordering amendments to the Rabaul town plan which envisaged such redevelopment\. With Kokopo designated as the new provincial capital, and the departure from Rabaul of the post office, government administration, the main market and several key commercial enterprises, the probability of significant population return to Rabaul is diminishing over time \. Problems with counterpart funding during project implementation underline the risk of under -funded maintenance, operations and supplementary investment \. The Authorities are aware of the issue -- arrangements are being made to integrate maintenance needs into budgets \. Moreover, some entities -- notably the national Port Authority and the Water Board -- have good maintenance records \. Nonetheless, much infrastructure maintenance, especially for roads, has been traditionally inadequate in PNG \. An important decline in the ENBPA revenue base following replacement of the provincial sales tax by a national value added tax, is also a cause for concern \. Under-funding of maintenance is a significant risk especially when the international prices of PNG's commodity exports fall \. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: Bank performance for ensuring quality at entry was moderately satisfactory \. Appropriate steps were taken in identifying priorities for investment \. Relocation and resettlement plans were carefully prepared \. Critical risks were analyzed and corresponding mitigating measures proposed \. Tools, such as the Village Development Fund, were devised which added to flexibility and the team's ability to respond to changing circumstances during implementation\. The major design shortcoming was an over -optimistic assessment of the time needed to complete Phase I of the MTRP and, partly in consequence, an underestimation of project costs \. M&E was also deficient as no measures of restored economic and social well -being, sustainability of outcomes, and the minimization of adverse impacts of future volcanic eruptions on lives, property and livelihood were included \. This was a challenging project to supervise, and the Bank input -- in terms of the technical strength of the supervising team, staff continuity, and frequency of missions (regular, twice-yearly supervision missions were supplemented by visits from individual experts and audio -conferences from Sydney) -- was correspondingly intense\. Implementation Status Reports were candid and the ratings given appropriate \. The team displayed considerable flexibility in adapting to changing circumstances and to the challenges of implementing such a complex operation in a fragile state \. Measures were quickly taken to lessen the adverse impact of government funding problems, and additional donor funds were mobilized as needed \. The one noteworthy shortcoming -- which is an issue as much of general country policy dialogue as of project supervision -- was that the problem of lack of counterpart funding was not fully resolved \. Overall, supervision is rated as satisfactory \. at -Entry :Moderately Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: On the positive side, Government (by which is meant both the national Government of PNG and the ENBPA ) has shown strong commitment to project goals and has, for instance, taken a firm stand against the considerable political pressure for the redevelopment of Rabaul \. The ENBPA has worked well with the GRA and is taking active steps to incorporate the latter into the provincial administrative structure \. The main shortcoming of government performance has been inadequate counterpart funding, despite restructuring and extension of the implementation time period\. This led many stakeholders to consider the project to be at serious risk -- by the original closure date of June 30 2003, only about 20% of project funds had been disbursed \. Only when international commodity prices rose in the latter years of the project, did the counterpart constraint ease, and even then not fully\. Government performance is rated as moderately satisfactory \. The performance of the GRA as implementing agency was highly satisfactory \. Having already secured the confidence of stakeholders and the population of the Gazelle Peninsula following its effective intervention in the immediate aftermath of the eruption, GRA showed itself to be a highly effective implementing agency, able to tackle the severe complications arising from the lack of government counterpart funds and multi -donor financing\. It was effective in causing the necessary analytical work to be carried out (including environmental aspects ) during preparation and in wide ranging consultations to establish project priorities \. Its management of the project was fully adequate -- the appropriate expertise was swiftly recruited and a project financial and accounting system installed\. GRA was equally adept in adopting Bank procurement requirements and adjusting them to its requirements\. On-site supervision was constantly vigilant and pro -active\. a\. Government Performance :Moderately Satisfactory b\. Implementing Agency Performance :Highly Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: Design: Four key performance indicators (KPI) were developed in the PAD with which to monitor progress towards the completion of Phase I\. These were the triggers for the then proposed APL 2 for which KPIs were also elaborated \. The Phase I KPIs were (a) completion of infrastructure services at all relocation sites with at least an 80% occupancy rate; (b) 100% completion of the Rabaul port protection works and preparation of a zoning plan prohibiting redevelopment in the devastated areas of Rabaul; (c) 75% completion of other infrastructure, utilities and services; and (d) approval by ENBPA of detailed arrangements for the integration of the GRA into the provincial administration \. These indicators were appropriate for monitoring the implementation of the first Phase of the MTRP \. On the other hand, no performance indicators were defined to measure the achievements of the broader program objectives -- restored economic and social well -being, sustainability of outcomes, and the minimization of adverse impacts of future volcanic eruptions on lives, property and livelihood \. IEG rates M&E design as modest \. Implementation\. The KPIs were regularly monitored and used for measuring progress towards attaining Phase 1 targets\. The fact that the PAD also developed KPIs for Phase 2 was of great help both to the GRA and to Bank supervision missions, since progress was also made during implementation in reaching a number of Phase 2 targets\. Although an impact evaluation was ongoing, no beneficiary surveys were conducted \. Restored economic and social well-being, sustainability of outcomes, and the minimization of adverse impacts of future volcanic eruptions on lives, property and livelihood were not measured \. Implementation of M&E is rated as modest \. Utilization\.The KPIs developed during preparation continue to be used by GRA and the PNG Authorities for monitoring continued progress in implementing Phase 2 of the MTRP following project closure \. IEG rates utilization as substantial \. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Environment\. For purposes of O\.D\. 4\.01, the project was classified as Category B with the main environmental focus being on the possible adverse effects of construction and resettlement activity \. Several components therefore required as disbursement conditions environmental mitigation measures that were linked not only to construction but also to maintenance and operations \. These included the Rabaul/Kokopo road, urban drainage in both towns, erosion control at the port of Rabaul, and all urban solid waste and sanitation components \. The environmental studies and mitigation measures were carried out in accordance with World Bank safeguards policies \. Arrangements were also made to monitor constantly seismic activity and air quality during project implementation, but the large quantity of ash present in the air prevented more than basic study designs for air quality \. Resettlement\. The major safeguard issue in the project concerned large scale relocation and resettlement away from vulnerable areas\. Following the eruption, about 80,000 people were evacuated from devastated areas, some 30,000 lost their homes and 20,000 sought permanent resettlement in other parts of the Peninsula \. To minimize the negative impact of settling so many residents in a new area, a plan of open consultation with affected communities -- with special attention to the host community -- was adopted by the Authorities \. Although O\.D\. 4\.03 was not triggered since resettlement was necessitated by a natural disaster (the one exception being the acquisition of a plantation and the relocation of its workers which was carried out according to Bank guidelines, including the preparation of a Resettlement Plan), the Authorities nonetheless took steps to ensure that preferences and community feedback were taken into account to the extent possible \. Although not required to do so by the legal documents, the Government was planning to conduct a social assessment (including a household survey ) of project outcomes\. Fiduciary: The Borrower's ICR (Annex 3 of the ICR) refers to a fraud and corruption issue that was investigated early in 2004\. Although this is not mentioned or discussed in the ICR, Country Management has informed IEG of the investigation’s conclusion that there had been no wrong -doing\. However, the Project Implementation Unit, housed in the GRA, was never given any feedback on this investigation which the Borrower described as a "damaging" event with "wide implications" for the relationship with the Bank (although it went on to say that these were by outweighed by the good working relationship with the Bank and "the positive impact of Bank support \.")\. No other fiduciary issues arose\. GRA commissioned the installation of a project financial management system to meet the Bank's reporting requirements\. Annual project accounts were audited in a timely manner by the Office of the Auditor General and were consistently unqualified\. Procurement was carried out satisfactorily by GRA who had already gained experience with Bank procedures during the ITRP \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately There were weaknesses in the Satisfactory relevance of design and in efficiency (see Sections 3 and 5)\. Risk to Development Moderate Significant The poor record regarding counterpart Outcome : funding availability and the inadequate maintenance of some public infrastructure, together with less tax autonomy for the ENBPA, combine to create a significant risk of under -funded maintenance of project-financed investments (see section 7)\. Bank Performance : Satisfactory Moderately The assessment of the time needed to Satisfactory complete Phase I of the MTRP was over-optimistic and, partly in consequence, project costs were underestimated\. M&E was also deficient, in that no measures of  restored economic and social well-being, sustainability of outcomes, and the minimization of adverse impacts of future volcanic eruptions on lives, property and livelihood were included\. Borrower Performance : Satisfactory Moderately Significant counterpart funding Satisfactory problems persisted throughout implementation\. Quality of ICR : Satisfactory NOTES NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: The following lessons may be learnt from the preparation and implementation of this project : When a Borrower has a record of problems in timely and adequate provision of counterpart funding, it would behoove the Bank to take appropriate mitigating measures \. Where a considerable number of different donor agencies are involved, each with its own procedures and requirements, implementation would be considerably eased if it were possible to create a mechanism whereby one of the donor's procedures were to be adopted for all procurement whether that donor is the source of funds or not\. GRA's practice, following the 2005 restructuring, of using a contract administration manual together with enhanced risk management measures proved highly effective in reducing further delays and cost escalations \. This practice could well be adopted in other projects both in PNG and elsewhere, provided the implementing agency is endowed with the necessary capacity \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: While the ICR is clearly written, does well in conveying the developing "story" of the implementation of this project, and presents a useful annex on "Outputs by Components," it does contain some significant drawbacks : (i) the ICR should have discussed the alleged fraud and corruption issue that was investigated early in 2004 and that is referred to in the Borrower's ICR; (ii) there is an absence of the analysis of efficiency; and (iii) the M&E section is unsystematic and does not follow the sub -headings of design, implementation and utilization \. Also, some discussion of the PAD's suggested trust fund for partially overcoming counterpart funding difficulties would have been useful \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P005524

REVIEW

P095514

Document of The World Bank Report No: ICR2937 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-74740) ON A LOAN IN THE AMOUNT OF US$ 200 MILLION TO THE ARGENTINE REPUBLIC FOR A LIFELONG LEARNING AND TRAINING PROJECT May 19, 2014 Human Development Sector Management Unit Argentina, Paraguay, Uruguay Country Management Unit Latin America and the Caribbean Regional Office  CURRENCY EQUIVALENTS (Exchange Rate Effective June 5, 2014) Currency Unit = Argentine Pesos 1\.00 = US$ 0\.12 US$ 1\.00 = 8\.12 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AGN National Audit\. Agency (Auditoría General de la Nación) ANSES National Administration of Social Security (Administración Nacional de la Seguridad Social) AUH Universal Child Allowance (Asignación Universal por Hijo) CAS Country Assistance Strategy CC Client Connection CECAM Quality and Modernization Center of the Argentine Federation of Municipalities (Centro de Calidad y Modernización Municipal) CNA Competency Normalization Activity CPS Country Partnership Strategy DINIECE National Directorate of information and evaluation of the educational quality (Dirección Nacional de Información y Evaluación de la Calidad Educativa) EO Employment Offices EPH National Household Survey (Encuesta Permanente de Hogares) FAP Fiduciary Action Plan FM Financial Management GDP Gross Domestic Product GECAL Offices of Employment and Job Training (Gerencia de Empleo y Capacitación Laboral) IEs Implementing Entities IFPs Professional Training Institutes (Institutos de Formación Profesional) IFR Interim Financial Reports\. INAI National Institute of Indigenous Affairs (Instituto Nacional de Asuntos Indígenas) INDEC Nacional Institute of Statistics and Census (Instituto Nacional de Estadística y Censo) INADI National Institute against Discrimination, Xenophobia and Racism (Instituto Nacional contra la Discriminación, la Xenofobia y el Racismo) IPP Indigenous Peoples Plan INTA National Institute of Agricultural Technology (Instituto Nacional de  Tecnología Agropecuaria) IRAM Argentine Institute for Normalization and Certification (Instituto Argentino de Normalización y Certificación) MIS Management Information System MOL Ministry of Labor MTESS Ministry of Labor, Employment and Social Security NGOs Non-governmental Organizations NPV Net Present Value OAA Argentina Organization of Accreditation OBA Out-based Approach PDO Project Development Objectives PJMyMT Youth with More and Better Employment (Jóvenes con Mas y Mejor Trabajo) POI Labor Orientation Workshop (Programa de Orientación e Inducción al mundo del trabajo) PSM Propensity Score Matching QER Quality Enhancement Review REGICE Registry of Training and Employment Institutions (Registro de Instituciones de Capacitación y Empleo) RENACI National Registry of Indigenous Communities (Registro Nacional de Comunidades Indígenas) SEPA Procurement Plans Administration System SIJP Integrated System for Retirement and Pensions (Sistema Integrado de Jubilaciones y Pensiones) SOE Statements of Expenditure UEPE Executing Unit for Projects with External Financing UEPEX Argentina Budget Execution Software for Multi-lateral Lending Operations UNDP United Nations Development Programme UTeCC Technical Unit for Certification and Competencies (Unidad Técnica de Certificación de Competencias) Vice President: Jorge Familiar Calderon Country Director: Jesko S\. Hentschel Sector Manager: Mansoora Rashid Project Team Leader: Theresa P\. Jones ICR Team Leader: Marcela Ines Salvador  ARGENTINA Lifelong Learning and Training Project Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 3 3\. Assessment of Outcomes \. 12 4\. Assessment of Risk to Development Outcome\. 16 5\. Assessment of Bank and Borrower Performance \. 17 6\. Lessons Learned \. 20 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 22 Annex 1\. Project Costs and Financing \. 23 Annex 2\. Outputs by Component \. 25 Annex 3\. Economic and Financial Analysis \. 43 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 55 Annex 5\. Beneficiary Survey Results \. 57 Annex 6\. Stakeholder Workshop Report and Results\. 58 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 59 Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders \. 89 Annex 9\. List of Supporting Documents \. 90 MAP A\. Basic Information AR Lifelong Learning Country: Argentina Project Name: Project Project ID: P095514 L/C/TF No\.(s): IBRD-74740 ICR Date: 05/14/2014 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL Borrower: ARGENTINA Original Total USD 200\.00M Disbursed Amount: USD 200\.00M Commitment: Revised Amount: USD 200\.00M Environmental Category: C Implementing Agencies: Ministry of Labor, Employment and Social Security Co-financiers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 06/22/2006 Effectiveness: 01/11/2008 01/11/2008 Appraisal: 04/16/2007 Restructuring(s): 08/01/2012 Approval: 06/28/2007 Mid-term Review: N/A 11/29/2011 Closing: 12/31/2013 12/31/2013 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: i C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Adult literacy/non-formal education 9 General industry and trade sector 6 General public administration sector 21 Other social services 14 Vocational training 50 Theme Code (as % of total Bank financing) Education for all 17 Education for the knowledge economy 33 Improving labor markets 33 Social Inclusion 17 E\. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Hasan A\. Tuluy Country Director: Jesko S\. Hentschel Axel van Trotsenburg Sector Manager: Mansoora Rashid Eduardo Velez Project Team Leader: Theresa Jones Theresa Jones ICR Team Leader: Marcela Salvador Alexandria Valerio/María Laura ICR Primary Author: Sánchez Puerta ii F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The proposed Project aims at supporting the Government of Argentina to consolidate, strengthen, and increase the coverage of a lifelong learning and competency-based training system for disadvantaged adults 18 years or older with the objectives for those who participate to: (i) enhance employability (for unemployed); and (ii) improve career opportunities (for employed)\. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Within a year, no less than 25 percent of certified adults obtaining registered Indicator 1 : employment or higher salary Value 25% 53\.8% quantitative or 0 (17,500) (40,580) Qualitative Date achieved 05/31/2007 11/01/2008 08/30/2013 Comments (incl\. % Target surpassed\. achievement) Within a year, no less than 50 percent of adults receiving basic education Indicator 2 : certificates continuing their training or education, obtaining registered employment or higher salary\. Value 50% 48\.7% quantitative or 0 (50,000) (45,910) Qualitative Date achieved 05/31/2007 11/01/2008 11/30/2013 Comments (incl\. % Target met\. (See Section 3\.2) achievement) No less than 50 percent of those in internships, employed within 12 months after Indicator 3 : participation\. Value 50% 56% quantitative or 0 (72,800) (12,114) Qualitative Date achieved 05/31/2007 11/01/2008 08/30/2013 The most recent data available shows that only 21,649 participants had completed their internships by May 2012 and indicates that 12, 114 (56%) of Comments those were employed within 12 months afterwards, slightly exceeding the target (incl\. % of 50%\. However, the No\. of internship participants was much less than targeted achievement) (81,190 vs\. 145,000 as of December 2013)\. See Intermediate Outcome Indicator 8\. (See Section 3\.2) iii Indicator 4 The formal labor market insertion rate of participants within 12 months after (additional) : participation is at least 50% higher than the comparison group\. 2008-9 86\.7% Value 2009-10 108\.2% (quantitative or 0 2010-11 79\.5% qualitative) 2011-12 128\.6% Date achieved 08/30/2013 Comments This indicator is derived from the comparison of Youth participants versus a (incl\. % comparison group created with the panels from the EPH (Permanent Household achievement) Survey) and for all periods surpasses the 50% target\. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : 30 sector councils and technical units installed\. Value (quantitative 4 30 41 or qualitative) Date achieved 05/31/2007 11/01/2008 12/30/2013 The indicator was achieved\. 41 technical units were established\. Most of these Comments technical units are represented in the 22 Sector Councils with high level (incl\. % achievement) representatives created\. Indicator 2 : 300 norms registered\. Value (quantitative 76 300 314 or qualitative) Date achieved 05/31/2007 11/01/2008 12/30/2013 Comments (incl\. % Target exceeded\. achievement) 420 training institutions offering competency-based training and having Indicator 3 : completed quality improvement process\. Value (quantitative 0 420 442 or Qualitative) Date achieved 11/01/2008 12/30/2013 Comments (incl\. % The indicator was surpassed\. achievement) Indicator 4 : 150 training institutions certified\. Value (quantitative 0 150 150 or Qualitative) Date achieved 11/01/2008 12/30/2013 iv Comments (incl\. % The indicator was met\. achievement) Indicator 5 : 250,000 workers trained in competency based courses Value (quantitative 2,000 250,000 388,078 or Qualitative) Date achieved 05/31/2007 11/01/2008 12/30/2013 Comments The indicator was surpassed\. (incl\. % achievement) 100,000 adults evaluated according to competency-based norms, of which 70,000 Indicator 6 : are certified Value 100,000 evaluated 109,453 evaluated (quantitative 1,250 or Qualitative) 70,000 certified 109,143 certified Date achieved 05/31/2007 11/01/2008 12/30/2013 Comments The indicator was surpassed\. The certification achievements were above (incl\. % expectations\. achievement) 100,000 adults receive basic education certificates\. Indicator 7 : Value (quantitative 70,000 100,000 94,194 or Qualitative) Date achieved 05/31/2007 11/01/2008 12/30/2013 Comments The indicator was met (94\.2 percent achievement)\. Note this reflects data (incl\. % available only as of December 2012 and which covers only 61% of registered achievement) participants (further discussion in Annex 2)\. 145,000 youth participants in combined work experience and training Indicator 8 : (Internships) Value (quantitative 0 145,600 81,190 or Qualitative) Date achieved 05/31/2007 11/01/2008 12/30/2013 Comments The indicator was not met (56 percent achievement)\. (incl\. % achievement) No\. of youth receiving employment services\. Indicator 9 : Value (quantitative 0 600,000 602,050 or Qualitative) Date achieved 05/31/2007 11/01/2008 12/30/2013 Comments The No\. of youth joining the program by the end of 2013 achieved the targeted (incl\. % No\. achievement) v  No\. of Employment Offices making informed client referrals to training and Indicator 10 : education services\. Value (quantitative 0 250 342 or Qualitative) Date achieved 05/31/2007 11/01/2008 05/30/2013 Comments The indicator was surpassed\. The No\. of employment offices incorporated in the (incl\. % Promotion of Youth Employment exceeded the original target by 40%\. achievement) No\. of businesses participating in the Network\. Indicator 11 : Value (quantitative 0 0 11,999 or Qualitative) Date achieved 05/31/2007 11/01/2008 05/30/2013 Comments The Network of Businesses was not utilized for the Project as originally (incl\. % designed\. The data shows the No\. of institutions (11,588 businesses and 411 achievement) public organization/municipalities) who sponsored internships\. (See Annex 2) No\. of workers covered in MIS Indicator 12: Value 500,000 workers (quantitative 0 per year by the end 2,642,339 or Qualitative) of the Project Date achieved 05/31/2007 11/01/2008 05/30/2013 Comments The indicator was surpassed\. The indicator shows the No\. of individuals who (incl\. % have updated their labor histories and/or have received training and certification achievement) during the Project\.(i\.e\. 687,000 in 2013, 581,300 in 2012 and 528,400 in 2011) Indicator 13 : No\. of agencies using MIS Value (quantitative 0 420 1,390 or Qualitative) Date achieved 05/31/2007 11/01/2008 05/30/2013 The indicator was surpassed\. The target covered only training institutions but the Comments MIS was extended to other agencies that were connected and supported as (incl\. % clients: 442 training institutions, 564 municipal employment offices and 384 achievement) enterprises participating in the Fiscal Credit for Training Program\. G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 12/21/2007 Satisfactory Satisfactory 0\.00 2 05/28/2008 Moderately Satisfactory Moderately Satisfactory 0\.00 3 12/05/2008 Moderately Satisfactory Moderately Satisfactory 7\.00 4 06/21/2009 Satisfactory Moderately Satisfactory 14\.83 5 12/19/2009 Satisfactory Moderately Satisfactory 41\.86 vi  6 06/18/2010 Satisfactory Moderately Satisfactory 57\.18 7 02/04/2011 Satisfactory Moderately Satisfactory 81\.32 8 07/12/2011 Satisfactory Moderately Satisfactory 108\.81 9 02/12/2012 Satisfactory Moderately Satisfactory 157\.04 10 10/27/2012 Satisfactory Moderately Satisfactory 182\.53 11 05/16/2013 Satisfactory Moderately Satisfactory 196\.44 12 01/04/2014 Satisfactory Moderately Satisfactory 200\.00 H\. Restructuring (if any) Not Applicable I\. Disbursement Profile vii 1\. Project Context, Development Objectives and Design 1\. In 2006, with the economy recovering from the economic crisis of 2001-2 and aided by improved competitiveness, the Argentine Government was shifting policy towards a focus on employment as the principal means to foster equitable and inclusive development\. The Lifelong Learning and Training Project supported this shift by trying to develop in close coordination with employers and workers, flexible learning opportunities for the unemployed and poor workers to acquire labor-market relevant skills in which core competencies were developed\. The Project aimed to improve the quality and relevance of training services (including adult education) and increase coverage among the economically active population, and in the process make progress towards the eventual goal of installing in Argentina a lifelong learning and training system linked to employment\. If successful, the Project would improve employability for the unemployed and poor workers and contribute to higher economic productivity\. 1\.1 Context at Appraisal 2\. By 2006, effective macroeconomic management had helped to establish four years of pro- poor growth in Argentina and the structure of the economy had changed\. Currency depreciation favored tradable sectors, notably manufacturing\. These activities absorbed more labor, and less skilled workers, than was the case with the dynamic sectors during the 1990s\. As a result, unemployment dropped significantly\. In order to sustain growth over the medium-term, however, Argentina needed to improve the investment climate and raise productivity levels and quality of exports\. The Government identified education and training as major priorities in achieving its goals of poverty reduction and job creation\. Secondary education was becoming a minimum requirement for access to good jobs and Argentina needed to invest in the less skilled through additional education and training for school leavers that had not completed that level\. In addition, the knowledge economy was generating new skill requirements\. 3\. The Lifelong Learning and Training Project responded to the Government’s objective of improving training and education opportunities to promote employment and reduce poverty\. It was also fully aligned with the 2006 CAS pillar on social inclusion (Report No\. 3405)\. In addition, the Project built on analytical work (Building a Skilled Labor Force for Sustained and Equitable Economic Growth: Education, Training and Labor Markets in Argentina, Report No\. 31850-AR, May 5, 2006), which proposed measures to increase the linkages between the education system and labor market and improve the vocational education and training system\. It presented evidence that showed that the rates of return to lifelong learning are substantial at the secondary school level for both youth and adults in Argentina\. Finally, the Project complemented the Heads of Household Transition Project (Ln\. 7369), which was promoting the participation of beneficiaries of the emergency public works program in training and adult education courses, as well as strengthening municipal employment offices\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 4\. The Project supported the Government of Argentina to consolidate, strengthen, and increase the coverage of a lifelong learning and competency-based training system for disadvantaged 1 adults 18 years or older with the objectives for participants to: (i) enhance employability (for unemployed); and (ii) improve career opportunities (for employed)\. These objectives were translated into the following key indicators and targets: (1) 300 competency-based occupational standards registered by sector groups (2) 150 training institutions certified (3) Participation of 250,000 workers in competency-based training courses (4) Certification of 70,000 workers according to competency-based occupational standards (5) Within a year, no less than 25 percent of certified adults obtaining registered employment or higher salary (6) Award of 100,000 secondary or primary education certificates to out-of-school adults (7) Within a year, no less than 50 percent of adults receiving basic education certificates continuing training or education, obtaining registered employment or higher salary (8) Participation of 145,600 youth in youth internships (9) Within a year, no less than 50 percent of youth participating in internships are employed\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 5\. There were no revisions to Project Development Objectives or key indicators\. 1\.4 Main Beneficiaries 6\. The primary target group was disadvantaged adults 18 years or older\. Loan resources also financed activities to strengthen the capacity of the Ministry of Labor, Employment and Social Security (hereafter Ministry of Labor - MoL) to install a lifelong learning and training system linked to employment, including the creation and/or support of entities providing employment and educational services such as professional training institutes, adult education services of provincial Ministries of Education, and municipal employment offices\. 1\.5 Original Components (as approved) A\. The Component to Expand and Strengthen Competency-Based Training and Certification System supported the expansion and improvement of a competency-based certification and training system through three subcomponents: (1) establish in 30 economic sectors, competency-based training and certification systems, through development, validation and registration of occupational norms, training and certification of evaluators, and ensuring the functioning of qualified third-party assessment centers and certification organizations; (2) align the supply of training with the competency-based approach and strengthen professional training institutes; and (3) train, assess and certify workers\. B\. The Basic Education Services and Certification for Adults Component offered economically active adults, particularly the vulnerable and disadvantaged, the opportunity to complete their basic and/or secondary education using innovative policies and strategies through two subcomponents: (1) support to selected Provincial Ministries of Education and (2) support to sub-projects for adult education services, including through technical assistance, preparation and publication of didactic materials, and adult education courses\. 2 C\. The Promotion of Youth Employment through Work Experience and Training Component (hereafter Promotion of Youth Employment) was targeted to youth between 18 and 24 years of age excluded from full participation in the economy because of their low education and skills level and low or nonexistent work experience through three subcomponents: (1) providing employment and career orientation to youth through municipal employment offices; (2) facilitating training and/or education opportunities; and (3) organizing internships with employers\. D\. The Strengthen Management Information System, Project Administration and Studies Component had two subcomponents: (1) installation of an integrated management information system (MIS), including its operation and incorporation of users; and (2) project administration, including impact evaluations and studies to support the development of a longer-term strategy for a lifelong learning system\. 1\.6 Revised Components 7\. Project components were not revised\. 1\.7 Other significant changes 8\. There were three major changes to the Project design\. First, in 2009 the Secretary of Employment eliminated the technical project coordinator role in favor of managing the components within the MoL structure\. Second, through two project restructurings (described below), the funding allocation for the promotion of youth employment program stipends rose from $43 million to $73 million, mainly by reducing the allocation for consultant and non- consultant services, goods and works expenditure category\. Third, the MoL and the Bank agreed to focus efforts on the Basic Education Services and Certification for Adults Component with the Provincial Ministries of Education, dropping the smaller second sub-component of special subprojects with other implementing entities\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 9\. The Project benefited from the findings of a study on education, skills and the labor market (Report No\. 31850) and operational experiences from Bank financed projects in Argentina that included second chance adult education (e\.g\., Heads of Household Transition Project, Ln\.7369- AR) and a pilot Program of Training and Certification of Competencies financed by an Inter- American Development Bank grant\. Lessons were incorporated from competency-based training and certification systems in Australia, Chile, Mexico, and New Zealand and technical insights from OECD research on skills and lifelong learning policies, as well as innovative approaches to adult education in countries such as Mexico and to youth unemployment in the UK and Latin America\. The Bank also had a long-standing partnership with the MoL in the area of social protection, as well as substantial involvement in the education sector\. Project objectives were clear, realistic and important for Argentina, reflecting the strong focus of the Government on employment as the principal means to foster equitable and inclusive development\. 3 10\. Regarding quality at entry, the Competency-based Training and Certification System component provided an operational entry point to support the MoL’s strategy, which focused on the development of workforce skills for disadvantaged workers through a system that (a) made qualifications more transparent, portable, and relevant; (b) offered a modular system of training that linked to skills demands; and (c) promoted quality of services through third-party accreditation and certification of providers and individuals\. 11\. The main justification for the Basic Education Services and Certification for Adults component is the importance of providing second-chance education opportunities in a system of lifelong learning and training, particularly since the target group was disadvantaged adults\. Secondary education certification was a key to employment as well as professional training opportunities\. Background analysis included a study of the performance of the adult education system in Argentina and the growing shortfalls in secondary education certifications\. Keeping in mind that these activities and reforms in the provision of adult education were not the responsibility of the Ministry of Labor, the ambitions of the component were modest\. Innovative approaches would be supported only in selected provinces where interest and experience existed\. In addition to support for the development of more flexible and pertinent education services, the design focused on certification results as reflected in the output-based financing mechanism and based on lessons learned in previous Bank projects\. 12\. The activities designed under the Promotion of Youth Employment through Work Experience and Training component were backed by a diagnostic study prepared by the MoL and lessons from both international experiences, and from previous Bank support to municipal employment offices\. International evidence showed that the most effective tools for increasing youth employability consisted of comprehensive programs, including both a life skills training component as well as on-the-job training through internships\. 13\. The admittedly complex Project design and comprehensive scope was justified by the Government’s ambitious goal of installing a lifelong learning and training system linked to employment which required activities in all components, as well as by the previous experience of the Ministry of Labor in carrying out similar activities and collaborating with the Bank\. The targets were demanding, but were based on careful analysis and realistic projections, and focused on outcomes for which the Project could reasonably be held accountable\. The key indicators combined intermediate results of lifelong learning and training activities, with employment outcomes, with the latter not overly ambitious\. The risk of inadequate capacity was correctly identified as substantial for both: (i) financial management and procurement within the MoL; and (ii) labor intermediation in the municipal employment offices\. These were the only risks which adversely affected Project performance\. 2\.2 Implementation 14\. Overall, implementation was satisfactory and the Project closed on schedule after 6 years of execution 1\. The Project was amended once and restructured (Level 2) twice, mainly to facilitate 1 Although there was provision for retroactive financing of up to $40 million, because of problems to obtain the needed documentation of eligible expenditures, only $1\.5 million was used\. 4 disbursements\. The amendment, processed in August 2009, added an additional activity (workers assessment) to the output based activities list\. The restructuring approved in April 2011 reallocated resources from the categories of consultants and non-consultant services and operating costs to the category of Stipends under the promotion of youth employment program\. A restructuring in August 2012 primarily modified administrative procedures (the contracting method for the youth orientation workshops changed from consultancy services to standard fees, as used by other training courses)\. In addition, the MoL decided to finance some expenditure using national resources in order to simplify internal administration\. As a result the amounts in the expenditure categories of consultants, operating costs, training and education sub-projects were reduced\. The allocation for the fees expenditure category increased substantially (from $48 million to $81 million) and the amount for the stipends category for the youth employment program was raised again\. Unit costs for output based activities were increased once for school certifications, norms, evaluators, evaluations, and curricular designs and didactic materials\. 15\. The Competency-based Training and Certification System Component was implemented satisfactorily\. Despite a high volume of planned activities, because of the close involvement of Sector Councils (comprised of industry, employers, trade unions and other relevant associations), the Component started according to plan\. This was expected, since it was designed to scale-up a successful pilot experience\. The only activity that took time to materialize, although it was achieved shortly before Project closing, was the completion of an official agreement with the Argentina Organization of Accreditation (OAA) to accredit Certification Organizations\. 16\. The one area that proved more complex than anticipated was Bank procurement\. The MoL had anticipated the institutional complexity of scaling up and had prepared accordingly in the area of technical staff, but the client and the Bank underestimated the time and effort that it would take to become fully proficient with Bank procurement processes\. Although the inclusion of output based activities was designed to ameliorate this problem, the original Project design still included substantial expenditures on equipment for training institutions\. 17\. Several factors worked in favor of successful implementation if the component\. These included (a) the leadership and steadfast support of the Minister of Labor; (b) strong technical and institutional capacity in the MoL to carry out an ambitious and operationally complex program; (c) the MoL’s openness to innovating and to learning by testing unconventional paths to achieving results (e\.g\., offering training in the workplace rather than asking participants to attend courses in a traditional classroom setting); (d) the willingness of the MoL to negotiate with provincial and municipal entities and Sector Councils to tailor some aspects of the program to fit the needs of their beneficiaries; and (e) the strong pool of sector experts willing to be placed on retainer to offer short-term training programs on demand\. 18\. Some difficulties were encountered, namely: (a) the rapid acceleration to expand almost exponentially stretched MoL capacity, placing quality Component A –Summary of outputs at peril; (b) at times it was hard to attract qualified Sectors covered 41 sector experts, many of whom work in industry and Competency Norms registered 314 receive more lucrative offers for their time; and (c) Workers trained 388,078 Workers certified 109,143 despite encouragement from MoL and from Bank Training institutions strengthened 442 5 supervision missions to gather, systematize and share information on outcomes and impacts, most Sector Councils and training institutions remain weak in this area\. Some inroads have been made to address these challenges, but more time and effort will likely be required to address them in full\. 19\. There were initial delays in the implementation of the Basic Education Services and Certification for Adults Component\. Changes in staffing within the MoL contributed to a lack of clarity on the criteria for eligibility for Project financing related to both the requirement for innovations in the delivery of adult education services as well as the output based disbursement mechanism\. The output-based approach (OBA) changed the long-standing financing arrangement between the MoL and the provincial ministries of education from one based on inputs and processes, with little monitoring of certification results, to one where the focus was on the introduction of innovations to make adult education services more pertinent and accessible for workers and certification results\. The shift to a focus on results and the incorporation of the innovation criteria took time and considerable efforts\. 20\. In 2008, the Bank and the MoL took steps to overcome the implementation delay\. First, Bank and the MoL agreed on the innovation criteria (modular scheme, flexible entrance, recognition of previous knowledge and combined training and education curricula) which would be the basis for MoL work with provinces\. Second, recognizing that the MoL needed to refer adults to education services in all provinces, the Bank would recognize as eligible expenditures the certifications of beneficiaries of any program of the MoL, whether in innovative or regular educational services\. Nevertheless, because of the initial delay the Project did not begin to finance expenditures related to this component until late 2009 after the Ministry adjusted the agreements with the provinces to incorporate information on innovations and certifications\. 21\. In the end, activities under this component covered seven provinces\. Activities were not carried out in Buenos Aires, which given its size would have had a large impact on the scope and results of this component, nor in Santa Fe, both included in the original Project design\. In 2010 the Bank recommended that the MoL focus its efforts on the provincial Ministries of Education and consider dropping the second subcomponent of sub-projects for adult education services\. The second subcomponent would have required developing a process to promote and select subprojects proposed by other agencies and guarantee the validity of the certification, taking attention away from the main providers of adult education services – the provinces\. The MoL agreed and this was formalized in the August 2012 restructuring which also maintained the original certification target for the component of 100,000 adults\. About 45 percent of the adults enrolled in education classes and supported by the Project were individuals referred from the promotion of youth employment program\. An unexpected technical difficulty was the serious problem in accessing information from school authorities on education certifications\. When this difficulty persisted, the MoL organized visits by regionally-based staff to collect the data\. 22\. The Promotion of Youth Employment through Work Experience and Training Component 2 was implemented satisfactorily despite facing various challenges\. One unforeseen 2 In Argentina, this program was known by the title Jóvenes con Más y Mejor Trabajo (Youth with More and Better Employment)\. 6 development was the introduction by the Government of the Asignación Universal por Hijo (AUH, Universal Child Allowance), which caused many youth to opt out of the promotion of youth employment program because they could not receive a benefit from both\. Nevertheless, the No\. of youth who joined the program met the target (600,000) and the No\. of participating municipal employment offices was higher than expected\. 23\. There was better performance on organizing the Component C–Summary of outputs orientation workshop and linking youth to adult Total Youth covered 602,050 education services, than for professional training and Municipal Employment Offices 342 internships\. The capacity of the municipal Youth in Services: Employment Orientation Workshop 476,971 employment offices varied substantially and many had Second-chance education 377,475 difficulties in matching participants from the Professional training 80,060 promotion of youth employment program with Internships 81,190 competency-based training courses\. Furthermore it took time for the management information system (MIS) improvements supported by the Project to be realized, including ensuring the timely availability of information on training courses at the municipal employment offices\. By the end of the Project, only 81,190 youth had been placed in internships compared to the target of 145,600\. The shortfall was explained by several factors including the lack of participation by the “Network of Business for Youth with a Future”, the failure to carry out a planned outreach campaign to employers, and the fact that some municipal employment offices identified very few or no internships, in part because they had yet to develop relationships with employers\. 24\. Although the comprehensive and tailored approach of the component drew on international experience and was in theory a strength, it proved challenging to pull off in practice and suffered from inadequate coordination among the different units of the Ministry managing the promotion of youth employment program, supporting the municipal employment offices, promoting adult education, and organizing adult training and certification\. That being said, the MoL made adjustments to improve performance\. For example, it changed the structure of incentives for youth attending adult education courses to better align them to the PDO: instead of supporting only attendance, it started providing bonuses for completion of studies\. Other issues addressed during implementation included ending recruitment of youth attending secondary school (not adult education classes) and stopping recruitment directly from social organizations\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 25\. Design\. Adequate, high quality and reliable indicators were identified to monitor progress towards the PDOs, drawn mostly from existing administrative data available in the MIS of the MoL, as well as in the database on social security contributions\. Easy access to the latter was a particular strength in measuring outcomes\. The fact that the Project supported the integration and strengthening of existing systems in the Ministry of Labor was an advantage\. Preliminary designs were available for possible impact evaluations of three Project interventions: competency-based training, adult education, and promotion of youth employment\. One weakness was the lack of a target for youth participation in training courses\. 26\. Implementation\. The MoL demonstrated strong capacity given its qualified staff\. The appropriate data was collected on a timely basis and made available to staff in the MoL and the 7 Bank\. The database on formal employment was cross-checked periodically in order to track formal employment outcomes (rates of insertion and salary levels)\. Collection mechanisms were appropriate and attention was paid to ensuring quality and consistency\. For the Promotion of Youth Employment Component, the Bank and the MoL collaborated on the design and implementation of a survey of participants, a qualitative and process evaluation, as well as ex- post reviews of internships and self-employment activities, although the latter two were late in the life of the Project\. The arrangements appear to be sustainable beyond the Project as they are being extended to other activities and are now part of the MoL’s regular work program\. Although the decision of the Ministry to focus exclusively on outcomes in the formal labor market is understandable, it meant that the likely positive impact of Project activities on informal workers went unmeasured in spite of accounting for 40% of the labor market\. 27\. There are two caveats to this assessment\. The first is that in the case of Component B (Adult Education), it proved difficult to access or to obtain information on certifications\. This was a serious problem because it was an output based activity\. When other alternatives did not prove successful, the MoL organized a special supervision exercise which did manage to collect the needed data, although it cannot be considered an efficient mechanism\. The second is that no impact evaluations were carried out for a variety of reasons including the reluctance of the MoL to modify normal procedures in order to identify an acceptable control group and difficulties (un- related to the Project) in the implementation of a special purpose social protection survey which would have provided an excellent base for an impact evaluation of the promotion of youth employment program\. Although no impact evaluations were carried out, the MoL staff proposed alternate arrangements in order to track progress on Project results, particularly for adult training and certification and the youth employment program\. While not using experimental methods, both evaluations were methodologically sound\. 28\. Utilization\. Monitoring indicators were reviewed and used to measure progress and to identify problems for all components\. Findings were used, in general, to modify procedures and to take actions\. Again there is a caveat to this assessment\. There could have been more effort to monitor data on the delivery of the activities of Component C (Promotion of Youth Employment) particularly the shortfalls in the referrals of youth to different services (internships and professional training) as well as the variation in performance among municipal employment offices\. The data could have been used to a greater extent, for example, in negotiations with municipalities regarding the timing and quantity of additional cohorts of participants and in discussions with other units in the MoL critical to the provision of services\. 2\.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution, as applicable) 8 Safeguard Compliance 29\. Appropriate activities were carried out consistently during Project implementation in order to achieve the proposals made in the Indigenous Peoples Plan (IPP), respecting cultural diversity at the municipality and provincial level\. As stipulated, the agreements signed between the MoL and provinces (Component B) or municipalities (Component C) included a special clause requiring the inclusion of the IPP as an integral part of the annual operational agreements (Protocols)\. The Protocols were signed before loan funds were advanced or transferred to a province or municipality\. 30\. There were some delays at the beginning of the Project to operationalize the Protocols beyond the legal requirement\. The principal obstacles were: communication problems between communities and urban centers where programs were managed; communication constraints arising from the predominant use of indigenous languages; scarcity of training pertinent for the specific needs of indigenous communities; little or no formal studies offered by the provinces for indigenous youth; and the persistence of discriminatory attitudes among officers in the public and private sectors (local public agencies, schools, banks, etc\.)\. 31\. Early on the MoL hired two qualified consultants to support implementation of the activities planned in the IPPs\. The strategies used to overcome the obstacles noted above included: (i) providing support to provincial and municipal staff; (ii) taking a broad approach to the consultation process; (iii) translating materials to native languages; (iv) organizing awareness workshops for central and regional MoL staff and other agencies - training and adult education centers and municipalities; (v) arranging for training on intercultural issues, especially for municipal employment office staff; (vi) coordinating with other programs to guarantee adequate training and education opportunities; (v) using national funds to finance IPP activities when Bank procurement process were difficult to apply; (vi) including questions on ethnic identity in the MIS; and (vii) taking timely remedial actions to resolve weaknesses\. 32\. All activities planned in the IPPs in the 12 provinces where the OP 4\.10 was triggered were carried out and in some provinces additional activities were included\. The budget was covered in part by the Loan but mainly by national funds\. In all, US$ 480,000 of national funds was invested, besides expert staff, demonstrating the commitment of the MoL to fully implement the IPP\. The instruments and materials used by the Project were under constant review with the intention of improving their application and adapting them to the particular characteristics of different indigenous communities, including those for the orientation workshop for youth and for the bilingual adult education tutors\. The MoL actively articulated with indigenous communities and other national and provincial agencies (National Ministry of Education, INADI, INTI, among others)\. This approach facilitated communication between Project staff and indigenous communities and creative solutions to carry out IPP activities\. 33\. Regarding indigenous beneficiaries, the Project covered 15% of the indigenous population in the 12 provinces which triggered OP 4\.10\. 12,100 individuals (around 8% of the indigenous population of the 12 provinces) completed labor histories in the municipal employment offices\. There were 3,244 participants in adult education (30% more than planned), 2,241 in professional training, 345 in self-employment training, and 296 were assisted in finding formal jobs\. 9 Reflecting promotion efforts among young people, 3,088 participated in the promotion of youth employment program, of which 53% were female; 1,942 benefited from internships\. Fiduciary Compliance 34\. Despite the fact that the MoL had administered several Bank loans, this Project experienced difficulties on fiduciary issues\. In contrast to previous projects where most financing went for monetary transfers to individuals, the Project had a complex design requiring stronger coordination between administrative and technical units\. The Executing Unit for Projects with External Financing (UEPE) lacked sufficient capacity for financial management (FM) and to handle the considerable volume and diversity of procurement procedures\. 35\. The MoL only partially complied with the Bank’s financial management requirements\. The mandatory budget execution software for multilateral lending operations in Argentina (UEPEX), was not fully implemented until November 2010\. In addition, there were substantial delays in delivering a concurrent audit report which complied with the terms of reference\. Because the MoL failed to address these and other weaknesses included in the FM action plan, in June 2011 the rating was downgraded to unsatisfactory\. 36\. Thereafter, actions were taken to solve the issues\. The MoL and the Bank met with the National Audit Agency (AGN) to clarify their understanding of the terms of reference and the expected scope of their field work for the concurrent audit, particularly as related to output based activities\. AGN finally delivered an acceptable report in November 2011, thereby resolving a major FM weakness\. In spite of the spotty performance on the concurrent audit, the delivery and the findings of the annual financial audits were satisfactory\. The FM rating was upgraded to moderately unsatisfactory at the end of 2011 and to moderately satisfactory in early 2012, a ranking maintained until Project closing\. During this latter period, only moderate shortcomings were identified: i) delays in the submission of the concurrent audit reports to the Bank; ii) delays in the submission of Interim Financial Reports (IFR); and iii) minor differences between disbursements records in Client Connection (CC) and Project uses of funds reported in the IFR\. 37\. The Project experienced significant difficulties in complying with Bank procurement policy and procedural requirements, including the use of the Procurement Plans Administration System (SEPA), use of correct procedures, and timely notification of changes in procurement to the Bank\. The Project also had some delays in starting procurement processes in part due to lack of knowledge of Bank rules for some procedures\. 38\. The October 2010 ex-post procurement review detected problems\. The observations made in the previous review had not been addressed and there were additional problems brought about by the high volume of procurement procedures: poor planning of purchases resulting in the repetition of similar purchases in a short period of time; incorrect use of the shopping procedure; significant discrepancies in cost estimates; and failure to register all planned procurement\. In addition, the field visit found inconsistencies between the information held by the MoL on the technical specifications, quantity and location of purchased goods and what was observed at the sites\. As a result, the rating was downgraded to unsatisfactory and a detailed report provided to the MoL with a plan to address urgently the irregularities\. In order to follow-up on these issues 10 an additional review with an expanded field sample took place in February 2011\. In part because the Secretary of Employment took a pro-active role in addressing the problems, control over the assets acquired with Project funds and the registration of procurement information in the Procurement Plans Administration System (SEPA) both significantly improved\. The MoL also decided to centralize purchases made with loan funds in order to lower the risk of the use of different procedures among institutions\. Since these improvements were maintained, the procurement rating was moderately satisfactory from mid-2011 until the end of the Project\. 2\.5 Post-completion Operation/Next Phase 39\. Given the nature of the Project, the main question is whether there are means of sustaining the reforms and institutional capacity supported by the Loan\. The picture is mixed\. Continuation seems highly like for the Competency-based Training and Certification System because it is a core component of the MoL’s strategy to improve employability, workers’ competencies and competitiveness\. The training system enjoys the support of employers, workers, trade unions, industry associations, and sector-based organizations in the roughly 40 sectors where the program is in operation\. In 2011, the MoL passed Resolution No\. 434 to provide a legal foundation to the National Lifelong Learning System\. This resolution opened the door to additional resolutions passed since then to institutionalize important elements of the system\. The combination of resolutions gave way to the Lifelong Learning Strategic Plan: Innovation and Employment Argentina 2020\. The MoL plans to continue innovating, expanding, and financing the competency-based program and has allocated financing to this end\. It is possible that the heavy reliance on public funds could get in the way of expansion\. In light of this, the MoL is working proactively on three fronts: (1) improving its communication strategy to show the advantages, achievements, and impacts of the Lifelong Training System; (2) promoting the use of the fiscal credit scheme (a tax rebate for employers who provide competency-based training and certification), especially among medium-size and small enterprises; and (3) institutionalizing the program by ensuring that most training offered is competency-based\. 40\. In the case of Basic Education Services and Certification for Adults there is some evidence to suggest that at least some of the supported activities will be sustained beyond the end of the Project\. First, the agreements between the MoL and the provincial Ministries of Education are multi-year, and continuation of some actions is already envisaged\. Second, the fact that the innovations supported by the Project were designed and implemented by provincial Ministries of Education, not parallel organizations, favors institutional sustainability\. Third, the technical capacities developed since 2010 in areas such as modularization of curricula, preparation of didactic materials, teacher and tutor training, and student assessments would help to sustain the reforms\. Fourth, Project resources covered a relatively small share of total expenditures for this component and it is likely that financing would continue to be covered jointly by provinces and the national level\. Finally, the recent Ministerial Resolutions (in Chaco and Chubut, for example) give a legal basis to the new modular curricula, an innovation financed under the Project\. The longer term goal of generating and sustaining innovations in adult education services depends on the education ministries at the national and provincial level\. 41\. In the case of the Promotion of Youth Employment Component, the President recently announced a new youth program Progresar to be managed by ANSES with a focus on promoting the completion of secondary school and targeting nearly the same group as did the 11 MoL\. While the detailed regulations are still being developed, the new program plans to incorporate the curriculum for the orientation workshop, developed under the Project, as well as the referrals to youth to education and professional training and a role for the MoL\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 42\. Creating jobs and increasing productivity are at the top of the social and economic agendas of governments around the world\. Skills development is an essential component of these agendas\. 3 The objectives, design and implementation of the Project are relevant to Argentina’s current strategy for economic growth, competiveness and social development\. The Project is also consistent with the FY2010-2012 Country Partnership Strategy (CPS) (Report 48476-AR, May 6, 2009) and the draft new CPS 2013-2016\. In fact in the FY2010-2012 CPS, there was a shift to more support for the social inclusion pillar\. A key element of the Bank’s ongoing policy dialogue toward this objective is to improve the employability of the most vulnerable\. 43\. The Competency-based Training and Certification Component is currently focused on working with strategic sectors for economic growth and, in coordination with other Government programs, to meet national goals established for 2020\. The Component has scope for expanding to more sectors, raising labor productivity, and improving the country’s global competitiveness\. The provision of second-chance education services and improvements in their pertinence and accessibility for adults in the working population (Component B) remains relevant to the lifelong learning aim of ensuring linkages between the education system and labor market in Argentina\. The share of adults who have not completed secondary school has fallen from slightly over 50 percent in the 2001 Census to 43\.4 percent in the 2010 Census, but is still substantial\. This has obvious consequences on the economy as a whole, as highlighted by several studies at the international level, as well as for Argentina\. 4\. Data from the most recent National Household Survey (2013) confirm that people aged 20-64 with complete secondary education have a ten percent higher probability of being employed\. Among the employed, workers with complete compulsory education enjoy on average a 55 percent higher wage and a 27 percent higher probability of being employed in the formal sector\. Youth unemployment is still a challenge as the rate remains more than three times higher than the national average\. 3\.2 Achievement of Project Development Objectives 44\. This section discusses achievements on the two Project Development Objectives as measured by the PAD indicators as well as findings from impact assessments on competency- based training and the promotion of youth employment program, both carried out by the MoL\. 3 (p\. 11, “The Right Skills for the Job? Rethinking Training Policies for Workers, Rita Almeida, Jere Behrman, David Robalino editors) 4 Among others, Alzúa, Gasparini and Haimovich (2010) show that in Argentina the number of years of education has a causal relationship with probability of employment, wage and number of working hours\. 12 45\. There are three Project Outcome Indicators, each related to a component\. The first is outcomes for certified workers\. Results surpassed targets in both dimensions: the No\. of workers certified was higher than planned and 53\.8 percent either improved their salary or obtained registered employment, more than double the 25 percent goal 5\. The second indicator related to adult education certification\. Although the second sub-component for special projects was dropped from the Project, the target of 100,000 certifications was maintained\. Based on data available in November 2013, this indicator is considered achieved: there are only minor shortfalls in both actual certifications (94,194 vs\. the 100,000 target) and the outcome for those certified, with 48\.7% continuing training or education or obtaining registered employment or a higher salary, versus the goal of 50%\. These figures also underestimate the results of the Project for two reasons\. First, the information does not include certifications (nor the related outcomes) awarded at the end of 2013\. Second, because it proved difficult to obtain information on certification, results are only available for 60 percent of the adult students registered in the MIS of the Ministry, excluding, for example, Buenos Aires, the largest province and proactive in adult education\. The third indicator covered the promotion of youth employment\. As previously discussed, there was a significant shortfall in the No\. of internship participants (81,190 versus the 145,000 target)\. Even though outcomes for participants exceeded expectations, with 61% having found a formal job within a year after internship completion compared to the goal of 50% 6, the outcome indicator cannot be considered as achieved\. 46\. The Data Sheet and Annex 2 have information on the results of 12 intermediate indicators which cover all four Project components: all but two achieved or surpassed the targets\. The exceptions relate to youth internships\. Annex 2 also contains information on component outputs and other selected monitoring indicators\. 47\. As already mentioned, impact evaluations using the preliminary experimental designs included in the PAD were not carried out\. The MoL did evaluate the impact of competency- based training and the promotion of youth employment program using quasi-experimental methods 7\. Key findings from the evaluation indicate the following: (a) the competency-based program reached its target beneficiaries, specifically, poorly qualified or unqualified workers and unemployed individuals, many of whom were age 25 or below; (b) the probability of obtaining formal employment 12 to 18 months after completing the program increased by 30 percent for trainees who had been unemployed or employed only in informal sector activities; (c) the probability of obtaining a job in the formal sector decreased with age, increased for those who had previously held a formal sector job, and was lower for women; (d) the impacts were slightly stronger for more vulnerable groups; and (e) training programs in metal mechanics, automotive mechanics, software, and construction had the strongest impacts on employment\. 5 Figures are based on the assessment of labor market outcomes only for workers certified through end June 2012\. MoL did not provide updated information\. 6 Based on the latest measurement (end 2013) for those youth who had completed internships by December 2012\. 7 Details on the methodology for both evaluations are in Annex 3\. 13 48\. In the case of the Promotion of Youth Employment program, the MoL developed a strategy to try to attribute the impact on labor market with a view to obtaining a measure that could reflect the broader program, not only internships\. This was done by creating a comparison group with data from the Permanent Household Survey (EPH – Encuesta Permanente de Hogares) panel of youth with similar characteristics of the target group for the promotion of youth employment component (age 18-24, less than complete secondary school education, not in school, and unemployed or under-employed, informal workers in the base year)\. This group of youth is followed in the panel and their average formal labor market insertion is calculated a year later\. The insertion rate of the “EPH panel youth” is then compared to that of the promotion of youth employment program participants 8 over the same period\. Information for the cohorts is shown in the Data Sheet (additional PDO indicator) and was monitored as part of Project supervision\. For each cohort, the difference in the formal labor market insertion rate of the youth employment group was more than 50 percent higher than that of the comparison group, the target agreed between the MoL and the Bank team\. 49\. This technique is not as rigorous as a randomized evaluation- the two datasets are collected from different sources and there might be unobservable characteristics that could bias the results\. The analysis lacks sensitivity analysis or descriptive statistics comparing the participants and the comparison group\. Estimates could be biased upwards since full-time informal employees are not included in the comparison group\. Although not likely, it might have been possible for full- time informally employed youth to participate for some period of time\. Even with those caveats, and assuming this is an upper bound estimate, the results suggest a positive employment impact\. 3\.3 Efficiency 50\. The economic analysis presented in the PAD took a two-pronged approach – the first of a general nature and the second more quantitative\. First, evidence was provided to demonstrate the need for a Project which sought to upgrade the skills and competencies of the labor force, as well as to address social deficits arising from inequitable attainment in education and skills\. Second, evidence was provided regarding the specific components by making a cost-benefit assessment using the estimated unit costs in order to determine the order of magnitude of gains necessary for the Project to have a positive net value\. 51\. Annex 3 contains the complete economic analysis which updates the quantitative section of the PAD using actual costs and No\. of participants\. Given that estimates of local spending were uncertain at that time, the PAD analysis only included loan financing\. Since the amount of local spending is now available, the ICR update includes: a) calculations considering only Bank financing in order to compare results to the appraisal estimates and b) calculations considering the total Project costs for a more complete efficiency assessment\. The figures below refer to the latter calculations\. 52\. In the case of the Component to Expand and Strengthen the Competency-Based Training and Certification System, for all scenarios including the most conservative one, the annual 8 Participant is defined as any youth who participated in at least the initial orientation workshop (POI)\. 14 increment in beneficiary income needed to break even is modest\. For instance, assuming a 40 year-old worker and applying the highest discount rate, an annual increment of US$69 would be sufficient to make the investment economically viable\. For a 60 year-old worker willing to retire at minimum retirement age, the investment in training and certification will be offset by just US$ 149 per year\. To put these figures in context, the amounts represent respectively 15 percent and 33 percent of the current monthly minimum wage in Argentina\. The Component is more cost-effective than the PAD estimates due to the fact that there were both cost savings and a higher No\. of beneficiaries\. In the case of the Basic Education Services and Certification for Adults Component, an even lower annual increase in beneficiary income is needed to break even\. For a 40 year-old person, the needed increment is US$18 per year\. The No\. of actual fell only slightly short of the target and actual spending was less than initially allocated\. 53\. In the case of the Promotion of Youth Employment Component, the updated analysis takes into account changes during implementation\. The analysis presented in the PAD focused only on internships, but in practice the youth participated to a greater extent in other services (employment services and education)\. For this reason, the updated economic analysis applies the same methodology as used in the other two Components\. The analysis takes into account that more resources were spent for this Component than initially allocated and the No\. of participants was close to the target\. Assuming 45 years of working life remaining, and the higher discount rate of 12 percent each beneficiary would need to experience an increase of US$120 (27% of the monthly minimum wage) to make the investment economically viable\. In sum, even with conservative estimates and without considering other likely positive spillovers to firms and to beneficiaries’ families, among others, the figures justify a satisfactory assessment of the economic efficiency of the Project\. 3\.4 Justification of Overall Outcome Rating 54\. In most aspects Project results are quite positive\. With the exception of youth internships, all PDO and Intermediate Results Indicators are met, even exceeded in many cases and economic efficiency is satisfactory\. Quasi-experimental evaluations for competency-based training and the promotion of youth employment program suggest positive impacts\. However, given the weight of the Promotion of Youth employment component in Project costs the overall outcome rating is assessed as Moderately Satisfactory given the substantial shortfall on internships\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 55\. Although there was no explicit targeting instrument used, it is likely that many of the participants in Adult Education Services and the Promotion of Youth Employment components were disadvantaged given their gaps in education attainment\. In 2012, poverty rates were between 50-60% higher for adults and youth without complete secondary education, compared to the average\. Even though participants in competency-based training and certification activities were likely better off, for one year for which data is available (2011), 40 percent of trainees were either unemployed or had an unregistered job\. In practice, it is more difficult to extend the reach of these activities to the most disadvantaged because the evaluation of competencies is difficult to carry out for the unemployed, self-employed or informally employed\. That being said, the 15 poverty impact of the component would be promoted by the fact that the focus was on norms for basic occupational categories, thus creating opportunities for relatively unskilled workers and the fact that certification benefits those who have acquired learning mainly on-the-job\. Nearly 60 percent of trainees were male\. 56\. About 60% of the participants in adult education services were women; child care services and semi-onsite students’ flexible schemes facilitated their access and retention\. In the case of the Promotion of Youth Employment activities, there were pro-active efforts to incorporate a gender focus\. In order to work specifically in this area, the MoL supplemented Project resources with a grant from the Gender Action Plan\. The MoL developed materials to be used for the labor orientation workshop as well as in the training for the municipal employment offices\. The grant aimed to improve the quality of employment services provided to clients, particularly for young women, to counsel female jobseekers, and to strengthen capacity to interact with employers\. (b) Institutional Change/Strengthening 57\. The quality certification process with the participation of independent, specialized agencies that was used for training institutions was not only technically rigorous and best practice, but influenced other areas of the Ministry\. The Ministry is promoting and supporting a similar process for the municipal employment offices\. The investments made in strengthening the management information system (MIS) facilitated improvements in administration of agreements and the exchange of information with myriad actors, such as training institutions and the municipal employment offices\. This was critical to consolidate a systems approach to lifelong learning and training\. Advances were also made in the regular reporting of monitoring indicators for the programs managed by the Ministry of Labor\. The development of a network of Public Employment Services is still in progress; nevertheless, through the Project, more than 340 employment offices across the country have been strengthened, and staff has been trained to counsel, reach out to employers, and make referrals to training/education programs\. Finally, improved procedures needed for asset control, identified in an ex-post procurement review, were applied not only for goods financed by the Project, but extended to all Ministry purchases\. (c) Other Unintended Outcomes and Impacts (positive or negative) 58\. Not applicable\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 59\. Not applicable\. 4\. Assessment of Risk to Development Outcome Rating: Moderate 60\. The Ministry of Labor has signaled its intention to expand the competency-based training and certification program\. The 2014 budget already picked up the activities that had been previously financed by the Project\. Two other signs of program continuation are: (a) the legal resolutions that the Ministry of Labor has passed since 2011 to institutionalize those elements of the Lifelong Learning System that have reached maturity and that can be consolidated in 16 legislation; and (b) the expansion of the fiscal credit for competency-based training to incentivize worker training in formal enterprises\. Nevertheless since these activities are largely dependent for the time being on public funding, budget cutbacks could get in the way of expansion\. In the case of adult education services, the new Progresar Program continues to focus on secondary school completion for adults with education gaps\. However, the longer term goal of generating and sustaining innovations in adult education services depends on the education ministries at the national and provincial level where interest and commitment are mixed\. In addition, although the key promotion of youth employment activities, namely the orientation/soft skills course and professional training will continue to be provided by the MoL for Progresar, it is not clear what will happen with other services such as supported job search and internships\. Finally, it is unlikely that the gains made possible by the improvements in the MIS (integration of data bases and making obligatory its use) will be reversed\. Taking into account these factors the risk to development outcome is assessed as moderate\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 61\. Bank performance is rated as moderately satisfactory\. Project preparation was informed by examples of good practices and lessons learned from projects in Latin America and other regions\. The Bank team included experts with international experience in the design and management of lifelong learning systems as well as on adult education services and the Argentine education system\. The Project design benefited from feedback from peers who participated in a Quality Enhancement Review (QER)\. The use of the output based disbursement mechanism, innovative at the time, was ideal to support the competency-based training and certification system\. It was an effective tool to support activities being undertaken by sector actors (development of norms, worker evaluations and certification, and alignment of curricular designs), facilitated disbursements, and maintained a focus on results\. However, there were moderate shortcomings\. Not enough attention was paid to ensuring timely information on adult certifications from the provincial Ministries of Education and identifying up-front the changes needed in the agreements between the MoL and the provincial Ministries of Education\. Furthermore, the Bank team underestimated the strains on MoL capacity\. Preparation should have focused more on implementation arrangements, specifically on streamlining the high demands on capacity for carrying out procurement activities and clarifying the requirements for the concurrent audit\. Notwithstanding the technical capacity of the MoL, it took much longer than anticipated for it to become familiar with Bank fiduciary requirements, especially on procurement\. Finally, the Bank team did not identify the risk of not being able to identify sufficient internships\. 17 (b) Quality of Supervision Rating: Moderately Satisfactory 62\. The quality of supervision is rated moderately satisfactory\. At least two supervision missions, with specialized experts as team members, were carried out every year\. There was a strong focus on the PDO and outcome indicators as well as fiduciary and safeguards policies\. There was a high level of engagement between the Bank and the client\. Aide Memoires provided a thorough and candid account of implementation progress, challenges, and agreements between the two parties and show the efforts of the team to improve processes in order to achieve the PDO and outcome indicators\. ISRs were candid about the lags in progress on some activities and fiduciary weaknesses\. In the case of adult education services, attention was paid to both the implementation of the innovations in adult education services to improve their pertinence, accessibility, and efficiency and the results on certifications\. Bank staff was pro-active in recommending the dropping of the smaller activity on sub-projects with other implementing agencies in favor of maintaining the focus on activities with the provincial Ministries of Education\. 63\. However, there was a moderate shortcoming\. Progress was slow on identifying internships activities which was a key indicator for the Promotion of Youth Employment Component\. The view of the ICR team is that it would have been advisable to restructure the Project to reduce the value of the target\. The Bank team opted not to lower the target in order to maintain a focus on expanding efforts to promote internships, and in view of the favorable labor market outcomes of those who did participate\. Nor did the target of 145,000 (or 25 percent of participants) seem excessive relative to the scale of the promotion of youth employment program (around 600,000 participants)\. The Bank team did recommend that the rate of new entries into the Promotion of Youth Employment program be moderated since there was a shortfall not only in internships, but also in opportunities for participation in other services (professional training, for example)\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 64\. Taking into account the ratings of moderately satisfactory on both ensuring quality at entry and supervision, overall Bank performance is rated as moderately satisfactory\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 65\. Economic growth and job creation (particularly in the formal sector) maintained a favorable enabling environment for Project implementation\. However, there were also moderate shortcomings\. Little attention was paid to the technical issues which arose during Project implementation and there was no monitoring of the actions agreed between the Ministry of Labor and the Bank\. There was little interest in improving adult education services to make them more pertinent and accessible for working age adults\. Results would likely have been both more 18 significant and more sustainable with more interest and support of the initiative on the part of the National Ministry of Education\. For this component as well as for the Promotion of Youth Employment component, on occasion, sensitive relations between the national government and the provinces and municipalities made it difficult to conclude technical agreements, as proved to be the case with the province of Buenos Aires and the capital\. Finally, provincial Ministries of Education did not provide needed information on education certifications\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 66\. There were several areas of strength\. First it is important to recognize the scale of the main activities - economic sectors included in the competency-based training and certification system, adults trained, professional training institutes with strengthened capacity, and the Promotion of Youth Employment and the fact that it was largely managed through the regular Ministry structure\. In particular the continuity and strategic direction of the MoL was an important ingredient for the success of the competency-based training and certification activities\. For this component qualified staff of the MoL ensured the timely implementation of annual work programs and achievement of targets\. The Directorate of Institutional Quality coordinated implementation activities with Sector Councils, the Argentine Institute of Norms and Certification (IRAM), the Center for Municipal Quality and Modernization (CECAM), the Argentine Accreditation Organization (OAA), training institutions, and the universities contracted to support and strengthen the capacity of the training institutes\. Throughout implementation, the MoL had qualified staff that provided a direct line for the implementation of the three sub-components\. Project documentation shows that the MoL was quick to identify and solve implementation bottlenecks\. An important aspect that should be recognized is the MoL’s openness to take informed risks, learn from experience, and make adjustments\. For example, when it became clear that it would be unrealistic to expect adult workers (employed or unemployed) to turn up in the classroom for training, the Sector Councils proposed, and the MoL agreed, to take the training to the workplace or as close to the workplace as possible (e\.g\., in agricultural fields and at construction sites)\. As a result, competency-based training programs reached a greater No\. of participants, particularly in rural areas\. 67\. The MoL understood the relevance of having pertinent adult education services due to the substantial share of the Argentinian population lacking particularly complete secondary education, and the consequences for their employment\. After initial implementation delays, the MoL team became more proactive, focusing more on promoting and documenting innovations in adult education services and making substantial efforts on certification results\. Noteworthy were the sustained efforts to exchange experiences and to promote the use of key indicators and information among a large set of provincial Ministries of Education, not only those who were eligible for financing under the Bank loan\. In addition, the MoL organized a special supervision effort to collect data on certifications when this information was not forthcoming from the provincial ministries of education\. It would have been helpful to have had the same attention paid to innovations in services as there was (rightly) to the operational barriers for participation (child care, materials) and accessibility (vacancies) given that it is also relevant to improve adult education performance\. For the Promotion of Youth Employment component the MoL responded to problems, for example, to address registration of participants at schools and moving 19 incentives from attendance to certifications or completion of training\. In order to promote internships in the public sector, the MoL negotiated and signed agreements with the Ministry of Justice, Secretary of Sports, and the National Administration for Social Security\. Staff responsible for indigenous issues was proactive and committed going beyond the formal requirements of safeguards policy\. The MoL’s staff was also proactive to incorporate gender focus on the developed materials and the delivery of the Promotion of Youth Employment services\. 68\. However, there were also moderate shortcomings\. One area where the MoL could probably have done more during implementation was to systematically collect and disseminate implementation experiences -beyond targets and outputs\. The Network of Businesses did not participate in the Promotion of Youth Employment component and there was no national campaign for private internships, contrary to the original Project design\. Opportunities were missed to use performance data (for example, on internships and professional training) in the negotiations with municipalities on the timing and extent of further rounds of entries into the youth employment program or to identify which municipal employment offices most needed support\. However, in spite of the strong performance described earlier in this section, there are two main reasons why a lower rating of moderately satisfactory is assigned\. First, assessed in the context of the ambitious goal of the Project to make progress in the installation of a Lifelong Learning and Training System in Argentina, there was inadequate articulation across components and areas of the MoL\. Consequences included the shortage of professional training opportunities for participants in the Promotion of Youth Employment component and shortfalls in the performance of the municipal employment offices, including in the identification of internships\. There was also poor coordination between the technical and administrative areas of the MoL\. The second factor is the serious deficiencies in procurement and financial management described in Section 2\.5\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 69\. Based on the ratings on government and implementing agency performance, the rating is moderately satisfactory\. 6\. Lessons Learned 70\. Piloting and Learning\. The competency-based training and certification system began over ten years ago as a pilot\. Experience shows that getting the system’s structure and technical content right was a process that took time and that involved some trial and error\. The MoL’s commitment to learning and improving before scaling up was a key factor to success, and contributed to the strong results for these Project activities\. The dissemination of early successes was also key to expanding the appeal of the program\. 71\. Relevance of Country Context and Timing\. Specific conditions in Argentina may have provided a propitious environment for the activities supported by the Project\. First, employment 20 and training policy became a priority given the resumption of economic growth, employment creation, and improved fiscal performance after the decline of competiveness during the 1990’s and the economic crisis of 2001-2\. Second, the culture of tripartite social dialogue facilitated the impressive accomplishments in sector participation which are a necessary pillar for the development of a lifelong learning and training system and its sustainability\. Third, in order to reach the scale of activities and investments - all driven by sector actors - steady progress is required over a sufficient time period\. This might have been difficult to achieve in the absence of the stability observed in both representatives of the social actors and in MoL staff\. 72\. Strategic and Comprehensive Engagement with the Private Sector\. In large part, the success of the competency-based and certification system rests on the work of the sector councils\. These councils played a dual role as both aggregators of technical know-how and conveners of relevant participants from industry, trade unions, employers, and training institutions\. Since they were envisaged as a fundamental building block in the architecture of the system, careful attention was given to how they were selected into the program\. Sectors councils not only had to be on the county’s priority list as having substantial potential for reactivation, but also had to demonstrate commitment to advancing the competency-based training and certification in the sector\. That is, sectors that understood the importance of having qualified workers to seize new technologies, improve product quality, reduce workplace accidents (and insurance policies) and increase market share\. To increase the take up, MOL offered a combination of financial incentives and technical inputs to support the needed interactions of sector councils with industry and union representatives, employers and training providers\. Financial incentives included the development of standards and curricula, the cost of training delivery and the provision of some resources for training and light equipment\. Without the recognition of the training program as part of Government’s policy to improve the employability and employment outcomes of low skilled and unemployed workers, it is unlikely that an effort of the current magnitude would have emerged (as is the case in most countries where efforts to cover vulnerable populations tend to resemble a patchwork of projects rather than a structured program)\. 73\. Flexible Approach Needed to Maintain Private Sector Engagement\. To sustain the interest of industry and employers, the MOL worked with sector councils to ensure they had flexibility to tailor training programs to fit industry needs (i\.e\. course duration, training length, trainer profile, training location, etc\.) while meeting overall competency-based training and certification standards\. Had the Government been inflexible on the approach to marry the needs of industry with national program competency-based training and certification standards (as was the case in some programs in Mexico), the private sector would have found it unproductive to remain on board\. 74\. Leadership and Institutional Capacity\. The Minister of Labor was an early advocate of the competency-based and certification system\. For over ten years, he provided strategic leadership and supported the efforts of MoL senior management to build and strengthen the system\. Having his weight behind the effort was a factor for success\. Implementing a competency-based training and certification system that truly reflects industry demands is a complex task that requires working with a multiplicity of sectors and many stakeholders within each sector, some of whom may be at odds with a new system or with each other\. 21 75\. Output-based Activities\. The output based disbursement mechanism proved effective for financing agreed outputs, in fact so much so that the Ministry of Labor decided to move the payments for evaluation and certification services to this disbursement modality\. There are two caveats to the otherwise positive experience\. First, the time-lag between the initiation and completion of activities related to formulation of the occupational norms and related activities and the reimbursement of costs could be several months, thus requiring sector councils to rely on their own resources for extended periods of time\. Second, when new finance and disbursements arrangements are to be put in place, as was the case for output based disbursement mechanism for adult certifications, assurances need to be confirmed early on that the required information and data are feasible, timely and aligned with the technical objective\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 76\. The MoL has indicated that they have no further comments beyond those registered in Annex 7\. (b) Co-financiers 77\. Not applicable\. (c) Other partners and stakeholders 78\. Not applicable\. 22 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Total Baseline Cost 360\.00 678\.70 188\.50 Physical Contingencies 0\.00 0\.00 0\.00 Price Contingencies 0\.00 0\.00 0\.00 Total Project Costs 360\.00 678\.70 188\.50 Component A 110\.90 58\.60 52\.80 Component B 48\.40 13\.40 27\.70 Component C 167\.60 599\.80 357\.90 Component D 33\.10 6\.90 20\.70 Total Financing Required 360\.00 678\.70 188\.50 Project Cost by Component (BIRF) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) BIRF Baseline Cost 200\.00 200\.00 100\.00 Component A 70\.20 50\.00 71\.20 Component B 28\.10 10\.30 36\.70 Component C 86\.00 133\.00 154\.70 Component D 15\.70 6\.70 42\.70 Total BIRF Financing 200\.00 200\.00 100\.00 (b) Financing Appraisal Actual/Latest Type of Co- Percentage of Source of Funds Estimate Estimate financing Appraisal (USD millions) (USD millions) Borrower 160\.00 478\.70 299\.20 International Bank for Reconstruction 200\.00 200\.00 100\.00 and Development Note: The differences between the cost estimates made at appraisal and actual spending for the Bank loan are due principally to the following factors\. First, in relation to the Promotion of Youth Employment Component, resources were reallocated to stipends\. In addition, reflecting both the emphasis given to the orientation training and to shortfalls in the capacity of the municipal employment offices, more resources were spent to contract outside 23 providers\. Second, for the Adult Education Component, the second sub-component was dropped and fewer resources were required by provincial ministries of education or for printing of educational materials\. Third, in the case of the Competency-Based Training and Certification System Component costs for training and the technical assistance provided to training institutes was less than expected\. Fourth, affecting all components was the decision of the MoL to incorporate most consultants as regular staff, thereby removing this financing from the Project\. Fifth, in part because of the difficulties managing Bank procurement procedures, some spending (transfers to municipal employment offices and equipment purchases, for example) were financed through national resources instead of the loan\. Sixth, some projected financing (for equipment purchases planned for the MIS in the fourth component) was covered instead by other Bank loans to the MoL\. While many of these factors apply equally to the revised estimates of Government funding, those figures are more difficult to interpret\. Since the Project was implemented through the administrative structure of the MoL, it is somewhat arbitrary where to draw the line between the overall operations of the MoL and spending which relates most closely to the Project\. An additional complication is the methodology to convert spending in Argentine pesos into US$ over the Project life\. 24 Annex 2\. Outputs by Component The project supported four components\. The detailed results for each one are listed below\. Component A: Expand and Strengthen Competency-Based Training and Certification System The indicator selected to monitor the achievement of this component was defined as having no less than 25 percent of certified adults obtaining formal employment or a higher salary\. This indicator was surpassed: 53\.8 percent of certified adults either obtained formal employment or a higher salary within a year of being certified\. The targets for all intermediate indicators were achieved, with most being surpassed\. In particular, the No\. of workers trained in competency based courses was significantly higher than the original estimate\. The specific activities accomplished by sub-components included these: (a) for sub-component A\.1 (Establish Competency-based Certification), Sector Councils were constituted to carry out competency normalization activities, technical units were established in the Sector Councils to support their work, and Certification Organizations were identified and registered to serve as independent evaluators of competencies; (b) for sub-component A2 (Align Training with Competency-based Approach and Strengthen Professional Training Institutes), an assessment framework was developed to evaluate the quality and relevance of training institutions, curricular designs were prepared to underpin the competency norms approved in sub-component A\.1, and staff from training institutions were trained in the competency-based approach; and for subcomponent A3 (Train, Assess and Certify Workers) the training, assessment, and certification of workers was carried out\. Sub-component A\.1 (Establish Competency-based Certification)\. The project consolidated the social basis that makes lifelong learning sustainable through the Sector Councils for training and labor competencies certification\. The MoL decided to use Sector Councils as the vehicle to promote a strategic vision on employment and to respond to the demands of workers at both the national and regional level\. The establishment of a Sector Council is a process that takes time (identification of the sector and its major representatives, establishment and signing of the Protocol outlining the work plan, the regular evaluation of results, etc\.) and required the commitment and involvement of senior officials from the Ministry, the unions and the industry\. Each Council can involve more than one sub-sector: the 22 Sector Councils created over the life of the Project (2008-2013) oversaw the work of around 40 technical units 9\. The first 10 of the 41 sectors now covered under competency-based certification included construction, contact centers, forestry, graphics, automotive mechanics, metal mechanics, metallurgy, confectionery, bakery, and fruit and olive orchards\. The No\. of sectors covered grew rapidly starting in 2007: about 70 percent were added between 2008 and 2013, coinciding with the implementation of the Project\. Since 2008, under the Project 314 competency norms (surpassing the Project goal of 300) were developed\. The norms cover 41 sectors, with 9 In the PAD results framework it was erroneously assumed that there would be a one-to-one correspondence between sector councils and technical units\. 25 automobile mechanics having the greatest No\. of norms (39), followed by construction (37) frigorific/refrigeration (32) and metallurgic/metal mechanics (29)\. Under the Project, 1,330 evaluators were trained\. Table 1 provides a breakdown by sector of the norms, certifications, curricula designs, evaluators, and worker evaluations and certifications supported by the Project\. In March 2014, the team preparing the ICR visited representatives of Sector Councils (and corresponding technical units) covering: (i) construction, (ii) metal mechanics, (iii) software, (iv) bakeries, (v) footwear (leather-working), and (vi) fruit, vegetable and olive production\. The sample visited included small and large ones, industry and union-led management, and a range of public, private and trade union-owned institutions in the city of Buenos Aires and the provinces of Buenos Aires and Mendoza\. The ICR team’s overall impression after speaking with more than 30 representatives and stakeholders is positive\. While the degree of penetration across sectors varies in scope (geographical coverage) and depth (No\. of norms and curricular designs developed), all representatives were committed to competency-based training and certification\. Sub-component A\.2 (Align Training with Competency-based Approach and Strengthen Professional Training Institutes)\. During Project implementation, in order to align training courses with the competency-based approach, 251 curricular designs were developed, the vast majority (190) based on competency norms\. As part of the strategy to strengthen and improve the quality of training providers, 690 training institutions were prequalified for participation based on an assessment against a standard for institutional quality\. Of these, about 442 started a structured process of institutional development based on the results of the application of a diagnostic instrument and an intervention framework proposed by the Ministry\. Out of that group, 150 training institutions completed the institutional strengthening program (meeting the Project target) and received from an independent third party, the Argentine Institute for Norms and Certification (Instituto Argentino de Normalización and Certificación –IRAM) a quality certification\. The accreditation provided by IRAM ensures that the training is aligned to agreed standards and delivered with quality and efficiency\. This process started from zero and required the agreement with IRAM to jointly develop a new quality referential (norm) to apply to the training institutions and specialized technical assistance\. The Ministry also contracted the Center for Municipal Quality and Modernization (Centro de Calidad y Modernización Municipal or CECAM) to assist those 150 training institutes to address their quality and pertinence gaps in order to receive the IRAM certification\. While some of the training institutions that participated in the project focused solely on training for specific sectors, a number of them covered sectors beyond those included in the project\. Since the institutional capacity interventions were intended to improve the training institution as a whole, the delivery of program offerings beyond sectors included in the project was markedly improved\. In some cases training offerings beyond project financed sectors developed 'competency-based-type' standards, training curricula and delivery methodologies\. Since one of the goals of the institutional strengthening is to gain a highly coveted certification from a third party (IRAM), there is now a concrete benchmark against training providers can aspire to obtain and be assessed\. This sub-component was perhaps the most challenging and it had the slowest implementation\. Changing institutional practices takes planning and requires making adjustments, learning and 26 implementing new practices\. An added challenge was the need to find appropriate moments during the academic calendar to work with the institutions and staff\. Opportunities in the academic year to do this work are limited, making advance planning an absolute must\. Sub-component A\.3 (Train, Assess and Certify Workers) Demand for competency-based training in Argentina has grown since 2003, with a total of 388,078 individuals having participated in these programs in the context of sector agreements during the period of the Project\. Almost 25 percent of all participants joined the training programs in 2012 and 2013\. It is important to highlight that in addition to these individuals, whose training was directly financed by the Project, there were also indirect beneficiaries if one takes into account those who received other types of training in the 442 Training Institutions that were strengthened as part of Sub- component A\.2\. Participant characteristics\. Training benefitted mainly individuals who were receiving social transfers from the MoL between 70 to 86 percent, depending on the sector)\. Only about one-fifth of participants took part in the Promotion of Youth Employment Program, and about one-third of participants enrolled in industrial manufacturing programs\. Slightly over half of the participants were men (52 percent)\. About 37 percent of participants were between the ages of 18 and 25, and 50 percent were between the ages of 26 and 46\. The provinces of Buenos Aires, Mendoza, Tucuman, Santa Fe, Cordoba, and Salta as well as the city of Buenos Aires accounted for three quarters of all participants\. Certification\. Among the individuals who were evaluated, 99\.7 percent received certification, the majority of them after 2008 once the program was scaled up\. The final ratio between workers assessed and certified (99%) was different than assumed in the PAD (70%); the estimation were done based on the pilot experience, but with the maturity of the sectors involved and the consolidation and understanding of the process, almost all workers assessed were also certified\. Two sectors accounted for about two-thirds of all certifications: construction (53 percent) and frigorific/refrigeration (9 percent)\. The distribution of types of certification does not seem to correlate with either the total availability of norms per sector or the length of time the norm has been in existence\. As it shown in Table 1, the norms have been used by the sectors both for curricula design and workers certifications in all cases, except the ones recently developed (Commerce and Technological University)\. In interviews during the ICR mission, all representatives of Sector Councils agreed on the importance of allowing innovation and the importance offsetting some of the costs of developing norms and providing training\. Each sector is unique, so implementation had to allow for some flexibility to adapt to different conditions on the ground, whether that meant taking the classroom to the field to train farmers or entering into an interim arrangement with trade unions to support competency-based training with curricula focused on draft norms rather than approved norms (metal mechanics sector)\. Another point on which there was a consensus was the importance of one of the byproducts of competency-based training: building participants’ self- esteem\. Acknowledging the existing skills of technically unqualified workers - many of whom had been toiling away for years - gave them social standing in their families and communities\. This awakened a desire for continued growth\. 27 The construction sector has been a trailblazer, pioneering the implementation of a system to keep track of trained and certified individuals\. In this sector, each person who participates in competency-based training or is certified on a competency norm receives an ID card with a digitally readable computer chip that records their training trajectory and earned certifications\. This makes it easier for the cardholder to access formal employment and for prospective employers to know the person’s occupational qualifications\. A top challenge mentioned included the need to strike a balance between quantity and quality\. At times, the courses felt rushed or somewhat driven by the need to meet targeted outputs\. A second challenge was the constant need to raise funds to cover the cost of training equipment\. Table 1 - Registered Competency Norms, Certification and Evaluations, by Sector 2008-2013 # Curricular # Registered design based # # Trained # Individuals Competency on Individuals Evaluator Certified Norms 10 Competency Evaluated s Norms Public administration 4 1\.003 1\.000 20 Agricultural-agro-industrial 8 2\.609 2\.603 70 Shoes 5 5 351 351 10 Garments 8 5 301 289 22 Building 37 32 57\.810 57\.763 150 Contact center 3 1\.419 1\.419 40 Electric power 15 3 358 386 37 Gas stations 7 5 4\.317 4\.276 29 Forests 12 8 4\.439 4\.390 78 Cold storage plants 32 25 9\.853 9\.764 41 Graphics 3 18 1\.317 1\.317 18 Timber industry 7 7 353 349 30 Wool textile 3 3 137 137 11 Building superintendents 1 501 500 21 Automobile mechanics 39 23 4\.833 4\.829 70 Metal mechanics 6 2 260 260 9 Metalworkers 23 14 3\.405 3\.398 51 Water 12 6 4\.057 4\.036 231 Pastry cooks 14 5 355 355 24 Oil 13 81 81 13 Pizza-fast food 5 45 45 3 Fruit, vegetable & farm family 3 2\.891 2\.890 81 production Mohair goat sector 1 122 121 25 Trade 1 4 12 Fruit, vegetable and oil sector 19 7 4\.219 4\.205 71 Naval sector 4 8 26 26 7 Teleworkers 5 627 605 29 Superintendents (horizontal property) 1 1 1\.362 1\.349 18 10 Each norm includes between 2-5 competency units\. 28  National Technological University 5 15 Tourism 9 6 1\.954 1\.954 63 Wine industry 9 3 448 445 31 Total 314 190 109\.453 109\.143 1\.330 In order to consolidate gains and institutionalize important aspects of the competency-based training and certification system, since 2011 the MoL has put out several important Ministerial resolutions\. These resolutions define the framework and operational procedures for the system, including the institutional arrangements and responsibilities within the MoL, the eligibility criteria and instruments relating to the participation of the different stakeholders and institutions participating in training and certification policies and to receive public funds\. In particular, Resolution no\. 434/2011, the National System of Lifelong Training, set up the strategic lines of activity, provided a legal foundation and laid the base for additional resolutions put out since then to institutionalize important elements of the system\. These include (a) Resolution No\. 1204/2011, Institutional Strengthening and Certification of Quality for Training Institutions; (b) Resolution No\. 1471/2011, Sector Certification of Worker Competencies; (c) Resolution No\. 1495/2011, Definition and Content of Basic Competencies; and (d) Resolution No\. 1496/2011,Basis for the Creation and Functions of the Sector Councils for Training and Certification of Labor Competencies\. Component B: Basic Education Services and Certification for Adults This section describes in more detail the results for the intermediate result indicator, the specific activities and investments supported under the Project for the seven provinces which implemented innovations in adult education services, and finally, the main findings of a background paper written during preparation of the ICR\. The purpose of the background paper was to analyze the recent evolution of adult education in Argentina in order to provide the context for the activities supported by the Project to implement innovations in services and to see if the data could possibly shed some light on their performance primarily by comparing the trends and patterns in these 7 provinces with the rest of the country\. The intermediate result indicator was the No\. of participants in adult education certifying basic education completion (target 100,000)\. Table 2 below shows the breakdown of the results achieved for the 7 provinces and the remaining provinces as well as those participants referred from the Promotion of Youth Employment Program\. Based on latest data available as of Project closing, 94,194 participants completed either the primary or secondary education cycle\. Of those, 42% (39,241 participants) are from the seven innovative provinces supported under the Component\. Of those certified, 37,660 (40%) participated in the promotion of youth employment program, with the majority (94\.5%) concentrated at the secondary level\. Among all those receiving certifications, 79\.4% certified the secondary level and the rest primary level\. Patterns did not differ between the 7 provinces and the others\. These figures underestimate Project results\. It proved difficult to obtain information on certification, so the data show results only for 61% of students registered in the MIS of the MoL\. For example, information is missing from the province of Buenos Aires, the largest and proactive in adult education\. Additionally, certification results are only available until December 2012\. 29  Table 2: No\. of certified beneficiaries by type of province and program participation -2008-2013 Type of Youth Program Other Participants TOTAL Province Participants Innovative 15,497 23,744 39,241 Others 22,163 32790 54,953 TOTAL 37,660 56,534 94,194 Data source: Ministry of Labor Table 3 below shows in detail the educational innovations, beneficiaries and certification results for each of the 7 provinces where the Project supported innovation activities\. There is great variation in the certification results among these 7 provinces; rates range from 18% in Mendoza to 8\.5% in La Rioja\. Figures are based on information on certifications awarded through the end of 2012, due to delays in receipt of information from provincial jurisdictions\. Project investments were mainly focused on the hiring of tutors to support semi-onsite students’ and distance educational schemes that were promoted (40% of the total)\. Another 40% of the resources were divided between development and printing of new curricular designs and teaching materials and teacher training for the use of new methodologies for flexible teaching modalities\. The rest was to reproduce materials in different languages for indigenous people and to hire bilingual teachers\. To a lesser extent basic educational kit and books were bought\. 30  Table 3\. Summary of Innovations, Enrollments and Results for 7 Provinces Enrollment Youth (2) / (1) Enrollment Adults (4) / (3) Province Characteristics of innovations as of 2013 Participants in % as of 2012 certified as of in % (1) Enrolment 2013 (3) 2012 (component C) (4) (2) • Modular • Semi-onsite students’ courses in addition to face-to- face\. • Recognition and accreditation of previous knowledge acquired (with official document) • Flexible schedules to respond to the characteristics of Chaco the participants\. 87,986 57,213 65 79,080 7,522 9\.5 • Educational content associated with the world of work • Childcare services for adults with young children who attend face-to-face or semi-onsite students’ modalities\. • Teacher training and tutors for semi-onsite students’ and face-to-face modes • Special services for Indigenous People (ethnic Qom, Wichí and Mocoví) • Delivery of educational kits • Modular • Semi-onsite students’ courses in addition to face-to- face\. Chubut • Flexible schedules to respond to the characteristics of 7,980 4,307 54 6,560 1,031 15\.7 the participants\. • Childcare services for adults with young children who attend face-to-face or semi-onsite students’ modalities\. • Delivery of educational kits and didactic materials 31  • Modular • ÂCurriculum-based on disciplinary areas relevant to adults, especially in the area of work\. • Recognition and accreditation of previous knowledge acquired (with official document) • ÂSemi-onsite students’ courses in addition to face-to- face • ÂFlexible schedules to respond to the characteristics of Córdoba the participants\. • Educational contents associated with the world of work\. 75,667 13,767 18\.2 64,020 8,781 13\.7 • ÂModular educational materials adopted at the national level by the Plan Fines from the Ministry of Education\. • Teacher training and tutors for semi-onsite students’ and face-to-face modes • ÂEstablishment of 60 new places to accompany the semi-onsite students’ mode •  Project integration at the end of educational segments (level 1-4, 4-7, 7-11) • Modular • Curriculum-based on disciplinary areas relevant to adults, especially in the area of work\. • Recognition and accreditation of previous knowledge acquired (with official document) • Semi-onsite students’ Offer in addition to the face-to- face 15,075 6,239 41\.4 12,895 1,091 8\.5 La Rioja • Flexible schedules to respond to the characteristics of the participants\. • They use the material produced by Cordoba • Delivery of technological kits (scientific calculators and pen drives) as a retention strategy • Each module contains formative assessments complemented by a portfolio of activities performed by students in each area of discipline\. At the end of each section, a summative evaluation is given\. \. • Semi-onsite students’ courses in addition to face-to- face 32 Mendoza • Flexible schedules to respond to the characteristics of 53,063 16,120 30\.4 48,129 8,704 18\.1 the participants\. • Educational contents associated with the world of work\. • Modular Misiones • 59 places for distance education courses were opened 61,479 29,716 48\.3 48,990 6,852 14 for Youth Program participants • Delivery of educational kits as a retention strategy\. • Extension of the school calendar from January to December with the inclusion of summer school for Youth Program participants\. • ÂModular Tucumán • ÂCurriculum-based on disciplinary areas relevant to adults (work, citizen participation and lifelong learning) • Recognition and accreditation of the previous knowledge acquired • Development of modular training materials 61,212 31,279 51\.1 47,987 5,089 10\.6 • Teacher training for the semi-onsite students’ mode • Flexible Schedule to respond to the characteristics of the participants  • Educational itineraries (modular sequence) adapted to adults • Flexibility for entrance to the educational system in different moments during the year\. • Citizenship workshops\. Total 362,462 158,641 43\.8 307,661 39,070 12\.7 33 Recent Trends on Adult Education in Argentina and in the 7 Project Provinces In order to put the Adult Education Services Component in context background papers were prepared both during Project preparation and for the ICR\. The papers used data drawn from two sources: the periodic Population Census as well as the National Directorate of Information and Evaluation of the Education Quality (DINIECE - Direccion Nacional de Información y Evaluación Educativa)\. In the case of the latter, a particular interest was to see how trends in the 7 provinces which had received support from the Project to implement innovations to improve both the accessibility and pertinence of adult education services compared to the rest of the country\. Also, the comparison of the trends identified in both papers shows the changes in adult education during the time of Project implementation\. The background paper done at the time of Project preparation identified several important trends and characteristics of adult education in Argentina\. Although there had been an expansion in adult education enrollment between 1997 and 2005 (of about 70,000 students), in the case of secondary students the peak had been reached in 2001 and thereafter declined, in part because of a decline in the share of the age group 20-29 in the population\. In addition, the total No\. of individuals attending adult education classes had peaked in 2003 (615,431) and had fallen slightly in 2005 (608,735)\. The coverage of adult education services was very small in comparison with the need, reaching only 5% of the potential population who had not completed secondary education\. High rates of failure in the system had persisted for a long period\. About 25 percent of those who enrolled dropped out during the year and for those remaining, one-third did not get promoted to the next level\. This means that half of those who initially enroll failed each year\. The No\. (and proportion) of secondary school completers within adult education had increased over the period 1997-2005, moving from 72,500 to 102,500\. But this represented only 4\.2% of the 2\.4 million of individuals aged 20-49 who in 2001 had achieved no higher than incomplete secondary\. The paper suggested that there was lots of room to expand both the No\. of students and the efficiency in adult education, even assuming that Argentina continued to make progress on increasing the No\. of children who completed secondary school\. The purpose of the background paper done as part of the ICR preparation was twofold: to update the trends in adult education in Argentina in order to provide the context for the activities supported by the Project; and to see if the data could shed some light on the relative performance of the 7 Provinces by comparing them with the rest of the country\. The analysis covers the period 2001-2012, using the same data sources as the first background paper and covers trends in the schooling deficit among the population age 18-49 (proxy for potential unsatisfied demand), trends in enrollment in adult education and trends in secondary graduation rates in this modality\. The 7 project Provinces are not homogeneous\. Three of them (Misiones, Chaco and Tucuman) are among the provinces with the highest school deficit in the country\. Mendoza and Chubut are only slightly worse that the country average, while both La Rioja and Cordoba are slightly better\. Thus it was not always possible to find a particular pattern for the 7 Project provinces\. As did the previous paper, the main target population for adult education is defined as those between 20 and 49 years of age, but the analysis also covers 18-19 year olds and those above 50 years of age\. The main findings are summarized below\. The complete paper is in the Project files\. 34 First, data from the 2010 Population Census showed that 43\.3 percent of the Argentine population between 18 and 49 had not completed secondary school, a drop of 8\.6 percentage points compared to 2001\. The No\. of individuals without secondary school had barely changed over the period, remaining at about 7\.8 million\. For the 7 Project provinces, the reduction was more accelerated, but still not sufficient to compensate for their worse starting point, so that in 2010 they still lagged the rest of the country with 47\.6 percent of the population without complete secondary education\. The acceleration experienced by these provinces was due primarily to improvement in performance for 18-29 year olds\. Thus, despite a reduction in the general educational deficiency, Argentina still registers a high percentage of adult population that has not completed secondary school\. More than 40 percent of the working-age population in their most productive years was undereducated\. This has obvious consequences for the economy, as highlighted by several studies at the international level, as well as in the specific Argentinean context 11, as well as for individuals\. Data from the most recent National Household Survey (2013) confirm that people aged 20-64 with complete secondary education have a 10% higher probability of being employed\. Among the employed, workers with complete compulsory education enjoy on average a higher wage (55% higher) and higher probability of being employed in the formal sector (+27%)\. Therefore, tackling educational deficiency and in particular graduation form compulsory schools represents a crucial issue to achieve the PDO objectives to (i) enhance employability (for unemployed); and (ii) improve career opportunities (for employed)\. Second, based on DINIECE data, overall enrollment in adult education increased 20% between 2001 and 2012, but in the 7 Project provinces the increase was more than double that (42\.8%) with more of a difference after 2007-2008\. For the rest of country the increase was due mostly to those under 20, whereas for the 7 Project provinces it was the age group between 20-29 years of age which increased the most\. Third, the No\. of secondary school graduates in adult education increased 44 percent for the country between 2001 (47,707) and 2012 (68,736), but more than doubled for the 7 Project provinces (from 5,640 to 11,375)\. For both the country as a whole and for the 7 Project provinces during the middle of this period (starting around 2004) there was a decline, which was reversed beginning in 2007-2008\. The corresponding share of secondary school graduates represented by the 7 Project provinces declined from 11\.8% in 2001 to 9\.6% in 2006 before rising to reach 16\.5% in 2011-2012\. Fourth, the graduation rates for secondary adult education students rose slightly from 11\.5% in 2001 to 13\.2% in 2012\. For the 7 Project provinces the rate stayed the same at about 11\.4%, although there were contrasting trends during the period\. Between 2001 and 2007 there was actually a decline in graduation among the 7 provinces, followed by an increase in graduation rates between 2007-2012\. This translated into a higher than the average country-wide improvement in graduation rates during this period for the 7 Project provinces, at that same time 11 Among others, Alzúa, Gasparini and Haimovich (2010) show that in Argentina the number of years of education has a causal relationship with probability of employment, wage and number of working hours\. 35 that enrollment was also increasing more in these provinces\. The analysis seems to suggest that the activities supported by the Project may have contributed to higher enrollments as well as improved efficiency in adult education services in the 7 Provinces\. Component C: Promotion of Youth Employment through Work Experience and Training\. Although implementation of this component faced challenges, aside from internships other targets were achieved\. Below is a description of the outputs/outcomes by sub-component, focusing on the performance of the MoL in each area\. The component aimed to provide to youth participants a range of quality services all with the aim of improving employability\. These services could be combined and phased according to the needs of the participant and the local economic context for a maximum of 24 months\. Providing employment and career orientation to youth through municipal employment offices (Sub Component C\.1)\. As the table below shows, the geographical coverage of the promotion of youth employment program expanded greatly over time\. When the program started, it was implemented in only seven provinces and 33 municipal employment offices, with a total of 9,500 beneficiaries\. Five years later, it covered all provinces and 342 offices (representing 274 municipalities) and was serving 260,000\. The coverage of this component was larger than expected: the No\. of youth who joined slightly exceeded the target of 600,000 and the No\. of employment offices offering the program exceeded the target of 250\. Table 4\. Coverage of the Promotion of Youth Employment Program 2008-2013 2008 2009 2010 2011 2012 2013 Total No\. of provinces 7 16 21 23 24 24 24 No\. of Employment Offices 33 112 157 226 287 342 342 No\. of youth participants in 9,268 58,171 59,912 138,403 125,437 103,706 476,971 Orientation Workshops Youth Covered* 9,526 75,229 124,686 317,491 286,447 259,611 602,050 *Defined as those who received the stipend at least one month which means they participated in a service\. With the massive influx of youth into the program, the efforts of the municipal employment offices focused on developing and strengthening and development the initial activities and services to be provided, i\.e\., the Orientation Workshop (Programa de Orientación y Inducción al Mundo de Trabajo – POI), referrals to adult education services, and support for job search skills (see full list of activities below)\. To this end, quality, standardized materials were produced for training providers and the counselors in the employment offices (POI, Club de Empleo, etc\.)\. The jury is still out regarding the impact that life skills training (embodied in the POI) has on labor market outcomes\. However, there is strong evidence in both developed and developing countries regarding the positive impact that this type of training has on awareness, self-esteem, and motivation\. Youth in the focus groups organized for the qualitative analysis done under the Project provided a positive assessment of the POI\. 36 Facilitating training and/or education opportunities (Sub Component C\.2) It was envisaged that the MoL (through the UTeCC, Technical Unit for Certification and Competencies) would develop competency-based standards, training and certification for basic skills, as well as for selective occupations relevant for youth, and train instructors so that the corresponding training courses could be delivered in existing schools and professional training institutes\. Good quality materials for basic skills courses were developed, but used only to a limited extent during the summer when other services were not available (adult education, for example), primarily because the activity did not prove to be popular among the participants\. In addition, referrals were made to second-chance education and professional training courses\. Participation in adult education ended up being the most important activity under this sub- component, second only to the POI\. According to the latest data available 12 , nearly 38,000 received their certifications, about 10% of program students\. The certification is expected to contribute positively to the Project Development Objective of increasing the employability of the unemployed\. The literature on returns to education shows that probability of employment in the formal sector for those with complete secondary education is higher than for those who have not completed that level\. Table 5\. Youth Participation by Service Category No\. of participants 602,050 Services Orientation Workshop (POI) 476,971 Adult Education 377,475 Professional training 80,060 Internships 81,190 Self-employment Workshop 3,684 Other workshops 118,988 Basic appointments at Employment Office 125,662 Note: No\. of participants includes those who have received a stipend at least one month which means they participated in a service\. Most participated in more than one service during their time in the program\. The range of services reflects the aim of the MoL to respond to both the different interests and concerns of the participants, as well as to operational needs\. “Other workshops” refer mainly to cultural and awareness activities (arts performance, information on reproductive health, violence, etc\.) to promote integration and social inclusion\. Also, mainly in order to minimize gaps between enrollment in the program and the initiation of activities or between different activities, “Basic appointments at Employment Office” were organized to avoid “losing” participants (twice a month and for no longer than two months)\. 12 As is the case in general with the information on education certifications for the Project, figures reflects data as of December 31, 2013, meaning that certifications in the 2013 school year are not included\. In addition, the data is incomplete since it covers only about 60% of registered participants in adult education classes\. 37 Additionally, a study was done to analyze the trajectories and results for a group of youth in the program who participated in the self-employment activities (3,684)\. To be able to receive financial assistance for their enterprise and coaching/mentoring, those youth needed to complete the entrepreneurship training course, present a technically sound business plan, and register with the tax authorities\. Among this group, of the 90 percent still in operation, about a third had achieved employment quality ranked as medium or high (compared to about half for adult participants in the self-employment activities) and about twenty percent of the projects were considered to have high chances of sustainability (slightly higher than the share for adults)\. Preliminary recommendations to improve the design and implementation of self-employment activities include the need for stronger monitoring and evaluation of the experiences (more focus on results and the systematization and exchange of findings), updating the ceiling for financial assistance and differentiate according to the type of project, and extending the time of follow up and mentoring of the entrepreneurs\. Organizing internships with employers (Sub Component C\.3) The PAD outlined two strategies that the MoL intended to use to promote internships with employers\. One, at the national level, internships with large employers would be proposed by the members of a Network of Businesses for Youth with a Future (the Network)\. Two, for smaller companies and in localities where Network companies are not located, municipal employment offices would be responsible for helping to promote internships\. However, in practice no internships were identified through the Network for the Project, leaving the main burden of promoting internships to the municipal employment offices, supplemented by support from the MoL in reaching agreements with other public agencies to offer internships\. Efforts were also handicapped by the lack of an effective outreach campaign for employers, although one had been included in the Project design\. By the end of the project, there had been around 81,190 internships, only 56 percent of the target\. Some of the challenges faced could also be attributed to the different characteristics of the employment offices and the heterogeneous local labor markets (management and leadership, institutional capacity, regional economic growth, etc\.)\. Some offices did not identify even one internship, while others were effective in working with employers and promoting internships\. A qualitative analysis was conducted to review internships in the private sector, public institutions and social or non-governmental organizations (NGOs)\. The study covered twenty- eight cases in four localities (Ciudad Autónoma de Buenos Aires - CABA, Conurbano Sur, Gran Resistencia y Gran Rosario), which accounted for the largest number of internships\. There were some general findings for all internships\. For example, all sponsors and youth assessed the experience as positive\. Youth identified the learning gained, especially in soft skills, increased social capital, and expanded opportunities\. The competency most commonly identified by all youth was responsibility (timeliness, complying with work hours, letting people know if absent or late, and task focus)\. Neither the private or public sector sponsors identified any big differences between the youth and other entry level workers\. In fact sometimes the youth were better\. Youth saw the value of the internships as a signal to employers as most did not have previous experience\. Now they had references\. 38 On the other hand, some results varied depending on the sponsor, the extent of linkage with the employment office and the social context\. Private firms considered the internships an efficient way to respond quickly to higher demands and to try out potential new staff\. All had considered contracting some of the participants\. In addition, in order to participate in additional internships, the MoL required some employment of previous participants\. Firms promoted the termination of secondary school among their participants and to that end allowed some flexibility in work schedule\. If youth were studying to finish high school it was seen as a sign of commitment and responsibility\. In the area of skills acquisition, after responsibility, the ones most commonly mentioned for private internships was adaptability and teamwork, whereas for public and social organizations, it was communication and self-confidence\. Specific job-related skills were more likely to be acquired with the private sector\. Administrative skills were more commonly acquired with the public sector and skills for social or community work only for public and social organizations\. In the case of social organizations the importance of the internship as a source of income and of social integration was mentioned\. The proximity to the labor market of the internships depends on the linkages with the employment office as well as with the possibility for labor market insertion once the internship was finished\. While the private sector in general ranked higher, there were good examples in the public sector\. At the other extreme were most internships with NGOs\. The report ranked the internships overall using four criteria: presence of a tutor/coach at the workplace, the relationship with the employment office, and the scope for development of soft skills and of job-specific skills\. Those with a positive classification on all four dimensions were ranked high, those lacking in one dimension were ranked medium, and those lacking in two dimensions (the remainder) were ranked low\. The top performers were most of the internships in the private sector\. The bottom performers were most of the internships in the NGOs, primarily because there was little contact with the employment offices and no development of job-specific skills\. The outcomes for those who did participate in internships surpassed the target\. According to the latest data available (mid 2013) which looks at outcomes for those youth who had completed their internships 12 months or more before the measurement date, out of the 21,649 beneficiaries who had completed their internships by May 2012, 56% of them found a formal job within a year, exceeding the 50% targeted\. Given the scale of the promotion of youth employment program, the target set for internships was much higher than other youth employment programs in the region (around 10,000 a year) which also have much fewer total participants\. Comparing the outcomes for Argentina with similar programs in other countries is difficult because of different indicators\. Although the results for Argentina are higher, part of the explanation may be that other programs only count employment in the same firm which sponsored the internship\. Indicator Program Juventud y Empleo- ProcaJoven- Jóvenes en Acción- Dominican Republic Panama Colombia 33% 22% 32% Receives offer at the firm Is hired by the firm Insertion rate Is hired by the firm at the where internship took where internship took end of the internship place place Source: IDB “Cómo mejorar las posibilidades de inserción de los jóvenes en América Latina?” 39 Institutional Arrangements The institutional arrangements for this component were complex (including multiple units under the Ministry of Labor as well as municipal employment offices across the country)\. This component was implemented mainly by municipal employment offices based on signed agreements between the MoL and the respective municipalities\. The municipalities received support from the MoL, including equipment, support for promotional activities, training and technical assistance as specified in the agreements\. The aim was for municipal employment offices to serve as a gateway to the appropriate services for youth who needed basic skills, wished to finish their education or receive professional training\. Component D: Strengthen Management Information System, Project Administration and Studies The objectives and indicators for the component were reached\. The component was successful in supporting the integration of the data bases which exist in the MoL and the development of a new unified tool required for the planning and monitoring of the Lifelong Learning and Training System\. This strengthened MIS facilitated the interface among different processes, originally distributed in different data bases, which today are compatible and integrated with each other\. By the end of the Project, the MIS had national coverage, was available 24 hours a day and had exceeded the targets set for transactions per month and users connected at any one time (5,100 users vs\. the target of 1000)\. Intermediate indicators were met\. It was expected that information on 500,000 workers would be in the MIS by the end of the Project\. Between 2008 and 2013, 2\.6 million individuals updated their labor histories and/or registered their training and certification (687,000 in 2013, 581,300 in 2012 and 528,400 in 2011)\. In total there are 1,390 institutions (442 training centers, 564 municipal employment offices and 384 enterprises participating in Crédito Fiscal for training) connected and supported as clients vs\. the target of 420 institutions\. This scaling up of users shows the emphasis given to facilitating access and use of information by key actors in the Lifelong Learning system, aside from the MoL\. The MIS facilitated administrative processes, planning, and the promotion of the activities of the different Project components\. There were two main improvements aside from the integration of information: 1) Support for Effective Decentralized management: MIS users can manage and exploit information directly (see, add or use data)\. It is a fluid system in terms of the activities which can be registered and the availability of individual, personalized information\. In the registration of information, one of the main advances was the ability to capture data at source while the central level validates information and guarantees the security of the system\. 2) Capacity to Monitor physical and financial targets: The strengthened MIS allows for the complete follow up of an action and identification of the achievements reached\. The Project contributed to improvement management within the Ministry since the MIS must be used for all actions, not just those of the Project\. The MIS is also integrated and compatible with other systems such as records and resolutions\. The installation of the tool modified the administrative 40 structure because different aspects of the same action were integrated and use of the system is mandatory\. Thus, it broke down some divisions between units since different processes are related to each other\. Starting from the resolution that originates an action (budget and goals), specific activities, participants, and execution must be recorded to make a payment\. This required the strong development of various types and levels of internal and external users, thereby contributing to transparency\. Additionally, the possibility to assemble different data bases has facilitated the availability of information to support the implementation of impact evaluation studies, such as the impact assessments for components A and C\. Even though the objectives and indicators for the component were achieved, additional improvements and development are planned, such as access and external management of some services related to employment offices like intermediation (direct access by companies and jobseekers)\. Also modules of e-government could be incorporated to facilitate registration in courses, etc\. This component also financed consultancy services for project administration\. The No\. of consultants working on activities related to the Project and financed by the Loan was usually less than planned\. In practice, many functions were transferred to line staff, thereby strengthening MoL capacity\. The celling planned for 2011 was 85 consultants, but only 42 were hired with even less by the end of the Project\. Consultants financed by loan proceeds 2007 2008 2009 2010 2011 2012 until closing date\. BIRF 83 85 105 105 85 65 (planned) BIRF 66 115 85 42 15 (executed) 41  Selected Monitoring Indicators Indicators Target Values Link to Component Lifelong Learning Program –Component A – Competency-Base Training and Certification No\. of sectors/province/month (distribution) 41 1 No\. of Normalization Committees (Unidades Técnicas de 22 A\.1 gestión) working\. No\. of competence norms registered in each sector\. 314 2 No\. of evaluators trained and registered\. 1,330 A\.1 No\. of individuals (employed and unemployed) trained by 388,078 province/month/sector (F/M) 3 - No\. of individuals evaluated 109,453 A\.3 - No\. of individuals certificated 109,143 No\. of training institutions strengthened 442 - With diagnosis 690 4 - In program of improvement A\.2 - Certified 150 Lifelong Learning Program –Component B – Adult Education Services No\. of agreements with 7 (Chaco, Chubut, - Provinces Cordoba, La Rioja, 1 B\.1 Mendoza, Misiones y Tucuman) 2 No\. of individuals registered/attending school 923,458 B\.1/ 3 No\. of individuals certified (F/M) 94,194 B\.1/ - Primary 19,417 - High school 74,777 4 No\. of HH/PEC beneficiaries registered/attending school 570,611 B\.1 5 No\. of HH/PEC beneficiaries certified (F/M) 56,534 B\.1 - Primary 17,630 - High school 39,204 6 No\. of indigenous individuals registered/attending school 3,244 B\.1 Lifelong Learning Program – Components C and D - Employment Services and Work Placement for Youth 1 No\. of employment offices (EO) with youth services 342 C\.1 2 No\. of youth beneficiaries registered (F/M) 602,050 C\.1 Total No\. of Youth beneficiaries directed to other services 3 - No\. of beneficiaries who attended labor C\.2 orientation course 476,971 4 No\. of youth registered for finish primary or high school\. 377,475 C\.2 No\. of youth certified 37,660 5 - Primary 2,087 C\.2 - High school 35,573 6 No\. of youth beneficiaries trained 80,060 C\.2 7 No\. of youth beneficiaries in “pasantias” 81,190 C\.3 8 No\. of Youth beneficiaries placed in employment 74,147 C\.3 No\. of external agencies connected and using the 9 1,390 D\.1 information system 10 No\. of individuals registered (updated labor histories) 2,642,339 D\.1 42 Annex 3\. Economic and Financial Analysis This section presents evidence to assess the economic efficiency of the Project\. Section (a) updates the cost-benefit analysis by calculating the unit cost per beneficiary in each of the four components of the Project and providing an idea of the value of benefits per beneficiary that would be required to consider the Project economically viable and updates the PAD analysis for youth internships\. Section (b) refers to selected international evidence, presents information on the Argentine labor market in order to put into context the required benefits estimated in the first section, and finally discusses details of two impact evaluations\. a\. Cost-Benefit Analysis This analysis updates the one presented in the PAD\. It applies the same methodology in order to offer comparable estimates\. Given the flexible and modular structure of the Project, the wide range of age groups covered, the estimation of the Project’s internal rate of return would require several assumptions on benefits achieved by beneficiaries\. 13 Rather, this analysis opts for applying a more conservative methodology\. It consists in looking at the actual amount invested in each Project component and the No\. of beneficiaries covered, to derive the unit cost per beneficiary\. This allows for an estimate of the order of magnitude of benefits necessary for the Project to have a positive net present value\. Taking into account the different age groups covered as well as the broad scope of activities considered, the exercise assumes different scenarios of duration of working life (from 5 to 45 years after participating in Project activities) and social rates of return (8% and 12%) 14\. The cost-benefit analysis in the PAD took into account only Bank financing, not considering costs covered by the Government of Argentina\. The updated analysis includes: i) calculations considering Bank’s financing only, to compare results to estimations at appraisal; and ii) calculations considering the total Project cost, for a more accurate evaluation of efficiency\. It is important to recall that the design of Project activities envisaged at appraisal changed somewhat during the lifetime of the Project\. In the case of the Promotion of Youth Employment Component, changes have been substantial\. This would seriously affect comparability of the economic analysis if this one had been based on activity-specific assumptions for estimating benefits, as they would no longer be valid\. On the other hand, the issue is of less concern when focusing on unit cost per beneficiary\. Even with different activities, cost figures can still be used to derive conclusions on the economic efficiency of the Project\. 13 The same issue would arise for a cost-effectiveness analysis\. Furthermore, a comparison between the three components would be complicated by the different age groups targeted\. 14 The social rates of return used under the three scenarios are compatible with estimates used in the literature on educational programs in Argentina\. See Cossa (2000) and McCready (2005) and consistent with the average interest rate on Argentine government bonds over the period 2007-2012\. 43 Table 1 presents information for the first component of the Project, Expansion and Strengthening of a Labor Competency-based Training and Certification System\. It includes the No\. of beneficiaries, the actual cost, the cost per beneficiary and the annual increment in social benefits to break even assuming that the worker is 20 years of age (i\.e\. can potentially work for 45 years ), 30, 40, 50 and 60 years of age\. The analysis does not consider opportunity costs for the worker, as the certification does not require a significant commitment of time\. It is evident that the annual increment in beneficiary income to break-even is very modest in all scenarios\. For instance, assuming a 40 year-old beneficiary and applying the highest discount rate, an annual increment of US$ 69 would be sufficient to make the investment economically viable\. For a 60 year-old worker willing to retire at the minimum retirement age, the investment in training and certification will be offset by just US$ 149 per year\. To put these figures in context, the amount represents respectively 15% and 33% of the current monthly minimum wage 15 in Argentina\. The economic analysis at appraisal considered higher component costs and a lower No\. of workers certified\. Cost savings and the surpassing of targets on certification made this component more cost-effective that what was expected in 2007\. Table 2 presents the same information for Component B, Expansion of Coverage and Certification of Basic Education Services for Adults\. As in the previous case, the opportunity cost of classes is not included as this component is based on innovative programs offering the possibility of completing mandatory education through modalities that are flexible, modular and responsive to the needs and circumstances of interested adults\. Investment in Component B requires an even lower annual increase in beneficiary income to break even\. For a 40 year-old person, the needed increment would equal US$ 18 per year\. The total No\. of beneficiaries reached was in line with what was expected in 2007 (94,000 versus 100,000 estimated), while IBRD resources assigned to this component were less than expected\. As a result, again in this case, spending for this component has been more efficient then appraisal estimates, in the sense that it requires a lower increase in annual beneficiary’s income to offset the unit cost\. Component C, Promotion of Youth Employment through Work Experience and Training, changed in design with respect to its original description at appraisal, as explained in detail in Section 2\.2 of this ICR\. The economic analysis in the PAD focused on on-the-job training or internships for youth, and took into account the cost for employers as well as the opportunity cost for youth arising for this time-intensive activity\. During implementation of this component, however, there were less internship compared to some other activities, such as orientation workshops and other employment services, and adult education\. Out of the total youth participants, only about 15% participated in on-the-job training\. For this reason, this exercise applies the same methodology used for the other components\. Hence, it disregards opportunity costs as the vast majority of activities financed did not require a heavy time commitment incompatible with other activities in the labor market\. (For completeness, an update of the calculations made specifically for internships in the PAD is presented in Box 1)\. Table 3 presents the results for Component C\. The actual No\. of beneficiaries includes all who received a payment for at least one month (meaning that they were participating in an activity) 15 As of April 2014 the monthly minimum wage in Argentina is AR$ 3600, roughly US$450\. 44 and the actual component costs, which were significantly higher than expected at appraisal\. The services offered were much cheaper than average cost of on-the-job training\. Given that roughly 73% of beneficiaries in this component are less than 21 years of age 16, let us consider the case of 45 years of remaining working life\. Assuming the higher discount rate of 12%, each beneficiary should get an increase in annual income of US$ 120 (27% of the monthly minimum wage) to make the investment economically viable\. Even in the worst case scenario, of young beneficiaries working only 5 years after completing the program, an annual increase of 61% of the monthly minimum wage would be sufficient to break even\. 16 Informe mensual Enero 2014, Programa Jóvenes con Más y Mejor Trabajo\. MoL\. 45 Table 1\. Component A: Expansion and Strengthening of a Labor Competency-based Training and Certification System\. Project Unit Cost and Gains per Beneficiary to Break Even Annual increment in Beneficiary income to break even Unit Cost Assuming Assuming No\. of Cost of Assuming 45 Assuming Assuming per 15 years of 5 years of Beneficiaries Component years of 35 years of 25 years of Beneficiary working working working life working life working life life life OVERALL PROJECT Discount Rate 12 per cent 109,143 $58,659,766 $537 $65 $66 $69 $79 $149 Discount Rate 8 per cent 109,143 $58,659,766 $537 $44 $46 $50 $63 $135 IBRD ONLY Discount Rate 12 per cent 109,143 $50,000,653 $458 $55 $56 $58 $67 $127 Discount Rate 8 per cent 109,143 $50,000,653 $458 $38 $39 $43 $54 $115 Table 2\. Component B: Expansion of Coverage and Certification of Basic Education Services for Adults\. Project Unit Cost and Gains per Beneficiary to Break Even Annual increment in Beneficiary income to break even No\. of Cost of Unit Cost per Assuming Assuming Assuming Assuming Assuming Beneficiaries Component Beneficiary 45 years of 35 years of 25 years of 15 years of 5 years of working working working working working life life life life life OVERALL PROJECT Discount Rate 12 per cent 94,194 $13,432,355 $143 $17 $17 $18 $21 $40 Discount Rate 8 per cent 94,194 $13,432,355 $143 $12 $12 $13 $17 $36 IBRD ONLY Discount Rate 12 per cent 94,194 $10,273,973 $109 $13 $13 $14 $16 $30 Discount Rate 8 per cent 94,194 $10,273,973 $109 $9 $9 $10 $13 $27 46 Table 3\. Component C: Youth Component\. Project Unit Cost and Gains per Beneficiary to Break Even Annual increment in Beneficiary income to break even Predicted Estimated Unit Cost No\. of Cost of per Assuming Assuming Assuming Assuming Assuming Beneficiaries Component Beneficiary 45 years of 35 years of 25 years of 15 years of 5 years of working life working life working life working life working life OVERALL PROJECT Discount Rate 12 per cent 602,050 $599,905,688 $996 $120 $122 $127 $146 $276 Discount Rate 8 per cent 602,050 $599,905,688 $996 $82 $85 $93 $116 $250 BIRF ONLY Discount Rate 12 per cent 602,050 $132,981,989 $221 $27 $27 $28 $32 $61 Discount Rate 8 per cent 602,050 $132,981,989 $221 $18 $19 $21 $26 $55 47 Box 1\. Youth Internships, Project Unit cost and gains per beneficiary to break even The evaluation of internships at appraisal considered the following cost structure: i) the government cost of internships (stipend, transportation and internship related expenses); ii) the employer cost of training (stipend and transportation expenses) and iii) the trainee opportunity cost for the duration of the internship (PAD, 2007)\. An update of this exercise takes into account some modifications which took place during implementation\. First, the cost structure differed somewhat depending upon whether the employer was private, public, or NGO\. These differed in terms of the stipend paid by the government and the average duration of the internship\. By considering the respective share of each type (private sector, public sector, NGOs) of internship financed, it is possible to get an average approximation of unit cost and gains per beneficiary to break even, comparable to estimations at appraisal\. Second, the evaluation at appraisal considered transportation expenses and other training-related expenses financed by the government and the employer\. During implementation, these extra-costs were incorporated into the general stipend\. Therefore, the present update does not present these spending categories as separate items\. Incorporating these adjustments, Table B1 presents the cost structure for: i) private internship only; and ii) average taking into account the different types of internship\. The opportunity cost is estimated based on labor income and employment probability for the 18-24 youth, with incomplete secondary education, belonging to quintiles I and II (EPH 2013-II)\. It emerges that, in both cases, unit cost per beneficiary is in line with estimates at appraisal ($2,953), although slightly lower\. Table B1\. Cost Structure Youth Internship Average (Private Sector, Public Private sector only Sector, NGO) Stipend paid by the government $823 $945 Stipend paid by the employer $299 $108 Private Opportunity Cost of Training $1,213 $1,487 Total $2,335 $2,540 Again, the gains per beneficiary that would make this activity economically viable depend on the number of years that the beneficiary works\. With 45 years of work and a 12% discount rate, additional income of US$ 307 per year, per beneficiary, would be needed (about 68% of the monthly minimum wage\. Table B2\. Youth Internships – Unit Cost and Gain per Beneficiary to Break Even Annual increment in Beneficiary income to Unit Cost per break even Beneficiary 45 years of 25 years of 5 years of working life working life working life Private sector only Discount Rate 12 per cent $2,335 $282 $298 $648 Discount Rate 8 per cent $2,335 $193 $219 $585 Average (Private Sector, Public Sector, NGOs) Discount Rate 12 per cent $2,540 $307 $324 $705 Discount Rate 8 per cent $2,540 $210 $238 $636 48  b\. General Evidence on Benefits The impact of interventions such as technical training, completion of secondary school, employability workshops and on-the-job training on different age-groups of workers has been the object of extensive and well-known research at international level\. This section briefly recalls some of the conclusions highlighted by the international literature and presents specific evidence for Argentina collected by the MoL on labor market outcomes of Project beneficiaries of competency-based training and the promotion of youth employment, based on administrative data and the National Household Survey (EPH)\. International evidence There is widespread consensus on the positive returns of education on labor market outcomes, both in developed and developing countries\. Among others, findings by Hanushek et al\. (2011), Blundell et al\. (2005) and Card (1999), indicate that at the individual level, higher education levels are associated with improved employment opportunities and higher earnings\. In Latin America, returns to secondary education have been positive although decreasing in the last decade (Manacorda et al\., 2005, and Gasparini et al\., 2011) consistent with the observed increase in coverage of this educational level experienced by the region\. Evidence on the impact of occupational training on labor market outcomes is more mixed\. Recent studies in several European countries find that youth vocational graduates enjoy a faster transition to work, are more likely to have a permanent first job, and are less likely to find themselves in a first job with a qualification mismatch (CEDEFOP, European Centre for the Development of Vocational Training - 2013)\. Hanushek et al\. (2011) get similar results for a broader set of developed economies, although they warn that positive impact is usually short- term and decreasing with time\. Evidence is less straightforward for developing countries\. Almeida et al\. (2014) find no effect of occupational training on the probability of being employed in Turkey, but a positive effect on the quality of employment\. Murrugarra (2011) and Bodewig & Hirshleifer (2011) point to the importance that occupational training could have for specific segments of the population, particularly old-age workers, in Latin America and Eastern Europe & Central Asia, respectively\. Finally, a growing literature has been focusing its attention on the effect of lifelong-learning activities on labor market outcomes of youth, specifically\. Among others, Cooper et al\. (2011) focus on strategies in Latin America targeted to at risk youth population that are no longer in the educational system, an approach similar to the one adopted in Component C of this Project\. They found that there is scarce robust evidence of the effectiveness of these programs\. Nevertheless, they do remark on the importance of “life skills” - personal discipline, formal appearance, personal conduct, fluent language and a sense of the position in the hierarchy –as equally or even more important than technical skills\. In terms of evidence on job training programs for youth in Latin America, Ibarraran & Rosas (2009) find that this particular activity increases the employment rate by about 0 to 5 percentage points—with higher and significant for some groups such as women –with an impact of 6 to 12 percentage points in the employment rate\. In most cases there is a larger and significant impact 49 on job quality, measured by getting a formal job, having a contract and/or receiving health insurance as a benefit\. New evidence for Argentina The MoL conducted a quasi-experimental impact evaluation 17 on occupational training 18, which was completed in 2013\. The study focused on the impact of sectoral (or competency-based) training on employment outcomes among individuals who had participated in such training in 2010 19\. A comparison group is constructed by Propensity Score Matching (PSM), on the basis of some observable socio-demographic and behavioral characteristics (gender, age, educational attainments, geographical origin and location, experience in the formal labor market) previous to treatment\. Data on both treatment and comparison groups are drawn from the MoL administrative data, completed labor force histories from those who registered in municipal employment offices and expressed interest in employment services, thus reducing the potential risk arising from differences in motivation (unobservable) among the two groups\. The scope of the analysis is limited to the impact on the likelihood of getting a job in the formal sector, thus disregarding other potential benefits such as wage increase or labor income from a job in the informal sector 20\. The evaluation finds that participation to occupational training increases the likelihood of finding a job in the formal sector from 10% to 13%\. Notwithstanding that this represents a 30% increase with respect to the comparison group; the employment probability is still low for both groups\. This could be explained by the fact that, despite the occupational training, beneficiaries are still part of a vulnerable group with serious deficiencies in terms of educational attainment and experience in the formal market\. 17 Evaluación de impacto en la inserción laboral de los beneficiarios de los cursos sectoriales de formación profesional, MTESS, 2013\. 18 The quasi-experimental approach is very useful in situations in which it is difficult to apply a random discrimination between population that participate in a determined policy and those who do not\. Difficulties can arise for a variety of reason during policy implementation (political choice, logistics, lack of resources\.)\. For a similar application of the quasi-experimental approach in the evaluation of employment policies, see King et al\. (2012) and Card et al\. (2010)\. 19 As such, please note that results apply only to a subgroup of the total beneficiaries of occupational training under this Project\. 20 This quasi experimental impact evaluation was internally reviewed within the Bank\. The reviewers congratulated the work and the innovative use of PSM with administrative data\. To strengthen the study’s robustness, reviewers suggest considering to combine the PSM approach with Difference-in-Difference (DiD), in order to make sure to control for unobservable characteristics\. The DiD, that requires following both treated and control groups over time, is feasible in this case given the availability of administrative, longitudinal data\. Provided that both groups show similar characteristics over time/ trends (before the treatment), this approach would avoid the potential bias from unobservable characteristics\. Combined with the PSM already used in the MoL study, this would ensure a robust impact evaluation\. 50 The study also presents important findings for other Components of the Project and the interaction between them\. It finds that when occupational training is accompanied by completion of mandatory schooling and experience in the formal sector, the likelihood of finding a job in the formal sector for these vulnerable beneficiaries increases from 31% to 36% for men and from 27% to 30% for women, justifying the broad scope and the flexible structure of the Project\. The EPH is quite useful to identify differences in labor conditions for population that has completed mandatory schooling, with respect to those who have not, those providing some evidence on activities under Component B\. Data from 2013 21 highlight that among population aged 20-64, those with complete secondary education have a 10% higher probability of having a job with respect to those who do not\. Among employed, those with complete mandatory school enjoy a 55% higher salary, and are 27% more likely to be employed in the formal sector\. Among youth (18-24), complete secondary school translates in a 13% higher probability of being employed, and 29% higher probability of working in the formal sector\. These data are consistent with findings in a recent paper by Alzúa, Gasparini and Haimovich (2010) that show that in Argentina years of education are causally linked to probability of being employed, average wage and the No\. of hours worked\. In terms of Component C, the MoL used administrative data from the social security registry to describe some of the labor outcomes enjoyed by beneficiaries of the Programa Jóvenes con Más y Major Trabajo (PJMyMT)\. The analysis is restricted to those who have at least participated to the labor orientation workshop\. It considers those beneficiaries who are no longer enrolled in the program, and evaluates their insertion in the private labor market within 12 months (time 1) after their “graduation” (or simple exit, at time 0) from the program\. The evaluation also presents results for a comparable group built based on the National Household Survey, which showed similar characteristics at time 0 (age 18-24, less than complete secondary school, not attending school, and unemployed or under-employed, informal workers in the base year)\. On average over the period 2008-2012, 19\.1% of the youth that participated in some activities of the program 22 were found to have found a job in the formal private sector within 12 months after exiting the program\. On average, only 9\.6% of the comparison group of non-beneficiaries (drawn from EPH) found a job in the formal sector\. Therefore, in the period 2008-2012 Project beneficiaries were nearly twice as likely to find a formal job relative to the comparison group\. Finally, the results of the Project PDO indicators offer informative data on benefits from participating in Project activities\. Among the beneficiaries of occupational training (component A), 53\.8% obtained either formal employment or higher salary within a year\. The 48\.7% of adults certifying completion of basic education (component B) found a job in the formal sector or obtained a wage increase\. Among the youth (component C) participating to on-the-job training, 56% got a formal job\. 21 Encuesta Permanente de Hogares, II trimestre 2013, INDEC\. 22 Unfortunately, results per specific type of activity are not available\. 51 Final considerations from the literature review International evidence on the active labor market policies such as occupational training and youth employment do not give a final word on the impact of such programs, nor its magnitude or duration\. This is even truer for literature reviewing examples in Latin America\. Note that this does not mean that these policies do not have an impact on labor market outcomes, but only that until now the literature have not been able yet to combine strong methodological choices with availability of data, in order to provide final evidence\. The Argentine MoL does a good job in providing first evidence on the impact of occupational training and employment services for youth in the context of the Lifelong Learning project, but even in this case the robustness of results could be improved\. This observation reinforces the rationale for estimating the Project's efficiency by using a Net Present Value (NPV) approach, avoiding making arguable assumptions on potential quantitative benefits\. In this way, the NPV presents a conservative, and yet clear, argument for the Project's effectiveness given the very low, marginal benefit that would eventually be sufficient for the project to break even\. 52 References used in the Economic and Financial Analysis Aedo, C\. (2007) “Argentina Life Long Learning and Training Project - Economic Evaluation”\. Project Appraisal Document Almeida, R\. et al\. (2014)\. “The Impact of Vocational Training for the Unemployed\. Experimental Evidence from Turkey”\. World Bank, Policy Research Working Paper 6807 Blundell, R\. et al\. (2005)\. “Evaluating the impact of education on earnings in the UK: models, methods and results from the national child development survey: \. Journal of the Royal statistical society: series A, July 2005, Vol\. 168, No 3, pp\. 473-512\. Bodewig, C\. & Hirshleifer , S\. (2011)\. “Advancing Adult Learning in Eastern Europe and Central Asia”\. World Bank, SP Discussion Paper NO\. 1108 Cedefop (2013)\. “Labour market outcomes of vocational education in Europe\. Evidence from the European Union labour force survey”\. CEDEFOP, Research Paper No 32 Card, D\. (1999)\. “The causal effect of education on earnings”\. In: Ashenfelter, O\.; Card, D\. (eds)\. Handbook of labour economics\. Amsterdam: Elsevier, Vol\. 3A, pp\. 1801-1863\. Cooper, R\. et al\. (2011)\. “Expertise on Evidence of Good Practices of Life Skills and Employability: Programs for High Risk Youth in Latin America”\. JPAL Gasparini, L\. et al (2011)\. “Educational Upgrading and Returns to Skills in Latin America\. Evidence from a Supply-Demand Framework, 1990-2010”\. CEDLAS\. Hanushek, E\.A\. et al\. (2011)\. “General education, vocational education and labour-market outcomes over the life cycle\.” Bonn: IZA, Institute for the Study of Labour\. IZA discussion paper; No 6083\. Ibarraran, P\. & Rosas, D\. (2009)\. “Evaluating the Impact of Job Training Programs in Latin America: Evidence from IDB funded operations”\. Journal of Development Effectiveness King, C\. et al\. (2012)\. “Local Investments in Workforce Development: 2012 Evaluation Update”\. Ray Marshall Center for the Study of Human Resources Manacorda, Marco, Sanchez-Paramo, Carolina and Schady, Norbert (2005) “Changes in returns to education in Latin America: the role of demand and supply of skills”\. CEPDP, 712\. Centre for Economic Performance, London School of Economics and Political Science, London, UK\. ISBN 0753019116 Murrugarra, E\. (2011)\. “Employability and Productivity among Older Workers: A Policy Framework and Evidence from Latin America”\. World Bank, SP Discussion Paper NO\. 1113 MTEySS (2012)\. “Informe Programa Jóvenes con Más y Mejor Trabajo” 53 MTEySS (2013)\. “Evaluación de impacto en la inserción laboral de los beneficiarios de los cursos sectoriales de formación profesional”\. 54 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Maria Lucy Giraldo Senior Procurement Specialist LCSPT LCSHS- Theresa Jones Lead Operations Officer DPT Juan Prawda Consultant EASHD LCSHS- Marcela Ines Salvador Social Protection Specialist DPT Supervision/ICR Mario Cristian Aedo Inostroza Sr Education Econ\. ECSH2 LCSHS- Jorge C\. Barrientos Consultant DPT Sergio Espana Consultant LCSHE Ana Maria Grofsmacht Procurement Specialist LCSPT Luz Maria Meyer Financial Management Analyst LCSFM Juan Prawda Consultant EASHD LCSHS- Marcela Ines Salvador Social Protection Specialist DPT Alejandro Roger Solanot Sr Financial Management Specialist LCSFM Isabel Tomadin Safeguards Consultant (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY06 5\.85 38\.01 FY07 39\.16 248\.78 FY08 0\.95 -0\.49 Total: 45\.96 286\.30 Supervision/ICR FY06 0\.00 0\.00 FY07 0\.00 0\.00 FY08 12\.99 111\.30 FY09 12\.46 94\.07 FY10 14\.99 111\.53 FY11 37\.90 116\.72 FY12 26\.73 103\.19 FY13 30\.62 134\.58 FY14 29\.45 137\.44 55 Total: 165\.14 808\.83 56 Annex 5\. Beneficiary Survey Results (if any) 57 Annex 6\. Stakeholder Workshop Report and Results (if any) 58 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR English Summary of the main points from Borrower’s contribution Component A: • The Project consolidated a social and institutional base for lifelong learning by creating and strengthening the Tripartite Sector Councils of Certification and Training\. • The MoL values the opportunity offered by the Project to achieve the standardization and the adoption of written administrative procedures, contributing to the organization of the area and the systematization of actions\. This has allowed the institutionalization of the different lines of work, both within the MoL and other agencies of the National Public Administration\. • The systematization of procedures that were fragmented, and consequently the establishment of unified mechanisms of work enabled the counterparts and MoL to consolidate technical teams and to work together\. • A better organization of administrative procedures also helped to achieve a large scale in the execution of training activities and to monitor results\. • The Sector Councils have promoted a regional and territorial view\. Instruments were developed to track implementation progress\. The result-oriented approach and the definition of targets at each phase contributed to the development of annual plans consistent with the goals and needs of each sector and region\. • The norms and competency-based approach brought about a systematic organization of the training supply provided by the MoL\. The Project helped to promote a policy of institutional quality with a central focus on Lifelong Learning; it drew on a highly technical approach and promoted the transfer and dissemination of knowledge to the private sector\. • Standardization of work roles (norms) has greatly contributed to the development of a policy for equity\. The assessment and the subsequent certification of competences promoted the recognition of knowledge, skills and abilities of workers who, for social, economic and family reasons, had to interrupt their educational trajectories\. • The Project emphasis on achieving results was highly valued\. Performance management modified the procedures followed by the MoL’s technical teams at the central and regional levels, as well as among technicians in the sectors\. • An interesting aspect of this Project was its implementation through the institutional structure of the MoL and regular staff dedicated to the respective components, instead of an ad-hoc, separated implementation unit\. • The sustainability of the Component’s strategy and activities is supported by a) the established management capacity of the MoL, the strengthened institutions, and ownership of the strategy by the main Sectors and b) the legal documents (Resolutions) that move towards the creation of the Lifelong Learning System as well as its main strategic lines\. 59 Component B • At the time of project design, it was expected that some provinces, including Buenos Aires and Santa Fe that traditionally carried out innovative policy initiatives would participate in the actions of this component\. However, the two mentioned provinces ended up not participating because of institutional changes that occurred during the first year of the Project\. • Obtaining data and information on the results achieved by the participants constituted a major challenge to overcome\. This is in part because of differences in registration procedures used by provincial educational ministries and the MoL (Statistical vs\. Nominal Administrative data)\. This difficulty adversely influenced both the verification and timely achievement of the goals\. • Among other challenges, the MoL highlights the promotion of some of the innovations, especially the possibility to recognize participants’ prior technical knowledge as part of the academic curriculum and the evaluations of performance\. • The innovations financed by the MoL incentivized the National Education Ministry to promote similar initiatives, financed by the European Union, which were complementary to this project, supporting the need for change in adult educational policy in Argentina, as indicated by previous studies used at the Project design stage\. • The MoL highly valued the concern by the World Bank to obtain information on the results achieved by the participants, as it helped to strengthen the technical team "to work for results\." • Procurement processes were long and complex given the timing of the school calendar\. Component C • The design of the national youth program was based on a pilot project undertaken by the MoL ("Youth with a Future" Program)\. In view of the magnitude of the youth employment problem, the Ministry recognized the need to implement a policy with greater coverage and scope aimed at young people aged 18 to 24 who had not completed formal studies and had difficulties with their insertion in the labor market\. This decision was based on the understanding that the most important determinants that explained the main issues affecting youth in households with low incomes, are linked to the lack of a set of basic skills usually required to access quality employment (formal education, job training, work experience, etc\.) Thus in 2008 the Youth with More and Better Jobs (PJMyMT) was launched\. • The Business Network, which served the "Youth with a Future" Program, did not respond to the large-scale PJMyMT\. During Project preparation, the Network was envisaged as the principal mechanism to incorporate program participants in internships given the size of the companies participating to the Network\. However, most of these companies were located in the metropolitan area of Buenos Aires, and could not offer opportunities nationwide\. Moreover, the participation of businesses was not adequately promoted and the scale of internships in this Network (1000 young people a year) wouldn’t be sufficient to achieve the Project’s goal\. 60 • 364 municipalities received support for municipal employment offices (MOE) to serve young people, thereby covering the main urban centers in the country and surpassing the goal that was set\. • The main challenge was to strengthen the links with the productive and institutional context (particularly training institutions and other specialized organizations) locally\. • Institutional strengthening through financing and training of human resources in the areas of youth employment has allowed the MOE to have a specialized area that applies specific strategies for youth, including interventions to address the characteristics of this target group, remove barriers and ensure their inclusion in the labor market\. • The personalized service offered by the MOE was able, through progressive interventions, to close the gaps between the youth and the labor market in order to "build bridges" and overcome gender barriers, lack of basic employability skills, strengthen their self-esteem, communication skills and ensure access to other benefits (i\.e\. child care)\. • Heterogeneity of municipal institutional realities generated uneven performance\. In some cases, the increasing demand of the program exceeded the institutional capacity to provide an adequate supply of benefits/services\. These circumstances demonstrate the need to continue strengthening the MOE in their joint work with local contexts, developing better links with both training institutions and employers\. • The MoL has been promoting municipal employment services since 2006, and the area of youth employment, from 2008\. The period is still relatively short for such a complex institutional framework to mature\. Moreover, considering that the MOE are under the jurisdiction of municipalities, the ability of the MoL to promote more even interventions was limited\. The management arrangements in each locality necessarily affect the results\. • In some municipalities, the short time since the installation of the MOE was the main reason for the low "recognition” obtained among local actors, particularly among the employers\. It is necessary to develop more intensive outreach strategies to local private companies to build bonds of trust and use of the services offered by the MOE\. • About opportunities for training and / or education for youth, one of the main challenges is to expand and strengthen the supply of technical and vocational training based on a competency-based approach and establish a stronger relationship between the training institutes and the MOE\. • Internships for Youth presented major difficulties for its implementation, which affected the overall development of component 3 particularly compared with what is described in the Project’s original design\. • Nevertheless, the Ministry made countless efforts to promote practices among young people valuing that experience in a work environment as a key learning for the population served by the program\. • In this sense, new areas were opened-not originally foreseen in the Project-to provide opportunities for young people\. The agreement with state agencies and non-governmental organizations expanded the supply of internships\. These are lines of action that will need to be enhanced in the future\. Also extending the relationship with government agencies to promote internships will be another way to promote internships\. • Another possible strategy to promote internships in the productive sectors would be to coordinate through the Sector Councils\. • The decentralization of management in municipalities using their network of employment offices reflected a high dispersion in the interventions\. 61  • Notwithstanding the challenges, the MoL is satisfied with the results achieved during Project implementation, which show significant annual growth in youth participation in internships\. In all nearly 90,000 youth went through this kind of experience in the Project and the young men and women who participated have expressed high satisfaction and incorporated meaningful learning to bring them closer to the labor market\. Component D • The MoL recommended properly considering timing and level of negotiation demanded by the integration of the different developments of the program\. This system was able to carry out the physical management of several components, and has also provided information relevant to its assessment\. • The adoption of a legal framework supporting the information process was a key factor to move from technical development to the consolidation of a MIS\. Regulating the developed management tools has allowed for sustainability and has also attributed clear accountabilities to each area of the MoL, as well as to the rest of the agencies that are part of the MIS\. • The MoL appreciated the flexibility of the Management System, which enabled its compatibility with the array of databases and applications used by the Ministry\. This coordination facilitates cross-checking massive volumes of information managed from other organizational units (those related to social security were particularly useful)\. Recommendations to the World Bank • It would be important to adjust the procedural mechanisms to local characteristics and regulations of the country, as more flexibility does not necessarily undermine transparency, and supports the realization of the goals\. • The Bank might change some administrative processes (procurement) to adapt them to existing commercial and financial procedures in Argentina\. • The purchase of equipment and materials using Bank procedures would be one aspect to re-consider in any new loan\. They are not appropriate for the characteristics of a Project like this one\. A more streamlined procurement process is not incompatible with the standards of transparency and can meet the criteria of efficiency and effectiveness\. • The World Bank technical teams need to be more informed about MoL plans and programs, particularly those that respond to local requirements\. • It has been clearly expressed and demonstrated that for the purposes of local technical assistance (training institutions); the skills of national consultants are more relevant and appropriate\. The expertise of foreign consultants is more appropriate for knowledge exchange, seminars or similar activities\. • Under Component 3, it should be noted that the relationship between the MoL and the Bank was fluid during preparation and execution\. The Bank had flexibility to understand the obstacles that made the achievement of results difficult, and the efforts made by the MoL to promote improvements were positive assessed\. However, it would be appropriate for the Bank reviews to have a more comprehensive view of the different components of a Project, particularly when the actions of some of them may affect the achievement of another\. 62 • As was stated in the Aide Memoires, throughout Project execution, the performance on the main indicator for Component 3 was discussed extensively\. In this regard, it was agreed to expand the definition of the outcome indicator\. While there was willingness from the Bank to understand the situation, it would have been better to formally change the indicators provided in the PAD, to show more clearly the achievements of the Project\. • The Bank could contribute and support the dissemination of lessons learned during the implementation of the Project to a greater extent and promote exchanges between similar experiences\. • The development of systems for the collection and massive exploitation of information is essential to the implementation of public policies at large scale\. Its use is not limited to implementation monitoring (physical or financial), but it is also linked to access to public information, impact assessment and results accountability\. The MoL recommended the Bank to continue supporting this type of developments as part of more general institutional processes, as was the case in this project\. 63 Full version in Spanish El propósito de este informe es presentar de manera sucinta los logros, los desafíos y las principales lecciones aprendidas del Proyecto mencionado\. Componente A Ampliación y fortalecimiento del sistema de capacitación y certificación basado en las competencias Componente B Ampliación de la cobertura y de la certificación de Educación Básica para adultos Componente C Fomento del empleo para jóvenes a través de servicios de empleo, educación, capacitación y pasantías\. Componente D Fortalecimiento de los sistemas de información y gestión para la formación y capacitación basadas en competencias El objetivo del proyecto fue contribuir a la consolidación, fortalecimiento y aumento de la cobertura de un Sistema de Formación Continua, capacitación y certificación basado en competencias laborales, destinado a adultos de 18 años o más, con el propósito de que los participantes: (i) mejoren su empleabilidad y (ii) refuercen sus oportunidades de avance en sus carreras profesionales\. Por otra parte, su ejecución mejoraría la calidad y relevancia de los servicios de capacitación y formación general de adultos al mismo tiempo de apoyar la creación de un Sistema de Formación Continua y Certificación de Competencias Laborales vinculado con el empleo\. Los Componentes mencionados anteriormente permitirían el logro de esos objetivos\. A los efectos expositivos, se han respetado para la organización de este informe los componentes y subcomponentes que integran el Proyecto, considerando los siguientes cinco ejes: • Principales aprendizajes adquiridos durante la ejecución del Proyecto; • principales desafíos; • qué se valora y qué cambiaría; • qué recomendaciones le haría al Banco Mundial, y • cómo ve la sostenibilidad de la línea que lleva adelante\. Componente A: 1\. Sobre los subprocesos de normalización, evaluación y certificación de trabajadores y trabajadoras basados en normas de competencia laboral\. Principales aprendizajes adquiridos durante la ejecución del Proyecto: 64 Como avance en el proceso de consolidación del Sistema de Formación Continua y la creación de una base social e institucional de sostén del mencionado Sistema, uno de los aprendizajes a destacar lo constituye el proceso de creación e institucionalización de los Organismos Sectoriales de Certificación\. Éstos están conformados en su mayoría, por actores sindicales y empresariales en forma conjunta\. A pesar de que estos actores en algunos casos sostienen intereses contrapuestos; los procesos de normalización, evaluación y certificación de trabajadores, -piezas clave de la formación continua-, lograron consolidar puntos de consenso que potenciaron la participación conjunta de ambos actores del mundo del trabajo\. Así se ha modificado la lógica en la que era sólo uno de los actores mencionados el que se involucraba en el reconocimiento y en la mejora de las competencias de los trabajadores de un sector de actividad, consolidándose de este modo una base importante para la realización efectiva del diálogo social de actores\. Para llevar adelante el enfoque de las competencias laborales, fue importante la apropiación y profesionalización por parte de los actores sociales, -sindicatos y empresarios- del proceso de normalización y certificación de competencias laborales de los trabajadores y de las acciones que supone este proceso\. Se partió de un esquema altamente técnico, desconocido en el marco estatal, que promovió la capacidad de transferencia y divulgación hacia el sector privado de estos conocimientos\. Esto permitió la multiplicación e intercambio de saberes y la adquisición de competencias que no estaban disponibles sistemáticamente en espacios educativos o especializaciones para los profesionales\. Aún hoy su aparición es incipiente en algunas instituciones\. Cabe señalar por otra parte y relacionado con el concepto del párrafo anterior, que la norma de competencia laboral al promover el proceso de certificación cumplió por un lado, un cometido social –reconocimiento de las competencias laborales de los trabajadores en el ejercicio de un oficio- y por otro un proceso sistemático de ordenamiento de la formación profesional brindada por el MTESS\. Principales desafíos: Uno de los grandes desafíos fue vencer las resistencias de algunos sindicatos en promover entre sus trabajadores la certificación de competencias\. Para esto fue fundamental la formación continua que permite brindar apoyo al trabajador para mejorar sus cualificaciones\. Otro de los desafíos con los que se encontró esta línea ha sido la necesidad de incorporar en la visión del empresariado, las ventajas comparativas que significaba la posibilidad de evaluar y formar a sus trabajadores bajo parámetros normalizados y poder así orientar sus planes de capacitación con un criterio fundado en un diagnóstico técnico\. Si bien la implementación del Proyecto facilitó un desarrollo exponencial de la evaluación de competencias de los trabajadores, un desafío a resolver en el futuro es lograr una mayor profundización y ampliación de las acciones de evaluación y certificación hacia nuevos sectores de actividad\. 65 Qué se valora y qué cambiaría: Como valoración positiva se puede mencionar que este Proyecto ha permitido la sistematización de procedimientos que se encontraban fragmentados, y consecuentemente, la constitución de mecanismos unificados que posibilitaron a las contrapartes, consolidar equipos técnicos para el trabajo con la Dirección\. En los sectores que han promovido más la evaluación de las competencias de los trabajadores, estos equipos han ganado solvencia técnico profesional y administrativa\. En forma adicional, la sistematización de procedimientos mencionada dio lugar a la construcción y actualización de normativas específicas para la gestión de la formación continua que confluyeron en la Resolución de creación de la línea de Certificación Sectorial y su reglamentación (Resoluciones MTESS N° 1471/11 y 247/13, respectivamente)\. A modo de sugerencia, se podría modificar la estructura de los proyectos a los efectos de que sean más dinámicos y que permitan su revisión y modificación en función de la experiencia acumulada durante su ejecución\. A su vez, sería importante profundizar la difusión de las acciones de normalización, evaluación y certificación de competencias laborales, entre el sector empresarial\. Qué recomendaciones le haría al Banco Mundial: A partir de la experiencia acumulada en esta línea en los años de ejecución del Proyecto, se aconseja considerar las formas en que los actores involucrados se apropian de las acciones previstas aun cuando éstas no respondan taxativamente a los esquemas propuestos en el Proyecto\. Por el otro, sería importante ajustar los mecanismos procedimentales a las características territoriales y regulaciones vigentes en el país, dado que una mayor flexibilidad no atentaría contra la transparencia, y apoyaría la concreción de las metas\. Cómo ve la sostenibilidad de la línea que lleva adelante Este es un desafío a considerar\. En efecto, a medida que se profundicen las acciones, serán mayores las demandas de los empresarios y la posibilidad de autofinanciamiento de Organismos Sectoriales\. Para ello es central que los actores puedan sostener los consensos logrados y que los que todavía no han incorporado los procesos de certificación, puedan avanzar en ese sentido\. 2\. Acerca del Fortalecimiento de las Instituciones de Formación profesional El desarrollo de este subcomponente comprende tanto las acciones de mejora de la calidad de las Instituciones de Formación Profesional, la certificación de la calidad de las mismas, como la formación de docentes y diseños curriculares\. 2\.1 Fortalecimiento de las Instituciones de Formación profesional Principales aprendizajes adquiridos durante la ejecución del Proyecto 66 En cuanto a los Proyectos de Fortalecimiento de la Gestión de las Instituciones de Formación Profesional, uno de los principales aprendizajes en esta línea lo constituye la mejora en la sistematización de procedimientos en cuanto a lo requerido para la presentación de proyectos por parte de las instituciones, el desarrollo de su ejecución, la adquisición del equipamiento, la contratación de consultorías y el registro de instalación del equipamiento en las instituciones destinatarias\. Ante las exigencias establecidas por el Reglamento del Préstamo BIRF ARG 7474, se generaron instrumentos de registro en el interior del área que luego fueron utilizados para Proyectos de otra fuente\. Otro aspecto que contribuyó en este proceso fue el planteamiento de metas físicas para cada etapa básica (Precalificación, Plan de mejora y Certificación) así como para cada año de ejecución del Proyecto\. Esta información contribuyó al desarrollo de una Planificación anual de los proyectos acorde a las metas y a las necesidades de las instituciones por sector y por región\. En lo relativo a la línea de Certificación de Calidad, la contratación directa de la Asistencia Técnica (FAM) y del Organismo Certificador (IRAM) por un número predeterminado de Instituciones, agilizó el cumplimiento de las metas de certificación a partir del segundo año de ejecución en el que se planteó una meta mayor en cada contratación\. En este sentido el cambio de modo de contratación que se solicitó en la última etapa del proyecto, al exigir que se hiciera por concurso, demoró y dificultó hasta la fecha la finalización de las acciones comprometidas\. Qué se valora y qué cambiaría Se valora la posibilidad de extender la Red de Formación Continua a diferentes sectores y diferentes territorios, brindando no sólo apoyo en la adquisición y actualización del equipamiento existente en los centros, sino también apoyando la implementación de herramientas de gestión con criterios de calidad en todos los centros miembro de la Red\. Podrían modificarse algunos procesos administrativos de los procedimientos de compra centralizada, de modo de adecuarlos al circuito comercial y financiero de la Argentina\. Esto sería importante a los efectos de no tener que dar de baja la compra del equipamiento comprometido para el fortalecimiento de una institución, por razones administrativas ajenas a la estrategia del Proyecto\. Cómo ve la sostenibilidad de la línea que lleva adelante La sostenibilidad de la línea está dada por la capacidad de gestión instalada en las instituciones fortalecidas, la introducción de las IFP en procesos de documentación de procedimientos y registro, asegura la continuidad del Plan de mejora transferido\. Los actores responsables de las Instituciones a través de la asistencia técnica del equipo a cargo y las reuniones de transferencia de las metodologías e instrumentos desarrollados en las dimensiones de la calidad de la gestión, logran apropiarse de los procesos básicos\. Estos procesos se refuerzan con la certificación y revalidación de la calidad que se realiza en una segunda etapa en un grupo de Instituciones con mejor nivel de avance\. 67 2\.2 Formación Docente y el Desarrollo de Diseños Curriculares Principales aprendizajes adquiridos durante la ejecución del Proyecto El Proyecto facilitó la decisión de la Dirección de elaborar los diseños curriculares propios y el correspondiente material didáctico\. Promovió en ese sentido una metodología de trabajo con la participación de expertos y actores sociales a fin de obtener un producto consensuado para el desarrollo de las capacitaciones\. Uno de los principales logros del Componente A y de este subcomponente en particular, es la elaboración de la matriz de calificaciones\. Elemento ordenador de la Formación Continua, permite vincular la norma de competencia laboral con el diseño curricular específico\. Por otra parte y, tal vez ya con una visión general sobre el Componente, uno de los aprendizajes a mencionar en esta línea, ha sido el reconocimiento de la necesidad de sistematización y desarrollo de un registro permanente de las acciones ejecutadas o en ejecución\. En general, en el quehacer diario, no se dimensiona la progresión de las actividades y metas de cada equipo\. Cada visita del Banco ha requerido de informes que deben disponerse a partir de una base de datos actualizada, lo que permite, informe tras informe, visualizar las tendencias que se vienen expresando\. A su vez, a partir de la práctica sistematizada en procesos y registros, se ha desarrollado una mayor capacidad para establecer hipótesis de trabajo\. Principales desafíos Es un desafío para esta unidad, el sostener la calidad alcanzada a la par del desarrollo y ampliación de las líneas de acción\. Lo que antes era un objetivo, ahora es un escalón que mueve a objetivos más altos\. La innovación tecnológica en los sectores de actividad incita a la incorporación de nuevas tecnologías, muy vinculadas a lo audiovisual y comunicacional con impacto en la elaboración de los materiales didácticos Qué se valora y qué cambiaría Es profundamente valorado por este equipo de trabajo el haber logrado la sistematización de las acciones\. Esto ha permitido en principio, institucionalizarlas en líneas, tanto hacia el interior de la Dirección (Resoluciones MTESS 1204/2011 y SE N° 1550/2012) como hacia otras direcciones dentro del mismo ministerio, y en relación con las contrapartes y distintas dependencias de la Administración Pública Nacional\. Por otro lado, la actualización permanente de la información y su traducción en datos, ha permitido revertir la lógica del trabajo “a demanda”, esto es, a partir de la solicitud de los actores, y sustituirla por otra que responda a la coherencia que instala la implementación del Sistema Nacional de Formación Continua\. Se propone cambiar algunos aspectos de los procesos de licitación para acciones de consultoría\. Por tratarse de actividades en las que, a los fines para los que se solicitan, se pondera más el componente cualitativo, el proceso de evaluación y los instrumentos resultan algo rígidos\. 68 Qué recomendaciones le haría al Banco Mundial Se recomendaría por un lado, a los equipos técnicos y consultores intervinientes por Banco Mundial, una mayor consustanciación con los planes y programas del MTESS, en particular por las necesidades a las que responden y el anclaje local necesario para otorgarles sentido\. Por otro lado y en relación a los procesos licitatorios, el desconocimiento sobre la complejidad de las realidades y contextos de los sujetos destinatarios de los planes y programas, así como de las variaciones que impone la distribución de talleres de capacitación y actualización de directivos y docentes de IFP en un país de vasta extensión territorial y diversidad cultural, trajo aparejado demoras debidas a reiteradas solicitudes de No Objeción ante contingencias presentadas por fuera de la linealidad del proceso de contratación, propias del dinamismo del trabajo de cada área técnica en sí misma\. Si los procesos contemplaran un rango más amplio de opciones, a disponer según criterio del responsable por la contratante, estos tiempos se verían sensiblemente reducidos e impactarían favorablemente en la ejecución de las metas propuestas, porque podrían agotarse en el transcurso de 1 año\. Cómo ve la sostenibilidad de la línea que lleva adelante\. El Proyecto ha contribuido a visibilizar la labor de construcción de los diseños curriculares como elementos centrales en lo que a la formación profesional, a partir del enfoque por competencias, se refiere\. En ese sentido, la decisión de institucionalizar esta tarea como línea independiente pero articulada con el resto de los equipos del Sistema de Formación Continua, es un elemento importante que fortalece la sostenibilidad de estas acciones\. Otro aspecto a resaltar, más relacionado con los aprendizajes pero también vinculado con la sostenibilidad de las acciones de Formación Docente y Diseño Curricular, es que de la experiencia desarrollada con las consultoras adjudicatarias de la licitación, ha resultado claramente expreso y manifiesto que para las necesidades de asistencia técnica local, resulta pertinente y adecuada la asistencia de consultoras nacionales\. La experticia de consultores extranjeros, en cambio, resulta más adecuada para relaciones de intercambio, seminarios o similares\. Si bien una consultora extranjera alcanzó durante el proceso de evaluación una calificación que la posicionó holgadamente en la lista corta, en la práctica concreta ha requerido de excesiva asistencia del equipo técnico de la Dirección de Fortalecimiento Institucional (DFI), para colocar los contenidos en contexto y llevarlos a la realidad de los destinatarios de los talleres\. En suma, lo que debiera haber resultado una acción tercerizada, resultó una sobrecarga de trabajo para el equipo\. 3\. Formación Sectorial Principales aprendizajes adquiridos durante la ejecución del Proyecto Entre los principales logros alcanzados por la línea de formación de trabajadores en competencias laborales se consigna la superación de la meta física alcanzada y la ampliación de los sectores participantes en el proceso de formación de trabajadores ocupados y desocupados\. Se ha logrado trabajar con más de 45 sectores de actividad con una cobertura territorial de alcance nacional\. La adquisición de equipamiento para la ejecución de las acciones de 69 capacitación laboral, el material didáctico utilizado en estas acciones, ha contribuido a mejorar la capacidad de las instituciones de formación profesional que participaron de las actividades del Proyecto\. El proyecto contribuyó fuertemente a la consolidación de las bases del Sistema Nacional de Formación Continua a través de la formación de los Consejos Sectoriales de Formación Continua y Certificación de Competencias Laborales\. Ellos se sustentan en el diálogo social de actores del mundo del trabajo, base fundamental de la formación Continua\. Los Consejos surgieron por voluntad política de la actual gestión del Ministerio de Trabajo, contaron con el apoyo explícito del Ministro Carlos Tomada, pero difícilmente podrían haberse formado y desarrollado si no se hubiera promovido la participación en la formación laboral de numerosos trabajadores de diversos sectores de actividad\. Un aspecto no menor a destacar entre los aprendizajes adquiridos es la organización de procedimientos administrativos para la ejecución masiva de acciones de formación profesional\. Estos han facilitado el ordenamiento de los presupuestos de cursos de costos variables; la definición de la unidad de gestión y control de proyectos en relación al aporte principal de cursos y el diseño de proyectos a plazo medio y seguimiento en relación a resultados\. Principales desafíos En el desarrollo de las acciones se ha logrado alinear a los actores sociales al cumplimiento de los procedimientos de compra de equipamiento según las exigencias del Banco Mundial\. Si bien las compras después de algunos intentos de descentralización se realizaron desde el nivel central, las especificaciones técnicas, la identificación de los bienes adquiridos, las precisiones sobre su localización fueron cuestiones atendidas entre los actores sociales y los equipos técnicos del nivel central\. A su vez, se ha logrado adaptar los mecanismos de entrega de información del Proyecto y de rendición económica en función de lo solicitado por el Banco Mundial\. Qué se valora y qué cambiaría Este equipo valora el hecho de que la estandarización y el establecimiento de procedimientos administrativos escritos, haya contribuido a la organización del área en general\. Por otra parte, sería facilitador adaptar las pautas exigidas por el Banco Mundial para la compra de equipamiento, ya que no es conducente que lo habitual sea la compra por la vía de solicitud de excepciones\. Qué recomendaciones le haría al Banco Mundial Una recomendación a presentar a partir de la experiencia de trabajo de este equipo sería la creación de una línea de asistencia técnica para proyectos que incorporen tecnología novedosa o innovaciones en didáctica\. 70 A su vez, como se señaló más arriba, se recomienda adaptar las pautas de compra de equipamiento para posibilitar y agilizar este tipo de acciones\. Cómo ve la sostenibilidad de la línea que lleva adelante La línea de formación sectorial es sostenible, dado que durante la implementación del Proyecto se ha logrado la apropiación de la misma por parte de los principales actores sectoriales del país\. Componente B Principales aprendizajes adquiridos durante la ejecución del Proyecto El dictado de normas vinculadas con los procesos innovadores en la enseñanza media, la sempiresencialidad, la modularización, por ejemplo, fortaleció las iniciativas innovadoras y permitió su institucionalización, además de contribuir a su sustentabilidad y a la posibilidad de su análisis y aplicación en otras localizaciones geográficas, tomando en cuenta sus características particulares\. Las estrategias compensatorias tales como: útiles, material didáctico, posibilidad de utilización de los servicios de cuidado infantil a través de salas y jardines maternales contribuyeron a facilitar el acceso y la permanencia de los participantes en el sistema educativo\. La flexibilidad en el calendario educativo y la estructura modular permitió el ingreso de los participantes en diferentes períodos del ciclo lectivo y el avance según sus propios ritmos de aprendizaje\. El reconocimiento de saberes previos ayudó a que los participantes con años anteriores cursados, pudiesen ingresar en diferentes trayectos superiores al inicial sin que como respaldo ostentaran exclusivamente una documentación de respaldo\. El desempeño eficiente de los tutores y facilitadores constituyó una importante estrategia para la contención de los alumnos en el sistema educativo y para su apoyo en la resolución de las problemáticas que algunos presentaron\. Este aspecto ha contribuido a la mejora de los niveles de egreso de las provincias innovadoras y en las asistidas por el Ministerio de Trabajo en relación con la información proporcionada por DINIECE\. La incorporación de contenidos vinculados con el mundo del trabajo permitió que los participantes reflexionaran sobre su trayectoria ocupacional y su futura inserción en el mercado laboral o en la gestión de un emprendimiento propio\. La ejecución del componente y la evaluación realizada sobre las provincias con innovación contribuyó a una evaluación integral de la línea de certificación de estudios obligatorios, primarios y secundarios, impulsada por la Dirección Nacional de Orientación y Formación Profesional, (ver informe sobre los resultados alcanzados sobre las siguientes variables: tasa de egreso, duración e inversión realizada) Los mismos criterios de evaluación y las mismas 71 variables fueron aplicadas al resto de las provincias asistidas por el MTESS, que no llevaron adelante procesos de innovación\. Principales desafíos Al momento del diseño del Proyecto y en particular de este Componente, se estimó que algunas provincias que tradicionalmente llevaron adelante propuestas de innovación con un caudal de alumnos matriculados relevante, irían a participar de las acciones del Componente\. Es el caso de las provincias de Buenos Aires y de Santa Fe; sin embargo, los cambios institucionales que se sucedieron durante el primer año de vida del Proyecto hicieron imposible su incorporación a la experiencia de innovación\. No obstante ello, participaron otras que permitieron avanzar en la implementación del Componente\. En la etapa de diseño se consideró que las organizaciones no gubernamentales podrían llevar adelante propuestas innovadoras\. Este fue el fundamento del subcomponente B2\. Tal vez se subestimó la incidencia del Sistema Educativo Argentino según el cual, las jurisdicciones provinciales son las que acreditan la certificación de los niveles obligatorios de enseñanza y tienen la facultad de reconocer las propuestas curriculares que pueden llevar adelante fundaciones o entes privados para cumplir el mismo cometido\. Durante la primera etapa de ejecución resultó pues, difícil encontrar organizaciones fuera del ámbito gubernamental, que proporcionaran estos servicios educativos\. En la vida del Proyecto, el MTESS identificó algunas de dichas instituciones, pero los procedimientos establecidos para su contratación no hubieran permitido observar los resultados alcanzados por la incorporación de los participantes en los estudios obligatorios\. Por tal motivo, ambos organismos, Ministerio y Proyecto, adoptaron criterios específicos y consensuados, para contabilizar la meta del Componente\. Estos criterios constan en las respectivas Ayudas Memoria\. La obtención de los resultados alcanzados por los participantes al finalizar el ciclo lectivo constituyó un desafío muy importante a vencer\. Las diferencias en los sistemas de registro entre las jurisdicciones educativas y el MTESS, -Registro Estadístico vs\. Nominal-, requirió de la colaboración del personal de la supervisión de la Secretaría de Empleo para efectuar el monitoreo de los resultados de los participantes en los niveles de educación primario o secundario (promovido, certificado, abandonó o repitente)\. Los inconvenientes en compatibilizar ambos registros han incidido en la verificación en tiempo y forma del cumplimiento de las metas\. Este equipo considera que uno de los principales desafíos fue promover en el sistema educativo de las provincias asistidas, los procesos de reconocimiento de saberes previos, mediante evaluaciones que permitan observar el desempeño de las diferentes competencias necesarias para el nivel al que podría postularse el participante, ofreciendo diversas alternativas a la presentación de documentación que los acredite\. • Lograr la sustentabilidad de las innovaciones implementadas en las diferentes jurisdicciones con el apoyo del Ministerio de Educación de la Nación\. • Promover el desarrollo de innovaciones en otras provincias/ instituciones para facilitar los procesos educativos sin perder calidad\. • Fomentar la difusión de las acciones desarrolladas a través de publicaciones elaboradas por el Ministerio sobre las lecciones aprendidas\. 72  • Garantizar y promover la sostenibilidad de los procesos innovadores a través de la difusión de lecciones aprendidas por ejemplo en la Provincia de Chaco\. Es importante resaltar que durante el año 2012 el Ministerio de Educación, Ciencia y Tecnología del Chaco aprobó el diseño curricular para la educación inicial primaria y su modalidad adultos y secundarios a través de la Resolución 10\.469/12\. Qué se valora y qué cambiaría Se valora la intervención del Ministerio de Trabajo, Empleo y Seguridad Social con el apoyo del BIRF, para la propuesta y desarrollo y/o fortalecimiento de procesos innovadores en las diferentes jurisdicciones educativas, dado que por la carencia de asistencia técnica y/o financiera se hubiese dificultado la implementación de los mismos\. Además, se consideran positivamente las visitas de seguimiento compartidas con los consultores asignados en las diferentes misiones, las que resultaron provechosas en términos de asesoramiento para la mejora continua de los procesos innovadores y de la sistematización de información\. Los eventos de intercambio de experiencias nacionales que organizamos que sirvieron para la cooperación horizontal y el conocimiento de los diferentes referentes provinciales entre sí, también han sido valorados por este equipo de trabajo\. Se solicitaría la facilitación del proceso de adquisiciones dado que el mismo resulta muy extenso y complejo para su ejecución durante un ciclo lectivo\. Se valora expresamente la preocupación por parte del B\. Mundial de la obtención de los resultados alcanzados por los participantes de las acciones de este Componente\. Qué recomendaciones le haría al Banco Mundial Este equipo recomendaría facilitar el intercambio en el ámbito internacional de los equipos técnicos para un mejor acompañamiento y seguimiento de los procesos que se desarrollan en el marco del proyecto\. Además, aconsejaría los servicios de asistencia técnica prestados al Ministerio con la presencia de consultores internacionales que tengan experiencia en proyectos similares mediante la organización de talleres participativos u otras modalidades en las que se puedan presentar los casos y evaluarlos\. Componente C El Proyecto, a través del Componente C se propuso alcanzar a aproximadamente el 10% de los 1\.7 millones de jóvenes argentinos entre 18 y 24 años de edad sin sus estudios formales obligatorios finalizados, a través de la implementación de servicios de empleo para jóvenes en 250 oficinas municipales de empleo; brindar información y contactar desde la oficina municipal de empleo a 600\.000 jóvenes; y promover la participación de 145\.000 de ellos en trayectos combinados de capacitación en competencias básicas y experiencia laboral\. 73 Cabe señalar que durante el proceso de diseño del Proyecto, sobre la base de una experiencia piloto encarada por el MTESS realizada desde el “Programa Jóvenes con Futuro”, se delineó un programa nacional para jóvenes\. En tal sentido, asumiendo la dimensión de la problemática juvenil, el Ministerio estableció la necesidad de poner en marcha una política con mayor cobertura y alcance destinada a los y las jóvenes de 18 a 24 años que no hubieran finalizado los estudios formales y presentaran dificultades de inserción en el mercado de trabajo\. Esta decisión se sustentó en el entendimiento que los determinantes más relevantes que explican las principales problemáticas laborales que afectan a los segmentos de la población juvenil pertenecientes a hogares de bajos ingresos, se vinculan con la carencia de un conjunto de competencias básicas requeridas habitualmente para acceder al empleo de calidad (estudios formales, capacitación y formación para el trabajo, falta de experiencia laboral, entre otros)\. Así, en el año 2008 se implementó el Programa Jóvenes con Más y Mejor Trabajo (PJMyMT) a través del cual se articulan y coordinan las prestaciones impulsadas por el MTESS dirigidas a mejorar la empleabilidad del mencionado grupo poblacional\. La implementación del PJMyMT se apoyó en la oportunidad brindada por el Proyecto Formación Profesional Permanente, financiado parcialmente por el préstamo BIRF 7474-AR\. El Proyecto posibilitó desarrollar espacios de atención a los jóvenes, desde una perspectiva novedosa en materia de políticas activas de empleo, centrando sus intervenciones con foco en los jóvenes como protagonistas de la definición de su propio proyecto formativo ocupacional\. La estrategia de la política dirigida a los y las jóvenes se apoyó en el conjunto de los componentes del Proyecto: la orientación laboral y apoyo a la búsqueda de empleo, a través de la red de oficinas de empleo municipales; el mejoramiento cuali-cuantitativo de los servicios educativos destinados a jóvenes y adultos; y la oferta creciente de Formación Profesional como resultado del fortalecimiento del Sistema de Formación Continua\. Aprendizajes adquiridos durante la ejecución del Proyecto\. El proceso de creación de áreas de atención a jóvenes en la Red de Oficinas de Empleo Municipales permitió -en el trabajo conjunto con los actores locales- generar un fuerte impacto de sensibilización respecto de la problemática juvenil e identificar las principales barreras que dificultaban la concreción de oportunidades de inclusión social y laboral para los colectivos más vulnerados\. En este sentido, el Proyecto ha logrado instalar el servicio público de empleo como ámbito de referencia para la población juvenil desde el que se promueven estrategias para el desarrollo de un proyecto formativo-ocupacional en el que cada joven puede definir - conforme a sus intereses y a las oportunidades de los mercados de trabajo locales- trayectorias formativas posibles\. Entre los principales logros alcanzados se puede señalar que se superaron las metas de atención a jóvenes que recibieron información del servicio público empleo, así como la de aquellos que realizaron alguna prestación específica orientada a la mejora de la empleabilidad\. Al mismo tiempo, los 364 municipios que recibieron fortalecimiento para las Oficinas de Empleo para la atención a la población juvenil permitieron cubrir los principales centros urbanos del país, sobrepasando la meta que se había programado\. 74 Subcomponente 1: Acerca de acciones de Empleo y orientación vocacional para jóvenes El desarrollo de este subcomponente se propuso el fortalecimiento de la capacidad de las oficinas de empleo de los Municipios (OEM) para la prestación servicios de orientación y tutorías para jóvenes\. Para ello se creó en las OEM un Área de Empleo Joven, se capacitaron y financiaron equipos técnicos, se reacondicionaron las oficinas y se dotaron de equipamiento informático\. Por medio de entrevistas personales los equipos técnicos de las OEM asistieron a los jóvenes para que identifiquen sus intereses laborales y obtengan información sobre un conjunto de prestaciones que mejorarían su empleabilidad\. Los jóvenes que participaron se comprometieron a poner en práctica acciones específicas y convenidas con ellos mediante una declaración firmada\. Asimismo se desarrollaron diseños de intervención adecuados para la población juvenil destinados a fortalecer las acciones de orientación y apoyo a la búsqueda de empleo, tales como: “Talleres de orientación e inducción al mundo del trabajo” y el “Club de empleo”\. Para su implementación se capacitó a equipos técnicos de las OEM\. Principales desafíos El principal desafío es fortalecer la articulación con el contexto productivo e institucional (en particular IFPs y otras organizaciones especializadas) a nivel local\. Esto permitirá a la OEM desarrollar estrategias adaptadas a cada territorio y desplegar un esquema de recursos que garantice ofertas adecuadas para sostener los trayectos que cada joven demanda para su proceso de inclusión social y laboral, partiendo de la base que gran parte de la población juvenil que se acerca al programa tiene importantes déficits de competencias sociales, lo que les impide el acceso a prestaciones específicas vinculadas al mundo laboral, y requieren de un mayor acompañamiento\. Qué se valora y qué cambiaría En primer término, el fortalecimiento institucional a través del financiamiento y capacitación de recursos humanos en las áreas de empleo joven de las OEM ha permitido contar con un ámbito especializado que aplica estrategias específicas, incluyendo intervenciones que atienden a las características de dicha población para la remoción de barreras tanto objetivas como subjetivas, asegurando su creciente inclusión\. Asimismo, se desarrolló en cada municipio una red de instituciones que colaboraron con las OEM, la que permitió brindar orientación y derivar a los jóvenes a talleres con el objetivo de contribuir a que definieran su proyecto formativo-ocupacional; fortalecieran sus competencias básicas; recibieran información sobre el mercado de trabajo local y sobre la normativa que rige las relaciones laborales\. También les permitió introducirse en un proceso de alfabetización informática\. En esta perspectiva, ha sido muy valorado el desarrollo de los talleres de orientación e inducción al mundo del trabajo (POI) que cubrió a casi 480 mil jóvenes, generando un alto nivel de satisfacción por parte de todos los participantes, tal como arrojan las distintas evaluaciones realizadas\. 75 A través de la atención personalizada en las OEM se pudo registrar que las brechas que distanciaban a los/as jóvenes del mercado de trabajo requerían de intervenciones graduales y progresivas con el fin de “tender puentes” para procesar y superar barreras de género, manejo de competencias básicas de empleabilidad, destinadas a fortalecer su autoestima, desarrollo de competencias comunicacionales, entre otras, asegurando el acceso a otras prestaciones más específicas\. Entre las lecciones aprendidas cabe destacar que la heterogeneidad de las realidades institucionales municipales generó desempeños desiguales\. En algunos casos, la demanda creciente sobre el programa superó las capacidades institucionales para proveer una oferta de prestaciones adecuada a las demandas\. Estas circunstancias evidencian la necesidad de continuar fortaleciendo a las OEM en su trabajo de articulación con los contextos locales, en el desarrollo de mejores vínculos tanto con las instituciones de formación como con el sector empleador\. Si bien el MTESS viene impulsando la Red de Servicios de Empleo desde el año 2006, y el área de empleo joven, a partir de 2008, el tiempo de maduración de una institucionalidad tan compleja resulta aún escaso\. Por otra parte, teniendo en cuenta que las OEM se encuentran bajo la jurisdicción de los municipios, esto dificulta ciertos niveles de gobernabilidad al MTESS para impulsar de manera más homogénea metodologías y procedimientos de intervención\. Mucho se ha avanzado en este camino, aunque las modalidades de gestión en cada territorio inciden necesariamente en los resultados alcanzados\. En algunos municipios, el escaso tiempo transcurrido desde la instalación de estos ámbitos constituyó el principal motivo del bajo “reconocimiento” que obtuvieron entre los actores locales, en particular entre el sector empleador\. Y si bien el Ministerio fortaleció las OEM a través de la contratación de diferentes perfiles profesionales, en el futuro es necesario desarrollar estrategias más intensivas de acercamiento a las empresas privadas locales para generar vínculos de confianza y aprovechamiento de los servicios ofrecidos por las OEM\. Recomendaciones al Banco Mundial En relación con este Subcomponente el rol del Banco Mundial ha sido muy positivo, y cabe señalar que desde otros Proyectos ha procurado apoyar y fortalecer la Red de Servicios de Empleo, a partir de la comprensión de las dificultades que enfrenta el MTESS para llevar adelante la concreción de esta institucionalidad\. La heterogeneidad de contextos y recursos puede computarse como una de las dificultades que explica la obtención de disimiles resultados\. Subcomponente 2 Acerca las oportunidades de Capacitación y/o educación para jóvenes Las OEM brindaron servicios correspondientes a aquellos jóvenes que requerían habilidades básicas, o completar su educación y/o recibir formación profesional, permitiéndoles así mejorar sus cualificaciones a fin de vincularse al mercado laboral\. Las OEM procuraron asegurar la disponibilidad del tipo de capacitación requerida tanto por los/as jóvenes como las demandadas por el mercado laboral local, identificando y resolviendo brechas, con el apoyo del MTESS\. Las oficinas también apoyaron a los interesados en trabajar en 76 forma autónoma brindando la capacitación y orientación suficiente, en articulación con otras instituciones\. Principales desafíos Uno de los principales desafíos es expandir y fortalecer la oferta de FP, basada en un enfoque de competencias laborales\. Promover cursos adecuados a los trayectos profesionales iniciales, ya que constituyen la demanda básica de las personas jóvenes sin experiencia laboral ni formación previa\. Por otra parte, es importante incluir en estas currículas competencias básicas que aseguren la superación de los déficits educativos que presenta la población juvenil que participa en el programa\. El principal desafío, sobre todo teniendo en cuenta la política que en la actualidad impulsa el Gobierno Nacional para los jóvenes a través del PROGRESAR, es vincular con más fuerza a las instituciones de Formación Profesional con las OEM\. También deben profundizarse las acciones de articulación con las instituciones de IFPs sectoriales para que su oferta alcance a los jóvenes más vulnerados\. Sin embargo, puede destacarse la mayor vinculación obtenida con el sistema educativo que brinda la oferta para jóvenes y adultos, así como con Universidades y Organizaciones que han tenido a cargo el dictado de talleres de competencias básicas y de orientación e inducción al mundo del trabajo , entre otros, Qué valora y qué cambiaría Cabe destacar que los procesos de Orientación Laboral encarados por los jóvenes permitieron el desarrollo de un Proyecto Formativo Ocupacional y la definición de trayectos que permitían fortalecer de manera creciente la empleabilidad\. Esto exigió priorizar prestaciones previstas en este subcomponente, resultando las más demandadas, al mismo tiempo que restaron peso cuantitativo tanto a la FP como a las prácticas laborales\. Los/as jóvenes priorizaron como primer trayecto la finalización de estudios formales, entendiendo que este constituía un primer paso necesario para su acercamiento al mercado de trabajo desde la perspectiva de un empleo decente\. Esto dilató el acceso a otras prestaciones y se constata en los indicadores de monitoreo que muestra que casi 400 mil jóvenes se incluyeron en acciones que permitía la finalización de la escolaridad obligatoria\. En los diferentes estudios realizados quedó en evidencia que el impulso que da el PJMyMT para cumplir con el trayecto de los estudios formales es registrado por los jóvenes como un logro central para mejorar sus posibilidades de insertarse en un trabajo registrado, ya que constituye un requisito generalizado en las demandas laborales; al tiempo que les permite fortalecer su autoestima y proyectar el cumplimiento de trayectos formativos de mejor nivel, es decir continuar estudiando\. También se ha detectado que los jóvenes que han desertado del nivel educativo y se incluyen los cursos del FP presentan dificultades para sostener la continuidad en la asistencia y tiene poca confianza de alcanzar las metas propuestas por los cursos\. Esta situación, dada la dispar oferta de formación profesional existente en los territorios, en algunos casos se constituyó en un obstáculo para realizar las derivaciones pertinentes 77 Recomendaciones al Banco Mundial Cabe señalar que la relación con el Banco resultó fluida durante la preparación y la ejecución, se planteó un intercambio permanente de propuestas para avanzar en el logro de los objetivos e indicadores de resultados planteados\. Existiendo flexibilidad para comprender los obstáculos que se presentaban para el desarrollo de determinadas prestaciones, así como se valoraron los esfuerzos realizados por el MTESS para promover mejoras en los resultados\. No obstante, resultaría oportuno que las evaluaciones del Banco partieran de una visión más integradora de los distintos componentes de un proyecto, en particular cuando las acciones de algunos de ellos puedan impactar en el logro de los objetivos de otro Subcomponente 3 Acerca de las Pasantías para Jóvenes Este subcomponente estuvo destinado a apoyar la organización e implementación de subproyectos de pasantías que incorporan los siguientes elementos: (a) integración en el lugar de trabajo; (b) participación de la comunidad; (c) desarrollo de hábitos y actitudes de inserción social; (d) estimulación de una experiencia positiva en un trabajo decente\. Desafíos Este fue el subcomponente que presentó mayores dificultades para su implementación, situación que afectó al desenvolvimiento general del Componente C desde la perspectiva de lo prescripto en el Proyecto\. Pese a ello, el Ministerio realizó innumerables esfuerzos para promover prácticas entre los jóvenes valorando que la experiencia laboral en un ámbito de trabajo constituye un aprendizaje central para la población atendida por el programa\. En este sentido, se abrieron nuevos ámbitos -no previstos inicialmente en el Proyecto- para ofrecer oportunidades a los y las jóvenes\. El acuerdo con agencias estatales y con organizaciones no gubernamentales potenció estas experiencias\. Se observa que en las Provincias en las que las áreas de Producción y Empleo asumieron compromisos con la promoción de prácticas en las empresas, los resultados fueron positivos\. Esta es una línea de intervención que será necesaria potenciar a futuro\. Asimismo ampliar la vinculación con agencias del Gobierno para promover la realización de prácticas calificantes será otra vía para promover esta prestación\. Asimismo, se evalúa positivamente la estrategia de, en el futuro, apoyarse en los Consejos Sectoriales de Formación Profesional para promover este tipo de experiencias en los sectores productivos\. Qué valora y qué cambiaría En el esquema propuesto en el Proyecto, las experiencias de prácticas laborales debían ser presentadas por empleadores, comprendiendo: a) el número y los detalles de las características de la pasantía (habilidades necesarias, contenido del trabajo, duración, condiciones laborales tales 78 como horario); b) capacitación y educación propuestas para los participantes tanto en el lugar de trabajo como fuera del mismo; y c) posibilidades de evaluación y certificación de competencias\. Este subcomponente se planteaba dos estrategias previstas respecto de la promoción de prácticas laborales, una a nivel nacional, que consistiría en propuestas presentadas por grandes empleadores, miembros de una Red Empresaria que promocionó el MTESS\. La segunda se orientaba a empresas más pequeñas que no pertenecían a la Red, y estaban localizadas en los municipios, asignando un rol central a las oficinas de empleo municipales (OEM) responsables de identificar las oportunidades\. Ambas estrategias presentaron dificultades\. Los principales problemas presentados han permitido realizar algunos aprendizajes\. Por una parte, la Red de Empresas no respondió de la manera prevista a la masividad del PJMyMT, ya que no confiaron de manera adecuada en el rol intermediador de la Red de OEM para la búsqueda de los jóvenes y promotores de proyectos, lo que impidió una articulación eficiente\. Cabe destacar que, en la previsión inicial, este era el mecanismo de mayor escala para incorporar a los participantes del Programa en las prácticas calificantes dado el tamaño de las empresas\. Si se observa la evaluación realizada del Programa Jóvenes con Futuro (base del diseño de este Componente) solo una cuarta parte fueron reclutados a través de las OEM)\. La mayor parte de estas empresas estaban localizadas en el área metropolitana de Buenos Aires, no ofreciendo oportunidades a nivel nacional\. Por otro lado, es evidente que no se logró sensibilizar la participación de los empleadores de manera adecuada y que la escala en que esta Red Empresaria participó de estas prestaciones muestra que su oferta rondaba una cobertura de aproximadamente 1000 jóvenes anuales sin que se pudiera superar esta meta\. Por otra parte, si bien las OEM han desarrollado buenas capacidades institucionales para la atención de las personas con problemas de empleo, mostraron mayor debilidad en relación con los procesos de intermediación y, en particular, en su vinculación con el sector empleador privado\. Asimismo el tamaño de las empresas a las cuales más habitualmente llegan las OEM implica pensar en una cobertura acotada, ya que se trata de pequeños comercios y/o empleadores\. En algunos casos, la presencia MTESS constituyó un factor de desconfianza, barrera que en el corto tiempo de implementación de la estrategia de proximidad y promoción a las micro- empresas no ha sido posible superar\. La descentralización de la gestión en los municipios apoyándose en la red de Oficinas de Empleo reflejó una alta dispersión en las intervenciones\. Sin duda el Proyecto planteó una meta muy elevada en este subcomponente, sin atender a las restricciones que presentaba la articulación con empleadores para sensibilizar y comprometer a las empresas en este tipo de acciones\. Paralelamente, cabe señalar que en la experiencia comparada se verifica la dificultad de los servicios públicos de empleo para tomar contacto con el sector empleador y ofrecer, entre otros, servicios de intermediación\. No obstante lo dicho, el MTESS se manifiesta satisfecho por los resultados alcanzados -durante la ejecución del proyecto- que muestran un crecimiento anual significativo en la participación de los jóvenes en acciones vinculadas al empleo como parte de las prestaciones del Programa\. Si se considera el Entrenamiento para el Trabajo y la Inserción Laboral Asistida, casi 90 mil jóvenes pasaron por este tipo de experiencia en el marco del Proyecto\. 79 En los estudios realizados, los/as jóvenes que participaron en este tipo de prestaciones han manifestado alto grado de satisfacción, incorporando un aprendizaje significativo para su acercamiento al mercado de trabajo\. Qué recomendaciones le haría al Banco Mundial Tal como consta en los Ayuda Memoria, a lo largo de la ejecución del Proyecto se reflexionó con insistencia en el marco de las Misiones de Supervisión del Banco Mundial sobre el logro del indicador principal del Componente: “Después de un año, no menos del 50% de los jóvenes que participaron en prácticas calificantes mas capacitaciones (165 mil), obtienen empleo registrado”\. Tanto el MTESS como el Banco, asumiendo las dificultades para su concreción y verificando que el cumplimiento físico de la meta estaba muy por debajo del esperado, acordaron modificar este indicador y ajustarlo a las condiciones objetivas en las que se desarrollaba el Proyecto\. Estas no sólo se basaban en dificultades operativas para acceder a proyectos presentados por empleadores, sino también en la decisión de los/as jóvenes de apostar a otras prestaciones como terminalidad educativa, por considerarla prioritaria para su proyecto formativo ocupacional\. En tal sentido, se acordó ajustar la definición de indicador de resultado, conforme a la siguiente propuesta: “no menos del 50 por ciento de los jóvenes que han participado al menos en los Talleres de Orientación, consiguen empleo dentro de los 12 meses posteriores o certifican su nivel de estudios secundarios”\. Si bien existió predisposición por parte del Banco para comprender esta situación, tal vez hubiera sido necesario concretar la modificación en los indicadores previsto en el PAD, de modo tal que permitieran mostrar con mayor claridad los logros del Proyecto\. Componente D Principales aprendizajes adquiridos durante la ejecución del Proyecto Entre los principales aprendizajes que deja la ejecución del componente vale la pena apuntar el nivel de negociación que demanda la integración de los desarrollos de un programa particular de las características del Sistema de Información para el Proyecto de Formación Continua (punto b de las premisas mencionadas en el apartado siguiente)\. Es importante evaluar adecuadamente los tiempos que esto demanda, ya que, a su vez, el enraizamiento de los nuevos desarrollos en la matriz de información del organismo ha demostrado ser absolutamente clave\. El sistema de gestión desarrollado no sólo ha sido capaz de administrar la gestión física de los distintos componentes, sino que se mostró dúctil para suministrar información que fue utilizada en evaluaciones de dichos componentes\. Otro aspecto destacable es el papel de las apoyaturas normativas que se mostraron, muy útiles y dinamizadoras del proceso de adopción del Sistema de Gestión\. Es posible, en medio de procesos de transformación, administrativa, caer en cierta fascinación tecnológica que nos induzca a creer que la adopción de herramientas de gestión innovadoras decantará naturalmente, por el mero influjo de su potencial\. Sin embargo, en nuestro caso, la adopción de una normativa de soporte al proceso de informatización, fue clave e introdujo un parte aguas que permitió pasar de los desarrollos incipientes a la consolidación\. 80 Principales desafíos El desarrollo del Sistema de Información para el Proyecto de Formación Continua se propuso crear herramientas eficaces para la administración y seguimiento de los resultados físicos de la política de formación del Ministerio de Trabajo en su conjunto\. Las premisas conceptuales que guiaron su desarrollo fueron las siguientes: a) recolección de datos en la fuente (favoreciendo en consecuencia la descentralización operativa del sistema)\. b) integración de todos los desarrollos de software en las políticas informáticas generales del organismo (eludiendo la tentación de configurar sistemas cerrados sólo capaces de dar respuesta a un componente particular de la política del Ministerio) c) diseño de una arquitectura informativa capaz de dotar a los datos administrativos de un fuerte potencial para su uso en investigaciones y evaluaciones de impacto\. d) crear las apoyaturas normativas necesarias para garantizar la exclusividad del Sistema Informático como herramienta de gestión física de la política e) dotar a los usuarios de capacidades para el aprovechamiento de la herramienta de información (generando políticas e instancias de asistencia técnica y capacitación)\. Estas premisas constituyeron, así mismo, los desafíos del proyecto, que fueron abordados sistemáticamente en todos sus puntos a lo largo de la ejecución del programa de financiamiento\. Qué se valora y qué cambiaria Desde este Componente se valora la ductilidad del Sistema de Gestión que fue posible gracias a considerar las compatibilidades con el conjunto de bases de datos y aplicaciones del Ministerio\. Dicha articulación, facilita el cruce con volúmenes masivos de información gestionadas desde otras políticas y unidades organizativas (particularmente útiles resultaron las relativas a la seguridad social)\. Qué recomendaciones le haría al Banco Mundial El desarrollo de sistemas de recolección y explotación masiva de información resulta consustancial a la implementación de políticas públicas de gran alcance\. Su utilidad no se limita a la clásica demanda burocrática de control de ejecución (física o financiera), se liga hoy también fuertemente a la posibilidad de crear marcos de acceso ciudadano a las mismas, al desarrollo de capacidades evaluativas sobre sus impactos y a la rendición de resultados a la ciudadanía en general\. Existe un gran potencial si el apoyo de los organismos multilaterales en materia de desarrollo de este tipo de sistemas contempla desde su punto de partida estrategias de enraizamiento en el proceso administrativo general de las políticas en su conjunto (más allá de la fuente de financiamiento)\. Esa visión ha estado presente en este componente y entendemos que los buenos resultados obtenidos ameritan sostenerla como recomendación\. 81 Cómo ve la sostenibilidad de la línea que lleva adelante El ejercicio de la facultad reglamentaria por parte de un órgano burocrático con atribuciones en la materia, introdujo una fuerte señal hacia los actores y hacia el personal interno del propio organismo\. Dio entidad y previsibilidad a los cambios e inició una fase de consolidación que hoy Reflexiones finales: Principales resultados alcanzados durante la ejecución del Proyecto\. Componentes A y B- El Proyecto de Creación de un Sistema de Formación Continua ha tenido como propósito principal generar las bases para su constitución\. En tal sentido, para evaluar el logro del objetivo se tienen en cuenta aspectos cuantitativos y cualitativos\. Los primeros tienen que ver con la cobertura y su alcance y los segundos con su sustentabilidad técnica, social e institucional\. Si se considera el crecimiento del número de trabajadores comprendidos en las acciones de formación en general (formación profesional, certificación de competencias laborales y finalización de estudios formales) puede sostenerse que las metas cuantitativas del Proyecto han sido ampliamente cumplidas\. En cuanto a las metas de certificación de estudios obligatorios de nivel primario y secundario de adultos a través de experiencias innovadoras no se alcanzó la meta total aún, aunque registró niveles aceptables\. Debe tenerse en cuenta que los egresados durante el último año de ejecución del Proyecto serán finalmente informados en el transcurso del año 2014\. La masividad de las acciones de formación queda demostrado con el número de trabajadores alcanzados por las mismas\. El cómputo de las personas contadas una sola vez, si se analiza el período comprendido entre 2003 y 2013, alcanza a 1\.638\.698\. A partir del año 2008, fecha de inicio de este Proyecto se observa un incremento de la matrícula de trabajadores inscriptos y capacitados en las diferentes líneas sustantivas de este Proyecto de 1\.419\.337 \. La cantidad de sectores económicos y actores sociales comprendidos en las acciones llevadas adelante en el marco de este Proyecto, cobran importancia de manera similar al crecimiento de matrícula de los trabajadores formados\. En ese sentido la participación de más de 45 sectores de actividad, 135 organizaciones sindicales, 260 organizaciones empresariales, 112 organizaciones sociales y 43 organismos estatales, demuestra la incidencia en la creación del Sistema\. La formación profesional en Argentina ha encontrado en los actores sociales, en particular en los sindicatos, un fuerte protagonista\. El proyecto deja consolidada una base social sustentable de la formación Continua a través de los Consejos Tripartitos de Formación Continua y Certificación de Competencias Laborales\. Los 25 Consejos creados dan cuenta de ello\. Han surgido de la expresa voluntad del Ministro de Trabajo, Empleo y Seguridad Social, como es de público conocimiento\. La máxima autoridad del Ministerio los ha convocado no sólo en las sesiones inaugurales de cada uno de ellos, sino en las sucesivas reuniones de evaluación de los resultados alcanzados, a posteriori de la implementación de proyectos\. Los Consejos han promovido una visión estratégica sobre las características demandadas a los trabajadores de los sectores de actividad, y una reflexión sobre el empleo\. En ese sentido recogen una tradición de la formación profesional argentina y de las iniciativas de incentivo del diálogo social de actores 82 creado a través de las convocatorias de las mesas sectoriales, antecedente de los mencionados Consejos\. Los Consejos han promovido una mirada regional y territorial de la formación Continua a través de la conformación de aquellos específicos de la radicación de un sector de actividad en el territorio\. Nos referimos por ejemplo al Consejo Forestal de la Madera y Mueble, que encuentra su localización en las provincias del territorio nacional donde la actividad económica tiene relevancia\. En igual sentido puede mencionarse al Consejo Vitivinícola y al Apícola\. La evaluación de impacto realizada arrojó un resultado satisfactorio sobre las probabilidades de inserción laboral de los trabajadores formados en cursos sectoriales\. Al respecto pudo corroborarse en el 2011, sobre una cohorte de beneficiarios que realizaron los cursos durante el año 2010 que, en promedio, los trabajadores desocupados que se formaron en cursos correspondientes al sector del software, la metalmecánica y la construcción alcanzaban un 13% más de probabilidades de insertarse laboralmente\. Tal como señala el informe oportunamente entregado a la Misión de supervisión, existen variaciones al interior de los sectores, en relación a la probabilidad de inserción según edad y género\. Las metas vinculadas con la Evaluación y Certificación de Competencias Laborales han sido plenamente alcanzadas y este proceso ha contribuido fuertemente a la consolidación del Sistema Nacional de Formación Continua\. No sólo por la atracción de la temática por parte de los actores empresariales y sindicales, los que han vencido paulatinamente sus resistencias, sino por los productos alcanzados en este proceso\. 384 Normas de Competencia laboral elaboradas con la participación de los actores sociales, la evaluación de 109\.453 trabajadores -entre febrero de 2007 y diciembre 2013 y la certificación de las competencias laborales de los mismos\. Además los dispositivos vinculados con la registración de las normas de competencia, las evaluaciones de los trabajadores y la certificación alcanzados por cada uno de ellos en el REGICE (Registro de Instituciones de Capacitación y Empleo) ha dado cuenta de ello\. La creación de los Organismos de Certificación Sectorial y los avances, lentos pero firmes, hacia su reconocimiento ante el Organismo Certificador de la Argentina el OAA, dan cuenta de los procesos de institucionalización\. La normalización, evaluación y certificación de competencias laborales de los trabajadores ha contribuido a consolidar en los sectores de actividad una capacidad técnica orientada a la evaluación, a la promoción de instrumentos de evaluación y a la formación de evaluadores a fin de continuar con estas prácticas a través de la asistencia técnica y financiera proporcionada por el Proyecto\. La normalización de los roles laborales ha contribuido fuertemente al desarrollo de una política destinada a la equidad\. La evaluación y consiguiente certificación de las competencias de los trabajadores ha promovido el reconocimiento de los saberes, habilidades y destrezas de trabajadores que, por diversas circunstancias sociales, económicas y familiares, vieron interrumpidas sus trayectorias formativas\. La normalización promovió el ordenamiento de la oferta de formación Continua proporcionada por el MTESS\. A partir de la norma se construyó la matriz de calificaciones, 83 producto que integra, o permite vincularla al diseño curricular y al curso con su denominación\. La correspondencia entre diseño de curso, denominación y norma contribuye a hacer trasparente la oferta de formación profesional y facilita el proceso de orientación\. Las metas correspondientes a la precalificación, ejecución de los planes de mejora y certificación de la calidad de las instituciones se alcanzaron en su totalidad\. Resulta indispensable para el funcionamiento del Sistema contar con un conjunto de instituciones involucradas en la implementación de las dimensiones del fortalecimiento de la gestión (la vinculación con el contexto productivo, la orientación laboral, la formación basada en competencias laborales y el seguimiento de los egresados) ya que de esta manera se estandariza la calidad de los centros de formación profesional desde la perspectiva del empleo\. El proceso de certificación de la calidad de las instituciones respecto del referencial elaborado con IRAM da cuenta de ello y resulta el primer escalón para la certificación de la calidad de las instituciones contra la norma ISO 29\.990\. En tal sentido y de acuerdo con lo enunciado en el párrafo anterior, el Proyecto contribuyó a promover una política de calidad institucional como eje transversal de la Formación Continua\. Uno de los principales desafíos fue justamente alentar en los cuerpos directivos de los Centros de Formación Profesional la necesidad de mejorar la calidad de los aprendizajes\. En algunos casos estos abordajes se realizaron a través de los organismos de los cuales dependen las instituciones –jurisdicciones provinciales- y en otros a partir del convencimiento de las autoridades directivas de cada una de las instituciones\. La promoción de la formación de la red sectorial de las instituciones constituyó otro desafío: el intercambio de información, la aplicación de procedimientos similares, la calidad del equipamiento disponible y su mejora, la formación de los docentes constituyeron ejes de la política formativa y desafíos a vencer con la promoción de un número significativo de instituciones\. La elaboración de diseños curriculares y de su correspondiente material didáctico supuso promover la participación de actores y el compromiso de los mismos en un proceso de duración considerable que requiere de experticia técnica, actualización permanente y voluntad de aprender y aprovechar los avances tecnológicos en su elaboración\. La implementación de procedimientos administrativos requeridos por el Banco constituyó un desafío a vencer\. Impactaron en los aprendizajes de los equipos técnicos del nivel central y regional para la implementación y en los actores externos, tanto institucionales como sociales\. Comprendieron tanto aspectos vinculados con las transferencias de los fondos necesarios para la implementación de acciones (número de cuotas, topes de cada una de ellas, entre otros aspectos) como con la adquisición de bienes y servicios a través del Proyecto\. En relación con el Componente B, más allá de la necesidad de verificar el alcance de las metas del Proyecto, contribuyó a consolidar la mirada del MTESS desde la perspectiva del trabajo de la formación básica\. En ese sentido acompañó los esfuerzos en promover “la segunda oportunidad” para los adultos a través de formas más flexibles –la semipresencialidad, la 84 modularización, el desarrollo de estrategias compensatorias- consolidando de este modo el primer peldaño para la formación continua de los trabajadores\. Vencer y convencer a las jurisdicciones educativas provinciales para incorporar modificaciones en la educación de adultos desde la Cartera de Trabajo constituyó un desafío en sí mismo\. No obstante ello, a la par de impulsar estas innovaciones por parte del Ministerio de Trabajo, el Ministerio de Educación de la Nación, promovió una iniciativa similar con apoyo de la Unión Europea que resultó complementaria a la impulsada por el Proyecto y abonó la necesidad de cambios en una modalidad educativa con falencias en la Argentina, tal como indican los estudios previos a la elaboración del diseño del Proyecto\. Las innovaciones educativas asumieron características propias en la implementación en cada una de las provincias en consonancia con el régimen federal educativo del país\. Así la semi- presencialidad ganó terreno y cobertura en la provincia de Tucumán, en Chubut, en La Rioja, en Misiones, en Córdoba y en Mendoza\. En algunos esta modalidad de enseñanza preexistía sin ser aprovechada por los adultos y en otros su implementación fue mejorada sustantivamente a través del fortalecimiento de los docentes a cargo de los núcleos, la ampliación horaria, la tutoría (Misiones)\. Las innovaciones dejaron una capacidad instalada de fuste en cada una de las provincias que la abordaron\. La necesidad de obtener los resultados alcanzados por los participantes de las acciones de certificación de estudios obligatorios y de los cursos de formación profesional contribuyó a afianzar la cultura de los equipos técnicos de “trabajar por resultados”\. Qué valoramos y que cambiaríamos: El MTESS considera que los logros alcanzados en materia de metas físicas y los aspectos cualitativos de la implementación han contribuido a asentar las bases del Sistema de Formación Continua en sus aspectos, conceptuales, institucionales y sociales\. Se valora del proyecto el énfasis puesto en el alcance de resultados\. La gestión por resultados modifica los procedimientos seguidos por los equipos técnicos de los niveles centrales y regionales y por los técnicos de cada uno de los sectores y/o jurisdicciones en la implementación de las líneas de trabajo del Proyecto\. Este punto se visualiza en las evaluaciones realizadas sobre la aprobación o desaprobación de los participantes de los cursos de formación continua al finalizar cada uno de ellos y en los diversos resultados (promovido, certificado, abandono, repitente) en la educación de adultos\. El énfasis puesto por las auditorías sobre las adquisiciones del Proyecto contribuyó a la visibilidad de las acciones del mismo\. Identificar cada bien con el organismo y protocolo por el cual fue adquirido y las precisiones requeridas al respecto proporcionaron los incentivos para la identificación de una marca entre los actores participantes en las acciones del Proyecto: Formación Continua\. A modo de ejemplo puede decirse que su logo es visible en los centros de Formación, en los materiales didácticos de cada uno de los Componentes y en los equipos adquiridos\. 85  Se valora el énfasis puesto por el Banco en la sistematización de la información de cada una de las acciones de formación\. En tal sentido, el análisis de los costos y dimensiones comprendidas en los “fee” de cada curso y en las cápitas de los beneficiarios participantes del Componente B resultan de alta utilidad para estandarizar la gestión y analizar las posibles fluctuaciones económicas de los recursos asignados a la implementación de acciones, más allá de la vida del Proyecto\. La adquisición de equipos y materiales a través de los procedimientos previstos por el Banco sería uno de los aspectos a modificar en un nuevo Préstamo\. Los mismos no se adaptan a las características de un Proyecto como éste\. En tal sentido se necesita un procedimiento más ágil de adquisiciones, que por ser diferente no está reñido con los criterios de transparencia y cumple con el criterio de eficacia y eficiencia para garantizar su disponibilidad\. En algunos aspectos la duración del Proyecto resultó escasa\. Esto se refleja especialmente en la implementación del Componente B: la duración de la finalización de la escuela y la percepción de los resultados requiere de mayor tiempo de implementación y seguimiento\. Experiencias innovadoras como la acreditación cruzada, son de mediano plazo de duración\. Para que sus resultados hubieran sido apreciados durante la vida del Proyecto, hubiera sido necesario detectar este tipo de iniciativas al momento de su comienzo y haber alcanzado pleno dominio en su ejecución\. Un aspecto que se relaciona con el párrafo anterior tiene que ver con la complementariedad en la ejecución de los Componentes\. La incorporación de los Jóvenes a las acciones formativas, constituyó un eje en la implementación del Componente B\. En los últimos años del Proyecto se incentivó la participación de los Jóvenes en el Componente A\. El fomento de la efectiva participación de los Jóvenes en los cursos de formación profesional se dio al mismo tiempo de la elaboración sustantiva de los productos del Componente\. A modo de ejemplo, difícilmente se hubiera aprovechado la certificación competencias de los jóvenes si no se disponía de las normas\. Si los jóvenes son procedentes de sectores muy vulnerados carecen de competencias básicas y actitudinales para llevar adelante en forma cabal un curso de formación profesional\. La incentivación de la participación juvenil requirió de un concurso de esfuerzos institucionales que pudieron ponerse en marcha hacia el final de la vida del Proyecto\. Un aspecto interesante de la ejecución de este Proyecto es haber privilegiado en su implementación la organización del Proyecto a través de la línea institucional en el conjunto de los Componentes y no haber constituido una Unidad Ejecutora independiente\. Recomendaciones al Banco Mundial: Mejorar la asistencia técnica vinculada con los procedimientos de adquisiciones al momento del diseño del Proyecto\. Este aspecto resulta de capital importancia para no tomar decisiones apresuradas que luego impactan en la gestión\. Contribuir a la difusión de las experiencias positivas y lecciones aprendidas durante la implementación del proyecto y promover el intercambio entre experiencias similares\. 86  Por el otro, sería importante ajustar los mecanismos procedimentales a las características territoriales y regulaciones vigentes en el país, dado que una mayor flexibilidad no atentaría contra la transparencia, y apoyaría la concreción de las metas\. Sustentabilidad del Proyecto El Sistema de Formación Continua ha ganado en institucionalidad a través del conjunto de Resoluciones que dieron origen a su creación, Resolución MTESS N° 434/ 11 como de las principales líneas estratégicas que los constituyen\. Entre ellas se pueden mencionar la Resolución N° 1496/11 de Conformación de los Consejos Sectoriales de Formación Continua y Certificación de Competencias Laborales; la Resolución MTESS N° 1471/11 de Creación de la Línea de Certificación Sectorial y la Resolución Reglamentaria SE N°247/2013; la Resolución MTESS N° 1495/11 Creación de la Línea de Competencias Básicas; y la Resolución MTESS N° 1204/11 de Creación de la Línea de Fortalecimiento Institucional y Certificación de la Calidad junto con la Resolución Reglamentaria SE N° 1550/12\. Componente C “Fomentar el empleo para Jóvenes a través de Servicios de Empleo, Educación, Formación Profesional, y Pasantías” sobre el cual MTESS fundamentó la línea estratégica de promoción de la inclusión para jóvenes\. Dicha línea se concretó a través del Programa Jóvenes por Más y mejor Trabajo, convirtiéndose en el año 2014 en una política del Gobierno nacional a través del PROGRESAR\. De los estudios realizados se ha podido verificar una adecuada focalización del Programa, ya que los/as beneficiarios/as del PJMyMT en su mayoría presenta un déficit educativo total o parcial y si bien casi la totalidad cuenta con experiencia laboral, esta es, mayoritariamente, no registrada o informal\. Asimismo, el grado de vulnerabilidad socio-económica es elevado, la mayoría de ellos se ubica en el 40% de los hogares con ingresos familiares más bajos\. Por otra parte, la información relevada muestra que en el marco del Programa se han llevado adelante prestaciones acordes a los déficits que presentan los/as jóvenes en materia de empleabilidad\. Uno de los logros más importantes es que los/as beneficiarios/as casi duplican el nivel de asistencia al sistema educativo que el total de los/as jóvenes provenientes de hogares de similar origen social\. En este sentido, parece válido afirmar el impacto positivo del Programa, ya que resulta una medida eficaz tanto para que retomen sus estudios, como para contener a aquellos que estando en el sistema educativo, presentan riesgos potenciales de abandono\. Adicionalmente, la mayoría de los beneficiarios tiene una opinión positiva de las prestaciones en las cuales han participado, a la vez que considera que el Programa les ayudará a mejorar sus posibilidades para encontrar un trabajo mejor\. No obstante lo dicho, y a pesar de los importantes avances alcanzados por la política, se requiere mejorar algunos aspectos de su implementación en vistas de incrementar su impacto positivo sobre las condiciones laborales de los jóvenes\. Una de las dimensiones más relevantes es la intensificación de las prácticas laborales certificadas en empresas o instituciones y la ampliación de los contactos con las empresas demandantes de personal a nivel territorial\. Es decir, que se requiere incrementar los esfuerzos en las acciones de intermediación que establecen nexos más directos entre los jóvenes y el acceso al empleo de calidad\. 87  La magnitud que aún presenta este colectivo especialmente vulnerable y la gravedad de sus consecuencias para el entramado del conjunto de la sociedad, exigen indudablemente que el Estado siga redoblando sus intervenciones\. En este sentido, surge el PROGRESAR como definición de una nueva política pública establecida como un derecho para todos/as los/as jóvenes de este grupo vulnerable, brindando la oportunidad de mejorar su empleabilidad con eje en la educación y en la formación profesional, principal déficit de este colectivo\. Desde esta perspectiva se asume la necesidad de entablar de un sólido y real compromiso del estado (en sus distintos niveles), de las IFPs, de empresarios y sindicatos a través de una participación activa en la tarea de promocionar la inclusión de jóvenes en la educación formal, en acciones de formación profesional de calidad y en empleos registrados, dado que se ha demostrado que el tránsito por estos trayectos mejora sustancialmente sus posibilidades de desarrollo socio-laboral futuro\. Sólo a través de la sinergia pública y privada podrá potenciarse la repercusión de las acciones, no sólo para lograr la mayor inclusión de los jóvenes trabajadores, sino también para mejorar la competencia económica de las unidades productivas y la ampliación de la representación de los actores sociales\. 88 Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders 89 Annex 9\. List of Supporting Documents Evaluación de impacto en la inserción laboral de los beneficiarios de los cursos sectoriales de formación profesional\. Subsecretaría de Programación Técnica y Estudios laborales, MTEySS, DGEy EL (Noviembre 2013) Proyecto de Desarrollo de un Sistema de Formación Continua\. Propuestas Educativas en el Marco del Componente B: “Ampliación de la cobertura y certificación de Educación Básica para Jóvenes y Adultos”\. MTEySS, DNOyFP (Febrero 2014)\. Evolución reciente de la Educación de Jóvenes y Adultos en la Argentina: La experiencia de las Provincias con Propuestas Educativas Innovadora by Sara Troiano (Febrero 2014) “Jóvenes: formación y empleo\. Estudio sobre los participantes del Programa Jóvenes con Más y Mejor Trabajo”\. Serie Estudios/12 Trabajo, ocupación y empleo Investigaciones 2013: Estudios sobre multinacionales y evaluación de políticas, SSPTyEL, MTEySS by Mazorra, X\.; Schachtel, L\.; Schleser, D\.; Soto, C\. (2013)\. En prensa\. Revisión de Entrenamientos para el Trabajo del Programa Jóvenes con Más y Mejor Trabajo - Estudio de casos - by Evelyn Vezza y Sara Troiano (Febrero 2014)\. Estudio Evaluativo “Resultados alcanzados en los Emprendimientos Laborales y Productivos ejecutados por jóvenes del Programa Jóvenes con Más y Mejor Trabajo” Coordinadora del Estudio Lic\. María Sol Niemand (Febrero 2014)\. 90 MAP SECTION 91 92

REVIEW

P174404

 Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00005514 IMPLEMENTATION COMPLETION AND RESULTS REPORT TF0B4177 ON A SMALL GRANT IN THE AMOUNT OF USD 942,857 TO THE DEMOCRATIC REPUBLIC OF TIMOR LESTE FOR Timor-Leste COVID-19 Emergency Support Project (P174404) {Date-Use date ICR submitted to SECPO} Health, Nutrition & Population Global Practice East Asia And Pacific Region Regional Vice President: Victoria Kwakwa Country Director: Satu Kristiina Jyrintytar Kahkonen Regional Director: Daniel Dulitzky Practice Manager: Aparnaa Somanathan Task Team Leader(s): Eko Setyo Pambudi, Hui Sin Teo ICR Main Contributor: Hope C\. Phillips Volker  ABBREVIATIONS AND ACRONYMS COVID-19 Coronavirus (SARS-CoV-2) CPF Country Partnership Framework DFAT Australia’s Department of Foreign Affairs and Trade EU European Union M&E Monitoring and evaluation MOH Ministry of Health NHSSP National Health Sector Strategic Plan PDO Project Development Objective PEF Pandemic Emergency Financing PPE Personal protective equipment RETF Recipient-Executed Trust Fund SDP Strategic Development Plan USAID United States Agency for International Development WHO World Health Organization  TABLE OF CONTENTS DATA SHEET \. ERROR! BOOKMARK NOT DEFINED\. I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 3 II\. OUTCOME \. 7 III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 11 IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 12 V\. LESSONS LEARNED AND RECOMMENDATIONS \. 12 ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 13 ANNEX 2\. PROJECT COST BY COMPONENT \. 16 ANNEX 3\. GOVERNMENT’S ESCP IMPLEMENTATION REPORT \. 17  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P174404 Timor-Leste COVID-19 Emergency Support Project Country Financing Instrument Timor-Leste Investment Project Financing Original EA Category Revised EA Category Organizations Borrower Implementing Agency DEMOCRATIC REPUBLIC OF TIMOR LESTE Ministry of Health Project Development Objective (PDO) Original PDO To support the Government of Timor-Leste in its response to COVID-19 FINANCING FINANCE_TBL Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) Donor Financing TF-B4177 942,857 942,835 942,835 Total 942,857 942,835 942,835 Total Project Cost 942,857 942,835 942,835 Page 1 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) KEY DATES Approval Effectiveness Original Closing Actual Closing 21-Oct-2020 19-Nov-2020 31-Jan-2021 31-Jan-2021 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No\. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 01-Apr-2021 Satisfactory Satisfactory 0\.94 ADM STAFF Role At Approval At ICR Regional Vice President: Victoria Kwakwa Victoria Kwakwa Satu Kristiina Jyrintytar Country Director: Satu Kristiina Jyrintytar Kahkonen Kahkonen Director: Daniel Dulitzky Daniel Dulitzky Practice Manager: Aparnaa Somanathan Aparnaa Somanathan Task Team Leader(s): Eko Setyo Pambudi, Hui Sin Teo Eko Setyo Pambudi, Hui Sin Teo ICR Contributing Author: Hope C\. Phillips Volker Page 2 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A\. Country Context 1\. The Democratic Republic of Timor-Leste is a lower middle-income country with a population of 1\.3 million\. Approximately 70 percent of the population live in rural areas, and its limited transport infrastructure means that a large share of the population resides in hard-to-reach areas\. The economy relies heavily on oil and recent losses in international equity and bond markets and the sharp fall in oil prices have negatively impacted the value of Timor- Leste’s Petroleum Fund\. Although this has not immediately affected the real economy, it can have significant medium-term consequences by reducing the resources available to invest in future generations\. 2\. The country has made progress in improving living standards, however there is still significant progress to be made on reducing poverty and building human capital\. The proportion of Timorese living in poverty has declined from 50 percent in 2007 to an estimated 42 percent in 2014\. Investments in human capital are directly linked to Timor-Leste’s future growth, productivity, and competitiveness\. In 2020, the Human Capital Index for Timor-Leste stood at 0\.45, significantly lower than East Asia and the Pacific’s regional average of 0\.59\. B\. Sectoral Context 3\. An outbreak of the coronavirus disease (COVID-19) caused by the 2019 novel coronavirus (SARS-CoV-2) has spread rapidly across the world since December 2019, following the initial diagnosis of cases in Wuhan, Hubei Province, China\. Since the beginning of March 2020, the number of cases outside China had increased thirteenfold and the number of affected countries had tripled\. On March 11, 2020, the World Health Organization (WHO) declared a global pandemic as the coronavirus has been rapidly spreading across the world\. As of the time this activity was approved, the outbreak had resulted in an estimated 34 million confirmed cases and 1\.08 million deaths in 216 countries\. 4\. While Timor-Leste had not seen a large number of COVID-19 cases, there was a risk of a second wave of cases as economic activity resumed and countries reopened their borders\. The first case of COVID-19 in Timor-Leste was confirmed on March 21, 2020, and all active cases were cleared by May 2020, with no further cases identified for a period of more than three months\. One additional case was confirmed on August 3, 2020, involving an Indonesian national who entered Timor-Leste via the land border with West Timor\. At the time of the project preparation (September 30, 2020), Timor-Leste had a cumulative total of 27 confirmed COVID-19 cases and no COVID-19 deaths\. The latest information on COVID-19 for May 12 and 24, 2021 are provided in the following table\. Page 3 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) Table 1: Data on Confirmed, New and Deaths Status May 12 May 24 Total confirmed cases 3,626 5,816 New cases 840 179 Deaths 5 13 Source: WHO situation report May 12, 2021 and Timor Leste COVID-19 Dashboard May 24, 2021 5\. If there were a COVID-19 outbreak, the consequences of a lockdown would further strain the country’s public service delivery systems that are already struggling to deliver basic health and nutrition services\. While Timor- Leste has made progress on key population health outcomes such as life expectancy, mortality rates, and control of infectious diseases over the past two decades, coverage of essential health services remains uneven, and overall health service utilization is low\. Malnutrition remains a serious problem, and stunting rates are high: almost half of all Timorese children under five years are stunted\. Rural and poor households continue to receive poorer quality care, especially in the primary health care setting\. There are also continuing challenges with infectious diseases: the incidence of tuberculosis is still high (498 per 100,000 population) and is one of the highest causes of hospital deaths in the country\. These factors, combined, leave Timor-Leste's population at risk of significant adverse impacts on their health in the event of a COVID-19 outbreak and/or as a result of the negative externalities of the lockdowns\. 6\. The Government of Timor-Leste has responded swiftly to the COVID-19 situation\. On March 28, 2020, the President declared a state of emergency, which was renewed twice (on April 24 and May 28, 2020)\. The state of emergency provided a constitutional basis for the Government to take restrictive measures, including the suspension of nonessential public activities, school activities, public gatherings, and public transport\. Borders have been fully closed as well\. A whole-of-government approach has been adopted to coordinate the response to COVID-19: in March 2020, an Inter-ministerial Coordination Committee for COVID-19 response was established to lead the effort\. On April 20, 2020, Parliament approved a special draw of US$150 million from petroleum reserves to establish a COVID-19 Fund to respond to the effects of COVID-19 in Timor-Leste\. 7\. In response to the COVID-19 pandemic situation, clear guidance on how to act and the procedures to follow have been developed\. The Ministry of Health (MOH), through the Health Executive Commission for the COVID-19 Outbreak, adopted a document called the ‘National Contingency Plan for Public Health Emergencies’ on June 16, 2020\. The document outlined the following main objectives: (a) strengthen intersectoral coordination and cooperation to enforce the prevention and control measures related to the COVID-19 outbreak; (b) bolster the implementation of the measures to reduce the risk of the virus entering the national territory through the points of entry; (c) guide the institutions of the National Health System for an active, immediate, and timely adoption of infection prevention, diagnosis, treatment, and control measures; (d) strengthen human and animal epidemiological surveillance procedures and the appropriate investigation and follow-up of cases; (e) take infection prevention and control measures; and (f) ensure logistics and technological supplies in sufficient quantities to deliver adequate medical assistance\. 8\. In the health sector, significant efforts have been made to ramp up the capacity to respond to the situation\. The national laboratory has been equipped to perform COVID-19 tests independently; in previous months these laboratory tests had to be shipped to Darwin, Australia, for confirmation\. The MOH has expanded its monitoring system to the municipalities through a ‘Sentinel Surveillance’ system\. The Vera Cruz public clinic in Dili has been Page 4 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) designated as an isolation facility, while hotels and residential compounds are being used for quarantine\. There have also been public campaigns to educate people on hygiene and social distancing measures\. 9\. Despite significant efforts and the creation of fiscal space for the COVID-19 response, gaps remained\. The Government of Timor-Leste’s health sector response to COVID-19, at a cost of US$52 million, is being financed by the COVID-19 Fund and the MOH’s regular budget\. Government’s response was complemented by support from other development partners\. At the time of approval, the resources from Australia’s Department of Foreign Affairs and Trade (DFAT), the European Union (EU), the United States Agency for International Development (USAID), WHO and other United Nations’ agencies were estimated at US$6 million\. These available grant resources were allocated to purchase needed medications, drugs, equipment, and personal protective equipment (PPE), while other response activities were undertaken using domestic funds\. The key gaps identified included transporting these items to the districts, undertaking adequate monitoring and surveillance activities for the response, and ensuring safe transport and isolation of COVID-suspected cases, especially to and from the remote parts of the country, and were supported through the Pandemic Emergency Financing (PEF) grant\. 10\. This PEF Insurance Window was triggered for COVID-19 and a total of US$195\.84 million was made available for PEF eligible countries that had reported cases of COVID-19 as of April 22, 2020\. The country allocation from the PEF Insurance Window for Timor-Leste was US$1 million\. The Government of Timor-Leste requested the PEF grant be delivered as a stand-alone Recipient-Executed Trust Fund (RETF)\. The RETF grant amount was US$942,857, exclusive of 5 percent trust fund cost recovery fees, and US$10,000 on account of the Bank-Executed Trust Fund for supervision costs\. The grant was approved on October 21, 2020, became effective on November 19, 2020 which resulted in an implementation period of approximately 2\.5 months\. Activities selected for support were identified in close coordination with the Government and other development partners, took into consideration the available financing, and feasibility of implementation during this limited period, with a view to minimize duplication and cover identified gaps\. Project Development Objectives (PDOs) 11\. The Project Development Objective (PDO) was to support the Government of Timor-Leste in its response to COVID-19\. Key Expected Outcomes and Outcome Indicators 12\. The aim of the project was to support the Government of Timor-Leste in its response to COVID-19\. The project design was aligned with the MOH’s National Contingency Plan for Public Health Emergencies and responded to areas where existing gaps were identified\. The identified areas would help improve the Government’s surveillance capacity through training health personnel, strengthening supervision, and facilitating the equitable distribution of essential supplies and commodities to health facilities\. This would be accomplished by financing transport means (ambulances), and training of the drivers, to ensure safe transportation of COVID-19 suspected cases and patients by ambulance for those in need of referral\. The shortage of ambulances/safe transportation was putting the entire population at risk as patients would use public transport in the absence of ambulances\. 13\. The achievement of the PDO was measured by the following PDO indicators (see Annex 1 for the Results Framework and Key Outputs): • Number of ambulances deployed in hard to reach areas of the country Page 5 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) • Number of health facilities receiving monitoring and supervision visits from the central government Components 14\. Component 1: Emergency COVID-19 prevention and response (US$942,857, PEF)\. The project had one component (see Annex 2 for the Project Cost by Component), which aimed to prevent and respond to the COVID-19 outbreak\. This aim would be achieved by supporting the country’s health system through strengthening (a) supervision, logistics and surveillance capacity; (b) safe patient transport and referral capacity; and (c) surveillance capacity\. This project supported Pillars 1, 3, 6 and 7 of the country’s COVID-19 Contingency Plan and comprised the following three subcomponents (please note that the financing amounts for subcomponents 1\.1 and 1\.2 were inadvertently reversed in the Project Paper): (a) Subcomponent 1\.1: Strengthened supervision, logistics, and surveillance capacity to respond to COVID-19 (US$616,000, PEF)\. Under this subcomponent, the project financed the purchase of eight vehicles\. First, enhanced transportation capacity would enable rapid and equitable distribution of essential supplies including PPE, medicines, medical supplies, and equipment to hard-to-reach or underserved areas to protect essential health personnel and the community at large\. Second, it would support the transportation of samples for COVID-19 detection activities\. Third, it would also support monitoring and evaluation (M&E) and enhanced supervision of the Government of Timor-Leste’s COVID-19 response, through better data gathering, travel of staff, and strengthened coordination among all parties involved in the response\. The M&E aspect was an important part of the National Contingency Plan for COVID-19, under Pillar 1: “Coordination, Planning, and Monitoring at the National levelâ€?\. (b) Subcomponent 1\.2: Strengthening safe patient transportation and referral capacity, especially from remote areas (US$304,000, PEF)\. Under this subcomponent, the project purchased 11 ambulances to close the gap in underserved areas of the country\. A plan to distribute the ambulances in an equitable manner is available and provided in Figure 1 (from the MOH’s Ambulance Distribution Plan)\. In the absence of such safe transportation, the use of public transport by suspected COVID-19 cases could put the entire population at risk\. Furthermore, a WHO COVID-19 situation report at the time (September 23, 2020) shows much lower testing among women (a cumulative total of 2,894 among women compared to 4,147 men having been tested)\. This lower testing among women could indicate an access challenge, where safe transportation arrangements may help reduce this gender inequality\. Safe transportation of the COVID-19 cases to specialized facilities will protect health workers as well\. Enhanced capacity to refer patients is also critical in supporting continuity of essential non-COVID-19 health services delivery, especially in case of a surge in demand\. Page 6 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) Figure 1\. Ambulance Distribution Plan Source: Ambulance distribution plan, MOH (c) Subcomponent 1\.3: Strengthened surveillance capacity (US$22,843, PEF)\. This subcomponent supported the surveillance capacity by providing (i) office supplies (such as computer and printer), to enable data recording as a result of the surveillance activities, and (ii) communication cost, which supported communication between the surveillance officer, if a case is detected, and follow-up of quarantined case needs\. II\. OUTCOME Assessment of Achievement of Each Objective/Outcome A\. Relevance of PDOs 15\. The PDO of the Project was “to support the Government of Timor-Leste in its response to COVID-19â€?\. The achievement would be measured through the following PDO level results indicators and outcomes, which are deemed appropriate: Page 7 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) • Number of ambulances deployed in hard to reach areas of the country; and • Number of health facilities receiving monitoring and supervision visits from the central government\. 16\. This grant was well aligned with the current Country Partnership Framework (CPF) for 2020 –2024\.1 It contributed to CPF Focus Area 2: ‘Invest in human capital, service delivery and social protection’\. The grant was fully in line with the CPF’s objective of promoting investment in human capital, which includes health and nutrition as priority areas\. The high rate of childhood stunting in Timor-Leste affects children’s physical and cognitive development\. Low levels of access to safe water and poor water quality, sanitation, and hygiene standards are a risk factor for effective infection control in relation to the COVID-19 pandemic and potentially other public health emergencies\. Rural populations still report low levels of access to, and use of, health services\. This grant was expected to directly support Timor-Leste’s response to COVID-19, help mitigate the negative impact from the lockdown, and contribute to improving access to health and nutrition services\. 17\. Timor-Leste’s policy framework also consistently supports investments in human capital and population health\. The National Health Sector Strategic Plan (NHSSP) for 2011–2030 aims to ensure available, accessible, and affordable health care services for all Timorese people\. The NHSSP is also fully in line with Timor-Leste’s Strategic Development Plan (SDP) for 2011–2030\. The SDP aims to make comprehensive, high-quality health services accessible to all Timorese people and in turn contribute to poverty reduction, raise income levels, and improve national productivity\. The grant also directly supported the Government’s COVID-19 response plan\. 18\. The rating for Relevance of the PDO is High\. B\. Achievement of the PDO 19\. By the closing date of the Project, the PDO-level indicators were met, with one indicator exceeding the original target\. The indicators chosen reflected activities which supported Government’s response to COVID-19, were aligned with the Timor-Leste National Contingency Plan for Public Health Emergencies, took into consideration support from other development partners, and responded to identified existing gaps (see MOH’s Environmental and Social Commitment Plan Implementation Report, February 15, 2021 in Annex 3)\. 20\. The first PDO indicator was met by the successful procurement and deployment of the 11 ambulances to 10 municipalities in underserved areas of the country\. The availability of these will contribute to strengthening safe patient transport and referral capacity, in particular those from hard to reach/remote areas of the country\. The ambulances will allow for the transport of COVID-19 patients in lieu of their using public transportation which would have a deleterious effect on Government’s ability to respond/contain COVID-19 or other emerging infectious diseases in the future\. These vehicles will also help to strengthen the referral system in general\. 21\. The end target of 50 health facilities receiving monitoring and supervision from the central government was surpassed; a total of 80 visits took place during the project period\. The project procured operational vehicles which assisted not only in the distribution of supplies and equipment, and transportation of COVID-19 samples, but also facilitated monitoring and evaluation and supervision by the central level\. A total of eight vehicles were purchased, per original plan\. The purchase of six laptops and pulsar communication facilitated contact tracing, as well as other surveillance activities\. The remaining balance from unspent operational expenses was used to purchase telephone 1http://documents1\.worldbank\.org/curated/en/353111574777310081/pdf/Timor-Leste-Country-Partnership-Framework-for-the-Period- Page 8 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) credits (US$42,165)\. This hardware is also expected to be useful in the event of any future surges, emerging infectious diseases as well as strengthening the health service in general\. 22\. The end target for the project’s only intermediate results indicator “Number of women who have been tested for COVID-19â€? was exceeded (8,527 versus 4,000)\. This indicator was chosen since the number of women being tested at the time of preparation was approximately 50 percent of men who were being tested\. Financing of equipment (computers and transport) needed to monitor and supervise testing ensured the availability of this data\. While there is no direct data from which to attribute this to the project, the project supported the distribution of information, education and communication materials (2,000 posters and 1,420 stickers in 48 villages and 242 sub villages on information related to COVID-19 prevention); in addition 400 materials were developed, printed and translated into the local dialect and distributed among border communities in Boboaro and Covalima\. Government and development partners supported the provision of information on COVID-19 generally, and specifically to benefit indigenous people in hard to reach areas was also provided\. Community outreach campaigns have been undertaken in 13 districts where stickers, posters and banners on COVID-19 prevention were disseminated\. At the national level, this information was broadcast through videos on television, audio messages on the national and community radio channels which provided the information in five local dialects\. 23\. Based on the foregoing the Overall Efficacy is rated as High\. C\. Efficiency 24\. The costs involved in achieving the PDO are considered reasonable in terms of the benefits and value for money\. The Project Paper did not include an economic analysis\. The estimated costs necessary to achieve the outcomes were in line with those required, the planned timeframe for the activities were met, and the savings were utilized in a manner which would contribute to achievement of the PDO\. The savings arising from subcomponent 1\.3 was the result of Government allocations being made to support this aspect as well\. The following table presents a comparison between the original allocation and actual expenditures; the expenditure percentages are shown against the reversed figures from the Project Paper, as well as the percentage against the original intention\. Table 1: Original Allocation and Actual Expenditure by Component2 Component In US$ % Original Actual Original Corrected Original 1\. Emergency COVID-19 prevention and response 942,857 942,835 99\.99 99\.99 1\.1 Strengthened supervision, logistics and surveillance 616,000 325,500 52\.84 97\.94 capacity to respond to COVID-19 1\.2 Strengthening safe patient transportation and referral 304,000 603,350 198\.47 107\.07 capacity, especially from remote areas 1\.3 Strengthened surveillance capacity 22,843 13,985 61\.22 61\.22 FY2020-FY2024\.pdf\. 2 As indicated above, the original allocations for Subcomponents 1\.1 and 1\.2 were inadvertently reversed in the Project Paper\. Page 9 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) 25\. The Government was efficient in their spending, considering the implementation period, and maximized the use of balances prior to the closing in support of the PDO\. It should be noted that notwithstanding what appears to be a reversed allocation to subcomponents 1 and 2, the amount for the Component as a whole was utilized except for US$22\. The savings from the underspent categories were utilized to support activities which contributed to the PDO, as well as future public health emergencies\. 26\. Based on the foregoing the Efficiency is rated as Substantial\. Overall Outcome Rating 27\. Based on the Relevance and Efficacy being High, and the Efficiency being rated Substantial, the overall outcome rating for this Grant is Highly Satisfactory\. Other Outcomes and Impacts 28\. It should be noted that the support provided under this financing was contributing to an overall plan, for which the MOH was responsible, along with support from a variety of development partners (Government’s Environmental and Social Commitment Plan Implementation Report, February 15, 2021 attached as Annex 3)\. The following paragraphs describe briefly some of the complimentary activities to which the Government, and other development partners contributed\. 29\. A great deal of attention was paid to the environmental and social aspects of this grant, whose rating for this aspect was moderate at the approval stage\. Existing measures (relevant regulations, guidelines on infection prevention and control, along with technical guidelines for surveillance and case management) were being followed during the implementation period\. The crews for the ambulances (drivers, medical doctors and nurses) were trained on proper use of personal protective equipment, as well as management of COVID-19 cases\. In addition, training was provided to responders from Dili District\. Health workers (district health directors, rapid response teams and surveillance focal points) attended a day-long workshop to equip them with accurate technical information on COVID- 19, strengthen the emergency preparedness and response, and to put in place mechanisms for community surveillance, as well as providing accurate information to the public and dispel myths)\. A National Media Workshop was conducted and trained participants from television, radio, newspapers, community ratio, websites and the MOH communication focal points from the municipalities\. An inventory and moveable asset management system was developed during Project implementation and is expected to be used in the future\. 30\. Directors from MOH were appointed to be responsible for the feedback and grievance redress mechanism\. The mechanism was based on MOH’s existing mechanism for worker complaints (using the hotline, among other mechanisms)\. It is understood that the mechanism did not receive any complaints during the period of implementation\. 31\. Communication Strategies for Inclusion\. Sensitization sessions on COVID-19 prevention were conducted at the local mosque\. Approximately 2,000 posters and 1,420 stickers were distributed to 48 villages and 242 sub-villages nationally\. There were 400 IEC materials developed, translated into local dialect and printed before being distributed to border communities in Bobonaro and Covalima\. The MOH, with support from other partners, has also established a hotline dedicated to mental health\. The hotline is operated by dedicated MOH staff and a local organization experienced for providing psychosocial services in the country over the past 20 years\. Page 10 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) 32\. The project activities will also contribute to improvements in health service delivery in addition to responding to the existing pandemic\. The provision of the ambulances to the municipalities enabled safe transportation of COVID-19 cases, and protected health workers as well\. Government’s measures put in place in response to COVID- 19 followed good international practice (i\.e\., social distancing, wearing masks and hand washing); some of the activities supported under the project also contributed to improved infection prevention and control\. Training was provided to doctors, nurses, midwives and paramedics, and cleaners, among others on the use of personal protective equipment; briefings were also provided on COVID-19 prevention, clinical management, surveillance, and the use of protective gear\. 33\. The project, along with the Government and other development partners supported training and capacity building for workers related to the project\. Training was provided to around 0 responders from Dili District and 10 health specialists from the Chinese Medical Brigade on case management and proper use of PPEs\. Technical discussions and refresher training to manage COVID-19 cases included 32 officials of the National Medical Emergency team\. A one-day workshop on COVID-19 was provided to 75 country-wide health workers (district health directors, rapid response teams and surveillance focal points) to equip them with accurate technical information, strengthen emergency preparedness and response and put in place mechanisms for community surveillance\. Around 50 journalists from across media platforms participated in a National Medica Workshop on COVID-19 to equip them with accurate information and provide guidance on finding reliable sources to prevent misinformation and rumors\. A listing of some of the training is provided in Annex 3 of the MOH report)\. 34\. With a view to laying the groundwork for responding to COVID-19, the MOH provided a variety of training to health care workers, including ambulance crews\. Health care workers were trained on important aspects of properly using personal protective equipment as well as management of COVID-19 cases\. In addition, 50 ambulance crews (including drivers) were also trained; these drivers are all required to have a license specifically for driving ambulances\. In addition, Government has developed an Inventory and Moveable Assets Management Manual; the vehicles procured under the project fall under the requirements of this document, which includes maintaining a trip ticket for each journey undertaken which is the responsibility of the driver\. III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME 35\. This Project provided financing, for gaps identified in consultation with MOH and development partners, to the Government’s emergency response efforts\. As the activities supported were part of Government’s plan, and were simple in design (important because of the short, less than three months, implementation period), which contributed to the rapid preparation (one month between activity initiation approval and World Bank approval), and implementation (one month between approval and effectiveness, and less than three months for implementation) and achievement of the objectives\. 36\. Limited availability of vehicles and lack of familiarity with World Bank procurement procedures impacted processing and timing for completion of procurement\. Requests for quotation were published on December 1, 2020 and notification of award published in December as well\. The selected vendor advised of their inability, due to lack of vehicles on hand, to deliver by the project closing date\. The contract was ultimately issued to another bidder, who provided the vehicles at a price which was approximately US$25,000 more than the original winning bidder\. Page 11 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME 37\. The World Bank, as indicated previously, responded to the identified gaps in an efficient manner\. The bulk of the activities supported were straightforward (i\.e\., primarily procurement of vehicles for prevention, response and monitoring, along with computers for monitoring and evaluation)\. Environmental and social risks were deemed moderate, and there were no issues which arose during implementation\. The implementing agency (MOH) took its responsibilities seriously and appointed members of its staff to be responsible for aspects of the grant; this approach (as opposed to contracting technical assistance) was appropriate given the short implementation period\. It is estimated that this approach also mitigated, to a certain extent, any risk to the development outcome\. V\. LESSONS LEARNED AND RECOMMENDATIONS 38\. The following are key lessons learned from this operation’s experience: (a) Positive outcomes are derived from financing gaps which complement other development partners’ support in line with an existing government plan and deemed achievable within the implementation period\. (b) Close collaboration between the implementing agency and development partners, with a shared vision, also enhances the achievement of development objectives\. (c) Provision of hands-on support, in situations where the implementing agency is less familiar with the World Bank procedures and the implementation period is short, contributes to a successful outcome\. (d) Procurement planning needs to take into consideration availability of goods in-country and/or the time required to obtain these from outside the country, especially in circumstances where the implementation period is short\. \. Page 12 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS A\. RESULTS INDICATORS A\.1 PDO Indicators Objective/Outcome: To support the Government of Timor-Leste in its response to COVID-19 Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of ambulances Number 0\.00 11\.00 11\.00 11\.00 deployed in hard to reach areas of the country 12-Oct-2020 29-Jan-2021 29-Jan-2021 31-Jan-2021 Comments (achievements against targets): Target has been fully achieved Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of health facilities Number 0\.00 50\.00 50\.00 80\.00 receiving monitoring and supervision visits from the 12-Oct-2020 29-Jan-2021 29-Jan-2021 31-Dec-2020 central government Page 13 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) Comments (achievements against targets): Achievement has been beyond its targeted A\.2 Intermediate Results Indicators Component: Component 1: Emergency COVID-19 prevention and response Subcomponent 1\.3: Strengthened surveillance capacity Unit of Formally Revised Actual Achieved at Indicator Name Baseline Original Target Measure Target Completion Number of women who have Number 2894\.00 4000\.00 4000\.00 8527\.00 been tested for COVID-19 23-Sep-2020 29-Jan-2021 29-Jan-2021 17-Feb-2021 Comments (achievements against targets): Number of women who have been tested for COIVD-19 achievement was beyond the target Page 14 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) B\. ORGANIZATION OF THE ASSESSMENT OF THE PDO Objective/Outcome 1 1\. Number of ambulances deployed in hard to reach areas of the country Outcome Indicators 2\. Number of health facilities receiving monitoring and supervision visits from the central government Intermediate Results Indicators 1\. Number of women who have been tested for COVID-19 1\. 11 ambulances deployed as planned\. Key Outputs by Component 2\. 80 monitoring and supervision visits were undertaken against a (linked to the achievement of the Objective/Outcome 1) target of 50\. 3\. 8,527 women were tested against a target of 4,000\. Page 15 of 72  The World Bank Timor-Leste COVID-19 Emergency Support Project (P174404) \. ANNEX 2\. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (US$M) Emergency COVID-19 942,857\.00 942,835\.00 99\.99 Prevention and Response Total 942,857\.00 942,835\.00 99\.99 Page 16 of 72  ANNEX 3\. Government’s ESCP Implementation Report ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) IMPLEMENTATION REPORT TIMOR-LESTE COVID-19 PANDEMIC EMERGENCY FUND (P174404) IN THE AMOUNT OF US$942,857 TO THE MINISTRY OF HEALTH DEMOCRATIC REPUBLIC OF TIMOR-LESTE FOR A TIMOR-LESTE COVID-19 EMERGENCY SUPPORT PROJECT FEBRUARY 15, 2021 Page 17 of 72  ENVIRONMENTAL AND SOCIAL COMMITMENT PLAN (ESCP) IMPLEMENTATION REPORT TIMOR-LESTE COVID-19 PANDEMIC EMERGENCY FUND (P174404) TABLE OF CONTENTS I\. INTRODUCTION \. 1 A\. Project overview\. 1 B\. Project organisational structure\. 3 C\. Project implementation updates \. 4 II\. LABOUR MANAGEMENT IMPLEMENTATION \. 6 A\. Implemantation of ocupational health and safty (OHS) measures \. 6 B\. Implementation of measures for operations and maintenance of ambulances and operational vihicles \. 8 C\. Implementation of measures for safe disposal of office supply \. 11 D\. Training and capacity building for workers related to the project \. 12 E\. Feedback and grievance redress mechanism (FGRM) for workers related to the project14 III\. STAKEHOLDER ENGAGEMENT PLAN (SEP) IMPLEMENTATION \. 15 A\. Proof of information disclosure and procurament transparancy \. 15 B\. Effective communication strategies for the inclusion of ethnic groups \. 19 C\. Document of covid-19 protocols and technical guidance used during public meeting \. 20 D\. Operations of feedback and grievance redress mechanism (FGRM) \. 26 IV\. SUMMARY OF INCIDENTS/ACCIDENTS AND CORRECTIVE ACTIONS \. 27 V\. ANNEXES Annex 1\. Result framework and monitoring\.29 Annex 2\. Nomination of the team for the project \. 32 Annex 3\. List of training conducted by INS on covid-19 \.33 Annex 4\. List of stock on hand and pipe line of PPEs from SAMES \. 34 Annex 5\. List of training for ambulances drivers and health profesionals \. 36 Annex 6\. Message on ppe proper use for use local language \. 38 Annex 7\. Certificate of handover operational cars \. 39 Annex 8\. Certificate of hand over lap tops for surveillance \. 40 xviii Annex 9\. Photos of receiving and inspection\.41 Annex 10\. Photos of the training, meeting and others activities of covid-19 \. 42 Annex 11\. Number of women tested for covid-19 \. 43 Annex 12\. Photos handover operational veheicles \. 44 Annex 13\. Vehicle Maintenance Monitoring \. 45 Annex 14\. Vehicle operation monitoring report \. 46 Annex 15\. Preventative Maintenance \. 47 Annex 16\. Asset disposal form\. 49 Annex 17\. List of Distribution PPEs… \. 50 Annex 18\. Inventory and moveable asset registered for operational vehicles \. 51 Annex 19\. Inventory and moveable asset registered for Ambulances \. 52 Annex 20\. Picture of publication tenders in news papers \. 53 xix  I\. INTRODUCTION A\. Project Overview The first case was reported on 23 March 2020, cases started rising steeply in April, and by09 February 2021, Timor-Leste had confirmed 86 cases no reported deaths due to COVID- 19, with a cumulative total of over 19\.743 people tested Covid-19 and 19\.541 was reported negative\. but its closest neighbour, Indonesia with whom it shares a land border has regularly been reporting a rapid rise in numbers\. On March 28, 2020, which was renewed ten time (on February 2 and March 3, 2021) the declared a state of emergency covers the entire national territory\. The risk related to the spread of COVID-19 among the populationat large especially for the most disadvantaged and vulnerable populations such as elderly, children, poor households, and indigenous peoples and the epidemiological situation shows a notorious trend of aggravation and in particular, the pandemic evolution in the world and the neighbour country\. The Ministry of Health has reinforcing of the implementing of National Contingency Plan for Public Health Emergency COVID-19 and the Governmentdecree of the estate of emergency remains mandatory that all individuals wishing to enter or leave the national territory are subject to health control\. It also remains mandatory for prophylactic isolation (quarantine) with a minimum duration of fourteen days, and testing for COVID- 19, for citizens wishing to enter the country, who have symptoms of COVID- 19 or who have had contact with individuals infected with SARS-CoV-2\. Expenses related to prophylactic isolation are borne by each individuals when the prophylactic isolation is carried out in a private health establishment or private isolation centre established by the State\. The ban on land border crossings for traditional or customary purposes and for accessto regulated markets is also maintained, while maintaining the respective sanctions\. The entry of foreigners into national territory, across land borders, remains subject to prior authorization\. On May 4, 2020, the government of Timor-Leste represented by the Ministry of Finance received the communication letter from the World Bank informed its commitment to support the Government of Timor-Leste follow with a grant agreement signed to provide an Emergency COVID-19 Prevention and Response project with amount (US$942,857, PEF), aiming to prevent and respond to the COVID-19 outbreak\. The project design aligned with the MOH of Timor-Leste’s National Contingency Plan for Public Health Emergencies and responds to areas where existing gaps have been identified\. The identified areas of support 1 mainly improve the Government’s surveillance capacity through training health personnel, strengthening supervision, facilitating the equitable distribution of essential supplies and commodities to health facilities by financing transport and ensuring safe transportation of COVID-19 suspected cases and patients by ambulance\. The limitation available number of ambulances puts the entire population at risk as patients would use public transport in the absence of ambulances\. The project has one single component mainly; Component 1: Emergency COVID-19 Prevention and Response\. The project has achieved by initiating sub-components as follows: • Subcomponent 1\.1: Strengthening safe patient transportation and referral capacity, especially from remote areas respond to COVID-19 to (US$616,000, PEF)\. Under this subcomponent, the project will purchase 11 ambulances to close the gap in underserved areas of the country\. A plan to distribute the ambulances in 10 different municipals have been appointed as end-users of the ambulances\.Furthermore, access challenge, where safe transportation arrangements may help reduce this gender inequality\. Safe transportation of the COVID-19 cases to specialized facilities will protect health workers as well\. Enhanced capacity to refer patients is also critical in supporting continuity of essential non-COVID-19 health services delivery, especially in case of a surge in demand\. • Subcomponent 1\.2: Strengthened supervision, logistics, and surveillance capacity (US$304,000, PEF)\. Under this subcomponent, the project would finance eight vehicles\. First, enhanced transportation capacity would enable rapid and equitable distribution of essential supplies including PPE, medicines, medical supplies, and equipment to hard-to-reach or underserved areas to protect essential health personnel and the community at large\. Second, it would support the transportation of samples for COVID-19 detection activities\. Third, it would also support monitoring and evaluation (M&E) and enhanced supervision of the Government of Timor- Leste’s COVID-19 response, through better data gathering, travel of staff, and strengthened coordination among all parties involved in the response\. M&E is an important part of the National Contingency Plan for COVID-19, under Pillar 1: ‘Coordination, Planning, and Monitoring at the National level’\. • Subcomponent 1\.3: Strengthened surveillance capacity (US$22,843, PEF)\. This subcomponent will support the surveillance capacity by providing (i) office supplies 2 such as computer and printer, to enable data recording as a result of the surveillance activities, and (ii) communication cost, which will support communication between the surveillance officer, if a case is detected, and follow-up of quarantined case needs\. B\. Project Organizational Structure The Ministry of Health has responsible for leading the Environment and Social (E&S) safeguards, as recipient of the emergency Covid-19 prevention and response, including overall coordination, results monitoring, and communication on the project implementation\. The Director of Cabinet for Policy, Planning, and Cooperation, appointed as ESCP-PEF Project Director has provided oversight and support coordination of project implementation among the relevant pillar leads of the National Contingency Plan, as well as among departments of the MOH, autonomous agencies in the health sector, and municipal health authorities\. Environmental and Social Standard focal point has been appointed the Director of Administration and Logistic has supported for respective areas through the project implementation phase\. As this is an emergency project with a short implementation period, no recruitment of personnel to implement the project\. The nominated of the team bellow in Annex 2\. To ensure the project implementation, on October 6, 2020, Hon\. Minister of Health designated several Directorate under MoH to support the implementation of the project namely: No Name Position Contact Email 1 Marcelo Amaral National Director ofPlanning marceloamaral2605@gmail\.com and Finance, actual as General Director of Corporate Services 2 Nelson Correia National Director of nelsonlindacastro@gmail\.com Castro Procurement 3 Emilia de Jesus National Director of ecorves971@gmail\.com Alves Mendonca Administration and Logistic 4 Dr\. Avelino Advisor of Cabinet Hon\. guterresavelino@gmail\.com Correia Guterres Vice Minister 5 Marcelo da Rosa Legal Advisor Ministry of marcelodarosa21@gmail\.com Health 3  C\. Project Implementation Updates The project has purchased of 11 Ambulances under Subcomponent 1\.1: Strengthening safe patient transportation and referral capacity, especially from remote areas with positive impact on E&S risks because considering that the project type and nature itself constitutes low E&S risk associated for the environmental impacts from operating\. Those Ambulances has distributed to the teen different municipals were appointed as end-users of the ambulances\. Detailed of the distribution of the Ambulances for end- users in Annex 19\. Furthermore, access challenge, where safe transportation arrangements may help reduce this gender inequality\. Safe transportation of the COVID-19 cases to specialized facilities will protect health workers as well\. Enhanced capacityto refer patients is also critical in supporting continuity of essential non-COVID-19 healthservices delivery, especially in case of a surge in demand\. Strengthened supervision, logistics, and surveillance capacity to respond to COVID-19 Moreover, occupational health and safety risks related to the spread of the SARS-CoV-2 among indirect workers (transport, cleaning, and health care workers) using the operational vehicles and the ambulances procured under project of ESCP-PEF in performed their duties\. However, during project implementation has low impact and considered low in future, due to the restriction of government decree of estate emergency as the existing measures related to COVID-19 response\. Considering current measures in place as stipulated in national regulations as well as specific measures by the MOH related to the COVID-19 response as stated in the National Contingency Plan for Public Health Emergency COVID-19, the E&S risks during project implementation negligible\. Moreover, the state emergency requires that all individuals residing in Timor-Leste to maintain a distance of, at least, five feet from other individuals with whom they do not live in a common economy, to wear a face mask that covers their nose andmouth when they have to access or stay in public or private premises for collective use, and to sanitize their hands when they intend to enter commercial, industrial or service establishments or buildings where public administration services operate\. Additionally, risks and impacts on human population due to the project activities negligible\. This is because the project implementation not complex and haven’t involve activities that have a high potential for harming people or the environment\. In addition to that the project also procured eight operational vehicles under sub component 1\.2, the project has financed eight vehicles\. The detailed of the certificate of 4 distribution eight operational vehicles in Annex 7\. The eight operational vehicles has enhanced transportation capacity to enable rapid and equitable distribution of essential supplies including PPE, medicines, medical supplies, and equipment to hard-to-reach or underserved areas to protect essential health personnel and the community at large\. Second, the eight operational vehicles have supported the transportation of samples for COVID-19 detection activities\. Third, those operational vehicles have supported monitoring and evaluation (M&E) and enhanced supervision of the Government ofTimor-Leste’s COVID-19 response, through better data gathering, travel of staff, and strengthened coordination among all parties involved in the response\. Potential of environmental risk of pollution due to generation of hazardous waste from disposal of computer negligible\. Due to the six computers distributed to support the surveillance department not replace the existing computers that are currently in use by the surveillance MOH but will instead close the existing gaps in surveillance capacity, in particular to facilitate surveillance data recording and analysis\. The detailed of certificate distribution of the six laptops in Annex 8\. In addition to that, communication cost has distributed to the surveillance officers, management of Ministry of Health which has supported a lot in communication between the surveillance officer, during case detected, and follow-up of quarantined cases\. The capacity development through the project several training were conducted to the Doctors, nurses, midwife, and paramedics from Policia Nacional Timor-Leste (PNTL) and the Falintil Forca Defesa Timor-Leste (FDTL), Security, Cleaners underwent an intensive training on use of personal protective equipment (PPE) in addition to briefing on COVID- 19, prevention, clinical management, surveillance and the use of protective gear\. The measurement indicators were developed for the Emergency COVID-19 Prevention and Response mainly; to procuring 11 Ambulances, conduct monitoring and supervision from national to municipalities 50 times and test Covid-19 for 4000 women duringproject implementation period\. The overall target was achieved and some of indicators was over achievements\. Targeted to procure 11 Ambulances, the implement agency complete purchased 11 Ambulances and distributed to the 10 different Municipalities, 80 times monitoring and supervision have been made and the target was over achievement due to Covid-19 were requiring more intensive monitoring and supervision from National to District\. Under Covid-19 budget was allocated for health sector item travels US$ 614\.340 and executed US$ 445\.488\. In addition to that, on other target was 4000 women tested for Covid-19, during project implementation 8472 women tested 5 for Covid-19\. Moreover, there under the project has procured 8 operational vehicles, 6 computers and pulsar communication for surveillances and others workers to facilitate communication for contact tracing and as well as other surveillance activities\. Detailedof result framework monitor in Annex 1\. The project has brought positive impacts to the Timor-Leste health system for theimprovement of health service delivery and strengthening the resilience of health system to be better respond to the ongoing COVID-19 pandemic as well as future public health emergencies in better referral and logistical capacity through enhanced transportation modalities, improved supervision, and strengthened surveillance mechanism\. The project has implemented in accordance with initial plan and meet the target and the outcome to be better prepare the health sector to respond to future public health emergencies across the country and ensure better continuity of essential health service delivery\. II\. LABOR MANAGEMENT IMPLEMENTATION A\. Implementation of Occupational Health and Safety (OHS) Measures The Ministry of Health ensuring the Occupational Health Safety Measure for all healthworkers during pandemic Covid-19 prevention and response through developed guideline Infection Prevention Control on the used PPE and health consumables in accordance to national regulations and WHO technicalguidelines\. The risk related to COVID-19 exposure to workers and community willfollow existing measures, including relevant existing regulations, guidelines related to infections prevention and control (IPC) in the National Contingency Plan as well as in the technical guideline for surveillance and case management which is developed referring to WHO\. 6 To ensure the safety of all health workers and ensure there is no shortage of personal protective equipment (PPE), the government of Timor-Leste procured the PPEs through UNDP and UNICEF as well as supported by the Bilateral Donors and Development Partners are housed at Servico Autonomo de Medicamentos e Equipamentos de Saude (SAMES) in Kampong Alor in Dili\. The MoH of Timor-Leste’s, National Contingency Plan for Public Health Emergencies and responds ensuring the prevention and control to prevent COVID-19 exposure to personnel have sufficient numbers of PPE to be utilised by the health workers\. On 29 January 2020 the SAMES central Medical warehouse has updated the stock available of the PPE which will be cover for an other 4 Months, the update PPEs include information on pipeline of the supply of the PPEs, the stock of PPEs available at SAMES; 2\.500 gloves, 1\.030\.800 stock face masks/respirators, 2\.521 gown and 500 goggles\. For further on the list of stock on hand of PPEs detailed in Annex 4\. The Ministry of Health conducted training to the 50 ambulance crew include drivers, medical doters, nurses on the important aspects of the Properly use of PPEs and also management of this cases of Covid-19\. The government under public servant regulation ensured all drivers must have licence specially for the Ambulances drivers\. Due to the nature of their work, ambulance drivers must have a valid driver’s license and a good driving record\. The position requires evening, weekend, and holiday work hours, and rotating shiftsmay include 12 or more hours a day\. Because they deal with emergency and life or death situations, prospective ambulance drivers must thrive under pressure\. They must also be able to remain calm and composed and have the ability to put frightened and agitated patients at ease\. Therefore, to reinforce the Ambulance services in all over the country as well as control the use of Ambulances include all resources, in the beginning of the year 2021 the Ministry of Health under new organic low established SNAEM\. IP as Autonomous Institution shall be endowed with a legal 7 personality with administrative, financial autonomy\. For further detailed list of trained Ambulance drivers and crew in Annex 5\. B\. Implementation of Measures for Operations and Maintenance of Ambulances and Operational Vehicles The project ha purchased eight operational vehicles and operationally those vehicles’ have distributed four for Pharmacy and biomedical technicians to enhanced transportation capacity would enable rapid and equitable distribution of essential supplies including PPE, medicines, medical supplies, and equipment to hard-to-reach or underserved areas to protect essential health personnel and the community at large\. Four Operational cars distributed two for Ministry of Finance and other 2 for Monitoring Evaluation, MoH\. Those vehicles also support to transportation of samples for COVID-19 detection activities and support monitoring and evaluation (M&E) and enhanced supervision of the Government of Timor-Leste’s COVID-19 response, through better data gathering, travel of staff, and strengthened coordination among all parties involved in the response\. In addition to thatthe project also procured 11 Ambulances and distributed to 10 different municipals have been appointed as end- users\. For further detail Ambulance Distribution in Annex 19\. The implementation of Measures for the maintenance of ambulances and operational vehicles\. the government of Timor-Leste has developed Inventory and Moveable Assets Management Manual include all government vehicle Management is an important element of Asset Management as the costs of running the government fleet of vehicles are significant\. As such, additional systems are in place to control and monitor vehicle operations\. The Trip Ticket is an essential tool to accurately and accountably record every travel usethe government vehicle makes\. The Trip Ticket records the following data: • Date of travel • Name of the driver • Starting point and Destination • Start and Finish km for the journey • Objective of the journey • Fuel added to the vehicle (including Fuel Coupon No) The driver of the vehicle is responsible for completing the trip ticket and must sign atthe end of each journey\. For operational vehicles, the custodian is also responsible for 8 monitoring completion of the trip ticket\. Information collected from the trip ticket is then used to monitor vehicle performance, efficiency and safety\. In terms internal procedure to monitor the vehicle operation monitoring report calculates the fuel efficiency of each vehicle, based on the kilometres travelled and fuel consumed in a calendar month using a log book for each of vehicles\. The fewer kilometres travelled per litre of fuel, the higher the fuel consumption of that vehicle\. To ensure the reports give accurate fuel consumption figures, the fuel tank of each vehicle should be full at theend of the month\. Detailed on the example vehicle operation monitor report in Annex 14\. The normal range of fuel consumption for different categories of vehicles is listed below: Vehicle type Normal Fuel Consumption Pick-up 6 -10 kilometres per litre of fuel Landcruiser Troop Carrier 5 – 8 kilometres per litre of fuel Sedan 10-15 kilometres per litre of fuel Bus Depends on size – refer to vehicle manual Truck Depends on size – refer to vehicle manual The Ministry of Health under Government State Budget for the year 2021 has allocated amount US$ 211\.670 for the fuel for petrol and diesel\. In case of practical that the higher than normal fuel consumption can be a result of a number of factors, but should always be investigated immediately\. Some causes of higher than normal fuel consumption are; • Engine problems with the vehicle; • Theft of fuel; • Errors in compiling the report\. The Logistics Officer Minister of Health is responsible for preparing the vehicle operation monitoring report, and these must be submitted to the National Directorate of Central Logistic by 9 quarterly\. The National Directorate Central Logistic is mandated to investigate unusually high fuel consumption of vehicles in all Government Agencies\. In term of ambulances and operational vehicles planned as well as recommended operation and maintenance programs, all State owned vehicles must undergo “preventative maintenanceâ€? rather than “responsive maintenanceâ€?\. Preventative Maintenance is maintaining a vehicle according to a set schedule to prevent breakdowns and prolong the operational life of the vehicle\. Responsive Maintenance is responding to vehicle problems as they occur this normally results in higher maintenance costs in the longterm and shortens the operational life of vehicles\. The inventory and moveable assets management manual recommended all operational vehicles and Ambulances have follow the preventative maintenance schedule requires a service every 5000km\. There are three different levels of Servicing (A, B & C) with the most comprehensive service taking place every 20,000km\. New vehicle would undergo thefollowing servicing under this schedule: Km 5000 10000 15000 20000 25000 30000 35000 40000 Travelled Service A B A C A B A C The Ministry of Health has allocated budget for the year 2021 on vehicles maintenancewith an amount US$ 394\.510\. To implement and execute the budget, the Ministry ofHealth designated National Directorate of procurament and National Director of Logistic and Administration to ensure a competent and qualified mechanic should be used to conduct the preventative maintenance\. The Government recommended to issue a tender and contract for overall fleet maintenance rather than tendering out individual services\. The vehicle maintenance monitoring report is a monitoring tool that captures information on vehicle maintenance costs and shows which vehicle maintenance is occurring\. The Logistics Officer Ministry ofHealth is responsible for preparing the vehicle maintenance monitoring Report\. For further detail on the example vehicle maintenance monitoring in annex 13\. 10 For marking of state owned vehicles, all operational state owned vehicles are required to be permanently marked with the words “Kareta Estadoâ€? upon registration\. This is to ensure state owned vehicles are clearly visible to the public at all times, and to reduce the risk of misuse of these vehicles\. However, the following categories of vehicles do not need to be marked: emergency vehicles Ambulance will be marks as an emergency vehicles\. The Government under public servant regulation ensuring that all drivers must have common licence, due to the nature of their work\. C\. Implementation of Measures for Safe Disposal of Office Supplies The first point government approved Decree-Law 2/2017 on urban solid waste management system\. Following with the authority is regulated by the Joint MinisterialDiploma 43/2017, sanctioned by the Ministry of Public Works, Transport and Communications and the Ministry of State Administration\. To control of the disposal of office supply include computers, structurally under management of the Directorate of Administration and logistic to oversee and control as well as routinely evaluate the performance of the company in performing task\. In addition tothat ensured the company have to balance providing the best value service to all officeroom as well as environment with safe waste disposal in line with government regulations, all wastes collected are disposed of at the Tibar dump, which is also managed by District Administration Sanitation Department\. The landfill has a paved access road and is gated and fenced\. The officer on duty from the District Administration Sanitation Department is responsible for inspecting and keeping a record of the number of vehicles and the value of wastes being disposed\. The government has developed tools for registration of the assets for disposal as in Annex 16\. In the implementation the government developed inventory and moveable asset management \. detailed on the inventory and moveable asset management registered as government asset in Annex 18\. The assets should be disposed when they no longer able to efficiently support operations of Government Agencies\. The decision to dispose assets could be based on one or more of the following: • Beyond economical repair • No expected use in the future • Obsolete or operationally inefficient 11  • Unsafe to continue operation of the asset The asset disposal process must be managed carefully to ensure the maximum return is received by the G-RDTL and to ensure transparency\. An asset is deemed to be beyond economical repair if the anticipated future maintenance costs outweigh the expected future benefits of using that asset\. Measurement of the office supplies as well managed and proper disposal, the Ministry of Health with its own budget allocate amount US$ 180\.000 for the year 2021 to establish regular contract with company for cleaning of the office day to day include management of disposal of office supply\. Likewise, the responsibility of the company includes management of the office waste through collection of the disposal of office supply, transporting for disposal and also make sure that the disposal of the office supply will be not harmful to the workers and the communities as well as no made damage to the environment as possible\. The approach using by the company use one place approach is company prepare containersplastic for each of room of the office to collect all disposal office supply and accumulate all disposal from all room and stored safely in suitable containers with covers to make sure it doesn’t leak out or escape and transporting to the safe disposal place\. This accumulation of waste has some devastating and harmful effects on our atmosphere as well as our biosphere\. In addition to the Ministry of Health also applying general safety principles through promote cleaning of the Office in every Friday as proper work practices\. The workers aware and understand the potential hazards associated with the task at hand and how to control their workplaces to minimize the danger\. However, under this project purchase of office stationery and copy of the form for surveillance wasn’t implemented due to the state of emergency lock down and other reason is short time for the implementation of the project\. D\. Training and Capacity Building for Workers Related to the Project The emergency medical services community faces many challenges in providing patient care while maintaining the safety of their patients and themselves\. One factor that influences patient care and safety is the ability of the drivers provider operating the ambulance to quickly but safely to the site of the medical emergency and subsequently transport the patient’s to the hospitals\. The emergency vehicle operations training important to all driversof Ambulances specially to help and maintain safety transport of Covid-19 patients\. Drivers has afforded multiple opportunities to learn and practice common driving such as control of the Ambulance, safety driving and also properly use of PPEs for transporting of the Covid-19patients\. 12 Training provided to about 40 responders from Dili District (clinical staff from the five CHCs, ambulance crew, airport staff, seaport staff, animal and plant quarantine officers) and 10 health specialists from the Chinese Medical Brigade in Dili on the important aspects of the management of this cases of Covid-19 and use PPE properly\. 32 officials of the National Medical Emergency team (including clinical directors of all five referral hospitals, doctors, nurses, mid-wives and senior officials from the Department of Ambulance and Medical Emergency held technical discussions and participated in refresher training to manage potential Covid-19 cases\. The training topics include; prevention, clinical management, surveillance and the use of protective gear\. For further detailed on the list of trainingconducted by INS on Covid-19 in Annex 5\. More than 75 health workers from all over the country comprising district health directors, rapid response teams (RRTs), and surveillance focal points underwent a daylong workshop on Covid-19\. The objective of the workshop is to equip health workers with accurate technical information on Covid- 19, strengthen the emergency preparedness and response and put in place mechanisms for community surveillance\. Another important aspect is to give accurate information to the public and dispel myths\. The workshop was organised by the Ministry of Health and partners\. Nine senior doctors and nurses from the national hospital, HNGV who successfully completed the Integrated Management of Adult and Adolescent Illness (IMAI) training spread over 11 weeks received certificate of attendance\. With support and collaboration with different institutions within the Ministry of Health, these new trainers will roll out IMAI training to community health centres and regional hospitals in the coming months\. Another batch of 12 health workers successfully completed training by senior HNGV specialists, based on the internationally-recognised BASIC short course that trains nurses and doctors on the essentials and fundamentals of clinical care in a hospital intensive-care unit\. The participants received certificate of attendance in the presence of directors of HNGV and other senior officials\. Some of the participants from the group are in the process of acquiring certification in becoming internationally-accredited BASIC course trainers\. National Media Workshop on Covid-19 conducted in Dili, 50 journalists from across media platforms like TV, radio, newspapers, community radio, websites and the MoH communication focal points from the municipalities\. The objective of the workshop was to equip journalists with accurate information on Covid-19 and provide guidance on finding reliable sources to gather information on Covid-19 to prevent any misinformation andrumours\. 13 The Ministry of Health together with partners conducted intensive training to 1\.156 Doctors, nurses, and paramedics from Policia Nacional Timor-Leste and the Falintil Forca Defesa Timor-Leste (FDTL), security, Cleaners underwent include Media on use of personal protective equipment (PPE) in addition to briefing on COVID-19, prevention, clinical management, surveillance and the use of protective gear\. Detailed on the training conducted by INS on Covid-19 in Annex 3\. E\. Feedback and Grievance Redress Mechanism (FGRM) for Workers Related to the Project The Ministry of Health appointed several Directors at Ministry of Health for Feedback and Grievance Redress Mechanism (FGRM) compoust of Director Finance, Procurament, Logistic and Administration and Director of Policy, Planning and Cooperation lead coordination and Management of the Emergency COVID-19 Prevention and Response project to facilitate resolution of complaints by workers on the E&S risks during period of the project implementation\. The Feedback and Grievance Redress Mechanism (FGRM) has been facilitated by the team designated with the aim to ensure and maintain a grievance complaints by the workers\. The Feedback and Grievance Redress Mechanism (FGRM) aim toprovide a time-bound and transparent mechanism to voice and resolve environmental and social\. In addition to that to facilitate the complaints from the workers, to ensure all health workers aware the project, the Ministry of Health through the Cabinet Quality Assurance Health (CQAH) has leadership support, a legal mandate for its work, have developed a quality improvement framework outlining an agreed set of domains to address in theirwork, have piloted systems such as a complaints hotline number 3310493 with the aim to facilitate workers and assisting complaints for individual comfortable\. The Feedback and Grievance Redress Mechanism (FGRM) also has been based on existing arrangements of the under organic low structure of the Ministry of Health for redress of grievances for workers complaints which will through to the CQAH hotline or to the existing structure Cabinet of Health Inspectorate or the complaints may directly to the Hon\. Minister of Health for smoothly or faster processing\. This indirect route have remain in place to preserve the usual administrative remedies\. The process to be established to deal with Emergency COVID-19 Prevention and Response project complaints and grievances is based on this existing/traditionl approach and upon the results from actual structure of the Ministry of Health\. 14 The process of the Feedback and Grievance Redress Mechanism (FGRM once received the complaints from the workers addressed to the Hon\. Minister of Health\. Following Hon\. Minister of Health will dispatch to the Cabinet of Health Inspectorate to analyse the contents of the complaints and if necessary a team will conduct audit and inspection,accordingly the finding will report to the Hon\. Minister of Health include recommendations, for further decision, in some case If the complaints not solve, the complainant’s will have access to the GOTL’s judicial or administrative remedies\. III\. STAKEHOLDER ENGAGEMENT PLAN (SEP) IMPLEMENTATION A\. Proof of Information Disclosure and Procurement Transparency The recent Procurement Legal Regime Decree Law sets out new tender processes which must be carried out by government procurement officers for purchases on behalf of the Government of Timor- Leste\. The key tender process used Request for Quotes for theoperational vehicles, laptops and pulsa for surveillance and Limited Tender by Pre- Qualification supplier for Ambulances\. The project has done on the disclosure as part of thestakeholder engagements focused on request of quotation with evidence publicated on several local news paper namely; Tempo Timor, Independente, STL\. The aim of the stakeholder engagement detailed on publication of tenders in newspaper in Annex 20\. The aim of the publications to news papers to ensure all process the procurement has followed and transparency for each of project subcomponents as follows; Subcomponent 1\.1: Strengthening safe patient transportation and referral capacity, especially from remote areas respond to COVID-19 to (US$616,000, PEF) The project PEF under subcomponent 1\.1 has executed amount US$ 616,000 for purchased 11 Ambulances through the procurement process of limited tender by pre-qualification supplier by justification for the Direct Selection was submitted for clearance and No Objection was issued for the Direct Selection of Timor Safari 4x4 Unipessoal Lda on January 21, 2021\. Draft Contract was submitted for clearance and No Objection was issued on January 29, 2021 with the incorporation of Manufacturer’s Authorization Letter and Letter of Acceptance of World Bank’s Anticorruption Guidelines and Sanctions Framework\. The Contract award was published at undb@worldbank\.org, infor@dgmarket\.com, procservices@worldbank\.org as follows: 15 Project: P174404 – Timor Leste COVID 19 Emergency Support Project Loan/Credit/RF Info:TF- B4177 Bid/Contract Reference No: TL-COVID19-GO/1 Procurement Method: DIR-Direct Selection Scope of Contract: Supply of Multifunction Ambulance Vehicles (11 units) for Timor Leste, MoH Contract Signature: December 18, 2020 Awarded Firm/ Individual: Timor Safari 4x4 Unipessoal Lda (542832) Rua de Matadoro,Caicoli, Dili, Timor Leste Signed Contract Amount: USD 603,350\.00 Delivery and Completion Date : January 28, 2021 Subcomponent 1\.2: Strengthened supervision, logistics, and surveillance capacity (US$304,000, PEF)\. (US$304,000, PEF)\. Supply of Operational Vehicles, subject for Post Review The project has purchased eight operational vehicles with executed amount US$ 304,000, the process of procurement used Request for Quotation for the Supply of Operational Vehicles was published on December 1, 2020 in local newspapers as follows: Jornal Timor Post and Jornal STL with the submission date of December 4, 2020\. Four Companies took the RFQ document but only three companies submitted their quotation as follows: Ezma Unip Lda, Auto Timor Leste Lda and Ponte Unip Lda\. Evaluation Report was received on December 11, 2020 with the Responsive Bidder Ezma Unipessoal Lda with the Total Quote of $277,040\.00 The intent to Award was published in the local newspaper on December 2020 and Letter of Acceptance was issued to the Ezma Unipessoal Lda on December 29, 2020 and Letter for Change of Car Specification was received from Ezma Unipessoal Lda offering different specifications and price\. Target delivery date is beyond the project closingdate of 31 January 2021\. Because of this, MoH seek the advise of WB for possible option to purchase the Operational Cars\. Request for extension of Project Due date seems very difficult as the immediate supplier Auto Timor Leste supply will be available only by the end of February 2021\. Justification for Direct Contract for the Supply of Operational cars available at Dili Market was approved by MoH officials\. Survey the Dili Market for available Operational Cars with the following: Auto Timor Leste Lda, Timor Safari 4x4 Lda, Autozone Lda and only Auto Timor Leste Lda and Timor Safari 4x4 Unip Lda submitted the proposal for the available stocks in Dili\. Auto Timor Leste Lda offered their available stocks and so as with Timor Safari 4x4 Unip Lda\. Ocular inspection was done by DG Vitor and DNA Director Nelson before the Contract Approval\. Contracts were done in two lots: 16  Nos\. Contract Number Company Number of Units Amount Vehicles 1 RDTL-MS-DNA- Auto Timor 4 Units $ 180,500\.00 WB-DC-20- Leste Lda 247(Lot A) 2 RDTL-MS-DNA- Timor Safari 3 Units $ 121,500\.00 WB-DC-20- 4x4 Unip Lda 247(Lot B) Totals 7 Units $ 302,000\.00 The Contract award was published at undb@worldbank\.org, infor@dgmarket\.com, procservices@worldbank\.org as follows: Project: P174404 – Timor Leste COVID 19 Emergency Support Project Loan/Credit/RF Info: TF-B4177 Bid/Contract Reference No: RDTL-MS-DNA-WB-DC-20-247 (Lot A) Procurement Method: DIR-Direct Selection Scope of Contract: Direct Contract for Operational Vehicles (4 units)Contract Signature: January 19, 2021 Awarded Firm/ Individual: Auto Timor Leste Lda (551888) Avenida Martires da PatriaDili, Timor Leste\. Signed Contract Amount: USD 180,500\.00 and Delivery and Completion Date : January 27, 2021 The Contract award was published at undb@worldbank\.org, infor@dgmarket\.com, procservices@worldbank\.org as follows: Project: P174404 – Timor Leste COVID 19 Emergency Support Project Loan/Credit/RF Info: TF-B4177 Bid/Contract Reference No: RDTL-MS-DNA-WB-DC-20-247 (Lot B) Procurement Method: DIR-Direct Selection Scope of Contract: Supply of Operational Vehicles (3 units) for Timor Leste MoH Contract Signature: December 18, 2020 Awarded Firm/ Individual: Timor Safari 4x4 Unipessoal Lda (551870) Rua de Matadoro, Caicoli, Dili, Timor LesteSigned Contract Amount: USD 121,500\.00 Delivery and Completion Date : January 27, 2021 17 Subcomponent 1\.3: Strengthened surveillance capacity (US$22,843, PEF), Supply of Laptop Computers, subject for Post Review: Under sub component 1\.3 purchased six laptop computers for surveillance\. The process of procurament used method of Request for Quotation was published on December 1, 2020in local newspapers as follows: Jornal Timor Post and Jornal STL with the submission date of December 4, 2020 and Seven (7) companies took the RFQ documents\. Only three (3) submitted the quotations and did not meet the technical requirements\. The technical specifications was revised and published the Cancellation of the RFQ document and published the Retender on December 18, 2020 wherein submission is scheduled on 23 December 2020\. Seven (7) companies took the RFQ documents but only Six (6) companies submitted their Quotation\. Evaluation Committee recommended Xtrabox Unip Lda as the winning company with the Total Quotation of $11,820\.00 for 6 units of laptop computers\. The Evaluation Result was published on 06 January 2021 and was published in two local Newspapers: Diario Nacional and Jornal Independent after the protest clearance period the Letter of Acceptance was issued to Xrabox Unipessoal Lda on 18 January 2021\. Contract Completion : January 29, 2020\. UPDATED PROCUREMENT PLAN as of January 26, 2021 Nos\. Description Supplier Qty Contract Amount Covid 19 Emergency Support Budget Amount $ 942,835\.00 Ambulance Timor Safari 11 1 Vehicles 4x4 units $ 603,350\.00 2 Operational Timor Safari Vehicles 4x4 3 units $ 121,500\.00 Operational Auto Timor 3 Vehicles Leste Lda 4 units $ 180,500\.00 Computer Xtrabox Unip 4 Laptops Lda 6 units $ 11,820\.00 Total Amount Executed $ 917,170\.00 $ 917,170\.00 Total Variance due to unimplemented Operational Cost As of Jan $ 25,665\.00 18 Ministry of Health’s request to purchase additional Operational Vehicle and the Remaining amount to be used to Purchase Telephone Credits for communication purposes\. After collaboration with World Bank for the implementation by adding the activity in theprocurement Plan, the no objection was issued on 28 January 2021 to purchase Additional Operational Vehicle in the amount of $23,500 and the Telephone Credits from Timor Telecom was also processed\. Additional Operational Vehicle contract was approved in the amount of $23,500 and the Timor Telecom Contract was approved in the amount of $2,165\.00 \. Contract Completion: Auto Timor Leste Lda – additional Operation Vehicle $ 23,500\.00 January 30, 2021\. Timor Telecom Lda telephone credits $ 2,165\.00 January 30, 2021\. B\. Effective Communication Strategies for the Inclusion of Ethnic Groups Timor-Leste is a very diverse country in terms of its ethnicity, consisting of almost 16 different ethnic groups\. The majority of indigenous people are Austronesian (Malayo-Polinesian) origin and some of them are predominantly Melanesian-Papuan origin\. The Malayo-Polynesian ethnic groups are the Tetum in the north coast and around Dili; the Mambae in the mountains of central East Timor; the Tukudede in the area around Maubara and Liquisa; the Galoli inbetween the tribes of Mambae and Makasae; Kemak in north-central Timor island; and the Baikeno in the area around Pantemakassar\. The main tribes of predominantly Melanesian- Papuan origin include the Bunak in Central interior Timor island; the Fataluku in the eastern tip of East Timor around Los Palos; and the Makasae in the eastern end of the island\. Timor-Leste also has a variety of languages, in which it has constituted 2 official languages (Tetum and Portuguese); 2 working languages (Bahasa Indonesia and English); and a total of about 16 indigenous languages (Tetum, Galole, Mambae, Kemak, etc\.) The Ministry of Health together with partners trained 36 healthcare workers from HNGV and two community health centers (CHC) in Dili on Infection Prevention and Control (IPC) measures to prevent the spread of COVID-19 and other infectious diseases\. This activity will benefit 635 mothers and infants, as well as 350 pregnant women attending the national referral hospital and 285 pregnant women attending the two CHCs\. To further equip communities strategy to promoted by inviting relevant parties to the discussion such as ethnic groups representatives, communicating in a culturally appropriate format using relevant local language’s that is understandable to the indigenous people on accurate information on COVID- 2019, sensitization session on Covid-19 prevention conductedat the mosque, Masjid Kampung Alor and has participated Muslim religion in the country\. IEC material has been distributed mainly; 2,000 posters and 1,420 stickers in 48 villages and 242 19 sub villages in all over the countries\. In addition to that 400 IEC materials has developed,printed and translated in local dialect, which were distributed among border communities in Bobonaro and Covalima\. For further detailed on the local message for Covid-19 in Annex 6\. Other important service were provided to support accessing the information of the Covid-19 include other health information for mental illness, the Ministry of Health together with partners have established telephone hotline 12123 which is dedicated to mental health\. The establishment of the hotline as part of ongoing response and recovery activities around the COVID-19 crisis\. The hotline operated by the dedicated Ministry of Health staff and the NGO PRADET, a local non-governmental organisation that has been providing psychosocial servicesin Timor-Leste for the past 20 years\. Calls to the hotline will be answered by trained mental health councellors, who can offer over-the-phone support as well as referrals to other health services\. The hotline will also provide information to those seeking support for key health issuessuch as maternal, child health and newborn care, nutrition and seek advice for general health treatment or health information\. The hotline is toll-free for six months and will be implementedwith support from Timor-Leste’s mobile phone service providers Telcomcel, Telemor and Timor Telecom\. Other approach to provide information on Covid-19 to community in general speciallyto potential benefit for the indigenous people especially in the hard-to-reach area, in respect, and preserve the culture, knowledge, and practices of the indigenous peoples\. The Covid-19 prevention response team together with partners have been reached with vehicle based community outreach campaign in all 13 districts including Região Administrativa Especial Oé- Cusse Ambeno (RAEOA) include provided stickers, posters and banners on COVID- 19 prevention, in addition to broadcast of videos on TV, audio messages on the national and community radio channels including five local dialects\. C\. Documentation of COVID-19 Protocol and Technical Guidance Used during Public Meetings Based on National Contingency Plan implementation, given the nature of this project as a support of the nation- wide response, it is necessaryto initiate the sourcing of supplies to establish a national reserve or stock of medicines and medical supplies, of essential goods and services, through the mapping of resources and supply systems on the basisof defined epidemiological scenarios\. Under of pillar 20 8 operational and logistic support those operational cars utilised to monitor the needs and to coordinate the distribution of the following goods and services: • To distribute foodstuffs (catering) to the Confinement Units and to frontline workers/professionals; • To distribute medicines and medical supplies, as well as medical equipment and PPEs; • To allocate operational vehicles and to distribute of fuel tokens; • To distribute office supplies, furniture and IT equipment required to the operation of the various pillars of intervention; • To map and/or carryout a technical survey of the physical and material requirements of the Confinement Units (quarantine and isolation); • To coordinate and to define technical specifications for the design and engineering of the isolation infrastructures in hospitals, healthcare centres or healthcare units identified for such purpose\. The project also purchase eleven Ambulances were distributed to 10 different municipals have been appointed as end-users of the ambulances to help safe transportation arrangements by reducing gender inequality\. Likewise, safe transportation of the COVID-19 cases to specialized facilities and contribution to protect health workers as well as strengthening capacity to refer patients of COVID- 19 from the rural area to the isolation facility\. The standard operation of the surveillance highlighted of the important establishment ofthe Rapid Response Team (RRTs) at the national and municipality levels should remain on standby and maintain vigilance\. The RRTs has established a team at National level and each team for each 13 districts and they have participated training specially on surveillance\. The team has responsible when alerted by healthcare facilities or other sources of a suspected or a confirmed case, the Surveillance Department, MoH should coordinate and activateRRTs and ensure: • To investigate the event within 24 hours of receiving notification • To interview the case(s) and identify all contacts which should be done using the case investigation and contact tracing forms\. • Trace contacts in person and direct them to quarantine immediately - visit their household or quarantine facilities (depending on whether it is self-quarantine or 21 quarantine in facilities, or from the health care facilities)\. Depending on theprevailing situation, follow-up of contacts may be considered using telephone\. • Share findings (e\.g\. completed case investigation and contact tracing forms) to the respective focal surveillance/RRTs and report to the Surveillance Department and Director of DDC at the Ministry of Health\. The composition of rapid response teams at the national and municipality levels should be determined by the Surveillance Department of the Ministry of Health\. However, basic minimum team should include: • Ambulance and other designated vehicle should always be available and ready for transportation of suspected cases and should be equipped with minimum IPCand lifesaving equipment (e\.g\. oxygen)\. • Vehicles should always be made available to transport arriving entrants from the points of entry to designated government quarantine facilities and respective homes for home quarantine • All the drivers and staff of designated ambulances and other vehicles should be trained on transportation of patients with respiratory infection and on infection prevention and control\. Ambulance/ designated vehicles should be immediately deployed after receiving the direction from the relevant agencies at the PoE or Surveillance Department of the Ministry of health\. The project has contributed training to the 50 ambulance personnel, including drivers and co-drivers, from 13 Districts to improve their capacity in transporting patients safely and reacting to medical emergencies during transfers in a proper and timely manner\. Thetopics of training focuses on; • Proper use of PPE, • Case definitions, 22  • Infection prevention and control, • Management principles and assessment of severity, • Management of mild cases, • Management of moderate cases, • Management of severe cases, • Management considerations in pregnancy, • Management considerations in children, • Specific treatments • palliation\. Moreover, the government decree of state emergency requires that all individuals, who are not subject to a mandatory isolation regime, when walking on public roads must do so unaccompanied, wearing masks, observing the distance of, at least, one meter from other passers-by and avoid the formation of crowds\. All individuals shall also maintain a distance of, at least, one meter when they are waiting for the opportunity to enter commercial, provision of services or public administration services facilities, as well as at the places of entry and exit of passengers on public transport\. The decree forbidden to hold meetings and demonstrations, as well as any social, cultural or sporting events involving the agglomeration of more than ten people\. This prohibition does not apply to individual sporting activities, which do not involve the agglomeration of people\. It is also prohibited to hold any religious events, including worship celebrations involvingthe agglomeration of more than ten people\. Funerals are conditional on the adoption of organizational measures that prevent the transmission of the SARS-Cov-2 virus and should not imply the simultaneous presence of more than ten people\. Public passenger transport is allowed, however vehicles must be sanitized daily, before starting the activity, and drivers, crews and passengers are required to wear mouth andnose protection masks\. Passengers shall avoid, among themselves and to the extent possible, any form of physical contact\. Markets and all commercial, industrial, crafts or service provision establishments are permitted\. All individuals wishing to enter these establishments or premises must wear a mask, wash their hands before entering the premises and respect the distance of, at least, one meter from other individuals\. Those 23 responsible for market and establishments shall provide the necessary conditions for compliance with those rules and shall refuse entry to those who do not comply with the previous provisions\. The above rules also apply to premises where public services operate\. Street vendors must keep a distance of, at least, one meter from their customers and other street vendors, and shall permanently wear a mouth and nose protection mask, as well as ensure hand hygiene\. However, should engage activities not possible to be carried out online and required physical presence include training of health pesrsonels, the Ministry of health utilised WHO standards protocols in the workplace will be adapted, with following procedures: BEFORE the meeting or event 1) Develop and agree a preparedness plan to prevent infection at your meeting or event\. • Consider whether a face-to-face meeting or event is needed\. • Ensure and verify information and communication channels in advance with key partners such as public health and health care authorities\. • Pre-order sufficient supplies and materials, including tissues and hand sanitizer for all participants\. Have surgical masks available to offer anyone who develops respiratory symptoms • Actively monitor where COVID-19 is circulating\. Advise participants in advance that if they have any symptoms or feel unwell, they should not attend\. • Make sure all organizers, participants, caterers and visitors at the event provide contact details: mobile telephone number, email and address where they are staying\. State clearly that their details will be shared with local public health authorities if any participant becomes ill with a suspected infectious disease\. If they will not agree to this they cannot attend the event or meeting\. 24  2) Develop and agree a response plan in case someone at the meeting becomes ill with symptoms of COVID-19 (dry cough, fever, malaise)\. This plan should include at least: • Identify a room or area where someone who is feeling unwell or has symptoms can be safely isolated • Have a plan for how they can be safely transferred from there to a health facility\. • Agree the plan in advance with your partner healthcare provider or health department\. DURING the meeting or event 1)\. Provide information or a briefing, preferably both orally and in writing, on COVID-19 and the measures that organizers are taking to make this event safe for participants\. o Build trust\. For example, as an icebreaker, practice ways to say hello without touching\. o Encourage regular hand- washing or use of an alcohol rub by all participants at the meeting or event o Encourage participants to cover their face with the bend of their elbow or a tissue if they cough or sneeze\. Supply tissues and closed bins to dispose of them in\. o Provide contact details or a health hotline number that participants can call for advice or to give information\. 2)\. Display dispensers of alcohol-based hand rub prominently around the venue\. 3)\. If there is space, arrange seats so that participants are at least one meter apart\. 4)\. Open windows and doors whenever possible to make sure the venue is well ventilated\. 5)\. If anyone who starts to feel unwell, follow your preparedness plan or call your hotline\. • Depending on the situation in your area, or recent travel of the participant, place the person in the isolation room\. Offer the person a mask so they can get home safely, if appropriate, or to a designated assessment facility\. 25  • Thank all participants for their cooperation with the provisions in place\. AFTER the meeting 1) Retain the names and contact details of all participants for at least one month\. This will help public health authorities trace people who may have been exposed to COVID-19 if one or more participants become ill shortly after the event\. 2) If someone at the meeting or event was isolated as a suspected COVID-19 case, the organizer should let all participants know this\. They should be advised to monitor themselves for symptoms for 14 days and take their temperature twice a day\. 3) If they develop even a mild cough or low-grade fever (i\.e\. a temperature of 37\.3 C or more) they should stay at home and self-isolate\. This means avoiding close contact (1 meter or nearer) with other people, including family members\. They should also telephone their healthcare provider or the local public health department, giving them details of their recent travel and symptoms\. 4) Thank all the participants for their cooperation with the provisions in place\. D\. Operations of Feedback and Grievance Redress Mechanism (FGRM) The Ministry of Health have been continuous and consistent advocacy and sensitization session for communities include line ministries and government agencies, international nongovernmental organizations, health development partners, faith based institutions and communities at large\. Each pillars from 1 to 9 have been actively appeared on GMNTV’s,TVe, TVTL daily live show Café Kmanek to address questions on COVID-19 and dispel misconceptions and confusions about the disease and also give an update on preparedness and response\. In addition to that, National Media Workshop on Covid-19 in Dili\. Workshop conducted for journalists from across media platforms like TV, radio, newspapers, community radio, websites and the MoH communication focal points from the municipalities\. The objective of the workshop was to equip journalists with accurate information on Covid-19 and provide guidance on finding reliable sources to gather information on Covid-19 to prevent any misinformation and rumours\. In terms of grievance management from public audiences, the Ministry of Health established COVID- 19 Hotline contacted by dialling 119 for individuals comfortable speaking with an on-demand information about COVID-19\. Alternatively, grievances canalso be delivered through the Ministry of Health’s website at http://www\.moh\.gov\.tl/?q=contact, Facebook page palacio das Cinzas, As of January 2021 26 the hotline has received more than 15\.500 calls, there was increase in the number ofrequests for support and information as well as inform the illegal people entrance through land border mainly in Oecusse, Covalima and Bobonaro District through dialling to hotline 119\. In addition to the hotline, The Ministry of Health has use its Facebook page palacio das Cinzas to reaches a broad audience, as of January 2021 the audience access like Facebook pages Palacio das Cinzas reached 51\.000\. The Ministry of Health together with Partners conduct Covid-19 Rapid Assessment with focus on the Knowledge Attitude and Practice\. The objective of the rapid assessment To assess and obtain overall information related to COVID-19 including the KAP’s, accessible and preferred information channels, and barriers and enablers to practicing the key behaviors\. Through the cross-sectional study design a total of 1252 individuals selectedfrom 7 municipalities included in this assessment\. The findings of rapid assessment on knowledge about Covid-19; majority 86% remember the information on the prevention of the COVID-19, followed with symptoms and way of transmission and only 10%, remember message on what to do if they have COVID-19 symptoms\. The source of information on Covid-19 Majority 71% access through TV, 53% through health workers and 49% through Radio were the most common sources where the community received the COIVID-19 information\. Information from TV 50% and 26% from Health workers were reported as most trusted sources, others sources including radio found less trusted sources\. IV\. SUMMARY OF INCIDENTS/ACCIDENTS AND CORRECTIVE ACTIONS During the period of implementation Emergency COVID-19 Prevention and Response and the project period there were no health worker, drivers and surveillance officer contracted the Covid-19\. However, the Ministry of Health together with partners continuing strengthening capacity of health workers, surveillance and drivers providing refreshing training for health workers with the topic of training compost of; Infection prevention and control, Management principles and assessment of severity, Management of mild cases, Management of moderate cases, Management of severe cases, De-isolation and discharge, Management considerations in pregnancy, Management considerations in children, Specific treatments, Palliation, Post-mortem considerations and included waste management and cleaning\. In addition to that the training also have been conducted to the health workers 1\.156 to cover in all 13 District\. All healthcare facilities have established or strengthen and implement IPC programmes and Occupational Health and Safety programmes with clinical management guideline to ensure health worker safety and prevent HW infections while in 27 the work environment\. Other approach, the Ministry of Health ensuring adequate clinical staffing levels is recommended to prevent the transmission of health care-associated infections\. In regard to accident in Timor-Leste was reported by the WHO on 2017 that the accident injury and deaths in Timor-Leste reached 208 or 2\.77% of total deaths\. The age-adjusted Death Rate is 19\.34 per 100,000 of population, which ranks Timor-Leste #84 in the word\. However, during the period of implementation of emergency Covid-19 Prevention and Response project, no accident related to the use of the operational vehicles and Ambulances\. 28  Annex 1 Results Framework COUNTRY : Timor-Leste Timor-Leste COVID-19 Emergency Support Project Project Development Objectives To support the Government of Timor-Leste in its response to COVID-19 Project Development Objective Indicators Unit of Corporate Data Source /Responsibility for Data Indicator Name Measur e Baseline End Target Frequency Methodology Collection Name: Number of Number 0\.00 11\.00 Ministry of Healthcomplete ambulances deployed By January 31, Ministry of Health procured 11Ambulances as in hard to reach areasof 2021 database perplanned the country Description: Number of ambulances procured under PEF COVID19 emergency fund project, deployed in hard to reach areas of Timor-Leste\. Name: Number of Number 0\.00 80\.00 The Ministry of Health Supervision and health facilities By December conducted 80 times Monitoring receiving monitoring 31, 2020 monitoring and database and supervision visits supervision from Central 29  Unit of Corporate Data Source / Responsibility for Data Indicator Name Measur e Baseline End Target Frequency Methodology Collection from the central to the districts during government project implementation\. The target was over due to the Covid-19 prevention response was required more often Monitoring and supervision from National to Districts\. Description: Number of health facilities receiving monitoring and supervision visits from the central government which the transportation mode using vehicles purchased under this project Intermediate Results Indicators Unit of Corporate End Data Source / Responsibility for Indicator Name Measur Baseline Frequency Target Methodology Data Collection e Name: Number of Number 2894\.00 Number of women who havebeen testing for tested for COVID-19 By February 17, WHO and MOH women achieved 8\.527 2021 administrative data over targets due to the expansion of the testing 30  Unit of Corporate End Data Source / Responsibility for Indicator Name Measur Baseline Frequency Target Methodology Data Collection e facilities to the referral hospitals and the districts 31  Annex 2 Nomination of the team for the project 32  Annex 3 List of training conducted by INS on covid-19 Formasaun covid -19 ne'ebe ins fornese iha tinan 2020Hahu iha Fulan Maio to'o Novembro 2020 Profissaun Formandus Fatin Jestor / Total Formandus No Fundus Medico Enfermeiru Parteira Tek\. Aliadu Munisipiu Administrasaun M F TTL M F TTL F TTL M F TTL M F TTL M F TTL OGE, WHO & 1 Aileu 15 9 24 10 4 14 12 12 4 4 8 0 29 29 58 Maluk Timor OGE & Maluk 2 Ainaro 13 16 29 12 9 21 9 9 5 3 8 1 3 4 31 40 71 Timor OGE & Maluk 3 Baucau 23 25 48 14 29 43 32 32 5 8 13 3 2 5 45 96 141 Timor OGE, WHO & 4 Bobonaro 13 13 26 15 13 28 17 17 6 7 13 9 7 16 43 57 100 Maluk Timor OGE, WHO, JSI & 5 Covalima 10 8 18 21 13 34 21 21 7 8 15 12 4 16 50 54 104 Maluk Timor OGE, WHO, 6 Dili 94 19 113 13 30 43 24 24 5 3 8 5 3 8 117 79 196 Kristal & UNFPA OGE & Maluk 7 Ermera 17 21 38 15 18 33 19 19 3 8 11 2 2 37 66 103 Timor OGE & Maluk 8 Liquica 15 21 36 6 2 8 1 1 1 1 0 21 25 46 Timor OGE & Maluk 9 Lautem 16 11 27 11 8 19 6 6 6 5 11 1 1 33 31 64 Timor 10 Manatuto OGE, Maluk 18 7 25 10 12 22 16 16 7 5 12 1 1 36 40 76 33  Timor & HAI OGE & Maluk 11 Manufahi 9 5 14 9 4 13 16 16 7 3 10 3 3 28 28 56 Timor OGE & Maluk 12 Viqueque 21 13 34 8 10 18 8 8 6 3 9 1 1 35 35 70 Timor OGE & Maluk 13 RAEOA 6 12 18 9 6 15 16 16 7 4 11 10 1 11 32 39 71 Timor 27 18 15 15 19 Total 450 311 197 68 62 130 46 22 68 537 619 1156 0 0 3 8 7 Domingas da Costa Pereira, L\.Ec Diretora Ezekutivu INS 34  Annex 4 List of stock on hand and pipe line of PPEs from SAMES Dadus Stock e Konsume Mensal por dia 10 de Fevereiro 2021 Item Stock on Code Item Name VEN In Stock order 1 49_0062 Surgical Cap Cotton Green 165 204\.804 2 49_0099 Surgical Cap Cotton Yellow 257 290 3 49_0063 Surgical Gown Size XL 350 - 4 49_0963 Surgical Gown Size XXL - 60 5 18_0119 Surgical Gown Universal Size 9\.123 - Gloves Gynaecological Latex Sterile 6 27_8095 Disposable (6\.5) Small - 7\.000 Gloves Gynaecological Latex Sterile 7 27_8096 Disposable (7\.5) Medium - 7\.000 Gloves Gynaecological Latex Sterile 8 27_8097 Disposable (8\.5) Large - 7\.000 Gloves Surgeon (Sterile) Latex Cuffed 9 27_8060 Size 6 - 470\.200 Gloves Surgeon (Sterile) Latex Cuffed 10 27_8065 Size 6\.5 - 462\.500 Gloves Surgeon (Sterile) Latex Cuffed 11 27_8070 Size 7 - 446\.400 Gloves Surgeon (Sterile) Latex Cuffed 12 27_8075 Size 7\.5 1\.500 545\.078 Gloves Surgeon (Sterile) Latex Cuffed 13 27_8080 Size 8 1\.000 462\.400 Gloves Surgeon (Sterile) Latex Cuffed 14 27_8085 Size 8\.5 - 282\.000 15 49_0061 Gown Suresafe 35 poly (M) 21 20 16 49_2910 Hand Towel 4\.176 - 17 49_0180 Mask Face Surgical Cotton Green 8\.920 40\.590 Mask Surgical Operating Theatre 18 49_0181 Disposable 1\.021\.930 3\.004\.390 19 49_0062 Surgical Cap Cotton Green 165 204\.804 20 49_0099 Surgical Cap Cotton Yellow 257 290 21 49_0063 Surgical Gown Size XL 350 - 22 49_0963 Surgical Gown Size XXL - 60 23 18_0119 Surgical Gown Universal Size 9\.123 - 35  Annex 5 List of training for ambulances drivers and health profesionals I\. TREINAMENTO MUNICIPIO BOBONARO HR MALIAN IHA DIA 17-19 DE JUNHO DE 2020 NO\. NARAN KOMPLETO POZISAUN 1 Madalena da C\. Marques Director Clinico 2 Boaventura Jesus dos Santos Chefe Gabineti Quality Control 3 Carlos Magno Chefe Departamento Emergencia 4 Hendrikus Hasan Enfermeiro Ambulancia 5 Lambert Hale Enfermeiro Ambulancia 6 Antonio Gama Agente Ambulancia 7 Celino Goncalves Lopes Agente Ambulancia 8 Alvaro Maia Agente Ambulancia 9 Simplicio Amaral de Deus Medico Ambulancia 10 Gil Ferreira Ximenes Enfermeiro Ambulancia 11 Jose Araujo Agente Ambulancia 12 Manuel da Silva Agente Ambulancia 13 Arnaldo Pires Enfermeiro Ambulancia II\. TREINEMENTO MUNICIPIO COVALIMA, HR SUAI IHA DIA 08-10 DE JULHO DE 2020 NO\. NARAN KOMPLETO POZISAUN 1 Alipio Soares Enfermeiro Ambulancia 2 Estanislau Carvalho Enfermeiro Ambulancia 3 Francisco Amaral Agente Ambulancia 4 Cancio Cardoso Agente Ambulancia 5 Jose de Jesus Agente Ambulancia 6 Felismina dos Santos Parteira 7 João Baptista Enfermeiro Ambulancia 8 Nuno Alvaro Correia Agente Ambulancia 9 Fidel Elvis Soares Agente Ambulancia 10 Ivonio da Cruz Enfermeiro Ambulancia TREINAMENTO MUNICIPIO AINARO, HR MAUBISE IHA DIA 20-22 DE JULHO DE 2020 NO\. NARAN KOMPLETO POZISAUN 1 Cristovão Falcão Agente Ambulancia 2 Romaldo de Deus Costa Enfermeiro Ambulancia 36  3 Lourenço M\. Lopez Agente Ambulancia 4 Aderito Salsinha Enfermeiro Ambulancia 5 Imaculada da Conceicão Parteira 6 Liliana Tilman Parteira 7 Angelina Cabral Parteira 8 Felismina dos Santos Parteira 9 Hermenegildo Pereira Medico Ambulancia 10 Alfredo Pacheco Agente Ambulancia 11 Marcelino Martins Agente Ambulancia 12 Graciano Claver Enfermeiro Ambulancia ` IV\. TREINAMENTO MUNICIPIO BAUCAU, HOREX BAUCAU IHA DIA 27-29 DE JULHO DE 2020 NO\. NARAN KOMPLETO POZISAUN 1 Francisco da Silva Enfermeiro Ambulancia 2 Santiago de Sa Enfermeiro Ambulancia 3 Domingus Guterres Enfermeiro Ambulancia 4 Elias Bocilai Soares Enfermeiro Ambulancia 5 João Gusmão Soares Agente Ambulancia 6 Deolindo M\. da Silva Agente Ambulancia 7 Jose Agapito M\. Belo Agente Ambulancia 8 Mario Vitor D\. Sarmento Agente Ambulancia 9 Reinaldo Soares Enfermeiro Ambulancia 10 Abilio A\.B\. Bovida Telefonista Ambulancia 11 Nunu Vital Soares Chefe Dep, E\.Medica 12 Adelino do Rosario Guterres Enfermeiro Ambulancia 13 Januario Oliveira Agente Ambulancia 14 Felismina dos Satos Parteira 15 Herminia dos Dantos Enfermeira Ambulancia Chefe Dep\. Emergencia Medica Director DNASH ( Dr\. Nuno Vital Soares, S\.Psi) (Dr\. Nilton do Carmo da Silva, SpOT, M\.Biomed) No\. ID: 30788-2 No\. ID : 22445-6 37  Annex 6 Message on ppe proper use for use local language 38  Annex 7 Certificate of handover operational cars 39  Annex 8 Certificate of hand over lap tops for surveillance 40  Annex 9 Photos of receiving and inspection 41  Annex 10 Photos of the training, meeting and others activities of covid-19 42  Annex 11 Number of women tested for covid-19 43  Annex 12 Photos handover operational veheicles 44  Annex 13 Vehicle Maintenance Monitoring 45  Annex 14 Vehicle operation monitoring report 46  Annex 15 Preventative Maintenance REPUBLICA DEMOCRATICA DE TIMOR LESTEMINISTERIO DAS FINANÇAS DIRECÇÃO GERAL DE FINANÇAS DO ESTADO DIRECÇÃO NACIONAL DE GESTÃO DO PATRIMONIO DO ESTADO Rua\.Eestrada de Balide Raihun,Ex Coumpound Logistic and Transport Unmiset DiliTelp\. : 3317233, 3317234, 3331098 PREVENTATIVE MAINTENANCE SCHEDULE "A" MAINTENANCE (EVERY 5000 KM) a) Change engine oil; b) Perform "A" Maintenance Check and Rectify as necessary: c) Check and add battery water, ensure battery terminals are cleaned; d) Inspect hoses, tubes and fuel lines for signs of leaks; e) Check radiator, coolers and condensers, use compressed air to clean dust; f) Check all belts tension and idler bearings; g) Check and add oil to all gear boxes; steering, transmission & differential; h) Check all electrical systems; lights, horn, radio, instruments & gauges; i) Check steering, driveline and suspensions; shock absorber bushes & joints; j) Lubricate grease points as required; k) Refill reservoir windshied washer and check wiper blades; l) Inflate all tires with pressure according to manaufactures specification; m) Check tools and equipment; jack, tire wrench and basic tools; n) Road test to check unusual noise and accessories operating condition; o) Provide PM sticker to determine the next scheduled maintenance; p) Check all mirrors; side and rear view; q) Car wash complete; clean in and out, blow with compressed air engine compartment\. "B" MAINTENANCE (EVERY 10000 KM) All items required in the "A" Maintenance, and; a) Change Engine oil and Filter; b) Adjust clutch and brakes free play; c) Check fuel filters and change if necessary; 47  d) Rotate tires and balance if required\. "C" MAINTENANCE (EVERY 20000 KM) All items required n the “Aâ€? & “Bâ€? Maintenances, and; a) Change Engine oil and Filter; b) Adjust clutch and brakes free play; c) Check fuel filters and change if necessary; d) Rotate tires and balance if required; e) Change fuel and air filters; f) Check alternator brushes and flush cooling system; g) Check ignition timing and take cylinder compression reading; h) Adjust valves and renew valve cover gasket if necessary; i) Open all wheels for brakes inspection; pads, disc rotor & shoes& drums; j) Adjust front wheel bearings free play; lubricate if required; k) Check and tighten loose nuts and bolts; l) Renew spark plugs/test injectors\. 48 Annex 16 Asset disposal form REPUBLICA DEMOCRATICA DE TIMOR LESTE ASSET DISPOSAL FORM 1\. SUBMISSION FOR DISPOSAL RDTL/Barcode No\. Name of Asset make/type Serial No\. Acquisition (Donated/Gov't) Date Original Cost Depreciated Value User & Location Department Unit Contact person Reason for disposal: ï?¯ Beyond Economical Repair ï?¯ Obsolete or inefficient ï?¯ Other (please specify) ï?¯ No expected future Use ï?¯ Unsafe Approvals Acknowledged by User Approved by Minister of Relevant Line Ministry Acknowledged by Logistics in Line Ministry Asset received by Asset Disposal - DNGPE Notes: a) If Asset is Beyond Economical Repair please attach 3 quotations for repairs b) Replacement Assets can only be issued through normal annual budget process 2\. ASSESSMENT BY ASSET DISPOSAL DEPARTMENT - DNGPE Notes on condition of asset Recommendation: ï?¯ Dispose ï?¯ Return to Operation ï?¯ Reallocate to other line ministry Estimated Value: Approvals Chief of Asset Disposal Department - DNGPE Director DNGPE 3\. DECISION BY AUCTIONS COMMISSION ï?¯ Sale by Public Tender ï?¯ Sale by Public Auction Reserve Price: ï?¯ Sale at Negotiated Price ï?¯ Donation Donation to: ï?¯ Destroy or Dump Notes: a) Reserve Price must be specfied if to be sold by Auction or Tender -this is usually the estimated value - 20% ï?¯ Return to Service b) Beneficiary Organisation must be specified in case of donation Approvals President of Auctions Commission Vice President of Auctions Comission 4\. DISPOSAL RECORD Disposal date Proceeds of Sale (USD) Receipt No\. Bank & A/C No\. Destrotyed/Dumped by: Witnessed by: Donated to: Witnessed by: Approvals: Chief of Asset Disposal Department - DNGPE Director DNGPE Dispoal acknowledged by: Chief of Asset Management Department - DNGPE Notes: a) The sale documents should be attached to this form for the paper file\. b) The Chief of Asset Management Department Signs to ackowledge the Asset Register has been updated for disposal 49  Annex 17 List of Distribution PPEs TOTAL Distribution of Service Delivery Points/ TOTAL Distribution TOTAL Centro Dirtibution Isolame PPE Items Strength Form HR\. HR\. HR\.RA Municip for ALL HNGV HoREX HR\. Suai nto Maliana Maubisse EOA alities Health Vera Facilities Cruz (Column A) Protective Goggles 300 100 100 100 100 100 500 1\.850 3\.150 Gloves examination nitrile Gloves examination nitrile Gloves examination nitrile Masker N95 Mask surgical non-steril Surgical Gown Page 1 S Pear M Pear L Pear Pcs Pcs M Pcs 100 100 200 2\.000 100 100 1\.000 50 100 100 100 1\.000 1\.000 50 100 - 100 100 100 1\.000 50 100 1\.000 50 400 500 500 500 2\.000 200 1\.500 800 1\.760 19\.200 580 - 3\.150 2\.500 1\.300 500 2\.960 28\.200 Surgical Gown L Pcs 200 50 50 - 50 50 200 720 1\.080 Surgical Gown XL Pcs - - - - - - 40 - 1\.320 Surgical Gown XXL Pcs 100 100 100 100 100 100 100 1\.300 40 Shoes covers Pear 300 100 100 100 100 100 500 1\.850 2\.000 Oxygen Mask Tubing - - - - - - 40 - 3\.150 50  Annex 18 Inventory and moveable asset management for Operational Vehicles MINISTERIO DA Diresaun Nacional Administração Logisitica Patrimonio SAUDE Lista Viaturas Operasional Foun 2021 Fonte Kondisaun tinan No Fasilidade No\.MatriculaMarca/Tipo Barcode No\. Motor No\. Chassis Lokal Utulizador Kustu USD G D Dk At'blh At'lbh Fabrika Sosa Utuliza 1 06-835 G Toyota Hilux 1GD4291740 MR0BA3CD300008701 √ √ 2017 2021 2021 MdS Motorista Ministerio 2 06-836 G Pajero Sport 4D56UBB3187 MMBGNKR30LH011835 √ √ 2020 2021 2021 MdS Financas 3 06-837 G Pajero Sport 4D56UBB3245 MMBGNKR30LH011953 √ √ 2020 2021 2021 MdS Motorista 4 Servico 06-838 G Toyota Prado 1KD2763664 JTEBH9FJ70K194645 √ √ 2017 2021 2021 MdS Motorista 5 Centrais 06-834 G Toyota Rav 2AD5825749 JTMBCREVX0D086998 √ √ 2017 2021 2021 MdS Motorista Ministerio 6 06-833 G Toyota Rav 2AD5227025 JTMBBREVX0D087491 √ √ 2017 2021 2021 MdS Financas 7 06-832 G Toyota Rav 2AD5826016 JTMBBREV40D086515 √ √ 2017 2021 2021 MdS Motorista 8 06-839 G Toyota Rush 2NRF897325 MHKE8FB300K005596 √ √ 2019 2021 2021 MdS Motorista NB: G: Governo D: Doasaun Dk: Diak A't blh: A't bele hadia A't lbh: A't labele hadia 51  Annex 19 Inventory and moveable asset registered for Ambulances MINISTERIO DA Diresaun Nacional Administração LogisiticaPatrimonio SAUDE Lista Viaturas Ambulansia Multi Funsaun Foun 2021 Fonte Kondisaun tinan No Fasilidade No\.MatriculaMarca/Tipo Barcode No\. Motor No\. Chassis Lokal Utulizador Kustu USD G D Dk At'blh At'lbh Fabrika Sosa Utuliza 1 SSM Aileu 06-849 G Toyota Hilux 1GD4939716 MR0DA8CB705866695 √ 2021 2021 CS Laulara Motorista SSM 2 06-848 G Toyota Hilux 1GD4942624 MR0DA8CB705866938 √ 2021 2021 CS Riamary Motorista Baucau SSM 3 06-847 G Toyota Hilux 1GD4941474 MR0DA8CB305866936 √ 2021 2021 CS Atsabe Motorista Bobonaro SSM 4 06-846 G Toyota Hilux 1GD4941446 MR0DA8CBX05866934 √ 2021 2021 CS Fohorem Motorista Covalima SSM 5 06-845 G Toyota Hilux 1GD4942736 MR0DA8CB105866918 √ 2021 2021 CS Fatululik Motorista Covalima 6 SSM Dili 06-844 Toyota Hilux 1GD0929293 MR0DA8CB405866961 √ 2021 2021 CS Metinaro Motorista SSM 7 06-843 G Toyota Hilux 1GD4944489 MR0DA8CB905867055 √ 2021 2021 CS Mehara Motorista Lautem SSM 8 06-842 G Toyota Hilux 1GD4943063 MR0DA8CB305867066 √ 2021 2021 CS Maubara Motorista Liquisa SSM 9 06-841 Toyota Hilux 1GD4944514 MR0DA8CB705867054 √ 2021 2021 CS Laclo Motorista Manatuto SSM 10 06-850 G Toyota Hilux 1GD4943141 MR0DA8CB605867062 √ 2021 2021 CS Turiscai Motorista Manufahi SSm 11 06-840 G Toyota Hilux 1GD0929402 MR0DA8CB605867059 √ 2021 2021 CS Uatulari Motorista Viqueque NB: G: Governo D: Doasaun Dk: Diak A't blh: A't bele hadia A't lbh: A't labele hadia 52  Annex 20 Picture of Publication Tenders in News papers 53

REVIEW

P071092

 ICRR 12829 Report Number : ICRR12829 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 02/20/2008 PROJ ID : P071092 Appraisal Actual Project Name : NWFP On-farm Water Project Costs (US$M):US$M ): 32\.05 16\.91 Management Project Country : Pakistan Loan/ Loan /Credit (US$M ): US$M): 21\.35 13\.37 Sector Board : RDV US$M ): Cofinancing (US$M): Sector (s): Irrigation and drainage (67%) Flood protection (21%) Other social services (11%) Central government administration (1%) Theme (s): Participation and civic engagement (25% - P) Water resource management (25% - P) Rural policies and institutions (25% - P) Rural services and infrastructure (25% - P) L/C Number : C3516 Board Approval Date : 06/12/2001 Partners involved : Closing Date : 06/30/2006 03/31/2007 Evaluator : Panel Reviewer : Group Manager : Group : Kristin S\. Little Ronald S\. Parker Alain A\. Barbu IEGSG 2\. Project Objectives and Components: a\. Objectives: The overall objective of the Project was to increase agricultural growth and productivity and expand farm incomes \. This objective was to be achieved by : (a) improving the reliability, efficiency and equity of distribution of the available irrigation water; (b) increasing on-farm water use efficiency; and (c) enhancing long-term financial sustainability of the irrigation system by supporting the government ’s effort to foster self-sustaining farmer organizations (FOs)\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): (i) Community Development and Support Program; (Appraisal: US$2\.32 million; Actual: US$1\.55 million--66\.9 percent of appraisal estimate) (ii) Distributary-level Improvement Program; (Appraisal: US$4\.24 million; Actual: US$0\.51 million--12\.0 percent of appraisal estimate) (iii) Watercourse and On-farm Improvements Program; (Appraisal: US$9\.26 million; Actual: US$8\.34 million--90\.06 percent of appraisal estimate) (iv) Improvements in Branch/Distributary Canals; (Appraisal: US$1\.82 million; Actual: US$0\.0 million--0 percent of appraisal estimate) (v) Local/Minor Irrigation Schemes Development Program outside the Indus Basin Irrigation System (IBIS); (Appraisal: US$11\.06 million; Actual: US$3\.91 million--35\.3 percent of appraisal estimate) and (vi) Project Management Support Component \. (Appraisal: US$3\.35 million; Actual: US$2\.6 million--77\.6 percent of appraisal estimate) Component (iv), Improvements in Branch Canals, was cancelled at the GoP's request because the distributary canals selected for rehabilitation had branch canals that had already been remodeled through an ADB -assisted project\. The cancellation did not affect the overall achievement of the PDO \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Actual project cost was 52\.5 percent of appraisal mainly because of (i) reduced need for rehabilitation of distributaries; (ii) smaller sizes of distributaries rehabilitated during project implementation; and (iii) overestimation of Localized Minor Irrigation Schemes (LMIS) costs at appraisal\. A savings of US$3\.47 million was cancelled on August 2, 2004\. At the request to the borrower, an amount of US$ 7\.5 million was diverted to the Emergency Rehabilitation Project (Cr\. 3516-10 PAK, Part Z), following the October 2006 earthquake\. Farmers' contributions in rehabilitation of distributaries/minors were reduced to reflect their affordability \. The credit closing date was extended by nine months (until March 31, 2007) reflecting accumulated delays in project implementation \. 3\. Relevance of Objectives & Design: Relevance of Objectives : The Project Development Objective (PDO) remains relevant at project close \. Beneficiary participation in irrigation management at farm - and as well as at secondary levels of the irrigation systems is an important development priority of current Government agenda \. The project's watercourse improvement and institutional strengthening of water user associations (WUAs) components are consistent with Government ’s ongoing National Program for Watercourse Improvement \. The CAS on which the project was based (1995) notes the GOP's interest in "revamp[ing] the irrigation and drainage system, by expanding farmers' responsibilities in operations and maintenance and by identifying and adequately funding priority drainage investments \." And the latest CAS (2006) continues to make this a priority, envisioning an expansion in lending in infrastructure (primarily energy, water, and transport ) and human development and stating that there remains a need for significant new investment in irrigation and other uses of water as well \. Rating: substantial \. Relevance of Design: Design Project design included elements that address GOP's priorities and critical issues mentioned in the CAS (e\.g\., the involvement of beneficiaries in managing the distributaries and minor canals through formation and support of FOs)\. However, the project management setup lacked structure, staff, and a clearly delineated role, given the complexity of the project\. This flaw resulted in a lack of commitment which often led to delayed preparation of feasibility studies of individual subprojects, and insufficient attention to procurement and the supervision of civil works for irrigation improvement\. Making the completion of the social mobilization process (which involved: (i) formation of farmer organizations, (ii) carrying out of the detailed baseline surveys for the subprojects, (iii) preparation and use of the Framework for Identifying and Screening Sub -projects (FISSP); (iv) carrying out Distributary Environmental and Social Assessments (DESAs), and (v) signing of Irrigation and Irrigation and Drainage Management Agreements for transfer of distributaries/minor channels to FOs), an essential prerequisite for implementation, proved problematic as the time needed for this was underestimated; delaying the physical rehabilitation until the fourth year of the project modest and creating pressure to complete the components within a short time period \. Rating: modest\. 4\. Achievement of Objectives (Efficacy): (i) Increase agricultural growth and productivity \. The project delivered on its key outputs, even exceeding some expectations, with the establishment and operation of 53 farmer organizations (FOs) and federations of water user associations (FWUAs), and the rehabilitation of 21 distributary canals, 31 local minor irrigations systems, 1,115 watercourses and the construction of 496 new water tanks\. The rehabilitation of 20 branch canals as originally planned was cancelled because the GoP completed these tasks through an ADB -financed project\. This, therefore, did not affect the overall project outcome \. The irrigated area in the project districts has been increased as a result of improved irrigation infrastructure\. This resulted in increased agricultural growth and productivity, according to the findings of a project impact assessment study \. The study found that cropping intensity was increased by 20-30 percent and per ha yields of major crops also increased in the surveyed project areas \. Rating: substantial \. (ii) Expand farm incomes\. Another impact evaluation looked at water use efficiency, crop yield, and farm incomes \. This revealed a 21 percent increase over the baseline indicators determined during the early stages of project implementation\. Today, the farmers in the project area are much more aware of their roles in managing water resources at distributaries, minors, and watercourse levels through FOs /FWUAs/WUAs\. These results are expected to lead to significant increases in farm incomes, and contribute to poverty reduction in the project area covering 2\.2 million population in the North West Frontier Province (NWFP)\. Rating: substantial \. 5\. Efficiency (not applicable to DPLs): This otherwise thorough analysis did not take into account that salinization is occurring partly as a result of expanded irrigation\. The financial rate return (FRR) at project appraisal was estimated at 24\.3 percent, and the estimate at project completion was slightly higher, at 26\.7 percent\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 26\.6% 100% ICR estimate Yes 30\.2% 100% * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The project did substantially achieve its objectives (see section 4)\. The Improvements in Branch/Distributary Canals component was dropped, but this did not affect the achievement of the project's development objectives as the task was completed instead with funding from ADB \. However, overall project outcomes are assessed as moderately satisfactory because of moderate shortcomings --in this case a significant uncertainty about the sustainability of the farmer organizations \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: There is a critical lack of long -term commitment and support of FOs/FWUAs by the provincial government that threatens development gains made \. Likewise, a weak O&M framework for sustainable management of the distributaries and minors, which have been transferred to FOs indicates a further risk to development \. The FOs are young (most are less than 3 years old) and their capacities are weak \. To decrease this risk, the provincial government would need to institutionalize capacity building support to the FOs /FWUAs/WUAs and provide them with necessary financial resources \. This would require the provision of external technical support to the provincial government\. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: Quality at Entry: An important design feature was the involvement of beneficiaries in managing the distributaries and minor canals through formation and support of FOs \. However, several design flaws, including inadequate project management setup; insufficient coordination, particularly the lack of involvement of the Irrigation Department (PID) in the Project; and underestimation of efforts and time needed for social mobilization and support activities, proved detrimental to project success \. Additionally, project design lacked adequate procurement planning\. The limited work windows due to canal openings, and climatic constraints were not taken fully into consideration during planning, making the contract completion periods unrealistic \. Supervision: Substantial Bank involvement during implementation, including efforts to make up for quality at entry weaknesses, proved helpful \. The Bank identified major issues and worked to solve them, together with the provincial government; advised on procurement, disbursement, and financial management; and approved the extension in a timely manner\. Overall Bank Performance: Though there were flaws in the project design, the project responded to a pressing need, in line with country priorities, and project supervision compensated for some of the shortcomings of the design\. Overall, the Bank's performance is rated moderately satisfactory \. at -Entry :Moderately Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: Government: Both the GoP and the provincial government provided proper guidance throughout the project, facilitating implementation\. The GoP also effectively monitored the use of credit proceeds \. Implementing Agency: The implementing agency's involvement was effective and proactive, with some exceptions, namely with coordination between key stakeholders, and the appointment of a full -time project director\. Despite a sub-optimal project management setup, the implementing agency was able to deliver key project outputs\.The agency offered adequate project oversight, and compliance with legal covenants and social and environmental safeguards \. Government performance was satisfactory, but given the weak performance of the IA, especially in the first years of project implementation, borrower performance is rated moderately satisfactory \. a\. Government Performance :Satisfactory b\. Implementing Agency Performance :Moderately Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: Design: Design M&E design was well thought out at appraisal \. According to the PAD, the project impact evaluation studies were to focus on: (a) agricultural growth and crop diversification; (b) impact on income and employment, and secondary effects on regional economy; (c) impact on groundwater aquifers and water quality; (d) impact on water use and equity in distribution; and (e) performance of FOs/FWUAs\. Baseline surveys were to be completed within one year of the start of the project \. During project implementation, baseline data was to be compared to on -going data collected in terms of the development indicators \. The progress made toward achieving the project objective was intended to be constantly monitored and periodically evaluated Implementation : For the most part, this plan was followed \. Data was regularly collected, collated, tabulated and analyzed for the preparation of monitoring reports for various management forums and committees \. Good quality quarterly reports were generated on a regular basis during the implementation period \. Baseline data collection and impact evaluation were carried out by specialized consulting firms \. Utilization : The data collected were utilized for impact evaluation on project close \. a\. M&E Quality Rating : Substantial 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): During project implementation, no significant negative social impacts were observed\. The project was classified as environmental category “B â€? as it involved mainly environmentally beneficial works and construction works for minor irrigation schemes with little and easily manageable environmental impacts \. An ex-post assessment report indicated that no major environmental impacts occurred except for several cases of tree cutting in watercourse areas where civil works were carried out, but later on farmers replanted the trees \. The implementation of DESA and gender related safeguards were satisfactory \. Procurement problems prevailed due to lack of adequate procurement planning and weak capacity of implementation agencies and consultants \. Financial management and auditing arrangements were made based on a detailed review of the financial management aspect of the project \. The project faced some difficulties in the preparation of quarterly financial management reports, but this was resolved through guidance and training from Bank staff\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Satisfactory Satisfactory Risk to Development Significant Significant ICR rates this as "substantial" though Outcome : this is not one of the ratings options \. Bank Performance : Moderately Moderately Satisfactory Satisfactory Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: Without an up-front investment in social mobilization activities prior to project approval, projects needing such activities can be delayed considerably \. Lack of a clear definition of institutional roles can slow progress \. For example, if the role of the Irrigation Department was never clearly defined in terms of resource allocation and management, implementation, and delivery of key outputs, resulting in a lack of commitment and many delays \. Involving the farmers and farmer organizations formally, fully, and from the start resulted in more effective beneficiary participation in the process \. Where this did not happen, participation was less effective \. 14\. Assessment Recommended? Yes No Why? This may have lessons for other water management initiatives globally, particularly the lessons learned concerning the sustainability of institutional development gains made with FOs /FWUAs/WUAs\. It would be instructive to find out how the FOs/FWUAs/WUAs hold up over time and what lessons can be learned from the lengthy and somewhat difficult experience this project has had \. 15\. Comments on Quality of ICR: The ICR is candid and generally well prepared \. However, it is surprising that the report did not do more to explain further the project experience with social mobilization \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P007392

 ICRR 11366 Report Number : ICRR11366 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/22/2002 PROJ ID : P007392 Appraisal Actual Project Name : Hn/nutrition/health Project Costs 65\.8 73\.5 US$M ) (US$M) Country : Honduras Loan /Credit (US$M) Loan/ US$M ) 35\.4 35\.8 Sector (s): Board: HE - Other social Cofinancing 18\.7 21\.4 services (61%), Health US$M ) (US$M) (27%), Central government administration (7%), Sanitation (3%), Pre-primary education (2%) L/C Number : C2452 Board Approval 93 FY ) (FY) Partners involved : WFP, USAID, Others Closing Date 06/30/1997 06/30/2001 Prepared by : Reviewed by : Group Manager : Group : Ronald G\. Ridker Timothy A\. Johnston Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives (a) Protect nutrition status of poorest children and pregnant and nursing women, thought to be most vulnerable to economic adjustment process under way at the time \. (b) Support development and implementation of a long -term nutrition assistance strategy \. (c) Reduce maternal, child, and infant mortality and morbidity rates by improving access to basic health services and safe water and sanitation, quality of services, and health, nutrition and family planning education\. (d) Strengthen the institutional capacity of relevant agencies \. (e) Control spread of AIDS\. b\. Components Original components included (1) Nutrition Assistance and Policy Development ($32\.5m/$39\.0m); (2) Delivery of Basic Health Services ($24\.6m/$26\.2m); (3) Environmental Health ($7\.2m/$7\.0m); and (4) Monitoring, Evaluation and Auditing ($1\.5m/$1\.3m)\. In January, 1999, three months after hurricane Mitch, supplemental funds and activities were added; most significantly, a sub -component under (2) for Epidemiological Surveillance, Disease Prevention and Control ($3\.7m) was added\. (First figure is appraisal estimate plus supplement; second figure is latest estimate ) c\. Comments on Project Cost, Financing and Dates Original total project cost was $54\.23m, with IDA financing $25m\. As a consequence of hurricane Mitch, total project cost was raised to $65\.8m and IDA's contribution to $35\.4m, and the completion date was extended \. Final figures are slightly larger due to exchange rate changes \. There were no formal cofinanciers, but there was substantial parallel financing; the amounts involved are recorded above in the space for cofinanciers contributions \. 3\. Achievement of Relevant Objectives: (a) The project helped expand a national food stamp program (replacing general food subsidies )\. Nutrition status did not deteriorate (and by some measures improved modestly ) as it might have because of deterioration in economic conditions of the poor resulting from the economic adjustment program and Hurricane Mitch \. (b) A long-term nutrition strategy with useful features was developed; implementation was spotty and slow, however, largely because of shortages of trained personnel \. (c) Access to basic health services and safe water and sanitation improved significantly\. During this same period maternal and child mortality rates declined but it is not clear to what extent the project inputs were responsible for these improvements \. (d) The efforts to strengthen institutional capacity had mixed results and overall is rated as modest \. (e) Efforts to control the spread of AIDS were unsatisfactory \. 4\. Significant Outcomes/Impacts: The project coincided with improvements in national -level indicators for child 0-5 mortality due to diarrhea, child stunting, and contraceptive prevalence \. The ICR suggests that monetary incentives, in particular the food stamp program, along with health education and expansion of health services, contributed to these changes \. The project also helped catalyze community involvement in provision of safe water and sanitation, increasing prospects for sustainability of these investments \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): Although planned inputs were provided and most policy and procedural changes occurred, "there is little evidence that [these] project interventions significantly changed the decision making and planning processes within the Ministry of Health, and these remain weak \." The AIDS component did not achieve its objectives \. Two important studies were not undertaken \. Communications equipment and clinic construction financed by the project may be at risk due to insufficient arrangements for operations and maintenance \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory While the project achieved many of its objectives, there were some significant shortcomings: the AIDS program was unsatisfactory, several key studies were not undertaken, efforts to strengthen communication networks under the supplemental credit did not fare well and suffered from lack of MOH ownership, etc \. Institutional Dev \.: Modest Modest Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. NOTE: 7\. Lessons of Broad Applicability: The ICR offers a number of lessons, including : (1) Demand-side interventions (most significantly, food-stamps) are an important tool to provide effective social protection \. (2) Well-structured community participation (most significantly, water and sanitation) can contribute to sustainability \. (3) Education can play a major role in helping achieve nutrition, family planning and health improvements [the ICR offers no evidence, however, on the outcome of the education voucher program, other than the number of households enrolled ]\. 8\. Assessment Recommended? Yes No Why? The use coupons (maternal-child coupons and coupons for school -age children) to improve the nutritional status and educational attainment of targeted poor groups is intriguing and appears to have worked well \. But no evidence is provided \. If they did in fact work well, they might be of use elsewhere \. A review of the unsuccessful AIDS component might also be useful for the upcoming OED evaluation of Bank support for HIV /AIDS programs\. 9\. Comments on Quality of ICR: The ICR is only marginally satisfactory \. It covers all the necessary bases, but many of its assertions regarding project impact are not backed up by adequate analysis and data \. For example, the assertion is made, but without evidence or explanation, that the food stamps were well targeted; and no attempt was made to explain the lack of significant institutional improvement in MOH operations despite the satisfactory provision of apparently appropriate inputs\. For the purposes of this Evaluation Summary, these assertions have been accepted since they are plausible, but the case is not totally convincing \.

REVIEW

P115143

 ICRR 13978 Report Number : ICRR13978 IEG ICR Review Independent Evaluation Group 1\. Project Data : Date Posted : 10/02/2012 Country : Ukraine Is this Review for a Programmatic Series? Yes No How many operations were planned for the 2 series? How many were approved? 1 Series ID : S115143 First Project ID : P115143 Appraisal Actual Project Name : Programmatic US$M ): Project Costs (US$M): US$400 US$400 Financial Rehabilitation Development Policy Loan 1 (PFRL 1) L/C Number : L7780 Loan/ Loan US$M): /Credit (US$M ): US$400 US$400 Sector Board : US$M): Cofinancing (US$M ): Cofinanciers : Board Approval Date : 09/17/2009 Closing Date : 03/10/2010 03/10/2010 Sector (s): Banking (100%) Theme (s): Other financial and private sector development (50% - P); International financial standards and systems (50%) Evaluator : Panel Reviewer : ICR Review Group : Coordinator : Ismail Dalla Michael R\. Lav Navin Girishankar IEGPS2 2\. Project Objectives and Components: a\. Objectives: The objectives of the proposed PFRLs are to : (i) support a sound banking sector recapitalization program and restructuring process, (ii) enhance the legal framework for bank resolution, and (iii) strengthen the deposit insurance payout functions \. This will in turn contribute to restoring financial sector stability (para 84 of PD)\. PFRL 1 was expected to focus on rescuing the core banking sector \. The operation focused on the recapitalization process with public funds for systemic banks, enhancement of the resolution framework and strengthening of the pay-out functions of the Deposit Guarantee Fund (DGF)\. PFRL 2 was expected to focus on medium term objectives of consolidation and increased resilience to future crisis \. Under PFRL 2, banks recapitalized with public funding was expected to undergo major restructuring (both on the asset and liabilities sides), the new resolution framework was to be implemented on non -systemic banks and some resolution responsibility were to be transferred to the DGF \. This, together with more stringent regulatory measures, was expected to facilitate consolidation in the banking sector \. Further enhancement of the regulatory framework for bank supervision (including strengthening of on -site supervision, introducing consolidated supervision and requirement to disclose ultimate shareholders, introducing incentives for loan portfolio restructuring in provisioning levels, improving home -host supervisory arrangements, introducing IFRS and enhancing NBU governance) were expected to increase the sector resilience to future crisis \. The second PFRL has not materialized \. The ICR and this ICR review were prepared based on implementation of PFRL 1 as Bank policy stipulates that a programmatic series is to be so evaluated if more than 24 months  have lapsed after a loan and no subsequent loan in the series has been approved \. b\. If this is a single DPL operation (not part of a series), were the project objectives/ key associated outcome targets revised during implementation? No c\. Policy Areas: Policy Areas of the Programmatic Series First pillar – Bank Recapitalization and Restructuring The two loans were expected to support policy actions covering the adoption and implementation of a sound publicly funded recapitalization program \. Policy actions under this pillar aim at ensuring that the recapitalization and restructuring program meets the highest standard of transparency and good governance and the value of banks recapitalized with public funding is maximized \. Under this pillar and for PFRL 1, CoM or MoF would approve resolutions or orders, as the case may be : (i) establishing the RECAPU and RECAP Board with respective governance arrangements and controls and budgetary resources; (ii) establishing the process for recapitalization and eligibility criteria for bank recapitalization with public funding; (iii) defining the instruments for recapitalization and liquidity support for banks recapitalized with public funds; and (iv) defining the mechanisms and methodology for monitoring and control by RECAPU of banks recapitalized with public funds \. Approval of the first PFRL was conditional upon satisfactory progress of the recapitalization process as evidence by a CoM decision on recapitalization of Bank Kiev, Rodovid Bank and Ukrgazbank and by the NBU resolution imposing monitorable sanctions on banks in group 1 and 2 which do not comply with agreed privately funded recapitalization programs\. PFRL 2 was expected to support continued and satisfactory implementation of the recapitalization and restructuring program \. To achieve these objectives the GoU will continue to ensure a smooth functioning of the RECAPU\. Second pillar – Resolution and consolidation of the banking system The two loans were to assist GoU adopt and implement legal amendments enhancing the existing bank resolution process \. Policy actions under this pillar aim at ensuring that insolvent banks be promptly resolved based on a least cost principle \. In the context of the PFRL 1, this pillar supports the approval of Banking Law, Anti-Crisis law, Civic Code, Joint Stock Company Law and Bankruptcy Law amendments requiring the enhancement of the existing resolution framework, namely : allowing the transfer of assets and liabilities (purchase and assumption transactions ) on an open or closed bank basis (i\.e\. before or after license revocation ) without prior approval of creditors, including depositors; enabling the government to provide financial assistance to banks under resolution and the MoF to provide assistance to acquirers of such banks; providing authority to the government to create a bridge bank owned by the GoU to facilitate resolution transactions; introducing civil liability protection for the NBU, the DGF and the MoF officials, temporary administrators, auditors and contractors when discharging functions related to their official duties; simplifying grounds for introduction of temporary administration in problem banks by the NBU by reducing the applicable time period, defining key terms, and deleting unnecessary conditions; and changing bank liquidation requirements to provide a higher priority for the GoU, the NBU and the DGF funding \. PFRL 2 was expected to support a satisfactory implementation of the resolution program on non -systemic banks and approval in the Parliament of amendments transferring responsibility for bank resolution to the DGF \. Third pillar – DGF payout functions The two loans support policies that enhance deposit insurance operations to ensure preparedness in time of crisis and expansion of DGF functions \. PFRL 1 was to support the formulation and implementation of a strategy for crisis management to include : (i) identification and training of additional staff and work plan required in case of large scale reimbursement; (ii) validation of appropriateness of current IT software; (iii) approval by the NBU of a regulation on process required to extend a credit to the DGF, (iv) enhancement of the existing MoU between the NBU and the DGF on exchange of information on banks \. The Second PFRL was to be anchored to the enactments of amendments to the legislative framework to increase the role and funding for the DGF in bank resolution; potentially ranging from transferring liquidation functions, to requiring the DGF to act as a temporary  administrator in resolving banks, to full resolution powers \. Fourth Pillar - Enhancing the legal and regulatory framework PFRL 2 was to assist GoU implement its medium term strategy through the introduction of legal and regulatory changes to improve supervision and promote sector consolidation \. PFRL 2 was expected to address priorities beyond the immediate needs of rescuing the core banking sector \. The Letter of Development Policy indicated that GoU and NBU would ensure that the sector is more consolidated and resilient to future crisis\. To do so, GoU and NBU were expected to strengthen on -site supervision and corrective action plans, review provisioning rules for restructured loans, introduce consolidated supervision, require disclosure of ultimate shareholders, improve home-host supervisory arrangements, increase minimum capital requirements and introduce IFRS\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: PFRL 1 was the first of the two operations that were designed to strengthen financial markets in Ukraine \. However, only the first operation was approved \. PFRL 1 was a single tranche DPL for US$400 million in support of the bank restructuring program \. It was appraised in August 2009, approved by the Board of Directors on September 17, 2009 , became effective on September 21, 2009 and disbursed on September 29, 2009\. The loan was an IBRD Flexible Loan at 6 months LIBOR for US dollars plus variable spread, with a 30 year maturity, including 5 year grace period, commitment linked and with level repayment pattern \. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Ukraine was one of the countries that was hit hardest by the 1998 global financial crisis\. The global financial crisis exposed Ukraine’s inherent macroeconomic and banking sector vulnerability, leading to a 15 percent decline in GDP in 2009, compared with average growth of 7\.5 percent per annum between 2000 and 2007\. Ukraine's banking system depended heavily on short -term borrowing from international markets to finance rapid growth in mortgages and consumer loans in foreign currency \. The corporate sector also had a large exposure to foreign currency\. The banks in Ukraine were highly exposed to metal -related industries, trade and consumer business, and construction (accounting for 72 percent of total loans at the end of 2008)\. There was an exceptional credit growth with the loan -deposit ratio rising to 140 percent\. The sharp reversal of foreign capital flows in 2008 hit Ukraine hard\. It was shut out of the international capital markets and the sovereign Credit Default Swap spreads rose to 2,300 basis points\. Fitch and S&P both downgraded Ukraine with negative outlook\. Moody’s also downgraded a number of Ukrainian enterprises, and placed the sovereign rating on negative outlook\. There was massive currency and maturity mismatch similar to Thailand in 1997\. The government sought IMF’s assistance and on November 5, 2008 received a two-year $16\.5 billion (SDR 11 billion) Stand-By Arrangement (SBA) involving exceptional access (802 percent of quota)\. Under the program, Ukraine received financing of US$ 4\.3 billion in 2008\. The remaining balance was to be available in 2009 (US$10 billion) and in 2010 (US$2\.3 billion) subject to meeting IMF’s conditions\. The financing program also implies a minimum of US$ 1\.5 billion of external financing to the budget in 2009 coming from IFIs, and a similar amount in 2010\. PFRL1 was a part of this program\. Although the financial sector crisis was not foreseen in the 2007 CAS, the objectives of the programmatic series and the overall reform program were highly relevant to prevailing conditions in Ukraine in 2009\. Ukraine was hardest hit by the global economic and financial crisis that started in 2008\. The reversal of capital flows triggered a balance of payments crisis, which also eroded confidence in the banking system \. The corporate sector was heavily exposed to foreign exchange risks due to asset -liability mismatch\. Pressure on the currency was exacerbated by the dwindling confidence in the banking system \. Widespread deposit withdrawals followed a deposit run on the sixth largest bank Prominvest, which was put under receivership in October 2008\. The collapse of housing prices (20%) and the stock market (65 percent) in the second half of 2008 intensified concerns about the soundness of the banking system and the currency \. In September/October 2008, the National Bank of Ukraine (NBU) lost US$4\.3 billion (12 percent) of its reserves through interventions and the hryvnia’s market rate depreciated by over 20 percent\. IEG assesses the relevance of objectives as high\. high b\. Relevance of Design: Although the size of the PFRL 1 (US$400 million) was relatively modest, it was designed to compliment IMF ’s large SBY program and it was prepared in close collaboration with IMF and other donors (EBRD and USAID0\. PFRL 1 succeeded in putting in place a system consisting of diagnostics of large, systemically important banks in order to determine their viability, assessing recapitalization needs, and resolving nonviable banks, had to be accompanied by an effort to make the recapitalization and resolution policy framework more transparent and efficient\. These policies were not only meant to restore confidence in the system but also aimed to minimize the cost to the state (taxpayers) of resolving weak banks\. The program was accompanied by a significant technical assistance support program from the international community, including in the use of proper techniques for assessing the capital position of individual banks and in developing the proper safeguards for the use of public money in the recapitalization effort \. PFRL I included several prior conditions : (i) Adoption by the Cabinet of Ministers (CoM) or MoF of resolutions or orders to establish the institutional framework for a transparent bank recapitalization with public funding, (ii) implementation by MoF and NBU of the newly established recapitalization process by recapitalizing three banks with public funding (Ukrgazbank, Rodovid Bank and Bank Kiev ); (iii) adoption by NBU of a regulation outlining specific and monitorable enforcement actions and timeline to ensure compliance by undercapitalized banks with privately funded recapitalization program; (iv) Amendment of the legislative framework to introduce more efficient bank resolution techniques; and (v) implementation of a strategy for crisis management for the DGF \. These conditions were appropriate and were met prior to Board presentation \. Notwithstanding these strengths, the project design was weakened by the absence of a robust monitoring and evaluation system\. The PD stated the M&E of the operation was to be supported by various data sources collected by different stakeholders (NBU, MOF and DGF)\. Given that this operation was a part of programmatic operation, efforts were expected to be made to identify outcomes that could be linked to a longer timeframe for reform program\. However, the indicators were not supported by specific baselines, nor were a specific timeline given for their achievement (see Sections 4 and 10 for further explanation)\. Overall, IEG assesses the relevance of design of the programmatic series as substantial \. 4\. Achievement of Objectives (Efficacy): In accordance with the Bank policy, achievements are evaluated against the objectives of the PFRL program, even though only PFRL 1 was approved\. The achievements under the program are discussed below \. (i) support a sound banking sector recapitalization program and restructuring process Achievement of this objective is assessed as modest for two reasons\. First, the banking system in Ukraine appears to be well capitalized \. This was accomplished after capital infusion of US$8 billion during 2009-10\. The reported Capital Adequacy Ration (CAR) was 19 percent as of end-2011 compared to the target indicator of 10%\. However, the use of the 10% target was not very meaningful since the overall CAR of the system was already higher, 14\.5% as of June 30, 2009 (para 18 of ICR)\. This higher CAR was inflated due mainly to the five international banks (Raiffeisen, BNP Paribas, Unicredit, OTP and Alfa Bank ) that accounted for about a third of the Ukrainian banking system in 2009\. Moreover, the officially reported share of NPLs is much lower than 42% (as estimated by the IMF), thereby implying a much lower actual CAR for the system\. The Ukraine banking system was unprofitable during the second quarter of 2012 (EIU, Aug 2012)\. Second, a donor-funded diagnostic exercise identified four groupings within the banking sector that have proceed with restructuring with varying degrees of success \. The first and second groups were the top banks (including foreign owned banks ), and the third and fourth groups were comprised of smaller domestic banks \. Twenty five out of 38 banks in the group 1 and 2 needed to be capitalized to various degrees \. All of these banks except Nadra Bank, Rodovid Bank, Ukrgazbank and Ukrprombank committed to raise capital \. Rodovid Bank, Ukrgazbank and Ukrprombank have been recapitalization with public funding (de facto nationalized)\. Nadra still remains work in progress as the owner is a powerful businessman \. The banks in group 3 and 4 were smaller and were required to meet CAR or exit the business \. It is not clear whether this has actually been achieved \. The resolution of the nationalized banks is also not clear \. (ii) enhance the legal framework for bank resolution Achievement of this objective was modest \. Recapitalization of the banking system together with the exit of 15-20  nonviable banks , has put the system on a stronger footing and translated into more confidence on the part of depositors, as shown by a return of deposit flows into the system \. However, it is unclear whether bank resolution is now more efficient and transparent (ICR)\. Although a well-designed resolution framework was put in place, it is subject to judgment whether, in practice, those mechanisms are being fully utilized (ICR)\. For example, the resolution of Bank Nadra through sale to a new private owner has thus far lasted for 30 months\. The transaction has required significant concessions on the part of the NBU and a possible infringement on depositors ’ rights\. It is not clear when the transaction will be concluded \. In this connection, the way in which the tool of temporary administration is being used—with ad hoc extensions and resorting to moratorium on the repayment of deposits — may have actually reduced rather than increased confidence in the system along with undermining the reputation of the NBU and the Government in safeguarding the interests of depositors \. (iii) strengthen the deposit insurance payout functions \. Achievement of this objective was substantial \. The PFRLs included preconditions for implementation of a strategy for crisis management for the Deposit Guarantee Fund (DFG)\. The strategy included: (a) Approval of an action plan in case of large scale payouts, including a temporary staff relocation plan; (b) Validation of appropriateness of current IT software; (c) Approval by the NBU Board of a regulation on process required to extend a credit to the DGF; (d) Amendment of the NBU-DGF Memorandum on exchange of information to reduce timeframe within which information is exchanged; and (e) Approval by the DGF Administrative Board of an investment policy to ensure transparent investment of its resources \. There has been substantial progress since the passage in March 2010 of the new law on Deposit Guarantee Fund (DGF) which is expected to become effective on September 27, 2012\. DGF will be given the full mandate for bank resolution\. In addition to the satisfactory macroeconomic condition, this is the only remaining condition that is required for the region to proceed with the Second PFRL \. Overall, Ukraine was one of the countries that were hit hardest by the 1998 global financial crisis\. The global financial crisis exposed Ukraine ’s inherent macroeconomic and banking sector vulnerability, leading to a 15 percent decline in GDP in 2009, compared with average growth of 7\.5 percent per annum between 2000 and 2007\. Ukraine experienced strong economic recovery in 2010–11, following the deep recession ensuing from the 2008–09 global crisis\. In 2010, GDP growth was 4\.1%\. GDP grew by 5\.2% in 2011 but is expected to slow down to 3% in 2012 due to lower demand for Ukraine’s exports and slow credit growth \. Inflation is projected to rise to 7\.4 percent during the year, reflecting wage pressures and rising food prices \. Weakening external demand is expected to widen the current account deficit to 6\.5 percent of GDP in 2012 from 5\.5% in 2011\. Risks remain elevated in an uncertain global environment \. A significant contraction in global demand, commodity price shocks, or deleveraging by European banks would pose risks to external stability given Ukraine ’s high external financing requirements\. Banking sector reforms have advanced although balance sheets remain week \. Although the banking system appears well capitalized, profitability is near zero, non -performing loans remain high, and banks balance sheets remain exposed to currency movements (IMF, July 6, 2012 statement at the conclusion of Article IV consultation)\. 5\. Efficiency (not applicable to DPLs): 6\. Outcome: The program achieved the major short -term objective of stabilizing the banking system through capitalization of banks and establishing a bank resolution system \. DGF was also strengthened\. The health of the banking system has improved but the system remains highly vulnerable to external shocks due to low profitability and elevated NPLs\. Governance in the banking system remains a major issue \. Many banks still owe large amounts to the NBU stabilization funds and the government still owns three large banks \. Since very little progress has been made since 2010 in addressing the structural issues in Ukraine (IMF 2012), the global macroeconomic environment remains a threat to the Ukraine ’s economy and its banking system \. Currency mismatch in the banking sector remains a major issue \. The level of foreign exchange reserves is relatively low \. Based on ratings for relevance of objectives (high), relevance of design (substantial), and ratings for objectives relating to bank recapitalization and restructuring (modest), the bank resolution system (modest), and deposit insurance payout functions (substantial), IEG rates the overall outcome as moderately satisfactory \. The derivation of this rating is consistent with the IEG /OPCS Harmonized Evaluation Criteria\. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Risks to development outcome remain high due to uncertain global financial market and on -going debt crisis in Europe\. Ukraine has not carried out adequate macroeconomic reforms to address its structural issues \. As a result, Ukraine is highly vulnerable to the recession in Europe which is its major export market \. During 2009, the banking system was largely restructured and the system was stabilized \. However, the recovery in the banking system in 2009 also coincided with the improvement in global financial markets brought about by the concerted efforts made by the G-20\. Therefore, it is not possible to fully attribute the full credit of banking recovery to the PFRLS\. It appears that the banking system may need to be recapitalized once again and the ultimate fiscal costs of the banking crisis may increase \. Commercial banks in Ukraine are marginally profitable (EIU and IMF)\. There are also substantial financial risks for the NBU which has been mandated to bear the cost of bank restructuring through liquidity supports that have become long -term loans\. The existing SBY with the IMF is at risk and rollover risks are exacerbated by large debt service requirements falling due in 2012, including to the IMF (CAS, Jan 20, 2012)\. a\. Risk to Development Outcome Rating : High 8\. Assessment of Bank Performance: a\. Quality at entry: Although the 2007 CSP did not foresee global financial crisis and its likely impact on Ukraine, the Bank responded swiftly to the financial crisis that hit Ukraine in 2008\. The Bank worked very closely with IMF and other international financial institutions in addressing the pressing banking crisis \. The quality of technical work was high and the restructuring plan was well thought out and minimum conditions to ensure success were front loaded\. This was attempted in country with unstable political climate and very poor governance \. Overall, the quality at entry can be considered to be satisfactory \. at -Entry Rating : Quality -at- Satisfactory b\. Quality of supervision: The operation was well supervised by the financial sector team in the country \. The implementation of this operation was very labor intensive and involves several legislative changes \. Implementation of the operation was hampered by the change in the government and unstable political condition \. The government also lacked the political will to implement major reforms \. However, the problems were beyond control of Bank staff\. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: There were two governments during the implementation of the PFRL 1\. The operation was implemented during a period of considerable economic and political uncertainty in Ukraine \. Prime Minister Timoshenko’s coalition government collapsed in late 2009 after the President’s faction announced that it would leave the coalition\. This complicated the legislative process and slowed down Ukraine ’s crisis response\. However, new government has made notable progress in implementing agreed reforms required under PFRL 2, which is  under consideration\. Given the efforts of the new government to pursue reform, its performance is rated as Moderately Satisfactory \. Government Performance Rating : Moderately Satisfactory b\. Implementing Agency Performance: not applicable Implementing Agency Performance Rating : Not Applicable Overall Borrower Performance Rating : Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: M&E design was a major weakness of the operation \. Most indicators were statement of objectives and were not supported by specific baselines or specific time line for achievements \. This was acknowledged in the ICR \. For example, as noted earlier, the use of “all banks recapitalized to at least CAR ≥ 10%â€? as a prior action for PRFL2 and “banking sector recapitalized [to] CAR ≥ 10%â€? as an outcomes indicator for the program were not very meaningful as the overall CAR of the system of 14\. 30 , 2009 was already higher than 10% 14 \.5% as of June 30, (para 18 of ICR)\. This was due to the fact five international banks (Raiffeisen, BNP Paribas, Unicredit, OTP and Alfa Bank) accounted for about a third of the banking system in Ukraine in 2009 and they were well capitalized\. The CAR indicator, for example, could have also been usefully linked to the capital requirement of individual banks rather than for the system \. In addition, the target for CAR was set based on historical numbers that were based on past banking regulations \. Also, most indicators included in the program also relate more to ‘outputs’ rather than ‘outcomes\. The evaluation of outcomes could have been made easier by resorting to the use of better defined quantitative (rather than qualitative) indicators linked to the higher objective of “restoring financial sector stability \.â€? Examples of these include the level of total banking assets to GDP, loan /deposit ratio or household deposits in the banking sector \. b\. M&E Implementation: There was not much to implement given that no specific monitoring indicators were established \. c\. M&E Utilization: The ICR does not provide evidence of how M&E was used in resource allocation or other decisions \. M&E Quality Rating : Negligible 11\. Other Issues a\. Safeguards: No issues were identified b\. Fiduciary Compliance: No issues were identified c\. Unintended Impacts (positive or negative): No unintended impacts were identified d\. Other: \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Ukraine's banking system remains Satisfactory weak and highly vulnerable to external shocks\. Reforms implemented under PFRL 1 helped stabilized banking system but were only partially successful in restoring the health of the banking system\. Risk to Development Significant High It appears that the banking system may Outcome : needs to be restructured again as Ukraine remains highly vulnerable to external shocks and macroeconomic instability\. Bank Performance : Satisfactory Satisfactory Borrower Performance : Satisfactory Moderately The Government's commitment waned Satisfactory and the implementation of reforms was incomplete, at times, ad hoc\. For example, the restructuring of Nadra Bank has been slow and still not completed after 3 years\. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: IEG agrees with the ICR that it would have been useful to include outcome indicators that would allow for a more objective assessment of performance in the short term \. Specifically, it would have been useful to have allowed for the possibility of assessing progress in a short span to properly supervise the project and evaluate its impact\. Those indicators could have also been usefully linked to more quantitative benchmarks, with appropriate baselines and more clearly specified time line for implementation \. IEG agrees with the lesson given in the ICR that it is important to maintain a policy dialogue in support of longer-term strategic goals, even in a difficult political environment \. However, the Bank should have waited until there was a credible government before proceeding with the programmatic series \. With the benefit of hindsight, it is clear that the outcomes of the PFRLs are less likely to be sustained and a second round of restructuring of the banking sector is in the offing \. The risk of failures was already high due to the poor governance in the financial sector \. It is also essential to have clear agreed and measurable outcome indicators for such operation to ensure its success \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR:  The ICR covers most of the required material and on balance it is rated satisfactory \. However, the ICR evaluated outcomes against the objectives of PFRL 1 only and not the programmatic series \. Discussions of the "Achievement of Program Developmental Objectives were brief and not well explained \. The ICR is also silent on the reason for not proceeding with the PFRL 2\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P000003

 ICRR 11917 Report Number : ICRR11917 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 09/10/2004 PROJ ID : P000003 Appraisal Actual Project Name : Regional Environmental Project Costs 19\.35 18\.12 Information Management US$M ) (US$M) Country : Africa Loan/ Loan US$M ) 4\.02 /Credit (US$M) 4\.08 Sector (s): Board: ENV - General Cofinancing 12\.76 12\.32 public administration sector US$M ) (US$M) (70%), General information and communications sector (20%), Other social services (10%) L/C Number : Board Approval 98 FY ) (FY) Partners involved : 12 multi- and bilateral Closing Date 06/30/2003 06/30/2003 cofinanciers Prepared by : Reviewed by : Group Manager : Group : Peter W\. Whitford Fernando Manibog Alain A\. Barbu OEDSG 2\. Project Objectives and Components a\. Objectives To improve and strengthen the management and planning of natural resources and their utilization in the Congo Basin Region, through: i) ensuring the circulation of environmental information and optimizing benefits from existing initiatives; ii) fostering involvement of decision -makers in environmental information use and facilitating sound land use planning in the Congo Basin; iii) providing users with environmental information meeting their demand; and iv) strengthening national capacities for environmental information management \. b\. Components 1\. Network Creation ($1\.03 million) - strengthening dissemination of environmental information; promotion of the results of analyses and good practices; workshops; and, improvement of communications \. 2\. Assistance to Decision-Making ($1\.54 million) - development of information databases; and, dissemination to stakeholders\. 3\. Generation of Information ($6\.18 million) - maps; remote sensing products; zoning, forest and biodiversity management plans; coastal risk mitigation plans; and, monitoring tools \. 4\. National Capacity Building ($4\.20 million) - training; technical assistance; technology transfer; equipment; and, establishment of Centers of Excellence \. 5\. Project Management ($6\.40 million) - technical assistance [and establishment of a Regional Fund for Local Initiatives (REFLI), though not mentioned in the Grant Agreement ] The project originally covered six countries - Cameroon, Central African Republic, Congo, Democratic Republic of Congo, Equatorial Guinea, and Gabon - with Chad joining in 2001\. c\. Comments on Project Cost, Financing and Dates The estimated projects costs and implementation schedule were reasonable \. GEF funds of $4\.08 million were leveraged with $12\.76 million in other donor support (mostly parallel funding) by bundling together planned donor support for project activities supporting the overall objective (cf\. Cameroon: Biodiversity)\. 3\. Achievement of Relevant Objectives: The Objective and Sub-Objectives were well designed to meet the needs of the partner countries, with flexibility to meet emerging and evolving needs \. Although the overall objective was too sweeping to be met in a first operation, satisfactory progress was made; the sub -objectives were substantially met \. 4\. Significant Outcomes/Impacts: Improved awareness among stakeholders of the importance of reliable, accessible environmental information Establishment of a regional organization (ADIE) to coordinate and cross-fertilize national efforts in environmental  information management Initiation of networks between governmental, NGO and private sector users of information, together with databases, libraries, catalogs, audiovisual materials, and a web site Establishment of a Central Africa Forest Observatory Building of the capacity of network members and training of staff Leveraging of considerable co -finance (though the ICR does not report on the outcomes of the co -financed activities) These achievements need to be seen in the light of considerable civil unrest in some of the partner countries during project implementation\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): For a first operation, the targets were rather ambitious, especially on cost recovery \. Another shortcoming was not insisting on full-time national coordinators\. Otherwise, quality at entry was very high\. Project preparation was highly participatory and the resulting Project Document (PD) showed clear logic, with innovations like a quantitative approach to project benefits, rules for data sharing, a lean regional organization and a flexible structure to accommodate unanticipated changes \. Quality of implementation was high but the following shortcomings may be noted : the self-financing goal was not realistic and was not achieved (however, the important principle of government contributions to ADIE's core running costs has been established ) coordination of 12 co-financiers was not simple (not surprisingly), with the largest - the EU - cooperating poorly with the project management lack of full-time coordination staff from governments and difficulties with counterpart funding inadequate financial management by ADIE shortfalls in some physical output targets possibly an over-emphasis on academic, as opposed to on the job, training Safeguard policies are not discussed at all in the PD or ICR \. However, as the project comprised technical assistance, training, office and scientific equipment and operating costs, it is difficult to see that it would have had any significant negative environmental or social impacts and thus its appropriate category would have been C, not requiring any specific analysis or mitigation measures \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Close to Highly Satisfactory, especially in comparison with the results of other regional environmental initiatives e \.g\. Aral Sea Institutional Dev \.: Modest Modest We defer to the ICR, although the material presented there would seem to support a higher rating\. Sustainability : Unlikely Unlikely Long-term sustainability unlikely, on balance, as ADIE will probably not be able to survive in a meaningful form without further L-Tdonor support\. However, (short-term) sustainability could be attained if the countries follow through on their commitment to contribute core operating funds and discussions for a follow-up donor-funded project are successful\. Bank Performance : Satisfactory Satisfactory Close to Highly Satisfactory, especially in preparation and appraisal\. However, Bank/GEF costs were a high 20% of the grant amount (32% if project preparation grants are included)\. Borrower Perf \.: Satisfactory Satisfactory Includes the Recipient (ADIE) and the seven governments\. Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: 1\. Even in a region beset by poverty and civil strife, progress on cooperation in environmental information is possible, when there is full commitment from the major stakeholders and some coordination of donor efforts \. 2\. Establishing the principle of modest cash contributions from the partner governments is an important first step towards eventual sustainability of a regional organization \. 3\. The model of a lean regional organization coordinating a decentralized network of specialist agencies is preferable, especially in the information field, to the traditional model of a centralized body with high overheads, non-participatory management and low sustainability \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR does a sound job of summarizing the project's implementation history, achievements and shortcomings \. Lessons Learned were particularly well done \. However, some shortcoming were noted : the ICR covers only the GEF portion of the project, which was only 20% of the whole\. The achievements and shortcomings of the co-financed activities would have been worth recording \. a discussion as to whether the REFLI achieved full transparency in its awards procedures would be useful for other projects of this kind e \.g\. did the Bank have a right of prior review of proposed awards? it was not correct to say in Section 4\.3 that quantification of benefits could not be done for a project of this kind, as the PD had already done it a more complete matrix of projected (PD) and actual outputs, covering the whole project and not just ADIE, would have been useful

REVIEW

P004805

 ICRR 11847 Report Number : ICRR11847 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 09/14/2004 PROJ ID : P004805 Appraisal Actual Project Name : Th-university Science & Project Costs 261\.5 153 Eng\. Educ US$M ) (US$M) Country : Thailand Loan /Credit (US$M) Loan/ US$M ) 143\.4 127\.4 Sector (s): Board: ED - Tertiary Cofinancing education (100%) US$M ) (US$M) L/C Number : L4160 Board Approval 97 FY ) (FY) Partners involved : Australia (parallel) Closing Date 12/31/2002 12/31/2003 Prepared by : Reviewed by : Group Manager : Group : Helen Abadzi Denise A\. Vaillancourt Alain A\. Barbu OEDSG 2\. Project Objectives and Components a\. Objectives The overall objective of the Universities Science and Engineering Education Project was to improve the quality of undergraduate science and engineering programs\. Specifically, the project aimed to: a) strengthen faculty teaching capabilities; b ) upgrade the existing science and engineering program content and broaden the range of programs relevant to Thailand ' s technological advancement; c ) modernize laboratories and strengthen their management; and d) improve resource utilization in engineering and science faculties and establish a system for large -scale equipment procurement\. b\. Components The project financed an institutional development program for 20 public universities which included : a) short term overseas training for selected academic and technical support staff in the educational use and maintenance of the project-financed equipment (US$2\.6 million); b) upgrading the content of existing programs in science and engineering, and recommend new ones, improve the program resource management, develop effective procedures for large scale equipment procurement and strengthen project management (US$12\.8 million); (c) modernizing laboratories and strengthen their management (US$130\.3 million); and (d) improving resource utilization in the engineering and science faculties to establish a system of large-scale equipment procurement (US$7\.3 million)\. c\. Comments on Project Cost, Financing and Dates The project was completed after an extension of one year\. Many activities were completed at a cost lower than expected, so the government cancelled US$14 million in 2001\. Total project cost was 58% of appraisal estimate\. Technical assistance was provided by Australia in a parallel -financed program\. 3\. Achievement of Relevant Objectives: The objectives were substantially achieved; numerical targets for various activities were attained and surpassed\. Examples are as follows: (a) Strengthen faculty teaching capabilities - achieved\. International fellowships, in-country training programs were financed for the teaching staff in all 36 recipient faculties through 139 staff development programs (47 in engineering and 92 in science)\. With the help of Australian funding, 3641 staff were trained in-country and 180 in Australia\. Also 2295 participants received training in pedagogy and curriculum development, 9,268 in English language, and 368 specialized short-term overseas fellowships were also awarded\. (b) Upgrade the existing science and engineering programs - achieved\. Faculties evaluated existing programs, identified new ones in need of support, and forged linkages with the industry and overseas universities\. More than 3000 courses were enhanced or developed\. In comparison to 1997, there are now 13% more undergraduate and 82% more graduate programs in engineering as well as 25% more undergraduate and 47% graduate programs in science\. Because of limited communication among universities and departments, some efforts were unnecessarily duplicated \. ( c) Modernize laboratories - achieved\. About 38,671 equipment items were procured and delivered to 295 sites, 12,217 specification documents were written, and 798 staff received training in equipment maintenance\. (d) Improve resource utilization in engineering and science faculties - achieved\. Technical assistance was provided to the Ministry of University Affairs \. All the public universities instituted a new budgeting system that incorporates depreciated costs of equipment and will make it possible to identify and plan for replacing equipment to optimize student learning \. 4\. Significant Outcomes/Impacts: An evaluation (referred to in the ICR but not specifically cited ) gave strong indications of client satisfaction with the implementation and outcomes of the project\. Following training and linkages with foreign universities, teaching and administrative staff were better able to serve the academic needs of students and manage resources\. A sector-wide quality assurance and asset management system was developed \. The ICR reports that universities have substantially improved their capacity to design and update courses in science and engineering, plan and implement large -scale scientific procurement, operate and maintain sophisticated teaching equipment, and manage large-scale development projects in higher education \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The project suffered initial delays partly because staff were not experienced with Bank procurement \. The Bank did not approve of an electronic bidding system until later in the project \. Equipment procurement in large lots caused some problems and had hidden costs; some suppliers bid outside their scope of ability, did not maintain their contractual commitments, and some equipment did not function properly \. Overly high appraisal estimates resulted in cost changes and cancellation of US$ 14 million\. The design did not include clear indicators to help measure project outcomes \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev \.: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: - With government and stakeholder commitment, it is possible for a large university system to be changed through targeted investments and well-conceived interventions\. -The communication among university departments and various universities is not always optimal \. Where faculties have similar or related academic interests, careful attention should be given to options for integration and sharing of equipment and other resources\. - Existence of procurement advisors in field offices has advantages for projects which require frequent monitoring and evaluation \. - In countries with a single language, the command of English language may not be extensive \. Overestimating the capacity to read and understand English may cause delays and misunderstandings \. -A clear definition of roles and responsibilities is critical for timely and successful project implementation \. -Early establishment of baseline data as well as a monitoring and evaluation plan is most useful for tracking program performance\. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR is satisfactory overall \. However, it could have given more information regarding the evaluation that was carried out and its findings (referred to on p\. 4 and elsewhere)\. It is hoped that the evaluation to be completed in September 2004 (p\. 6) will clarify the relationship between inputs and instructional quality improvement\. Also, though the Staff Appraisal Report mentions 21 universities, the ICR mentions 20 and does not explain whether one was dropped\.

REVIEW

P122785

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) Report Number: ICRR0021989 1\. Project Data Project ID Project Name P122785 HIGHER ED COMPTET Country Practice Area(Lead) Montenegro Education L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IBRD-81180 30-Mar-2017 13,651,329\.26 Bank Approval Date Closing Date (Actual) 24-Jan-2012 30-Jun-2019 IBRD/IDA (USD) Grants (USD) Original Commitment 15,980,000\.00 0\.00 Revised Commitment 15,980,000\.00 0\.00 Actual 13,651,329\.26 0\.00 Prepared by Reviewed by ICR Review Coordinator Group Katharina Ferl Judyth L\. Twigg Joy Behrens IEGHC (Unit 2) 2\. Project Objectives and Components DEVOBJ_TBL a\. Objectives According to the Project Appraisal Document (PAD, p\. ii) and the Loan Agreement of February 22, 2012, the objective of the project was “to strengthen the quality and relevance of higher education and research in Montenegro through reforming the higher education finance and quality assurance systems and by strengthening research and development capabilities\." Page 1 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) b\. Were the project objectives/key associated outcome targets revised during implementation? No c\. Will a split evaluation be undertaken? No d\. Components The project included four components: Component 1: Higher Education Finance Reforms and Implementation of Quality Assurance Norms (appraisal estimate US$3\.73 million, actual US$1\.73 million): This component was to finance activities in three areas: 1\. Higher education finance reforms: These reforms were to ensure that the mechanism for financing teaching/research/institutional management in higher education was to follow global good practices, was to promote both efficiencies and innovative practices, and was to ensure that the limited public resources spent in this area were directed toward results and outputs in a manner relevant to the public interest\. 2\. Higher education quality assurance and relevance activities: These activities were to: a) improve capacity of the Council of Higher Education, the public, autonomous quality assurance agency for Montenegro, and support capacity building in quality assurance within the Higher Education Department of the Ministry of Education and Sports (MoES) and other relevant stakeholders in the higher education sector; b) achieve full compliance with the norms and standards of the European Quality Assurance Register for Higher Education (EQAR) and to become a full member of the European Association for Quality Assurance in Higher Education (ENQA); c) conduct external evaluations of all Higher Education Institutions (HEIs), including baseline and follow-up studies, and the external evaluation of Montenegro’s three universities and all academic institutions; and d) conduct one tracer study and two labor market studies (one benchmark and one results study), including technical assistance for designing such studies and carrying out the related proposed methodologies\. 3\. Competitively awarded grants to incentivize participation and support capacity building: This comprised contract technical assistance to prepare an institutional grants scheme designed to incentivize participation in the reforms and support capacity building, by financing grants to institutions/faculties that were to have improvement plans approved by an Evaluation Committee of experts\. Component 2: Human Capital Development through Internationalization Initiatives (appraisal estimate US$2\.81 million, actual US$3\.30 million): This component was to finance maximizing absorption of knowledge and technical training provided around the world for students and academic staff through foreign study and research in areas of national importance through: 1\. financing the establishment of a facilitation office to serve as a clearinghouse for information on international opportunities for students and academic staff; and 2\. funding the development and implementation of a targeted scholarship scheme (academic fees and living expenses for post-graduate students), developing mechanisms such as improved and modernized student residence hostels to attract international students and staff to Montenegrin higher education institutions, particularly in fields deemed nationally important\. Page 2 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) Component 3: Establishing a Competitive Research Environment (appraisal estimate US$7\.94 million, actual US$6\.47 million): This component was to finance: i) establishing Centers of Excellence (CoEs) in scientific research; ii) developing the criteria defining the CoEs; iii) establishing their governance framework; and iv) establishing the first CoE as a pilot for future CoEs\. Component 4: Project Management and Monitoring and Evaluation (appraisal estimate US$1\.26 million, actual US$1\.19): This component was to finance capacity building within the MoES and the Ministry of Science (MoS) to manage the day-today implementation of the project and M&E activities\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: The project was estimated to cost US$15\.98 million\. Actual cost was US$13\.65 million\. According to the ICR (p\. 45), the loan was fully disbursed\. The difference in approved and actual amounts is due to the different conversion rates applied (the Bank loan department applies a different rate each time a withdrawal application is submitted)\. Financing: The project was to be financed through a Bank loan of US$15\.98 million, of which US$13\.65 million was disbursed\. Borrower Contribution: No contributions by the Borrower were planned or made\. Dates: The project was restructured twice: ï‚ On June 30, 2016 the project’s closing date was extended from March 30, 2017 to December 31, 2018 to support the full realization of ongoing activities, in particular the research and scholarship initiatives that were inherently linked to the academic year cycle, and to allow for thorough measurement of results by the revised closing date\. An activity was added (which complemented but did not expand the project's scope) to further examine potential mechanisms related to innovation and education for economic competitiveness\. ï‚ On October 22, 2018 the project’s closing date was extended from December 31, 2018 to June 30, 2019 to allow for the completion of the following project activities: i) implementation of the National Excellence Scholarship Program linked to the academic cycle; ii) establishment of the CoEs, which had been delayed due to procurement delays, evaluation of the pilot experience, and development of a framework for future centers\. 3\. Relevance of Objectives Rationale According to the PAD (p\. 1), Montenegro is a relatively young, small, middle-income country\. The key sectors of Montenegro’s open economy and potential growth engines over the longer term include tourism, service, and other knowledge-driven industries\. Small and medium enterprises (SMEs) have been an increasing share of the economy; however, they were largely focused on the domestic market\. Moving forward, SMEs need to become more regionally competitive to strengthen their impact on the national Page 3 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) economy\. In order to increase competitiveness, improving the efficiency and quality of higher education and strengthening the links between research, innovation, and business was seen as critical\. According to the ICR (p\. 6), Montenegro had already been investing in its education system at comparable rates as other countries in the region\. However, it was not able to achieve similar outcomes\. Obstacles to the implementation of reforms were identified as: i) lack of easily accessible information on spending, staffing, graduation rates, graduate employment, and research output in the higher education sector; ii) inefficient financing mechanisms of public higher education; and iii) internal fragmentation of the public university, in which faculties acted as quasi-autonomous entities\. Also, the higher education system suffered from high drop-out rates and deficiencies in education quality and management compared to other socialist countries\. Montenegro’s spending on research and development (R&D) was comparatively low at 0\.16 percent of gross domestic product, compared to the EU25 average of 1\.86 percent\. According to the ICR (p\. 6), Montenegro faced several analogous obstacles to R&D such as a fragmented policy framework; poor linkages between higher education institutions, R&D centers, and private businesses at national and regional levels; insufficient availability of scientists and engineers; dated or inadequate laboratory equipment; and limited technology commercialization and patenting activities\. The project supported the pre-requisite for participating in the European Commission’s Framework programs\. Strengthening of the human capital and research infrastructure was also critical for integration into the European Research Area to advance to European Union (EU) accession\. The objective of the project supported the government’s Strategy for Development and Financing of Higher Education (2016-2020), Strategy for Innovation Activity (2016-2020), Strategy for Scientific Research Activity (2017-2021), Smart Specialization Strategy (2019-2024), Law on Higher Education (adopted in June 2017), and Law on Academic Integrity (adopted in March 2019)\. The objective of the project was in line with the Bank’s most recent Country Partnership Framework (FY16-20), especially with its focus area 2 “expand access to economic opportunities” and objective 2a “enhanced quality and relevance of higher education and research\." A moderate shortcoming affecting relevance of objectives was an element of ambiguity of the PDO statement\. The ICR (para\. 50) notes that “…the composite and broad nature of the PDO could be measured in different ways…” and “It would have been better to avoid composite PDOs and leave no room for interpretation\.” Relevance of objectives is therefore rated Substantial\. Rating Relevance TBL Rating Substantial 4\. Achievement of Objectives (Efficacy) EFFICACY_TBL OBJECTIVE 1 Objective To strengthen the quality of higher education in Montenegro through reforming the higher education finance and quality assurance systems Page 4 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) Rationale Note on structuring the assessment of the PDO into four objectives: The ICR (para\. 10) states that “the project treated quality and relevance as mutually reinforcing and dependent concepts and designed the interventions targeting both at the same time\.” This ICR Review assesses efficacy separately for the four objectives indicated in the PDO statement, i\.e\. quality of higher education, relevance of higher education, quality of research, and relevance of research, for several reasons: (1) Mutually reinforcing objectives do not need to be assessed together, and in fact assessing mutually reinforcing objectives separately can help to clarify the logic of the interventions and achievements\. (2) In education, “quality” and “relevance” do not reinforce each other in all cases\. Also, even when they are mutually reinforcing, “quality” can be improved without improving “relevance” and vice versa\. For example, it is possible to improve the quality of teaching and content for subjects that are not relevant – the PAD for this project, para\. 15, states “the universities may be providing sub-standard and/or irrelevant education to their students\.” Assessing the two types of objectives together could hinder assessment of whether the interventions targeting both at the same time were working as intended\. (3) An important aspect of defining relevance would have been a more explicit statement of “relevant to whom” and “relevant for what”\. The PAD’s discussion of relevance was, arguably, ambiguous\. In defining the PDO, the PAD (p\. 7) states in a footnote that “relevance is understood to be the utility of the outputs of higher education for its stakeholders and to the local, regional, and international contexts in which the stakeholders operate,” and the ICR repeats this definition in paragraph 10\. With “the stakeholders” undefined, however, this statement leaves the question of relevance open to interpretation\. Reading between the lines, some statements in the PAD could be interpreted to mean that relevance has to do with education and research “becoming a mainstream economic driver for Montenegro” (paragraph 8) or relating to “the needs of the labor market” (paragraph 15)\. The PAD (paragraph 75) states that in the national Strategy for the Development and Financing of Higher education one area of focus is “relevance of higher education to serve industry, national development, and cultural preservation\.” Although these are helpful, the PDO-level definition of “relevance” remained implicit rather than explicit\. The ICR (paragraph 11) stated that “Relevance was envisioned to be assessed through: a) the application of ESG standards which embed the concept of relevance by design; and b) a perception of higher education programs and degrees among employers,” and this came closer to suggesting the intended stakeholders\. ---------------- The project’s theory of change linked improving higher education finance and quality assurance systems with better quality of education\. It was envisioned that HEIs' ability to systematically self-evaluate was to lead to being re-accredited following external evaluations that would follow European Higher Education Area (EHEA) norms\. This was to result in gradually advancing in compliance with EHEA standards and HEIs improving in quality\. Ultimately, all four objectives were to result in more productive human capital, a more competitive and innovative economy, and stronger integration with the EU\. Outputs: ï‚ 16 grants were awarded to faculties, programs, and institutions, not achieving the target of 20 grants\. However, according to the ICR (p\. 36), the project made the decision to support fewer but more substantial interventions, based on the applications received\. ï‚ A new National Quality Assurance Framework (NQAF) was established according to Bologna-defined EU norms and is operational, achieving the target\. Two cycles of external evaluation of all HEIs, Page 5 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) including three main universities, were conducted to help achieve full compliance with the norms and standards of the EQAR and ENQA, achieving the target\. Furthermore, quality assurance and accreditation measures were applied nationally to all HEIs, achieving the target\. Country systems were strengthened to systematically administer and apply quality assurance and accreditation measures to all HEIs, in accordance with EU standards and practices\. To strengthen responsibility for ethical behavior at HEIs, the project supported the development of a new framework for plagiarism prevention, which was later prescribed by the 2019 Law on Academic Integrity\. Outcomes: ï‚ Four main universities were (re)accredited in line with EU standards, exceeding the target of three universities\. According to the Bank team (February 13, 2020), nine HEIs (four universities and five other HEIs) in the country went through two cycles of external evaluation and were (re) accredited\. The most important outcome in aligning with EU standards was setting up a recurring quality assurance process in which areas for improvement were systematically identified and addressed\. Rating Substantial OBJECTIVE 2 Objective To strengthen the relevance of higher education in Montenegro through reforming the higher education finance and quality assurance systems Rationale The project's theory of change envisioned that activities on accreditation and quality assurance were to result in improving perceptions of the relevance of higher education in the country and employment prospects for HEI graduates\. Outputs: ï‚ An office within the MoES was established to coordinate bilateral and multilateral agreement programs available to Montenegrin students and academic staff, achieving the target\. ï‚ A new HEI funding model was implemented, achieving the target of one new model being implemented\. The model introduced allocations towards defined strategic plans\. The aim of the model was to ensure efficient and effective public allocations in line with national priorities\. It also prescribed a cap on student enrollment to improve the student-teacher ratio and enforced free studies to promote the quality of learning outcomes versus fee-based student enrollment\. ï‚ A feasibility study was conducted to identify programs with strong potential to be offered in English (with the purpose of attracting more international students)\. Outcomes: Page 6 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) ï‚ A 20 percent increase in positive perception of HEI programs/degrees among employers was not achieved\. According to the ICR (p\. 33), the 2013 baseline and 2018 follow-up surveys on the perception of relevance (or utility) of higher education by employers in Montenegro did not produce statistically different results\. The ICR (p\. 15) stated that the 15 percent decrease in the numbers of unemployed graduates with higher education degrees between 2016-2018 may be seen as a positive trend which could indicate higher relevance of skills\. ï‚ According to the ICR (p\. 19), the establishment of the NQAF generated efficiencies in the HEI system\. The number of HEIs and academic programs was reduced from 13 to nine HEIs, and from more than 300 to 208 academic programs\. Also, a new study model (three years of Bachelor plus two years of Masters, and three years of PhD studies) was implemented in accordance with the European Higher Education Area and the Bologna process\. The ICR stated that this model is likely to facilitate international integration, and to increase participation in mobility programs and cooperation in international research projects\. The outputs described above, the establishment of the NQAF, and the implementation of the new study model are noteworthy\. However, achievement of this objective (to strengthen the relevance of higher education) is rated Modest because of the finding that the baseline and follow-up surveys on the perception of relevance (or utility) of higher education by employers in Montenegro did not produce statistically different results\. Shifts in employment rates among HEI graduates could have more to do with changes in the labor market than with project activities or outputs, and evidence that would speak to labor market aspects was not presented in the ICR\. Rating Modest OBJECTIVE 3 Objective To strengthen the quality of research in Montenegro by strengthening research and development capabilities Rationale The project’s theory of change linked the strengthening of research and development capabilities with better quality in research\. Project activities assumed that developing linkages with the scientific diaspora, establishing a pilot Center of Excellence (CoE), supporting collaborative research and development sub- projects, as well as building capacity to administer and support the new CoE and grant programs, was to result in research having better quality and becoming more relevant\. Outputs: ï‚ A pilot CoE was established, achieving the target\. The aim of the CoE was to foster research excellence and cooperation between academia and the private sector\. Based on a competitive selection process, the new CoE was based at the University of Montenegro and implemented by the Faculty of Electrical Engineering\. The CoE focused on boosting the application of the latest information and communication technology innovations to sustainable agriculture, forestry, water, health, and land management\. Page 7 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) ï‚ A framework for future CoEs was developed, achieving the target\. Lessons learned from other projects' competitive grants programs were applied, such as the importance of a comprehensive methodology and principles for selecting suitable proposals, a funding model based on business co- financing, and robust monitoring and evaluation processes and procedures\. ï‚ 132 students received scholarships for Master’s, doctoral, and post-doctoral studies abroad through the National Excellence Scholarship Program (NESP), surpassing the target of 60 students\. ï‚ Two mapping exercises were conducted in order to optimize the use of research and development (R&D) equipment through equipment sharing and avoidance of investment in the same apparatus\. ï‚ Seven new laboratories were established, and scientific equipment was upgraded for four existing laboratories\. Also, 317 scientific papers were published, 11,766 citations were received, and 15 theses were defended based on the research advanced by individual sub-projects\. Two patents were issued at the national level and one patent internationally\. Furthermore, 15 new innovative products and services were developed\. There were not targets for these outputs\. Outcomes: ï‚ The number if Montenegrin researchers who participated in international R&D projects increased from 200 researchers in 2011 to 585 researchers in 2019, far surpassing the target of 235 researchers\. Rating High OBJECTIVE 4 Objective To strengthen the relevance of research in Montenegro by strengthening research and development capabilities Rationale The project's theory of change envisioned that public/private or international R&D partnerships would enhance linkages between HEI research and industry and international partners, and that with stronger ties to industry and international partners the HEIs would increase the relevance of their research\. Outputs: ï‚ 20 public/private or international R&D partnerships and/or business start-ups with research institutes or university faculties were established, surpassing the target of 10 partnerships\. Through the project, the MoS designed a new Program for Collaborative R&D grants (CRDS)\. The CRDS financed proposals in the national priority areas such as energy, information and communication technology, medicine and health, sustainable development and tourism, agriculture and food, and new materials, products & services\. ï‚ Nine research and development sub-projects were implemented, not achieving the target of 12 sub- projects\. According to the ICR (p\. 38), during implementation, larger projects with more diverse Page 8 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) partnership potential were awarded the majority of the research funding\. This resulted in fewer but larger sub-projects\. ï‚ A systematic cooperation with the Montenegrin scientific diaspora was established through the development of a Strategy for Collaboration with Diaspora (2015-2018), including topics such as education and science, and providing recommendations for better networking and cooperation with the diaspora\. Outcomes: According to the ICR (p\. 17), “An independent external evaluation of NESP (June 2019) concluded that the original NESP objective of gaining new knowledge through academic development and transferring it back into the national science and innovation environment was fully achieved\. NESP resulted in more than 150 papers published/presented; representation of Montenegro in 15 new international organizations; a 104 percent increase in employment of scholarship recipients; and 20 percent of [Master's-level scholarship recipients] (out of 84) considering pursing a PhD\.” These achievements indicate that activities related to strengthening research and development capabilities took place, although the connection to strengthened relevance of research in Montenegro is more implicit than explicit\. The ICR (p\. 49, toward the end of Appendix 4 on Efficiency) stated “Out of 22 products or services developed via CoE and Collaborative R&D Grants, 15 were applied in the public or private sector,” and the examples given suggest relevance to the country’s economy\. In comments on the draft of this review, the project team stated that “the PRODE project through the established PRODE 3D Laboratory has developed university capacities to build relationships with employers\. As a result, the university is increasing cooperation with the private sector in addressing enterprises’ needs in development of new solutions\.” Rating Substantial OVERALL EFF TBL OBJ_TBL OVERALL EFFICACY Rationale Overall, the information presented in the ICR indicates that quality of higher education, the quality of research, and the relevance of research in Montenegro were likely enhanced by the project\. With efficacy rated high for one objective, substantial for two objectives, and modest for one objective, overall efficacy is rated substantial\. Overall Efficacy Rating Substantial 5\. Efficiency Page 9 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) Economic analysis: Neither the PAD nor the ICR included a traditional economic analysis\. The PAD (p\. 18) stated that a separate economic and financial analysis was not carried out for the project, as international studies and recent Bank research provided sufficient information on the project’s benefits and potential financial impact\. The ICR did not present a cost-benefit analysis or a cost-efficiency analysis -- as was done, for example, for the ICRs of the Bangladesh Higher Education Quality Enhancement Project (P106216) and the Mozambique Higher Education Science and Technology project (P111592)\. The ICR's main efficiency discussion (p\. 19) largely described the project's results\. The ICR’s Annex 4 detailed achievements of individual project components\. Many of the achievements presented there could be understood as benefits, but they are not adequately analyzed or compared with project costs\. Operational efficiency: According to the ICR (p\. 20), the project was efficiently managed, as staff turn-over within the project management team and Bank teams was low\. Also, international technical experts in critical areas such as financing, quality assurance, and research and innovation supported capacity building efforts within key stakeholders in the line ministries and HEIs\. The project also experienced savings due to VAT exemptions for imported scientific equipment, which allowed for the funding of additional project activities\. However, the project’s closing date had to be extended twice due to implementation delays\. According to the ICR (p\. 20), the implementation delays resulted from low capacity of HEIs and research institutions to implement CRDS grant proposals following Bank procurement rules, establishment of the CoE as a legal entity, and completion of the National Excellence Scholarship Program linked to the two-year academic cycle\. Finally, the ICR (p\. 23) stated that the project did not sufficiently coordinate with the EU, and the development and financing of the National Qualifications Framework, which was planned to be one of the project’s activities, was funded by the EU instead\. Efficiency is rated Modest, given scanty economic analysis, with some evidence of implementation inefficiency\. Efficiency Rating Modest a\. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) 0 Appraisal 0  Not Applicable 0 ICR Estimate 0  Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. Page 10 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) 6\. Outcome The project's objectives were well aligned with country conditions, government strategy, and Bank strategy, but the wording of the objectives meant the PDO was open to several interpretations\. Relevance of the objectives was therefore Substantial\. Efficacy was Substantial, with evidence of significant achievement of the quality objectives but lack of evidence related to relevance of research\. Efficiency is rated Modest due to lack of formal analysis as well as evidence of implementation inefficiencies\. These ratings indicate moderate shortcomings in the project's preparation and implementation, consistent with an Outcome rating of Moderately Satisfactory\. a\. Outcome Rating Moderately Satisfactory 7\. Risk to Development Outcome According to the ICR (p\. 28), the government continues to support the project's objectives after project completion\. The ICR (p\. 29) noted a 60 percent increase in the MoS budget, though it did not specify the time frame for this increase\. The EU accession strategy should support the MoES to deepen its reforms\. Furthermore, a follow-on Bank project (Montenegro Growth and Jobs Project (P169604), US$11\.5 million) is being prepared and will build on the outcomes achieved under this project\. However, the ICR (p\. 29) stated that one challenge is the loss of revenue for the University of Montenegro due to legislation giving free admission for all students and limiting tuition to cases of poor performance\. Even though the government increased the budget for the University of Montenegro, the loss of income from tuition is substantial\. The government has tried to address this issue by incentivizing faculties to apply for competitive grants to obtain additional financing\. According to the ICR, the project had a significant impact on institutional development and strengthening such as external evaluations of HEIs and establishing and operationalizing new national independent Agency for the Control and Quality Assurance of Higher Education\. However, according to the ICR (p\. 29), it is not clear if the HEIs have sufficient capacity to compete for external funds and are able to balance daily job functions with searching for funds\. 8\. Assessment of Bank Performance a\. Quality-at-Entry According to the ICR (p\. 27), the Bank team had an adequate mix of skills\. Also, the Bank conducted stakeholder consultations and held technical discussions with national, regional, and international experts\. Furthermore, global and regional experiences and lessons learned from other Bank projects were taken into account, such as i) prioritizing quality and relevance; ii) competitive grant funding to drive innovation; iii) internationalization to improve cross-border knowledge and research; and iv) the usage of performance-based contracts to promote innovative approaches to research and change norms\. The ICR (p\. 28) stated that a strong relationship with the government and capacity-building activities during project Page 11 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) preparation allowed for high implementation readiness\. Also, the project was well anchored in existing government reform programs\. The Bank team identified relevant risks such as implementation capacity, absorption capacity, and stakeholder buy-in\. However, mitigation measures for all risks were not adequate\. According to the ICR (p\. 23), the risks of absorption and implementation capacity materialized and resulted in implementation delays\. The risks of HEIs and research institutions not being able to comply with Bank procurement procedures and the complexity of the institutional set up of a CoE were not identified during project preparation, but these risks materialized and resulted in implementation delays\. Also, according to the ICR (p\. 28), the project’s timeline was overly ambitious\. The design of the project’s results framework was adequate (see Section 9a), though it was a shortcoming that there was not an outcome indicator on the relevance of research\. Procurement, financial management, and administrative arrangements were adequate (see Section 10b)\. However, the Bank did not sufficiently coordinate with the EU, such that development of the National Qualifications Framework, one of the project’s activities, ended up being funded by the EU, which came as a surprise to the Bank team\. Quality-at-Entry Rating Moderately Satisfactory b\. Quality of supervision According to the ICR (p\. 28), the Bank worked closely with the project management team, ministries, and HEIs and conducted regular supervision missions\. Also, the Bank provided clear progress reports, feedback for counterparts, and technical assistance when needed\. The Bank team had the appropriate set of skills and did not experience any staff turn-over during project preparation and implementation\. The ICR (p\. 28) stated that the provision of an impact evaluation as well as external expertise ensured the government’s commitment to implementing complex reforms and provided the basis for follow-up programs by the government\. The Bank team provided technical assistance to address financial management and procurement delays\. However, during project implementation the Bank team did not modify the results framework to better measure project outcomes on relevance of research\. Quality of Supervision Rating Satisfactory Overall Bank Performance Rating Moderately Satisfactory 9\. M&E Design, Implementation, & Utilization Page 12 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) a\. M&E Design The project’s theory of change and the logic linking key activities and outputs with intended outcomes was sound and reflected in the results framework\. Furthermore, the results framework was simple, encompassing four PDO indicators and eight intermediate outcome indicators\. All indicators had baselines and targets with the exception of the second PDO indicator, “increase the perception of relevance of higher education programs and degrees\." According to the ICR (p\. 25), the M&E implementation arrangements included measurement of indicators included in the results framework, quarterly (if necessary monthly) implementation progress reports, a mid- term review of implementation and outcome progress, and impact evaluations\. The PAD (p\. 12) stated that the Project Director was to be responsible for bringing together the reports and representatives of MoES and MoS for monitoring of the PDO indicators and results\. However, the objectives of the project were convoluted and could be interpreted and measured in different ways\. Also, the first PDO indicator, “complete external evaluation of three main universities, utilizing new quality assurance and accreditation measures developed in accordance with Bologna defined EU norms and practices,” was overly complex and tried to measure several aspects at the same time\. Finally, the results framework did not include an adequate indicator to measure “relevance of research\." These shortcomings were considerate moderate\. b\. M&E Implementation According to the ICR (p\. 26), the project management team collected data from line ministries, tracked indicators, and evaluated progress of the implementation of project activities on a regular basis\. Also, the project management team used a more detailed M&E system with supplemental indicators and templates to report on grant recipients and other stakeholders\. However, the Bank team did not make some needed modifications to the results framework during the restructuring\. For example, the target for the perception of relevance was not defined, and an alternative was not identified once this indicator deemed to be not useful\. Also, according to the ICR (p\. 25), even though another agency implemented the National Qualifications Framework, the project did not drop the corresponding indicator\. The target for the number of research and development sub-projects was decreased from eleven to eight to reflect the fewer than anticipated but larger in size grants awarded\. However, the new target was not reflected in the results framework, indicating moderate shortcomings\. c\. M&E Utilization According to the ICR (p\. 26), the project’s M&E was used to monitor and manage implementation progress towards the PDO and identify implementation bottlenecks and corrective measures\. External expertise and impact evaluations were used to build capacity among key stakeholders to self-evaluate and identify evidence-based strategic action plans and policies\. The ICR also stated that the government designed follow-up programs based on the outcomes of the impact evaluation, such as a new PhD scholarship program and innovation projects grant program\. Page 13 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) M&E Quality Rating Substantial 10\. Other Issues a\. Safeguards The project was classified as category B and triggered the Bank’s safeguard policy OP/BP 4\.01 (Environmental Assessment) due to the financing of minor construction works and R&D grants\. According to the ICR (p\. 26), an Environmental Management Framework (EMF) was prepared\. All project activities complied with Montenegrin law, Bank safeguards, and the project EMF\. Also, the project prepared semi- annual progress reports that were reviewed by the Bank team on a regular basis\. The ICR (p\. 27) stated that a part-time environmental specialist, based within the project management team, provided guidance and ensured adequate implementation of safeguard policies\. The project’s final Environmental Management Plan Compliance Report confirmed that the project did not encounter any compliance issues (ICR, p\. 27)\. b\. Fiduciary Compliance Financial Management: The Technical Service Unit (TSU) within the Ministry of Finance was responsible for the fiduciary aspects of the project\. According to the ICR (p\. 27), the project’s financial management in regards to planning and budgeting, accounting, reporting, internal controls, and flow of funds was satisfactory throughout implementation\. Also, the project complied with legal covenants related to quarterly reporting and financial audits\. The external auditor’s opinion was unqualified, and no financial management issues were identified\. However, the submission of financial audits was generally delayed by two to three months\. Procurement: According to the ICR (p\. 27), the TSU ensured compliance with the Bank’s procurement policies\. Even though the Bank provided special training in procurement and related procedures for grant recipients, there were still capacity shortcomings\. The Bank addressed this issue by hiring an external procurement specialist to build capacity\. c\. Unintended impacts (Positive or Negative) According to the ICR (p\. 22), the project contributed to making access to higher education more inclusive for persons with physical disabilities through infrastructure improvements at four University of Montenegro faculties\. d\. Other Page 14 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) --- 11\. Ratings Reason for Ratings ICR IEG Disagreements/Comment There was evidence of lack of achievement on the perceived relevance of higher education\. Outcome Satisfactory Moderately Satisfactory Efficiency is rated Modest based on scanty economic analysis as well as some evidence of implementation inefficiencies\. Risk assessment at project preparation had shortcomings, Bank Performance Satisfactory Moderately Satisfactory and there were no outcome indicators adequate to measure improved relevance of research\. Quality of M&E Substantial Substantial Quality of ICR --- Substantial 12\. Lessons The ICR (pp\. 29-31) included several lessons, adapted here by IEG: ï‚ Assessing and understanding the local policy context to include factors outside the immediate sector is critical for project implementation\. This project was based on the Bologna standards and requirements for EU accession, which allowed the Bank and government to design a higher education project that received strong stakeholder ownership\. ï‚ Investing in substantial capacity development for establishing national systems in quality assurance, quality culture, research, and innovation is critical for ensuring long-term reforms to higher education\. Deep structural reforms take longer than the Bank’s project implementation period\. By investing in building capacity, reforms can continue after a Bank-financed project closes\. ï‚ In order to ensure sustainability of project outcomes, strengthening the collaboration of the involved ministries is beneficial\. In this higher education project, the Ministry of Science, Ministry of Economy, and Ministry of Education all played a critical role in financing, designing, and implementing policies for innovation and human capital development\. Creating a dedicated innovation agency might help to ensure an efficient collaboration between the different ministries\. 13\. Assessment Recommended? Page 15 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review HIGHER ED COMPTET (P122785) No 14\. Comments on Quality of ICR The ICR provided a good overview of project preparation and implementation\. The ICR was internally consistent, appropriately candid, and strong in the provision of useful lessons learned, which were based on the project’s implementation experience\. Also, the ICR’s analysis was of adequate quality\. However, the ICR did not include an economic analysis and did not provide any evidence regarding to what extent the outputs produced under objective four contributed to increasing the relevance of research\. a\. Quality of ICR Rating Substantial Page 16 of 16

REVIEW

P122194

Document of  The World Bank  FOR OFFICIAL USE ONLY    Report No: ICR00004461      IMPLEMENTATION COMPLETION AND RESULTS REPORT  ON A  LOAN (8212‐PE)  IN THE AMOUNT OF US$25 MILLION  TO THE  REPUBLIC OF PERU  FOR A  HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 )  September 25, 2018              Education Global Practice  Latin America And Caribbean Region       This document has a restricted distribution and may be used by recipients only in the performance of their  official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   CURRENCY EQUIVALENTS  (Exchange Rate Effective March 19, 2018)    Currency Unit =   Peruvian Soles (PEN)  PEN 1 =   US$0\.31  US$1 =  PEN 3\.27      FISCAL YEAR  July 1–June 30    ABBREVIATIONS AND ACRONYMS    ANR  National Assembly of Rectors (Asamblea Nacional de Rectores)  CAE  External Advisory Council (Comité Asesor Externo)  CDP  Project Steering Committee (Comité Directivo del Proyecto)  CONEACES  Council for the Evaluation, Accreditation, and Certification of Non‐University  Higher Education Quality (Consejo de Evaluación, Acreditación y Certificación de la  Calidad de la Educación Superior No Universitaria)  CONEAU  Council for the Evaluation, Accreditation, and Certification of University Higher  Education (Consejo de Evaluación, Acreditación y Certificación de la Calidad de la  Educación Superior Universitaria)  COSUSINEACE  Higher Council of the National System for Evaluation, Accreditation, and  Certification of the Quality of Education (Consejo Superior del Sistema Nacional de  Evaluación, Acreditación y Certificación de la Calidad Educativa)  CPF  Country Partnership Framework  CPS  Country Partnership Strategy  CTF  Fund Technical Commission (Comisión Técnica del Fondo)  EEFA  Evaluation Entity for Accreditation (Entidades Evaluadoras con Fines de  Acreditación)  FEC  Fund for Quality Enhancement (Fondo de Estímulo de la Calidad)  FM  Financial Management  GDP  Gross Domestic Product  GoP  Government of Peru  GPROC  Call for Proposals Management System (Sistema de Gestión de Convocatorias)  HEI  Higher Education Institution  HEQAS  Higher Education Quality Assurance System (Sistema del Aseguramiento de la  Calidad de la Educación Superior)  ICR  Implementation Completion and Results Report  ICT  Information and Communication Technology  IDF  Institutional Development Fund  IEES  Higher Education Institutes and Schools (Institutos y Escuelas de Educación  Superior)  INEI  National Institute of Statistics and Informatics (Instituto Nacional de Estadística e  Informática)   IPPF  Indigenous Peoples Planning Framework  IRI  Intermediate Results Indicator  IRR  Internal Rate of Return  ISR  Implementation Status and Results Report  M&E  Monitoring and Evaluation  MINEDU  Ministry of Education (Ministerio de Educación)  MTR  Midterm Review  NPV  Net Present Value  PCU  Project Coordination Unit (Unidad Coordinadora de Proyecto)  PDO  Project Development Objective  PMI  Institutional Improvement Plan (Plan de Mejora Institucional)  PROCALIDAD  Higher Education Quality Improvement Project (Proyecto Mejoramiento de la  Calidad de la Educación Superior)  RF  Results Framework  SAES  Quality Assurance Information (Sistema de Autoevaluación de la Educación  Superior)  SIAC  Quality Assurance Information System (Sistema de Información del Aseguramiento  de la Calidad)  SIES  Higher Education Information System (Sistema de Información de la Educación  Superior)  SINEACE  National System for Evaluation, Accreditation, and Certification of the Quality of  Education (Sistema Nacional de Evaluación, Acreditación y Certificación de la  Calidad Educativa)  SUNEDU  National Superintendence of Higher University Education (Superintendencia  Nacional de Educación Superior Universitaria)  UNMSM  Major National University of San Marcos (Universidad Nacional Mayor de San  Marcos)        Regional Vice President: Jorge Familiar  Country Director: Alberto Rodriguez  Senior Global Practice Director: Jaime Saavedra  Practice Manager: Reema Nayar  Task Team Leader(s): Ines Kudo  ICR Main Contributor: Suzana N\. de Campos Abbott     TABLE OF CONTENTS  DATA SHEET \. 1  I\.  PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES \. 5  A\. CONTEXT AT APPRAISAL \. 5  \. 10  B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)  II\.  OUTCOME \. 11  A\. RELEVANCE OF PDOs \. 11  B\. ACHIEVEMENT OF PDOs (EFFICACY) \. 12  C\. EFFICIENCY \. 15  D\. JUSTIFICATION OF OVERALL OUTCOME RATING \. 17  E\. OTHER OUTCOMES AND IMPACTS (IF ANY) \. 17  III\.  KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME \. 18  A\. KEY FACTORS DURING PREPARATION \. 18  B\. KEY FACTORS DURING IMPLEMENTATION \. 20  IV\.  BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME \. 21  A\. QUALITY OF MONITORING AND EVALUATION (M&E) \. 21  B\. ENVIRONMENTAL SAFEGUARD, SOCIAL SAFEGUARD, AND FIDUCIARY COMPLIANCE \. 23  C\. BANK PERFORMANCE \. 24  D\. RISK TO DEVELOPMENT OUTCOME \. 25  V\.  LESSONS LEARNED AND RECOMMENDATIONS \. 25  ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS \. 27  ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION \. 35  ANNEX 3\. PROJECT COST BY COMPONENT\. 37  ANNEX 4\. EFFICIENCY ANALYSIS \. 38  ANNEX 5\. BORROWER, CO‐FINANCIER, AND OTHER PARTNER/STAKEHOLDER COMMENTS \. 45  ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY) \. 57  ANNEX 7\. WHAT IMPROVEMENT PLANS FINANCED AND SUPPORTED \. 58        The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 )        DATA SHEET      BASIC INFORMATION   Product Information  Project ID  Project Name  P122194  HIGHER EDUCATION QUALITY IMPROVEMENT  Country  Financing Instrument  Peru  Investment Project Financing  Original EA Category  Revised EA Category  Not Required (C)  Not Required (C)  Organizations  Borrower  Implementing Agency  Republic of Peru  SINEACE  Project Development Objective (PDO)    Original PDO  The objective of the Project is to improve Peru’s higher education quality assurance system through the promotion  of self and external evaluations, the financing of improvement plans, and the provision of information\.      Page 1 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) FINANCING      Original Amount (US$)   Revised Amount (US$)  Actual Disbursed (US$)  World Bank Financing          25,000,000  24,828,146  24,828,146  IBRD‐82120  Total    25,000,000  24,828,146  24,828,146  Non‐World Bank Financing        Borrower  27,170,000     0     0  Total  27,170,000     0     0  Total Project Cost  52,170,000  24,828,146  24,828,146        KEY DATES      Approval  Effectiveness  MTR Review  Original Closing  Actual Closing  04‐Dec‐2012  08‐May‐2013  24‐Oct‐2016  01‐Apr‐2018  01‐Apr‐2018       RESTRUCTURING AND/OR ADDITIONAL FINANCING      Date(s)  Amount Disbursed (US$M)  Key Revisions  02‐Sep‐2016  9\.74  Change in Implementing Agency  Change in Results Framework  Change in Components and Cost  Reallocation between Disbursement Categories  Change in Legal Covenants  Change in Institutional Arrangements      KEY RATINGS      Outcome  Bank Performance  M&E Quality  Highly Satisfactory  Highly Satisfactory  High    Page 2 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) RATINGS OF PROJECT PERFORMANCE IN ISRs      Actual  No\.  Date ISR Archived  DO Rating  IP Rating  Disbursements  (US$M)  01  20‐Mar‐2013  Satisfactory  Satisfactory  0  02  22‐Oct‐2013  Satisfactory  Moderately Satisfactory  0  03  01‐Jun‐2014  Satisfactory  Moderately Satisfactory  \.72  04  18‐Dec‐2014  Moderately Satisfactory  Moderately Unsatisfactory  1\.10  Moderately  05  05‐Mar‐2015  Moderately Unsatisfactory  2\.57  Unsatisfactory  Moderately  06  19‐Aug‐2015  Moderately Unsatisfactory  2\.57  Unsatisfactory  Moderately  07  23‐Dec‐2015  Moderately Satisfactory  3\.96  Unsatisfactory  Moderately  08  29‐Jun‐2016  Moderately Satisfactory  7\.27  Unsatisfactory  09  22‐Nov‐2016  Satisfactory  Satisfactory  10\.45  10  20‐Apr‐2017  Satisfactory  Satisfactory  13\.40  11  21‐Nov‐2017  Satisfactory  Satisfactory  22\.34    SECTORS AND THEMES      Sectors  Major Sector/Sector  (%)    Public Administration     4  Other Public Administration  4      Education    96  Public Administration ‐ Education  9  Tertiary Education  87      Themes    Major Theme/ Theme (Level 2)/ Theme (Level 3)  (%)    Page 3 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Public Sector Management  4    Public Administration  4    Administrative and Civil Service Reform  4        Human Development and Gender  96    Education  96    Access to Education  24    Science and Technology  24    Teachers  24    Standards, Curriculum and Textbooks  24            ADM STAFF  Role  At Approval  At ICR  Regional Vice President:  Hasan A\. Tuluy  Jorge Familiar Calderon  Country Director:  Susan G\. Goldmark  Alberto Rodriguez  Senior Global Practice Director:  Keith E\. Hansen  Jaime Saavedra Chanduvi  Practice Manager:  Reema Nayar  Reema Nayar  Task Team Leader(s):  Marcelo Becerra  Ines Kudo  Suzana Nagele de Campos  ICR Contributing Author:    Abbott                   Page 4 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) I\. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES    A\. CONTEXT AT APPRAISAL  1\. At the time of appraisal of the Higher Education Quality Improvement Project (the Project) in  late 2012, Peru had become one of the fastest growing economies in Latin America, weathering well  the impact of the global financial and economic crisis\. Gross domestic product (GDP) growth averaged  5\.7 percent per year between 2000 and 2011\. This strong economic performance enabled a continuous  improvement of Peru’s income per capita, which increased by more than 50 percent during the decade,  after almost 30 years of stagnation\. Particularly, the strong growth between 2004 and 2011 had resulted  in significant improvements in poverty—almost 31 percent of the population was lifted out of poverty— and  other  social  indicators\.  Still,  overall  development  outcomes  remained  far  below  expected,  given  Peru’s per capita income, and gaps remained high\.  2\. The Government of Peru (GoP) aimed to preserve a sustained economic growth of 6 percent  annually, while fostering inclusiveness\. The Government recognized that to sustain growth, firms needed  to move into higher value‐added production and foster innovation, which required that companies have  access to  highly skilled labor because  employers had, in recent years, increased demand  for educated  workers, especially those with higher education\. However, the tertiary education system was fragmented  and offered divergent paths of access and quality to the population\. The GoP’s priority was to address  significant  gaps  in  human  capital  (especially  education)  and  infrastructure  development\.  The  GoP’s  National  Education  Project  2021  (Proyecto  Educativo  Nacional  al  2021)  included  among  its  strategic  priorities  enhancing  the  accreditation  system  for  tertiary  education  institutions  through  the  National  System  for  Evaluation,  Accreditation,  and  Certification  of  the  Quality  of  Education  (SINEACE,  Sistema  Nacional de Evaluación, Acreditación y Certificación de la Calidad Educativa)\.  3\. With  a  higher  education  coverage  enrollment  rate  of  around  36  percent,  Peru  had  already  achieved mass tertiary education coverage in line with regional standards\. At the time of appraisal, 35  public universities (55 percent of total university enrollment), 65 private universities (45 percent of total  enrollment), and more than 1,000 non‐university higher education institutions (HEIs, 53 percent public)  operated as higher education providers\. Most of the significant expansion in previous years had taken  place in private institutions, following the issuance of a 1996 decree authorizing the creation of for‐profit  institutions\.  4\. Nevertheless, Peru’s higher education system suffered from several issues that constituted a  major  obstacle  to  providing  the  human  capital  required  to  sustain  a  growing  economy\.  First,  higher  education  policy  making  was  hindered  by  weak  governance\.  The  National  Assembly  of  Rectors  (ANR,  Asamblea  Nacional  de  Rectores)  both  represented  and  regulated  universities,  creating  a  conflict  of  interest, especially with regard to quality assurance and the establishment or expansion of universities\.  Further, the Ministry of Education (MINEDU,  Ministerio de Educación) lacked the capacity for either the  analysis or the design of comprehensive public higher education policies\. Second, Peruvian universities  and  the  higher  education  system  as  a  whole  were  characterized  by  insufficient  funds  and  limited  accountability\. Although Peru invested about 1\.3 percent of GDP in higher education (of which 0\.7 percent  was provided by the public sector), regional comparisons showed that the levels of public and private  investment were below the level corresponding to the country’s income, both in the aggregate and per  Page 5 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) capita  terms\.  These  limited  investments  had  led  to  a  worsening  of  the  universities’  infrastructure  and  shortages  in  teaching  materials  and  equipment\.  Insufficient  public  financing,  together  with  growing  demand, had led public universities to rely increasingly on self‐generated funds, such as fees for entrance  examination and consultancy services\. Third, HEIs were not sufficiently accountable for the funds they  received,  as  their  annual  budgets  were  assigned  through  a  process  based  on  historical  priorities  and  political  bargaining,  where  the  ANR  had  significant  leverage\.  This  lack  of  accountability  perpetuated  significant difference in subsidies among HEIs and led to insufficient quality improvements\. Fourth, in part  the result of the above, the higher education system was characterized by low levels and large variance  in quality\. An estimated one‐third of employed higher education graduates did not work in their line of  specialization\. Although Peru had a traditional group of prestigious HEIs of relatively good quality, the  growing  number  of  providers  increased  the  range  of  program  quality  and  relevance\.  The  main  determinants of low quality included outdated programs, weak institutional capacity, insufficient teaching  equipment and laboratories, and the low qualification of professors, of whom only 7 percent had a PhD  and only 40 percent a postgraduate degree\. Yet, the lack of an integrated higher education information  system (SIES, Sistema de Información de la Educación Superior) did not allow the market (students, their  families,  policy  makers,  and  employers)  to  differentiate  the  quality  of  programs  and  HEIs,  thereby  providing  an  incentive  for  HEIs  to  improve\.  Finally,  Peru  had  not  until  2006  counted  upon  a  higher  education quality assurance system (HEQAS) that would both raise the minimum standards and foster  quality improvements by promoting self‐evaluations and external evaluations, promoting enhancements  based on these evaluation, providing a system for accreditation of quality HEIs, and providing information  to stakeholders\.  5\. In its National Education Project 2021, the GoP adopted a bold strategy to increase the quality  and relevance of tertiary education, by legally creating a QAS, SINEACE, that established a framework  for an intertwined HEQAS across both basic and higher education levels\. After approval of the SINEACE  Act  in  2006,  the  GoP  in  2011  created  the  Higher  Council  of  the  National  System  for  Evaluation,  Accreditation, and Certification of the Quality of Education (COSUSINEACE, Consejo Superior del Sistema  Nacional de Evaluación, Acreditación y Certificación de la Calidad Educativa) and three agencies under  COSUSINEACE, one each for basic education, higher education institutes and schools (IEES, Institutos y  Escuelas de Educación Superior), and university education to steer, develop, and supervise SINEACE, each  in their respective areas\.  6\. Peru’s  HEQAS  comprises  four  sets  of  actors:  (a)  public  entities,  namely  the  Council  for  the  Evaluation,  Accreditation,  and  Certification  of  Non‐University  Higher  Education  Quality  (CONEACES,  Consejo de Evaluación, Acreditación y Certificación de la Calidad de la Educación Superior No Universitaria)  and the Council for the Evaluation, Accreditation, and Certification of University Higher Education Quality  (CONEAU,  Consejo  de  Evaluación,  Acreditación  y  Certificación  de  la  Calidad  de  la  Educación  Superior  Universitaria) under COSUSINEACE; (b) HEIs that submit themselves and their programs to evaluation and  accreditation decisions; (c) Evaluation Entities for Accreditation (EEFAs, Entidades Evaluadoras con Fines  de Acreditación) that carry out external evaluations for HEIs; and (d) a SIES that fuels the HEQAS and allows  for better decision making by policy makers, HEIs, students, and other stakeholders\. Based on standards  developed and approved by CONEAU and CONEACES, the system’s functioning requires (a) self‐evaluation  by  HEIs;  (b)  external  evaluation  by  EEFAs,  private  entities  authorized  by  CONEAU  (for  universities),  or  CONEACES (for IEES) that employ peer reviewers to conduct evaluation of HEIs; and (c) decisions regarding  accreditation  taken  by  CONEAU  or  CONEACES  based  on  the  external  evaluation  reports’  recommendations for either improvement or accreditation\.  Page 6 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 7\. The HEQAS has three goals: (a) to classify HEIs and programs into two categories: acceptable to  minimum standards (accredited) or low quality (not accredited); (b) to make that information available  for prospective students and their families, the education community, and other stakeholders; and (c) to  promote quality improvements in individual HEIs and throughout the system\. At the time of appraisal,  COSUSINEACE  had  fully  developed  standards  and  guides  for  all  key  disciplines,  most  of  which  were  required to reach accreditation and were the first programs to be evaluated\.   Theory of Change (Results Chain)  8\. The Project’s Theory of Change, as retrofitted for purposes of this Implementation Completion  and  Results  Report  (ICR),  is  presented  in  figure  1\.  The  Project’s  outcomes,  as  reflected  in  its  Project  Development Objective (PDO), are expected to result in three direct impacts: (a) stakeholders make better  decisions based on better information available, (b) more HEIs meet the standards to get accredited, and  (c)  more  universities  meet  the  standards  to  get  licensed\.  Ultimately,  the  Project’s  long‐term  impact  is  expected to result in improved quality and returns to higher education\.  Figure 1\. Theory of Change  Page 7 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Project Development Objectives (PDOs)  9\. The PDO was to improve Peru’s higher education quality assurance system through the promotion  of self and external evaluations, the financing of improvement plans, and the provision of information\.   Key Expected Outcomes and Outcome Indicators  10\. Progress toward the PDO would be measured through the following four PDO indicators:  (a) Number of programs in the key disciplines and HEIs that have completed self‐evaluation on  the basis of CONEAU or CONEACES standards  (b) Number of programs in the key disciplines and HEIs that have completed external evaluation  on the basis of CONEAU or CONEACES standards  (c) Number  of  program  improvement  plans  and  institutional  improvement  plans  that  are  implemented satisfactorily  (d) Number  of  users  registered  in  the  website  of  the  Quality  Assurance  Information  System  (SIAC)1  11\. In  addition,  the  Project’s  Results  Framework  (RF)  included  10  Intermediate  Results  Indicators  (IRIs) (annex 1)\.  Components  12\. The Project comprised three components as follows:  ï‚ Component 1\. Development of Methods, Instruments, Norms, and Capacity for Evaluation  and Accreditation (estimated project cost: US$7\.92 million; World Bank financing: US$3\.80  million)\. Strengthening the capacity of CONEAU, CONEACES, HEIs, and EFFAs to handle their  respective responsibilities within HEQAS, through the following:  o Subcomponent 1\.1: Development of management, planning, and evaluation capacity  of  CONEAU  and  CONEACES\.  Enhancing  of  CONEAU  and  CONEACE’s  management,  planning, and evaluation capacity by developing standards, norms, and procedures for  evaluation and accreditation, including those for the supervision of EFFAs\.  o Subcomponent  1\.2:  Development  of  self‐evaluation  and  external  evaluation  capacity\.  Strengthening  of  the  capacity  of  (a)  HEIs  to  engage  in  both  internal  and  external evaluation processes and (b) EEFAs to carry out external evaluations including  learning from other experiences at the regional and international levels\.  1 SIAC = Quality Assurance Information System (Sistema de Información del Aseguramiento de la Calidad)\.  Page 8 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) o Subcomponent 1\.3: Support for project implementation\. Provision of support for the  technical and administrative management of the Project\.  ï‚ Component 2\. Development and Consolidation of a Higher Education Quality Assurance  Information  System  (estimated  project  cost:  US$5\.19  million;  World  Bank  financing:  US$2\.49 million)  o Subcomponent  2\.1:  Development  and  consolidation  of  an  observatory  for  the  accreditation  of  Peru’s  higher  education  (Acredita  Perú)\.  Development  and  consolidation of an observatory of the accreditation process of Peru’s higher education  responsible  for  the  organization  and  dissemination  of  information  on  standards,  criteria, indicators, EFFAs, as well as evaluation and accreditation procedures by degree  programs and HEIs\.  o Subcomponent 2\.2: Establishment of an observatory of higher education graduates  (Futuro Profesional)\.  Establishment of an observatory of higher education graduates  for  systematically  collecting,  processing,  and  disseminating  statistical  information  about  the  performance  of  higher  education  graduates  in  the  labor  market  and  providing information regarding employability and salaries of graduates from different  programs and HEIs\.  o Subcomponent  2\.3:  Elaboration  of  sector  studies\.  Carrying  out  of  several  studies  aiming  at  better  understanding  of  Peru’s  higher  education,  including,  among  other  things, (a) development of a methodology and initial data collection to carry out an  evaluation  regarding  the  long‐term  effects  of  the  introduction  of  the  HEQAS,  (b)  development of an in‐depth sociocultural assessment in the framework of the Project’s  Indigenous  Peoples  Planning  Framework  (IPPF),  (c)  assessment  of  the  role  of  information in the choice of postsecondary education, and (d) effect of accreditation  in Peru’s higher education system\.  ï‚ Component  3\.  Fund  for  Quality  Enhancement  (estimated  project  cost:  US$39\.06  million;  World Bank financing: US$18\.71 million)  o Subcomponent  3\.1:  External  evaluation  of  IEESs\.  External  evaluation  of  IEESs  (institution‐wide  for  technical  programs  in  health  and  education)  by  EEFA  of  their  choice, after completion of self‐evaluation\.   o Subcomponent 3\.2: Support to improvement plans\. Implementation of improvement  plans  for  both  IEESs  and  universities  (including  programs  within  HEIs)  based  on  the  results of the self‐evaluations and external evaluations\.   Page 9 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) B\. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)  Revised PDOs and Outcome Targets   13\. The  Project’s  PDO  was  not  revised\.  In  a  September  2016  Level  2  Project  Restructuring,  the  Project’s outcome targets for first three PDO indicators were revised to have one aggregate target per  indicator (as opposed to the original multiple targets per indicator) to replace reference to CONEAU and  CONEACES with wording that includes all public entities in charge of higher education\.2 Target values of  indicators  were  revised  to  reflect  implementation  progress  and  projections  based  on  implementation  trends and activities (annex 1)\.  Revised PDO Indicators  14\. In  addition  to  the  revisions  described  earlier,  the  September  2016  restructuring  revised  the  wording  of  the  Project’s  PDO  Indicator  4  “Number  of  users  registered  in  the  website  of  the  Quality  Assurance  Information  System  (SIAC)”  to  read  “Number  of  visits  to  the  dissemination  websites  of  the  Higher Education Information System (SIES)”\. It also dropped four, added one, and modified two IRIs\. One  IRI was dropped as it would be captured in the direct beneficiaries core indicator; three IRIs were merged  into a new indicator that measures a broader set of capacity‐building project activities from which HEI  may  benefit;  a  new  IRI  was  added  to  reflect  relevant  progress  in  supporting  the  development  and  implementation  of  the  new  Higher  Education  Quality  Model  that  was  key  to  having  an  operating  framework  for  all  public  entities  in  charge  of  higher  education  quality  assurance;  and  two  IRIs  were  modified to reflect changes in Subcomponents 2\.1 and 2\.2\.  Revised Components  15\. The September 2016 restructuring also modified project components and costs (see Annex 3)\.  Component 1 was modified to reflect institutional changes introduced, replacing CONEAU and CONEACES  by ‘public entities in charge of higher education quality assurance’ and eliminating the evaluating entities  for  accreditation  purposes  as  their  role  was  under  revision  and  the  GoP  was  evaluating  the  option  of  promoting  the  participation  of  academic  peers  and  independent  accreditation  agencies  instead\.  Component  2  and  its  subcomponents  were  modified  to  support  the  provision  of  knowledge  and  information  about  higher  education  because  the  systems  originally  supported  by  the  Project  were  replaced  by  new  systems  with  similar  objectives  and  a  new  integrated  information  system  was  being  developed and could benefit from the Project’s support\. The order of Subcomponents 2\.1 and 2\.2 was  inverted,  so  that  Subcomponent  2\.1  supported  the  development  of  the  new  Information  System  for  Higher  Education,  which  would  include  the  observatory  of  graduates  developed  by  MINEDU,  and  Subcomponent 2\.2 would support the development of the new module for Quality Assurance Information  (SAES, Sistema de Autoevaluación de la Educación Superior, http://saes\.procalidad\.gob\.pe/), which would  be  part  of  the  integrated  information  system\.  Component  3  and  Subcomponent  3\.1  were  modified  to  2 The Project Restructuring was processed in two phases\. In April 2016, an initial restructuring approved most of the revisions,  including to the RF\. The revisions to the Project’s implementation arrangements, together with the previous revisions, were then  approved in September 2016\.  Page 10 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) include options for financing aspects of the Adjustment Plans required for the university licensing and  Strengthening Plans for the emblematic universities identified in the University Law (para\. 38)\.   Other Changes  16\. The September 2016 restructuring also (a) modified the Project’s implementing agency, including  related changes to legal covenants; (b) reallocated loan funds among disbursement categories to allocate  a greater share to Component 3; (c) revised disbursement estimates to reflect implementation progress  and the revised Operational Plan based on the restructuring; (d) reflected modifications to the Project’s  new institutional arrangements; and (e) revised the risk for Institutional Capacity for Implementation from  Moderate to High to reflect the ongoing higher education reforms and new institutional changes, and the  Project’s overall risk from Moderate to Substantial as a result\.  Rationale for Changes and Their Implication on the Original Theory of Change  17\. The rationale for the changes was to make the Project’s institutional arrangements compatible  with the new institutional structure introduced in the University Law and also to streamline the Project’s  RF and update indicators and financing to reflect implementation progress\. The changes did not directly  affect  the  Project’s  Theory  of  Change,  but  the  impulse  provided  by  the  passage  of  the  University  Law  helped further the Project’s PDO\.  II\. OUTCOME      A\. RELEVANCE OF PDOs  Assessment of Relevance of PDOs and Rating  18\. The Project’s PDO was relevant at preparation and continues to be relevant to the World Bank’s  FY17–FY21 Country Partnership Framework (CPF) for Peru\.3 Specifically, the CPF’s Objective 3, Facilitate  absorption  of  skills  and  technology  especially  by  small‐  and  medium‐size  business,  under  Pillar  1,  Productivity for Growth, highlights that technology absorption and managerial capacity of businesses in  Peru is handicapped by scarce skills, which should begin to be built at early stages\. The CPF elaborates  that demand for secondary and tertiary workers continues to outpace supply and that Peru needs to start  developing  skills  and  human  capital  from  the  early  stages  of  education,  including  both  primary  and  secondary\. It further mentions that the low and heterogeneous quality of education contributes to the  insufficient human capital in the workforce and that enhancing the supply of high‐quality graduates would  raise  firms’  ability  to  adopt  new  technologies  and  management  processes  and  hence  boost  their  productivity\. The PDO has given a prominent role to quality assurance in higher education as a way to  enhance market‐relevant skills and foster social mobility, productivity, and growth and is, therefore, fully  consistent with the CPF\. More importantly, in supporting its PDO, the Project played an instrumental and  catalytic role in bringing all the involved institutions to work together harmoniously toward a subsector  3 World Bank Country Partnership Framework for the Republic of Peru for the Period FY17–FY21, Report No\. 112299‐PE dated  April 4, 2017\.   Page 11 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) reform that has institutionalized a system of accreditation and quality assurance of higher education in  Peru\.   19\. The relevance of the Project’s PDO is rated High\.  B\. ACHIEVEMENT OF PDOs (EFFICACY)  Assessment of Achievement of Each Objective/Outcome  20\. The Project supported the development and implementation of the new Higher Education Quality  Model  approved  under  the  framework  of  the  National  Education  Project  2021,  which  provides  the  operating framework for all public entities in charge of higher education quality assurance and articulates  evaluation,  supervision,  licensing,  and  accreditation  processes\.  It  achieved  its  objective  of  improving  Peru’s  HEQAS  through  the  promotion  of  self‐evaluations  and  external  evaluations,  financing  of  improvement  plans,  and  the  provision  of  information,  exceeding  targets  for  the  PDO  indicators  (both  original and as restructured) defined to monitor progress\. In its Completion Report, MINEDU highlights  that during the five years of the Project’s implementation, Peru’s higher education system progressed  more  than  in  the  previous  30  years\.  The  country  now  has  in  place  a  solid  system  for  licensing  and  accreditation,  and  for  assisting  HEIs  in  achieving  these,  that  the  Project  helped  put  in  place\.  Progress  toward each of these inputs to the system is described separately in the following paragraphs\.   Improve Peru’s Higher Education Quality Assurance System through the Promotion of Self and External  Evaluations  PDO Indicator 1: Number of programs in the key disciplines4 and HEIs that have completed self‐evaluation  on the basis of CONEAU and CONEACES standards\. Target: 470 university programs, 401 IEES programs,  24 universities, and 205 IEESs  Revised PDO Indicator 1: Number of self‐evaluations completed in SAES\. Target: 1,100; Achieved: 1,383  self‐evaluations completed  PDO  Indicator  2:  Number  of  programs  in  the  key  disciplines  and  HEIs  that  have  completed  external  evaluation  on  the  basis  of  CONEAU  or  CONEACES  standards\.  Target:  63  university  programs,  89  IEES  programs, 5 universities, and 10 IEESs  Revised  PDO  Indicator  2:  Number  of  external  evaluations  finalized  as  part  of  the  process  for  higher  education quality assurance\. Target: 190; Achieved: 456 external evaluations finalized  21\. Improvements through the promotion of self‐evaluations and external evaluations were to be  measured  by  the  number  of  self‐evaluations  completed  in  SAES  and  by  the  number  of  external  evaluations finalized as part of the process for higher education quality assurance\.5 There was notable  achievement, exceeding expectations, in both the number of self‐evaluations and external evaluations  4 Key disciplines are (a) at the university level: Education, Medicine, Other Health Sciences, and Engineering and (b) at the IEES  level: Health, Education, and Technology\.  5 These are the revised PDO Indicators; the original indicators were revised only to consolidate targets among different categories  of institutions and to reflect institutional changes introduced in the University Law\.   Page 12 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) finalized\. The Project established a model that articulates service delivery through the use of computer  and  management  tools,  including  SAES\.  SAES  strengthened  the  implementation  of  project  activities,  facilitating access by HEIs to the services offered by the Project and improving the services’ management\.  SAES  allows  for  a  step‐by‐step  monitoring  and  guidance  of  the  self‐evaluation  process  toward  accreditation of programs and institutions\. For those HEIs that went through SAES, the Project offered  three different services: (a) technical assistance supported through an online platform, (b) financing of  improvement plans (see below), and (c) financing of external evaluations for accreditation purposes\. The  Project  provided  technical  assistance  to  135  HEIs,  of  which  20  were  universities  (out  of  50  public  universities) and 115 institutes (out of 370 public institutes)\. This supported 233 quality committees and  413 instances of technical assistance\. Utilizing SAES, the Project helped estimate the effects of technical  assistance by comparing initial indicators with final indicators and complementing this with information  from SAES’s  online  technical assistance platform  to evaluate each technical assistance service and  the  contributions of each consultant to HEI and to observe how HEI absorbed and applied the consultants’  recommendations\.  Financing  under  the  Fund  for  Quality  Enhancement  (FEC,  Fondo  de  Estímulo  de  la  Calidad)  was  provided  to  60  public  pedagogic  and  technological  institutes  that  required  external  evaluation  as  a  final  step  in  the  process  of  accreditation  of  SINEACE  (against  an  Intermediate  Results  Indicator [IRI] target of 54)\. By completion, 1,383 self‐evaluations had been carried out in SAES (1,015 for  programs and 368 for institutions) against a PDO target of 1,100, and 456 external evaluations (402 for  programs  and  54  institutional)  had  been  finalized  as  part  of  the  process  of  higher  education  quality  assurance (against a PDO target of 190)\. Nearly 80 percent of the institutes that received financing for  carrying out external evaluations under the Project obtained the necessary accreditation from SINEACE\.  Improve Peru’s Higher Education Quality Assurance System through the Financing of Improvement Plans  PDO Indicator 3: Number of program improvement plans, and institutional improvement plans that are  implemented  satisfactorily\.  Target:  6  Institutional  Improvement  Plans  (PMIs,  Plan  de  Mejora  Institucional), 60 Permanent Improvement Plan (Plan de Mejora Continua)  Revised Indicator 3:  Number of improvement plans for programs and institutions that are satisfactorily  implemented\. Target: 108; Achieved: 257 improvement plans satisfactorily implemented  22\. Improvements  through  the  financing  of  improvement  plans  were  to  be  measured  by  the  number  of  improvement  plans  for  programs  and  institutions  that  were  satisfactorily  implemented\.  Again,  there  was  notable  achievement,  exceeding  expectations,  in  this  area\.  Under  nine  calls  for  proposals, the FEC provided financing for the implementation of 257 improvement plans (against an IRI  target of 155) in all of Peru’s 25 regions\. All of these 257 plans have been satisfactorily completed (against  a PDO target of 108)\. Five of the calls for proposals were regular calls and four were targeted to address  specific  issues  mandated  by  the  University  Law  and  other  priority  sector  policies  as  follows:  (a)  digitalization of university research; (b) strengthening of technical institutes; (c) Employment Education  Program;  (d)  improvement  of  the  quality  of  Intercultural  Bilingual  Teacher  Training  Institutions  and  strengthening of the capacity of their teachers; and (e) strengthening of research capacity in universities  to  meet  the  basic  standards  for  licensing,  improving  research  management  capacity,  and  developing  research  competencies  for  new  researchers\.  SAES,  under  its  Call  for  Proposals  Management  System  (GPROC,  Sistema  de  Gestión  de  Convocatorias:  http://gproc\.procalidad\.gob\.pe/)  management  tool,  facilitated the formulation of plans and offered training, both face‐to‐face and virtual\.  Page 13 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 23\. Following their self‐evaluations through SAES, project HEIs were eligible to prepare proposals for  financing  under  the  FEC  for  their  self‐improvement  plans  that  would  subsequently  facilitate  their  accreditation following external evaluation\. HEIs were offered technical assistance to help prepare their  improvement plans that were later awarded through calls for proposals (para\. 22)\. The improvement plans  proposed a variety of activities, assistance, training, materials, and equipment that would be required to  prepare HEIs and their programs to achieve accreditation\. An example of what was included in a typical  HEI improvement plan is presented in annex 7\.  Improve Peru’s Higher Education Quality Assurance System through the Provision of Information  PDO Indicator 4: Number of users registered in the website of the Quality Assurance Information System  (SIAC)\. Target: 100,000  Revised  PDO  Indicator  4:  Number  of  visits  to  the  dissemination  websites  of  the  Higher  Education  Information System (SIES)\. Target: 300,000; Achieved: 785,033 visits to dissemination websites\.  24\. Improvements through the provision of information was to be measured by the number of visits  to  the  dissemination  websites  of  SIES\.  The  Project‐supported  SIES—an  integrated  knowledge  and  information system that organizes, consolidates, and makes available knowledge and information about  the higher education system (available careers, their cost, faculty, students, graduates’ performance in  the labor market, licensing, and accreditation results)—is designed and information is being collected to  feed the system with information provided by HEIs\. SAES, a module of SIES, has been functioning (see  above)  and  is  now  being  revised  to  integrate  the  requirements  for  managing  licensing  processes\.  SIES  incorporates information that was to be included in the Acredita Perú system and the Futuro Profesional  observatory, which were later replaced and expanded by MINEDU’s Ponte en Carrera, a new observatory  of  graduates’  performance  in  the  labor  market\.  By  completion,  SIES  had  been  visited  785,033  times,  against a PDO end target of 300,000\.  Additional Indicators 25\. The Project Coordination Unit (PCU,  Unidad Coordinadora de Proyecto) compiled and analyzed  additional indicators to measure the Project’s impact\. They compare the impact of HEIs that prepared  initial and final self‐evaluations and received project services through improvement plans with those that  did  not  receive  project  services\.  The  institutions  and  programs  that  received  project  support  to  improvement plans improved quality more than those that did not\. For universities, quality improved on  average 15\.91 percent for those that received support against −0\.62 percent for those that did not\. For  institutes,  quality  improved  on  average  39\.64  percent  for  those  that  received  support  against  15\.06  percent for those that did not\. For both universities and institutes, the improvement in quality was higher  for fields related to teacher education than to those related to health sciences and science and technology  and  engineering\.  The  Project  also  supported  80  percent  of  the  courses  or  institutions  that  achieved  accreditation under the Project and 44 percent of university career paths that achieved accreditation\.   Justification of Overall Efficacy Rating   26\. Overall,  the  Project’s  efficacy  was  High\.  Although  implementation  suffered  before  the  September 2016 restructuring, the Project was making important progress toward its PDO, as measured  Page 14 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) by Key Outcome Indicators\. Thereafter, progress accelerated at such a high pace that by completion, on  schedule, the Project had exceeded all the targets of its Outcome Indicators\.  C\. EFFICIENCY    Assessment of Efficiency and Rating  27\. The economic analysis prepared at appraisal was done within a 20‐year time horizon because  the benefits of accreditation could only be measured on a long‐term basis following the cumulative impact  on  the  labor  market  of  successive  cohorts  of  graduates  from  accredited  programs\.  The  calculation  of  economic  benefits  considered  the  following:  (a)  the  salary  increase  that  is  associated  with  the  higher  productivity  stemming  from  quality  improvements  in  higher  education;  (b)  the  increasing  number  of  graduates that would benefit from the wage premium; the flow of beneficiaries was determined by the  percentage  of  institutions  that  have  been  accredited,  with  additional  beneficiaries  each  year  being  a  percentage of the student population equal to the percentage of HEIs that have been accredited; (c) the  stock of beneficiaries was determined by all those who graduated from an accredited HEI five years after  accreditation or later; and (d) the wage premium corresponding to each beneficiary would depend on the  income quintile to which they would belong had the accreditation process not taken place, as well as on  the  number  of  years  of  accumulated  professional  experience\.  It  concluded  that  the  Project’s  cost‐ effectiveness when considering different alternatives offers internal rate of return (IRR) ranging from 30  to 42 percent, with private and social costs\.  28\. An  ex  post  economic  and  financial  analysis  of  the  Project  was  carried  out,  including  a  cost‐ benefit analysis and sensitivity analysis\. It only considers the direct benefits of the Project defined as the  estimated impact on student learning of the institutions and programs intervened by the Project\. It does  not take into account other indirect positive effects of the Project, such as  an increase in demand for  institutions  that improved quality and  the incentives to improve the quality  of competing institutions\.  Neither  does  it  consider  other  indirect  effects  of  the  licensing  system,  such  as  the  exit  of  low‐quality  universities from the market\.  29\. Calculating the economic benefits involves looking at four elements: (a) estimating the positive  impact of the program on quality improvements of HEIs, (b) assessing the magnitude of the impact of  these quality improvements on student learning and average wage increases, (c) taking into consideration  the dynamics of these effects along the economic analysis time horizon of 20 years; and (d) considering  the beneficiaries as those graduates from HEIs that benefited from the Project\. Consistent with the 20‐ year time horizon, it has been assumed that although the Project was launched in 2013, it gradually had  an impact on the student achievement of 16 cohorts of students of the intervened institutions, graduating  from 2017 until 2032\.   30\. Conservative assumptions have been made about the Project’s benefits, both in terms of the  impact on student learning and on the number of future beneficiaries\. Thus, it has been assumed that the  impact  on  relevant  learning  is  one‐fifth  of  the  impact  on  the  quality  of  institutions\.  Regarding  future  beneficiaries, it was assumed that the proportion of university graduates as a proportion of the population  (between 23 and 25 years) is constant, even though the enrollment rate in Peru is lower than in other  countries such as Chile and Argentina\.  Page 15 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 31\. In  this framework, the Project’s benefits would be  determined  by the salary increase that is  associated with the higher productivity stemming from quality improvements in higher education\. The  actual flow of beneficiaries would be determined by the coverage of the Project defined as the percentage  of programs and institutions that have been the recipient of at least one intervention by the Project\. The  interventions  considered  relevant  for  the  analysis  are  technical  assistance,  financing  of  improvement  plans, or external evaluations\. The stock of beneficiaries is determined by all those who graduated from  a public HEI, recipient of an intervention three years after the intervention or later, up until 2032\. Finally,  the wage premium to the beneficiaries is calculated according to a Mincerian estimation of the hourly  wages of HEI graduates\. The referred Mincerian equation considers the average return of every year of  education in a public HEI and the number of years of accumulated professional experience\.  32\. The  assessment  was  carried  out  considering  social  costs,  on  the  basis  of  wage  premia  after  project implementation (as compared to the non‐Project scenario), minus the total costs carried out by  the  Project\.  The  estimated  effect  of  the  Project  on  beneficiaries’  future  earnings  is  3\.2  percent  for  university graduates and 4\.9 percent for institute graduates\. The flow is discounted with a 10 percent  discount rate and the net present value (NPV) is calculated at year 2012, one year before the beginning  of the Project\. The point estimate of the IRR is 16\.7 percent and the NPV is US$45 million\. The sensitivity  analysis  considers  different  alternatives  for  the  Project’s  impact  on  future  earnings:  4\.8  percent  for  university graduates and 7\.4 percent for graduates from institutes in the optimistic scenario; 3\.2 percent  for  university  graduates  and  4\.9  percent  for  graduates  from  institutes  in  the  conservative  (central)  scenario; and 1\.6 percent for university graduates and 2\.5 percent for graduates from institutes in the  pessimistic scenario\.6 The IRR is 11\.4 percent in the pessimistic case\. For the Project to be profitable, its  impact on productivity‐enhancing learning outcomes and future salaries should be as low as 1\.3 percent  for university graduates on beneficiary institutions and 2 percent for institute graduates, as the IRR would  be just 10 percent\. For any impact on or above that figure, the Project’s IRR is higher than 10 percent,  rendering it profitable\. This demonstrates the high profitability of the Project\.   33\. The Project’s design and implementation were also efficient\. Due to improved administrative  and  procurement  processes  and  the  development  of  supporting  software  systems,  procurement  processes of inputs for several HEIs were consolidated, yielding more competitive proposals than would  have  resulted  for  procurement  of  single  activities\.  As  a  result,  the  FEC  was  able  to  hold  two  calls  for  proposals  beyond  the  original  Procurement  Plan\.  The  Project  was  completed  on  time  while  achieving  more  than  originally  included  in  its  scope\.  The  implementation  period  was  extended  by  one  year  to  accommodate new activities, but, despite initial delays, there were no delays in the completion of the  original  activities\.  As  a  result,  the  loan’s  March  2018  closing  date  was  not  extended,  and  it  closed  as  scheduled,  with  the  Project  exceeding  by  far  most  targets\.  The  final  allocation  of  loan  proceeds  in  comparison to the allocation estimated at appraisal is presented in table 1\.  34\. The Project’s efficiency is rated High based on its high expected returns and the efficiency with  which  it  was  implemented,  both  in  terms  of  cost  savings  due  to  efficient  procurement  and  its  timely  6  These  scenarios  are  dependent  on  the  elasticity  of  future  earnings  on  quality  improvements\.  It  assumed  to  be  0\.3  in  the  optimistic scenario, 0\.2 in the central scenario, and 0\.1 in the pessimistic\. As the impact of the project on quality improvements  has been higher in institutes, it also reflects on the expected increment of its graduates\.   Page 16 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) implementation, despite the challenges it faced in making its implementation arrangements compatible  to the new institutional reality\.  Table 1\. Estimated Versus Actual Total Project Costs  World Bank  Estimated at  Financing  Actual  Appraisal  (US$  Component  millions)  (US$  (US$  %  %  Estimated  Actual  millions)  millions)  1\. Development of Methods, Instruments,  3\.80  15  2\.30  9  2\.30  2\.27  Norms and Capacity for Quality Assurance  (formerly for Evaluation and Accreditation)  2\. Provision of Knowledge and Information  2\.49  9  1\.55  7  1\.55  1\.53  about Higher Education (formerly, Development  and Consolidation of a Higher Education Quality  Assurance Information System)  3\. Fund for Quality Enhancement   18\.71  76  21\.15  84  21\.15  21\.03  Total Project Costs  25  100  25  100  25  24\.83    D\. JUSTIFICATION OF OVERALL OUTCOME RATING  35\. The ICR Guidelines require that when the scope of a project has been restructured, a split rating  may be required\. The project restructuring expanded the Project’s scope in several areas (section I\.B) by  increasing its targets\. A split rating has not been prepared because the restructurings only consolidated  the  same  overall  end  target  for  the  first  three  PDO  indicators  and  only  reworded  PDO  Indicator  4  to  capture the same information\.   36\. With  a  high  relevance  of  objectives  throughout  implementation  and  at  completion,  a  high  efficacy upon completion based on the overachievement of originally defined PDO indicators (adjusted  only to reflect changes during implementation, but with the same original targets), overall high efficiency  as described earlier, and strong likelihood for sustainability of the HEQAS as it would be difficult to turn  back on accreditation and licensing (para\. 64), the Project’s overall outcome rating is Highly Satisfactory\.   E\. OTHER OUTCOMES AND IMPACTS (IF ANY)  Gender  37\. The  Project  did  not  have  a  specific  gender  objective,  but  it  is  estimated  that  49  percent  of  project  beneficiaries  are  female,  as  represented  by  the  approximate  share  of  female  students  in  the  overall higher education student population\.  Institutional Strengthening  38\. Peru  currently  has  four  institutions  comprising  the  HEQAS:  MINEDU,  the  National  Superintendence  of  Higher  University  Education  (SUNEDU,  Superintendencia  Nacional  de  Educación  Page 17 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Superior Universitaria), SINEACE, and EDUCATEC (Organism for Managing Institutes and Higher Education  Schools, Organismo de Gestión de Institutos y Escuelas de Educación Superior)—the equivalent of SUNEDU  for  non‐university  HEIs\.  The  Project  supported  the  strengthening  of  MINEDU’s  teams,  processes,  and  systems for the collection, organization, and dissemination of information on higher education; SINEACE  in the development of their models, processes, and tools for accreditation both in the old and new models;  and SUNEDU in the design of processes and models for licensing and its articulation with other quality  assurance processes\.   Mobilizing Private Sector Financing  39\. Not applicable\.  Poverty Reduction and Shared Prosperity  40\. The Project did not have a specific poverty reduction objective\. However, the eighth call for  proposals of improvement plans was targeted at teaching programs specializing in Intercultural Bilingual  Education  so  that  the  Project’s  benefits  would  extend  to  improving  the  quality  of  basic  education  for  indigenous people\. A total of 29 of 36 HEIs with Intercultural Bilingual Education in the country benefited  from  project‐financed  improvement  plans\.  These  29  HEIs  are  in  15  of  Peru’s  regions  that  offer  specialization in 11 different native languages\. Activities financed included the following: (a) libraries; (b)  language  laboratory  equipment  and  materials;  (c)  training  for  directors  and  teachers  in  management,  research, and intercultural teaching; and (d) acquisition of language software for seven languages to help  teachers and bilingual students strengthen their oral and writing skills\.  Other Unintended Outcomes and Impacts  41\. Not applicable\.  III\. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME    A\. KEY FACTORS DURING PREPARATION  42\. Government commitment\. The GoP was committed to increase the quality and relevance of  tertiary education following the approval of the National Education Project 2021 that resulted in the legal  creation of a HEQAS, SINEACE, in 2006\. The GoP had identified the strengthening of SINEACE as a critical  first step in improving the higher education system\. It had already begun a program of self‐evaluations  and external evaluations for accreditation and authorized EEFAs to carry out these external evaluations\.  As  of  end‐2011,  56  programs  had  completed  self‐evaluation,  of  which  19  had  requested  external  evaluation toward accreditation\. Four EEFAs had already been authorized and were functioning, while  eight were expected to be operating by 2014—a number considered sufficient to carry out the expected  evaluation workload\.   43\. Lessons of experience\. The Project’s design took into account lessons of experience from similar  World Bank‐financed operations in Argentina, Chile, and Colombia\. Specifically, these lessons addressed  (a) design of capacity building and institutional strengthening at the ministry and for higher education  Page 18 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) evaluation, accreditation, and certification; (b) the establishment of comprehensive academic information  systems with the objective of strengthening the quality of higher education systems and the need for data  to  include  a  critical  proportion  of  institutions  and  be  of  sufficiently  high  quality  to  ensure  that  the  information  system  is  useful  and  effective  for  the  decision‐making  process  of  prospective  students,  employers, HEI managers, and policy makers; and (c) the relevance of institutional design of incentive  funds for maximizing the effect of incentives in diversified systems of higher education\.   44\. Consistency with World Bank Country Partnership Strategy\. The Project was fully consistent with  the  World  Bank’s  Peru  Country  Partnership  Strategy  (CPS)  for  FY12–FY16  (Report  No\.  66187‐PE),  considered by the Executive Directors on March 13, 2012\. The CPS gave a prominent role to the GoP’s role  as a guarantor of quality assurance in higher education as a way to enhance market‐relevant skills and  foster social mobility, productivity, and growth\. It was fully aligned with the GoP’s three strategic, long‐ term goals, as reflected in the CPS: (a) economic growth, (b) social development, and (c) modernization  of institutions\.  45\. The Project built upon earlier technical assistance and grant‐funded support by the World Bank  and provided continuity to the findings of these programs\. A technical assistance program, Strengthening  Skills  and  Employability  in  Peru  (Report  No\.  61699‐PE),  had  provided  valuable  findings  about  the  constraints  on  workers’  entry  into  the  labor  market  and  policy  advice  to  address  them\.  It  not  only  underlined the need for an SIES but also recommended the strengthening of COSUSINEACE to enhance  quality in the higher education system\. A subsequent Policy Note,  Hacia una Educación Superior para la  Competitividad  (Towards  a  Higher  Education  System  for  Competitiveness),  that  focused  on  challenges  with  human  capital  made  a  similar  recommendation\.  Finally,  an  Institutional  Development  Fund  (IDF)  grant (TF096586, P117834) was under implementation with the objective of strengthening CONEAU and  CONEACES\. Under the grant, CONEAU and CONEACES have developed appropriate educational standards  and guidelines for accreditation of education, health, engineering and law, economics, and basic sciences  programs and developed guidelines for the Quality Enhancement Fund (earlier, the Stimulus Fund)\.  46\. Project implementation arrangements\.  In accordance with its mandate, COSUSINEACE was the  agency that would be responsible for the Project’s implementation\. It would do so (a) under the overall  oversight and coordination of the Project Steering Committee (CDP, Comité Directivo del Proyecto)—with  representation from CONEAU and CONEACES, MINEDU, and the Ministry of Economy and Finance; (b)  with the support of the PCU that would work as an independent unit responsible for the management,  coordination, supervision, monitoring and evaluation (M&E), and fiduciary management of the Project;  and (c) for the Quality Enhancement Fund, through a Fund Technical Commission (CTF, Comisión Técnica  del Fondo) responsible for selecting and approving the improvement plan proposals and assisting HEIs in  the  elaboration  and  then  M&E  of  those  plans\.  The  Project’s  Operational  Manual  detailed  these  institutional arrangements, as well as the activity flow, financial management (FM), accounting and audit,  procurement,  monitoring,  and  other  arrangements\.  Establishment  of  the  PCU  was  a  condition  of  loan  effectiveness, and staffing of the unit, the CTF, the CDP, and an External Advisory Council (CAE,  Comité  Asesor  Externo)—composed  of  an  international  group  of  six  recognized  authorities  in  their  respective  fields of scientific, professional, and management activity—was loan covenants to be complied no later  than 90 days after effectiveness\.  47\. Risks\.  The  World  Bank  rated  the  Project’s  risk  as  Moderate,  with  only  one  risk,  Implementing  Agency Capacity, as Substantial\. In retrospect, the main risk that affected the Project—that the GoP would  Page 19 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) introduce policy legislation that would further its objectives, yet, affect implementation for almost two  years (section III B)—was not, and probably could not have been, identified\.  B\. KEY FACTORS DURING IMPLEMENTATION  48\. The US$25 million loan for the Project was approved on December 4, 2012, signed on January 15,  2013, and became effective on May 8, 2013\. A project launch mission in September 2013, attended by  the  President  of  the  Republic  and  the  Minister  of  Education,  helped  jump‐start  the  Project’s  implementation\.  The  main  issue  that  affected  implementation  until  mid‐  to  end‐2016  was  the  GoP’s  further reforms that in the end served to reinforce the Project’s objectives and even expand its impact  and outcomes\.   49\. Government  commitment\.  While  the  GoP’s  commitment  to  the  Project’s  objective  itself  was  unwavering, its position with respect to the institutional framework for higher education, and hence, for  the  Project’s  design,  was  evolving  during  early  implementation\.  Slightly  more  than  one  year  after  effectiveness, MINEDU expressed concerns about the Project, desiring to take on a more direct role in  higher education\. At the time, the important policy debate centered on the then proposed University Law  (see paragraph 50)\. The law’s proponents highlighted the rapidly increasing cost of tertiary education and  the fact that the GoP was unable to hold universities accountable in terms of public finance and program  quality\.  Opponents  were  concerned  that  the  law  would  effectively  alter  or  even  eliminate  university  autonomy, something that Peruvian universities historically enjoyed\. The University Law was approved on  July 9, 2014\. With its approval, and subsequent changes to the structure and functioning of SINEACE, there  were concerns that the Project was no longer in full compliance with the Legal Agreement\. MINEDU’s new  Organizational Rulebook was officially published in January 2015, creating two new General Directorates  related to higher education: one for Productive, Technological, and Artistic Higher Education and the other  for  Higher  University  Education  that  includes  a  directorate  for  quality  assurance  and  development  policies\.  MINEDU  became  increasingly  involved  with  the  higher  education  sector  and  expressed  its  intention to become responsible for the Project’s implementation with a target date of June 30, 2015\.  With implementation delayed and all three components lagging behind the implementing agencies’ own  annual work plan, the Project’s implementation status in the World Bank’s Implementation Status and  Results  Report  (ISR),  previously  rated  Moderately  Satisfactory,  was  downgraded  to  Moderately  Unsatisfactory\. With the legal changes affecting project‐supported institutions, and MINEDU’s decision to  assume responsibility for the Project, the ministry temporarily suspended all project activities that were  not under Component 3, Fund for Quality Enhancement\.  50\. University Law\. The University Law eliminated SINEACE’s operating entities (CONEAU, CONEACES,  and  Ipeba),  which  comprised  COSUSINEACE  (the  agency  responsible  for  the  Project),  replaced  COSUSINEACE with an Ad Hoc Executive Board in charge of reforming SINEACE, created SUNEDU, which  is responsible for licensing and supervising the quality of universities, and mandated the creation of a new  accreditation body to replace SINEACE—although it fell short of actually creating the agency\. The Project’s  transfer to MINEDU was to ensure the Project’s core principles of retaining the independence of SINEACE  and maintaining the distance between the ministry and the actual process of institutional accreditation\.  However, by June 2015, the changes needed to the legal framework to transfer the Project to MINEDU  were not in place, and the GoP decided to proceed with a technical restructuring to ensure that the Project  was consistent with the institutional and legal framework of the University Law and its policy priorities\.  The Ad Hoc Executive Board—including MINEDU, SUNEDU, and the Project Implementation Unit—worked  Page 20 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) jointly on a revised RF proposal and revised descriptions of project components and subcomponents as  an input to the Project’s restructuring\. Project activities resumed at a good pace\. During this time, the  Project,  among  other  things,  provided  support  to  the  development  of  a  University  Quality  Assurance  Policy  that  was  published  on  September  26,  2015,  and  the  preparation  of  the  Institutional  Quality  Assurance  Strengthening  Program  of  the  12  universities  designated  as  emblematic\.  The  ISR’s  Implementation Progress rating was upgraded to Moderately Satisfactory, but its Development Objective  rating  was  only  upgraded  to  Satisfactory  after  the  Project  restructuring  that  formally  reflected  these  modifications was approved in September 2016 (section I)\.   51\. Midterm  Review  (MTR)\.  The  Project’s  MTR  was  postponed  until  October  2016,  given  earlier  implementation delays\. The World Bank’s implementation support team had established three milestones  to upgrade the ISR’s Development Objective rating: (a) disbursement reached 15 percent, (b) restructuring  was completed, and (c) there was good progress toward revised 2015 targets in the Results Matrix\. These  were  reviewed  during  the  MTR,  and  both  the  Implementation  Progress  and  Development  Objective  ratings were  upgraded to  Satisfactory\.  MINEDU decided  not  to transfer responsibility for the Project’s  implementation  from  SINEACE  to  the  ministry\.  The  MTR  reported  that  performance  had  improved  significantly  as  (a)  the  authorities  and  technical  teams  of  the  main  actors  in  the  quality  improvement  system had come to a better understanding and greater alignment among themselves, (b) the Project  Implementation Unit’s implementing capacity had been enhanced as a result of a steep learning curve,  and  (c)  participation  of  HEIs  in  all  calls  for  proposals  increased  substantially,  as  had  the  quality  of  the  proposals\.  By  early‐2017,  substantial  progress  had  been  made  toward  achieving  and,  in  many  cases,  exceeding targets\.   52\. Financing  of  improvement  plans\.  Improvement  plans  were  approved  under  nine  calls  for  proposals, five of which were general or open to all HEIs, while the four ‘focused’ calls for proposals were  targeted  at  HEIs  offering  specific  programs  (para\.  22)\.  After  the  first  three  calls  for  proposals  of  improvement plans it became evident that the quality of the proposals put forward by HEIs was low as  only one out of seven proposals was approved for financing\. Adjustments were made for the fourth call,  with strengthened support and capacity building for the design of the improvement plans, along with a  support tool that guides the step‐by‐step process and includes catalogues to facilitate the development  of terms of reference and technical specifications\. This led to an increase in success rates, with half of the  proposals presented qualifying for funding and a significantly higher quality of the plans approved in the  following calls\.   IV\. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME    A\. QUALITY OF MONITORING AND EVALUATION (M&E)  M&E Design  53\. The PDO and the activities that the Project supported were designed to build strong capacity for  self‐monitoring and external monitoring in Peru’s higher education system\. The Project’s progress toward  the achievement of its PDO in this area is described in detail in section II B\. This section evaluates the  quality of the Project’s monitoring design, implementation, and utilization\.   Page 21 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 54\. Institutional  arrangements  for  M&E\.  The  appraisal  mission  found  that  there  was  sufficient  capacity  for  M&E  within  COSUSINEACE,  both  with  regard  to  its  own  activities  (as  evidenced  by  the  successful implementation of the IDF grant by CONEAU and CONEACES) and HEIs and the higher education  system at large\. The PCU’s Planning, Budgeting, Monitoring and Evaluation Unit would be responsible for  gathering,  processing,  and  analyzing  data  on  the  progress  toward  the  PDO  and  IRI  targets\.  Ultimate  responsibility  for  M&E  would  lie  within  the  CDP\.  The  CAE,  composed  of  an  international  group  of  six  recognized  authorities  (both  Peruvian  and  international)  in  their  respective  fields  of  scientific,  professional, and management activities, would perform a yearly evaluation of the Project, including at  midterm and upon completion\.  55\. RF\. The Project financed mostly institutional strengthening activities over a short implementation  period, and its RF, including the IRIs and PDO indicators, was designed to reflect this\. The PDO indicators  and  the  IRIs  were  sequenced  to  match  the  Project’s  implementation  timetable  to  keep  activities  on  schedule toward the achievement of its PDO\.  M&E Implementation  56\. M&E  was  implemented  routinely,  and  without  issues,  and  the  structure  of  the  Project’s  RF  provided a well‐defined yet flexible framework to monitor implementation progress\. The implementation  teams  adjusted  the  RF  in  the  September  2016  restructuring  both  to  reflect  modifications  required  to  ensure compatibility with the new University Law, MINEDU’s new Organizational Rulebook, the University  Quality  Assurance  Policy,  and  the  Institutional  Quality  Assurance  Strengthening  Program  of  the  12  universities designated as emblematic and to reflect progress and expectations of future implementation\.  In addition, the PCU monitored other complementary indicators that helped in monitoring the Project’s  progress toward its PDO, as mentioned in section II B\.  M&E Utilization  57\. The Project’s M&E was utilized routinely as input to monitor the Project’s progress and issues that  surfaced during implementation\. For example, when the first three calls for proposals of improvement  plans were conducted, only 10 percent of eligible HEIs presented proposals, and of those presented, only  one in seven was approved\. This was found to be due to the poor quality of the proposals, due in part to  the lack of a clear format or template that would aid in preparing the proposals\. In response, the Project  carried  out  a  radio  communications  campaign  to  disseminate  the  calls  for  proposals,  implemented  a  program to strengthen the HEIs’ quality committees in preparing improvement plans, and developed a  computerized information tool to assist in developing improvement plans, associating quality models with  the methodology and logical framework to develop plans, associating the results of self‐evaluations with  improvement plans\. With these additional actions, in subsequent calls for proposals, not only did HEIs in  all regions participate but the quality of proposals improved and one in every two improvement plans was  approved\.  Justification of Overall Rating of Quality of M&E  58\. The  overall  quality  of  M&E  is  rated  High,  based  on  its  good,  streamlined  design;  the  timely  adjustment of the RF to reflect institutional changes and implementation realities; and its utilization to  provide feedback and adjustment in implementation\.   Page 22 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) B\. ENVIRONMENTAL SAFEGUARD, SOCIAL SAFEGUARD, AND FIDUCIARY COMPLIANCE  59\. Safeguards\. The Project was classified as Category C for environmental purposes as it would not  finance new construction or civil works\. HEI improvement plans were expected to include some routine  maintenance  and  refurbishment  of  existing  infrastructure  that  would  be  subject  to  local  legislation  concerning worker health and safety and disposal of materials\. However, the Indigenous Peoples Policy  (OP/BP 4\.10) was triggered as the Project had a nationwide scope and would affect HEIs that enrolled  indigenous students\. During preparation, an IPPF was prepared, consulted, and disclosed, as required\.  The IPPF provided guidance and a menu of options for HEIs implementing a PMI, to address barriers and  improve the quality and effectiveness of higher education for indigenous students\. The IPPFs were to be  prepared  and  consulted  for  those  HEIs  that  had  more  than  5  percent  indigenous  peoples  within  their  student body and that were selected for the implementation of PMI\. Nevertheless, through late 2016,  none  of  the  HEI  improvement  plans  had  addressed  the  issue  of  indigenous  peoples\.  At  the  MTR,  an  agreement was reached that the eighth call for proposals of improvement plans would be targeted at  teaching programs specializing in Intercultural Bilingual  Education so  that the Project’s benefits would  extend to improving the quality of basic education for indigenous people; 29 of the 33 institutions that  presented proposals were awarded funding with this focus\. A study was carried out under the Project to  update  the reality  that indigenous students face in HEIs, the  legal framework that  protects them, and  updated information on the programs in which Indigenous students are enrolled\.   60\. FM\. The Project’s FM risk was rated Substantial\. This was because CONUSINEACE had not become  completely operational at appraisal and the Project’s design required management of a large number of  small  transactions  and  interaction  with  HEIs  through  the  country  for  financing  and  implementation  of  PMIs\. The Loan Agreement specified several aspects that needed to be addressed to adequately support  project implementation, including the recruitment of FM staff, the design and implementation of a project  information system, and completion of actions for the PCU to become fully operational with adequate  budget\. Project funding for 2013 had not been included formally in the budget (both for World Bank and  Government funding)\. As budget from loan proceeds became available in October 2013, funding for the  PCU  was  financed  from  loan  proceeds  through  the  end  of  2013  until  Government  funding  became  available  in  January  2014\.  The  MTR  concluded  that  the  Project’s  FM  provided  sound  reporting  and  controls  and  the  Project’s  financial  records  adequately  reflected  project  expenditures\.  The  latest  ISR  upgraded  the  FM  rating  to  Satisfactory  and  concluded  that  the  Project’s  FM  arrangements  (FM  staffing/personnel, budgeting, accounting, internal controls, funds flow, financial reporting, and auditing)  were adhering to the standards required by the World Bank\.   61\. Procurement\. The Project’s procurement risk was rated Substantial\. During preparation, the PCU  prepared  an  Operational  Manual  that  provided  detailed  procurement  information  for  implementation  including the procurement methods to be followed, a delineation of responsibilities for different types of  procurement, filing procedures, and management of the Project’s Procurement Plan\. The MTR concluded  that  procurement  and  contracting  processes  were  adequately  reflected  in  the  electronic  procurement  system  and  made  minor  suggestions  regarding  updating  information  in  the  system\.  The  latest  ISR  upgraded the procurement rating to Satisfactory and concluded that the Project’s procurement processes  had all been completed and the PCU was working to manage and close the goods and services contracts  signed\.   Page 23 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) C\. BANK PERFORMANCE  Quality at Entry  62\. The  World  Bank’s  performance  in  ensuring  Quality  at  Entry  is  rated  Satisfactory\.  The  World  Bank’s  task  managers  (there  were  two  co‐task  managers,  one  of  whom  had  been  involved  in  the  preparation and supervision of several education projects in the country) had a clear definition of the  GoP’s  priorities  and  plans  which  were  reflected  in  the  PDOs  and  the  design  of  the  Project’s  initial  institutional  arrangements  and  activities\.  The  Project’s  RF  was  concise,  and  the  IRIs  were  defined  to  measure progress toward the PDO indicators\. The team effectively applied lessons of experience from  similar projects in other countries in Latin America\. The Project was reasonable in terms of the activities  it included and the objectives which it strived to achieve, within its given implementation period\. Despite  initial delays due to the changes in the Project’s policy and institutional framework—which strengthened  the basis for the Project—its activities could be completed within the original implementation period\.   Quality of Supervision  63\. The  World  Bank’s  Quality  of  Supervision  is  rated  Highly  Satisfactory\.  The  World  Bank’s  implementation support team had in place all the characteristics that help promote excellent outcomes:  a well‐designed project at entry, continuity in task management from preparation through completion,  and an in‐country implementation support team, all of which facilitated hands‐on and expeditious support  when  the  Project’s  external  environment  changed\.  Implementation  support  maintained  open,  fluid,  trusting,  and  continuous  dialogue  with  the  GoP  teams\.  The  team  was  pragmatic,  results‐focused,  effective, and constantly on top of emerging issues\. When it became clear that the Project’s institutional  framework would be affected by the passage of the University Law and MINEDU’s new Organizational  Rulebook, the team remained open minded and willing to work to adjust the Project to reflect the new  policy  framework,  legal  and  institutional  realities  and  acted  fast  to  adapt  the  Project  to  its  new  institutional realities\. The team was instrumental in helping address the hurdles the Project faced and  sought practical solutions to advance a project restructuring to keep implementation on track, even when  a  definitive  position  had  not  been  reached  on  the  institutional  arrangements  for  determining  the  accreditation  body  to  replace  SINEACE\.  The  project  restructuring  was  processed  expeditiously  and  to  address  uncertainties  regarding  institutional  arrangement  it  was  processed  in  two  phases,  with  first  a  technical restructuring and then a complete one incorporating institutional changes\. The Project’s ISRs  were  timely,  clear,  and  results‐focused  and  provided  a  strong  basis  for  understanding  the  issues  the  Project’s implementation was facing and the progress it was making toward its PDO\.  Justification of Overall Rating of Bank Performance  64\. Overall Bank Performance is rated Highly Satisfactory, based on the ratings for Quality at Entry  and Quality of Supervision and the Project’s Highly Satisfactory outcome rating\. The World Bank’s Quality  of  Supervision,  as  described  earlier,  was  no  doubt  a  strong  influencing  factor  on  the  Project’s  Highly  Satisfactory outcome\.  Page 24 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) D\. RISK TO DEVELOPMENT OUTCOME  65\. The Risk to Development Outcome is considered Moderate\. It is unquestionable that the Project  helped improved Peru’s HEQAS\. In the process, several of these improvements have been anchored in  legislation,  including  the  University  Law  and  the  University  Quality  Assurance  Policy\.  The  main  risk  to  development outcome relates to the fact that currently there is no one authority that oversees the whole  the HEQAS\. While this may present the risk of HEIs having difficulties in following processes established  under the Project, there is no doubt the there is little if any room for turning back on accreditation and  licensing  and  this  strongly  supports  the  sustainability  of  the  HEQAS\.  A  proposed  Inter‐American  Development Bank project will include a fund like the FEC but focused on technical institutes\. And HEIs  on their own are internalizing the use of improvement plans in their routine business models\. Finally, the  World Bank is supporting further reforms in primary and secondary education under the ongoing Boosting  Human  Capital  and  Productivity  Development  Policy  Financing  with  a  Deferred  Drawdown  Option7  to  support measures targeting key productivity constraints by enhancing, among other things, the education  policy  framework  to  enable  better  quality  of  skills  through  the  following  expected  result  that  directly  reinforces the Project’s objectives: the number of universities and university programs under revision to  be licensed increases from 0 in 2014 to 20 in 2017\.   V\. LESSONS LEARNED AND RECOMMENDATIONS  66\. When  a  government  assigns  priority  for  a  policy  reform,  in  this  case  quality  assurance,  accreditation, and licensing, a project can help cement the institutional and legal foundations for that  reform, even though those foundations are not in place during preparation and approval\.  At the time  of loan approval, the GoP was proceeding with processes and products for HEIs to carry out evaluations,  but without a formal legal framework to sustain these\. The Project, and the implementation support that  it  provided,  was  instrumental,  through  dialogue,  in  highlighting  the  importance  of  these  reforms,  in  grounding these in legal terms and bringing the various actors to the table, especially during the MTR, to  agree  upon  institutional  responsibilities  for  the  new  processes\.  In  this  sense,  while  the  permanent  institutional and legal foundations were not completely in place at approval, the Project was catalytic in  bringing these about\. These are now in place for the long term and, as such, HEIs now see the processes  promoted by the Project as a new way of doing business for the long term\.   ï‚ Even intensified support for policy reform can affect implementation, at least initially\. The  Project was seriously affected by the institutional and other changes imposed by the passage  of the University Law, and implementation stalled\. Nevertheless, the project team embraced  the policy reform as supporting project objectives and worked closely with the GoP to bring  the Project in line with the requirements of the new legislation\. Despite occasional less than  positive project ratings, the timely restructurings allowed the Project to flourish and not only  achieve but exceed its objectives\.  ï‚ Timely restructurings, even when all the arrangements have not been defined, can help a  project make progress\. The first project restructuring, in April 2016, was processed when  7 World Bank, Program Document, Peru Boosting Human Capital and Productivity Development Policy Financing with Deferred  Drawdown Option, Report No\. 99251‐PE, dated January 16, 2016\.  Page 25 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) the  institutional  arrangements  for  implementation  had  not  been  defined\.  Still,  the  team  adjusted the Project’s RF and other modifications, leaving the definition of its institutional  arrangements  for  a  subsequent  restructuring  in  September  2016\.  This  allowed  implementation to continue, and make progress, while further discussions and agreements  on  institutional  arrangements  progressed\.  Timely,  and  at  times  incomplete,  restructuring  can make sense if it provides a framework for implementation to move forward\.  ï‚ Preparation  of  improvement  plans,  or  similar  proposals  prepared  by  executing  entities  without experience, requires up‐front guidance/instructions\. Under the Project, the initial  rounds of implementation plans lacked quality, and a large share were not approved as a  result\.  Strong  M&E  allowed  the  project  unit  to  identify  the  issues  and  prepare  a  set  of  support and  template instruments to  help  the units better  prepare their implementation  plans  in  accordance  with  expectations\.  The  technical  support,  coupled  with  a  simple  computerized  application,  was  instrumental  in  helping  the  units  prepare  implementation  plans addressing the issues identified in their self‐evaluations\.   ï‚ Sustainability  requires  up‐front  attention  and  definition\.  The  Project  counted  upon  the  support  and  implementation  by  a  self‐standing  Higher  Education  Quality  Improvement  Project  (PROCALIDAD, Proyecto Mejoramiento de la Calidad de la Educación Superior) unit,  within  the  ministry,  but  financed  to  coordinate  project  activities\.  The  PROCALIDAD  unit  acquired invaluable experience and manages important processes\. Several project activities  will be entrusted to different units responsible for these activities both within and outside  of the ministry, but it is still unclear where the overall coordination function will be carried  out\. While the project team began discussing this issue early on, decision in this regard is  still pending\.  \.  Page 26 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) ANNEX 1\. RESULTS FRAMEWORK AND KEY OUTPUTS               A\. RESULTS INDICATORS    A\.1 PDO Indicators            Objective/Outcome: Improve Peru's Higher Education Quality Assurance System through the Promotion of Self and External Evaluations\.  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  PDO indicator 1\.Number of  Number  0\.00  1100\.00  1100\.00  1383\.00  self‐evaluations completed in  SAES\.    31‐Jul‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018    Comments (achievements against targets): Achieved 125%      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  PDO indicator 2\.Number of  Number  0\.00  190\.00  190\.00  456\.00  external evaluations finalized  as part of the process for    31‐Jul‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018  higher education quality  assurance\.    Page 27 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 )   Comments (achievements against targets): Achieved 240%        Objective/Outcome: Improve Peru's Higher Education Quality Assurance System through the Financing of Improvement Plans\.  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  PDO indicator 3\.Number of  Number  0\.00  108\.00  108\.00  257\.00  improvement plans for  programs and institutions    31‐Jul‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018  that are satisfactorily  implemented\.    Comments (achievements against targets): Achieved 238%        Objective/Outcome: Improve Peru's Higher Education Quality Assurance System through the Provision of Information\.  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  PDO indicator 4\.Number of  Number  0\.00  300000\.00  300000\.00  785033\.00  visits to the dissemination  websites of the Higher    31‐Jul‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018  Education Information  System (SIES)\.    Comments (achievements against targets): Achieved 262%        Page 28 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) A\.2 Intermediate Results Indicators        Component: Component One: Development of Methods, Instruments, Norms and Capacity for Quality Assurance  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  IRI 1\.Development and  Text  Not started  Model implemented  Model implemented  Model implemented  implementation of the new  Higher Education Quality    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018  Model\.    Comments (achievements against targets): Fully achieved\. After the approval of the new model, SUNEDU has advanced with the licensing of 30  universities (8 public)\. Under the new model, SINEACE has already accredited a university program (pending Resolution), and there are also 5 institute  programs and 17 of universities that have already undergone external evaluation\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  IRI 2\.Number of HEIs  Number  0\.00  350\.00  350\.00  411\.00  benefited from at least one  quality improvement    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018  intervention\.    Comments (achievements against targets): Achieved at 117%        Component: Component Two: \. Provision of Knowledge and Information about Higher Education (formerly, Development and Consolidation of a Higher  Education Quality Assurance Information System)  Indicator Name  Unit of Measure  Baseline  Original Target  Formally Revised   Actual Achieved at  Page 29 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 )   Target  Completion  IRI 3\.Development of a  Text  Not started  SIES fully functional  SIES fully functional  The SIES works with  Higher Education  and responsive\.  and responsive\.  the Graduate  Information System (SIES)\.  Observatory and  already has an data  collection system  (SIRIES)\. The system is  implemented in 15  institutes (SISEI) and in  20 careers in 11  universities (SISEU)\.    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018    Comments (achievements against targets): Fully achieved\.      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  IRI 4\.Development of an  Text  Not started  The module is used to  The module is used to  SAES Licensing has  information module for  manage licensing  manage licensing  been designed\.  higher education quality  processes  processes  SUNEDU has  assurance (SAES)\.  expressed the will to  administer it\.    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018    Comments (achievements against targets): Partially achieved\. The SAES‐L is developed and ready to be used\. It was about to be transferred directly to  HEIs as planned when SUNEDU asked to evaluate the tool in the interest of being the host\. The transfer is still pending\.      Page 30 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 )   Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  IRI 5\.Number of studies  Number  0\.00  5\.00  5\.00  6\.00  published\.    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018    Comments (achievements against targets): Achieved 120%        Component: Component Three: Fund for Quality Enhancement  Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  IRI 6\.Number of external  Number  0\.00  54\.00  54\.00  60\.00  evaluations financed by the  FEC\.    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018    Comments (achievements against targets): Achieved 111%      Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  IRI 7\.Number of  Number  0\.00  155\.00  155\.00  257\.00  improvement plans financed  by the FEC\.    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018    Comments (achievements against targets): Aciheved 166%      Page 31 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 )   Formally Revised   Actual Achieved at  Indicator Name  Unit of Measure  Baseline  Original Target  Target  Completion  Direct project beneficiaries  Number  0\.00  200000\.00  200000\.00  210660\.00    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018    Female beneficiaries  Percentage  49\.00  49\.00  49\.00  49\.00    04‐Oct‐2012  31‐Dec‐2017  31‐Dec‐2017  23‐Mar‐2018      Comments (achievements against targets): Achieved 105%                     Page 32 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) B\. KEY OUTPUTS BY COMPONENT    Objective/Outcome 1: Improve Peru’s Higher Education Quality Assurance System through the Promotion of Self and External Evaluations  1\. Number of self‐evaluations completed in SAES\.  Outcome Indicators  2\. Number of external evaluations finalized as part of the process for  higher education quality assurance\.  1\. Development and implementation of the new Higher Education  Quality Model\.  2\. Number of HEIs benefited from at least one quality improvement  Intermediate Results Indicators  intervention\.  3\. Development of an information module for higher education  quality assurance (SAES)\.  1\. New Higher Education Quality Model designed\.  2\. New Higher Education Quality Model approved\.  3\. New Higher Education Quality Model implemented\.  4\. Training provided to HEI and Program Quality Committees to  disseminate the standards established in the model for higher  Key Outputs by Component  education quality\.  (linked to the achievement of the Objective/Outcome 1)  5\. Technical assistance provided to HEI and Program Quality  Committees to carry out self‐evaluations according to the standards  established in the model for higher education quality\.  6\. Technical assistance and training provided on the use of SAES\.  7\. Monitoring, through SAES, of progress made by HEIs and programs  in their self‐evaluation process\.  Objective/Outcome 2: Improve Peru’s Higher Education Quality Assurance System through the Financing of Improvement Plans  1\. Number of improvement plans for programs and institutions that   Outcome Indicators  are satisfactorily implemented\.  Intermediate Results Indicators  1\. Number of external evaluations financed by the FEC\.  Page 33 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 2\. Number of improvement plans financed by the FEC\.  1\. Design calls for proposals\.  2\. Provide technical assistance in the preparation of proposals\.  Key Outputs by Component  3\. Award funds to qualifying proposals\.  (linked to the achievement of the Objective/Outcome 2)  4\. Implement activities and procure goods to carry out award winning  plans\.  5\. Review outputs and verify implementation on the ground\.  Objective/Outcome 3: Improve Peru’s Higher Education Quality Assurance System through the Provision of Information  1\. Number of visits to the dissemination websites of the Higher  Outcome Indicators  Education Information System (SIES)\.  1\. Development of a Higher Education Information System (SIES)\.  Intermediate Results Indicators  2\. Number of studies published\.  1\. Design and implementation of the Graduate Observatory\.  2\. Preliminary design of the integrated system (SIES)\.  3\. Update of data and indicators in the Graduate Observatory\.  4\. Final design of SIES\.  5\. SIES fully functional and responsive\.  Key Outputs by Component  6\. The module has some preliminary design\.  (linked to the achievement of the Objective/Outcome 2)  7\. The technical design is finalized, and the module is used for  managing self‐evaluations\.  8\. The module is revised to integrate the requirements for managing  licensing processes\.  9\. The module is used to manage licensing processes\.      Page 34 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 )   ANNEX 2\. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION    A\. TASK TEAM MEMBERS    Name  Role  Preparation  Marcelo Becerra  Task Team Leader  Michael Crawford  Team Member  Omar Arias  Sector Leader  Janet Entwistle  Senior Operations Officer  Maria Elena Paz Gutzalenko  Team Member  Guillermo Toral  Junior Professional Associate  Mariana Montiel  Senior Counsel  Francisco Rodriguez  Procurement Specialist  Selene del Rocio La Vera  Procurement Specialist  Nelly Ikeda  FM Analyst  Kristina Bishop  Social Safeguards Specialist  Tatiana de Abreu Souza  Finance Analyst  Supervision/ICR  Ines Kudo and Dandan Chen  Task Team Leaders  Juan Carlos Martell Rivera and Selene del Rocio La Vera  Procurement Specialists  Nelly Ikeda  FM Specialist  Patricia De la Fuente Hoyes  Team Member  Raul Tolmos  Environmental Safeguards Specialist  Rory Narvaez  Team Member  Javier Botero Alvarez  Team Member  Maria Elena Paz Gutzalenko  Team Member  Sara Burga  Team Member  Daniel F\. Barco Rondan  Economista  Carlos Tomas Perez‐Brito  Social Safeguards Specialist     Luciana Beatriz Velarde Arrisueno  Team Member    B\. STAFF TIME AND COST  Staff Time and Cost  Stage of Project Cycle  No\. of staff weeks  US$ (including travel and consultant costs)  Preparation  FY10  \.400  22,504\.85  FY11  28\.061  161,827\.34  Page 35 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) FY12  38\.340  185,195\.17  FY13  21\.578  119,812\.65  Total  88\.38  489,340\.01    Supervision/ICR  FY13  15\.967  73,650\.06  FY14  33\.425  147,892\.25  FY15  26\.139  129,831\.91  FY16  31\.365  93,618\.87  FY17  28\.898  131,826\.04  FY18  11\.307  75,707\.30  FY19  3\.457  15,376\.41  Total  150\.56  667,902\.84             Page 36 of 70  The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) ANNEX 3\. PROJECT COST BY COMPONENT    Amount at  Actual at Project  Percentage of  Components8  Approval  Closing (US$,  Approval (US$,  (US$, millions)  millions)  millions)  Component 1: Development of  3\.80  2\.30  2\.27  Methods, Instruments, Norms  and Capacity for Quality  Assurance  Component 2: Provision of  2\.49  1\.55  1\.53  Knowledge and Information  about Higher Education  Component 3: Fund for Quality  18\.71  21\.15  21\.03  Enhancement  Total  25\.00  25\.00  24\.83    Prior the approved project restructuring from September 2016   Proposed Cost  Proposed Component Name  Current Cost  Action under  Current Component Name  (US$M)  (under restructuring)  (US$M)  restructuring  (under restructuring)  Component 1: Development of  Component 1: Development of  Methods, Instruments, Norms  Methods, Instruments, Norms  3\.80  2\.30  Revised  and Capacity for Evaluation and  and Capacity for Quality  Accreditation  Assurance  Component 2: Development  Component 2: Provision of  and Consolidation of a Higher  knowledge and information  2\.49  1\.55  Revised  Education Quality Assurance  about Higher Education  Information System  Component 3: Fund for Quality    18\.71  21\.15  Revised  Enhancement    Total:   25\.00  25\.00        8 Components were revised on September 2016\. See paragraph 15 of the main text\.  Page 37 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) ANNEX 4\. EFFICIENCY ANALYSIS  Summary  1\. This  annex  focuses  on  the  economic  rationale,  estimated  costs,  and  projected  benefits  of  the  Project’s activity to support the accreditation and licensing process of HEIs\. First, indicators of the impact  on the quality of HEIs by the Project and its coverage are included in the analysis\. Second, primary and  secondary data as well as assumptions were taken to estimate the benefits of the Project, while the costs  were assessed through reports by PROCALIDAD\. Third, a cost‐benefit analysis was performed based on  the projected impacts of the interventions of the Project\. Finally, a sensitivity analysis was conducted to  corroborate the robustness of the results\.   Rationale  2\. The goal of the analysis is to estimate the long‐term effect of the Project in increasing productivity  and salaries of those benefited by the interventions of the Project\. In doing so, we also expect that the  Project will contribute to lower Peru’s wage dispersion in the lifelong wage profile of higher education  graduates,  as  expressed  in  figure  4\.1\.  The  Chilean  economy  is  taken  as  the  reference  because  it  is  a  regional leader in higher education quality (with about 90 percent of its enrollment focusing on accredited  HEIs)\. For university programs, the rate of average wage differential between the first and the last decile,  up to five years after graduation, is 3\.9 in Chile but it goes up to 11\.4 in Peru (for non‐university programs  it is 3\.7 and 10\.6, respectively)\. This high dispersion might be reflecting an ample difference of quality  between HEIs and could be signaling a low or even negative rate of return for investment in education in  those institutions at the lower end of the quality distribution\.9     Figure 4\.1\. Effects of Higher Education Quality Improvement on the Dispersion of Wages as They Relate to  Professional Experience  Note:  Relationship  between  income  (vertical  axis)  and  experience  (horizontal  axes):  Peru  shows  a  larger  dispersion  of  income  trajectories than the reference economy\.  Source: SINEACE\. 2012\. Mejoramiento de la calidad de la educación superior (PROCALIDAD)\. SNIP 140673\. Nivel de Factibilidad\.  9 Even when the expected impact of the Project might include a reduction in the dispersion of salaries of HEIs graduates, it is still  too soon to show that in the actual data, as the expected beneficiaries of the Project will enter the labor market from 2018,  onwards, according to the analysis\.   Page 38 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 3\. The economic analysis has been done within a 20‐year time horizon because the benefits of the  interventions by PROCALIDAD can be only measured on a long‐term basis, when the impact on the labor  market  of  successive  cohorts  of  graduates  from  intervened  programs  takes  place\.  Calculating  the  economic benefits involves looking at four elements: (a) estimating the positive impact of the Project on  quality improvements of HEIs, (b) assessing the magnitude of the impact of these quality improvements  on  student  learning  and  average  wage  increases,  (c)  taking  into  consideration  the  dynamics  of  these  effects along the economic analysis’ time horizon of 20 years, and  (d) considering  the  beneficiaries as  those graduates from HEIs that benefited from the Project\.  (a) Changes in the quality of HEIs are measured through the differences in the score of self‐ evaluations at the beginning and at the end of a quality‐enhancing process\. It is observed  that, over the project implementation, the average score has increased significantly more in  HEIs  and  programs  that  were  intervened  compared  to  those  that  did  not  receive  any  additional service as shown in table 4\.1\.    Table 4\.1\. Effect of the Project on Quality of Intervened HEIsa    Universities  Institutes  (%)  (%)  With PROCALIDAD intervention  15\.9  39\.6  Without PROCALIDAD intervention  −0\.6  15\.1  b Difference  15\.9   24\.6  Source: PROCALIDAD\.  Note: a\. Measured as the difference in the score of the self‐evaluations at the beginning and at the end of  the accreditation process\. The self‐evaluations were designed and made available to HEIs by PROCALIDAD\.  b\. It is assumed that the increase in quality in non‐intervened universities is zero\.  (b) Several studies find a sizable effect of the quality of HEIs on students’ earnings, although  measures of quality are diverse and not directly comparable\. For the United States, Zhang  (2005) finds that “graduates from high quality institutions—both public and private—enjoy  a nearly 20% earnings premium over those from low‐quality public colleges\.”10 For France,  Canaan and Mouganie (2015) find that marginally passing the French Baccalaureate exam  increases the likelihood of attending a  higher  quality university  by 15 percent and future  earnings  by  13\.6  percent\.11  For  the  United  Kingdom,  Chevalier  (2014)  finds  that  “moving  from an institution in the 3rd quality quartile to a top‐quality institution is associated with a  7 percent increase in earnings\.”12 Although, the measures of quality used in these studies  are  not  directly  comparable  between  them  and  with  the  one  used  by  the  Project,  they  suggest a large effect of quality on future earnings\. Taking these studies as a reference, it  will be assumed that a fifth of the quality improvements generated by the Project translate  into  higher  productivity,  rendering  higher  future  earnings  of  3\.2  percent  for  university  students and 4\.9 percent for beneficiaries of institutes\. In the last section of this annex, a  10 Zhang, Liang\. 2005\. “Do Measures of College Quality Matter? The Effect of College Quality on Graduates’ Earnings\.” Cornell  University ILR School\.  11 Canaan, Serena, and Pierre Mouganie\. 2015\. “Quality of Higher Education and Earnings: Regression Discontinuity Evidence  from the French Baccalaureate\.” MPRA Paper 62509, University Library of Munich, Germany\.  12 Chevalier, Arnaud\. 2014\. “Does Higher Education Quality Matter in the UK?” Discussion Paper 8363, The Institute for the Study  of Labor, Bonn, Germany\.  Page 39 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) sensitivity analysis is conducted to assess the variation of the results under different values  of the rise in future earnings\.   (c) The dynamics of the effects along the 20‐year time horizon are linked to the duration of the  Project  and  its  effects  over  successive  cohorts  of  students  of  the  intervened  HEIs\.  Conservatively,  it  has  been  assumed  that  program  interventions  will  impact  learning  outcomes of those students graduating at least three years after the intervention\. Although  we expect the impact of this interventions over HEIs to be permanent, for the purposes of  this  analysis,  it  has  been  assumed  that  16  successive  cohorts  of  HEIs’  students,  those  graduating from 2017 until 2032, will be affected\.   (d) The Project’s beneficiaries are defined as those graduates from a HEI or program that has  been affected by at least one intervention by PROCALIDAD; that intervention being technical  assistance,  financing  of  improvement  plan  or  external  evaluation\.13  PROCALIDAD  reports  that  13\.8  percent  of  universities  or  university  programs  (subject  to  accreditation)  have  benefited as  have 14\.9 percent of institutes\. As PROCALIDAD only covers public  HEIs, we  have assumed that those figures also correspond to the percentage of students of public  universities and institutes affected by the program\. Conservatively, it has been assumed that  students graduating from public universities as a proportion of the population between 23  and 25 years old will remain constant between 2017 and 2032 and equal to that of 2016\.  Similarly,  the  proportion  of  students  enrolled  in  public  institutes  as  a  percentage  of  the  population between 18 and 20 years old has been assumed constant and equal to that of  2015\.   Benefits  4\. According to figures by SUNEDU and National Institute of Statistics and Informatics (INEI, Instituto  Nacional de Estadística e Informática), the students graduating from public universities as a proportion of  the population between 23 and 25 years old was 2\.5 percent in 2016\. Also, according to figures by Maximixe  and INEI, students enrolled in public institutes as a proportion of the population between 18 and 20 years  old is 6\.4 percent\. It has been assumed the latter proportion remained constant and 30 percent of those  enrolled graduated every year\. Furthermore, the proportion of graduates entering the labor market is 88  percent according to INEI\.   Table 4\.2\. Number of Beneficiaries for the Cohorts Graduating between 2017 and 2032  Universities  Institutes  Year of  Beneficiaries  Beneficiaries  Total  Graduation  Entering the  Entering the  Labor  Labor  Market  Market  2017  723  577  1,299  2018  1,811  1,730  3,541  2019  2,904  2,881  5,785  13 These interventions have different impacts\. However, what has been reported by PROCALIDAD is the average impact of those  interventions (table 4\.2)\.   Page 40 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Universities  Institutes  Year of  Beneficiaries  Beneficiaries  Total  Graduation  Entering the  Entering the  Labor  Labor  Market  Market  2020  4,363  4,032  8,395  2021  5,024  4,290  9,315  2022  5,027  4,294  9,321  2023  5,028  4,299  9,327  2024  5,029  4,305  9,334  2025  5,032  4,308  9,340  2026  5,039  4,305  9,345  2027  5,050  4,296  9,346  2028  5,061  4,282  9,343  2029  5,068  4,265  9,333  2030  5,068  4,246  9,315  2031  5,061  4,228  9,288  2032  5,047  4,208  9,256  Source: INEI, SUNEDU, Maximixe, and own estimates\.  5\. Taking into account the number of graduates entering the labor market from 2017 until 2032,  future annual earnings are predicted based on an estimated logarithmic earnings function\.14 The function  has the following explanatory variables:   X1: years of basic school  X2: years of high school  X3: years of superior education  Z: potential experience  Z2: potential experience squared  θZ δZ ϵ   According to Castro and Yamada (2010),15 the values for the parameters are the following:  0\.3   0\.04  0\.05  0\.15 for public universisties and 0\.10 for public institutes  Potential experience θ 0\.02   Experience squared δ 0\.0002  14 We made the assumption that earnings function does not change over time, except for the impact of the Project and inflation  (2 percent per year)\.  15 Castro, J\. F\., and G\. Yamada\. 2010\. “Educación superior e ingresos laborales: estimaciones paramétricas y no paramétricas de  la rentabilidad por niveles y carreras en el Perú\.” DD/10/06, Universidad del Pacífico\.  Page 41 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 6\. Using this equation, future annual earnings are calculated for the 2017 graduating cohort up to  the 2032 cohort\. We assume that the impact on earnings of every cohort will last for 20 years\. For this  purpose,  the  participation  rate  for  the  population  with  university  or  technical  degrees  is  taken  into  account (88 percent according to INEI) and the probability of being unemployed for this fraction of the  labor supply (5\.4 on average between 2007 and 2016)\.   7\. The Project benefits are calculated by comparing with and without the Project situation\. Thus, if        ∆    The benefits with the Project, either for beneficiaries in universities or institutes, are defined as:  ∗ ∆ ∗ \.    The numerical results are shown in table 4\.3\.  Table 4\.3\. Project Total Benefits (US$)  Without the Project  With the Project  Cohort  Project Benefits  (discounted earnings)  (discounted earnings)  2017  35,801,515  37,150,066  1,348,551  2018  88,725,593  92,131,042  3,405,449  2019  133,840,860  138,998,954  5,158,095  2020  181,518,624  188,461,427  6,942,803  2021  188,369,214  195,514,616  7,145,402  2022  174,773,436  181,403,272  6,629,836  2023  162,154,060  168,305,965  6,151,905  2024  150,448,318  156,156,796  5,708,478  2025  139,596,688  144,893,433  5,296,746  2026  129,543,725  134,457,933  4,914,208  2027  120,197,638  124,755,276  4,557,638  2028  111,479,808  115,704,532  4,224,723  2029  103,321,697  107,235,049  3,913,353  2030  95,665,874  99,287,574  3,621,700  2031  88,487,034  91,835,942  3,348,909  2032  81,780,129  84,874,564  3,094,435  Source: INEI, SUNEDU, Maximixe, and own estimates\.    Page 42 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Costs  8\. For this analysis we use the total Project costs by year based on the amounts already executed  for the Project, until 2017, and the amounts expected to be executed in 2018\.   Table 4\.4\. Project Total Costs (in PEN and US$)  Average  Total  Project Cost  Project Cost  Year  Exchange  Discounted  (PEN)  (US$)  Rate  Cost  2013  802,965  2\.70  297,138  270,126  2014  3,718,192  2\.84  1,309,802  1,082,481  2015  14,315,235  3\.19  4,494,136  3,376,511  2016  46,834,050  3\.38  13,875,005  9,476,815  2017  76,628,624  3\.26  23,500,506  14,591,965  2018  12,338,155  3\.24  3,803,377  2,146,907  Source: PROCALIDAD, Central Bank, and own estimates\.  Cost‐Benefit Indicators  9\. In the conservative scenario specified, comparing the total discounted benefits of the Project for  2014 to 2029 student cohorts with the total discounted costs, we obtain an Economic Rate of Return for  the  Project  equal  to  16\.7  percent\.  The  NPV  is  equal  to  US$45  million\.16  Therefore,  under  a  set  of  conservative assumptions, the Project is expected to render a positive reward in economic terms: the NPV  of estimated and expected costs is lower than the NPV of expected benefits\.  Table 4\.5\. Project Economic Indicators  NPV (2012 US$)  44,526,663  IRR  16\.7%  Source: Own estimates\.  Sensitivity Analysis  10\. High  IRR  values  are  robust  from  −3  to  +3  percentage  point  changes  in  productivity‐enhancing  learning  outcomes\.  The  benefits  in  the  situation  with  the  Project  are  calculated  under  a  conservative  scenario, already described\. To assess the robustness of the estimations, two other scenarios have been  specified\. With that, we have calculated IRR of the Project under three different scenarios: (a) optimistic:  the elasticity of future earnings on quality improvements is 0\.3 and, in consequence, the impact of the  Project on earnings is 4\.8 percent for university graduates and 7\.4 percent for graduates from institutes;  (b) conservative: the elasticity of future earnings on quality improvements is 0\.2 and, in consequence, the  impact of the Project on earnings is 3\.2 percent for university graduates and 4\.9 percent for graduates  from institutes; and (c) pessimistic: the elasticity of future earnings on quality improvements is 0\.1 and,  in  consequence,  the  impact  of  the  Project  on  earnings  is  1\.6  percent  for  university  graduates  and  2\.5  16 The NPV was calculated at a 10 percent discount rate\.   Page 43 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) percent for graduates from institutes\. In the most pessimistic scenario, the NPV ascends to US$7 million  and the IRR stays at 11\.4 percent (table 4\.6)\.  Table 4\.6\. Sensibility Analysis  Elasticity of  Increment in Productivity‐Enhancing  Future Earnings  Learning Outcomes (%)  NPV  IRR  Scenario  on Quality  (2012 US$)  (%)  Improvements  University  Institutes  Graduates  Graduates  Optimistic  0\.3  4\.8  7\.4  82,262,396  20\.4  Conservative  0\.2  3\.2  4\.9  44,526,663  16\.7  Pessimistic  0\.1  1\.6  2\.5  6,790,929  11\.4  Source: Own estimates\.      Page 44 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) ANNEX 5\. BORROWER, CO‐FINANCIER, AND OTHER PARTNER/STAKEHOLDER COMMENTS  This is a summary of the “Evaluación interna del Proyecto Procalidad‐análisis del resultado del Proyecto  contra los objetivos acordados (Contrato de Préstamo N° 8212‐PE),” translated into English by the World  Bank\. Any mistakes are the sole responsibility of the World Bank\.  INTERNAL EVALUATION OF THE PROCALIDAD PROJECT  ANALYSIS OF PROJECT OUTCOMES VERSUS ESTABLISHED OBJECTIVES  1\. INTRODUCTION  1\. The PROCALIDAD Project was defined with a core objective: ‘Improvement of the quality of higher  education in Peru’\. This project thus seeks to modify a specific attribute of the higher education service,  namely its quality, understood in terms of the effectiveness of HEIs in developing their students with the  knowledge and tools that allow them to competently perform tasks that are valued in the job market\.   2\. Based on this objective, the project organized its actions around a structure consisting of three  technical components, assisted by two support areas\. This structure was then used to design and execute  the activities, organize the technical and administrative teams, and allocate and implement the project  budget\.   3\. Despite this, as the project’s execution progressed, it became necessary, based on two premises— responding to the needs of the higher education reform process currently under way and keeping our  sights  firmly  set  on  achieving  the  expected  outcomes—to  restructure  the  project’s  work  around  two  dimensions: contributing to the improved quality of HEIs and ensuring the ability to influence the HEQAS\.  As such, we will refer in parallel throughout this document to the actions executed through the project’s  areas or components and to the contributions made by those actions to the outcome dimensions\.   4\. In  terms  of  indicators,  throughout  this  document  we  use  those  defined  for  the  project  accompanied  by  supplementary  indicators,  which—when  taken  as  a  whole—enable  us  to  infer  the  project’s achievements\.   2\. DESCRIPTION, MEASUREMENT, AND ANALYSIS OF PROJECT ACHIEVEMENTS   2\.1 Contribution to Improving the Quality of HEIs  5\. The  design  to  measure  the  project’s  progress  and  outcomes  was  constructed  based  on  four  development objective indicators and eight intermediate outcome indicators\. In addition to these official  indicators, PROCALIDAD designed a set of specific indicators and built a database to measure them\. We  will be presenting these indicators jointly throughout this section\.   2\.1\.1 Coverage Achieved by PROCALIDAD  6\. Coverage is measured by PDO Indicator 1, which was defined as the number of self‐evaluations  completed in SAES\.  Page 45 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 7\. A  total  of  1,383  complete,  closed  self‐evaluations  were  performed  in  SAES,  of  which  1,015  correspond to career programs and 368 to institutions\. The planned target was exceeded, reaching 128  percent over the course of the project\.   8\. To better understand the outcome obtained, the following must be considered:   ï‚ This indicator was reformulated as part of the project’s restructuring, although the broader  sense of the original indicator was maintained and SAES was introduced as a means for its  measurement\.   ï‚ SAES17  is  an  information  technology  tool  designed  by  the  project  to  facilitate  the  self‐ evaluation of the parties subject to accreditation (career programs and institutions)\.  ï‚ All the self‐evaluations considered were performed as part of the previous quality model for  accreditation\.   ï‚ The indicator includes all degree programs and both public and private administration\.  ï‚ Given that the quality model changed, the SAES tool has been updated to allow for its use  within this new framework\.   9\. The indicator shows us that the planned target was met and exceeded in absolute terms, but it  does not allow us to determine what value, with regard to the whole, can be attributed to the fact that  1,383 self‐evaluations were completed in SAES, corresponding to 411 HEIs\.   10\. The indicator was supplemented by an additional indicator, the coverage rate, which is obtained  by first defining the universe that could have gained access to the project’s services\. It is important to  mention that PROCALIDAD only worked with public institutions, among which there are a total of 1,087  universities and 1,445 institutes subject to accreditation\.18 Of these, 773 and 1,108, respectively, belong  to one of the knowledge areas prioritized in the project: Education, Health and Science, and Technology  and Engineering\.   11\. Of  those  subject  to  accreditation,  PROCALIDAD  provided  services  to  166  universities  and  267  institutes, resulting in a coverage rate of 21\.5 percent for universities and 24\.1 percent for institutes\.  12\. Coverage is defined based on the number of self‐evaluations in SAES, given that this was the only  channel  to  receive  any  of  the  services  offered  by  the  project  (technical  assistance,  financing  for  the  improvement plan or external evaluation)\.   17 SAES: Quality Assurance Information System, or Sistema de Autoevaluación de la Educación Superior\.  18  The  expression  ‘parties  subject  to  accreditation’  refers  to  degree  programs  or  institutions\.  It  should  be  recalled  that  the  framework of the previous quality model for accreditation was used to accredit university or vocational degree programs and  teacher training institutions\. The data source for the determination of the universe came from MINEDU, along with all regional  departments of Education\.  Page 46 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 2\.1\.2 Services Offered by PROCALIDAD to Public Institutions of Higher Education  13\. To measure the number of services delivered by the project, various indicators were considered\.  For Intermediate Outcome Indicator 2, the target was established at 350 beneficiary institutions with at  least  one  intervention  by  PROCALIDAD\.  PROCALIDAD  performed  interventions  in  41119  institutions,  providing services tied to the use of SAES, technical assistance, and financing of improvement plans, and  external evaluation, for a final outcome of 117 percent\.   14\. As  for  distribution  by  type  of  service,  it  should  be  reiterated  that  all  intervened  institutions  performed one or more self‐evaluations in SAES to gain access to the other three services\. The situation  with regard to these three services are described in the following paragraphs\.   Technical Assistance  15\. Technical assistance was a highly effective service in contributing to quality improvements in the  institutions  and  their  career  programs,  as  well  as  making  a  clear  secondary  contribution  to  increasing  these programs’ and institutions’ possibilities of gaining access to the other two services offered by the  project, that is, financing for improvement plans and external evaluation\.   16\. We  identified  three  stages  of  development  in  the  technical  assistance  over  the  course  of  the  project:   ï‚ Stage  1\.  It  started  in  late  2013,  with  the  objective  of  providing  specific  support  to  the  receiving institution or program based on the needs identified by the recipients themselves\.   ï‚ Stage  2\.  It  started  in  mid‐2014,  with  the  focus  of  the  objective  shifting  to  providing  the  educational institution or program with guidance in its ongoing improvement process\.  ï‚ Stage 3\. In 2015, it became necessary for the consultant to perform a minimum of two visits  per  instance  of  technical  assistance,  with  a  maximum  of  three,  to  help  guide  the  self‐ evaluation process\. The use of the Plac@seas virtual classroom was introduced as a way for  the consultant to provide guidance to members of the quality committee, improving process  traceability and follow‐up\.   Financing of Improvement Plans   17\. PROCALIDAD approved and financed a total of 25720 Improvement Plans, divided between two  types  of  calls  for  participants,  classified  as  ordinary  (148)  and  targeted  (109)\.  Of  these,  83  were  institutional plans and 174 were plans for career programs in institutes and universities\.   19  It  should  be  clarified  that  this  number  refers  to  institutions,  and  not  to  parties’  subject  to  accreditation  served\.  In  each  institution, one or more parties subject to accreditation may have been served\.   20 This number is taken from Intermediate Outcome Indicator 7: Number of Improvement Plans Financed by the FEC\.  Page 47 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Ordinary Calls for Participants  18\. These calls were for financing plans designed to improve the group of standards that were not  met by educational or institutional programs under their quality model\.   19\. It should be noted that between the third and fourth call for participants, a series of changes was  introduced, based on the conclusions reached following an analysis of the outcomes obtained in the initial  calls\. As a result, the following actions were adopted:   ï‚ A campaign was carried out to publicize the fourth call for participants though local radio  stations around the country\.   ï‚ A guidance strategy was designed and implemented for the quality committees, with the  primary  aim  of  strengthening  the  committees’  skills  in  formulating  improvement  plans  (online and in‐person courses)\.  ï‚ An information technology tool was developed to facilitate the formulation of improvement  plans\.  For  this,  the  quality  model  was  linked  to  the  methodology  used  to  formulate  improvement  plans—the  logical  framework  approach—making  it  possible  to  link  self‐ evaluations with the formulation of improvement plans\.   20\. The  result  was  an  increase  in  the  total  number  of  improvement  plans,  the  number  of  regions  served, and an improvement in the quality of the plans formulated\.   Targeted Calls for Participants  21\. Targeted calls were developed for two basic reasons: on the one hand, the analysis of the self‐ evaluations linked with the initial calls for participants showed patterns of weakness (infrastructure and  equipment, for example) focused on certain quality standards and/or factors of the accreditation model;  and  on  the  other  hand,  institutions  displayed  a  need  for  support,  within  the  higher  education  quality  assurance framework, in formulating models, designing and implementing tools, and so on\.  Finalization and Closure of Improvement Plans   22\. The  project  has  a  PDO  indicator  (Indicator  3)  linked  to  the  satisfactory  implementation  of  improvement  plans,  with  an  expected  end‐of‐project  target  of  108\.  The  satisfactory  implementation  referred to in this indicator was defined by PROCALIDAD at the operational level and was not linked to  the fulfillment of the plans but instead to their closure, which can only be done after all planned activities  have been executed:   Satisfactory Implementation = Execution of Activities + Technical Closure + Financial Closure  23\. The  target  set  for  PDO  Indicator  3  was  108  plans  satisfactorily  implemented\.  As  such,  the  cumulative progress is at 185 percent\.  Page 48 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Financing of External Evaluations   24\. During the project implementation period, 456 institutions or programs underwent an external  evaluation\. Of this group, 60 external evaluations were financed by PROCALIDAD: 26 career programs and  34 teacher training institutions\. These data comprise Intermediate Outcome Indicator 6\.   Effectiveness and Efficiency of PROCALIDAD   25\. PROCALIDAD has constructed two indicators to provide an approximate answer to the questions,  ‘What was PROCALIDAD’s contribution to this process?’ and ‘How much of that progress is attributable to  the PROCALIDAD’s work?’  26\. The  first  of  these  indicators  was  defined  as  the  overall  effect  of  PROCALIDAD,  which  helps  measure the improvement in the quality of the parties subject to accreditation that received services from  the project (compared to those that did not receive these services)\.  27\. The calculation includes the total number of users with an initial and final self‐evaluation that  received  one  or  more  services  from  the  project  between  both  self‐evaluations:  60  institutes  and  34  universities\.  28\. This is then compared to the total number of users with an initial and final self‐evaluation in SAES  that did not receive services from PROCALIDAD: 100 institutes and 36 universities (these institutions or  programs performed an initial self‐evaluation and a final self‐evaluation in SAES, but PROCALIDAD did not  provide  them  with  services,  technical  assistance,  an  improvement  plan,  or  financing  for  an  external  evaluation)\.   Figure 5\.1\. Difference in Quality Improvement (Measured as the Difference between the Final and Initial  Evaluations) between Institutions That Did and Did Not Receive Services from PROCALIDAD (Institutes and  Universities)  Universities Institutes 20\.00% 50\.00% 15\.91% 39\.64% 15\.00% 40\.00% 30\.00% 10\.00% 20\.00% 15\.06% 5\.00% 10\.00% ‐0\.62% 0\.00% 0\.00% CON SERVICIO SIN SERVICIO ‐5\.00% CON SERVICIO SIN SERVICIO     Source: PROCALIDAD database\. Prepared by authors\.  Page 49 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 29\. It  can  be  concluded  that  those  institutions  or  career  programs  that  received  services  from  PROCALIDAD exhibit greater improvements in quality than those that did not receive these services\.   30\. In  terms  of  the  contribution  to  accreditation,  the  indicator  was  constructed  based  on  the  following:  (a)  the  types  of  services  considered—technical  assistance,  improvement  plan,  and  external  evaluation and (b) accreditation date—we considered only cases in which the accreditation was granted  after receiving the service\.   31\. Of  the  total  number  of  accreditations  granted  by  SINEACE,  we  considered  only  those  that  fall  within  the  project’s  scope  (151  in  all,  of  which  85  accreditations  were  granted  to  institutes  and  66  to  university career programs)\.  32\. In the case of institutes, PROCALIDAD provided quality improvement services to 80 percent of the  degree programs or institutions that succeeded in gaining accreditation within the project’s scope\. In the  case of universities, PROCALIDAD provided services to 44 percent of the university degree programs that  succeeded in gaining accreditation within the same scope\.   2\.2 Impact on the Quality Assurance System   2\.2\.1 Individual and Institutional Capacity Building for the Development of the Higher Education Quality  Assurance System   33\. Bearing  in  mind  that  the  project  was  restructured  as  a  result  of  the  reforms  to  the  higher  education system, PROCALIDAD carried out a series of direct actions aimed, on the one hand, at providing  guidance  to  universities  in  the  process  of  preparing  their  institutional  strengthening  plans,  as  per  the  Fourth Supplementary Amending Provision of Law 30220 and on the other hand, at promoting the design  of  a  quality  model  that  helps  increase  articulation  between  licensing  and  accreditation  and  avoids  overlaps\. The Project’s contribution was defined as a target for Intermediate Outcome Indicator 1\.   34\. On a parallel and supplementary basis, the project carried out a series of actions aimed at building  capacity of the system’s stakeholders—including not only the administrative institutions but also those  offering  the  educational  service—and  thus  contributing  to  the  development  and  implementation  of  specific  policies\.  Examples  of  this  include  the  workshop  ‘Quality  Assurance  System:  The  Role  of  Information  in  Fostering  and  Developing  Capacities’,  the  First  International  Conference  on  Higher  Education  (‘The  State’s  Role  in  Quality  Assurance’),  and  the  Diploma  Program  for  Good  Governance  Studies in Public Universities, among others\.   35\. Along  these  same  lines,  consultancies  were  also  performed  at  the  request  of  the  system’s  administrative institutions: Departments of Higher Education of the Ministry of Education, SUNEDU, and  SINEACE\.   2\.2\.2 Development of the Integrated Higher Education Information System (SIES)  36\. PROCALIDAD  contributed  to  the  creation  and  strengthening  of  instruments  and  provided  financing for studies\. An international consultancy was financed for the conceptual development of the  Page 50 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) integrated  information  system,  which  included  the  definition  of  a  quality  module  where  PROCALIDAD  inputs information\.  37\. As an indicator for the higher education information system, the project includes PDO Indicator 4  “Number of visits to the dissemination websites of the Higher Education Information System (SIES)\.” The  target of this indicator was set at 300,000 visits, with a final total of 735,658\.  38\. The  project  also  established  three  other  intermediate  outcome  indicators  in  relation  to  the  information system (IRI 3, IRI 4, and IRI 5)\. The outcome for the first one was labeled “Development of a  Higher Education Information System (SIES)”; for the second, “Development of an information module for  higher education quality assurance (SAES)”; and for the third, “Number of studies published\.”  3\.  EVALUATION  OF  THE  BORROWER’S  PERFORMANCE  DURING  PROJECT  PREPARATION  AND  IMPLEMENTATION, WITH A SPECIAL EMPHASIS ON LESSONS LEARNED   3\.1 Borrower’s Performance Evaluation   39\. The concept of ‘borrower’ is a broad one\. As such, we will focus here on the evaluation of the  project’s technical and administrative team, as well as on an analysis of the functioning of the project’s  governing  bodies  and  the  role  played  in  its  management  by  the  main  stakeholders—SINEACE,  as  the  implementing agency; MINEDU, as the governing body; and SUNEDU, as an emergent institution in the  regulation of the basic quality conditions for university‐level higher education\.  3\.1\.1 Administrative and Technical Performance of the Project Team   40\. Two  supplementary  indicators  were  calculated  to  measure  the  overall  performance  of  the  administrative  team  and  the  technical  team  (the  total  cost  of  the  services  provided  compared  to  the  number of people who worked in each area and the total cost of the services provided compared to the  cost of the personnel involved in each area)\. The results for the administrative team are PEN 6,771, 503  and PEN 15\.5 and for the technical team PEN 11,080,641 and PEN 24\.8\.  3\.1\.2 Project’s Governing Bodies: Technical  Commission of the  FEC, Board  of Directors,  and  External  Advisory Council   41\. The  Technical  Commission  of  the  FEC  provided  its  expertise,  helping  guarantee  the  evaluation  process for the winning plans\.  42\. In the case of the Board of Directors, the added value was in the articulation among the sector’s  different  representative  institutions  around  the  decision‐making  process,  as  both  guarantors  and  the  highest level of decision makers regarding project actions\.   43\. The  External  Advisory  Council  was  dedicated,  as  per  the  mandate  established  in  the  project  document, to both interim and final external evaluations\.   Page 51 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 3\.1\.3 SINEACE, MINEDU, and SUNEDU  44\. PROCALIDAD was created as an implementing agency for SINEACE\. However, the higher education  reforms carried out during the project created a different set of circumstances, characterized by a broader  institutional panorama where leading roles were taken by SUNEDU, as the agency responsible for licensing  universities, and especially by MINEDU, which became the governing body for higher education\. Under  these circumstances, PROCALIDAD met the needs and contributed to the design of instruments and the  development of strategies to promote the policies of the three actors\.   3\.2 Main Difficulties   45\. The project was ultimately carried out in a constantly evolving context, especially during the first  year of implementation\. This posed significant challenges that ended up creating opportunities, of which  we believe full advantage was taken\.   3\.2\.1 Changes in the Attribution of Project Responsibilities   46\. One of the main difficulties revolved around changes in the attribution of responsibilities, of which  there were basically two: the responsibility for carrying out the Graduate Observatory and SIES and the  concept of technical assistance\. The elimination of the Graduate Observatory and SIES from the direct  orbit  of  the  project’s  responsibility  created  the  space  and  time  necessary  to  develop  the  information  technology  tools  for  the  provision  and  management  of  the  project’s  services  (SAES,  Plac@seas,  and  GPROC)\.  47\. The reorganization of SINEACE under the University Act, and the consequent disappearance of  the  operating  bodies,  made  it  necessary  to  modify  the  mechanism  for  the  fulfillment  of  technical  assistance, with PROCALIDAD directly providing this service to HEIs\.   3\.2\.2 Quality of the Formulation of Improvement Plans (Technical and Administrative Areas)  48\. There  was  an  urgent  need  to  improve  the  installed  capacity  of  the  quality  committees  in  the  formulation of improvement plans\. There was a lack of knowledge regarding the ties that should exist  between the self‐evaluation and the improvement plan, a methodology for the formulation of plans, the  preparation of terms of reference or technical specifications, or market research techniques\. PROCALIDAD  developed and implemented strategies to overcome these shortcomings (see section 2 in this annex\.)\.   3\.2\.3 Lack of Balanced Scorecards   49\. Managing a nationwide project with a small team, with the challenge of directly implementing a  set  of  assigned  economic  resources  in  a  constantly  changing  context,  is  an  enormously  difficult  undertaking\.   50\. It  must  be  acknowledged  that  the  project’s  technical  management,  and  especially  its  administrative management, would have improved noticeably if there had been a balanced scorecard on  the  progress  of  the  administrative  processes,  which  would  have  made  it  possible  to  make  real‐time  decisions and improve the project’s follow‐up and monitoring\.   Page 52 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 3\.3 Lessons Learned  3\.3\.1  Coordination  among  Technical  Areas  and  between  the  Technical  Areas  and  the  Administrative  Processes   51\. One of the main lessons learned for the technical team was to focus its attention on the recipient  of the services, that is, the educational institution\. This apparently simple idea led to the need to articulate  these  services  on  a  continuum,  within  the  project,  to  contribute  to  a  continuous  improvement  in  the  quality of HEIs\.   3\.3\.2 Advantages of Autonomous Management Associated with Flexibility: The Possibility of Adapting  to Changes in QAS  52\. The management model defined for the project, as the executing agency of an institution, gave it  a  certain  degree  of  autonomy  in  its  technical  and  financial  management\.  We  believe  this  autonomy  created  the  conditions  to  react  promptly  and  appropriately  to  the  situations  that  arose  in  the  ever‐ evolving  context  referred  to  earlier,  both  internally  (such  as  changes  in  Components  1  and  2)  and  externally (the creation of new institutions, roles, and standards for higher education)\.   3\.3\.3 Guidance of Institutions   53\. In a higher education system that cannot yet be considered fully mature, given that the majority  of its supervisory institutions have only recently been created, or at the very least, have only recently  assumed their roles and where the institutions that offer higher education services still suffer from weak  management  capacities,  it  is  not  enough  to  provide  services;  it  is  necessary  to  establish  guidance  mechanisms to facilitate access to these services\.   3\.3\.4 Interconnection of Tools to Services  54\. The  interconnection  of  tools  to  the  services  delivered  contributed  to  achieving  the  planned  national scope, with homogeneous distribution, not centered on the Lima region\. The evaluation and the  generation of data on the quality of public higher education in Peru was an important marginal benefit\.   3\.3\.5 Delivery of Goods and Services, as Opposed to Economic Resources   55\. Given the low maturity level of the administrative apparatuses for the university institutions and  the fact that the institutes do not exist, in budgetary terms, the decision to use the project to undertake  the direct delivery of goods and services to the institutions—as opposed to economic resources—allowed  for the complete implementation of the budget and the prompt delivery of goods and services\.   56\. The  link  between  the  formulation  of  improvement  plans  and  the  financial  implementation  thereof—through the GPROC (computer program for the formulation of improvement plans, to which an  administrative  module  was  linked),  the  catalogue  of  goods  (with  technical  specifications),  and  the  catalogue of consultancies—facilitated the formulation of plans and helped organize the administrative  execution  within  PROCALIDAD  by  grouping  together  procurement  and  augmenting  the  scale  of  the  processes,  and  thus,  the  number  of  national  public  tender  processes  compared  to  other  types  of  administrative processes\.   Page 53 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 3\.3\.6 Ties between HEIs and Policy Makers   57\. One of PROCALIDAD’s responsibilities, which was not initially planned, was to contribute to the  articulation  between  the  system’s  administrative  institutions—that  is,  the  policy  makers—and  the  institutions  offering  educational  services\.  From  the  administrators  to  the  educational  institutions,  we  emphasized activities aimed at implementation, policy development, and targeted calls for participants  or consultancies on the formulation of basic quality conditions, among others\. In the opposite direction— that  is,  from  the  educational  institutions  to  the  administrators—it  is  worth  noting  the  collection  and  provision of information for decision making, as well as the boost given to universities in the formulation  of institutional strengthening plans for the quality of the professional training they provide\.   4\.  DESCRIPTION  OF  PROPOSED  ARRANGEMENTS  FOR  THE  PROJECT’S  FUTURE  OPERATION  AND  SUSTAINABILITY OF THE EFFECTS GENERATED   58\. Sustainability is linked  to maintaining the effects generated  by the project  in four dimensions:  institutional, social, technical, and economic\.   4\.1 Transfer of Tangibles and Intangibles  59\. The  assets  associated  with  the  execution  of  the  improvement  plans  were  delivered  and  transferred to the corresponding institutions, whether universities or regional governments21 (in the case  of institutes)\. The assets from the PROCALIDAD office, along with office equipment and furniture, will be  transferred to SINEACE\.   60\. Regarding intangibles, there are three aspects to note as follows:   ï‚ First, the project created a model to manage the provision of quality improvement services\.  This legacy is an intangible that we believe to be highly valuable, constituting an important  asset for the higher education HEQAC\.   ï‚ Second, the importance of the information generated by the project within the framework  of the improvement in processes it has helped drive is worth noting\. A considerable amount  of quality data has been gathered and generated, which must now be taken advantage of by  turning it into knowledge\.   ï‚ Lastly,  through  the  consultancies  tied  to  the  execution  of  the  improvement  plans,  PROCALIDAD  has  created  a  set  of  resources  that  were  organized  into  two  consultancy  catalogues and information technology instruments that are available to the institutions at  http://tools\.procalidad\.gob\.pe/\.  4\.2 Sustainability of the Functions Performed by PROCALIDAD  61\. As  of  the  end  of  the  project,  it  is  clear  that  the  educational  institutions  would  like  to  see  a  continuation of some of the actions of the project\. There is an unmet demand\. As such, it is necessary to  21 The transfer was formally performed by the institutes, which must work with their respective portfolio—the corresponding  regional government in each case—to process their registration in the inventory of national assets\.   Page 54 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) go into greater depth in the development of financing mechanisms for quality improvements, especially  for public institutions\.   62\. There is still one pending task that we might classify as structural, namely the consolidation of the  pillar for the promotion of QAS\. This pillar must be developed and institutionalized based on a formally  approved  planning  document  that  distributes  roles  among  the  system’s  stakeholders,  as  well  as  a  coordination  mechanism  that  can  be  used  to  establish  periodic  targets  under  the  leadership  of  the  Ministry of Education, with the participation of all the stakeholders involved\.   63\. Given that SINEACE is the natural institutional heir of PROCALIDAD’s duties and responsibilities,  we suggest creating a cross‐cutting administrative unit that includes both the Evaluation and Accreditation  Departments to articulate their work in relation to the services offered by PROCALIDAD and to manage  what we would call the project’s legacy\.  4\.3 Final Tasks and Pending Actions   64\. PROCALIDAD has been carrying out the following actions:   ï‚ Organize,  classify,  and  prioritize  the  information  generated  (consultancy  outcomes,  management  software,  databases  of  primary  information  from  self‐evaluations  and  consultancies performed)\.  ï‚ Disseminate  the  legacy  of  PROCALIDAD  among  all  public  HEIs,  including  institutes  and  universities,  administrative institutions of the QAS,  and other stakeholders, based on  the  conviction that the democratization of information is a first step in generating knowledge\.   ï‚ Articulate  efforts,  experiences,  and  knowledge  in  an  attempt  to  collectively  define  and  prioritize a research and systematization agenda within the framework of higher education  that brings together the ideas and intentions of academia and public administrators through  symposia\.   ï‚ Lastly, a process has been implemented to take full advantage of the information generated  by PROCALIDAD by carrying out research and systematization actions that will lead to the  publication of six documents that contribute to the generation of knowledge\.  5\. EVALUATION OF WORLD BANK PERFORMANCE   65\. As noted earlier, the PROCALIDAD Project was implemented amidst the most significant changes  in higher education to have occurred in Peru in the last 30 years\. The passage of the new University Act,  the  changes  in  the  organization  of  SINEACE,  the  change  in  the  concept  of  quality  assurance  with  the  participation of other stakeholders, the creation of SUNEDU, and the strengthening of the MINEDU’s role  as the governing body of the education sector, among other factors, accentuated the need to establish  close ties with the World Bank to carry out the project and subsequently the restructured outcome of the  first amendment to the Loan Agreement\.   Page 55 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) 66\. The foregoing was corroborated by mission visits by World Bank officials on up to 12 occasions\.  Along  with  the  meetings  and  conversations  held  with  accredited  officials  in  Lima,  this  gave  us  the  confidence that the Project’s implementation was aligned with the objectives defined for it by both the  Peruvian Government and the World Bank\.  67\. We  are  particularly  grateful  to  Ines  Kudo,  Javier  Botero,  Nelly  Ikeda,  Selene  Lavera,  and  Juan  Carlos Martell for their support and understanding in answering our questions and requests and to the  rest  of  the  World  Bank  team\.  Without  their  help  and  input,  it  would  never  have  been  possible  to  adequately conclude the project by the planned deadlines\.     Page 56 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) ANNEX 6\. SUPPORTING DOCUMENTS (IF ANY)  Canaan,  Serena,  and  Pierre  Mouganie\.  2015\.  “Quality  of  Higher  Education  and  Earnings:  Regression  Discontinuity Evidence from the French Baccalaureate\.” MPRA Paper 62509, University Library of Munich,  Germany\.  Castro, J\. F\., and G\. Yamada\. 2010\. “Educación superior e ingresos laborales: estimaciones paramétricas y  no paramétricas de la rentabilidad por niveles y carreras en el Perú”, DD/10/06, Universidad del Pacifico\.  Chevalier, Arnaud\. 2014\. “Does Higher Education Quality Matter in the UK?” Discussion Paper No\. 8363,  The Institute for the Study of Labor, Bonn, Germany\.  Peru, Ministerio de Educación, Sistema Nacional de Evaluación Acreditación y Certificación de la Calidad  Educativa, PROCALIDAD, Oficio No\. 342‐2018‐SINEACE‐PROCALIDAD, Informe de cierre de PROCALIDAD\.  PROCALIDAD, Memoria Annual 2017\.  World Bank, Project Appraisal Document, Peru Higher Education Quality Improvement Project, Report No\.  63766‐PE dated November 1, 2012\.  World  Bank,  Restructuring  Paper,  Peru  Higher  Education  Quality  Improvement  Project,  Report  No\.  RES18302, dated September 1, 2016\.  World  Bank,  Peru  Higher  Education  Quality  Improvement  Project,  Implementation  Status  Reports  and  Mission Aide Memoires\.  World Bank, Country Partnership Framework for the Republic of Peru for the Period FY17–FY21, Report  No\. 112299‐PE dated April 4, 2017\.  Zhang, Liang\. 2005\. “Do Measures of College Quality Matter? The Effect of College Quality on Graduates’  Earnings\.” Cornell University ILR School\.    Page 57 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) ANNEX 7\. WHAT IMPROVEMENT PLANS FINANCED AND SUPPORTED22  1\. According  to  the  ‘Report  of  the  Technical  Closing  of  Improvement  Plans’,23  257  plans  were  effectively completed\. Those correspond to nine calls for funding, across all regions in the country\. Of the  257 plans, 118 were implemented by universities and 139 by institutes\. Also, 148 plans received funds  through the five general calls and 109 through the four targeted calls\.  2\. Based on the Quality Assurance Model, the Project organized the components of the plans and  their funding across ‘Quality Factors’ and the standards associated to those factors\. It is clear, through the  summary statistics, that the initial calls were heavily focused on infrastructure and slowly shifted (more  so  in  universities)  to  other  factors\.  Figure  7\.1  shows  the  trend  in  universities  going  from  71  percent  focused on infrastructure and equipment in the second call to 5 percent in the sixth call\. Between those  calls, teaching and learning went from 8 percent to 27 percent, research from 7 percent to 15 percent,  teachers from 5 percent to 13 percent, and well‐being from 1 percent to 13 percent\.  Figure 7\.1\. Trends in the Implementation of the Improvement Plans of Universities, by Factors    Source: PROCALIDAD\.  3\. Something  similar  happened  with  the  institutes,  although  less  pronounced\.  In  the  first  call,  infrastructure and equipment comprised nearly 90 percent, while the other factors had less than 3 percent  (most below 1 percent)\. By the sixth call, the share of infrastructure had dropped to about 60 percent,  while teaching and learning had 8\.3 percent and research 7\.13 percent\. This shows the different needs  and priorities between institutes and universities\.  22 Taken from technical closing reports prepared for the Project by consultants\.  23 PROCALIDAD 2018\.  Page 58 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Figure 7\.2\. Implementation of the Improvement Plans of Institutes in the First and Sixth calls, by Factors      Source: PROCALIDAD\.  4\. A summary of what institutional improvement plans financed, and what they aimed to achieve  and achieved, is illustrated in the following paragraphs with two examples\. The first example is of IESPP  (Higher  Education  Pedagogic  Institutes,  Instituto  de  Educación  Superior  Pedagógicos),  the  IPNM  ‘Monterrico’, a teacher training institution that received funding under the FEC’s fourth call for proposals\.  The second summarizes the improvement plan of the Pharmacy and Biochemical Program of the National  Major University of San Marcos\.  1\. IPNM (Pedagogic National Institute Monterrico, Instituto Nacional Pedagógico Monterrico)  Summary of Improvement Plan  5\. The  IPNM,  a  teacher  training  institution,  currently  accredited  and  in  the  process  of  reaccreditation, benefited from strengthening under its institutional improvement plan, approved under  the  fourth  call  for  funding\.  Its  implementation  has  resulted  in  establishing  a  planning  system  more  participative  of the  teaching staff and  manager of  the institution, establishing clear  commitments and  goals for its continuous institutional improvement, within the process of reaccreditation and licensing\.  6\. It  has  fostered  changes  in  educational  programs,  with  positive  results,  generating  social  acceptance due to the solid training of its graduates; high graduation and graduation rates; professors  competent in the generation, application, and transmission of knowledge for the services received, with  an  up‐to‐date  and  pertinent  curriculum;  appropriate  and  reliable  processes  and  instruments  for  the  learning  assessment,  new  state‐of‐the‐art  equipment  to  support  the  academic  work  of  teachers  and  students, a management system and a work of social projection articulated to society, and the objectives  of the institutional educational project\.  Page 59 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Financing  FEC: PEN 770,516\.59  INSTITUTION (own funds): PEN 73,880\.00  Quality Factors and Standards Involved in the Plan  Table 7\.1\. Factors and Standards Involved in the Performance of the Improvement Plan  Factor(s)  Standard(s)  Administrative Organization and  1\.1\. Quality‐Based Organizational Culture  Management  1\.2\. Teamwork  Teacher Management   2\.1\. Supplementary Teacher Training Activities  2\.2\. Ongoing Training  2\.3\. Application of Acquired Skills  Curriculum Design  3\.1\. Comprehensive Training  3\.2\. Alignment with Local Needs and Main Pedagogical Trends  3\.3\. Curricular Evaluation  Teaching/Learning  4\.1\. Compliance with Program  4\.2\. Self‐Guided Learning  4\.3\. New Technologies  Infrastructure, Equipment, and Technology  5\.1\. Didactic Resources  5\.2\. Essential Services  5\.3\. Maintenance  5\.4\. Environmental Protection  5\.5\. Furniture and Fittings  Institutional Image  6\.1\. Users’ Opinions  Social Outreach  7\.1\. Sustainability  Graduates  8\.1\. Permanent Rapport with Graduates  8\.2\. Insertion into the Job Market  Total  8  Total  20  Verification of Deliverables  a\. Assets  7\. The performance of the improvement plan has contributed to the implementation of a total of  467 assets, distributed among classrooms, practice laboratories, departments of the different areas, and  so on\.   ï‚ The equipment has been installed in different areas, both for teaching/learning and in spaces  used by teachers and administrative staff\. For example, a social room has been implemented  for staff to meet at break time or to celebrate institutional events that reinforce camaraderie  and identification with the institution and the institutional climate\.  ï‚ The video camera is used by the Educational Outreach Center for activities with graduates\.   ï‚ Microscopes  for  the  Natural  Science  Studies  Program  and  teaching  practice  in  the  Annex  Page 60 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Center\.  Stabilizers  have  been  installed  in  the  computer  rooms  used  by  students  and  teachers\.   ï‚ Software  has  allowed  for  teacher  training  sessions  as  part  of  the  Educational  Research  Diploma Program offered by the IPNM\.   ï‚ Compilatio is new for teachers and students in the research area\. The software has helped  bolster ethical research actions and practices, control plagiarism, and above all, reinforce  the need to conceptualize knowledge and the review of theoretical sources because it has  forced  student  researchers  and  their  advisers  to  develop  the  ability  to  paraphrase  and  rework the ideas set forth in the works of the authors consulted and not to use more than  30 percent literal quotes\.  b\. Services  Human Resource Training  ï‚ Performance of 13 training sessions, held in situ, with the participation of teachers from the  different  areas  of  the  institution,  with  a  focus  on  institutional  management,  social  responsibility, teaching and learning, curriculum design, teacher training, and more\.   ï‚ Two  internships  at  prestigious  universities  in  Chile  and  Colombia,  engaging  in  new  experiences aimed at strengthening knowledge of the curricular system\.  Consultancies  8\. The performance of five consultancies are as follows:   1\. Design and implementation of an environmental protection plan  2\. Preparation of mechanisms for the empowerment of the institution’s image  3\. Design, validation, and implementation of an academic management system and a curricular  management system  4\. Design of a graduate monitoring system and a strategy for the implementation of this system  5\. Preparation and design of strategies for the implementation of teacher management  Status of Activities as of the Closing  Administrative Organization and Management  ï‚ Training:  Institutional  Culture  and  Identity\.  The  training  session  has  made  a  significant  contribution,  allowing  promotion  of  an  adequate  organizational  climate  based  on  institutional  values,  among  both  hired  staff  and  appointed  officials\.  The  session  has  also  Page 61 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) helped bolster institutional identity\. The participative techniques and dynamics taught in the  training session have been replicated and used in tutoring sessions by participating teachers\.   ï‚ Training:  Review  and  Design  of  Strategies  to  Bolster  the  Organizational  Climate\.  This  activity  has  helped  strengthen  the  organizational  climate  and  propose  actions  for  improvement  through  different  management  bodies\.  This  aspect  was  also  aided  by  the  implementation of the social room for both teachers and administrative staff\.   ï‚ Training: Personal Development for Teachers to Improve Teamwork at the Institution\. This  activity made it possible to identify the teamwork strengths and weaknesses among teaching  staff\. This group recognition led to the implementation of a series of measures that have  been incorporated into the Academic and Institutional Work Committees to achieve goals,  foster accountability, and strengthen the quality of educational services\.   Teacher Management   ï‚ Consultancy:  Preparation  and  design  of  a  strategy  for  the  implementation  of  a  teacher  management system\. IPNM has managed to design and implement the process flows based  on the standardization of the teacher management system\. They are especially pleased with  the establishment of the road map and criteria for ensuring an adequate teaching staff\. They  recognize the work done by their teachers and have an academic development plan\. This  translates  to  processes  for  selection,  evaluation,  training,  and  refresher  courses  for  the  teaching team\. The challenge is to align these processes with the IPNM’s new training and  curricular development program\.   Curriculum Design  ï‚ Consultancy:  Design,  Validation,  and  Implementation  of  an  Academic  Management  System and a Curricular Management System for Higher Education Pedagogy\. This activity  has achieved the complete integration of the IPNM’s computerized evaluation system\. This  computer program integrates information collected from the current evaluation system and  consolidates the information, contributing new functionalities, such as a competence‐based  approach and performance levels, and generating performance and achievements reports  for  units,  courses,  and  curriculum  area\.  The  Computerized  Competency‐Based  Learning  Evaluation  System  generates  personalized  reports  based  on  the  profile  of  each  user\.  The  administrators will also have access to all the achievement and performance reports, while  teachers will have access to the reports on the courses they teach and students will have  access to their academic performance report\.   ï‚ Internship: Curricular Management at the Universidad Católica de Chile for the purposes  of implementing the processes of the curricular management system\. This activity provided  IPNM with information on curricular management and evaluation, allowing them to focus  the education process on progressive learning based on the analysis of content and texts\.  They have identified the importance of critical thinking in education, that is, being aware  that our educational decisions in all areas include an ideological component that must be  addressed, and, to the extent possible, made explicit\.   Page 62 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) ï‚ Internship: Curricular Management at the Universidad de Los Andes ‐ School of Education\.  With  the  experience  gained,  the  teachers  at  the  institution  have  proposed  an  evaluation  using a comprehensive approach aimed at processes of self‐reflection\. Evaluation becomes  a  critical  practice  throughout  the  educational  process,  with  the  goal  of  promoting  the  changes required\.   Teaching/Learning   ï‚ Training: Application of Teaching and Learning Strategies in Higher Education\. The teachers  from  the  seven  study  programs  took  part  in  this  training  session,  enabling  them  to  disseminate  and  clarify  conceptual  frameworks  with  regard  to  teaching  and  learning  in  higher education\. They have highlighted the need to promote autonomous and collaborative  learning\.   ï‚ Training:  Evaluation  Using  a  Competence‐based  Approach  in  Preschool  Education\.  The  Computerized Competence‐Based Learning Evaluation System offers personalized reports  based on the profile of each user\. Thus, administrators will have access to achievement and  performance  reports,  while  teachers  will  have  access  to  the  reports  on  the  courses  they  teach and students will have access to their academic performance report\.  ï‚ Training:  Evaluation  of  Strategies  for  Reading  and  Writing  in  Primary  Education  and  Application  of  ICTs  for  Teaching  Social  Sciences\.  This  session  helped  teachers  from  the  Historical  and  Social  Science  Studies  Program  apply  information  and  communication  technologies (ICTs) as part of their teaching processes, for example, the use of the IPNM’s  virtual platform, through forums, in the implementation of learning sessions\.   ï‚ Training: Interdisciplinarity in the Sciences\. The teachers from the study program took part  in conceptualization of the interdisciplinarity of science, investigation‐based learning, and  links with other fields of scientific knowledge\. This has translated to learning sessions that  foster multidisciplinary knowledge and collaborative, holistic learning based on a problem  situation\.  ï‚ Training: Strategies for Developing Cognitive Processes Using ICTs in the Communications  Area\.  This  workshop  provided  the  teachers  from  the  Language,  Literature,  and  Communications Studies Program with a theoretical framework and tools to design learning  sessions using ICTs (Photoshop, Issuu, Zooburst, Movie Maker, and so on)\.  ï‚ Training: Neurolinguistics in Learning a Second Language ‐ Language Program: English\. The  teachers from the Language Studies Program ‐ English reworked their theoretical knowledge  based on neurolinguistics in the process of learning a second language\. Further practice or  pedagogical application is still required in this field of knowledge based on scientific rigor\.   ï‚ Training:  Didactics  in  Secondary  School  Mathematics  and  Physics  for  the  Mathematics/Physics Program\. Teachers from the Secondary Education Studies Program ‐  Mathematics/Physics  took  part  in  the  workshop,  where  they  reviewed  the  didactics  of  mathematics in secondary education, mathematical thinking processes, conversions using  Page 63 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) mathematical content, and so on\. This provided them with the tools to review the advice  they provide on teaching practices to students in this area in the schools where they work\.   ï‚ Training:  Self‐Study  Strategies  within  the  Framework  of  the  New  Teacher  Training  Proposal\.  Self‐study  activities  were  performed  by  the  students  on  a  continuous,  autonomous basis, with a sense of responsibility for their own teacher training process in  each area and course\. The use of resources was also encouraged to promote self‐study\.   Infrastructure, Equipment, and Technology  ï‚ Consultancy:  Design  and  Instrumentation  of  an  Environmental  Protection  Plan  for  Two  Public Institutions of Higher Education\. Owing to this consultancy, the institute now has an  approved  Environmental  Management  Plan  that  is  being  implemented,  consisting  of  two  components: Environmental Management and Risk Management (there is a commission of  trained personnel who run these activities)\.  ï‚ Teaching Tools: Machinery and Equipment, Furniture and Fittings, Computer Equipment,  Software,  Didactic  Material\.  The  assets  received  have  been  used  to  fit  out  the  different  rooms,  laboratories,  and  practice  classroom,  significantly  strengthening  the  teaching/learning  process,  increasing  levels  of  comfort,  and  offering  a  space  apt  for  attending to the IPNM’s users and members of its educational community\.  Institutional Image   ï‚ Consultancy:  Design  of  Mechanisms  for  the  Empowerment  of  Institutional  Image\.  This  consultancy made it possible to set up an office responsible for development strategies for  the  IPNM’s  empowerment  and  its  positive  image  and  influence  at  the  local  and  national  levels,  in  the  education  field  and  specifically  with  regard  to  teacher  training\.  This  office  ensures  a  high  level  of  technical  quality  in  its  preparation  of  advertising,  publicity,  and  communications materials\.  Social Outreach  ï‚ Training:  Preparation  and  Sustainability  of  Social  Responsibility  Projects\.  This  activity  resulted in the scheduling of courses and academic events for graduates and students based  on their training needs, pedagogical refresher courses, and management requirements\. It  has allowed them to enhance their service training and preschool training skills, with a focus  on a number of areas of specialization offered at the institute\.  Graduates  ï‚ Consultancy:  Design  of  a  Graduate  Monitoring  System  and  a  Strategy  for  the  Implementation of the Said System\. The implementation of this important system has made  it  possible  to  establish  immediate  ties  with  graduates\.  This  strategy  has  helped  them  improve  the  preschool  training  and  service  training  processes\.  It  provides  them  with  information on professional references\. In the new accreditation process, it is helping them  Page 64 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) with  the  construction  of  stakeholder  groups\.  They  have  appointed  exclusively  dedicated  personnel to ensure the continued relevance and efficiency of the application\.   2\. PHARMACOLOGY AND BIOCHEMISTRY ‐ NATIONAL UNIVERSITY OF SAN MARCOS (UNMSM)  9\. The UNMSM’s Pharmacology and Biochemistry Program has been bolstered with the ‘Initiation  into  Change’  improvement  plan,  helping  strengthen  its  weak  points  as  a  result  of  the  self‐evaluation  performed\.  The  goods  and  services  received  have  helped  the  major  achieve  accreditation  under  the  SINEACE, thus establishing a culture of quality in the program\.   10\. The  benefits  generated  by  PROCALIDAD  include  the  performance  of  consulting  processes,  training, and laboratories fitted out with high‐quality equipment and instruments, thus meeting the high  standards of laboratory technology in the program and integrating into the use of this technology the  teachers’ knowledge gained as a result of the services received\. They also have a ‘Quality Management  System’, making them the first department in the university to be certified by internal auditors\.   11\. The program currently has implemented laboratories and classrooms, which serve as tools for an  improved teaching/learning process with students studying these majors\.   Financing  FEC: PEN 698,779\.80  INSTITUTIONAL: PEN 62,495\.00  Table 7\.2\. Factors and Standards Involved in the Performance of the Improvement Plan  Factor(s)  Standard(s)  Planning, Organization, Management, and  9\. The major has a program implemented that contributes to the  Control  internalization of the organizational culture among students,  teachers, and administrative staff in the professional program\.  Teaching/Learning  36\. Students admitted to the professional program meet the  incoming student profile\.  40\. Students in scholarship programs, academic exchanges, work  banks, and internships are satisfied with the help received\.  45\. Graduates are satisfied with the monitoring system\.  Research  46\. The major has an evaluation system implemented for training  research and the final project/paper of the professional program\.  Extended University Learning and Social  56\. The major has an evaluation system implemented for the  Outreach  extended learning program\.  62\. The extended learning, social outreach, and learning evaluation  systems are articulated to achieve a comprehensive evaluation of  the student\.  Teachers  68\. Students are satisfied with the tutoring system\.  Infrastructure and Equipment  84\. Teaching/learning, research, extended university learning,  social outreach, administration, and well‐being infrastructure offer  the necessary comfort, safety, and equipment\.  85\. The infrastructure where the teaching/learning, research,  extended university learning, social outreach, administration and  Page 65 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Factor(s)  Standard(s)  well‐being work is done and its respective equipment, have a  program implemented for the maintenance, renewal, and  expansion thereof\.   Well‐being  88\. Students, teachers, and administrative staff are satisfied with  the primary medical care, psychology, pedagogy, social services,  athletic, cultural, and leisure programs\.  Total  7  Total  11  Verification of Deliverables  a\. Goods  12\. The performance of the improvement plan has helped strengthen the implementation of  ï‚ Six laboratories for the program (botany, pharmacology, toxicology, bromatology,  nutritional technology, and analytical chemistry);  ï‚ Five departments in the program (biochemistry, basic/applied chemistry,  pharmacology/bromatology/toxicology, pharmatechnology, and  microbiology/parasitology);  ï‚ Five teaching/learning classrooms (microbiology, Organics A, Classroom B, Classroom 1— Basement, and Classroom 2—Biochemistry);   ï‚ One auditorium (Juan de Dios Guevara);  ï‚ Accreditation Quality Office;  ï‚ Computer Science Unit; and  ï‚ Social Responsibility and University Extension Center\.   b\. Services  Human Resources Training  ï‚ Performance  of  12  training  sessions,  aimed  at  the  following  areas:  tutoring,  teaching/learning, management (training of internal auditors), social outreach, well‐being,  administrative  management,  and  research,  resulting  in  teachers  and  administrative  staff  with better, more up‐to‐date training\.   ï‚ Performance of two internships: one in Havana, Cuba, and one in Colombia\. The experience  accrued  has  contributed  a  significant  added  value  to  the  implementation  of  the  new  curricular study of the program, tied to local job necessities (professional profile)\.  Page 66 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Consultancies  13\. The performance of nine consultancy processes are as follows:   1\. Design of a methodology for the evaluation of competencies   2\. Design of academic support strategies for incoming students   3\. Articulation strategies for the planning and budget system   4\. Design of a graduate’s system  5\. Implementation of an online platform  6\. Updating of the institutional educational project  7\. Research: Preparation of molecules for therapeutic use  8\. Evaluation instruments for the university extension and social responsibility system  9\. Strengthening of the research training system  c\. Minor Works  14\. Performance  of  two  minor  works:  (a)  installation  of  eight  air  conditioning  systems  and  (b)  improvement of the pharmacology laboratory infrastructure\.   Status of Activities as of Close  Planning, Organization, Management, and Control  ï‚ Training: Internal Auditor Training\. The program’s team of internal auditors was created so  that they can help monitor accreditation processes under the quality management system  approved by a Resolution of the Rector’s Office\.  ï‚ Training:  University  Administrative  Management\.  The  administrative  management  procedures  have  been  reviewed,  updated,  and  are  currently  in  the  process  of  implementation (approved by a Resolution of the Rector’s Office)\.  ï‚ Training:  Library  System  Techniques  and  Procedures  for  Administrative  Staff\.  Improvements were implemented at the central level, and library staff are aware of their  responsibility for the continuing improvement of their processes\.  Teaching/Learning   ï‚ Consultancy:  Curriculum  Design  for  Professional  Majors  Using  a  Competency‐Based  Approach to Ensure Consistency among Elements\. Results obtained include preparation of  Page 67 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) the 2018 study plan using the competency‐based approach; curricular articulation between  the professional profile, graduate’s profile, general and specific competencies, performance,  achievement level, learning outcomes, and summaries of each course; dissemination of the  new study plan; and updating of the syllabus preparation procedure using a competency‐ based approach\.  ï‚ Consultancy: Design of an Academic Evaluation and Support Methodology for Incoming  Students\.  Results  achieved  include  a  diagnosis  of  incoming  students’  economic  and  sociocultural conditions\. Based on this diagnosis, a new methodology has been implemented  for  the  competency‐based  evaluation  of  incoming  students\.  Academic  support  strategies  were  design  for  students,  the  impact  of  which  will  be  measured  at  the  end  of  the  2018  academic year\.   ï‚ Training: Articulation of the Teaching/Learning Evaluation with the University Extension  and  Social  Outreach  Evaluation\.  University  extension  activities  have  been  successfully  inserted  into  the  program’s  courses,  with  a  program  that  will  be  evaluated  following  the  second semester of 2018\.   Research  ï‚ Consultancy: Strengthening of the Research Training System\. Results obtained include the  following:  diagnosis  of  the  program’s  research  system;  preparation  and  approval  of  the  document  on  the  conceptualization,  policies,  and  strategies  for  the  performance  of  research; and drafting of research training manual\.   ï‚ Consultancy: Information and Communication System and Its Evaluation Instruments\. The  online platform has been implemented for the teaching/learning process\.  ï‚ Internship to Universidad ICESI (in Cali, Colombia) to Learn about the Research Training  Evaluation  System\.  The  teachers’  experience  has  made  it  possible  to  implement  the  contents  in  the  courses  and  carry  out  new  evaluation  procedures  on  the  research  being  performed\.   ï‚ Training:  Preparation  of  Molecules  for  Therapeutic  Use\.  Research  in  this  field  has  been  bolstered, after obtaining funding for the performance of projects\.   ï‚ Research Workshop on the Reevaluation of Ancestral Knowledge in Traditional Andean  and  Amazonian  Medicine\.  A  total  of  28  teachers  participated,  successfully  strengthening  knowledge in the specific areas of professional performance for pharmacists related to the  study of traditional medicine\.   University Extension and Social Outreach   ï‚ Consultancy:  Design  of  Evaluation  Instruments  for  the  University  Extension  and  Social  Responsibility System\. Surveys were conducted to obtain results on the activities organized  by the Social Responsibility and University Extension Center\.  Page 68 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) Teachers  ï‚ Internship:  Participation  in  the  10th  International  Congress  on  Higher  Education\.  Three  teachers in this program strengthened their knowledge, learning about the progress made  in the teaching of higher education in other countries and contributing this knowledge to  update the study plan\.  ï‚ Training:  Development  of  General  Competencies  in  the  Teaching/Learning  Process\.  The  general competencies in the study plan were reviewed, and new general competencies were  established for inclusion in the 2018 study plan\.   ï‚ Training: Preparation of Competency‐Based Syllabi\.  The quality objectives were achieved,  and over 80 percent of the program’s syllabi were prepared using this model in late 2017\.  For  this  first  semester  of  2018,  over  90  percent  of  syllabi  were  prepared  using  the  competency‐based approach\.   ï‚ Training: Competency‐Based Teaching/Learning Strategies\. Significant achievements were  made in the conducting of surveys among students, resulting in a substantial improvement  in the teaching/learning process\.   ï‚ Training: Evaluation of Competency‐Based  Learning in  Higher Education\.  The  evaluation  regulations  are  currently  being  reviewed  to  adapt  them  to  the  competency‐based  evaluation, thus helping consolidate the competency‐based educational model\.  ï‚ Training: Tutorship Strategies in Higher Education\.  There is currently a tutoring activities  and monitoring plan, which helps improve students’ academic performance\. The tutoring  regulations were approved by a Resolution of the Rector’s Office, so that the tutoring system  will remain in place as an ongoing activity\.   Infrastructure and Equipment   ï‚ Assets  to  Strengthen  the  Pharmacology  and  Biochemistry  Program\.  Rooms  with  air  conditioning were implemented\. Computer equipment was assigned to the program offices  to facilitate academic work\. The server and other necessary tools have helped support the  online platform\. The machines and equipment received have been installed in classrooms  and practice labs, making for a substantial improvement in the physical conditions and level  of tools available for teaching/learning\.   Well‐being  ï‚ Training: Use of Specialized Health Databases\.  As a result of the training activities, annual  well‐being plans have been drawn up and then implemented and evaluated, with positive  results\.  This  leads  to  improved  service  for  the  university  community  in  aspects  such  as  health, the promotion of culture, athletics, and socioeconomic support\.  Page 69 of 70 The World Bank HIGHER EDUCATION QUALITY IMPROVEMENT ( P122194 ) ï‚ Training:  Design  of  Strategies  for  the  Implementation  of  Wellbeing  Programs\.  Improvements  have  been  made  in  attending  to  the  university  community  with  regard  to  preventive health aspects\.   Graduates  ï‚ Consultancy: Design of a Graduate System and a Strategy for the Implementation of the  Said  System\.  Results  obtained  included  current  situation  of  graduates  from  the  last  five  years;  document  containing  conceptualization,  policies,  and  strategies  for  monitoring  graduates; and graduate monitoring processes map\.  Page 70 of 70

REVIEW

P008317

 ICRR 11098 Report Number : ICRR11098 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 07/31/2001 PROJ ID : P008317 Appraisal Actual Project Name : Financial and Enterprise Project Costs 150 150 Sector Adjustment Loan II US$M ) (US$M) Country : Bulgaria Loan /Credit (US$M) Loan/ US$M ) 100 100 Sector (s): Board: FSP - General Cofinancing 50 50 industry and trade sector US$M ) (US$M) (67%), General energy sector (17%), Banking (16%) L/C Number : L4521 Board Approval 0 FY ) (FY) Partners involved : Japan Bank for Closing Date 03/31/2000 03/31/2000 International Cooperation Prepared by : Reviewed by : Group Manager : Group : Poonam Gupta Laurie Effron Ruben Lamdany OEDCR 2\. Project Objectives and Components a\. Objectives Support substantial progress in the implementation of structural reforms in the financial and enterprise sectors and initial phase of the energy sector restructuring program b\. Components (a) accelerate the privatization or liquidation of SOEs; (b) maintain financial discipline in the enterprise sector; (c) sustain banking reform focusing on privatization of banks and upgrading of supervision capacity; and (d) restructure the energy sector\. c\. Comments on Project Cost, Financing and Dates FESAL II was designed as a one tranche operation where all actions had to be completed prior to Board presentation\. It was approved on December 2nd, 1999 and made effective on December 15, 1999\. It continued essentially the same agenda as FESAL I with the addition of the electricity sector \. The IMF's Extended Fund Facility of 1998 followed FESAL I but preceded FESAL II and incorporated many of the conditions in both FESAL I and II \. 3\. Achievement of Relevant Objectives: (a) Privatization or liquidation of SOEs was accelerated and by end of 2000, 90 percent of non-energy and non-infrastructure assets had been divested \. But the pace of privatization post -FESAL II was slower than envisioned in the Letter of Development Policy \. The negotiations for the sale of the Bulgarian Telecommunications Company fell through\. The attempt to privatize Bulgartabac -large tobacco holding company -failed\. Another factor slowing the privatization was a Government review of the privatization program and the subsequent Parliamentary approval of amendments in the Privatization Law to improve the transparency of the process \. The Government put in place the legal and regulatory framework for energy restructuring, including the unbundling and privatization of the National Electricity Company\. Concerning (b) financial discipline on the SOE sector , through the isolation program, all 48 SOEs exited; 32 were privatized, 13 were liquidated, and 3 were placed under bankruptcy proceedings \. The exiting of the SOEs significantly reduced the risk of Government funding of SOE losses \. As a conditionality of FESAL II, many of the loss making energy and infrastructure SOEs increased tariffs and divested non -core assets which improved their financial results\. The district heating companies, railways and coal mining companies running losses submitted restructuring plans\. The Government put in place actions to ensure that major source of funds to the SOE sector --the National Electricity Company\. the gas company, the tax office, the National Social Security Institute and the banking system imposed financial discipline on SOEs \. The Government initiated reforms to improve the liquidation process for SOEs and court administered insolvency procedures \. (c) Reforming the banking system : Conditionalities included the completion of two bank privatization transactions and the preparation of three other bank privatizations \. Privatization transactions for four were completed \. The fifth fell through and a new procedure is under way \. By the end-2000, the share of the private sector in the banking system had increased to 86 percent from about 50 percent in mid-1997\. The Bulgarian National Bank (BNB) continued the process of upgrading its banking supervision capacity \. In addition prudential regulations were improved, including the issuance of regulations on consolidated supervision \. The government and the BNB successfully dealt with the problem of lack of progress in the liquidation of banks that were under court supervised bankruptcy procedures\. (d) Energy restructuring : A Law on energy and energy efficiency was passed by the Parliament, a State Commission for Energy Regulation was established and NEK was unbundled \. In addition NEK raised electricity prices twice in 1999\. The Parliament approved a District Heating Strategy acceptable to the Bank \. Post FESAL II there were delays in implementation of the privatization component of the energy restructuring plan \. 4\. Significant Outcomes/Impacts: The privatization of SOEs and state -owned banks broke the link which caused the quasi -fiscal deficit and money supply to increase so rapidly in the past \. It also set the stage for private sector development and continued growth \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): At the time the project was approved there was a substantial body of evidence from other transition economies to indicate that some privatization processes for SOEs can impede private sector development \. In Bulgaria, the FESAL II would have been a stronger project if it had drawn on this evidence and had specified more clearly the details of the privatization process \. In particular, it would have been useful to more firmly ensure that privatization processes brought in new management and ownership, rather than rely on buyouts by management and employees to any great extent\. In Bulgaria's case MEBOs were favored for a range of purchases which evidence indicates are not as likely as other privatization modes to bring injections of management and capital to restructure SOEs \. Another issue relates to the post -privatization constraints placed on enterprises \. The largest loss-making SOEs were handled by the Privatization Agency \. 90 percent of privatization agency deals included investment commitments and employment arrangements\. This will further slowdown restructuring and adjustment needed by many of the enterprises\. Considering banking sector reforms, although 80 percent of bank assets are now privately owned and credit to the private sector has increased, IMF and Bank documents as well as bankers interviewed in Bulgaria indicated the need for additional reforms for the banking system to function as a financial intermediary \. Currently difficulties are encountered in seizing collateral, in assessing the situation of potential borrowers, and from a Commercial Code that indicates no order of priority for payment of creditors \. These issues could not necessarily have been addressed at the time the loan was designed but they have diluted the impact of FESAL II \. Aside from these a number of broader issues concerning governance were not adequately addressed in the Bank's country assistance strategy \. With the backstopping by the IMF on the privatization agenda (and successful implementation of the IMF program), the Bank had a certain degree of freedom to expand the reforms in areas complementary to privatization itself \. Thus, the Bank had the flexibility to move on to address governance, judicial reform and related issues\. Admittedly these were beyond the scope of FESAL II, but they could have been addressed in a separate adjustment operation \. The lack of progress in these areas also reduced ex-post the relevance and efficacy of FESAL II \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory Please see para 5\. Institutional Dev \.: Modest Modest A substantial amount needs to be done before new institutions have the desired impact on the economy\. Newly privatized banks operating in the absence of an adequate judicial and legal framework are not yet engaging vigorously in new lending\. Sustainability : Highly Likely Likely Concerning the SOE and financial sector reforms, privatization and liquidation of SOEs is unlikely to be reversed \. However, a number of complementary reforms are needed for satisfactory private sector development\. In addition, the prevalence of MEBOs and constraints  imposed by post privatization employment and investment agreements could pose some risk to sustainability and they might reduce growth and employment benefits to the economy and lessen support for reforms over time\. In the energy sector, follow-up actions have to be taken before institutional arrangements will deliver their mandate\. For instance, even though enabling legal and institutional structures are mostly in place, the only element of competition envisaged in Bulgaria's electricity market in the foreseeable future is the bidding process for new capacity \. Bank Performance : Satisfactory Satisfactory Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. NOTE: 7\. Lessons of Broad Applicability: First, complementary public sector reforms for private sector development need to be addressed \. Second, it is important to focus on the quality of privatization which will affect private sector development in the future \. Third, close collaboration with partners (such as the IMF) can help the agenda to move forward \. Fourth, adjustment lending instrument (together with partners) can lead to reform progress in politically sensitive areas such as energy because of the involvement of Government institutions beyond the energy ministry \. 8\. Assessment Recommended? Yes No Why? It was part of a package of four loans that should be assessed as a cluster to understand the Bank's involvement during the transition in the financial and enterprise sector in an economy with stop -and-go policies\. The loan raises interesting coordination issues with the IMF \. The audit will be useful for Bulgaria Country Assistance Evaluation\. 9\. Comments on Quality of ICR: The ICR is of satisfactory quality \. However, the ICR could have tracked the outcomes in the three levels on which privatization was pursued (privatization agency, line ministries and mass privatization )\. It could have highlighted the use of MEBOs, investment commitments and employment arrangements in the privatization transactions \. The implementation of conditionalities in the all important energy sector could have been further elaborated in the main ICR\. This sector has enormous implications for macro /fiscal, social and private sector development \. Finally there is no mention in the ICR of the loan amount \. Project costs and financing are listed as 0\.0 in all columns of annex 2\.

REVIEW

P106445

Panama Health Equity and Performance Improvement Project Description Development Challenge Purpose: Provide better health quality for mothers Panama's rural poor and indigenous communities experience and their children much worse health outcomes than the rest of the population\. Expected Results (include): For example, mortality rates for children under five years old - Provide 200,000 beneficiaries from 47 can be as have reached 2\.4 higher than the national average underserved rural communities access to basic of 19\.9 deaths per 1,000 live births\. health care through these mobile health units to improve mother and child health care, including pregnant women completing at least 3 prenatal\. - Provide more babies with less than 1 year of age Project Description with complete vaccination records, and have more In 2008, the World Bank supported Panama's Health Equity births attended by skilled personnel\. and Performance Improvement Project\. The program uses IBRD Financing: $40 million mobile health teams to provide the rural poor with continuous access to a package of health services known to improve mother and child health care\. The mobile health teams were contracted with the Ministry of Health using a payment scheme that provided them incentives to reach more under- served rural populations\. Photo: © Gerardo Pesantez / World Bank For more information: http://www\.worldbank\.org/projects/P106445/health-equity-performance-improvement-project?lang=en 61

REVIEW

P100218

 Document of The World Bank Report No: ICR00002182 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-56894) ON A MULTI-DONOR TRUST FUND (MDF) FOR ACEH AND NIAS GRANT IN THE AMOUNT OF US$42 MILLION TO THE REPUBLIC OF INDONESIA THROUGH THE AGENCY FOR RECONSTRUCTION AND REHABILITATION FOR ACEH AND NIAS FOR THE INFRASTRUCTURE RECONSTRUCTION ENABLING PROGRAM June 20, 2012 Indonesia Sustainable Development Unit (EASIS) Sustainable Development Department East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective June 15, 2012) Currency Unit = Indonesian Rupiah IDR 1,000 = US$0\.107 US$1 = IDR 9,385 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS BRR Bureau for Rehabilitation and Reconstruction for Aceh and Nias EIA Environment Impact Assessment FM Financial Management FMR Financial Management Report GOI Government of Indonesia IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDA International Development Association IFR Interim Financial Report IPM Infrastructure Program Management IREP Infrastructure Reconstruction Enabling Program LARAP Land Acquisition and Resettlement Action Plan MDF Multi-Donor Trust Fund for Aceh and North Sumatra later simplified to Multi-Donor Trust Fund for Aceh and Nias MIS Monitoring Information System MOF Ministry of Finance MoPW Ministry of Public Works MOU Memorandum of Understanding NCB National Competitive Bidding NGO Non-Governmental Organization O&M Operations and Maintenance PIU Project Implementation Unit PDCS Planning, Design and Construction Supervision PMU Project Management Unit TA Technical Assistance Vice President: Pamela Cox Country Director: Stefan G\. Koeberle Sector Manager: Franz R\. Dress-Gross Task Team Leader: Khairy Al-Jamal ICR Team Leader: Khairy Al-Jamal ICR Primary Author: Reda Hamedoun  Republic of Indonesia Infrastructure Reconstruction Enabling Program CONTENTS Data Sheet A\. Basic Information \. i B\. Key Dates \. i C\. Ratings Summary \. i D\. Sector and Theme Codes\. ii E\. Bank Staff \. ii F\. Results Framework Analysis \. iii G\. Ratings of Project Performance in ISRs \.v H\. Restructuring (if any) \. vi I\. Disbursement Profile \. vi 1\. Project Context, Development Objectives and Design \.1 2\. Key Factors Affecting Implementation and Outcomes \.6 3\. Assessment of Outcomes \.15 4\. Assessment of Risk to Development Outcome \.18 5\. Assessment of Bank and Borrower Performance \.18 6\. Lessons Learned\.21 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\.23 Annex 1\. Project Costs and Financing \.25 Annex 2\. Outputs by Component\.26 Annex 3\. Economic and Financial Analysis \.29 Annex 4\. Grant Preparation and Implementation Support/Supervision Processes \.30 Annex 5\. Beneficiary Survey Results \.33 Annex 6\. Stakeholder Workshop Report and Results\.34 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \.35 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \.38 Annex 9\. List of Supporting Documents \.41 MAP \.42 A\. Basic Information ID-Aceh-Infrastructure Reconstruction Country: Indonesia Project Name: Enabling Program (IREP) Project ID: P100218 L/C/TF Number(s): TF-056894 ICR Date: ICR Type: Core ICR REPUBLIC OF Lending Instrument: ERL Borrower: INDONESIA Original Total US$42\.00M Disbursed Amount: US$35\.655M Commitment: Revised Amount : US$42\.00M Environmental Category: B Implementing Agencies: Bureau for Rehabilitation and Reconstruction for Aceh and Nias (BRR); and Ministry of Public Works (MoPW) Cofinanciers and Other External Partners: Multi-Donor Trust Fund (MDTF) B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 02/17/2006 Effectiveness: 09/13/2006 01/07/2008 01/10/20091 Appraisal: 03/27/2006 Restructuring(s): 04/15/2009 06/30/20102 Approval: 06/30/2006 Mid-term Review: 09/30/2008 12/19/2008 Closing: 10/31/2009 12/31/2011 1\. Shifting costs between components and reviewing the scope of the IPM and PDCSs through operational Bank clearance without formal amendment\. 2\. The date in the project portal was misquoted as June 28, 2010\. C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General water, sanitation and flood protection sector 25 9 Ports, waterway and shipping 25 18 Roads and highways 25 67 Water supply 25 6 Theme Code (as % of total Bank financing) Other urban development 100 100 E\. Bank Staff Positions At ICR At Approval Vice President: Pamela Cox Jeffrey Gutman (acting) Country Director: Stefan G\. Koeberle Andrew D\. Steer Sector Manager: Franz R\. Drees-Gross Keshav Varma Project Team Leader: Khairy Al-Jamal Aniruddha Dasgupta ICR Team Leader: Khairy Al-Jamal ICR Primary Author: Reda Hamedoun ii F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Support the BRR's strategy for infrastructure reconstruction by providing high quality technical assistance (TA) in order to ensure that infrastructure program management, planning, design and construction management follow adequate standards, and to support BRR in overall coordination of the infrastructure reconstruction program\. Revised Project Development Objectives (as approved by original approving authority) The development objectives and key indicators were not revised\. (a) PDO Key Performance Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Post Tsunami infrastructure reconstruction and development Monitoring Indicator 1 : Framework for Aceh and Nias Value Framework Framework was quantitative or N/A developed and N/A complete and applied Qualitative) applied Date achieved 09/01/2006 12/31/2011 12/31/2011 12/17/2010 Comments (incl\. % Achieved achievement) Indicator 2 : A strategic plan for infrastructure reconstruction in Aceh and Nias exists Plan exists and has Value Plan to be prepared been utilized quantitative or N/A N/A and utilized throughout the Qualitative) project\. Date achieved 09/01/2006 12/31/2011 12/31/2011 12/31/2011 Comments Achieved (incl\. % achievement) Donors and stakeholders are consulted on the plan and design of projects Indicator 3 : that support implementation of the strategic reconstruction plan Donors are fully informed on program Donors are and project activities, Value continually updated now totaling quantitative or N/A on implementation of N/A US$ 207 million of Qualitative) the strategic infrastructure from reconstruction plan\. the strategic plan and additional financing of US$ 36\.7 million Date achieved 09/01/2006 12/31/2011 12/31/2011 12/17/2010 Comments Achieved iii  Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years (incl\. % achievement) Indicator 4 : Proper safeguard measures are integrated into project preparation plan IPM consultants established a project tracking system that All IRFF supported incorporated all Value Safeguard sub-projects will safeguard aspects of quantitative or framework is N/A adhere to the projects\. All Qualitative) established\. safeguard framework\. subprojects supported by IRFF adhered to the framework\. Date achieved 09/01/2006 12/31/2011 12/31/2011 12/31/2011 Comments (incl\. % Achieved achievement) Projects funded by BRR through IRFF are matched to articulate demands Indicator 5 : of local governments\. All IRFF investments Initial and updated were included in the investments are annual investment discussed and agreed plans, and identified Value on with local as a priority by local quantitative or None government and other N/A government\. All Qualitative) stakeholders\. All MOUs for O&M and O&M MOUs to be asset transfer were signed with local signed for local government\. government project\. Date achieved 09/01/2006 12/31/2011 12/31/2011 12/17/2010 Comments Achieved (incl\. % achievement) Indicator 6 : Works meet the specifications of the technical designs\. In general, quality of Value All works comply works is good and in quantitative or N/A with the design N/A compliance with the Qualitative) specifications\. design specifications\. Date achieved 09/01/2006 12/31/2011 12/31/2011 12/31/2011 Comments 95% Achieved as two subprojects were not completed and required design (incl\. % reviews\. achievement) Projects are of higher quality standards than those prepared and Indicator 7 : implemented prior to the TA\. iv  Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years In general sub- projects prepared under the IREP were Value All sub-projects of higher quality and quantitative or N/A under the TA will be N/A bids were subject to Qualitative) of higher standards minor variations and designs were more detailed\. Date achieved 09/01/2006 12/31/2011 12/31/2011 12/31/2011 Comments (incl\. % Achieved achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : All Consultants are appointed and functioning\. All consultants All consultants Value including IPM, No consultant is including IPM, quantitative or N/A PDCSs and FM selected PDCSs and FM are Qualitative) were selected and selected\. functional Date achieved 09/01/2006 03/31/2007 03/31/2007 03/31/2007 Comments (incl\. % Achieved achievement) G\. Ratings of Project Performance in ISRs Development Implementation Date ISR Actual Disbursements No\. Objective Performance Archived (US$ millions) DO IP 01 03/20/2007 Moderately Moderately 0\.00 Satisfactory Satisfactory 02 01/04/2008 Moderately Moderately 7\.28 Satisfactory Satisfactory 03 06/30/2009 Moderately Moderately 17\.80 Satisfactory Satisfactory 04 06/30/2010 Moderately Moderately 28\.13 Satisfactory Satisfactory v  05 03/29/2011 Moderately Moderately 33\.99 Satisfactory Satisfactory 06 12/25/2011 Moderately Moderately 34\.89 Satisfactory Satisfactory H\. Restructuring (if any) Reason for Board ISR Rating at Amount Disbursed Restructuring Restructuring & Approved Restructuring at Restructuring in Date Key Changes PDO change DO IP US$ Millions Made 01/07/2008 MS MS 7\.28 Review the scope of the impacted area\. 01/10/2009 MS MS 16\.28 Review the scope of IPM and the PDCSs and shifting costs between components\. 04/15/2009 MS MS 17\.8 Restatement of GA, MoPW became the implementing Agency after closure of BRR and extension of Closing Date to June 30, 2010\. 06/30/2010 MS MS 28\.13 Extension of the closing date to 12/31/2011\. I\. Disbursement Profile vi vii 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal Country and sector context The tsunami of December 26, 2004 killed or left missing more than 230,000 people in Indonesia, and the total reconstruction and development program for Aceh and Nias was estimated to cost up to US$9 billion through 2009\. The estimate of the damage to the housing sector alone was US$ 1\.4 billion, with the demand for new housing ranging from 93,000 to 120,000 units\. The government of Indonesia (GoI) created a dedicated Rehabilitation and Reconstruction Agency– Badan Rehabilitasi dan Rekonstruksi (BRR) - to lead the recovery efforts\. The BRR’s priorities were to (i) strengthen coordination between donors and government agencies; (ii) ensure pledges for infrastructure are prioritized and matched with sector needs; (iii) improve the quality and pace of infrastructure reconstruction supporting housing/settlements; (iv) develop institutional resources for sustainable infrastructure operations and services after the BRR’s operating period; (v) improve cost effectiveness through quality management and competitive procurement; and (vi) and increase the efficiency and flexibility of the capital works planning and budgeting process\. Rationale for Bank Assistance As a leading international development agency in the area of post-disaster reconstruction, with a longstanding engagement with relevant government agencies in Indonesia and around the world, the Bank was well-position to support BRR in its reconstruction efforts\. In addition, the Bank’s involvement in Indonesia’s community-driven development program also provided a platform to quickly replicate stakeholder consultation and participation mechanisms and to scale up financing to specifically address reconstruction needs\. GoI had also asked the Bank to take a lead in coordinating the donor community, requesting suggestions on how this could be handled in practice\. In March 2005, the Bank formally established the "Multi-donor Trust Fund for Aceh and North Sumatra" (MDTFANS), later simplified to "Multi Donor Fund for Aceh and Nias (MDF)"\. The Bank also provided at the same time a grant of US$25 million as a contribution to the MDF\. In all, 15 funding agencies contributed an initial US$550 million to the MDF\. The Bank and the European commission channeled all their support through the MDF, while the Nordic countries, the Netherlands and Belgium provided half or more of their funding through the MDF\. Project Background and development It was noted that most of the funds pledged to support rehabilitation and reconstruction in Aceh were quickly programmed by the GoI, leaving mostly gaps to finance minimum needs in certain critical areas\. BRR’s strategy, therefore, was to focus on the remaining 1 available funds to ensure that they were allocated to cover these gaps\. Of the donor resources, the MDF was the largest source of programmable funds with US$230 million still available to be programmed at the time IREP was approved\. Among other priorities, BRR’s medium-term strategy called for the main utilization of the remaining MDF resources for the reconstruction and development (i\.e\., building back better) of infrastructure in the areas most damaged by the tsunami and earthquake in Nias and Aceh\. In order to guide the investment program during BRR’s assignment period, BRR developed an Infrastructure Reconstruction Strategy\. This strategy encompassed three phases: (i) the execution of the ongoing MDF-supported Immediate Action Plan (IAP) agreed upon in November 2005 to meet urgent infrastructure needs; (ii) the proposed Infrastructure Reconstruction Enabling Program (IREP), which would provide technical assistance for the mobilization of human resources and technical support to BRR, provincial, and local governments; and (iii) investment in infrastructure works by BRR and other donors, including through a proposed Aceh Infrastructure Reconstruction Facility (IRFF)\. The implementation of IRFF would be financed through the MDF and the GoI and the technical support would be managed under IREP\. IREP was designed to work within the prevailing infrastructure framework and strategies of GoI, and with numerous agencies and donors involved in the reconstruction effort in Aceh and Nias\. In conjunction with IREP, local and provincial governments were expected to build project management capacity; prepare infrastructure development plans, feasibility studies, detailed designs, comprehensive procurement planning; and provide support during construction supervision\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The development objective of the project was to support BRR's strategy for infrastructure reconstruction by providing high quality technical assistance in order to ensure that infrastructure program management, planning, design and construction management follow adequate standards, and to support BRR in overall coordination of the infrastructure reconstruction program\. The Key Performance Indicators for this development objective at appraisal were: 1\. Development of a sustainable and strategic long-term infrastructure reconstruction plan for Aceh and Nias; 2\. Donors and other stakeholders are consulted on the infrastructure reconstruction plan and design projects that support implementation of the strategy; 3\. Technical designs created during project appraisal ensure appropriate quality measures have been included; 4\. Consultant teams and local and provincial governments prepare projects that incorporate adequate procurement and financial management practices and safeguards measures; 2 5\. The scale of funding committed to implement projects submitted by local and provincial governments to BRR as part of their AIPs; 6\. Projects are of higher quality standards than those prepared and implemented prior to the TA; 7\. Increased participation of local and provincial government staff to incorporate appropriate safeguards measures and financial management and procurement practices during project design and implementation\. In principle, the PDO and the performance indicators are consistent in the project documents with very minor discrepancies between the PAD and the Legal Agreement\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The development objectives and key indicators were not revised\. 1\.4 Main Beneficiaries In a narrow sense, the direct beneficiaries were the BRR, Ministry of Public Works (MoPW), project management unit (PMU), project implementation unit (PIU), and local consultants who saw their capacity in infrastructure management, design, monitoring and construction supervision improve\. However, the true beneficiaries in a broader sense were the people of Aceh and Nias (around 1\.6 million inhabitants), who benefitted from the strengthened capacity of these entities to plan and implement infrastructure reconstruction projects in the disaster affected area\. IREP was strategically integrated with the Infrastructure Reconstruction Financing Facility (IRFF), another project executed with the Bank acting as Partner Agency on behalf the MDF\. To a large extent, IRFF focused on financing the infrastructure sub- projects prepared with technical assistance from IREP\. IREP worked with 12 local governments: 7 local governments in the West Coast Logistical Area, 2 in Nias, the remaining 3 local governments being Aceh Besar, Banda Aceh and Sabang\. At the provincial level, IRFF included strategic projects, prepared by the provincial government with IREP support\. Some of these projects were located outside the jurisdiction of the 12 local governments to cover the East Coast and central parts of Aceh but this was consistent with amendment no\. 1 to the Grant agreement\. 1\.5 Original Components (as approved) The US$42 million program consisted of five consultancy TA components to be implemented over a three-year period: ï‚ Component 1 - Infrastructure Program Management (US$19\.5 million) to support the mobilization of a highly skilled Infrastructure Program Management (IPM) team deployed within the existing BRR structure to coordinate the infrastructure program and its activities at the macro level\. These experts were mobilized to provide assistance to BRR in eight specific areas: (i) overall strategic infrastructure planning for Aceh and Nias, as per the BRR Infrastructure Reconstruction Strategy; (ii) 3  management of the infrastructure reconstruction program in Aceh and Nias; (iii) review of local and provincial governments’ plans for infrastructure investment as a basis for BRR funding; (iv) quality control, supervision, and monitoring o f BRR- funded infrastructure projects; (v) procurement support; (vi) safeguard support for BRR-funded infrastructure projects; (vii) anti-corruption support for BRR-funded infrastructure projects; and (viii) management and coordination of other IREP consultant teams\. At all times, Consultants in Components 2, 3, 4, and 5 reported directly to BRR, not the IPM Consultants\. The first two tasks of this component referred to the entire infrastructure reconstruction program throughout Aceh and Nias, as these areas encompassed the work of both the government and other development partners\. The remaining six activities focused on BRR funded activities\. ï‚ Component 2 - West Coast Infrastructure Planning, Design, and Construction Supervision (US$l0 million) to finance a technical team to undertake the planning, project preparation, and implementation work for the West Coast Logistical Area\. This team provided assistance to the local governments in three main areas: (i) strategic planning; and (ii) project design and implementation; and (iii) institutional development support, including the development of a long term maintenance strategy, and training\. The assignment led to the mobilization of a project team with skills in infrastructure planning and program management, institutional development, implementation methods of essential services delivery, technical design and procurement, construction planning and management, and construction supervision\. As planned, all works were conducted in close collaboration with local governments and public works and in consultation with local communities\. ï‚ Component 3 - Nias Infrastructure Planning, Design, and Construction Supervision (US$5 million) to support mobilization of a technical team to undertake the planning, project preparation, and implementation work for the Nias logistical area\. As planned, the work focused on repairing the transport network\. The consultant team provided assistance to the local governments involved in three main areas: (i) strategic planning; (ii) project design and implementation; and (iii) institutional development support and training\. All works were conducted in close collaboration with local governments and public works and in consultation with local communities\. ï‚ Component 4 - Strategic Infrastructure Project Planning, Design, and Construction Supervision (US$6 million) to finance a technical consulting team to undertake the formulation, investment planning, design, and project implementation work for strategic infrastructure projects at the provincial and or national level, or with local governments not covered by components 2 and 3\. This component was designed to strengthen the ability of BRR and that of the relevant governments to carry out project identification, appraisal, and implementation\. The Provincial Government participated in the selection and development of the “strategic projectsâ€? and participated in management of the TA consultants\. The infrastructure projects financed under this TA were mainly related to ports, and key roads managed by provincial, national or local government entities\. 4 ï‚ Component 5 - Financial Management of BRR-financed Projects (US$1\.5 million) to strengthen BRR’s capacity to put in place the financial management framework required to ensure that it meets all its fiduciary responsibilities with respect to this TA and other BRR investment projects\. This assistance was provided by a team of experts that, initially, was located within BRR and later worked side by side with the PMU at the MoPW\. Financial management of BRR-financed projects included PMU and PIUs to establish and maintain financial accounting and statement arrangements for project activities undertaken and expenditures incurred at all project locations, including monitoring the operation of internal controls over implementation of the contracts\. 1\.6 Revised Components None\. 1\.7 Other Significant Changes: ï‚ Amendment No\.1, “Review of the Project Areaâ€?, January 7, 2008: This amendment effected the change in the project service area and introduced the “West Coast Logistical Area" which covers the West Coast Kabupatens of Aceh Jaya, Aceh Barat, Nagan Rava, Aceh Barat Daya, Aceh Selatan, Aceh Singkil, Simeulue, Aceh Basear, Banda Aceh and Sabang, and such additional Kabupatens as may be agreed by the Association in writing\. The original Legal Agreement referred only to Aceh Jaya, Aceh Barat, Nagan Raya, Aceh Barat Daya, Aceh Selatan, Aceh Singkil and Simeulue\. ï‚ Amendment No\. 2 “Grant Agreement Amendment and Restatementâ€?, April 15, 2009: BRR closed on April 16, 2009, and the implementation of the project was entrusted to the national Ministry of Public Works (MoPW)\. The institutional and legal transition to MoPW was carried out smoothly\. Thus, the implementing agency for IREP (and IRFF) became the MoPW\. The new PMU was tasked to handle the remaining construction works in Aceh and Nias, and was staffed with many former BRR officials for a seamless continuation of the project implementation\. The IREP grant agreement was amended to reflect the new arrangements and to extend the closing date to June 30, 2010 in order to match the closing date of IRFF, at that time\. ï‚ Amendment No\. 3 “Extension of closing dateâ€?, June 30, 2010: the Regional Vice President approved a second closing date extension, which brought the cumulative extension to 26 months\. ï‚ Shifting costs between components, January 10, 2009: As detailed in Annex 1, the actual costs by component changed substantially from those estimated at appraisal\. The main change was to reduce the resources dedicated to Components 1 and 2, and increase financing for Component 4\. This was done to accommodate changing needs and priorities, to take advantage of opportunities to increase project effectiveness and efficiency, to make the best use of project resources and to balance the 5  implementation schedules of components 2, 3 and 4\. The changes were requested by the government, agreed by the Bank, and did not require amendments of the grant agreement\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry Institutional design: Four months after the devastating tsunami and earthquake, the GoI established the BRR to manage the reconstruction program of Aceh with an estimated budget of $6-9 billion\. According to the end of first year assessment (December 2005), the first reconstruction priority was the provision of housing (which was well underway and progressing adequately)\. However, as the second reconstruction priority (rebuilding and restoring essential infrastructure) made very little progress, BRR recognized the need to apply better spatial planning to handle the reconstruction program\. Accordingly, Aceh and Nias were divided into five areas (North Coast, West Coast, Nias, East Coast and Middle Aceh)\. BRR recognized the complexity of the scope and diversity of the skills needed to implement the reconstruction program and the need to centralize the program management under a limited number of relatively large consultancy services\. The thinking was to expedite the reconstruction process and to ensure adequate design and construction quality, which led to the design of the project under its five components, as described above\. Based on its long experience and technical resources to respond to emergency situations, the World Bank was requested to prepare IREP\. Lessons learned from similar operations: In order to optimize the design of IREP, BRR incorporated lessons learned from its first year of operation\. This included: (i) the need for supplemental capacity in the BRR to implement and supervise infrastructure projects; (ii) the imperative that local and provincial governments identify their priorities within a framework of good practice; (iii) coordination across development partner and government reconstruction programs; (iv) the allocation of sufficient resources for close supervision of works to ensure quality construction; and (v) the importance of engaging communities and other stakeholders throughout the project cycle\. BRR developed a Blueprint for projects before Component 1 was in place, due to the time pressures of the reconstruction agenda and BRR’s own short life term\. BRR anticipated that this list would need to be revised at some stage and that the designs would need to be updated\. The scope of services of the PDCS consultants accounted for such a need and all construction works under IRFF were subject to design review prior to their tendering\. Moreover, the priority list was adjusted to reflect the changing demands from the local authorities and to account for socio-economic and political factors (especially along the East Coast and Middle Aceh)\. Design of the implementation arrangements: During the project's preparatory stage, within the overall time constraints, the implementation arrangements were detailed and set up satisfactorily (including necessary fiduciary requirements related to procurement, 6 disbursement and financial management)\. This was instrumental in the satisfactory implementation of the project\. By preparing the project in six months, the preparation team also distinguished itself in terms of responsiveness, a crucial attribute in the development of emergency operations\. BRR had established the PMU, led by senior BRR staff, to oversee project implementation and to interface with all consultants and donors with the support from the IPM\. Assessment of risks: The financial management and procurement risks were rated as substantial and high respectively, due to the limited capacity of BRR\. However, the project design addressed these risks adequately through: (i) the hiring of the FM consultant as described in component 5 of the project; (ii) the hiring of a Procurement Advisory (PA) team financed by DFID; (iii) the activation of internal FM controls; (iv) application of BRR and MoPW internal audits; and (v) the hiring of the services of external audits\. All in all, the project responded to GoI’s reconstruction priorities to produce a simple design that avoided implementation difficulties\. However, in hindsight, several areas were identified where project preparation could have been improved: ï‚ Sub-project identification: The process of ex-ante definition of the portfolio seemed consistent at the time with the short timeframe available\. However, this method made it inevitable that some important projects would be missed, for some feasibility studies to be insufficient at the outset (in water supply or ports) or for some projects to be included for political reasons rather than reconstruction realities\. Bank supervision missions noted that there was pressure from BRR to approve incomplete and preliminary designs\. ï‚ Capacity Building: IREP design aimed at achieving both short-term reconstruction objectives and longer-term objectives of enabling and capacity building of local governments\. Though an emphasis on capacity building was rightly identified during project preparation as crucial to ensure the sustainability and maintenance of the assets produced by the program, the lack of resources devoted to it made its achievement unrealistic\. With a large reconstruction program to deliver in a tight time frame and an under-sourced capacity building component, planning, procurement and contract management could not always be conducted in a satisfactory manner\. ï‚ Institutional design: IREP designed a one-door communication system, in which any communication between the consultants and the Bank, as well as coordination with related central government level agencies would be carried out through the PMU\. A good concept in principle, this communication system turned out to be burdensome for all parties involved\. For an understaffed PMU, it meant an increased workload while it had to manage a large infrastructure program\. For the consultants, it resulted in incomplete information sharing and time delays in receiving guidance and instructions, as the flow of information with the gatekeeper (the PMU) became increasingly imperfect\. This situation was even clearer when the BRR was closed and the MoPW became the implementing agency\. For the Bank, it meant putting in place 7  a track for information gathering and monitoring that was independent from the PMU in some instances, which led to an unnecessary increase in the workload for consultants and the Bank task team\. ï‚ Role of Infrastructure Program Management (IPM) Team: The IPM was designed to assume the responsibilities of a “super-consultantâ€? and trusted advisor to the BRR, which recognized during project preparation that it lacked the adequate capacities in terms of strategic planning and program management\. However, this role proved to be too broadly designed and overly ambitious as it tasked the consultant to provide assistance in eight different areas (strategic infrastructure planning, management of infrastructure, review of local and provincial government plans, quality control, procurement, safeguards, anti-corruption efforts, and management and coordination of the four other IREP consultant teams)\. 2\.2 Implementation ï‚ Scope, timing, and effectiveness of IPM consultancy\. In mid-2008, it was decided that IPM should limit its focus to areas of core implementation, including program management and quality assurance, and reduce its engagement in capacity building\. IPM had been delivering work outside of its original TORs in response to the client’s requests, while at the same time having delays in the submission of key deliverables\. After consultation with the Bank, the BRR decided to refocus IPM resources to optimize delivery of IRFF sub-projects and to save costs\. The IPM consultant was mobilized late, after BRR had started its planning\. This undermined the ability of IPM to influence strategic planning at the early stage and did not help to properly position IPM to be in the driver’s seat in terms of leading the reconstruction planning process\. Moreover, the improper use of funds by the IPM consultant as proven in 2010 led to a lack of trust between the consultant and BRR and later MoPW\. Accordingly, MoPW decided not to extend the contract of the IPM consultant beyond its amended end date in March 2010\. ï‚ Flexibility in allocating resources between contracts\. In the course of implementation, the five consultancy contracts financed under IREP were amended to reflect evolving priorities, adequately balance the allocation of resources among consultants, and adapt to the closure of BRR\. Due to the dynamics of the reconstruction program, this proactive flexibility on the part of BRR and MoPW was pivotal in facilitating the mobilization of adequately staffed international consultants to ensure proper designs and good construction quality\. This was particularly true for the Planning, Design, and Construction Supervision (PDCS) activities\. BRR regularly reassessed whether the PDCS consultants had the right resources in place, and contracts were amended to reflect these assessments\. ï‚ Restructuring: As explained in more detail in Section 1\.6, the project was restructured three times to clarify the geographic scope of the project, formalize the transition to a 8  new implementing agency, and extend the closing date twice\. The restructurings were fairly routine in nature, but helped ensure proper targeting, smooth implementation, and alignment of IREP with IRFF (and in particular with the additional financing and extension of IRFF)\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design: The project design included well-conceived, appropriate outcome indicators that were clearly linked to the development objectives, verifiable either quantitatively or qualitatively, and attributable to project interventions\. There were some minor discrepancies between one section of the PAD and another, but the substance was the same, and the intent was clear\. Due to the importance of the M&E in both guiding project implementation and assessing outcomes, and the shortcomings in the capacity of BRR, the design called for the IPM to provide support in carrying out the M&E functions\. The design called for the development of a computerized Monitoring Information System (MIS) which was expected to facilitate the monitoring of outcome indicators and routine project implementation and financial management for both IREP and IRFF\. M&E Implementation: The IPM successfully produced regular M&E reports, which were integral parts of the Semi Annual Reports that compiled data provided by the PDCS and FM consultant (and confirmed by IPM quality assurance staff)\. In addition, the PMU developed a Monthly Portfolio Review for a quick monitoring of the progress of all sub- projects under IRFF and updated the performance indicator matrices for both IREP and IRFF\. The efforts of IPM to develop a stand-alone computerized MIS were not fully successful and the system was never used as the focal database for the program\. Development of the system took longer than expected, and ultimately the BRR developed its own MIS system which made a separate system specifically for IREP redundant and unnecessary\. While the MIS was intended to monitor both physical progress and financial performance, the shortcomings and delays in the MIS system did not significantly hinder monitoring of the KPIs, many of which were qualitative in nature\. M&E Utilization: The data and information gathered from the field were compiled by the IPM consultant and communicated to the PDCS consultants to review the designs of some sub-projects\. This is clear in some roads projects where the soil turned to be unstable and the need to strengthen the road shoulders was eminent in order to mitigate the impact of potential landslides\. Moreover, in order to maximize the returns from BRR’s MIS, it had been centrally connected to Bappenas’ MIS which enabled sharing the project information at the central level\. 2\.4 Safeguard and Fiduciary Compliance Procurement 9 All major procurement, such as the selection of the design review and construction supervision consultants, FM consultant, and program management consultant was performed in a timely fashion and was generally satisfactory over the course of the project\. BRR was assisted by the Procurement Advisor (PA), financed by DFID, to prepare all of the early procurement packages\. Only the delay in the appointment of individual consultants for program management and supervision of the sub-projects carried out under the relatively minor gaps of IRFF was moderately unsatisfactory\. IREP also provided support to BRR and the MoPW to set up adequate procurement procedures for the procurement of the 56 contract packages (signed value of US$223\.62 million) carried out under IRFF and followed by four contract packages (signed value of US$31\.51 million) under IRFF Additional Financing\. In particular, IPM was tasked to: ï‚ Provide direct support to BRR and local government procurement activities during the first 1\.5 to 2 years\. ï‚ Identify and agree with BRR alternate and appropriate procurement procedures and regulations for each set of investments\. ï‚ Assist the preparation of tender documents for international and national procurement on BRR, National or World Bank Guidelines\. ï‚ Provide guidance on procurement, contract packaging and bid documentation to other agencies\. ï‚ Recommend the contract packaging and detailed strategy of the works for BRR\. To this end, IPM provided comprehensive support throughout the procurement process and proceeded to the establishment of a Central Procurement Unit (CPU) within BRR\. The Bid Documents were standardized for National Competitive Bidding (NCB), applying to works costing up to US$5\.0 million, International competitive Bidding for large civil works (ICB large works) costing above US$10\.0 million\. The procurement manual was prepared detailing the procurement implementation steps and decision- tree for the procurement committees and CPU\. The standard operating procedures were designed\. The packaging of works, identification of appropriate document procedures and regulations for the identified sub-projects were developed\. IREP, through IPM, also provided advice to the CPU on the finalization of the procurement plans\. In addition to this, the IPM advised the procurement committees on bid evaluation, advised the CPU on procurement decisions, investigated complaints, reviewed the bid evaluation reports, addressed comments from the Bank, prepared winner notifications, letters of acceptance and draft contracts, revised (after the Bank supervision mission of September 2009) the General Conditions of Contract Clause 38 for both NCB and ICB contracts to provide an allowance for physical contingencies or provisional sums for unforeseen items, and prepared the procurement completion report of the 56 IRFF contract packages\. As a result, the IRFF procurement phase was completed in 18 months with an average time for procurement from advertising to contract signing of 150 days for NCB and 210 10 days for ICB\. The Bank supervision mission of December 2008 noted that procurement process was being carried out efficiently and in accordance with the scheduling process\. Financial Management The FM aspects were in general in compliance with Bank procedures (and with additional standards as the financial controls included a Supreme Audit evaluation report, as well as an annual external audit evaluation report)\. The external audit reports also concluded with unqualified compliance\. However, the following issues were identified during the early stages of project implementation: ï‚ Delayed payments during project implementation: The delays adversely affected the PDCS consultants’ work and their ability to retain staff and conduct field supervision\. The delays were mostly due to the bureaucratic complication of yearly reappointment of PPK/Satkers who had responsibility and authority in the budget allocation (DIPA’s) process\. However the PPK/Satker reappointment delay was reduced by PMU and MoF at the Bank prompting from three months to one month\. ï‚ The Interim Financial Report (IFR) submissions were chronically late, despite the Bank missions’ systematic reminders that PMU (through IREP 5) should submit them 45 days after each quarter closes\. The Bank also recommended that the PMU should implement a financial penalty to any underperforming consultants who submitted their reports late\. These delays were also a reflection of the dysfunctional MIS, as the FM consultant (IREP 5) could not rely on a comprehensive and up to date monitoring database and information flows with the three other consultants (IPM and the three PDCS) were not smooth\. IREP 5 did not have access to some contract amendments, or IPM did not receive updated physical progress information from PDCS in a timely manner\. Numerous occasions arose where the FM consultant received conflicting information from the contractors and the PDCS consultant on the progres of works, especially in Nias\. These delays improved during the later stages of the project as the FM consultant proactively compiled and consolidated IPM and PDCS reports\. ï‚ The financial control systems were less than satisfactory as the oversight role of IREP 5 was limited\. IREP 5 did not have adequate access to all documents and was unable to verify all payments as per their TORs and project SOPs\. A Bank supervision mission in April 2009 noted that only 30% of payments were verified by the FM consultant\. Corrective measures, including that no payment request should be processed without prior verification from the FM consultant, were raised by the Bank and led to the gradual improvement of FM oversight as noted in the ISRs\. Environment Although IREP’s scope encompassed only the procurement of services to support infrastructure reconstruction, the PAD noted that it would have, in practice, the effect of programming very significant resources for reconstruction in Aceh and Nias\. Key 11 environmental impact areas to be considered included: resource extraction impacts (primarily sourcing of sand, gravel and other quarry material) and construction impacts (excavation, fuel spills, noise, dust, obstruction to drainage, pollution and sedimentation of water courses)\. The approach followed was to task the IPM team to support BRR efforts in meeting the environmental safeguards requirements by providing advice to BRR on all safeguards- related issues and in assisting it in drafting action plans, preparing an Environmental strategy for approval by BRR, engaging additional and specialist consulting support to prepare all required social and environmental studies (AMDAL, UKL/UPL, and LARAP) and to ensure that contractors and suppliers operated in accordance with accepted contractual safeguard requirements\. It was agreed from the start that the Indonesian AMDAL legislation and procedures would satisfy the Bank’s requirements, particularly for the planning and design of the packages\. During the 2007 Bank supervision mission, the Bank and BRR agreed to implement a modified system of quality assurance designed by the IPM safeguards team that was set out in a draft Environmental Management and Monitoring Protocol\. The Protocol linked the design and planning phase to the implementation of the project and applied to all project packages\. In effect, this created the Construction Environmental Action Plan (CEAP) as a unique feature applying to all IRFF sub-projects\. However, 22 projects which were already approved or in the procurement stage at the time of the 2007 supervision mission were excluded from the new CEAP requirement\. Overall, environmental management during implementation was satisfactory, and the Bank task teams showed serious interest and concern for good safeguard management\. This engagement was particularly visible in the following areas: ï‚ Regulatory requirements, including Bank review and clearance: Most regulatory requirements were met, and approval by GoI and review and clearance by the Bank were issued\. It must be noted, however, that some environmental assessment studies were not up to Bank standards, which cleared some with the condition that a supplementary CEAP be done for the construction stage\. Also, the Bank’s environmental specialists reviewed most AMDAL studies received, plus a sample of the UKL/ UPL documents, and their quality was considered to be generally acceptable\. ï‚ Bank supervision: In addition to the Bank’s regular supervision missions, Bank staff based in Banda Aceh carried out periodic field visits to review construction progress, quality and safeguards aspects\. As a matter of practice, the key findings were provided immediately to the BRR, IPM and the three PDCS upon return from the field, with detailed recommendations and target dates for completion of actions\. ï‚ Environmental monitoring, reports and actions: The environmental monitoring site visits and subsequent reports by the PDCS consultants added significant value in terms of quality improvement of implementation\. A number of serious design flaws 12  were identified by these field visits\. Actions for improvements, including specific instructions to the contractors by the supervision engineers, were recommended by the monitoring teams\. They also provided coaching and mentoring to contractors and supervision field staff on how to do better environmental management\. ï‚ Interventions addressed at contractors: The CEAP model proved to very useful and positively impacted environmental performance under the construction contracts\. For instance, a template for a CEAP for a typical road project was prepared by the IPM consultants, which helped to improve the quality of the plans, and ultimately the quality of implementation\. Two other contracts (Calang Port and Kota Sigli WS) used a CEAP prepared with the help of the PDCS consultants and implementation quality was found to be generally better\. Social Safeguards Social safeguard policies triggered by IREP were, as outlined in the PAD, involuntary resettlement and indigenous peoples\. Although, the actual supervision and monitoring of land acquisition/resettlement and compensation was within the scope of IRFF (IREP was only tasked with providing consultancy services in this area), it should be noted that timely compensation was provided for the ten sub-projects involving land acquisition\. Bank supervision missions regularly provided updates on the status of land acquisition and documentation, and monitored the submission of IPRs\. Where specific issues arose, the Bank was pro-active and diligent\. When the Tj\. Meulaboh-Pante Cermin kabupaten road subproject was about to acquire a piece of land with an old house on it, the Bank requested IPM to confirm that a negotiation between the BRR and land owner would be done properly, that compensation levels would be set at or above the market price and that remaining land plots could be used for productive activities\. IPM was tasked to provide advice to BRR, help it prepare social studies, and assist in ensuring that all social safeguards requirements were met\. It was agreed for social safeguards that the project would strictly follow Bank policies and procedures (the main areas of difference between Bank and local policy included land acquisition, compensation, resettlement, indigenous people, gender and social inclusion)\. To this end, IPM developed social management plans for any subproject with a potential social impact on surrounding communities, such as the Lohseumawe Drainage and Reservoir project and Calang-Meulaboah Road\. Both local and provincial governments were cooperative and fairly compensated impacted people\. 2\.5 Post-completion Operation/Next Phase The sustainability and maintenance of the assets was probably the most important issue affecting the project\. The PAD did identify the main sustainability risks arising from the expiration of the BRR mandate in April 2009 (i\.e\., before the closure of IREP and IRFF): (i) local and provincial governments might not own the projects financed by BRR, which could result in inadequate maintenance in the post-BRR period, and (ii) local government 13 revenues derived from natural resources would likely decline as Aceh’s share of oil and gas revenues would decrease after 2009\. Out of the 56 IRFF sub-projects, 13 sub-projects, comprising 34 % of the total asset cost were handed over to the central authorities (5 ports to the Ministry of Transportation; and 8 national roads to the MoPW)\. Those packages are being managed following the national standards and using national budget allocations\. 9 provincial road sub-projects comprising 32% of the total asset cost were handed over to the Aceh and North Sumatra provincial governments\. As with other provincial assets, these roads are being managed by the Provincial Dinas with adequate maintenance budget allocations\. For the remaining projects (34% of the total assets), MoUs for assets handover were signed between BRR and local governments (based on a standard template drafted by IREP consultants), but the financial capacity of local governments did not always allow them to devote sufficient funds for maintenance\. In a context where decentralization efforts have not been complete in the project area (infrastructure maintenance fund allocation have been historically centralized in Jakarta), local governments do not always dispose of sufficient funds to meet expenditures or prioritize new construction over maintenance of existing assets\. While the MOUs served to ensure smooth asset transfers to the local authorities, the low capacity of these local authorities to manage these assets remains a concern which is shared among the entire Aceh reconstruction program\. The Bank supervision teams were mindful of these risks, but efforts to remedy the risks posed to sustainability of the assets produced limited results in terms of actual allocation of maintenance funds\. These efforts included: ï‚ The review by all PDCS and IPM of district level projects to assess if there were local government initiatives critical for successful and long-term operation of the investment (these reviews were added to MOUs as addenda)\. ï‚ Local governments capacity assessments, which were implemented for 12 provincial/district governments, including: Aceh province, Banda Aceh, Sabang, Aceh Besar, Aceh Jaya, Nagan Raya, Aceh Barat, Aceh Barat Daya, Aceh Selatan, Aceh Singkil, Nias and Nias Selatan\. Consequently, capacity building program plans were produced\. The assessments were conducted through a series of focus group discussions that aimed at identifying strengths and weaknesses of local governments in terms of reconstruction management and maintenance programming\. ï‚ A request to the PMU in May 2010 to prepare a complete listing on each IRFF contract containing, among other data, an action list for ensuring final ownership and sustainability\. The donors and MDF called upon GoI to ensure that the maintenance costs were budgeted for and transferred to the local governments\. It is worth noting that the local governments have received some capacity building, through other projects like 14 Earthquake and Tsunami Emergency Support Project (ETESP) funded by ADB, Aceh Emergency Response and Transitional Recovery project managed by the UNDP, Support to Local Governments and Community Planning project, funded by GTZ and other projects funded from USAID, EU, CIDA, JICA, the Netherlands and France\. This needs to be considered in the design of any future capacity building program to avoid duplication\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation The project objectives remain highly relevant to the development priorities of Indonesia\. The development of large-scale infrastructure remains crucial to the country, and is a pillar of the Bank’s engagement (Core Engagement 2) as outlined in the 2008-2012 Country Partnership Strategy (CPS)\. The document recognizes the need to strengthen the accountability and capacity of institutions to deliver better infrastructure outcomes\. The project objectives are also highly relevant to the Bank’s strategy to play a major role in disaster reconstruction, helping to reduce Indonesia’s vulnerability to natural disasters as outlined in the CPS (Core Engagement 5)\. The document stressed that the Bank would continue deepening the relationships established with Bappenas and the local governments of Aceh and Nias in supporting selected elements of the Government’s actions to strengthen natural disaster resiliency\. Implementation arrangements were consistent with the country policy to build capacity within national institutions\. After BRR closed in 2009, the implementing agency of IREP became the MoPW\. The new PMU was tasked to handle remaining construction work in Aceh, and was staffed with many former BRR officials for continuity\. 3\.2 Achievement of Project Development Objectives Provision of high quality technical assistance in order to ensure that infrastructure program management, planning, design and construction management follow adequate standards (Moderately Satisfactory): The project strongly supported the BRR’s strategy for infrastructure reconstruction of Aceh and North Sumatra by providing high quality technical assistance and capacity building to BRR and MoPW\. The project in effect enabled the implementation of the IRFF by financing the technical assistance needed to perform the project implementation management activities including procurement, financial management, quality control and quality assurance, safeguards framework assurance and monitoring, implementation monitoring and the design and construction supervision of all activities under the IRFF\. All major consultancy firms required to manage the implementation of IRFF were appointed\. 15 In general, and given the time constraints at the beginning, the project fulfilled its primary objective in terms of the quality of the technical assistance provided\. All 56 sub- projects under IRFF, except for Siron Water Pipe Bridge and Siggli Water Intake, were subject to detailed engineering design reviews and adequate construction supervision\. In some cases, designs were adjusted to take into consideration new findings in the field, especially with respect to soil characteristics to mitigate for land-slides where road shoulders are steep and/or the soil is unstable\. The two failing sub-projects mentioned above (Siron Water Pipe Bridge and Siggli Water Intake) couldn’t be finished before the companion IRFF project closed\. Thus, they have subsequently been reviewed and redesigned and reconstruction is now underway from the MoPW’s own budget\. As a commitment guarantee, the involved PDCS liability was protected by renewing performance liability insurance to anticipate any shortfall that may be identified due to design fault or improper construction supervision\. Support BRR in overall coordination of the infrastructure reconstruction program (Moderately Satisfactory): The project also supported BRR and MoPW in the overall coordination of the infrastructure reconstruction program through the IPM consultant\. The IPM consultant provided solid support to BRR with regards to managing the work programs, performance and outputs of the three PDCS consultants and the FM consultant in charge of the implementation of four other components of IREP\. It strengthened the coordination arrangements with the PDCS consultants, notably in terms of quality assurance and control, construction supervision, monthly certificates preparation and program revisions such as the gaps and actions on Bank Aide-memoires\. IPM regularly monitored their performance and discussed findings with the PMU, prompting the issuance of jointly formulated action plans\. IPM performance was also solid in terms of environmental and social safeguard compliance of all stakeholders, as IPM consultants had established a project tracking system that incorporates all safeguard aspects of projects\. As discussed earlier, there were some shortcomings in the IPM consultants’ overall effectiveness, as the workload and number of deliverables under the original TORs were not matched by IPM capabilities and staffing\. In particular, the performance of IPM was found lacking in terms of completing the MIS, and at an early implementation stage, quarterly and mid-term reporting, PIPs and quality assurance were lagging behind\. The very high turnover of IPM leadership and expatriate staff also affected its coordination capacities and strained its working relationship with BRR, PMU and the four other consultants\. In May 2008, the Bank recommended to BRR to reduce the scope of works of IPM in areas such as capacity building and planning, which further reduced the capacities of IPM\. Ultimately, the IPM contract was cut by almost a third, and the completion date was moved from June 2010 to March 2010\. 3\.3 Efficiency 16 The performance of BRR is worth noting as being efficient, especially against the backdrop of the very real constraints following the tsunami and earthquakes of 2004\. In a short time, the BRR was able to lead the implementation of a US$6+ billion investment program including the 56 sub-project under IRFF\. However, the midterm review noted that all in all, the project provided low value for money\. While IPM was supposed to serve the overall infrastructure construction process (all GOI, BRR and other donor projects), the consultant worked almost exclusively on IRFF sub-projects\. PDCS consultants also almost exclusively worked on IRFF sub- projects\. As a consequence, the ratio of cost of the overall TA provided by IREP (US$42 million) to the capital investment (US$200 -300 million) was relatively high\. On the other hand, the ratio of the cost of the design and construction (i\.e\., only PDCS) on IRFF capital investment was around 11%, putting it within the Indonesian good practice range (8-12%)\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory The project achieved its primary development objective of supporting the BRR's strategy for infrastructure reconstruction by providing technical assistance in order to ensure that infrastructure program management, planning, design and construction management follow adequate standards\. IREP also managed to support the BRR/MoPW in the overall coordination of this large infrastructure program, and enabled the 56 IRFF sub-projects to come to fruition in a timely and adequate manner, for the benefit of the people of Aceh and Nias\. However, as discussed earlier, monitoring (through the failed MIS implementation), and capacity building of the local authorities could have been improved\. In summary, IREP achieved its development objectives, albeit with moderate shortcomings\. It remains highly relevant to the country infrastructure and disaster mitigation priorities\. During the implementation, quality assurance, financial management and post-completion operation and maintenance problems were identified and mitigated for the most part\. As such, an overall rating of moderately satisfactory is justified\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development IREP enabled the construction of 56 sub-projects including Ports, Roads, General Water Sanitation/Flood Protection and Water Supply\. Although no socio-economic impact study was conducted, it seems that the project has positively impacted the livelihoods of Aceh and Nias through (i) the improvement of sea and land connectivity and mobility; (ii) the improvement of livelihoods for the local community and the stimulation of local economic growth (increasing the number of cargo boats and docks loading and unloading 17 consumer items, processed products and crops\. In particular, cloves and crude palm oil have increased by more than 20%); (iii) the development of new economic growth contributors such as restaurants, shops, hotels and public services facilities (which all increased the districts’ disposable income); (iv) the improvement of Banda Aceh’s solid waste management through the construction of a sanitary landfill with recycling and composting capacity; and (v) the improved provision of clean water supply\. (b) Institutional Change/Strengthening The project provided an intense on-the-job training to the PMUs, PIU and other staff of Bappenas, MoF, MoPW and the provincial and local governments staff in program design and implementation, engineering designs, construction supervision and financial management\. The implementation arrangement initiated by BRR was adopted by MoPW after the closure of BRR\. Moreover, MoPW maintained the PMU structure after IREP closed\. (c) Other Unintended Outcomes and Impacts NA 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops NA 4\. Assessment of Risk to Development Outcome Rating: Moderate The IREP program has enabled proper design and construction of good quality infrastructure and has mitigated the risk of short life and/or failure of the assets\. As mentioned earlier (see Section 2\.5), the majority of large IRFF sub-projects are managed at the national and provincial levels, where capacity to maintain them is adequate\. However, sub-projects which were transferred to the local authorities might very well be affected by poor asset management and maintenance\. This significant risk is currently being addressed by central, provincial and local governments\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory The Bank Task Team ensured that IREP’s overall development objectives were closely aligned with both GoI and Bank strategies on infrastructure management and disaster mitigation\. This alignment, combined with sound implementation arrangements, 18 facilitated timely completion without compromising environmental concerns or social safeguards\. The program attracted the attention of the highest management level in the Bank including the close involvement of its regional Vice President for East Asia Pacific\. The design ensured timely delivery of the majority of the project development objectives\. The IREP was designed for carry out a disaster response program covering 12 districts in Aceh Province and Nias Island\. The program was successful in supporting the 56 priority sub-projects previously identified throughout the design, procurement, supervision and implementation stages\. Considering the time constraints during the IREP preparation stage, the IPM’s role (especially in terms of balancing the effectiveness and the wide geographic scope) was too ambitious\. Some of the IPM functions, such as the project supervision of QA, were found to be overlapping with the PDCS role\. As a result, BRR streamlined the IPM ToRs, limited such functions to the PDCS and requested the IPM to be more focused on implementation management activities until its contract ended\. (b) Quality of Supervision Rating: Satisfactory Bank supervision is rated satisfactory\. Task Team Leaders initially followed the project from Washington DC but were in continuous contact with infrastructure team members who were based in Banda Aceh\. This turned out to be critical for such a large size post- disaster reconstruction program\. Moreover, in late 2010, the TTL was re-located to Jakarta which further enhanced the quality of supervision\. This supervision set up and the permanent presence of Bank staff in the reconstruction areas ensured continuous Bank oversight throughout project implementation\. The Bank’s supervision strategy resulted in relatively high supervision costs which were financed from the MDF and which considered the success of the project a top priority\. While implementation difficulties did occur, the pro-activeness of Bank supervision could be noted in a number of aspects, such as: ï‚ Working with the PMU systematically to address weaknesses in reporting and in financial management\. ï‚ Increased attention to technical design, implementation quality and achievement of quality outcomes\. ï‚ Designing post-BRR institutional arrangements with MoPW, MoF and Bappenas\. Moreover, the Bank’s policies and procedures were applied consistently\. Supervision missions were conducted in a professional and constructive manner, and mission teams consistently included the experts needed to discuss relevant supervision topics and issues\. The timing of formal supervision missions (on average twice a year and supplemented by frequent routine supervision missions by the TTLs and the task team members who were based in Banda Aceh) was appropriate and comments received from PMU and BRR/MoPW staff indicated a respectful working relationship and a flexible approach by 19 Bank staff\. Aide Memoires, Management Letters, ISRs and other project communications and documents were completed in a timely manner with clear references to needed actions covering all aspects of project components, safeguards and fiduciary issues\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The Bank's overall performance rating is based on satisfactory ratings for both quality at entry and supervision\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory Performance of GoI was satisfactory, especially in terms of the strong and sustained commitment to the project development objective\. The agencies (MoF, MoPW and Bappenas) turned out to be extremely cooperative and very effective in taking decisive action in a timely manner, in particular with regard to the Bank recommendations on implementation activities, including channeling the budget allocation (DIPA) and preparing sufficient yearly budget allocations\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory Performance of the implementing agencies was satisfactory\. BRR and the MoPW protected the integrity of the project and sustained its development objective\. As an independent agency, BRR performed effectively and was able to channel and manage a reconstruction effort valued more than US$6 billion in only 4 years\. This fast pace was supported by the strong authority which BRR was granted which enabled it to avoid most of the bureaucracy faced by line ministries\. The slowdown of the implementation was clearly noticed following the closure of BRR and the handover of the implementation to the MoPW where the PMU functioned more as a Program Management Unit and effective implementation was mostly managed by a number of PIUs which sometimes were difficult to coordinate\. This setup required the Task Team to devote extra efforts to ensure compliance with Bank fiduciary and safeguards procedures and guidelines\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 20 Both GoI and the Implementing Agencies (BRR and MoPW) managed to implement the IREP with satisfactory performance\. 6\. Lessons Learned Lessons were learned for both future operations in both Indonesia and future similar reconstruction TAs in other countries, particularly in the following areas: Contract Management and Flexibility; Social and Environmental safeguards management; Implementation Arrangements; Maintenance and Capacity building; Stakeholder Participation and Commitment; and Implementation Support Arrangements\. a) Future operations in Indonesia Contract Management and Flexibility: BRR did not allow any sub-project to make any change that would have led to an increase of the signed contract price\. Thus, and to account for any design changes, the only way was to reduce the scope of the works\. This has led to some incomplete works\. While this policy gave BRR a tighter control on the budget, it also adversely affected some sub-projects\. Incomplete works were grouped under the “Gapsâ€? packages and were tendered separately, which turned out to be more costly\. Also, loading the consultancy contracts with reimbursable payments resulted in some fund misuse and false reporting on reimbursable expenses (as was the case in the IPM contract)\. To mitigate this, it would be best to design such contracts with very few or no reimbursable payments in the future\. Alternatively, more rigorous FM monitoring would be required\. Social and Environmental Safeguards management: the projects handled the design and implementation of 56 sub-projects of diverse types and in different locations and environment, leading to many safeguards issues\. These were addressed through: (i) the allocation of provisional budgets to implement environmental management plans as part of the civil works contracts; (ii) staffing of all PDCS consultants with the relevant safeguards specialists; (iii) IPM QA and QC functions included the safeguards aspects (iv) close involvement and commitment of the implementing agency, provincial and local governments to implement LARAPs satisfactorily; and (v) close Task Team monitoring and follow up with Indonesian counterparts\. b) Future similar reconstruction TAs in client countries Implementation arrangements: The establishment of BRR as the entity responsible for the implementation of the reconstruction program of Aceh undoubtedly boosted the construction pace\. BRR was empowered to operate outside the daily bureaucratic constraints, a setting that made the mobilization of financial and human resources easier\. Moreover, BRR was created with a limited lifetime to enable the line ministries, like the MoPW in this case, to pursue their roles seamlessly after the closure of the BRR\. Also, BRR established its own Procurement Central Unit (PCU) to manage all procurement activities\. 21 On the other hand, the daily implementation was fragmented between a large number of changing PIU/Satkers and thus many procurement committees\. The PMU had no control over the implementation and was mandated with the program planning\. This made it sometimes difficult for effective communication\. Also, a large and comprehensive reconstruction program such as the one supported by IREP was bound to be fraught with continuous changes in engineering designs, issues with the flows of information and unforeseen events\. More care will be needed in future operations in the design of roles and institutional coordination between the Bank, the PMU and the various contracted consultants\. Implementation models for consultant management could be based on the review of best practices in terms of progress of delivery, financial viability, quality of delivery, environmental soundness and asset end-user satisfaction\. Having IPM assisting the program management was not sufficient, especially where their ToRs overlapped with the mandate of the PDCSs like in the case of the quality assurance and quality control\. Maintenance and Capacity building: In order to ensure the sustainability, as a medium- term development objective, of built assets, mechanisms to allocate sufficient funds or establish a maintenance fund should be effectively designed, especially in environments where decentralization efforts are lagging\. Also, it seems that a regionalized large infrastructure program such as this one are best suited in an environment where the capacity of the local government is sound and devolution of authority is real\. In the end, and understandably, the emphasis in this project was always on the completion of the large building programs under institutional, budgetary and time pressures rather than on the sustainability of these assets after handover\. The project did not put enough emphasis in effective training in infrastructure management, operation and maintenance of local government staff, as was underscored by the reduction of funding devoted to these activities\. Local governments, on the other hand, did not allocate funds to these training activities\. Capacity building in infrastructure management can only be effective when based on a sound analysis of the incentives and capacity of the local government, to which assets are to be handed over\. It is recommended that in the future, local governments will allow for funding of capacity building programs in their medium term development plans to acquire the proper skills in infrastructure management\. Also, in some remote areas such as Nias, the working environment for outside contractors was challenging and made it less attractive for workers to stay\. This led to the termination of some contracts and when local contracts were subcontracted, the quality of works was not always satisfactory\. To mitigate this, it is thus recommended that capacity building in similar regional reconstruction projects include local contractors in the future\. Stakeholder Participation and Commitment: The project is a successful example of stakeholder participation and commitment, which led for instance to the satisfactory design of the sub-projects priority list and the support of the various authorities to 22 facilitate and safeguard project implementation\. Stakeholders included the central, provincial and local governments; local communities, NGOs, Donors, MDF and the Bank\. Implementation Support Arrangements: Both the MDF and the Bank acknowledged the necessity to be closer to the project area, and the MDF supported the opening of a field office in Banda Aceh\. This proximity to the center of activity greatly facilitated implementation on a day to day basis and provided continuous support to the client\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies In general, the government of Indonesia was satisfied with the project’s outcomes\. The original implementing agency (BRR) was closed in 2009\. The borrower completion report and comments on the ICR were prepared by the Ministry of Public Works (MoPW), and were mostly related to contract management\. ï‚ BPK’s audit in 2010: The BPK (Government Auditor) criticized the PMU for awarding contracts which exceeded Engineer Estimates and for the allocation of environmental budget for some sub-projects under IRFF\. The PMU requested a formal clarification from the Bank supporting their views\. The Bank invited the BPK and clarified that this can happen under normal circumstances and this is why the Bank issued the no objection letters to the award of contracts\. Nonetheless, BPK requested the PMU to re-bid these contracts but the Bank considered that this was not a sufficient basis for rebidding\. Moreover, the Bank addressed a general letter to BPK explaining that the Bank, as a matter of general practice, only issued a no objection letter and that it was the implementing agency’s responsibility to approve and sign the contracts as a legal entity\. The Bank had also made it clear that making provisional sums to implement environmental action plans was not against sound procurement principles and that it was up to the implementing agency to manage these components\. It was made clear that this practice was acceptable to the Bank\. Performance of IPM: The Borrower notes that the IPM Consultant was unable to perform its function optimally and that some capacity building, MIS and donor activities could not be conducted\. The Bank, as noted in the text of this ICR, shares this assessment and notes that the scope of activities and TORs might have been too ambitious and too broadly designed\. ï‚ Performance of PDCSs: The Task Team mediated between the PMU and the consultants to facilitate agreements between the parties to remedy the design and/or construction supervision shortfalls\. However, the team made it clear to the PMU that the Bank was not a legal entity in any contract and it would not issue a letter criticizing the design\. In all cases, the PMU was advised to refer to the dispute resolution clause of the signed contracts\. Moreover, the Bank assisted the consultants and the MoPW to reach a framework agreement to remedy the shortfalls in the sub- projects referred to in the Borrower ICR section, annex 7\. 23 ï‚ Rate adjustments: Based on the Bank’s review and the information provided, these adjustments were not eligible\. The PMU failed to present supporting documents to clear these adjustments\. It was noted that the PDCSs had approved them a long time after the event, that no notification was sent to the Bank and that the technical rationale was weak\. While the PDCS reviewed and approved the rate adjustment claims 12 months after the last monthly invoice, the PMU took around a year to respond to the clarifications raised by the Bank review and even then, the supporting documents were not sufficient to clear the rate adjustment\. (b) Cofinanciers The Multi-Donor Fund (MDF) was also generally positive about the outcomes of the project (see Annex 8 for comments provided by the MDF Secretariat)\. The Bank appreciates the inputs and support of the MDF in preparing the ICR, and does not have any comments about issues raised by the MDF\. 24  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in US$ Million equivalent) Appraisal Actual/Latest Percentage of Components Estimate Estimate Appraisal (US$ millions) (US$ millions) Infrastructure Program Management 19\.5 10\.45 53\.6 West Coast Infrastructure Planning, 10\.00 4\.27 42\.7 Design and Construction Supervision Nias Infrastructure Planning, Design and 5\.00 6\.21 124\.2 Construction Supervision Strategic Infrastructure Planning, Design 6\.00 12\.04 200\.6 and Construction Supervision Financial Management of BRR-financed 1\.50 2\.69 179\.4 Projects Total Baseline Cost 42\.00 35\.66 84\.9 Physical Contingencies 0\.00 0\.00 - Price Contingencies 0\.00 0\.00 - Total Project Costs 42\.00 35\.66 84\.9 Project Preparation Costs 0\.00 0\.00 - Total Financing Required 42\.00 35\.66 84\.9 (b) Financing Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate Cofinancing Appraisal (US$ millions) (US$ millions) Multi-Donor Trust Fund (MDF) 42\.00 35\.66 84\.9 Total Financing 42\.00 35\.66 84\.9 25  Annex 2\. Outputs by Component (US$ as approved, US$ actual) Component 1 (IREP 1 - IPM contract): US$19\.50 million as approved, US$10\.447 million actual\. GHD was appointed as the IPM consulting firm to provide assistance to BRR in overall strategic infrastructure planning for Aceh and Nias, management of the infrastructure reconstruction program in Aceh and Nias, review of local and provincial governments plans for infrastructure investment as a basis for BRR funding, quality control, supervision, and monitoring of BRR-funded infrastructure projects, procurement support, safeguard support for BRR-funded infrastructure projects, anti-corruption support for BRR-funded infrastructure projects, and management and coordination of the four other IREP consultant teams\. Following a Bank supervision mission in May 2008, it was decided that IPM should limit its focus on areas of core implementation, including program management and quality assurance, and reduce its capacity building engagement\. It was found that IPM was delivering work outside of its original TORs in response to the client’s requests, while facing time delays in the submission of key deliverables\. Following their consultation with the Bank BRR decided to refocus IPM resources to optimize delivery of IRFF sub- projects and save costs\. The reduction of the scope of the contract with IPM was formalized through an amendment to their original contract\. The IPM consultant was mobilized late, after BRR had started its planning\. This undermined the ability of IPM to influence strategic planning at the early stage and did not help to properly position IPM to be in the driving seat in terms of leading the reconstruction planning process\. Moreover, the improper use of fund by the IPM consultant as proved in 2010 lead to state of lack of trust between the consultant and BRR and MoPW later Accordingly, MoPW decided not to extend contract of the IPM consultant beyond its amended end date in March 2010\. In order to maintain the smooth implementation of the remaining of the IRFF until the closing date on December 31, 2011, the MoPW decided to appoint individual consultants but never did so\. Though it has minor effect in the overall implementation of IRFF, this has left some IRFF project Gaps’ works incomplete but the MoPW remained committed to complete such Gaps from the GoI own resources\. By closure of the contract in March 2010, IPM had fulfilled its obligations, including monitoring progress monitoring for all IRFF sub-projects, coordinating the work of the consultants and conducting regular QA/QC checks on PDCS services\. Components 2, 3 and 4 (IREP-2, IREP- 3, and IREP-4 - PDCS contracts): US$21\.00 million as approved, US$22\.517 million actual\. 26 The mobilization of adequately staffed international consultants ensured proper designs and good construction quality\. Due to the reconstruction program dynamics, BRR and the MoPW were flexible to consider re-allocation of resources for the PDCS consultants\. Thus BRR was always prompted to thoroughly analyze if PDCSs had the right resources to ensure the overall quality of the portfolio\. Contracts were amended to reflect these analyses and the changes in staffing and schedules resulting from the refocusing on quality assurance and supervision\. Moreover, the scope of these PDCSs was revised to allow for timely implementation of IREP and IRFF\. This has resulted in lowering the scope of IREP 3 and increase the scope of IREP 4\. In addition, the review of the priority construction projects under IRFF resulted in introducing new works in the Aceh east coast and the middle of Aceh\. All of these new works were added to the contract of IREP 4\. In particular: ï‚ IREP-2 (US$10\.00 million approved, US$4\.271 million actual): Royal Haskoning was the PDCS consultant for the west coast component, and this contract closed on December 15, 2009\. Designs were prepared, necessary procurement completed and construction overseen for four water and sanitation contracts, four water resource sub-projects and 16 packages for Kabupaten roads\. Physical works related to this component were completed\. ï‚ IREP-3 (US$5\.00 million approved, US$6\.211 million actual): DHV was contracted as the PDCS consultant providing the designs and construction supervision for sub-projects in Nias\. Works on the Gunung Sitoli Port and one provincial road package have been completed, with a second provincial road at 98% complete\. The two Kabupaten road packages are still under construction and both are less than 50% complete\. ï‚ IREP -4 (US$6\.00 million approved, US$12\.035 million actual): SMEC provided PDCS services for the strategic infrastructure component\. Designs were completed for all projects under this component\. Three ports were completed, and one port package (Calang Port) was terminated due to lack of performance by the contractor\. This sub-project was transferred to the Ministry of Transportation, subsequently retendered, and works are now continuing under GoI budget\. Three water and sanitation sub-projects were completed\. Roads packages were largely completed, with works on five national roads completed and works on two national roads ongoing\. One national roads contract was terminated due to poor contractor performance and was transferred to the Ministry of Public Works\. The recovery status of this sub-project is still pending\. Construction and supervision on four out of seven provincial roads are finished, with the remaining three roads under construction\. Four kabupaten roads were completed, and one sub-project, that has subsequently been included in the gaps tendering process, was terminated\. Under the gaps identified, one new water and sanitation sub-project and four roads packages are under preparation\. Component 5 (Financial Management) (US$1\.5 million approved, US$2\.691 million actual): 27 Financial Management services were provided by HLB\. The consulting firm had been verifying all requested payments prior to their submission\. It has also been monitoring the DIPA processes for all the PPKs of IRFF and IREP and has been managing the IRFF and IREP special accounts\. The FM consultant was properly staffed and financial management aspects were generally in compliance with Bank procedures, Tighter internal controls were introduced and, following the first implementation year, the FM consultant was prompted to ensure better observance of deadlines for FM and audit reports and stricter adherence to the FM manual\. 28  Annex 3\. Economic and Financial Analysis This annex is not applicable\. The project involved purely capacity building and technical assistance\. 29  Annex 4\. Grant Preparation and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending/Grant Preparation Aniruddha Dasgupta Task Team Leader EASUR Overall Michel Kerf Infrastructure Policy Advisor EASIN Policy Jerry Lebo Sr\. Transport Specialist EASTR Engineer Zoe Elena Trohanis Hazard Risk Management Specialist TUDUR Environment Indira Dharmapatni Sr\. Operations Officer EASUR Social Safeguard (resettlement/social) Yogana Prasta Sr\. Disbursement Officer EACIF Disbursement Imad Saleh Lead Procurement Specialist EAPCO Procurement Unggul Suprayitno Financial Management Specialist EAPCO Financial Steven Burgess Sr\. Social Development Specialist EASSD Social Melinda Good Counsel LEGEA Legal Andre Bald Infrastructure Specialist (consultant) EASUR Engineer Angus Mackay Environment Advisor (consultant) EASEN Environment Lauren Serota Local Government Specialist EASSD Policy (consultant) Patrisia Mulita Governance Specialist EASSD Governance Geoffrey Read Municipal Infrastructure Spec\. EASUR Engineer (consultant) Anders Bonde Transport Adviser (consultant) EASTR Engineer John Cameron Financial Management Specialist EASUR Financial (consultant) Alun Phillips Infrastructure Specialist (consultant) EASTR Engineer John Smithson Urban Drainage Specialist EASUR Engineer (consultant) Kalpana Seethepalli Infrastructure Economist EASIN Economist (consultant) Supervision/ICR Khairy Al-Jamal Project Team Leader EASIS Overall Suhail Jme’an Sr\. Financial Analyst, ex-TTL EASIN Financial Dean A\. Cira Lead Urban Specialist, ex-TTL EASVS Urban Andre A\. Bald Sr\. Infrastructure Specialist EASVS Engineer Indira Dharmapatni Sr\. Operations Officer EASIS Social Safeguard Mesra Eza E T Consultant EASIS Engineer Engineer, Lixin Gu Sr\. Infrastructure Specialist EASIN Coordinator ICR Primary Reda Hamedoun Transport Specialist EASIN Author Kris Hedipriyantoko E T Consultant EASIS Engineer 30  David A\. Howarth Consultant EASUR Procurement Imad Saleh Lead Procurement Specialist EAPPR Procurement Zhentu Liu Sr\. Procurement Specialist EAPPR Procurement Enggar Prasetyaningsih Procurement Specialist EAPPR Procurement Municipal Infrastructure Spec\. Geoffrey Read SASDU Engineer (consultant) Melinda Good Counsel LEGEA Legal Environment Andrew Daniel Sembel Environmental Specialist EASIS Safeguard Agus Sjamsudin Operations Officer EASIS Engineer Urban Drainage Specialist John Smithson EASIN Engineer (consultant) Sr\. Financial Management Unggul Suprayitno EAPFM Financial Specialist Mr\. Purwanto Financial Management Specialist EAPFM Financial Heinrich K\. Unger Consultant EASID Environment Achmad Affandi Nasution Temporary EACIF Governance Toyoko Kodama Operations Officer EASIN Assistance Murniati Sitorus Team Assistant EASIS Assistance Rebekka Hutabarat Team Assistant EACIF Assistance Ira Marina Team Assistant EACIF Assistance Evilia Nusi Team Assistant EACIF Assistance Isabel Duarte A\. Junior Program Assistant EASIN Assistance Sandra Walston Temporary EASIN Assistance Hiromi Yamaguchi Consultant ECSS1 Assistance (b) Staff Time and Cost1 Staff Time and Cost (Bank Budget Only) Stage of Project Cycle US$ Thousands (including No\. of staff weeks travel and consultant costs) Lending FY06 60\.30 355\.09 FY07 0\.25 -5\.82 Total: 60\.55 349\.27 Supervision/ICR FY08 0\.00 0\.00 FY09 0\.00 0\.00 FY10 0\.00 0\.61 FY11 0\.00 0\.00 FY12 0\.00 0\.00 Total: 0\.00 0\.61 1\. Almost all supervision costs of were covered from MDF supervision budget totaling US$1,703,506\.44\. This is higher than the real cost as the supervision budget was shared equally between the IREP and IRFF projects\. Even allowing for this adjustment, a total 31 supervision budget of US$852,000 over 5 years is approximately 2\.4 times higher than normal supervision coefficients for Indonesia\. 32  Annex 5\. Beneficiary Survey Results This annex is not applicable\. 33  Annex 6\. Stakeholder Workshop Report and Results This annex is not applicable\. 34 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR After reviewing the draft ICR, the Borrower provided an 8-page Completion Report in Indonesian with a summary in English\. This is intended to comprise both the Borrower’s Completion Report, as well as their comments on the draft ICR\. The English summary is as below, and the full report is archived in the project files\. Unedited English Summary of the Borrower ICR A\. Introduction Grant Agreement for the IREP program between The Government of Indonesia and The World Bank is to improve control and monitoring of the implementation of infrastructure reconstruction and rehabilitation in Aceh Province and Nias Island after the Tsunami and Earthquake in Aceh and Nias Island in 2004\. The Program is designed to assist Reconstruction and Rehabilitation Agency (BRR NAD -Nias) in managing IRFF program\. As at that time BRR NAD-Nias has limited reconstruction and rehabilitation implementation capacity with total budget for 4 years amounted to Idr\.11\.3 trillion\. Therefore, quality improvement, level of service and coverage are required\. This policy is called “Build Back Betterâ€?\. After the closing of BRR NAD –Nias on 16 April 2009, this program was handed over to Ministry of Public Works coordinated by PMU RRI NAD–Nias\. The Executing Agency for the IREP program than is PMU RRI NAD-Nias Ministry of Public Works and the Implementing Agency is the Directorate Pengembangan PLP under Directorate General Cipta Karya to the closing of IREP Grant on 31 December 2011\. Infrastructure Reconstruction Enabling Program (IREP) provides Strategic Planning, Program Management, Program Priority of Provincial and City/District Government, Supply, Quality Control, Capacity Building for Cities/Districts Government, and Community outreach\. To improve internal control, The World Bank required the External Audit from Public Accountant (KAP)\. So the IREP component consists of 6 packages of consultancy activities\. B\. Major Factors Affecting the Implementation and Result 1\. Infrastructure Program Management (IPM) consultant does not understand the scope of work so that there are some activities that cannot be implemented, like; i\. Capacity Building, for BRR Infrastructure and local government ii\. Internet-based Monitoring Information System (MIS) for BRR NAD-Nias infrastructure iii\. Coordination of Donor Funding for Activities planned in Strategic Infrastructure Planning for Aceh and Nias So that the employer re-scooping the IPM contract\. 35  2\. Planning, Design and Construction Supervision (PDCS)\. a\. Inaccurate design which resulted in many design changes by the time of implementation and preparation of MC-0 which spent a lot of time in technical justification process\. b\. Task Concept implementation does not work i\. Nias PDCS (DHV)’s recommendation on rate adjustment claim for RR\.02 and RR\.03 project is considered ineligible payment by The World Bank\. ii\. Lack of understanding on physical contract aspect from PDCS Consultant personnel\. iii\. PDCS consultant cannot manage the physical implementation so that many projects are not completed on time\. iv\. The PDCS performance liability is not specific only for the IREP Contract but it also covers the whole project handled by the respective PDCS which make it difficult to withdraw\. v\. Different opinion with Auditor (BPK) in Task Concept implementation\. BPK assume that Satker/PPK is responsible for the project\. However, in the Task Concept implementation the responsible party in project implementation is Consultant (PDCS)\. 3\. Procurement ï‚ The use of e-procurement is required by the Government while The World Bank does not allow using it\. ï‚ The World Bank allows the contract value exceeds the Engineer Estimate, but in view of Auditor (BPK) it is a violation against the rules\. ï‚ Contract cannot be signed before AMDAL and LARAP document made available on project required the document, for example in JP\.6 project (LARAP) and P\.5 (AMDAL Kuala Langsa Port)\. 4\. Environmental, ï‚ Environmental budget allocation in IRFF contract, there has been some perceptions from the Auditor (BPK) in its use with The World Bank Aide Memoire which required CEAP with environmental allocated budget in each IRFF project\. ï‚ SOP for the environmental budget use is not clear between the contractor obligation for the environmental control with CEAP, for example on working floor at AMP site to avoid oil and asphalt waste\. In BPK’s opinion it is the responsibility of the contractor however, during the Supervision Mission The World Bank instruction that the environmental budget in IRFF contract can be utilized\. C\. World Bank Performance The World Bank is good in regular coordination and monitoring which has been contributed a lot in achieving the good quality of the program implementation\. This can be observed from the regular Supervision Missions carried out actively with the central and local government in solving problems for the improvement of the program\. In BPK’s audit result on IREP and IRFF project, The World Bank responsibility contribution is bias\. The World Bank seems indecisive on the BPK’s findings, 36  especially on procurement process for contracts which exceed Engineer Estimate and environmental budget allocation in IRFF contract\. When the Auditor (BPK) requested The World Bank clarification, the World Bank’s response as addressed to the Head of BPK, stated that the “NOLâ€? issued by the World Bank is not an “approvalâ€? but a “no objectionâ€?\. According to The World Bank the approval is the responsibility of the Government of Indonesia\. On the PDCS (RH & DHV) cases (failure in making design and construction supervision), The World Bank cannot take action against the consultant even the Aide Memoire of the World Bank Supervision Mission has mentioned the consultant’s mistake, for example in WS\.1, WS\.3A and Nias JK\.2\. In construction implementation target, The World Bank is not so firm in achieving the target date of the project implementation\. The World Bank focused on Quality and Safeguard\. Many projects exceed the contract completion date which resulted in additional cost to the project as well as to the supervision consultant\. D\. Borrower Performance The Government of Indonesia as the IREP Grant Recipient in general has carried out its responsibility in completion of the IREP Program funded by the MDF Grant TF- 056894 per Grant Agreement signed by BRR NAD-Nias\. And later carried on by the Ministry of Public Works through PMU has performed its function as an Executing Agency for IREP and IRFF Grant, especially to coordinate the stakeholder in ministries/institution level, provincial and local government level\. After the closing of the BRR, the executing of IREP and IRFF program handed over to Ministry of Public Works and PMU RRI NAD - Nias was set up to perform the function\. However, since the program was handed over to Ministry of Public Works the IREP and IRFF implementation is handled by respective sectoral unit and should follow normal procedure thus PMU RRI only to perform coordination function with donors\. Therefore, Satker and PPK’s performance depends on the performance of unit in each sector\. E\. Lesson Learned 1\. IPM Consultant as PMU Advisor was unable to perform its function optimally\. There are several activities of the IPM function which finallly cannot be implemented like, Capacity Building, MIS and Donor Funding Coordination due to lack of understanding on the scope of work\. 2\. PDCS Consultant Task Concept cannot be fully implemented by the PDCS consultant for the IRFF projects due to the PDCS personnel’s lack of understanding on the contractual aspect\. The Task Concept implemented mostly through guidance from Satker/PPK, QA IPM as PMU Advisor, PMU and The World Bank during the site visit\. There was a decision that recommended by the PDCS which is not accepted to The World Bank like on rate adjustment claim on IRFF project RR\.02 and RR\.03 Nias\. 3\. Financial Management Consultant provides a very helpful assistance to PIU in verification of invoice from IREP Consultant and Contractor as well as to PMU in financial report preparation to donor and Ministry of Finance\. 37  Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders IREP ICR Comments: MDF Secretariat comments are provided below\. These comments do not necessarily reflect the views of the donors or the Steering Committee\. ________________________________________________________________________ The Multi Donor Fund for Aceh and Nias (MDF) was established to support the implementation of the Government of Indonesia’s (GOI’s) rehabilitation and reconstruction program after the December 2004 tsunami and subsequent March 2005 earthquake\. At the request of the government, the World Bank serves as the trustee to administer the MDF\. The MDF is governed by a Steering Committee comprised of donors, GOI, and civil society representatives, with the United Nations and international non-governmental organizations participating as observers\. The donors contributing to the MDF are: the European Union, the Netherlands, the United Kingdom, the World Bank, Sweden, Denmark, Norway, Germany, Canada, the Asian Development Bank, the United States of America, Belgium, Finland, New Zealand and Ireland\. The MDF pools about US$655 million in grant resources provided by these 15 donors, an amount equivalent to about 10% of the overall reconstruction efforts\. As of March 31, 2012, the MDF has committed US$650 million to 23 projects in five outcome areas: recovery of communities, recovery of large infrastructure and transport, strengthening governance and capacity building, supporting sustainable management of the environment, economic development and livelihoods, and providing support to enhance the overall reconstruction process\. The MDF followed a phased strategy in supporting the reconstruction\. With infrastructure investments following immediate recovery needs\. The Infrastructure Reconstruction Enabling Program (IREP), and its companion project, the Infrastructure Reconstruction Financing Facility (IRFF), were designed to work in tandem, with IREP providing the technical support for strategic planning, project design, implementation and supervision to support projects constructed through the IRFF and other and other sources\. These two projects were part of the second wave of the MDF’s reconstruction projects which focused on the reconstruction of large infrastructure given the complexity of investments and higher quality assurance, design and implementation requirements of infrastructure\. The first wave of projects covered immediate response activities that addressed emergency, housing and community reconstruction needs\. The IREP and IRFF projects formed a key component of the MDF portfolio\. The overall contribution by the MDF to large infrastructure reconstruction totals about 35 percent of funds allocated by the MDF to the reconstruction\. The largest allocation to a single project under MDF was made to the Infrastructure Reconstruction Financing Facility (US$ 136\.7 million, including the additional financing)\. IREP played a critical role in supporting IRFF activities, and together these two projects contributed US$ 178\.7 million, or 27 percent of total MDF allocations to projects\. 38 Significant results have been achieved by IREP and the associated IRFF programs\. Through IREP, designs were completed for 56 subprojects that were funded through IRFF\. These subprojects include national, provincial and district roads, ports, water supply and sanitation systems, as well as a waste management facility\. These projects have contributed to the construction of a strategic transportation network across Aceh and Nias, and have provided basic services for the population of Aceh\. IREP consultants also provided technical support and supervision of the physical works\. Originally IREP was envisaged to support the whole reconstruction effort, but BRR requested that the scope of IREP be reduced to mainly focus on the MDF investments, implemented through IRFF\. The Government of Indonesia (GOI) has demonstrated its commitment to the rebuilding of quality infrastructure throughout the reconstruction effort\. MDF grant funds were supplemented by over US$100 million in GoI co-financing for IRFF\. This co- financing arrangement facilitated the integration of donor and government support for reconstruction of infrastructure\. A few projects that were designed under IREP, but were not completed under IRFF at project closure, were thereafter completed by GOI using Government funds\. This also applies to subcontracts entered into by the GOI for construction of physical works with end dates beyond the closing date of IRFF and IREP\. This demonstrates increased likelihood of sustainability given GOI ownership of assets generated and investments made by the IREP and IRFF\. IREP and IRFF overcame various challenges in the successful reconstruction of large infrastructure in Aceh and Nias\. The projects were operating in a post-disaster context, embedded in a post-conflict context\. This complex context meant that government and local contractor capacity were lacking, having been affected by the 30 years of conflict in that area, which was further compounded by the huge human toll and widespread devastation of Aceh and Nias\. The remoteness and topographical challenges of Nias, together with the debilitating wet season also created a challenging implementing environment\. Striking a balance between speed of implementation and ensuring construction quality is a recurring challenge in post-disaster situations\. IREP and IRFF also struggled to achieve an acceptable balance between speed and quality of implementation, while maintaining the World Bank’s position of “no compromiseâ€? on quality of construction, a position that was backed by the MDF and donors\. After the closure of BRR, many MDF-funded projects faced challenges in transitioning from BRR implementation to regular line ministries for the continuation of reconstruction\. For IREP and IRFF, the Ministry of Public Works (MPW), which had had implementing responsibility for these projects under BRR, took over these projects, providing continuity throughout the life of the projects\. The achievements of the projects must be seen in the context of urgent disaster reconstruction challenges, and not necessarily measured against the usual, more stable conditions that prevail for Bank loans and credits\. The MDF has commissioned a working paper to document the key lessons learned from the MDF’s operations in the Infrastructure Sector in a post-disaster and post- conflict context\. The working paper will focus on the strategy and approaches adopted by the MDF for reconstruction of large infrastructure, documenting achievements and 39 lessons learned\. At the time of submission of this ICR, the working paper is still under preparation\. Once completed, it will be available through the World Bank’s website for those interested in the MDF’s experience and lessons learned in infrastructure reconstruction\. In the meantime, valuable lessons at various levels can already be drawn from the project\. These include lessons in the implementation of the project, progress reporting and sustainability of assets created: In a reconstruction context, the balance between speed and quality is critical\. The MDF tried to do this through its phased approach, but it was a challenge and remained so throughout the life of the MDF\. The MDF supported the WB’s decision that no compromise should be made on the quality of works designed and implemented under the reconstruction\. With appropriate supervision by the IREP consultants, contracts with subcontractors who did not perform to the required standards were terminated\. This points to the commitment of the WB to not compromise on quality issues\. The IREP and IRFF projects developed an important safeguards model which the GoI has now adopted as good practice\. The preparation of Construction Environmental Action Plans (CEAP), for IRFF implemented projects, was introduced under IREP and has now been accepted as good practice by the MPW\. MPW in Lhokseumawe has indicated that CEAP preparation has been introduced as a requirement for future MPW road construction design\. Separating technical assistance and design elements from project financing allowed for a more strategic approach to infrastructure reconstruction\. The IREP project focused on supporting a strategic approach to infrastructure, with attention to design and quality issues that had impact beyond the IRFF-funded projects only\. Robust M&E systems are needed in order to capture project results\. The MIS of the project was not fully functional; hence, the overall project results were not adequately documented\. The Results Framework for IREP was focused on project outcomes; however, specific and measurable project outputs were limited\. Inclusion of outputs would have contributed to better progress reporting over the lifespan of the program, even for a TA project such as IREP\. The balance of output and outcome based indicators is always a challenge, especially given the continuously evolving nature of disaster reconstruction\. IREP, working in tandem with IRFF, has significantly contributed to the success of the MDF at various levels\. The partnerships forged with government to reconstruct a strategic transportation network across Aceh and Nias will continue to benefit the economic development of the region after the closure of the MDF\. The project managed to strike a good balance between quality and speed of reconstruction, and offers a model for good practice which the MPW has adopted\. 40  Annex 9\. List of Supporting Documents 1\. Project Appraisal Document 2\. Grant Agreement 3\. Mission Aide Memoires 4\. Implementation Status Reports 5\. Project paper 6\. MDF Midterm review 41  95°E 96°E INDONESIA INFRASTRUCTURE RECONSTRUCTION AND REHABILITATION PROGRAM FOR ACEH AND NIAS PROJECT AREAS SELECTED CITIES AND TOWNS NATIONAL ROADS KABUPATEN CAPITALS PROVINCIAL ROADS PROVINCE CAPITAL 6°N 6°N RAILROADS KABUPATEN BOUNDARIES PROVINCE BOUNDARY We Sabang 97°E This map was produced by the Map Design Unit of The World Bank\. Breueh St The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank ra Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries\. Banda Aceh it Lhoknga Sigli of Lhokseumawe Seulimeum Taupingraya Meureudu Bireun Lhok Sukon M Jantho al ac Lamno Keumala ca 5°N Lutung Cot Girek 5°N Peureulak Geumpang Calang Takengon Peunaron Langsa Ceulala Karang Baru Uwak Jeuram Meulaboh Pangkalan- Kutanibong Blangkejeren brandan 4°N Lamie Blang Pidie Kutacane Tapaktuan Kandang 3°N Pulau-pulau Kokos Lewak Bakungan Sibigo Simeulue Nasreheu Rundeng Inor Sinabang P\. Balee Lasikin Ti\. Nibong Singkil Lasia Tuangku Babi Bangkaru 2°N INDIAN OCEAN 95°E 96°E MYANMAR Northern VIETNAM Mariana INDIA THAILAND Islands (U\.S\.) CAMBODIA Guam (U\.S\.) MARSHALL PHILIPPINES ISLANDS SRI LANKA Nias BRUNEI PALAU Area of M A L AY S I A MALDIVES FEDERATED STATES OF MICRONESIA Map 1°N 1°N 0˚ SINGAPORE NAURU I N D O N E S I A PAPUA NEW GUINEA SOLOMON TIMOR-LESTE ISLANDS INDIAN OCEAN 0 10 20 30 40 50 Kilometers 15˚S VANUATU IBRD 34927 New Caledonia 0 10 20 30 40 50 Miles JULY 2006 A U S T R A L I A (France) 97°E 98°E 75˚E 90˚E 105˚E 165˚E

REVIEW

P056018

IEG Report Number: ICRR14639 ICR Review Independent Evaluation Group 1\. Project Data: Date Posted: 06/09/2015 Country: Nicaragua Project ID: P056018 Appraisal Actual Project Name: Land Administration Project Costs (US$M): 48\.5 54\.2 L/C Number: C3665 Loan/Credit (US$M): 42\.6 48\.0 Sector Board: Agriculture and Rural Cofinancing (US$M): Development Cofinanciers: Board Approval Date : 06/18/2002 Closing Date: 12/31/2007 04/30/2013 Sector(s): Central government administration (44%); Sub-national government administration (36%); Other social services (15%); General agriculture fishing and forestry sector (3%); Law and justice (2%) Theme(s): Other rural development (25% - P); Personal and property rights (25% - P); Land administration and management (24% - P); Biodiversity (13% - S); Indigenous peoples (13% - S) Prepared by: Reviewed by: ICR Review Group: Coordinator: John R\. Heath J\. W\. Van Holst Christopher David IEGPS1 Pellekaan Nelson 2\. Project Objectives and Components: a\. Objectives: The two objectives were described in the Development Credit Agreement as: “(a) to develop the legal, institutional, technical and participatory framework for the administration of property rights in the Republic of Nicaragua’s territory; and (b) to demonstrate the feasibility of a systematic land rights regularization program\.” b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: 1\. Policy and Legal Reforms ORIGINAL COST (Estimated, US$0\.6 million; Actual, US$0\.1 million)\. ADDITIONAL FINANCING: (None)\. To strengthen the country’s land policy and legal frameworks through: the development of a national land policy framework; the development of laws related to indigenous peoples’ land rights in the Caribbean region; the modernization of cadastre and property registry systems; and the technological integration of cadastre and registry\. 2\. Institutional Strengthening and Decentralization ORIGINAL FINANCING (Estimated, US$13\.8 million; Actual, US$16\.5 million)\. ADDITIONAL FINANCING: (Estimated, US$3\.6 million; Actual, US$3\.2 million)\. To improve national institutional capacity by: establishing the National Directorate of Land and Agrarian Reform; implementing a new organizational model for cadastre and regularization; increasing efficiency in land administration services; and promoting coordination between land sector institutions\. The additional financing was used to scale up the component's activities\. 3\. Titling and regularization services ORIGINAL COST: (Estimated, US$16\.6 million; Actual, US$18\.0 million)\. ADDITIONAL FINANCING: (Estimated, US$5\.3 million; Actual, US$5\.9 million)\. To develop and implement a land regularization methodology that would serve as a foundation for a long-term, comprehensive program\. This component would also support processing of land claims and conflict resolution\. The additional financing was used to scale up the component's activities\. 4\. Demarcation and Consolidation of Protected Areas ORIGINAL COST: (Estimated, US$2\.2 million; Actual, US$2\.5 million)\. ADDITIONAL FINANCING: (Estimated, US$0\.3 million; Actual, US$0\.3 million)\. To physically demarcate selected protected areas, formulate management plans in a participatory manner, and implement a social and environmental communication program in and around these areas\. 5\. Demarcation of Indigenous Peoples’ Lands ORIGINAL COST: (Estimated, US$2\.6 million; Actual, US$2\.8 million)\. ADDITIONAL FINANCING: (None)\. To support the strengthening of indigenous peoples’ land rights in the Caribbean region through demarcation and titling of selected indigenous territories, including within the Bosawas Reserve for indigenous peoples, and the development of a limited number of territorial management plans\. 6\. Information Systems ORIGINAL COST: (Estimated, US$2\.7 million; Actual, US$4\.4 million)\. ADDITIONAL FINANCING: (Estimated, US$0\.9 million; Actual, US$0\.4 million)\. To develop an efficient technological framework that would: modernize cadastre and registry services and land titling and regularization procedures (including through the piloting of an Integrated Cadastre-Registry Information System or SIICAR);and provide for project management and monitoring and evaluation\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost At appraisal, the estimated project cost was US$48\.5 million; at closing, the actual project cost was US$ 54\.2 million\. Financing The original IDA credit was US$42\.6 million\. On 02/16/2010, Additional Financing (AF) of US$10 million was approved\. The distribution of AF between components is shown in Section 2c above\. At closing, total IDA financing was US$48\.0 million\. The equivalent of US$1\.2 million of the Original Credit was canceled at closing and US$13,492 was canceled when the AF closed\. Borrower Contribution The expected contribution from government was US$5\.8 million; the actual contribution was US$6\.1 million\. Local communities contributed US$0\.1 million (expected and actual)\. Dates The original closing date was December 31, 2007\. There were four extensions to the closing date of the Original Credit (OC): (a) at the January 2007 restructuring, closing was extended to December 31, 2008 to allow for the additional time required to achieve objectives and targets; (b) at the February 2008 restructuring, closing was extended to October 31, 2009 to provide additional time for the completion of key activities; (c) in May 2009, a six-months extension was approved, running to April 30, 2010, to allow for the preparation of the Additional Financing (AF); and (d) when the AF was approved in February 2010, closing of the OC was extended until July 2010 to ensure adequate closing of credit accounts\. The Additional Financing closed, as expected, on April 30, 2013\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: The relevance of objectives is rated high\. When the project was appraised over one-third of rural land was held without a clear title\. The share of land with no or inadequate documents was particularly high among small producers\. Land conflicts due to overlapping claims were numerous\. The land claims of indigenous peoples remained mostly unaddressed\. There was also an urgent need to promote gender equity in land ownership because past agrarian reform programs and inheritance laws had favored males\. Institutions needed consolidating: there were 25 agencies dealing with land allocation and land rights\. The procedures for land regularization were cumbersome and centralized, and the land agencies lacked capacity to handle the volume of cases\. Cadastral and property registry information was outdated or missing in many places, while the existing cadastral and property registry records were not systematically linked\. The project development objectives were consistent with the government’s 2008 National Plan for Human Development (NPHD) and the World Bank’s Country Partnership Strategy FY13-17 (CPS), which was current at project closing\. The NPHD described the regularization of land tenure, cadastre, land titling and territorial development as fundamental to development\. The CPS also gives priority to land administration\. NPHD and CPS cite reduced poverty and improved agricultural productivity as overarching goals\. Although typically these goals cannot be directly achieved through improved land administration, a project of this nature may be expected to contribute to rural development by helping to remove some of the impediments to the functioning of land markets and to investments in and diversification of the rural economy\. b\. Relevance of Design: The relevance of design is rated substantial\. The project was designed as a five-year pilot and yet realization of its objectives was predicated on various actions that were more consistent with a national program\. Thus, startup of the pilot assumed that the Cadastre Law would be passed by November 2003; passage was delayed until 2005\. Nevertheless, the components and activities were substantially relevant to achievement of project objectives\. The project focused on codifying land rights that were not formally defined\. The design allowed for this by: addressing the land rights of indigenous communities; mainstreaming alternative conflict resolution mechanisms; helping agrarian reform beneficiaries to substantiate their property claims; and strengthening the role of Regional Councils and the National Commission for Demarcation and Titling of Indigenous Territories\. The provision for monitoring and evaluation was intended to accommodate the political and social sensitivity of land issues and the potential impact of proposed legal and institutional changes; but the details were not spelled out and not enough priority was given to collecting baseline data\. 4\. Achievement of Objectives (Efficacy): To develop the legal, institutional, technical and participatory framework for the administration of property rights in the Republic of Nicaragua’s territory (Achievement: Substantial)\. Project outputs comprised: regularization of 26 percent of the untitled land in the pilot area (the target was 40 percent); delivery of 44,019 land titles in rural areas, of which 37,416 (85 percent) went to “very small producers” (the target was for 70 percent of titles to go to this group); 51 percent of titles were delivered either to women or jointly to women and their partners (the target was 40 percent)\. The primary outcome of the project was the technical support that it gave to facilitate passage of three important pieces of legislation: the 2003 Law for the Collective Land Rights of Indigenous Peoples; the 2005 Cadastre Law; and the 2009 Public Registry Law\. This legislation provided the foundation for a national program of land administration that would provide a durable legacy once the project closed\. Highlights of this legislation are as follows\. ï‚ The 2003 law allowed poor and marginalized indigenous communities in the Caribbean Region to receive collective titles to 15 of their ancestral territories, comprising over 22,000 square kilometers – or close to 19 percent of the national territory\. ï‚ The 2009 law made possible the integration of cadastral and registry information\. It also brought together under a national system all the 17 regional property registries of the country and set up a Special Commission of Property Registries and the National Directorate of Property Registries\. To demonstrate the feasibility of a systematic land rights regularization program (Achievement: Substantial)\. The pilot showed that the proposed land administration method was feasible\. Over 61,690 rural and urban households (mostly poor) were given title to their land\. The area surveyed equaled almost 20 percent of the national territory\. Fourteen protected areas were demarcated (the target was 11)\. The data from 30 municipalities was incorporated in the National Cadastre Database, allowing for expansion of the property tax base and strengthening of land planning\. Owing to the increase in operating efficiency resulting from the project, the Public Registry is financially sustainable\. The project also pioneered alternative dispute resolution procedures that can now be applied nationwide\. 5\. Efficiency: Efficiency is rated substantial\. The net benefit estimate is based on econometric modeling of the impact of titling on property values\. The ICR acknowledges that property values are influenced by a wide range of factors, such as location, access to public services, size, value of construction, use of the property, each of which interacts with tenure status\. The method used controls for these factors, isolating the effect of change in tenure status after regularization\. The analysis estimates that actual net benefits were US$ 17\.8 million, compared to the US$ 7\.5 million that was forecast at appraisal\. The economic rate of return was 24 percent, compared to the 19 percent that was estimated at the outset\. However, there is an important caveat\. The assumptions about benefits were based on ex ante comparisons of the value of titled and untitled land (with separate assumptions for the original credit and additional financing phases)\. “During the course of implementation there was no systematic monitoring of investments after property titling or of returns to investments\. Therefore, assumptions such as the lengthy lag in the internalization of benefits, and the size of land value increments after titling remained unchecked” (ICR, p\. 41)\. Three considerations offset this shortcoming of the ERR analysis\. First, contemporaneous research (not cited in the ICR) has demonstrated that the benefits of land titling in Nicaragua amply exceed the costs, using the same measure of increased property values (See Deininger, K\. and Chamorro, J\.S\. 2004\. “Investment and equity effects of land regularization: the case of Nicaragua\.” Agricultural Economics\. 30:101-116)\. Second, a 2012 survey commissioned by the project examined 2,251 households, comparing households that had benefited from the project with those that had not\. Based on the results of this survey, the ICR reports that “Investment in home construction and improvement was greater in the titled Project areas than in the control group, consistent with the theory of the positive effects of land tenure regularization” (ICR, p\. 49)\. Third, the Nordic Development Fund (a development partner) observed that “the fact that municipal revenue from property taxation has increased, and that an increasing number of land conflicts is being resolved, indicated a higher efficiency in the new system” (ICR, p\. 24)\. a\. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 19% 100% ICR estimate Yes 24% 100% * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: IEG agrees that the following statement in the ICR fairly represents the outcome of the project: "The Project remains highly relevant, while its Project Development Objectives (PDOs) were achieved and most of its performance indicators were met or exceeded, which likely improved the economic situation of poor households \. Building on Project results, the country has already launched a national land program\. Although several targets were not fully achieved in the expected time frame under the original Credit, results within the AF period were achieved six months before the expected three-year period\. Targets that were not fully achieved were in most cases substantially achieved, and this shortfall was more than compensated by surpassed targets on indicators of equal or greater relative weight\. The net economic benefits were significantly higher than those expected at appraisal\. The legal and institutional framework is clearer and more consolidated, and SIICAR is fully operational even though its expansion was more limited than originally planned" (italics added by IEG, p\. 18)\. There is one caveat\. The PDOs were pitched at the level of intermediate outcomes (that is, outcomes bearing on the effectiveness of land administration), rather than higher-level objectives such as poverty reduction\. Evidence from a 2012 survey sponsored by the project in connection with the impact evaluation suggests that the poverty impact may have been limited (calling into question the italicized statement in the paragraph above)\. The survey compared project beneficiaries with a control group who had not benefited from cadastral surveying and titling under the project\. Survey results showed that there was more investment in home construction and improvement by beneficiaries than by control households, and in the beneficiary group a higher proportion of title holders were women\. But in other respects there was no significant difference between the two groups: the propensity to use plots for commercial activities was similar, as was perceived security of tenure and access to credit (ICR, p\. 19)\. a\. Outcome Rating: Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Since credit closing the government has continued to consolidate land administration policies and institutions, including integration of cadastral and property registry information\. The necessary laws are now in place and coordination of the various agencies is less of a problem than it was at project startup\. There are two sources of risk, both moderate\. First, some municipalities lack the technical capacity and commitment to maintain the cadastre and the accuracy of the data may erode over time\. However, in order to ensure the overall integrity of the system, the government has a strong incentive to provide the necessary training and technical assistance to these municipalities\. Second, some people may be disinclined to register subsequent property transactions\. By ensuring that registry officers are accessible, that registry transaction fees are affordable and that public information campaigns are staged, government should be able to contain this risk\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: The design of the project was innovative and relevant to country needs at the time of appraisal\. It was well informed by analytic work\. The risk associated with adjudicating indigenous land rights was correctly assessed as substantial and sound mitigation measures were proposed\. However, the difficulty of coordinating the 25 institutions involved in allocating land rights (ICR, p\. 1) was underestimated\. Also, there was an overoptimistic assumption that enabling legislation would be swiftly passed (ICR, p\. 8)\. Finally, the provision for monitoring and evaluation was incomplete (ICR, pp\. 11-12)\. Quality-at-Entry Rating: Moderately Satisfactory b\. Quality of supervision: The operation was listed as a problem project in 2005, owing to implementation lags\. The mid-term review made important adjustments, including reallocation of funds between expenditure categories and improved procurement oversight\. Performance picked up thereafter\. Trust funding was secured to finance the hire of international experts\. Good use was made of FAO’s land administration expertise\. The safeguards bearing on indigenous peoples’ land rights were soundly enforced\. The Bank collaborated effectively with, and helped supervise, parallel land operations by the Nordic Development Fund and the Millennium Challenge Corporation\. Quality of Supervision Rating : Satisfactory Overall Bank Performance Rating : Moderately Satisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: Government was committed to the project throughout the period of preparation and implementation\. Strong commitment was manifest in the early enactment of Law 445, which signaled the government’s intention to recognize indigenous peoples’ land rights\. There was a delay in enacting the Cadastre Law but the government redoubled its support after 2007, leading to passage of the Public Registry Bill in 2009\. The government also pushed for closer collaboration between the judicial branch (property registry) and the executive (cadastre, regularization), thereby facilitating project implementation\. Delays resulting from protracted negotiations in the National Assembly and disruptions caused by two national and several municipal elections during the project span were beyond the control of the executive arm of government\. Government Performance Rating Satisfactory b\. Implementing Agency Performance: Project implementation was initially placed in the hands of the Finance Ministry (MHCP), subsequently shifting to the Attorney General's Office (PGR)\. On balance, PGR did a better job\. Under MHCP, the pace of implementation was generally good but dropped off at times\. Compliance with Credit Agreement conditions was inconsistent leading to some delays\. MHCP could have promoted inter-institutional coordination more vigorously\. It did not launch the promised Midterm Review evaluation\. In the space of twelve months in 2007 there were three Project Coordinators, which temporarily reduced the effectiveness of project management\. Under PGR, the impetus behind implementation increased substantially: inter-institutional coordination improved, contract management problems were resolved, and partnership with co-executing agencies was strengthened, gradually leading to better implementation capacity and achievement of key targets\. Implementing Agency Performance Rating : Satisfactory Overall Borrower Performance Rating : Satisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The ICR (pp\. 11-12) refers to shortcomings in the results matrix that was presented in Annex 1 of the PAD\. In general, the PAD makes little reference to the provision for M&E\. The PAD Outcome indicators were not well thought out and there was insufficient provision for a baseline survey\. b\. M&E Implementation: The specialized M&E unit introduced following the midterm review led to more thorough monitoring and completion of the special studies that had been promised\. An impact evaluation was carried out in the last year of implementation (some of the findings are summarized in Section 6 above)\. c\. M&E Utilization: Following the midterm review, monitoring results were taken more account of by project management and the improved M&E system made a significant contribution to preparation of the follow-on project\. M&E Quality Rating: Modest 11\. Other Issues a\. Safeguards: The following safeguards applied to this Category B project: Environmental Assessment (OP/BP 4\.01), Natural Habitats (OP/BP 4\.10), Indigenous Peoples (OP/BP 4\.10), Involuntary Resettlement (OP/BP 4\.12), Forests (OP/BP 4\.36), and Physical Cultural Resources (OP/BP 4\.01)\. Compliance with environmental and social safeguards was satisfactory\. There is no evidence that tenure regularization led to deforestation; and the demarcation of protected areas achieved under the project likely improved environmental stewardship, without curtailing access to resources by people near these areas\. Indigenous peoples were adequately consulted throughout project implementation and project activities were sensitive to social organization and culture (ICR, p\. 13)\. b\. Fiduciary Compliance: Financial management was satisfactory (all audits were unqualified) and procurement was sound, benefiting from adoption of the Electronic Procurement Management System (SEPA), and periodic fiduciary training for government and project staff\. c\. Unintended Impacts (positive or negative): d\. Other: 12\. Ratings: ICR IEG Review Reason for Disagreement/Comments Outcome: Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome: Bank Performance: Moderately Moderately Satisfactory Satisfactory Borrower Performance : Satisfactory Satisfactory Quality of ICR: Satisfactory NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: The following well-considered lessons are cited in the ICR:  The sustainability of outcomes of land administration interventions requires building broad social and political commitment, as well as maintaining and mainstreaming key competencies across electoral cycles\.  The challenge of recognizing the complexity of indigenous people’s land rights requires attention to historical and social particularities and intensive social supervision\.  A strong focus on local governments is critical to the sustainability of investments in cadastre and  registry modernization\.  Alternative conflict resolution mechanisms can effectively facilitate cadastral and regularization processes\. In addition, IEG proposes as a lesson that impact evaluations, like that sponsored by this project (see Section 6 above), can usefully help to establish whether changes in economic growth and poverty levels may be attributed to land administration projects\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR is clear, complete and concise and proposes useful lessons of broad relevance to land administration projects\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P036953

 ICRR 13137 Report Number : ICRR13137 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 12/15/2009 PROJ ID : P036953 Appraisal Actual Project Name : China Health Nine US$M ): Project Costs (US$M): 94\.86 98\.89 Project Country : China Loan /Credit (US$M): Loan/ US$M ): 60\.00 61\.80 Sector Board : HE Cofinancing (US$M US$M): ): 2\.16 Sector (s): Health (94%) Sub-national government administration (6%) Theme (s): HIV/AIDS (29% - P) Child health (29% - P) Population and reproductive health (14% - S) Health system performance (14% - S) Participation and civic engagement (14% - S) L/C Number : C3201; L4462 Board Approval Date : 05/04/1999 Partners involved : Australian Agency for Closing Date : 06/30/2006 06/30/2008 International Development (AusAID), Government of Japan Evaluator : Panel Reviewer : Group Manager : Group : Judyth L\. Twigg Kris Hallberg IEGSE ICR Reviews IEGSG 2\. Project Objectives and Components: a\. Objectives: The objective of the project , as stated in the Development Credit Agreement (DCA), was “to assist the Borrower in (i) reducing maternal and child mortality and morbidity and improving child survival and development in the poorest areas of the Borrower’s territory; and (ii) designing and implementing comprehensive and multi -sectoral public health programs to prevent and control HIV, AIDS, STD, and blood -borne infections and improving the capacity of the Borrower’s health sector institutions therefore \.â€? The Project Appraisal Document (PAD) states the objectives somewhat differently: “to reduce maternal and child mortality and morbidity and improve child survival and development in the poorest areas of China, â€? and “to prevent and control HIV/AIDS/STIs and other blood-borne infections by implementing comprehensive and multi -sectoral health programs at the provincial levels, and by building technical capacity at the Central level \.â€? This review will assess the achievement of objectives as stated in the DCA as the legally binding document \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): The project had three components : 53 \.9 million; actual, US$ 56\. 1\. Improved Maternal Health and Child Development (original, US$ 53\. 56 \.2 million ): targeting 113 counties in five provinces \. Contained five subcomponents : improved quality of basic maternal health and child development care services (development of a basic maternal and child health package; improved maternal care through systematic prenatal care, appropriate obstetric care, labor and delivery care, and effective management of high-risk pregnancies; integrated sick child care; and improved systematic well child and newborn care ); improved family and community participations and health education (premarital counseling and other community -based counseling and education services ); improved management of mother and child health (MCH) services, including management information systems (MISs); improved health worker training through a comprehensive training program to improve the clinical and technical competence of MCH staff; and improved access to MCH care services through a Medical Financial Assistance (MFA) program for pregnant women and children living in poor families \. 2\. Improved Prevention and Control of HIV /AIDS/ 35 \.0 AIDS /STDs and Other Blood -Borne Infections (original : US$ 35\. 36 \.8 million ): targeting 55 counties in 35 prefectures of four provinces \. Contained four million; actual US$ 36\. subcomponents: improved and expanded policy development and institution building (including awareness-raising and commitment-building interventions, strengthening of multisectoral collaboration, capacity -building interventions for public and private institutions and NGOs, integration of HIV /AIDS/STI programs into other health services, and support for policies on syndromic management ); improved HIV/AIDS and STD interventions and support (including interventions to prevent and control HIV /AIDS/STI, activities to encourage behavior change to reduce risks, support for improved STI management, condom social marketing, and patient care and support ) ; infrastructure investments and training for an improved HIV/AIDS and STD surveillance system; and improved management of blood transfusion services (including training and support for improved clinical guidelines )\. 3\. Project Coordination and Support (original : US$ 5\.9 million; actual US$ 5\.9 million ): supported training and technical assistance at the national level to development and implement policy to support project planning, supervision, implementation, monitoring, and reporting \. The ICR states that the blood transfusion management activities in Component 2 effectively became a separate component in the supervision arrangements \. In addition, a new area of work supporting enhanced NGO activities for HIV/AIDS control was supported by funding from the Australian Agency for International Development (AusAID) and the Japanese Social Development Fund (JSDF), and was effectively managed as a distinct subcomponent \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Total financing of US$ 60 million at appraisal included US$ 10 million from IBRD and US$ 50 million from IDA \. 61 \.8 million included US$ 9\.6 million from IBRD and US$ 52\. Total actual financing of US$ 61\. 52 \.2 million from IDA \. Additional financing totaled US$ 2\.16 million\. Financing from AusAID (AUD 2 million, or US$ 1\.1 million) from 7/1/2000-12/31/2002, and from JSDF (US$ 400,000) from 7/1/2000-4/30/2002, supported NGO capacity building for control and prevention of HIV/AIDS and STDs in all project provinces covered by Component 2\. AusAID’s funding also supported related central and provincial technical assistance \. JSDF provided further support (US$ 660,000) in June 2005 for Xinjiang Province only\. The project was extended by two years, to 6/30/2008, according to the ICR, to sustain implementation momentum and meet project objectives more fully \. 3\. Relevance of Objectives & Design: Relevance of Objectives and Design is rated Modest, based on Substantial relevance of objectives and Modest relevance of design\. Relevance of Objectives is rated Substantial \. Two of the five pillars of the 2006-2010 Country Partnership Strategy are directly relevant to the project : reducing poverty, inequality, and social exclusion, including through expansion of access to social and infrastructure services, especially in rural areas; and improving public and market institutions, including reform of public sector units \. According to UNAIDS, China’s HIV epidemic remains low prevalence (\.1% adult (15-49) prevalence), but with pockets of high infection among specific subpopulations and in specific geographic regions\. A 2007 UNICEF/WHO report observes that progress in infant and maternal mortality has been slow and uneven\. The objectives of the various parts of the project therefore remain substantially relevant \. The integration of two distinct sets of objectives (what could have easily been two separate projects ) into a single project, however, introduced significant complexity during implementation \. Relevance of Design is rated Modest \. The project chose appropriate provinces for intervention, with target groups for the MCH component in the poorest counties of relatively poor provinces not covered by previous Bank projects, and provinces for the HIV/AIDS component chosen as those high in prevalence of containing specific risk groups/behaviors (migrant workers in Fujian and unsafe blood donation activity in Shanxi )\. The ICR offers an observation, citing the opinion of many stakeholders within China, that World Bank projects there tend to function smoothly only after about three years during which the policy environment must be changed \. The ICR also notes that there was a significant policy shift in the Chinese government in the early 1990s, when mid- and long-term national plans for AIDS prevention and control were drafted, but that several challenges remained following this Government policy shift, including limited government awareness of the extent of the problem and relatively weak policy and regulatory mechanisms \. Yet the project was designed to address little in the area of policy development or policy advocacy (particularly policy and regulatory development related to HIV /AIDS), and there is no evidence that the Bank performed political economy analysis to understand how to prevent initial delays \. The project’s structure and implementation design, according to the ICR, was oriented more toward the grassroots level than to directly addressing higher-level policy and institutional change \. Project design was complex, containing what amounted to at least two distinct projects rather than a single unified project, scattered across a broad geographic area; there were no provisions that brought the various elements together \. Lack of a central funding provision for the MCH component resulted in a situation where resources for national -level activities were difficult to request from the provinces\. Risk identification and mitigation was weak, with some risks that could have been identified not sufficiently accounted for, particularly changes in the broader health financing environment and in the structure of MOH\. For the HIV/AIDS component, specific risk groups are identified – injection drug users, sex workers, blood donors and recipients of blood products, internal migrants – but it does not specify in detail how those populations would be reached with prevention interventions \. The project did not include what might have been helpful interventions in the area of human resources development \. 4\. Achievement of Objectives (Efficacy): Achievement of Objectives (Efficacy) is rated Substantial \. Because China has experienced significant improvements in MCH, HIV/AIDS/STI prevention and control, and blood management over the life of the project (due to significant economic growth, improved infrastructure, increased government financing, and other programs and policies), it is difficult to attribute observed gains specifically to the project \. However, the ICR does present some analysis comparing project regions with non -project regions\. Reduce maternal /child morbidity /mortality : Substantial Outputs : It should be noted that the ICR presents little data on coverage of outputs \. The TTL explains that coverage varied by type of output, with coverage of infrastructure development more select and need -based, but coverage of training more comprehensive \. 263 civil works projects were financed, and over 70,000 pieces of equipment were purchased \. Unspecified intensive training, introduction of new technology, new programs, and new procedures were introduced \. 1\.1 million person-time participants received unspecified short -term training, and 12,200 person-time participants received long-term training (“person-time participantsâ€? is not defined)\. 99\.6% of planned unspecified clinical advanced studies were completed; 121\.1% of planned long-term training was completed; 99\.2% of overseas training was completed; and 97\.4% of consultants’ services were completed\. The ICR does not specify exact values for these indicators, nor does it provide information on the activities involved \. 200,000 poor pregnant women and 500,000 children under five years of age from poor families received subsidies for unspecified MCH services\. A four-tier management mode for planning and coordinating MCH services was established at the central, provincial, prefecture, and county levels \. A management information system (MIS) for MCH was established and improved throughout the life of the project \. The Borrower’s ICR states that service delivery capacity at both the county and township level has improved substantially in the project areas, and the capacity of maternal health services, screening of high -risk pregnant women, primary children’s health care, comprehensive management capacity for childhood diseases have improved \. All project provinces developed and updated MCH service regulations and clinical protocols \. The ICR offers no specific information or evidence about these improvements; the TTL explains that these interventions included both technical training and policy /institutional development\. The ICR cites health education coverage of the premarital care population at 64\.1% in 2000 and 61\.7% in 2007; health education coverage of pregnant women at 82\.7% in 2000 and 91\.9% in 2007; and health education coverage of children’s parents at 61\.9% in 2000 and 83\.3% in 2007; but it does not give further information about the content, quality, coverage, or impact of this education \. The child nutrition monitoring rate increased from 33\.8% in 2000 to 52\.6% in 2007 in the project counties\. Outcomes : The ICR presents evidence of improvement on key indicators in project areas compared with non-project areas\. From 1999-2006, the hospital delivery rate increased in project counties from 48\.5% to 81\.0%, an increase of 67% compared to an increase nationwide of 38%\. The antenatal care rate (five or more visits to a health care provider ) increased from 16\.0% to 75\.8% from 1997-2007 in the project counties\. (It should be noted that, on p \. 36, the ICR gives the 75\.8% figure as the 2007 hospital delivery rate rather than the 2007 antenatal care rate, but this is not consistent with data cited in other parts of the ICR and therefore is assumed to be incorrect \.) The postnatal visit rate increased from 33\.0% in 1997 to 84\.2% in 2007 (it is unclear how this indicator is defined )\. The percentage of women exclusively breastfeeding for four months remained stable (73\.2% in 2002, 71\.1% in 2007)\. Maternal mortality (MMR) declined in project areas from 159\.3/100,000 in 1997 to 45\.1 in 2007\. Infant mortality IMR) declined in project areas from 67\.9/1,000 in 1997 to 12\.5 in 2007\. Under-five child mortality declined in project areas from 80\.7/1,000 in 1997 to 15\.8 in 2007\. The neo-natality rate (NMR) in project counties declined from 39\.8/1,000 in 1997 to 8\.2 in 2007\. Under-five moderate and severe malnutrition declined in project counties from 5\.7% in 1997 to 1\.6% in 2007\. Data for the specific time period of the project are not given in the ICR; it notes that significant improvement in these indicators had been noted between 1997 and 2000, although there is some indication that underreporting took place prior to 2002\. Importantly, the ICR presents analysis indicating that the annual rate of decline in MMR from 1997-2007 was 8\.9% in project counties, compared to 7\.6% in non-project counties, and the annual rate of decline of IMR over the same time period was 8\.5% in project counties, compared to 7\.3% in non-project counties\. AIDS /STD/ Prevent /control HIV /AIDS/ STD /blood -borne infections : Modest (Substantial for control of blood -borne infections ) Outputs : Prevention, control, and action plans for HIV /AIDS for the country and for the project regions were developed, issued, and implemented\. More than 30 national HIV/AIDS/STD technical regulations and guidelines were developed and put into effect\. 544 specific HIV/AIDS STD policies were developed and implemented at the provincial, prefecture, and county level\. Health education outputs in project areas related to HIV /STIs increased as follows from 1999 to 2006: newspapers, 275 issues to 1,281; leaflets, 409\.4 runs of 10,000 copies to 852\.3; picture posters, 53\.5 runs of 10,000 copies to 170\.5; face-to-face encounters, 133\.4 “10,000 person timesâ€? to 542\.1; 646 television broadcasts to 11,897; 251 radio broadcasts to 30,753\. The ICR does not provide information on the content, quality, or impact of these interventions \. The proportion of project areas with interventions targeted at drug users increased from 1999-2006 from 15% to 51%; at sex workers, from 30% to 82%; at floating (presumably migrant) populations, from 13% to 59\.5%; at women from 32% to 64%; at students, from 35% to 74%\. The ICR does not provide information on the content, quality, or impact of these interventions \. Unspecified training workshops were held for a “large numberâ€? of HIV/AIDS/STD professionals at all levels of government on surveillance, testing, interventions among high -risk groups, and blood safety \. According to the ICR, test scores on HIV/AIDS/STD knowledge and attitudes among trained professionals and government leaders were better in project prefectures than in control ones \. The ICR does not provide further information on this training \. Interventions aimed at risk groups (sex workers, IDUs, men who have sex with men, STD patients, long -distance truck drivers, coal miners, constructions workers, students, and medical professionals ) were implemented in each project region\. These interventions included activities in entertainment places, condom promotion, standardized STD management, information campaigns, peer education, needle social marketing, methadone maintenance treatment, voluntary counseling and testing, training for medical staff, community -based interventions, and interventions to prevent mother-to-child transmission\. NGOs implemented 52 such interventions targeted at risk groups \. No further information is provided on the content, coverage, or impact of these interventions, other than a statement that many of the interventions targeting high -risk groups remain pilots with limited coverage \. It should be noted that these interventions represent a substantial change in China ’s approach to its HIV/AIDS epidemic\. (willingness to engage with marginalized risk groups rather than focusing exclusively on the general population )\. 146 HIV sentinel surveillance sites were established \. The total volume of HIV sentinel surveillance increased from 9,622 to 200,277 (dates and units unspecified )\. The number of HIV testing laboratory members grew from 110 in 1999 to 863 in 2007\. A “large amountâ€? of unspecified equipment was purchased for the National HIV Reference Laboratory, blood stations, HIV testing labs, and intervention teams \. The project was the first to launch behavioral surveillance in China \. Three rounds of behavioral surveillance, eleven operational research projects, and “quite a fewâ€? surveillance and evaluation training workshops were conducted \. The number of “supportive policy areas in cities for HIV /STI prevention and treatmentâ€? increased from 55 in 2000 to 211 in 2007\. The ICR does not specify what is meant by a “supportive policy area\.â€? The ICR cites a 2007 study by the National HIV/AIDS/STD Center indicating that project prefectures reached a higher proportion of HIV/AIDS cases than non-project prefectures in the same regions \. It is unclear what it measured by this study\. New blood laws were legislated and implemented \. 75 blood donation sites were established in the four project regions, all with standardized operational procedures \. All staff of blood donation sites underwent professional training and examinations (90% staff pass rate)\. Outcomes : The evidence on prevention and control of HIV /AIDS/STIs is mixed, with some indicators pointing to significant achievement, some of the data impossible to interpret, and some indicators moving in the wrong direction \. Among the general population, awareness of HIV prevention rose from 3\.1% at project mid-term to 17\.4% at the end of the project\. Condom use at last sex rose from 19\.8% (date unspecified) to 30\.1% among the general population\. The ICR provides other information comparing HIV prevention knowledge and condom use among the general populations of project versus non -project areas, indicating that the project areas performed better, but the information is presented in a manner that is impossible to interpret precisely \. It should be noted that interventions targeted at the general population are not key in a concentrated HIV /AIDS epidemic like that in China\. Condom use at last sex among sex workers increased in Fujian from 33\.5-52\.3% in 2001 to 74\.3% in 2008; in Guangxi, decreased from 59\.4% in 2002 to 46\.6% in 2008; in Shanxi, remained stable at 84\.6% in 2004 and 83\.1% in 2008; and in Xinjiang, increased from 86\.1% in 2001 to 92\.4% in 2007\. Needle sharing among injection drug users (IDUs) increased in Fujian from 11% in 2001 to 22% in 2007; decreased in Guangxi from 59\.5% in 2001 to 41\.9% in 2008; remained stable in Shanxi at 25\.8% in 2004 and 23\.8% in 2008; and decreased in Xinjiang from 85\.1% in 2002 to 42\.2% in 2008\. The number of confirmed HIV-positive persons increased in Fujian from 57 in 2001 to 283 in 2007; in Guangxi from 2 to 1445 from 2001-2008; in Shanxi from 24 to 229 from 2001-2008; and in Xinjiang from 1109 to 2326 from 2001-2008\. The ICR notes that an initial jump in newly -reported cases is to be expected because of the project ’s contributions to surveillance and reporting \. The ICR reports that HIV prevalence among antenatal clinic attendees decreased in Fujian from 0\.04% in 2003 to 0\.02% in 2007; increased in Guangxi from 0 to 0\.31% from 2001-2008; remained stable in Shanxi at 0; and increased in Xinjiang from 0\.26% in 2001 to 0\.87% in 2008\. The ICR’s Basic Information Sheet (p\.iv) states that HIV prevalence among drug users decreased in Fujian from 0\.003 in 2001 to 0\.0017 in 2007; decreased in Guangxi from 0\.0018 in 2001 to 0\.00155 in 2008; decreased in Shanxi from 0\.0124 in 2001 to 0\.0068 in 2008\. It is unclear whether these figures represent percentages or rates (with denominator unspecified)\. On p\. 36 of the ICR, it is stated that HIV prevalence among drug users in project regions increased from 8\.38% in 1999 to 12\.9% in 2006\. On p\. 52 of the ICR, it is stated that HIV prevalence among drug users in project regions declined from 36\.6% in 1999 to 20\.8% in 2006\. HIV prevalence among sex workers in project counties decreased from 2\.99% in 1999 to 0\.71% in 2006\. HIV prevalence among STI outpatients increased from 0\.21% in 1999 to 0\.93% in 2006\. It is important to note that changes in HIV prevalence are not indicative of prevention success \. At one point, the ICR reports that the total number of STI cases reported per 100,000 population in project regions increased from 53\.8 in 1999 to 74\.3 in 2006\. However, at another point (p\. 52), the ICR reports that overall STD prevalence declined in project areas (without specifying exact data )\. The ICR also reports that between 2001 and 2004, gonorrhea, syphilis, condyloma accuminatum, and other STDs showed a decreasing trend in the project regions\. It does not give exact data on these trends \. The ICR indicates that after 2006 the percentage of reported cases for all STDs except gonorrhea increased again, speculating that this was due to the exhausting of project funding for scheduled STD interventions, among other factors \. Voluntary blood donation in project areas increased from 5% to over 96% of all donations; planned donation (unpaid blood donation organized by work units that are assigned quotas ) decreased from 81\.2% to less than 5\.2% of all donations\. Clinical component blood transfusions increased from 16\.5% to 91\.7% of all transfusions\. No shortfalls in meeting requests for blood have been reported \. There were no reports of HIV, Hepatitis B, or Hepatitis C transmission through transfusion in any of the project counties \. Important gains were made in institutional capacity at the Central and provincial levels \. These include capacity to formulate and implement action plans and to identify and interact with key risk groups \. 5\. Efficiency (not applicable to DPLs): Efficiency is rated Substantial \. Provinces were selected carefully to ensure targeting of appropriate populations \. Project interventions had spillover benefit into non-project areas, particularly through institutional reforms and capacity -strengthening\. However, inefficiencies in China’s health system, arising from the fragmentation of public health responsibilities, lack of clarity about roles and responsibilities across government, and inappropriate incentives, undermined the efficiency of project support, and the project missed an opportunity to amend this situation by engaging more effectively on health system issues at the provincial and national level \. Lack of continuity of Bank staff following mid -term led to missed opportunities for smooth implementation of activities, engagement with Government and development partners, policy dialogue, and use of the mid -term review for effective revision /course correction\. ERR/FRR, Appraisal and ICR Estimate: Not performed Appraisal: Net Present Value USD , IRR: 39%: MCH component; 36%: HIV/AIDS/STD component; 5,000%: blood services component ICR estimate: Not performed ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re -estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Based on Modest relevance, Substantial efficacy, and Substantial efficiency, the project ’s outcome is rated as Moderately Satisfactory\. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Budget allocations for basic preventive health services have been increased, MCH is now incorporated as part of a basic primary care package, and an improved training program for health workers and better management practices for the MCH system remain in place\. Ongoing policy and training support will be required to maintain MCH achievements, however, particularly in the poorest areas, and local government financial support capacity remains limited\. For HIV/AIDS, attitudinal shifts have taken place and infrastructure has improved, but sufficient human resource capacity may not be in place to absorb significant amounts of international funding (Global Fund and Gates Foundation)\. HIV/AIDS technical guidelines developed under the project have been transferred to non-project areas\. Behavioral surveillance, pioneered by the project, has been incorporated into a system of integrated surveillance, making its continuance more likely\. Blood management has been incorporated into government systems and budgets\. Risk to development outcome is highest for STI services, as China’s health financing arrangements consider testing and treatment for STIs to be a personal rather than public health service; since STI clinics are hospital-based and self-financing, they have little incentive to invest in prevention, education, or training\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: at-Entry is rated Moderately Unsatisfactory \. The project was built on a positive relationship Ensuring Quality -at- with MOH, established under earlier projects \. Project preparation and appraisal was led by a senior project officer, supported by a Bank sector specialist and other technical specialists familiar with China ’s health sector\. According to the ICR, team expertise was a positive factor in project preparation and quality -at-entry\. The project preparation process included capacity -building experiences such as overseas study tours for provincial leaders on HIV/AIDS\. However, there appears to have been insufficient attention to procurement procedures related to International Competitive Bidding, counterpart financing expectations, and overall resistance to new concepts, contributing to initial delays and slow disbursement \. There was also a lack of early training in project management that contributed to slowdowns \. Bank staff did not spend sufficient effort explaining to the counterparts what the project involved and the nature of the counterpart requirement \. Quality of Supervision is rated Moderately Unsatisfactory \. Supervision missions emphasized regular reporting on project indicators\. The Task Team Leader (TTL) changed frequently following the mid -term review; Chinese project managers believed this contributed to delays \. The only personnel continuity was the international expert involved with the blood safety subcomponent, who was highly respected by project participants and considered to be responsible for the achievements of that subcomponent \. The ICR states that the lack of a steady Bank presence in Beijing made the project “nearly invisibleâ€? over time (p\. 26), with staff turnover undermining implementation during key periods\. This contributed to a failure to use the mid -term review to reprioritize (or redesign) project activities as circumstances changed, and to sustain relationships and trust with Government counterparts and development partners \. By closure, the MCH division within MOH had only minimal understanding of the project; UNICEF was more aware of the HIV component than the MCH component; WHO was aware only of the blood safety subcomponent; and China ’s Center for Disease Control and UNAIDS had little knowledge of the project\. Some stakeholders speculated that the Bank had deliberately vacated the niche carved out by the HIV component, or it the Bank ’s effort was inadvertently overtaken by the entry of other organizations into the field\. Also, the Bank missed opportunities for impact on policy, particularly during the establishment of national Medical Assistance and New Cooperative Medical Service programs, when counterpart funding for analogous activities under the project ran out and these new schemes essentially replaced the project in providing financial assistance to a significant part of its target population \. There was also a lack of policy advocacy in key areas such as national policy on STIs \. at -Entry :Moderately Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Unsatisfactory c\. Overall Bank Performance :Moderately Unsatisfactory 9\. Assessment of Borrower Performance: Government Performance is rated Moderately Unsatisfactory \. Government ownership of the project was strong during preparation and early implementation; however, over time, there were changes in technical leadership that resulted in gaps in knowledge and consequent diminished interest \. Mobilization of counterpart funds at the provincial and county levels was slow throughout, and there was high staff turnover at the provincial level \. Government restructuring led to a slow start for the MCH component, and the lack of cross -county subsidization for counterpart funds resulted in some counties having to drop out of the project \. National experts for the MCH component became preoccupied with other projects over time that they assigned higher priority \. Leadership was also inconsistent for HIV/AIDS prevention and control activities, and not all departments were active in multi-sectoral leadership groups \. Coordination among government sectors, and between government departments and NGOs, was weak\. Implementing Agency Performance is rated Moderately Satisfactory \. Project management by the Foreign Loan Office (FLO) was strong, with experienced FLO project managers providing support for lower administrative levels to establish project management systems and to undertake advocacy with local government \. A single project manager, with responsibility for all components, during the final years of the project was very important to meeting project objectives\. However, there was limited attention to M&E beyond monitoring of plans and activities, with no entity driving to improve reporting quality and timelines against key performance indicators \.  a\. Government Performance :Moderately Unsatisfactory b\. Implementing Agency Performance :Moderately Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: M&E Design : Modest \. The PAD clearly denotes key performance indicators; however, a comprehensive framework for M&E was not set up properly until after several supervisory visits and recommendations \. The project’ s baseline survey covered only project areas, limiting the availability of useful data sources on non -project areas that could be used to evaluate project impacts and attribute results specifically to project interventions \. The design of surveillance systems for HIV/AIDS was inadequate to capture the local dynamics of the epidemic and did not coordinate effectively with systems for STD surveillance \. No central expert was assigned to drive the surveillance and reporting aspect of the project \. M&E Implementation : Modest \. There was a lack of early M&E\. Early MCH data collection did not reflect relevant performance indicators, and therefore data collection producing realistic indicators of implementation results did not occur until midway to late in the project \. Data collection for the MCH component was unreliable at the lower levels, with project managers and experts believing that lower -level MCH data prior to 2004 was generated largely to satisfy the interest of the leaders then in charge (a country-wide, not project-specific, problem)\. Since 2004, MCH data quality has improved as a result of supervisory missions \. A baseline survey was undertaken but not repeated at the end of the project (at the recommendation of the Bank, as alternative data sources were thought to be available to assess trends in key indicators )\. For the HIV/STD component, new sentinel surveillance sites were slow to be set up, mainly due to slow procurement; installation progressed more rapidly in the later years of the project \. M&E Utilization : Modest \. Limited funding available for evaluation was used to support case studies and focused evaluation of specific interventions, including studies comparing the achievements of project regions with control areas\. However, all of the data collected for HIV /AIDS have not been analyzed, and the findings from surveillance have not been used for effective guidance of future interventions among local high -risk groups\. Overall, there was a lack of an “information culture,â€? resulting in a situation where data were collected and perhaps even analyzed, but the results of that analysis went unused \. Encouragement from supervisory missions, however, increased utilization of data, largely because of the missions encouraging regular reporting of indicators \. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Safeguards : The project had limited environmental impact since the volume of hazardous medical waste in small health facilities is low\. Waste was handled through the general urban waste management system \. Unintended Positive Impact : Over time, the HIV/AIDS/STD component contributed to a change in attitudes among government agencies and service providers, increasing awareness and acceptance of the needs of vulnerable groups\. The HIV/AIDS component also strengthened central and provincial government capacity to take on new challenges once considered too sensitive to address \. AusAID and JSDF funding contributed to the development of capacity among NGOs to seek funding, implement programs, and account for their activities \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Based on Modest relevance, Satisfactory Substantial efficacy, and Substantial efficiency\. Project design did not take into account necessary changes in the policy environment, and lack of continuity of supervision led to some inefficiencies in implementation\. Risk to Development Negligible to Low Moderate Insufficient human resource capacity,  Outcome : attitudes toward STIs, and lack of incentives to invest in STI education, prevention, and training present risks to sustaining project achievements \. Bank Performance : Satisfactory Moderately Lack of continuity of staff following Unsatisfactory mid-term contributed to slowdowns in momentum, lack of visibility for the project, and missed opportunities for policy advocacy and development \. Borrower Performance : Satisfactory Moderately Government ownership and Satisfactory commitment, at all levels, lessened in the final years of the project, and coordination among government entities weakened\. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: Engagement on health system and policy issues is essential, particularly in a policy environment that is relatively immature and rapidly evolving \. Support for training and specific interventions risks becoming stale and irrelevant if not accompanied by ongoing policy dialog \. This project may have been more influential if it had concentrated more on system -level issues and less on direct technical assistance (as was the case with the blood safety subcomponent)\. Inconsistent supervision and slow implementation put a project ’s relevance at risk \. Lack of continuity of Bank task managers and limited presence in Beijing contributed to a failure to sustain relationships and trust with government counterparts and development partners and to reprioritize (or redesign) project activities as circumstances changed\. Stability and visible presence of project management is essential \. If an “information culture â€? does not exist when a project is launched, the Bank must make explicit efforts to build one\. one \. More attention in this project could have been focused on process evaluation and lesson learning during implementation\. MFA ) programs for poor women and children could usefully be integrated into Medical Financial Assistance (MFA) overall poverty reduction programs or into governmental medical assistance programs \. The MFA program of this project achieved important social benefits by making primary MCH services available for poor pregnant women and children from poor families\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR contains careful discussion of attribution of results to project interventions\. However, the ICR is not always careful to specify the definition, time period, and/or geographic area of cited indicators, making analysis a challenge\. Contradictory information is offered for some indicators\. The ICR provides very little specific or detailed information on project outputs or their coverage\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P009097

 ICRR 11074 Report Number : ICRR11074 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 08/07/2001 PROJ ID : P009097 Appraisal Actual Project Name : Ta For Treasury Data Project Costs 28\.1 30\.05 US$M ) (US$M) Country : Turkey Loan /Credit (US$M) Loan/ US$M ) 9\.20 9\.15 Sector (s): Board: PS - Central Cofinancing 18\.9 20\.9 government administration US$M ) (US$M) (100%) L/C Number : L3477 Board Approval 93 FY ) (FY) Partners involved : GTZ Closing Date 06/30/1999 06/30/2000 Prepared by : Reviewed by : Group Manager : Group : Michael R\. Lav Jorge Garcia-Garcia Ruben Lamdany OEDCR 2\. Project Objectives and Components a\. Objectives (a) Improve Treasury's monitoring and policy design functions; (b) Provide timely and efficient access for Treasury staff to a consistent, centralized data source; (c) enable Treasury both to contribute to and draw upon the databanks of multilateral institutions and other agencies; (d) ensure that organizational procedures support efficient data processing and analysis; and (e) support the development of a complementary institutional framework for investment in human capital\. In addition, the project sought to improve the availability and reliability of economic data that Treasury provides to other agencies, the private sector, and multilateral organizations \. b\. Components 1\. Develop a Data Management System (DMS) that: (a) provides an appropriate technology environment for macroeconomic data analysis; (b) contains centralized databases to support this work \. To do this the project would (i) update mainframe and install LAN services; (ii) convert existing data to the new system \. 2\. Institution-building initiatives including (a) training in selected economic, financial, and technical subjects; (b) consultant assistance for special studies and economic model -building; (c) management and training consultancy support; and (d) establishment of a Treasury library and Economic Information Center open to the public \. c\. Comments on Project Cost, Financing and Dates The project costs US$30\.05 million, financed by IBRD US$ 9\.15 million, GTZ, US$1\.95 million, and the Government of Turkey, US$18\.9 million\. The project was appraised in June, 1992, approved by the Board on May 28, 1992, made effective on September 12, 1992, and closed on June 30, 2000, one year behind schedule \. 3\. Achievement of Relevant Objectives: 1\. Development of a DMS considerably improved the quality and timeliness of Treasury economic data and Treasury's access to databanks of multilateral institutions and other agencies \. (a) Hardware: A noteworthy development was the shift in project concept from a mainframe to a PC network in line with developments in the computer industry in the early 1990s\. User needs were determined by an extensive consultant study which developed requirements for each of the 11 directorates of the Treasury \. The network utilizes ATM switches, a modern technology\. Six modern servers support about 875 PCs, with capacity to go to 1500 PCs to allow for future growth\. Security systems and firewalls were installed to provide security \. (b) Software: An Oracle Relational DMS was acquired\. DMS also uses Graphical Query Language and Power Builder software to create department formats and reports\. Email was installed\. (c) Implementation: Treasury staff assisted by consultants converted existing data, creased new databases within the DMS and Treasury staff were trained in use of the new system \. 8 out of 11 Treasury directorates are making effective use of the DMS, including Domestic Debt, External Finance, Banking, Foreign Trade, Macroeconomic Indicators, Asset and Debt Management, Sworn Bank Auditors, and Financial Institutions\. The conversion of data to the new system is satisfactory, although further improvements can be made on the interface between Directorates \. 2\. The institutional development component succeeded in its overall objective of improving the quality of Treasury staff using the new and better information available with the new DMS \. (a) Both long and short term training on economic, financial, and technical subjects were provided \. Midway through the project, a revised and expanded program for auditors was implemented, and was completed only at the end of 2001\. Many of the studies envisaged were completed, including one which developed Financial Early Warning Indicators \. (b) consultant assistance for model building was not implemented as foreseen because the high -level consultants sought by Treasury were not available as envisioned \. (c) Management and Training support was provided largely as foreseen\. 300 staff from 12 departments of the Treasury received short -term training\. A system was institutionalized to provide training in the future to new staff and to facilitate the introduction of new applications and knowledge in the future\. (d) the Economic Information Center was not established as a physical entity, but Treasury economic information has been effectively disseminated over the Interned \. The library, training center, conference facility, and publication center were all developed as envisioned \. 4\. Significant Outcomes/Impacts: The quality of Treasury economic statistics has improved significantly \. As an indicator of this improvement, IBRD staff report that Turkey's Treasury debt reporting is among the best from member countries, attributing this high quality data to this impact of this project \. 5\. Significant Shortcomings (including non-compliance with safeguard policies): Three directorates are not yet utilizing the DMS \. The State-Owned Enterprises Directorate and the Insurance General Directorates made little use of the new system because of institutional problems \. Since problems with SOEs have had major macroeconomic implications, this is a major shortcoming \. In addition, implementation of the project for the Automated Document Archival Systems has been postponed \. The studies to be done under the guidance of high-powered consultants engaged by the project were not done \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory This project achieved a smooth transition to a much-improved data base for Treasury, a difficult task in the best of circumstances\. Institutional Dev \.: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory The new computer system, based on networking of PCs rather than a mainframe as had been envisaged in the 1992 appraisal report was implemented with few problems because of high quality supervision support from the Bank \. However, the Bank was not able to provide the high-level consultants for economic studies as agreed \. Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. NOTE: 7\. Lessons of Broad Applicability: 1\. Turkey's experience shows that good and timely data, while useful for making decisions, does not ensure good economic management\. 2\. Consultants should be chosen for their ability to transmit knowledge as well as for their academic credentials\. The overemphasis by Treasury on "star" consultants resulted in disappointing results when the chosen consultants were not available as foreseen \. 3\. Internal incentive systems to adopt new systems should be fully explored and developed before project implementation begins \. The failure of two directorates to adopt the new system might have been avoided if the internal barriers to this progress had been explored more carefully and addressed by Treasury with Bank support \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: The ICR is well written and clearly presents this comprehensive data management project, precisely specifying both its positive and negative aspects \.

REVIEW

P006101

 ICRR 10567 Report Number : ICRR10567 ICR Review Operations Evaluation Department 1\. Project Data : Date Posted : 05/08/2000 PROJ ID : P006101 OEDID: OEDID : L3422 Appraisal Actual Project Name : Primary Education US$M ) Project Costs (US$M) 12\.6 0\.0 Development Country : Belize Loan/ US$M ) Loan /Credit (US$M) 7\.1 6\.5 Sector, Major Sect \.: Primary Education , US$M ) Cofinancing (US$M) 1\.26 n/a see below Education L/C Number : L3422 FY ) Board Approval (FY) 92 Partners involved : ODA/DfiD Closing Date 06/30/1999 12/22/1999 Prepared by : Reviewed by : Group Manager : Group : Linda Ankrah Dove Alain A\. Barbu Gregory K\. Ingram OEDST 2\. Project Objectives and Components a\. Objectives Improve the quality of instructional inputs into primary schools and improve student achievement levels by : 1\. improving the quality and relevance of primary teacher training \. 2\. improving the quality, availability and efficient use of educational facilities and resources for teaching, learning and assessment\. 3\. strengthening planning and management to enable the government to develop policies and implement program for greater cost-effectiveness of educational expenditures \. b\. Components 1\.a Introduce a new primary teacher training program \. 1\.b Expand teacher certification \. 1\.c Provide incentives for trained teachers \. 1\.d Train school principals in instructional leadership \. 1\.e Improve planning and delivery of teacher training \. 1\.f Strengthen Belize Teacher Training College through technical assistance and equipment \. 2\.1 Enhance school facilities, repair and supply equipment and furniture (50 schools) 2\.2 Reduce overcrowding through piloting multiple shifts \. 2\.3 Develop a new curriculum 2\.4 Provide textbooks and teaching materials \. 2\.5 Reform examination and assessment system 3\.1 Establish/Strengthen Educational Planning Unit in Ministry of Education (MOE)\. 3\.2 Develop a Management Information System (MIS); school mapping, staffing policy and school construction plan \. 3\.3 Renovate and equip three District Education Centers (DEC) for decentralization of educational management c\. Comments on Project Cost, Financing and Dates Actual total project costs are not available in ICR \. Annex 2 does not include costs and the title is misleading \. Par\. 69 provides estimated cost for civil works of $ 2\.8 m\., with loan disbursements of $3\.33 m\. after reallocations in 1998\. Region explained that DfiD 's grants were not cofinancing and were in part complementary and in part incremental to the project, and that the qualitative and institutional components were not tightly knit into the design \. Thus, the grant reduced the need for Bank financing which was reallocated to expand civil works and support project management \. DfID's expenditures, however, were not available to the Bank ICR team and the borrower contributions are not clearly presented\. 3\. Achievement of Relevant Objectives : Objectives were satisfactorily achieved, given that the project experienced two changes of government, discontinuity in Bank supervision staffing and in inexperienced management\. The ICR finds that progress towards development objectives proceeded satisfactorily after the midterm review \. Based on the new school map, in excess of 131 schools were built and 46 were renovated\. Six instead of  three DECs were built so that over 52% of the loan was expended on civil works and over 25% on goods\. The government absorbed the entire recurrent cost of the latter instead of a share \. Loan funds freed up by additional DfiD grants were reallocated to DECs and additional classroom expansion (quantity unavailable)\. Qualitative objectives were partially achieved \. About 66 % of teachers were trained (original target 80%) and demonstrated higher levels of teaching skills \. Curriculum implementation and textbook cost -sharing and delivery and use of assessment techniques to measure educational quality require persistence and effort to overcome shortcomings\. Multi-shift teaching was not achieved and overcrowding persisted \. The MOE achieved a rationalization of its organizational structure including integration of the Planning Unit but has not yet decided on the responsibilities of the six DECs \. Cost-effectiveness objectives were partially achieved through reducing student repetition and the number of over-age children in primary education \. Inservice teacher training was introduced with cost -savings (unquantified) over pre-service training but fee-based textbook provision needs persistent effort \. The project raised teachers salaries and proposed regular increments as recruitment incentives \. While salaries are the highest in the Region, recruitment remains problematic, though the ICR does not explore the economic, labor market and occupational status factors that may underlie this failure \. Salary expenditures have risen and remain a very high 98% of the education budget\. 4\. Significant Outcomes /Impacts : The ICR attributes the growth in net enrollments by 10,000, nearly 24% of the primary age-group, to the investment in school facilities\. The borrower's comments indicate that the project's focus on primary education weakened the focus on other important educational priorities, and thus did not maintain whole -hearted stakeholder support \. When the new government assumed office in 1998, the project served to advance a sector -wide policy framework in line with the Bank's sector-wide strategy for educational development \. Initial development of a monitoring and evaluation system was encouraging, including school effectiveness indicators (though MOE ownership and institutional capacity still require much strengthening )\. The ICR recommends that the M&E data should guide preparation of the proposed Education Sector Improvement Project\. In discussion, the Region emphasized the important development of the student assessment system \. A strong working partnership developed between the MOE and school managers, though the ICR missed an opportunity to identify mechanisms that proved highly effective (apart from local involvement through the full project cycle)\. The ICR concludes the partnership will ensure better delivery of school inputs for the future \. Though budgetary objectives were not explicit, the project strengthened budgetary planning for the subsector \. Budget allocations and expenditures on primary education increased during the seven years \. Annex 2 shows an increase in recurrent budget expenditures over projections of 26 percent (1998 dollar), with increases of 9% percent per pupil and 11% per teacher\. Annex 1 states that the annual budget for primary education increased by 19% (67% appears to be a calculation error )\. The ICR states that the government maintained its commitment to provide counterpart funds despite a restrictive fiscal policy in 1993\. However, it also states that the DfID grant offset the "reduction in counterpart funds \." This raises the fungibility issue since Annex 3 shows that the share of primary expenditures declined (6 %) as a share of the total education budget \. Education's share of the total capital budget is declining also \. The Region explained that this was probably appropriate since physical infrastructure in education is sufficient \. 5\. Significant Shortcomings (including non -compliance with safeguard policies ): The Region emphasizes that at completion the government included the project in its recurrent budget, and therefore that sustainability was likely\. However, several factors--a deteriorating macro-economic environment, the steep rise in salary costs, the intra-sectoral budgetary imbalance, and the current focus of the Bank on other levels of education, lead OED to the view that sustainability will remain highly dependent on external assistance \., continued commitment by successive governments and achievement of cost -efficiencies\. Efficiency gains are not evident from the data, other than modest reductions in repetition and gross enrollment ratios \. Annex 3 shows that pupil-teacher ratios increased by only 2 percentage points while teacher numbers increased by 14 points\. The ICR does not provide an account of achievement under the cost -effectiveness objective\. The rise in per pupil expenditures may not have been cost -effective since under 4% of project expenditures were targeted at sector capacity building through training and fellowships of sector managers and school personnel (compared with nearly 15% for consultants)\. Qualitative components, such as curriculum and instructional materials were rather ineffective until late in the project\. The qualitative and institutional components supported by the DfID grant were mixed in their effectiveness but no costs are available \. Local ownership of the large research study component funded by DfID was not achieved \. The ICR concludes that the resources were wasted because findings were published under consultants' names and not integrated or translated into MOE policy and action but this is somewhat inconsistent with the ICR's finding on p \.19 that the research studies had significant impact on policy without further explanation \. The ICR states that the partnership between DfID, the Bank and the MOE achieved a satisfactory level \. But it also suggests that, when DfID grant funds were substituted for the Bank loan, the decision to reallocate the Bank loan "savings" to building DECs and schools was problematic \. This inconsistency is not explained, though the ICR states that the partnership has deepened during preparation of the follow -up project\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Satisfactory for physical objectives and marginally satisfactory on long -term qualitative, institutional and cost-effectiveness objectives \. Satisfactory overall for a first project\. Institutional Dev \.: Negligible Modest The Region states that staff wanted to assess ID as marginally satisfactory (partial) but the new rating system forced a choice of "unsatisfactory"\. The ICR text indicates that institutional development achievements were satisfactory and identifies several areas for improvement \. OED agrees and rates ID as modest to acknowledge the achievements made in a first project\. Sustainability : Likely Uncertain The macro-economic environment has deteriorated, exacerbating the imbalances in intrasectoral budget allocations and modest gains in cost-efficiencies\. The financial factors put at risk the otherwise likely sustainability of the project \. Bank Performance : Satisfactory Satisfactory OED rates the Bank's performance as satisfactory but only marginally so \. Technical advice during supervision was satisfactory\. But Bank monitoring during supervision and at completion was weak \. The ICR (Annex 6) omits to rate Bank performance at appraisal though the text describes it as partially satisfactory (par\. 86)\. OED's satisfactory rating for supervision takes into account the improvement in performance after the midterm review (ICR p\.17) and the borrower's comments (par\. 105)\. Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Unsatisfactory 7\. Lessons of Broad Applicability : The ICR's lessons are relevant to all first projects in any sector \. They include the need for detailed implementation plans including costs and budgets, the separation of monitoring from outcome indicators, an agreed division of responsibilities between central and local partners and external donors, and the financial implications of organizational restructuring\. From an OED learning perspective, the operational experience emphasizes how a modest investment project can be effective in empowering borrowers and implementing agencies to develop and manage more ambitious sector policies and programs\. Several factors appear to be critical \. External financiers can demonstrate to policymakers the effectiveness of targeting investments and recurrent expenditures in a subsector to achieve intermediate objectives while shifting priorities from the short -term towards long-term sector policy\. Design and implementation activities need to be sufficiently modest to allow managers and stakeholders to achieve demonstrable results in a timely manner \. The progress made helps create positive conditions for learning from trial and error, for building confidence and for establishing ownership among local stakeholders,  beneficiaries and civil society \. External partners must not only provide sound advice but also ensure that local ownership of monitoring and evaluation is strong and that data and analysis are coordinated across the components that they support \. Investments in M&E capacity building can then add value because consensus can be built on the basis of facts that validate decisionmakers' choice of policy, strategy and use of budgets \. The Bank must be prepared to spend the resources necessary to enable staff to prepare counterparts and ensure projects are ready for implementation; to maintain close contact with other financiers' plans; to maintain continuity during supervision; and to continue dialogue during implementation with all stakeholders and political groups while maintaining the trust of policymakers and managers \. 8\. Audit Recommended? Yes No Why? A first project with important sustainability, ID, M&E and partnership innovations in a high priority sector consistent with the Bank's Education Sector Strategy \. However, the ICR ratings require validation \. 9\. Comments on Quality of ICR : The analysis of factors affecting implementation and outcomes is insightful and the implementation lessons drawn are relevant more broadly\. But the ICR has major weaknesses \. Internal consistency of evidence presented is weak and some evaluative judgments are not convincingly supported\. This casts doubt on the validity of the ratings \. Total costs including the borrower's contribution are not presented \. The expenditure trends presented in Annex 3 require much more explanation\. In themselves, they do not present clear evidence of likely financial sustainability (apart from continued high levels of external assistance)\. The ICR could have done better in evaluating the Bank's decision during implementation to approve the doubling of the size of the DEC component \. This investment appears not to have been adequately justified \. The Region states that the appraisal report provided little guidance or detail on the component but that it evolved during implementation\. While useful and generally positive, borrower comments on the ICR are presented in Annex I \. The inclusion of a summary of DfID's evaluation findings (listed in the files) would have added depth and breadth to the ICR \. The ICR's inconsistencies might have been remedied in part through tighter editing, proof -reading and corrections\. ICR Annex 5 shows ID rating as satisfactory \. The Region states that this was an error and it should read unsatisfactory\. Annex 6 omits to rate Bank performance at appraisal, though the text describes Bank performance overall as satisfactory and partially satisfactory at appraisal (par\. 86)\. The Region states that borrower performance on preparation should read as satisfactory, though par \. 82--86 assess it as unsatisfactory \.

REVIEW

P069679

 ICRR 13167 Report Number : ICRR13167 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 10/29/2009 PROJ ID : P069679 Appraisal Actual Project Name : Private & Public US$M ): Project Costs (US$M): 22\.34 21\.84 Sector Institution Building Loan (PPIBL) Country : Romania Loan/ US$M): Loan /Credit (US$M): 18\.6 18\.54 Sector Board : FPD US$M): Cofinancing (US$M ): Sector (s): Central government administration (40%) Banking (30%) Power (20%) Sub-national government administration (10%) Theme (s): Corporate governance (23% - P) State enterprise/bank restructuring and privatization (22% - P) Regulation and competition policy (22% - P) Infrastructure services for private sector development (22% - P) Legal institutions for a market economy (11% - S) L/C Number : L4676 Board Approval Date : 09/12/2002 Partners involved : European Union, The Closing Date : 06/30/2005 12/31/2008 Dutch Government Evaluator : Panel Reviewer : Group Manager : Group : Rupa Ranganathan Rene I\. Vandendries Ismail Arslan IEGCR 2\. Project Objectives and Components: a\. Objectives: Private and Public Sector Institution Building Loan (PPIBL) provided technical assistance (TA) to implement the policy measures supported by the Private Sector Adjustment Loan II (PSAL II) and lay the groundwork for reforms to be implemented under a planned series of Programmatic Adjustment Loans (PALs)\. The second loan in this series, PAL 2 which the TA supported was subsequently dropped in 2007\. The project aimed to develop an adequate institutional framework for : (1) A competitive financial sector through restructuring and privatization of state -owned banks, development of  a securities market, improvements in legal, regulatory and institutional frameworks (2) Privatization of state-owned enterprises (3) Restructuring and privatization of key industries in the energy sector, improvement of the regulatory framework, reduction in arrears build -up, and strengthening cost recovery measures in the energy sector (4) A business environment conducive to private sector growth (5) An effective, transparent and accountable public sector \. There were many internal inconsistencies in the program design \. Thus in the PAD, PPIBL defined “adoption of critical measures to provide social protection during the adjustment period and establish effective poverty reduction mechanismsâ€? as an objective but did not define activities or allocate funds to support this objective \. The loan agreement does not indicate that the adoption of social protection mechanisms was an objective \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): The original project supported five components : A\. Financial Sector Restructuring (estimated cost: $4\.35 million, actual cost: $0\.4 million): a) strengthening capacity of the Savings Bank through provision of advisory services for restructuring of the Bank through a twin-management arrangement; b) support capital markets development through regulatory and institutional capacity strengthening of the National Securities Commission (CVMN) and capacity of the Bucharest Stock Exchange; c) Strengthening the Insurance Supervision Commission for oversight for the insurance sector \. B\. Privatization Support for State -owned Enterprises (estimated cost: 0\.66 million, actual cost: $0 million): Provision of consultant services to assist in divestiture and privatization of selected SOEs \. C\. Privatization Support for the Energy Sector (estimated cost: $2\.5 million, actual cost: $0 million): a) Provision of goods and consultant services to strengthen the regulatory capacity of the National Agency for Gas Distribution (ANRG); b) Provision of assistance for preparing a privatization strategy for electricity generation; c) Provision of assistance to review taxation for oil and gas production \. D\. Support for an Improved Business Environment (estimated cost: $1\.96 million, actual cost: $0\.1 million): a) Strengthening e-business (e-commerce and e-government in the Ministry of Communication and Information Technology (MCIT); b) Provision of training of judges and country personnel in the area of bankruptcy; c) Refurbishing of works and provision of equipment for selected courts; d) Development and implementation of a public awareness campaign for improvements in the business environment; e) Advisory services and goods to improve the business environment in the Jiu Valley at the municipal-level\. E\. Institutional and Governance Reform (estimated cost: $12\.4\. million, actual cost: $19\.4 million): a)TA for public expenditure management (in areas of cash management within Treasury systems; budget formulation; foreign financing coordination; government accounting; internal audit and decentralization ); b) Advisory services, training and IT support for the Court of Accounts; c) E-Government (TA to MCIT for development of SMART card); d) Feasibility study for an integrated system for document management for the borrower's public administration; e) TA for institutions involved in legal drafting, and to judicial institutions for strengthening procedures for fair and speedy adjudication; f) development of a strategy and action plan for insurance administration \. A Project Management Unit (estimated cost: $0\.24 million, actual cost: $1\.8 million) was to support the management of PPIBL\. The PDO was not formally revised during implementation, nor were the components but there were two loan  amendments\. The 2004 Amendment expanded activities to support the PAL, established a new PAL PMU (in the Prime Minister’s Chancellery) to monitor PAL implementation and amended activities supporting the business environment\. The 2006 Amendment supported preparation of two projects (reforming the National Agency of Fiscal Administration and the Ministry of Environment )\. There were significant changes to activities undertaken under each component and to the costs across the components \. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: As soon as the project was approved, parallel financing through two Dutch grants totaling $ 5\.3 million became available\. An additional $10 million was available from the ongoing Private Sector Institution Building Loan (PIBL), which had unused funds for similar activities \. Access to additional funds required significant reallocation of PPIBL funds\. The planned allocation for components A and D was reduced significantly, no funds were provided for components B and C and almost 90 percent of the project costs were allocated for component E \. Project management costs also significantly increased \. PPIBL became de facto an investment loan as the share of infrastructure investments was 50 percent of the costs compared to an estimated 26 percent at appraisal\. The project’s activities started off with a 2-year delay due to delay in PAL preparation and completion of PSAL \. GoR requested that the Bank use funds from ongoing loans before tapping into PPIBL ’s funds\. The closing date was extended three times for 3\.5 years in December 2004 up to June 2007, in August 2006 up to June 2008 and in February 2008 up to December 2008\. 3\. Relevance of Objectives & Design: PPIBL’s objectives were relevant to Romania ’s development priorities of achieving private, financial and public sector development and accelerating Romania ’s quest for EU integration\. However, as soon as Romania gained EU Accession, strategic relevance was lacking because GoR's commitment to reforms supported by PPIBL waned\.There is also no clear rationale for why PPIBL was approved with overlapping objectives with another project (PIBL)\. The project was poorly designed \. The PAD failed to elaborate on how the project ’s interventions would achieve the PDO \. The log frame listed outputs with no explicit links to outcomes \. It was clear before approval that other funds were going to be available, requiring significant modifications to PPIBL activities supported under each component \. However, the M&E arrangements were not amended until the very end of the project\. 4\. Achievement of Objectives (Efficacy): A\. Financial Sector Strengthening Very little PPIBL funds supported this component \. Restructuring of CEC for privatization was completed through a twinning arrangement but the winning bid did not meet GoR's expectations and the sale did not go through \. The regulatory environment of capital markets was aligned with the EU acquis and the National Security Commission's supervisory capacity was strengthened \. The TA helped develop secondary legislation to support new financial instruments and build the enabling environment for corporate and municipal bond markets \. The TA for institutional strengthening of the Insurance Supervision Commission (ISC) assisted with capacity enhancement for supervision of the market for monitoring vehicle third party liabilities \. The TA also supported alignment of national laws with the EU acquis\. The percentage of carriers with insurance increased from 60 percent in 2003 to 90 percent in 2007 and time to process claims was expedited \. Efficacy is rated high\. B\. Privatization of State -owned Enterprises Other funds were used to finance activities under this component \. Sixteen SOEs were privatized through assets sale procedure, three were liquidated through voluntary /judicial procedures\. PIBL funded privatization of four SOEs and restructuring of three, the rest were through GoR \. It is unclear whether GoR disposed of 50 percent of its ownership in these enterprises which was the proposed target \.The targets for PSAL 2 and policy objectives for PAL were met\. Efficacy is rated substantial \. C\. Privatization Support for the Energy Sector, Reduction of Arrears and Cost Recovery Other funds were used to finance the activities \. The National Regulatory Authority in Natural Gas and the National Regulatory Agency for Electricity were strengthened and merged in 2007 to form the Romanian Energy Regulatory Authority (ANRE)\. ANRE has a solid track record as one of the most competent regulators in the region, tariff setting has been in line with international best practice \. Through tariff adjustments, bill  collection has improved from 65 percent to 100 percent\. Restructuring and privatization of energy has resulted in a decline in arrears but this has been reversed as a result of the financial crisis \. Efficacy is high\. D\. Improved Business Environment PPIBL only financed $0\.1 million compared to the planned $1\.96 million\. Proposed assistance for e -governance, training in bankruptcy procedures, court refurbishment, public awareness campaign and advisory support to strengthen the business environment in Jiu Valley was not provided \. The TA for e-business was modified and activities supported a Component of a Knowledge Economy Project (2006)\. The TA did not support the PAL as per PPIBL’s objectives but supported the business environment component of GoR ’s strategy for convergence with EU\. Efficacy is rated negligible\. E\. Institutional and Governance Reform Public Expenditure Management (PEM) PEM ): The proposed TA for cash management aimed to strengthen cash management capacity\. The volume of the Ministry of Public Finance ’s (MOPF) settled transactions increased significantly\. The new electronic payment system decreased processing speed of final settlements from 3\.65 days to a few seconds or hours depending on the settlement \. The treasury developed a system to determine balances in government accounts; a central data warehouse with historical budget execution data was also developed\. To develop results-orientation of budget formulation, the TA enabled integrated strategic planning linking budgets and policies, developed a macro model to prepare macro and revenue projections and prepared improved guidelines for budget preparation \. Efforts to improve coordination of foreign-financed activities resulted in improvements in infrastructure at MOPF and the National Bank of Romania (NBR), in increased capacity for debt and risk management through upgrading with new software, and in the establishment of a debt agency to manage IT infrastructure\. The proposed TA to strengthen government accounting capacities resulted in the design of a Strategic Development Plan - a PAL benchmark\. Accrual accounting was introduced but overall reporting of budget execution remains poor \. TA supported alignment of the framework for financial reporting in the corporate sector and alignment of accounting rules with EU standards \. PPIBL supported improvements in internal audit through training 42 internal auditors\. In support of decentralization, TA helped prioritize the National Agency for Fiscal Administration (NAFA’s) needs and made recommendations on working processes within NAFA\. A revised legal framework was drafted to harmonize the tax base for collecting payroll taxes \. The TA also aimed to provide advisory services, training and IT to the Court of Accounts \. PPIBL facilitated electronic communication between financial controllers, judges and prosecutors at the headquarters and 42 other offices\. It is unclear whether efficiency improvements were the result of this electronic communication \. For E-Government and Public administration , the proposed assistance did not materialize \. Assistance supported strengthening procedures for fair adjudication of disputes \. PPIBL aided in the drafting of the judicial reform strategy and the drafting of a corporate governance legislation that amended a Company Law in line with EU standards\. While EU accession conditions were met, court cases remain lengthy \. Doing Business Indicators showed only slight improvement in enforcing contracts between 2004-09 and the number of procedures are still high\. TA interventions helped strengthen the Health Sector Reform package enacted in 2006 consistent with the PAL and aided among other things the roll out of a new hospital finance system \. The goals of developing a public health insurance system were not achieved \. The ICR notes challenges in mobilizing additional financing and improving efficiency and equity of health provision \. On balance, due to the good progress in public expenditure management, reasonable progress in external audit and no progress in e-governance, public administration and health administration, efficacy of this pillar is rated modest\. PPIBL funded other unplanned activities relating to civil service reform, public administration, education and environment and water resource management \. Support was provided to draft new legislation, improve the Labor Code, support education decentralization and aid in meeting EU prerequisites for using EU funds for environmental protection\. In the area of public administration, policy formulation was hindered by a lack of political support and weaknesses in budget management \. In education, although a per capita financing scheme was introduced in the Education Law, TA recommendations were not incorporated into regulations \. PPIBL spent a significantly large amount ( 9 percent) of total project costs on project management and support for the PMU\. 5\. Efficiency (not applicable to DPLs): ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the  re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The project was strategically relevant when approved but relevance was undermined when Romania achieved EU Accession\. The project design was poor with PPIBL's objectives overlapping with another project \. During design only outputs were defined for the TA with no links to outcomes for PPIBL \. Most planned activities in components A-D were financed by PIBL or the Dutch grants \. PPIBL helped strengthen public expenditure management particularly in increasing efficiency of cash management in the treasury operations \. The TA helped Romania align the legal/regulatory structures with the EU \. Draft legislation was developed or amended in the areas of public expenditure management, civil service reform, education and the judicial system \. The benefits of the TA were not often realized due to lack of political support to implement the legislation \. Adequate assessments to determine the implementation capacity of the project beneficiary were not undertaken, impeding implementation and attainment of outcomes \. Balancing poor relevance of project design with reasonable progress in achieving outcomes, the outcome is rated as moderately satisfactory\. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: Risks pertaining to political support for PPIBL activities post -EU accession were not considered \. PPIBL was closely wedded to the objectives of the PAL \. However, when the PAL (PAL 2) was cancelled, the TA interventions which did not have clear institutional development goals were undermined \. PPIBL did not have the leverage to motivate the policy reforms \. Had the TA designed mitigation measures to minimize the risk of PAL 2's cancellation, some of the outcomes would not have been undermined \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: At entry , there were a number of weaknesses in Bank performance pertaining to lack of strategic relevance and poor M&E design\. It is unclear why the Bank approved a new loan and did not revise the project components when it was known that additional funds would be available before PPIBL was approved \. The results framework in the PAD was poorly designed \. The PAD did not spell out a clear log frame about how the TA activities would achieve institutional development outcomes \. During supervision, although the project’s components were significantly revised, the project was not formally restructured as was necessary in this case\. M&E arrangements were not revised until the final stages of the project \. The revised M&E design akin to the PAD focuses on activities and not on outcomes of the TA \. The PAL’s and PPIBL’s supervision missions were well-coordinated but the division of labor on supervision resulted in PPIBL supervising administrative tasks of the project rather than the policy aspects \. at -Entry :Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Unsatisfactory c\. Overall Bank Performance :Moderately Unsatisfactory 9\. Assessment of Borrower Performance:  During the initial stages of PPIBL, GoR's commitment to PPIBL was strong but it waned after EU accession and was rejuvenated towards the end of the project \. There were a number of implementation delays associated with how to use PPIBL funds \. The delays were associated with the government ’s internal discussion about what reforms to implement and which funds to use \. Post-accession, the urgency and appetite for further reforms decreased \. In retrospect, it is unclear why GoR asked for PPIBL ’s support when there was an ongoing TA with similar objectives \. The PMU managed a very complex project fairly well even in cases where the capacity of the project beneficiary was weak \. The PMU did a satisfactory job of managing the administrative tasks including the financial and procurement function but missed the policy implications and results of the TA\. a\. Government Performance :Moderately Satisfactory b\. Implementing Agency Performance :Moderately Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: The M&E design in the PAD was very weak \. The PDO indicators were inconsistent within the PAD and were inconsistent with the loan agreement \. The log frame defined in the PAD did not define clear outputs and outcomes of many interventions \. The M&E framework was retrofitted based on the activities implemented by the project just before the close of the project \. The new indicators were output -driven with no links to larger institutional development outcomes \. M&E implementation was less than satisfactory \. a\. M&E Quality Rating : Negligible 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): 12\. Ratings : 12\. ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately The project lacked strategic relevance \. Satisfactory PPIBL's funds contributed to improving systems for cash management in the treasury, supported budget formulation and helped align some of the regulatory standards in line with the EU\. Implementation of the TA encountered delays\. TA recommendations were not implemented in some cases due to poor capacity or lack of political support\. Risk to Development Moderate Moderate Outcome : Bank Performance : Moderately Moderately There were significant shortcomings in Unsatisfactory Unsatisfactory the project design and M&E arrangements\. The project should have been formally restructured in light of significant changes made to the components\. This would have improved efficiency and minimized delays\. Supervision was activity-focused with less emphasis on institutional development outcomes \.  Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: 1 \. Need for stand -alone objectives and targets for a project The objectives of PPIBL were anchored in supporting the policy reform objectives of the PAL and PSAL \. No clear institutional development objectives were defined for PPIBL \. The cancellation of PAL 2 left PPIBL without an anchor and without clear development targets \. The results of the TA interventions were undermined as there was no leverage to motivate reforms, undermining the effectiveness of the project \. 2\. Emphasize relevance of design and objectives before and during project implementation The relevance of the project in the context of the Bank's overall country program was not fully taken into account\. PPIBL was approved even though it had overlapping objectives with PIBL which had undisbursed funds\. The undisbursed funds and grants were pooled with PPIBL's resources, leading to a complex project design and contributing to implementation delays \. GoR paid commitment fees for unutilized funds until 2005\. These implementation challenges could have been avoided by first disbursing existing funds and then approving a project with clear and unique objectives \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR had the task of not only clarifying the objectives of the project but also documenting implementation and results of a complex project \. The ICR presents a picture of how the project evolved with reasonable clarity — an important contribution in light of the poor quality of the supervision documents that did not report clearly on progress of activities and outcomes \. The ICR can be criticized for not being outcome -driven in terms of the results the TA achieved, it is focused heavily on outputs \. In the absence of clear targets, the ICR is unable to link project outputs to institutional development goals \. The ICR is also extremely detail-oriented and wordy\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P117723

 Document of The World Bank Report No: ICR2115 IMPLEMENTATION COMPLETION AND RESULTS REPORT (Loan No\. 78380 and Loan No\. 80530 and Credit No\. 49490) ON A SERIES OF CREDITS AND LOANS IN THE AMOUNT OF SDR 167 MILLION IN CREDITS (US$ 262\.7 MILLION EQUIVALENT) AND US$ 587\.3 MILLION IN LOANS TO SOCIALIST REPUBLIC OF VIETNAM FOR A PUBLIC INVESTMENT REFORM DEVELOPMENT POLICY OPERATION 1 AND 2 June 26, 2012 Poverty Reduction and Economic Management Department Vietnam Country Department East Asia and Pacific Region  FISCAL YEAR [January 1 – December 31] CURRENCY EQUIVALENTS Exchange Rate Effective as of May 17, 2012 Currency Unit: VND US$1\.00 20,850 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AFD Agence Française de Développement CPS Country Partnership Strategy CFAA Country Financial Accountability Assessment CPGRS Comprehensive Poverty Reduction and Growth Strategy DPL Development Policy Loan EIA Environmental Impact Assessment EMP Environmental Management Plan FDI Foreign Direct Investment GDP Gross Domestic Product GSO General Statistics Office IBRD International Bank for Reconstruction and Development ICOR Incremental Capital-to-Output Ratio IDA International Development Association IEG Independent Evaluation Group IMF International Monetary Fund JICA Japanese International Cooperation Agency KfW German Kreditanstalt Für Wiederaufbau MARD Ministry of Agriculture and Rural Development MOC Ministry of Construction MOCST Ministry of Culture, Sports, and Tourism MOF Ministry of Finance MOHA Ministry of Home Affairs MOIT Ministry of Industry and Trade MONRE Ministry of Natural Resources and the Environment MOT Ministry of Transport MPI Ministry of Planning and Investment M&E Monitoring and Evaluation NPL Non-Performing Loan ODA Official Development Assistance OOG Office of the Government PER-IFA Public Expenditure Review and Integrated Fiduciary Assessment PPP Public-Private Partnership PRSC Poverty Reduction Support Credit SAV State Audit of Vietnam SCIC State Capital Investment Corporation SBV State Bank of Vietnam SEA Strategic Environmental Assessment SEDP Socio-Economic Development Plan SOE State-Owned Enterprise SOCB State-Owned Commercial Bank VDB Vietnam Development Bank VGFM Viability Gap Financing Mechanism WTO World Trade Organization Vice President: Pamela Cox Country Director: Victoria Kwakwa Sector Director: Sudhir Shetty Task Team Leaders: Deepak Mishra and Quang Hong Doan ICR Primary Author: Zahid Hasnain  VIETNAM VIETNAM-PUBLIC INVESTMENT REFORM DEVELOPMENT POLICY OPERATIONS 1 AND 2 CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Program Performance in ISRs H\. Restructuring 1\. Program Context, Development Objectives and Design \. 11 2\. Key Factors Affecting Implementation and Outcomes \. 14 3\. Assessment of Outcomes \. 22 4\. Assessment of Risk to Development Outcome \. 31 5\. Assessment of Bank and Borrower Performance \. 32 6\. Lessons Learned\. 34 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\. 35 Annex 1: Bank Lending and Implementation Support/Supervision Processes \. 36 Annex 2: Policy Matrix for Public Investment Reform Program - PIR 1 \. 39 Annex 3: Policy Matrix for Public Investment Reform Program – PIR 2 \. 45 Annex 4: Changes in Policy Matrix for the Second Public Investment Reform \. 48 Annex 5: Progress against the Results Framework\. 50 Annex 6: Stakeholder Workshop Report and Results\. 53 Annex 7: Summary of Borrower's ICR and/or Comments on Draft ICR \. 54 Annex 8: Comments of Cofinanciers and Other Partners/Stakeholders \. 55 Annex 9: List of Supporting Documents \. 56 MAP  DATA SHEET A\. Basic Information Program 1 VN-Public Investment Country Vietnam Program Name Reform 1 Program ID P117723 L/C/TF Number(s) IBRD-78380 ICR Date 6/27/2012 ICR Type Core ICR THE SOCIALIST Lending Instrument DPL Borrower REPUBLIC OF VIETNAM Original Total US$ 500\.00M Disbursed Amount US$ 500\.00M Commitment Implementing Agencies : State Bank of Vietnam Cofinanciers and Other External Partners: Agence Française de Développement Program 2 VN-Public Investment Country Vietnam Program Name Reform 2 IBRD-80530,IDA- Program ID P120946 L/C/TF Number(s) 49440 ICR Date 6/27/2012 ICR Type Core ICR THE SOCIALIST Lending Instrument DPL Borrower REPUBLIC OF VIETNAM Original Total US$ 350\.00M Disbursed Amount US$ 349\.84M Commitment Implementing Agencies: State Bank of Vietnam Cofinanciers and Other External Partners: Agence Française de Développement B\. Key Dates VN-Public Investment Reform 1 - P117723 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 09/28/2009 Effectiveness: 03/30/2010 03/30/2010 Appraisal: 11/17/2009 Restructuring(s): N/A N/A Approval: 12/22/2009 Mid-term Review: N/A N/A  Closing: 09/30/2010 09/30/2010 VN-Public Investment Reform 2 - P120946 Revised / Actual Process Date Process Original Date Date(s) Concept Review: 06/23/2010 Effectiveness: 07/13/2011 07/13/2011 Appraisal: 02/15/2011 Restructuring(s): N/A N/A Approval: 05/24/2011 Mid-term Review: N/A N/A Closing: 12/31/2011 12/31/2011 C\. Ratings Summary C\.1 Performance Rating by ICR Overall Program Rating Outcomes Moderately Satisfactory Risk to Development Outcome Low Bank Performance Moderately Satisfactory Borrower Performance Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Overall Program Rating Bank Ratings Borrower Ratings Quality at Entry Moderately Satisfactory Government: Not Applicable Implementing Quality of Supervision: Satisfactory Not Applicable Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance Performance C\.3 Quality at Entry and Implementation Performance Indicators VN-Public Investment Reform 1 - P117723 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Closing/Inactive status  VN-Public Investment Reform 2 - P120946 Implementation QAG Assessments Indicators Rating: Performance (if any) Potential Problem Quality at Entry Program at any time No None (QEA) (Yes/No): Problem Program at any Quality of No None time (Yes/No): Supervision (QSA) DO rating before Closing/Inactive status D\. Sector and Theme Codes VN-Public Investment Reform 1 - P117723 Original Actual Sector Code (as % of total Bank financing) Central government administration 100 100 Theme Code (as % of total Bank financing) Land administration and management 12 12 Other accountability/anti-corruption 22 22 Public expenditure, financial management and 44 44 procurement Regulation and competition policy 22 22 VN-Public Investment Reform 2 - P120946 Original Actual Sector Code (as % of total Bank financing) Central government administration 80 80 General industry and trade sector 20 20 Theme Code (as % of total Bank financing) Environmental policies and institutions 10 10 Legal institutions for a market economy 10 10 Managing for development results 10 10 Other financial and private sector development 10 10 Public expenditure, financial management and 60 60 procurement E\. Bank Staff VN-Public Investment Reform 1 - P117723 Positions At ICR At Approval Vice President: Pamela Cox James W\. Adams Country Director: Victoria Kwakwa Victoria Kwakwa Sector Director: Sudhir Shetty Vikram Nehru Task Team Leader: Deepak K\. Mishra Martin Rama ICR Team Leader: Quang Hong Doan Not Applicable ICR Primary Author: Zahid Hasnain/Quang Hong Doan Not Applicable VN-Public Investment Reform 2 - P120946 Positions At ICR At Approval Vice President: Pamela Cox James W\. Adams Country Director: Victoria Kwakwa Victoria Kwakwa Sector Director: Sudhir Shetty Vikram Nehru Deepak K\. Mishra/Quang Hong Deepak K\. Mishra/Quang Hong Task Team Leader: Doan Doan ICR Team Leader: Quang Hong Doan Not Applicable ICR Primary Author: Zahid Hasnain/Quang Hong Doan Not Applicable F\. Results Framework Analysis Program Development Objectives (from Program Document) The main objective of the program is to support modern governance, one of the four pillars of Vietnam‘s Socio-economic Development Plan 2006-10 (SEDP)\. Specifically, this operation was designed to assist the Government of Vietnam to strengthen the selection, preparation, implementation and supervision of public investment projects\. With the country facing enormous demand for infrastructure development, the public investment management (PIM) cycle plays a key role in ensuring effective translation of resources into improved service delivery\. Poor project preparation and screening, excessive environmental damage and adverse social impacts, fiduciary risks and pervasive conflict of interest, and an insufficiently developed framework for private participation in infrastructure have undermined the efficiency of public investments in Vietnam\. These weaknesses need to be addressed regardless of whether projects are funded by the budget or by development partners (DPs)\. At the same time, improving the PIM cycle is expected to result in higher disbursement rates for all public projects including those funded by DPs\. Upgrading country systems in areas such as public financial management, procurement and safeguards is also expected to pave the way for their gradual use in DPs-funded projects, on a pilot basis\. Another important objective of this program was to facilitate infrastructure development in Vietnam by developing basic legal framework for Public-Private Partnership (PPP) projects\. Revised Program Development Objectives (as approved by original approving authority) The PDO was not revised\. However, one Outcome Indicator, namely the number of FDI firms re- registered under the new Enterprise Law became irrelevant as the Government went beyond the reform measure proposed in the operation\. Decree 102, issued in October 2010, effectively removed the constraints facing FDI enterprises to be re-registered in expanding their operations beyond their license that was granted before the 2005 Enterprise Law\. The indicator therefore was no longer valid and hence dropped from the operation\. The intended objective of the policy action was however achieved\. Program Outcome Indicators VN-Public Investment Reform 1 - P117723 Original Target Formally Actual Value Achieved Baseline Values (from Indicator Revised at Completion or Value approval Target Values Target Years documents) Number of operating FDI 1,300 firms or 100 percent of the total firms established before July 20 percent of 1, 2006 which are re- the total registered under the new Enterprise Law\. Share of approved regional One third for 100 percent for regional and sectoral master plans regional master master plans and one None plans and one-fifth key economic sector whose preparation was informed by a comprehensive for key economic SEA\. sectors Number of agencies actually using e-procurement in their None Three Three operations Share of state capital in civil engineering and civil work companies affiliated with 90 percent 20 percent 15 percent MOC remaining under its management\. Compensation of resettled population groups is aligned with market prices and well- 75 percent implemented as demonstrated 45 percent N/A by satisfaction in perception surveys building on previous analytical work\. Share of projects for which consultations on EIAs were Negligible 50 percent N/A implemented timely during preparation\. Maximum reported time needed for budget recording 12 months 2-3 month 2-3 months of ODA projects Share of total investment costs spent on preparation 0\.5 percent higher than 0\.5 percent Negligible and consultation of EIAs\. Share of outstanding ODA investment portfolio with audits conducted by SAV or Negligible 60 percent 100 percent with independent audit reports received by SAV from implementing agencies Share of ―type A‖ projects which are subject to review None 7-8 percent None by independent investment evaluators\. VN-Public Investment Reform 2 - P120946 Formally Original Target Actual Value Achieved Baseline Revised Indicator Values (from at Completion or Value Target approval documents) Target Years Values Share of approved regional One third for regional 66 percent 100 percent for regional and sectoral master plans master plans and one- for regional master plans and one whose preparation was fifth for key economic master plans key economic sector informed by a comprehensive None sectors and one-fifth SEA\. for key economic sectors Number of agencies actually using e-procurement in their None Three Three operations Share of state capital in civil engineering and civil work companies affiliated with 90 percent 20 percent Less than15 percent MOC remaining under its management\. Compensation of resettled population groups is aligned 45 percent 75 percent N/A with market prices and well- implemented as demonstrated by satisfaction in perception surveys building on previous analytical work\. Share of projects for which consultations on EIAs were Negligible 50 percent N/A implemented in a timely manner during preparation\. Maximum reported time needed for budget recording 12 months 2-3 month 2-3 months of ODA projects Share of total investment costs spent on preparation 0\.5 percent Higher than 0\.5 percent Negligible and consultation of EIAs\. Share of outstanding ODA investment portfolio with audits conducted by SAV or Negligible 60 percent 100 percent with independent audit reports received by SAV from implementing agencies\. Share of ―type A‖ projects which are subject to review None 7-8 percent 7 to 8 percent None by independent investment evaluators\. (b) Intermediate Outcome Indicator(s) : N/A VN-Public Investment Reform 1 - P117723 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years VN-Public Investment Reform 2 - P120946 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years G\. Ratings of Program Performance in ISRs Not applicable H\. Restructuring (if any) Not applicable 1\. Program Context, Development Objectives and Design 1\.1 Context at Appraisal 1\. The Public Investment Reform Development Policy programmatic series was prepared in response to a request from the Government of Vietnam (GoV) to finance the government‘s fiscal stimulus package, announced at the height of the global economic crisis in 2009\. While the immediate intention was to help Vietnam avoid the adverse fall-outs of the crisis, the objective of the operation was to address weaknesses in the public investment cycle, a key long-term goal of the GoV\. Vietnam has been trying to move from an economic growth model that is largely based on capital accumulation, which is unsustainable given the already high rates of investments, to one based on improving the efficiency and productivity of capital\. Increasing the efficiency and productivity of investment had been identified as a high priority in prior analytical work, most notably the 2009 Vietnam Development Report Capital Matters, and then on-going dialogue under the PRSC series\. It was also an emerging priority in the Socio-Economic Development Strategy (SEDS) 2011-20, the Socio-Economic Development Plan (SEDP) 2006-10, and the SEDP 2011-15\. Since the stimulus measures announced to offset the impact of global economic crisis was expected to lead to a big boost in public investment, strengthening the PIM cycle became imperative\. The operations, therefore, sought to take advantage of the greater attention of the senior leadership on this issue, brought on by the global crisis, to gain some reform momentum in this area\. 2\. The global economic crisis led to a sharp slowdown in economic growth and export in Vietnam in late 2008 and early 2009\. The first quarter growth of 2009 was merely 3\.1 percent – the lowest growth rate on record since the beginning of the 1990s\. There were concerns that millions of workers in the export sector would lose jobs, their families would fall into poverty and some of the developmental gains of the past decades could be reversed\. While Vietnam did have the requisite fiscal space to undertake a large stimulus measure, the global situation did not permit it to borrow from the international market and funding the stimulus program by curtailing expenditure on public services was not an acceptable solution either\. Therefore, the Government called for financial assistance from development partners (DPs)\. A number of DPs, including WB, ADB, JICA, AFD, and others, provided emergency support to Vietnam – this operation being one such example\. 3\. Having agreed to provide financial support, the Bank decided to use the operation to support government‘s effort to improve the effectiveness of public investment – a known weakness\. With respect to the medium to long term growth agenda, there had been growing realization in Vietnam that while the country had achieved rapid economic growth and impressive poverty reduction over the last twenty years, the growth strategy based largely on factor accumulation may have run its course\. Vietnam has one of the highest investment rates in the world, averaging around 43 percent of GDP during the past five years; however, the growth rate has not been commensurate with this high investment rate\. Sustaining growth at 7 to 8 percent rate during the next decade cannot be achieved by raising the investment rate even higher\. Instead, the focus has to shift towards raising the competitiveness of economy, especially the quality of public investment\. 4\. These weaknesses ran the length of the public investment cycle\. The legal framework was fragmented with many and often inconsistent laws and decrees impacting various aspects of public investments\. With the passage of the Law on the State Budget (2002) and the Construction Law (2003), public investment management had been decentralized to line ministries and 11 provinces for most projects, with the Ministry of Planning and Investment (MPI) responsible for screening only large nationally important projects\. This change had not been matched by building the necessary mechanisms for project appraisal at the ministerial and, in particular, provincial levels\. The regulatory framework for private participation in infrastructure was weak and the main reason Vietnam had been unable to attract private financing\. Environmental assessments were not adequately informing strategic planning or specific projects\. Cost estimation was weak due to rigid cost norms, and Vietnam‘s legal framework for public procurement was not aligned to international standards\. 1\.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) 5\. The main objective of the program is to support modern governance, one of the four pillars of Vietnam‘s Socio-economic Development Plan 2006-10\. Specifically, the reform supported by PIR 1 and 2 attempts to improve the effectiveness of public investment through better project selection, implementation, financial management and oversight\. The program was organized around four main thematic areas which are essential to strengthening the public investment project cycle: ï‚ Project selection (competitive entry, environmental screening, project approval)\. ï‚ Project implementation (cost estimates, bidding rules, bidding transparency, conflict of interest, dispute resolution, land acquisition, environmental management)\. ï‚ Financial management (reporting and control, administrative costs, environmental budgets, subsidies and guarantees)\. ï‚ Project oversight (project documentation, monitoring and evaluation)\. Progress in these areas is expected to improve public investment processes and strengthen country systems\. 6\. A set of ten result indicators covering the aforementioned four areas of the program has been identified (Annex 5)\. Given the short time span for the program, and the short time period since effectiveness of the majorities of issued legal documents, it is difficult to have all measurable results on the ground\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification 7\. The PDO was not revised\. However, one outcome indicator, the number of FDI firms re- registered under the new Enterprise Law, was dropped as the government went beyond the reform measure proposed in the operation\. Decree 102, issued in October 2010 effectively removed the constraints facing FDI enterprises to-be-re-registered in expanding their operations beyond their license that were granted before the 2005 Enterprise Law\. This indicator therefore became irrelevant but the intended objective of the policy action was achieved\. 1\.4 Original Policy Areas Supported by the Program (as approved) 8\. The policy actions under the two operations PIR 1 and PIR 2 are organized around 17 main issues or problems to address\. Those 17 issues can be regrouped under four main thematic areas: project selection, project implementation, public financial management, and project 12 oversight (Annexes 2 and 3)\. The policy actions under PIR2 are either complements or follow- ups of the prior actions under PIR 1\. 9\. The selected issues are complex, and solving some of them requires the issuance of several legal documents which may require the involvement of the whole cabinet\. Consequently, the completion of some policy actions took a considerable amount of time, and demanded concerted efforts from both sides within the short timeframe of the program\. 10\. All the measures in the PIR program concern the management of public investment projects in general, regardless of their source of funding\. The project selection area covers the issues of competitive entry, environmental screening, and project approval\. The main objective of proposed actions in this area is to improve the sustainability of and to reduce the fragmentation of public investment\. Measures in this area support the improvement of the preparation and use of Strategic Environmental Assessment (SEAs), the re-registration of the FDI Enterprises under the Enterprise Law 2005, and the preparation of a Law on Public Investment to provide a common framework for all public projects\. The project implementation area covers the issues of cost estimates, bidding rules, bidding transparency, conflict of interest, dispute resolution, land acquisition and environmental management\. The important policy support in this area includes measures to narrow the gaps between Vietnamese legal framework for public procurement and international good practice so as to improve effectiveness and performance of public resource management\. The policy support under the financial management thematic area address the problems in reporting and control, administrative costs, environmental budgets, payment and disbursement procedures, subsidies and guarantees of the public investment project, especially ODA-funded project\. The measures are aimed at improving the quality of project preparation and supervision and mobilizing resources from the private sector\. Finally, project oversight area covers the issues in project documentation and monitoring and evaluation\. The key support in this area concerns the establishment of a consistent M&E framework including standardized monitoring tools\. 1\.5 Revised Policy Areas (if applicable) 11\. The final prior actions for PIR2 differ slightly from the triggers that were initially proposed in PIR1\. Annex 4 summarizes the changes which mostly are of editorial nature to reflect more accurately the content of the supporting documents related to the relevant policy actions\. In general, the reform objectives therefore have been kept unchanged despite the revisions\. 12\. Annex 4 highlights two notable changes in the policy matrix\. The most important change relates to the submission of Public Investment Law to the National Assembly for review (Trigger 3 as in PIR1)\. However, the government came to a decision that further research was needed for the formulation of this law and subsequently requested the National Assembly to withdraw the Public Investment Law from the legislative agenda of the National Assembly in 2010\. As a result, a draft law was not submitted to the National Assembly in November 2010 for review\. The formulation of a Law on Public Investment was therefore dropped from the PIR 2 operation despite its importance\. Consequently, there are only 12 prior actions in PIR 2 operation instead of 13 as proposed in PIR 1\. 13\. The second important change is the revision of trigger No\.13 in PIR 1 which is now labeled as prior action No\. 12 in PIR 2 due to the droppage of the Law of Public Investment\. The original trigger required an approval of a Charter establishing an Association of Independent Investment Evaluators\. However, investment evaluator is a new profession in Vietnam\. 13 Therefore, establishment of a new association for investment evaluators is time consuming and needs the establishment of a legal framework for the operation and activities of its members\. Towards the formulation of such a legal framework, the government asked MPI to issue two Circulars to establish standard templates for project monitoring reports and set up the criteria legally required for individuals and institutions to carry out investment evaluation\. In addition, the Circular setting up the criteria legally required for individuals and institutions to carry out investment evaluation is the legal pre-condition needed for the approval of the concerned Charter\. The issuance of these Circulars is included as a policy action for PIR2, replacing the original trigger of PIR1\. 1\.6 Other significant changes None\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Program Performance (supported by a table derived from a policy matrix) 14\. The PIR series consisted of two single-tranche operations: PIR 1 was US$ 500 million on IBRD resources, and PIR 2 was US$350 million, with US$ 262\.7 million from IDA and US$ 87\.3 million on IBRD funds\. PIR 1 was approved by the Board in December 22, 2009 and PIR2 was approved in May 24, 2011\. 15\. The Agence Française de Développement (AFD) co-financed the series, providing EUR 100 million for PIR 1, approved on January 21, 2010 and EUR 35 million for PIR 2, approved on May 25, 2011\. AFD participated in all technical meetings and completely aligned with the policy actions agreed between the Bank and the Government\. 16\. The size of PIR 2 was reduced from the original anticipated amount of US$ 500 million on account of: (i) the gradual and calibrated phasing out of stimulus measures resulting in a lower than expected fiscal deficit and financing gap; (ii) the lack of fulfillment of one trigger, the submission of the Law on Public Investments, to the National Assembly; and (iii) concern that a second large development policy loan would quickly exhaust Vietnam‘s limited IBRD exposure\. There was a change to one other policy measure in PIR 2, namely the trigger on the approval of a charter establishing an Association of Independent Evaluators for public investment projects was modified to the setting of criteria for the certification of individuals and institutions to carry out independent evaluation\. 17\. The prior actions for the two operations were as follows: Public Investment Reform DPL 1 List of prior actions from Program Document Status 1\. The Borrower has issued a law to allow a five-year period for FDI enterprises Fulfilled to re-register under the Enterprise Law\. 2\. The Borrower has issued a law to decentralize the setting of cost estimates to Fulfilled Investment Owners and has issued a decree to align cost norms with the market\. 3\. The Borrower has issued a law to clarify that late bids in procurement tenders Fulfilled for public investment projects shall be rejected\. 14 4\. The Borrower has issued a Decree to streamline provision of compensation to Fulfilled affected households, to align with market prices the compensation for land and property and to provide livelihood support\. 5\. The Borrower, through MOF, has issued a Decision to align time of recording Fulfilled ODA funds in government accounts with the timing of actual receipts and expenditures\. 6\. The Borrower, through, MOF has issued a Circular to align with the market Fulfilled cost norms applied to local consultants fees, translation fees, workshops and other costs related to the preparation and implementation of ODA funded projects\. 7\. The Borrower, through MOC, has issued a Decision to clarify that project Fulfilled preparation costs set in percentage of total project cost are for reference only and are not budget caps\. 8\. The Borrower has issued a Decree to harmonize terminology in documentation Fulfilled on prefeasibility and feasibility studies across budget- and ODA-funded projects\. 9\. The Borrower has issued a Decree to establish a consistent monitoring and Fulfilled evaluation framework for public investment projects including standardized monitoring tools\. Public Investment Reform DPL 2 List of prior actions from Program Document Status 1\. The Borrower, through MPI and MOIT, has incorporated SEAs in the Fulfilled development master plans for four regions and one key sector\. 2\. The Borrower, through MONRE, has reviewed the experience with the Fulfilled implementation of SEAs and has designed actions to improve SEAs‘ preparation and use\. 3\. The Borrower, through MPI, has issued a Circular, including technical Fulfilled guidelines, to implement the use of electronic procurement (e-procurement) in pilot provinces and agencies\. 4\. The Borrower has issued Decisions to transfer, from MOC, the right to exercise Fulfilled state ownership in two economic groups specialized in civil works, namely the Housing and Urban Development Group and Industrial Construction Group\. 5\. The Borrower has issued a Decree to clarify the rights and obligations of parties Fulfilled engaging in civil works contracts\. 6\. The Borrower has issued a Decree to mandate the timely preparation and Fulfilled review of SEAs and EIAs in order to inform preparation of master plans and feasibility studies for investment projects, respectively\. 7\. The Borrower, through MOF, has issued a Circular to mandate the sharing of Fulfilled independent audits of financial statements of ODA-funded projects with MOF and SAV\. 8\. The Borrower, through MOF, has issued Circulars to align with the market cost Fulfilled norms applied to consultants, translation fees, workshops and other costs related to the preparation and implementation of budget-funded projects\. 9\. The Borrower, through MOF and MONRE, has issued Circulars to define Fulfilled admissible expenses and sources of funding for the review of SEAs and EIAs\. 10\. The Borrower, through MOF, has issued a Circular to streamline payment Fulfilled procedures and clarify and simplify payment-supporting documents for ODA- funded projects\. 11\. The Borrower has issued a Decision to pilot the use of the PPP Framework\. Fulfilled 12\. The Borrower, through MPI, has issued Circulars to establish standard Fulfilled templates for project monitoring reports and set up the criteria legally required for individuals and institutions to carry out investment evaluation\. 15 2\.2 Major Factors Affecting Implementation: 18\. Partnership with the Government: The PIR program is well-aligned with the Country Partnership Strategy (CPS) 2007-11\. The PIR series touched on all four pillars of the CPS: (i) improving the business environment; (ii) strengthening social inclusion; (iii) strengthening natural resource and environmental management; and (iv) improving governance\. 19\. Overall, the program benefited considerably from the strong collaboration and trust with the Government line ministries and agencies that had been built over the years through lending operations, AAAs and policy dialogues\. The identification of potential prior actions and triggers for the program was primarily based on extensive review of analytical works, technical assistance, and on-going policy dialogues between development partners and government counterparts\. Given the consultative nature of all these activities, this resulted in a high degree of consensus and support from the counterparts for the proposed policy matrix\. Further consultation of the initial policy matrix within the country team, with six development banks and counterparts had helped build strong consensus with all stakeholders and facilitate the implementation process immensely\. 20\. Partnership with the government ministries and agencies also proved to be a decisive factor behind the intensive consultation and dialogue with the State Bank of Vietnam (SBV) and the Ministry of Finance (MOF) in the successful formulation of the stabilization package\. Resolution 11, adopted by the government since February 2011, is a complex package including monetary, fiscal, structural and social measures to restore macroeconomic stability\. The formulation of Resolution 11 took place during the negotiation of PIR2 and benefited from intensive policy dialogue between the IFM and the World Bank with SBV and MOF\. 21\. The PIR program also benefitted strongly from the PRSC series and its implementation mechanism\. The design of the operation drew on the lesson from the PRSC series in identifying an area in which the leadership was keen to move, where the dialogue was well advanced, and where capacity to develop and implement policy was in place\. This strategy worked well in some of the policy areas of the program, such as mitigating the environmental impact of projects, compensation for affected communities, and addressing SOE restructuring, where there was emerging interest in the Government\. However, it also meant that some other important areas, most notably procurement reform, were off the table as there was major disagreement between the Government and the donor community on many aspects and quite a distance between the institutional arrangements for public procurement in Vietnam and what is acceptable to the donor community\. 22\. An important factor behind the smooth implementation of the program is the coordination role of the SBV\. The SBV is also the coordinator for the PRSC series, and therefore is very experienced in effective arrangements of activities needed for budget support operations\. Successful implementation of the PIR program despite short preparatory period of time can largely be attributed to the reliance on the PRSC implementation mechanism and strong commitments of all government counterparts, especially from the SBV\. 23\. Government Ownership of the Program: Consultative nature of activities of development partners that secure active participation or leading role of government counterparts imply that the policy matrix was part of Government‘s own reform program\. There was also high level of attention on the program preparation and implementation from the Prime Minister, the Deputy Prime Minister, the Governor of the SBV, and relevant Sectoral Ministers\. In particular the 16 measures taken to stabilize the economy in 2011 with the approval of Resolution 11 by the Prime Minister speak to the high level of ownership\. However, there were also some notable disagreements between key Government agencies, institutional fragmentation, and unwillingness to relinquish strong controls that compromised the effectives of several key measures\. Lack of consensus within the Government on this complex issue was a key factor leading to the delay in submitting the Law on Public Investments\. The very institutional fragmentation that this Law is meant to address also implied that MPI and/or MOF could not adequately enforce some the provisions such as on the use of independent evaluators or adequate incorporation of environmental impact assessments in project appraisal\. The lack of flexibility on cost norms by the MOF also meant that the problem of unrealistic cost estimates was not properly solved\. 24\. Collaboration with other Development Partners: The Bank has an active dialogue and worked together with the IMF country teams for Vietnam on a range of macroeconomic and structural issues\. They have coordinated their macroeconomic policy messages to the authorities\. The two teams also work together on a number of issues such as surveillance of macroeconomic situation, joint Debt Sustainability Analysis, technical assistance for financial sector reform, preparatory work for FSAP, public financial management and tax and customs modernization reform, preparation of the Bank‗s semi-annual economic update\. The collaboration of the Bank and the IMF was very fruitful in helping the Government in the formulation of Resolution 11 and in the preparation of FSAP\. 25\. Besides the IMF, the World Bank worked closely with the other five development banks active in Vietnam to select the set of policy actions among the joint action plans for improvement of performance on ODA projects and programmes among the Government and the six development banks, namely AFD, ADB, the Japanese International Cooperation Agency (JICA), the Korean Development Bank, and the German Kreditanstalt Für Wiederaufbau (KfW)\. In the process, it led to a deep understanding of current weaknesses in project preparation, selection, implementation and monitoring in Vietnam\. Active consultation with other donors and with non- government actors also took place as part of analytical work underpinning this program\. 26\. The program strongly benefitted from close collaboration between the Bank task team and the task team of the co-financier, Agence Française de Développement (AFD)\. Good labor division and frequent interactions between two task teams took place throughout the program preparation, implementation and evaluation\. One of the two teams took lead in technical meetings for the prior actions and the other team actively participated and provided technical inputs for the formulation and finalization of the triggers and prior actions\. 27\. Decentralization of Task Team Management: The task team leaders of the two operations and most of the team members were based in the field office and therefore were able to engage on a continuous basis with government counterparts\. This was a key factor for successful design implementation of the program, particularly for the first operation given the urgency brought on by the crisis\. 28\. Supporting Analytical and TA Work: The selection of policy measures under the proposed program results from a combination of analytical and institutional criteria\. Key analytical inputs in the preparation of the proposed program include the Vietnam Development Report 2009 (entitled Capital Matters - World Bank Report to the Vietnam Consultative Group Meeting, December 2008)\. The long-standing analytical program of the World Bank and other donors was used to select the actions deemed more strategic, or with the highest potential impact on the actual implementation of public investment projects\. 17 29\. The analytical inputs from the World Bank and other donors combine insights from the work program on public financial management and financial accountability, from the joint efforts of the six development banks to implement the Paris Declaration and the Hanoi Core Statement on Aid Effectiveness, from the flagship Vietnam Development Report series, and from the technical assistance work in support of planning reform at MPI, among others\. Within the time frame of the program, the measures were extensively discussed with the relevant line ministries and government agencies to identify which of them were feasible since April 2009\. 30\. A series of core diagnostics and specific studies have been undertaken since 1999 to provide sound analytical underpinnings to the implementation of the government-led public financial management reform program\. The two most important assessments produced in recent years are the best-practice Public Expenditure Review and Integrated Fiduciary Assessment (PER-IFA), completed in 2005, and the 2007 Country Financial Accountability Assessment (CFAA) which was just been finalized\. These two comprehensive diagnostics have helped identify areas in need of further improvement, including the process of budget development, budget execution control, accessibility of financial information, and accounting, reporting, auditing and oversight framework\. In the meantime, the recommendations from PER-IFA 2004 and CFAA 2007 have formed the basis for policy dialogue conducted in the program\. 31\. Another important analytical underpinning for the design of the program was the Diagnostic Framework for Assessing Public Investment Management, produced in August 20101 by the Public Sector and Governance Unit of the PREM anchor\. This study provided a very useful starting point to design the results framework, an area in which few precedents are available\. Other studies serving as analytical underpinnings for the proposed program included the Public Investment Management Case Study for Vietnam conducted by the public sector group in the PREM anchor (PRMPS), in collaboration with the country office in 2008, the 2006 Vietnam Infrastructure Strategy 2 , the analysis of land markets in the Business Vietnam Development Report, and the piloting process for Medium-Term Expenditure Frameworks (MTEFs)\. 32\. Several of the actions pursued by the six development banks on-going dialogue with the Government feed directly into the preparation of the program\. On procurement, an independent assessment of the Vietnamese system was commissioned by MPI in 2007 using the OECD-DAC methodology\. On the use of cost estimates as bid price ceilings, the program included a program to review of the whole cost norm system to determine whether a reform would be advantageous for Vietnam\. On construction contracts, an Institutional Development Facility (IDF) grant supports the Ministry of Construction (MOC) to review a critically important decree and prepare for its replacement\. Good progress was also made by the six development banks on the common policy framework for resettlement and the environment\. Regulations on SEAs and EIAs were thoroughly reviewed, and proposals were made to improve the management of the resettlement of illegal land users, which has been one of the most controversial issues in the public debate recently\. On streamlining payment procedures and removing non-essential disbursement checks, the work of the six development banks included a survey of Project Management Units (PMUs) practices, leading to consultation and discussion with key stakeholders (MOF, State Treasury, and Vietnam Development Bank)\. 1 Diagnostic Framework for Assessing Public Investment Management - August 2010/ World Bank Policy Research Working Paper No 6397 2 Vietnam Infrastructure Strategy - Infrastructure Strategy, Cross-sectoral Issues\. World Bank Working Paper No 37184, 2006\. 18 33\. The technical assistance provided to MPI by the Bank and several development partners in recent years is aimed at introducing result-based planning and addressing remaining weaknesses in investment management\. Technical assistance has also been provided for the preparation of legal framework for pilot PPP projects and for e-procurement\. Some important lessons have been derived from this technical assistance work\. It appeared clearly that the key impediment to further breakthroughs in planning reform has been the lack of a sound regulatory framework that clearly spells out requirements, responsibilities processing, steps and resources needed for strategic planning\. Another important lesson concerns the lack of an effective M&E mechanism which would not just be based on administrative reporting\. At present, there are two on-going IDF TFs aiming to support the revision of the Procurement Law, reviewing the regulatory framework for public investment and strengthening MPI capacity in evidence-based formulation of the legal documents\. 34\. The World Bank‘s extensive analytical work on compensation and resettlement in Vietnam are useful for forming the analytical framework of the program with regard to land issue\. A thematic group on the harmonization of resettlement policies has analyzed the main gaps between government policies and international practice, and drawn an action plan to close the gaps\. A study conducted in 2008 provided an overview of current land policy-related research, identifying key issues and suggesting areas for further work\. Another study was done in the same year on illegal land users, to serve as the basis for the policy dialogue with the government\. Another study on land conflict management addresses issues related to compensation and resettlement3\. It identifies constraints to effective land allocation and land use, and proposes ways to provide incentives for private development, to improve performance in land administration, and to preserve social equity\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization: 35\. As acknowledged in the Program Document of the two operations, designing an appropriate results framework for the series was challenging, given the shortage of relevant precedents to build upon, absence of adequate data on the quality of the public investment portfolio and the fact that PFM reform does not lend itself to immediate measurable results\. Previous lending related to public investment management was quite limited and these operations had a different scope than the PIR series and were either embedded in public financial management reform or concerned a specific sector (such as roads, for instance) and therefore their results frameworks did not particularly fit to the one for the program\. Operations embedded in public financial management reform typically rely on outcome indicators for the performance of public investment management which are tied with measurement of efficiency, transparency and accountability of the overall public financial management system\. These indicators tend to focus on strategic upstream public investment programming, on its alignment with budget processes, and on enhancing the associated regulatory framework\. But broad indicators of this sort tend to be qualitative, and usually do not cover implementation and monitoring issues\. On the other hand, in operations with a sectoral focus, outcome indicators for public investment 3 Compulsory Land acquisition and Voluntary Land conversion in Vietnam: The Conceptual approach, Land valuation and Grievance redress mechanism, World Bank 2011\. 19 management tend to emphasize project implementation\. These programs are generally designed with sufficient time frames to allow measuring the outcomes of investment spending\. 36\. Another problem facing the task team in designing an M&E framework for the program is the limited availability of data for assessing the overall efficiency of public investment\. MPI primarily relies on regular administrative reports from all provinces, line ministries and agencies, as well as state economic groups and general corporations to compile the aggregate data for investment\. Quality of data from these reports is often questionable and there is no evaluation of economic impact for public investment in general and for projects in particular\. Apart from recent efforts to formulate a set of pilot quantitative indicators for evaluation of ODA projects, MPI is yet to develop guidelines with specific indicators for project management to replace Decree 12/2009 (guiding the implementation of the Construction Law)\. Different legal framework applied to different sources and types of public investment (budget, off-budget, ODA, SOEs, etc\.) and the rapid decentralization in making investment decisions also compounds the data issues in public investment management, imposing further difficulties for MPI in collecting reliable data\. 37\. Collecting data for assessing the impact of the PIR program faces another problem in the often very short time span between the issuance of legal documents as per the program policy matrix and their actual effectiveness\. In theory, a decree becomes effective two to three months after its issuance\. However, most of them will not be implemented in practice before the issuance of the guiding documents, usually the circulars\. It is not uncommon to have all the circulars needed for the decree in question in place one year after the issuance of a decree\. This is particularly relevant for Prior Action 6 of PIR 2\. This action was completed with the issuance of Decree 29/2011 in the mid April 2011\. But there is little information available about the actual implementation of this Decree because it has to be followed by necessary implanting circulars\. 38\. To overcome the weaknesses in M&E for public investment and data collection, the PIR program included project oversight as one of the policy areas covered by the program, and there are 2 policy actions in PIR1 and 1 policy action in PIR2\. With the conclusion of the policy actions, perhaps the important achievement of the program is to introduce, for the first time, a common legal framework for the M&E of the public investment projects\. The issued Decrees and Circulars include sound guiding principles for M&E of projects and overall public investment\. Nevertheless, further reforms are needed to roll out these principles in practice, especially for evaluation\. Availability of adequate resources for independent evaluation is a commonly cited problem that prevents the agencies from carrying out genuine independent evaluation\. 39\. The monitoring framework (see Table 4) was proposed for the entire program (both PIR 1 and PIR 2) and had already been revised further in the PIR 1 Program Document\. In particular, Indicator 1 (number of FDI re-registered firms) was removed\. With the issuance of Decree 102 on October 1, 2010, the re-registration of FDI firms became unnecessary even if they want to have operations in areas not specified in their license\. As a result, the intended objective of removing the constraints facing FDI firms to-be re-registered was achieved despite the proposed indicator was no longer relevant\. 2\.4 Expected Next Phase/Follow-up Operation (if any): 40\. Reform of the management of public investment and SOEs is a long-term process and the Bank continues to place high priority of its support to Vietnam in this area\. The CPS for the period of 2012-2016 will support selected elements of the strategy for Vietnam‘s progress toward a middle income country including transition from a focus on quantity toward a greater focus on quality of production and service provisions; and from a comparative advantage of low-cost labor, 20 with low value added, to one with a growing share of innovation-led and higher value-added production and services\. One of the three pillars of the CPS is strengthening Vietnam‘s competitiveness in the regional and global economy\. Among others, Pillar 1 on competitiveness addresses Vietnam‘s vulnerability to macroeconomic instability which has structural roots in distortions in the SOE and financial sectors and in weaknesses in public financial management\. 41\. The post-PRSC Economic Management and Competitiveness Credit (EMCC) programmatic series is expected to continue this reform agenda\. The EMCC, which will be the programmatic series of operations following the conclusion of the PRSC series, is expected to focus and deepen the Bank‘s engagement on the economic growth agenda, in particular SOE restructuring and public investment reform\. EMCC addresses the need in three policy areas, namely macroeconomic stability (maintaining fiscal discipline, and protecting vulnerable groups from instability), a transparent, efficient, and accountable public sector (strengthening revenue policy and administration, strengthening public expenditure management, improving public investment management, and improving accountability and external oversight functions), and enabling business environment (stabilizing banking sector, streamlining administrative procedures for private businesses, and regulating state enterprises)\. 42\. Specific on-going TAs to support public investment reform includes two IDF TFs both aim to strengthen the capacity of MPI\. One of the two IDF TFs came into operation during the preparation of the PIR program and helped the preparation of Circulars 13/2010 and 23/2010, Prior Action 12 in PIR2\. This IDF TF also assisted MPI in collaborating with research institutes to review the legal framework for public investment and contributed inputs for the preparation of the Law on Public Investment\. The other IDF TF focuses on assisting MPI in the revision of the Procurement Law, so as to narrow the gap between Vietnam‘s and international procurement practices\. 43\. In terms of AAA activities, the Bank already started a Programmatic Public Finance Review (PPFR) for FY12-16 to complement ongoing work on public finance management (PFM)\. The objectives of this programmatic AAA are to: (i) fill targeted analytical gaps to inform priority PFM reforms; (ii) provide critical input on PFM policy issues to legislative and executive bodies; (iii) provide analytical underpinning for PFM-related reforms in investment lending and development policy operations\. The PPFR will finance a core set of priority tasks, which will be determined on an annual basis through discussion between GoV and the Bank\. The upcoming Financial Sector Development Strategy, the PEFA and DeMPA diagnostics, and ongoing donor support for PFM reforms and analysis, helps inform activities in the coming years\. For FY12, the following three topics have been identified: Improving fiscal transparency, tax policy measures for new sources of domestic revenue, and fiscal decentralization\. In addition to specific topics agreed on an annual basis, the PPFR team will conduct more regular fiscal analysis, notably: (i) analysis of national budget, including macro setting, policy priorities, revenue analysis, expenditure analysis, and budget financing; (ii) semi-annual fiscal note, including spending and revenue execution, key trends, major virements, and any policy changes\. 44\. In terms of lending, the Public Financial Management Reform Project for Vietnam has provided support to strengthen the recipient's capacity to plan, execute and report on its budget and to improve the transparency and accountability of the budgetary systems and processes\. A second extension of the closing date of this credit from February 28, 2011 to February 28, 2013 was approved, extending the project‘s life to nine years\. 45\. The Second Power Sector Reform Development Policy Operation Program for Vietnam began in 2012 with the objective to support the GoV in the design and implementation of a 21 competitive market for electricity generation, restructuring of the power sector and reform of electricity tariffs that aim to facilitate effective competition, transparency and predictability to encourage generation investment, and to implement programs and incentives for efficient use of electricity\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 46\. The PIR operation was prepared in the context of the global financial crisis and the need for the Government of Vietnam to access $1\.5 billion overseas development assistance on an urgent basis\. After considering various options, the Bank chose the PIR series as the most appropriate instrument that would best achieve the delicate balance between the twin objectives of short-term crisis response and feasible but meaningful actions to advance the overall development agenda over the medium term\. Inefficiencies in the public investment cycle were identified, through analytical work, on-going dialogue between the government and the six development banks, and consultations with sector colleagues implementing investment projects, as a key constraint to infrastructure development and economic growth in Vietnam\. The Bank sought to take advantage of the increased focus of top-level policy-makers brought on by the crisis to achieve progress in an area highly relevant to the medium term growth agenda and to complement the on-going PRSC series, especially where limited progress was made\. 47\. The objective of the PIR series was aligned with the Government‘s medium term priorities and the CPS\. The Government‘s SEDS 2011-20, the SEDP 2006-10, and the SEDP 2011-15 all identify improving public investment efficiency as a key priority\. The Third Plenum of the XI Central Party Committee in the end of 2011 instructed MPI to prepare a proposal for restructuring the public investment management, including improvements in the regulatory environment, more rigorous medium-term investment planning, increasing the efficiency of the project cycle, and a more integrated framework for financing public investments through alternative sources\. 48\. In designing the programs to meet this objective, the Program Documents of the two operations were candid in their assessment of the risks inherent in tackling a difficult area of reform in the short-time frame necessary for crisis response, and in addressing longer term public financial management and institutional reforms in the short time span of a development policy operation\. The choice of prior actions also reflected the team‘s attempt to be both pragmatic, with several more procedural measures, particularly with regards to financial management, that could be achieved relatively quickly in PIR 1, with more ambitious, and therefore, more risky, reform measures, such as a new Law on Public Investments and reforming the governance arrangements of SOEs\. The program however refrained from going deeply into other important areas, such as procurement reform, because of the difficulties in introducing fundamental changes where substantive differences of views remained\. 3\.2 Achievement of Program Development Objectives (including brief discussion of causal linkages between policy actions supported by operations and outcomes) Overall achievement of PDOs Rating: Moderately Satisfactory 22 49\. The program has sufficient characteristics in its overall achievement to be rated satisfactory\. All but one policy actions were completed which made important contribution not only to strengthening the overall management of public investment in Vietnam but also to accelerating the reform momentum in this area\. The Public Sector Board highlighted the program as a good example of Bank‘s engagement in PIM reform in its briefing to the Bank‘s President\. The program not only provided timely support for the economic stimulus package but also was a key policy instrument for the policy dialogue between the Bank, the IMF and the Government of Vietnam in addressing issues of overheating during the course of PIR 2 implementation\. However, some weaknesses in designing the result framework and the slow progress of the formulation of the Law on Public Investment lower the ICR‘s overall rating for the achievement of PDOs to moderately satisfactory\. 50\. The timely response of the Bank to the 2008/09 crisis was greatly appreciated by the authorities\. As was repeatedly voiced by key counterparts, the Bank‘s support in a time of need underscored its role as the ―trusted partner‖ of the government and helped better position the Bank to provide advice going forward on both public investment reform and SOE restructuring\. For example, the MOF established a high-level Working Group on SOE restructuring and has requested the Bank for technical assistance\. The MPI has requested Bank‘s assistance on its proposal on investment restructuring legislation such as the preparation of the Law on Public Investment and the Spatial Planning Law\. Prior to the PIR series the Bank had little systemic engagement on public investment management, despite the PRSCs and the dialogue between the Government and six development banks on aid effectiveness, and it is expected that the Bank‘s involvement will accelerate through analytical work, technical assistance, and the new programmatic EMCC series\. 51\. The overall performance of the Vietnamese economy in 2009-11 showed that the immediate impetus for the program, namely crisis response, was very successful\. Vietnam has weathered the 2008-09 global economic crisis relatively well, in contrast to what was being projected at the time\. After declining to 5\.3 percent in 2009, below the historic average of 7\.5 percent, the economy grew by an estimated 6\.8 percent in 2010 and 5\.9 percent in 2011\. The rebound in export growth was particularly impressive and exceeded projections by a wide margin — for example the IMF Article IV Staff Report of 2008 had projected that exports would increase modestly from US$ 63 billion in 2008 to US$ 73 billion in 2011, whereas actual exports reached US$ 96\.9 billion in 2011\. The timely and large stimulus package helped cushion the adverse impact of the crisis\. Table 1: Vietnam - Key Economic Indicators 2008 2009 2010 2011 2012/f Output, Employment and Prices GDP (% change previous year) 6\.3 5\.3 6\.8 5\.9 5\.7 Industrial production index (% change, previous year) 7\.4 7\.1 9\.3 6\.8 7\.0 Unemployment rate (%, urban areas) 4\.7 4\.6 4\.3 3\.6 4\.0 Consumer price index (% change, period-end) 19\.9 6\.5 11\.8 18\.1 8-9 Fiscal Balance Fiscal balance (% GDP, including off-budget items) -0\.5 -7\.2 -5\.2 -2\.7 -3\.6 Foreign Trade, BOP and External Debt Trade balance (BOP definition, $US billion) -12\.8 -8\.3 -5\.1 -0\.5 -2\.2 Exports of goods, ($US billion, fob) 62\.7 57\.1 72\.2 96\.9 110\.5 Exports of goods (% change, previous year) 29\.1 -8\.9 26\.4 34\.2 14\.0 Imports of goods, ($US billion, fob) 75\.5 65\.4 84\.8 106\.7 123\.9 Imports of goods (% change, previous year) 28\.1 -13\.3 21\.2 25\.9 16\.0 23 Current account balance ($US billion ) -10\.8 -6\.1 -4\.3 -0\.6 -2\.1 Current account balance (percent GDP) -11\.9 -6\.6 -4\.1 -0\.5 -1\.6 Foreign direct investment (net inflows, $US billion) 9\.3 6\.9 7\.1 7\.3 7\.3 External debt ($US billion) 29\.2 38\.7 45\.4 50\.3 55\.6 as percent of GDP 32\.4 41\.6 43\.8 41\.0 41\.1 Debt service ratio (% exports of g&s) 2\.9 4\.9 3\.3 3\.4 3\.8 Financial Markets Credit to the economy (% change, period-end) 25\.4 39\.6 32\.4 14\.3 16\.0 Short-term interest rate (3-M deposits, period-end) 8\.1 10\.7 14\.0 14\.0 13\.0 Stock market - VN index (Jul 2000 =100) 316 495 485 352 --- 52\. Assessment against the nine outcome indicators of the program shows that the targets for six indicators were achieved by the time of the ICR mission\. At present, target for one indicator is not achieved and information for the remaining two indicators is not yet available for measuring the impact of the program\. One reason is that the actions were undertaken too recently and the actual time period of effectiveness for the issued documents is too short for the realization of the impact\. Another reason is that the system needed for actual implementation is yet to be established\. The lack of information for assessment indicates some weaknesses of the result framework for the program whose quality was apparently affected by the limited time devoted for program design and the unavailability of relevant experience from precedent similar operations\. 53\. In addition to assessing whether the prior actions achieved their stated objectives in terms of improved outcomes as per the Results Framework, it is important to assess whether the PIR program contributed to an overall increase in Government‘s commitment to public investment reform in Vietnam\. Beyond the specifics of the measures supported in the series, the most significant achievement of the programmatic series was the recognition by the government on the importance of improving public investment management, and the improved dialogue between the Bank, and other development partners, and the government on this agenda\. Improving public investment efficiency and SOE restructuring are two of three priority areas in the 2011-2015 SEDP, and the Government has taken numerous steps recently, as detailed in Box 1, towards this objective\. Moreover, the implementation of the PIR program helped the Government of Vietnam strengthen the coordination among its ministries and agencies in conducting macroeconomic policies\. Cooperation between MOF and SBV was facilitated during the preparation of the stabilization package with active participation of the IMF and the Bank in the context of negotiation of PIR2\. In February 2012, MOF and SBV officially formalized a mechanism for their cooperation by signing an agreement of collaboration and information exchanges which marks an important milestone in inter-ministerial coordination in macroeconomic management\. 54\. There are also other indicators which show notable improvements in the management of public investment in Vietnam during the period 2009-2011\. Budget deficit fell significantly from 7\.2 percent of GDP in 2009 to just 2\.7 percent in 2011, largely due to the consolidation in public investment\. Total capital spending (including off-budget) also declined considerably from 16\.3 percent of GDP to 9\.4 percent over the same period\. This illustrated the intention of the Government of Vietnam to continue fiscal consolidation efforts by targeting more efficient public investment\. 55\. While the withdrawal of the stimulus once growth resumed was delayed, and resulted in growing macroeconomic vulnerabilities, the Government moved decisively in early 2011 by issuing Resolution 11 which called for a wide range of monetary, fiscal, and structural policy reforms to address excess demand\. The delay of PIR 2 because of macroeconomic concerns helped raise the necessary alarm bells and contributed to this important policy measure\. In sum 24 therefore, from the macroeconomic perspective, the two operations helped in both supporting the fiscal stimulus when it was needed in 2009 and in its withdrawal to avoid further overheating of the economy\. Box 1: Government of Vietnam’s recent steps to improve public investment efficiency Socio-Economic Development Plan (2011-15) and Socio-Economic Development Strategy (2011- 2020): The main goal of the SEDP and SEDS is to improve productivity and competitiveness of the Vietnamese economy by restructuring the economy and changing the growth model, placing greater emphasis on efficiency and value addition\. These strategic documents identified restructuring of the SOEs and public investment as two of three restructuring pillars\. The MPI has been assigned by the government to prepare a plan for restructuring the economy and changing growth model\. The draft plan was submitted to the National Assembly in May 2012 for review\. Directive 1792/CT-TTG (October 15, 2011) by the Prime Minister on Enhancing Management of Investment from State Budget and Government Bonds: Directive 1792 deals with inflated demand for public resources by investment projects by emphasizing the consideration of the overall availability of resources in project appraisal\. The oversight role of the central government will be strengthened by the participation of MOF and MPI in appraising the overall resource availability for provinces, line ministries and agencies\. For the first time, individual responsibilities in investment decision making was clearly spelled out\. Directive 1792 also requires moving from an annual investment planning cycle to medium-term planning and assigns MPI to prepare a Decree on Medium-term Investment Planning\. The plan is to issue the Decree in the third quarter of 2012\. Preparation of Plan for Restructuring the SOEs and Plan for Restructuring Public Investment: MOF and MPI have been assigned by the Government to take the lead in preparing the plan for restructuring the SOEs and restructuring public investment, respectively\. Draft plans have recently been presented to the Cabinet\. The reform of the SOE sector places great emphasis on the State Economic Groups and General Corporations\. Several measures are listed, including acceleration of equitization process, improved separation between state ownership exercising and state regulatory functions, imposing market disciplines to the SOEs, and strengthening corporate governance\. The proposed plan for restructuring public investment focuses on further improving the legal framework, enhanced oversight of central government and gradual reduction of public investment together with the facilitation of the participation of private sector in infrastructure investment\. The promulgation of a law governing public investment management and a law for spatial planning has been identified as a major task during the next two years\. 56\. Moving to the specifics of the PIR program, while all the prior actions were fulfilled, with one notable exception, progress in implementation and follow-on measures to achieve the outcomes against each of the policy areas was mixed\. These are discussed in more details below, with progress against individual outcome indicators provided in Annex 5\. Project Selection: Moderately unsatisfactory 57\. Prior analytical work and on-going dialogue between the 6 Development Banks and the Government had identified numerous weaknesses in the planning, selection, and financing of public investment projects\. Underpinning these problems was a weak regulatory framework with many fragmented and often conflicting laws and decrees (for example there are different sets of regulations for projects with and without construction works)\. Project planning was weak and fragmented because of lack of environmental screening, lack of inter-sectoral or inter-provincial 25 prioritization, and limited use of socio-economic cost benefit analysis in the selection of projects\. In particular, in the context of the significant decentralization of public investment decision- making to line ministries and provinces brought on by the Law of Investments (2006), MPI‘s authority to appraise and screen investment projects had greatly dwindled and had not been replaced by any alternative institutional mechanisms\. 58\. To improve project selection, the PIR program focused on the preparation of a new Law on Public Investments to establish a clear and consistent regulatory framework for project preparation, appraisal, implementation, and monitoring in the context of decentralization\. However, lack of consensus on this law within the Cabinet resulted in delays and the trigger was consequently dropped from PIR 2\. With the growing attention on the potential adverse impact of fiscal policy in general and public investment in particular on the recurrent overheating of the economy, a consensus on this law has seemingly reached and the Government has asked the MPI to prepare this law for the National Assembly in 2012 for review and in 2013 for approval\. The initial proposal of the National Assembly is to merge the Law on Public Investment with the revised Law on Procurement into a new law entitled the Law on Public Investment and Public Procurement\. But the recent development indicated an inclination to having two separate laws instead of an encompassing one\. 59\. This dropped prior action was a focal point of discussion during the Bank‘s Operations Committee (OC) meeting on PIR 2 with guidance given to the team to continue support for the Law through other channels such as on-going trust fund support and analytical work\. The size of PIR 2 was reduced from US$ 500 million to US$ 350 million in part due to this missed action (the other reasons being the IBRD exposure limit and the smaller Government financing gap following the economic recovery)\. 60\. A second measure was improved planning through the integration of Strategic Environmental Assessments (SEAs) in regional and sectoral master plans\. The main problem being addressed by the prior actions was the poor quality of the SEAs for master plans caused by the late preparation of SEAs, done almost as an afterthought in the preparation of master plans, and inadequate funding for their preparation\. Lack of effective SEAs has commonly been identified as one of the main reasons undermining the environmental sustainability of investment in general and public investment in particular\. 61\. To date the SEAs of the master plans of all six regions and the power sector have been appraised and the corresponding draft master plans have incorporated recommendations from the SEAs, thus going beyond the program target of four regions and one sector (Outcome Indicator 1)\. However, the authorities commented that the initial drafts of some of the regional SEAs were of inadequate quality and therefore did not have the requisite ―demonstration effect‖ that was the objective of the reform\. The preparation of these drafts broadly followed the instruction as given in Circular 05/2008 but they are often vague when it comes to the assessment of proposed alternatives of the master plans and there were no description of specific measures for mitigation of potential negative impacts or for environmental monitoring and management during the implementation of the master plans\. SEAs reports with technical support from development partners (two regions and the power sector) are better appreciated by the authorities\. The quality differentials of the SEAs can largely be attributed to the lack of clarity in terms of technical guidelines on their preparation and the problem of inadequate funding\. It was expected that these issues were to be addressed by the implementation of Prior Action 6 of PIR 2 (under area for project implementation)\. 26 62\. Despite an overall rating of ―moderately unsatisfactory‖ for this program pillar based on the limited progress on outcomes, credit should be given to the team for taking on a difficult, but necessary, measure in the Law on Public Investment; it is unlikely that in the current context, a less ambitious measure would have achieved the objective of strengthening the regulatory framework for public investment management\. In addition, the Bank country team has continued the policy dialogue and technical assistance with regards to reform of public investment regulations as committed in the OC meeting\. There is an on-going IDF TF that aims to strengthen MPI capacity in preparing legal documents\. A component of this IDF TF is devoted to reviewing the existing regulatory framework for public investment and arranging consultations to obtain inputs for the formulation of the Law on Public Investment\. Another IDF TF, approved in 2011, provides assistance to MPI in the revision work of the Procurement Law\. The VDR 2012 devotes a large section to on examine the performance of SOEs and public investment and makes several recommendations for further reforms\. Together with the Office of the Government, the Bank in February 2012 arranged a high level workshop to discuss technical issues and policy options for restructuring the SOEs\. Project Implementation: Moderately satisfactory 63\. Public procurement reform has been a difficult area of dialogue as there is a fundamental disagreement between the Government and development partners on the principles of public procurement\. An assessment of Vietnam‘s public procurement law and related regulations using the OECD/DAC criteria revealed significant weaknesses in 14 of 17 dimensions, including the over-reliance on direct contracting (amounting to almost 50 percent of total state budget procurement by value in 2009), routine contract negotiations for goods and works, use of re- bidding, and problems with contract evaluation\. 64\. Given this overarching constraint, the program focused on the modest goal of enhancing bidding transparency through the piloting of e-government in 3 large agencies, namely Hanoi People‘s Committee, EVN, and VNPT, thereby achieving the program outcome (Outcome Indicator 2)\. While the number of the pilot institutions was small, together they cover a relatively large number of transactions with generally positive results and the government aims to expand e- procurement to 7 additional agencies in 2012\. The draft new Law on Public Investment and Public Procurement also has a chapter on e-procurement, indicating the government‘s continued attention on this agenda\. 65\. A prior action for the second operation touches upon the transfer of the representation of state ownership rights in SOEs out of the line ministries and focusing on the general corporations which were under MOC management\. On January 12, 2010, the Prime Minister issued Decisions 52 and 54/QD-TTg on the establishment of two State Economic Groups by restructuring ten existing general corporations and one independent SOE which used to belong to MOC\. The Prime Minister issued two additional Decisions in February 2010 (Decisions 261 and 262), appointing the Board members of these two groups\. The exercise of ownership rights has been transferred out of MOC to the Boards of these two economic groups, thus fulfilling the program outcome (Outcome Indicator 3)\. This change helps remove the eligibility issues related to potential conflict of interest that used to prevent the state enterprises under MOC management from participating in the bidding for construction work owned by MOC\. 66\. The momentum of SOE reform continues strongly in MOC\. An equitization framework for the remaining general corporations with 100 per cent state equity under the Vietnam Industrial Construction Group and Housing and Urban Development was approved by the Prime Minister in December 2010\. The equitization of these general corporations is expected to be completed in 27 2012\. At present, there are only four General Corporations under MOC management\. Apart from the four mother companies and four children companies which remain 100 percent owned by the state, all other children companies of these four MOC general corporations have already been equitized\. Restructuring plans of these four general corporations were approved by the Prime Minister in March 2012 with Official Letter 283/Ttg-DMDN issued on March 5, 2012\. According to the plans, all mother companies of the remaining four MOC‘s general corporations will be equitized by 2015 (i\.e\. Construction Corporation No\.1, Building Materials Corporation No\. 1, Vietnam Urban and Industrial Zone Development Investment Corporation, and Vietnam National Construction Consultants Corporation) and the State will hold more than 50 percent of equity\. The share of state equity in these companies will decline gradually and the target is that the state does not have the dominant share by 2020\. 67\. Many aspects of civil work contracts including content, time requirements, adjustment of costs, guarantees, insurance and legal obligations of engaged parties were not clearly defined in the regulatory framework and this problem was aggravated during the post 2006 construction boom\. A prior action of the PIR 2 aims to address these issues and the issuance of Decree 48 in 2010 about contracts in civil work with more than 30 percent capital from the state budget represents an important progress\. In addition, MOC has also instituted a number of specific templates for different types of contracts in civil work\. These changes are expected to facilitate the implementation of the contracts in civil work\. 68\. Land reclamation and compensation are affected by inconsistencies between the various regulations governing land and real estate\. Land is not always valued at market prices, support for loss of livelihoods is not provided and illegal land users are discriminated against\. Under PIR 1 Decree 69/2009/ND-CP was approved by MONRE requiring agricultural land acquisition to be based on market prices and compensation to include relocation and resettlement support, and livelihood and production support\. There are only negligible differences between Decree 69 and the Bank regulations for compensation of agricultural land for titled owners\. Anecdotal evidence, for example from the experience of Bank-funded projects, suggests that Decree 69 is being implemented and satisfaction of displaced people has greatly improved\. There is a need for systematic survey to provide stronger evidence for achievements related to this outcome indicator\. 69\. The policy actions under this area also aimed to address the issue of poor quality of Environmental Impact Assessments (EIAs)\. The EIAs are often conducted at a late phase in project preparation, hence have limited impact on the decision on whether or not to approve a project, thereby violating the requirements of the Law on Environmental Protection\. Two prior actions under PIR 2 sought to address this issue through the issuance of Decree 29/2011 on the timely preparation of EIAs and greater clarity on the need for consultations with the affected population, and the issuance of circulars to introduce some costs norms for the preparation of EIAs\. 70\. At the ICR preparation stage, the outcomes from these measures are mixed\. On the one hand, the revision of regulation related to EIA preparation has contributed to raising the resources for EIA significantly, more than the target of 0\.5 percent as per assessment of MONRE officials\. With the issuance of Circular 50 which became effective in May 2012 and set the formula for allocating the budget for EIAs, there will be further improvement and hence this target is considered to be achieved\. On the other hand, Outcome Indicator 5 (on timing of EIA) remains to be realized\. While Decree 29 was a positive step and contains significant changes such as moving the EIA appraisal authority out of the PMUs, actual implementation, in particular community consultations, will require time and further technical guidelines to elaborate its provisions\. In addition, Decree 29 only came into effect since June 2011 and Circular 26 guiding the 28 implementation of Decree 29 came into effect from September 2011\. There is a very short time period for actual implementation; hence measuring progress against Outcome Indicator 5 is practically impossible at the time of the ICR mission\. Financial Management: Moderately satisfactory 71\. Inadequate cost estimates have been a major factor contributing to poor public investment planning that results in downstream delays in project implementation\. The program sought to address this problem by requiring cost norms for administrative items to be aligned to the market and to be regularly updated\. As per the prior actions under the program the MOF issued Circulars 01/2010 and 97/2010 related to better align some cost norms including norms for travel costs and workshop arrangements with market prices\. More flexibility has been introduced with increased autonomy for spending units in setting the specific norms up to 20 percent higher than the MOF norms\. Nevertheless, these norms in the wake of on-going high inflation can quickly become outdated, given that there was no provision for automatic adjustment\. Therefore, the underlying problem of the inflexibility of these cost norms has not been addressed\. 72\. The other actions on financial management focused on the recording and audits of revenues and expenditures from ODA funds\. Here the prior actions have resulted in improved timeliness of recording which is now being done on a quarterly basis together with state budget revenue and expenditure (thereby meeting Outcome Indicator 6)\. In meetings with government officials, it was confirmed that there has been a good compliance in sharing the audit reports with the SAV\. 73\. Private financing for infrastructure will play an increasingly important role in Vietnam but is currently underutilized due to weaknesses in the regulatory framework for Public Private Partnerships (PPPs), in particular on how to handle unsolicited PPP proposals and on a clear and transparent mechanism for government guarantees to address the viability gap in PPP projects\. The prior action for PIR 2, Decision 71 of the Prime Minister issued on November 9, 2010, sets up for the first time interim regulations for pilot PPP projects with the objective that the experience of the pilot during a period of 3-5 years would be used to prepare more comprehensive legal provisions\. To date, nearly 30 projects proposals had been submitted by technical ministries and provincial people committees to MPI for pilot projects and MPI has to coordinate the selection of pilot projects to be approved by the Prime Minister\. However, progress on the actual implementation of a pilot project has been limited\. Currently one road project has been selected as a pilot, but this is an unsolicited proposal that may not be suitable for achieving the objectives of demonstrating a transparent Viability Gap Financing Mechanism\. The Government is planning to establish a Project Development Facility (PDF) with the financial and technical assistances from donors to facilitate the preparation of a series of viable and bankable PPP pilot projects\. Project Oversight: Moderately satisfactory 74\. MPI has a key role in monitoring and evaluation given the significant decentralization of authority for project preparation and implementation to line ministries and provinces\. The fragmentation in the legal framework meant that there was no clear M&E framework for public investment projects\. In addition to procedural improvements through broadening the use of standardized reporting tool for all public investment projects regardless of financing sources, the program sought to introduce independent evaluation of the outcomes of completed projects\. As per the prior action, the Government issued Decree 113 and several circulars on arrangements for 29 monitoring and evaluation that included provisions for the use of independent evaluators, and followed up with a circular specifying the details of the certification process for these evaluators\. 75\. However, to date there has been limited progress in the use of independent evaluators for public investment projects\. The original PIR 2 trigger of a charter establishing an Association of Independent Evaluators proved to be too difficult, and was replaced with the prior action of the legal requirements for individuals and organizations to be certified to perform evaluation\. MPI has already issued Circulars 13 and 23 in 2010 which outline the procedures for training institutes to register with MPI and for certification of individuals and organizations engaging in investment evaluation\. There remains, however, a problem with insufficient funding for project evaluation\. As per the regulations, funding for project evaluation has to come from the budget of the concerned project — there is no separate state budget provision for evaluation\. To date, no large project has been reviewed by independent evaluators, thus missing the target of 7 percent set in the program (Outcome Indicator 9)\. But this target appears to be over-ambiguous if taking into account the time needed for setting up the training institutions with relevant curriculum, training and certification of independent evaluators as well as the changes needed in the budgeting process for making resources available for independent evaluation\. 3\.3 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs) Rating: Moderately Satisfactory 76\. The overall rating of moderately satisfactory is based on weighing (a) the program‘s contribution to the stimulus package which was successful in helping the Vietnamese economy avoid a deeper recession; (b) PIR 2‘s contribution to the necessary macro-economic tightening in 2011; (c) the program‘s contribution to the Government‘s clear commitment to prioritizing public investment reform and the elevation of the Bank‘s engagement as the ―trusted partner‖; and (d) the less than satisfactory achievement of specific outcomes in the some areas related to project screening, environmental management, financial management, and monitoring and evaluation discussed above\. Given the medium-to-long-term nature of institutional and financial management reforms, success will depend on both the Government‘s continued commitment and the Bank‘s continued focus on this agenda in the next CPS\. 3\.4 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development 77\. The budget support program was prepared at the request of GOV which needed urgently resources for a sizeable stimulus package The package was effective in contribution to sustaining business confidence, economic activity and economic growth momentum\. Vietnam had managed to navigate through the crisis period 2008-09 relatively well\. The economy grew at 6\.8 percent in 2010 and the crisis seemed to have little impact on the pace of poverty reduction and employment\. 78\. In the context of PIR program, the formulation and implementation of Resolution 11 has played a major role behind the slowing down of inflation and gradually restores macroeconomic stability\. Resolution 11 also pays great attention to social measures and that has helped to mitigate the potential adverse impacts of tightening policies\. It is reported that despite slowing down in GDP growth in 2011, employment generation and poverty reduction continued to record positive results\. About 1\.6 million new jobs were created in 2011 and the unemployment rate of 30 people in working age living in urban areas was maintained at 3\.9–4 percent\. The poverty incidence in 2011 decreased by 2 percentage points and the number of poor district decreased by 4 percent\. Significant resources have been prioritized to implementing poverty reduction measures in 62 poor districts, including the especially disadvantaged communes and villages, and the national target program on sustainable poverty reduction for period 2011-2015\. (b) Institutional Change/Strengthening (particularly with reference to impacts on longer-term capacity and institutional development) 79\. Apart from the issuance of various legal documents, the implementation of PIR program has reinforced the well-known need for improved coordination among government agencies in policy formulation and implementation\. Perhaps a positive (but unexpected) institutional development impact was the signing of an agreement between SBV and MOF in coordinating their activities and information exchange with regards to macroeconomic management\. (c) Other Unintended Outcomes and Impacts (positive or negative, if any) 80\. Another unintended impact of the PIR programmatic operations is its contribution to raising the awareness of public investment reforms in Vietnam, not only for MPI but also for the other line ministries\. The implementation of PIR program provided good entry points for further policy dialogues for a range of issues including land management, environmental protection in planning, SOE reform and planning reform\. 3\.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) Not applicable\. 4\. Assessment of Risk to Development Outcome Rating: Low 81\. The risk of reform reversal is rated low given that the political consensus at the highest level was reached on further bold reform measures for both SOEs and public investment\. In November 2011, the Prime Minister issued Directive 1792 which aims to accelerate the reform in public investment management by strengthening the oversight of MPI and MOF in screening public projects and imposing individual responsibility in making investment decisions\. Restructuring public investment and restructuring SOEs are two of the three restructuring pillars of the SEDP 2011-15 and the SEDS 2011-20\. This clearly indicates that high priority has been given to further reform of public investment during the next ten years\. 82\. Recent proposal on public investment and SOEs restructuring developed by MPI and MOF include follow-up measures of reforms undertaken in the context of PIR, such as facilitating PPP development, strengthening the separation of state ownership exercising and state management functions, and revising of the Law on Environmental Protection\. Both the newly introduced measures and the proposed reforms in the draft restructuring plans suggest that none of the changes introduced by the PIR program will be reversed or diluted\. The significant decline of the share of public investment in total investment and in GDP in the last few years provides further evidence on the determination of the Government of Vietnam to continue fiscal consolidation by more efficient public investment\. 31 83\. The decision to include the Law on Public Investment and the revised Procurement Law in the 2012 legislative agenda of the National Assembly tenure 13th provides additional proof of the consensus reached for bold measures in difficult reform areas\. Drafts of both laws will be submitted to the National Assembly at the end of 2012 for review\. In addition, a Spatial Planning Law is being developed, also for the 2013 legislative agenda and aims at improving the inter- provincial coordination in investment planning\. Decision has also been made about moving from annual to medium-term investment planning in order to reduce the fragmentation associated with the mismatch between short-term planning cycle and the longer-term nature of investment projects\. A Decree for this change has been prepared by the MPI and is expected to be issued by the third quarter of 2012\. 5\. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) (a) Bank Performance in Ensuring Quality at Entry (i\.e\., performance through lending phase) Rating: Moderately satisfactory 84\. Through the PRSC series, the Bank, together with other development partners, has established a long and successful history of working closely with the Government on development policy operations to identify reforms and follow up their progress\. Quality at entry for the PIR series was therefore ensured by this on-going engagement as well as the strong program of support outside of the operation to help facilitate technical assistance and guidance in the selection and execution of triggers [see Box 2]\. As a result, all but one (trigger on Public Investment Law) triggers subsequently became prior actions with little modifications as normally the case for programmatic DPLs, despite the inclusion of a large number of triggers in the two PIR operations\. This demonstrated the strategic relevance, government commitment, and the buy- in by the senior leadership as well as officials at technical levels\. Moreover, throughout the annual preparation process of the two operations, the Bank was able to meet a tight delivery schedule, especially considering the depth of the engagement involving a cross-section of numerous government agencies and personnel\. 85\. The two operations were also prepared in close collaboration with the six development banks, and AFD provided co-financing based on the same policy matrix\. This provided a harmonized approach to policy-based lending and reduced the government‘s transaction costs in working with its counterparts\. 86\. The Bank performance in ensuring quality at entry is assessed as moderately satisfactory, taking into account some weaknesses in the design of the result framework which did not anticipate fully sufficient time needed for the realization of some targets\. The rating also reflects some weaknesses in the identification of the policy actions which resulted in the droppage of one trigger and delay in the completion of two other policy actions\. This delay has lead to the temporary four-week suspension of the PIR2 negotiation\. 32  Box 2: On-going and Planned World Bank TA and AAA Activities on Public Investments 1\. Public Financial Management Reform Project (additional financing, 2011 -2013): The objective of the Public Financial Management Reform Project (PFMRP) for Vietnam is to strengthen the recipient's capacity to plan, execute and report on its budget and to improve the transparency and accountability of the budgetary systems and processes\. PFMRP has three main components in addition to a project management component: implementation of an integrated Treasury and Budget Management Information System (TABMIS); strengthening of state budget and investment planning; and strengthening of the Government's ability to manage Vietnam's public debt and to begin monitoring fiscal risks that emanate from SOE liabilities\. As part of the restructuring, a second two- year extension of closing date of the original credit from February 28, 2011 to February 28, 2013 was approved, extending the project life to nine years\. 2\. Project Preparation Technical Assistance Facility Project (2010-2015): The objective is to increase the capacity of Government entities to plan and prepare public investments efficiently up to international quality standards\. The project has three components: project preparation facility; project preparation facility support and capacity building; and incremental operating costs and project management expenses\. 3\. Financial Sector Modernization and Information Management System Project (2008-2014): The objectives are to assist the SBV, the Credit Information Center (CIC), and the Deposit Insurance of Vietnam (DIV) to improve the delivery of their main functions in accordance with relevant international standards for the banking sector, through: (a) developing a centralized and integrated system of advanced business processes and a modern information technology architecture; and (b) strengthening their institutional capacity in carrying out their operations\. The project has three components: functional strengthening and business re-engineering; Information and Communications Technology (ICT) platform development; and project implementation management\. 4\. Land Administration Project (2008-2013): The objectives are to increase access to land information services by all stakeholders through development of an improved land administration system in selected provinces in Vietnam\. The project has three components: modernization of the land registration system; improvement of land registration service delivery; and support for the overall implementation of the project through project management monitoring and evaluation\. 5\. Vietnam Tax Administration Modernization Project, TAMP (2007-2013): The objectives are to assist the General Department of Taxation (GDT) in strengthening governance in tax administration and to increase the level of voluntary compliance with the tax system by improving the effectiveness, efficiency, transparency and accountability of the tax administration\. The project has four components: institutional development for the tax administration; operational modernization of the tax administration functions and processes; IT development; and project management\. (b) Quality of Supervision (including M&E arrangements) Rating: Satisfactory 87\. As the prior actions were completed before the loan went to the board, supervision was technically not needed\. Instead, in preparation for the next loan, continuing dialogue with the government and follow-up on the status of triggers served as a de facto form of supervision\. (c) Justification of Rating for Overall Bank Performance 33 Rating: Moderately Satisfactory 88\. The overall Bank performance is rated as moderately satisfactory, reflecting the above rating on the achieved outcomes, the quality of the program design and quality of supervision\. The task team made a strong effort to prepare and supervise a program in a challenging environment with uncertainty in global environment and recurrent macro instability in Vietnam\. Such effort ultimately allowed the program to deliver on most of its intended development objectives, but moderate shortcomings in delayed implementations of one key policy action affected the overall performance efficiency\. Borrower Performance Rating: Moderately Satisfactory 89\. Government performance is assessed as moderately satisfactory\. While the cooperation of the related line ministries and agencies was very good, the rating reflects the delay in the preparation of two policy actions that resulted in a temporary four-week suspension of the negotiation\. A further shortcoming is the droppage of the submission of the Law of Public Investment as a prior action\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 90\. The performance of the coordinating agency, the SBV is rated as satisfactory\. This reflects the considerable efforts exerted by the SBV in successful coordinating the complex program over a short period of time\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 91\. The overall performance of the Borrower is assessed as moderately satisfactory, reflecting the assessment of achievements of the development outcomes of the operation earlier and the ratings in paragraphs 82 and 83\. 6\. Lessons Learned (both operation-specific and of wide general application) 92\. An important lesson learned is that it is difficult to achieve significant institutional strengthening in the short time frame of a development policy operation prepared for crisis response\. The Bank‘s decision to design the crisis response as a thematic DPL focusing on a high priority reform area was correct and paid off in terms of garnering the attention of top policy makers on this issue\. There is plenty of evidence, as detailed earlier, about the Government‘s commitment on making progress on reforming the public investment system and restructuring the SOE sector\. 93\. The Bank will need to work effectively with a range of stakeholders, especially in the public investment area, given the decentralization of decision-making authority on public investments and the challenge to MPI in leading the reform process in this decentralized environment\. It was not feasible for the Bank to engage more deeply with the other key stakeholders, in particular the provinces, in the limited time frame of the PIR series, but this engagement will be necessary going forward with the successor EMCC operation\. 34 94\. The experience of PIR 2 also shows that holding the line and delaying the operation was the correct decision in order to force the issue on macroeconomic stability, as well as reducing the amount of the operation on account of the missed action on the Law on Public Investments\. This decision was appreciated by key counterparts\. 95\. For smooth implementation of DPLs, consideration of potential time needed for the completion of triggers must take into account the following factors: (i) Borrower‘s procedures for issuing legal documents and (ii) potential coordination issues among Borrower‘s agencies\. The two programmatic operations had a number of triggers that dealt with issuance or preparation of legal documents that required a considerable amount of time for the government to complete the internal procedures not only within the Cabinet but also requires the interaction with the National Assembly\. As a result, the completion of some policy actions was delayed and a key trigger was missed\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing agencies (b) Cofinanciers (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 35 Annex 1: Bank Lending and Implementation Support/Supervision Processes a) Task Team members Responsibility/ Names Title Unit Specialty Lending PIR 1 Core Martin Rama Lead Economist EASPR Task Team Leader Quang Hong Doan Senior Economist EASPR Task Team Leader Cuong Duc Dang Senior Operations Officer EASVS Transport Hisham A\. Abdo Kahin Senior Counsel LEGES Legal Tuan Minh Le Senior Economist AFTPR Economics Contributors Kofi Awanyo Senior Procurement Specialist EAPPR Procurement Portfolio Alain A\. Barbu Manager, Portfolio and Operations EACVF Management Dean A\. Cira Lead Urban Specialist EASVS Urban Coordinator Viet Tuan Dinh Senior Economist EASPR Economist Senior Financial Management Robert J\. Gilfoyle EAPFM Finance Specialist Douglas J\. Graham Senior Environmental Specialist EASVS Environment Dung Anh Hoang Operations Officer EASVS Transport Hoa Thi Hoang Senior Operations Officer EASVS Urban development Miguel Navarro-Martin Senior Financial Officer BDM Finance Dzung The Nguyen Senior Operations Officer EASVS Rural Development Son Duy Nguyen Operations Officer EACVF Portfolio Senior Social Development Hoa Thi Mong Pham EASVS Social issues Specialist Richard Jeremy Spencer Country Sector Coordinator EASVS Energy Thang-Long Ton Economist EASPR Economics Hung Tan Tran Power Engineer EASVS Governance Phuong Thi Minh Tran Senior Operations Officer EASVS Transport Phuong Thi Thanh Tran Senior Environmental Specialist EASVS Energy Paul Vallely Senior Transport Specialist EASVS Transport Son Thanh Vo Operations Officer EASVS Rural development Ly Thi Dieu Vu Operations Analyst EASVS Environment Quyen Hoang Vu Economist EASPR Economics Phuong Minh Le Team Assistant EACVF Assistance Dung Thi Ngoc Tran Team Assistant EACVF Assitance Peer Reviewers Milan Brahmbhatt PRMVP Washington DC Agence Française de Jean-Raphaël Chaponniere Développement, Paris Michael Warlters EASPR, Jakarta 36 Lending PIR 2 Core Deepak Mishra Lead Economist EASPR Task Team Leader Co-Task Team Quang Hong Doan Senior Economist EASPR Leader Hisham A\. Abdo Kahin Senior Counsel LEGES Legal Tuan Minh Le Senior Economist AFTPR Economics Contributors Kofi Awanyo Senior Procurement Specialist EAPPR Procurement Alain A\. Barbu Manager, Portfolio and Operations EACVF Portfolio Cuong Duc Dang Senior Operations Officer EASVS Urban Viet Tuan Dinh Senior Economist EASPR Economics Senior Financial Management Robert J\. Gilfoyle EAPFM Finance Specialist Finance and Private Sector Sameer Goyal EASFP Private Sector Coordinator Environment Country Sector Douglas J\. Graham EASVS Social issues Coordinator Thang Long Ton Economist EASPR Economics Valerie Kozel Senior Economist EASPR Poverty Keiko Kubota Senior Economist EASPR Economics Dzung The Nguyen Senior Operations Officer EASVS Rural development Son Duy Nguyen Senior Operations Officer EACVF Portfolio Senior Social Development Hoa Thi Mong Pham EASVS Social issues Specialist Martin Rama Lead Economist SARCE Economics Kien Trung Tran Senior Procurement Specialist EAPPR Procurement Phuong Thi Minh Tran Senior Operations Officer EASVS Transport Phuong Thi Thanh Tran Senior Environmental Specialist EASVS Environment Son Thanh Vo Operations Officer EASVS Rural development Ly Thi Dieu Vu Operations Analyst EASVS Environment Quyen Hoang Vu Economist EASPR Economics Phuong Lan Nguyen Team Assistant EASPR Assistance Peer Reviewers Milan Brahmbhatt PRMVP, Washington DC Theo David Thomas EASPR, Jakarta Agence Française de Jean-Raphaël Chaponniere Développement, Paris 37  (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No\. of staff weeks travel and consultant costs) PIR 1 44\.57 158,328\.00 USD Total: PIR 2 Total: 65\.88 293,107\.20 USD Supervision/ICR Total: 7 24,961 38 Annex 2: Policy Matrix for Public Investment Reform Program - PIR 1 Area Issue Problem to address Prior action under DPL 1 Trigger for DPL 2 Foreign companies established before the 1\. The Borrower has issued a Enterprise Law of 2005 came into effect law to allow a five-year cannot invest in sectors outside of their FDI period for FDI Enterprises license\. These companies also face to re-register under the Competitive restrictions to bid for public investment Enterprise Law\. entry contracts\. Lack of registration under the Enterprise Law crowds out private investment and undermines the quality of public investment\. Only investment projects consistent with 1\. The Borrower; through MPI, master plans are eligible for funding by the MARD, and MOIT; has state budget\. According to the Law on incorporated SEAs in the Environmental Protection of 2005, national development master plans Project and sectoral development master plans for two regions and two key selection Environmental required an approved SEA\. But to date no sectors\. screening master plan has incorporated the 2\. The Borrower, through recommendations of an SEA\. MONRE, has reviewed the experience with the implementation of SEAs and has designed actions to improve SEAs‘ preparation and use\. Increased decentralization has resulted in an 3\. The Borrower has incomplete and inconsistent regulatory submitted, for consideration framework for public investments\. In the by the National Assembly, a Project short term, language on planning for draft law on Public approval investment projects needs to be harmonized Investment providing a across legal documents\. Beyond, a common framework for all common framework needs to be developed\. public projects\. (Continued) 39 Annex 2\. Policy Matrix for Public Investment Reform Program - PIR 1 (continued) Area Issue Problem to address Prior action under DPL 1 Trigger for DPL 2 Cost estimates are frequently used as bid 2\. The Borrower has issued a price ceilings, due to ambiguous language law to decentralize the in several regulations including the setting of cost estimates to Cost Procurement Law\. This reduces investment owners and has estimates competition and delays project issued a decree to align cost implementation\. Greater flexibility and norms with the market\. more realism in the preparation of cost estimates should enhance competition and reduce the number of cases where all bids are ineligible\. Vietnamese procurement rules focus on cost 3\. The Borrower has issued a Project containment, giving discretion to law to clarify that late bids in implementation investment owners not to open bids procurement tenders for immediately after the deadline for bid public investment projects Bidding submission, in the event there are fewer shall be rejected\. rules than three bids\. This discretion raises fiduciary concerns\. Among other gaps with international practice, the Procurement Law does not include an explicit provision that late bids should be rejected\. Direct interaction between investment 4\. The Borrower, through MPI, owners and potential contractors is a source has issued a Decision, Bidding of fiduciary risk\. Impersonal, electronic including technical transparency interfaces, reducing discretion by all parties, guidelines, to implement the can in principle reduce processing times and use of electronic increase transparency in procurement\. procurement (e- procurement) in pilot provinces and agencies\. (Continued) 40 Annex 2\. Policy Matrix for Public Investment Reform Program – PIR 1 (continued) Area Issue Problem to address Prior action under DPL 1 Trigger for DPL 2 While many SOEs have been equitized, the 5\. The Borrower has issued a exercise of ownership rights on behalf of Decision to allocate the the state remains with the ministries they exercise of state ownership used to be affiliated with\. Participation of rights in two Economic Conflict of these SOEs in the design and Groups specialized in civil interest implementation of infrastructure projects works outside MOC\. owned by their ministries raises a conflict of interest\. This is especially the case in MOC, which is responsible for a large fraction of infrastructure spending\. The legal obligations of the parties engaging 6\. The Borrower, through MOC, in civil works contracts are not clearly has issued a Decree to Project defined, with disagreements often slowing clarify the rights and implementation Dispute down project implementation\. This obligations of parties (continued) resolution problem became apparent during the engaging in civil works inflation outburst of 2008\. Templates for contracts\. standard contracts under the Law on Commerce are needed\. Land reclamation and compensation were 4\. The Borrower has issued a affected by inconsistencies between the Decree to streamline various regulations governing land and real provision of compensation to Land estate\. Land was not always valued at affected households, to align acquisition market prices, support for loss of with market prices the livelihoods was not provided, affected compensation for land and populations without legal or legalizable property and to provide land-user rights were treated differently\. livelihood support\. (Continued) 41 Annex 2\. Policy Matrix for Public Investment Reform Program – PIR 1 (continued) Area Issue Problem to address Prior action under DPL 1 Trigger for DPL 2 EIAs are often conducted at a late phase in 7\. The Borrower, through project preparation\. As a result, MONRE, has issued a Environmental Management Plans (EMPs), Decree to mandate the Project which are part of EIAs, tend to be weak\. timely preparation and Environmental implementation These problems arise because of review of EIAs in order to management (continued) inconsistencies in the legal framework, inform preparation of allowing the submission of EIAs at the feasibility studies for same time as construction permits, despite investment projects\. the fact that this contradicts the Law on Environmental Protection\. Recording of budget revenue and spending 5\. The Borrower, through 8\. The Borrower, through is much slower for ODA funds than for MOF, has issued a Decision MOF, has issued a Circular state budget funds due to the spending and to align time of recording to mandate the sharing of Reporting and reporting procedures of project ODA funds in government independent audits of control implementing agencies\. ODA-funded accounts with the timing of financial statements of projects are also subject to less frequent actual receipts and ODA-funded projects with auditing by the State Audit of Vietnam expenditures\. MOF and SAV\. Financial (SAV)\. management Caps applying to consultant fees, translation 6\. The Borrower, through, 9\. The Borrower, through, services, the organization of workshops and MOF has issued a Circular MOF, has issued Circulars to other ancillary costs are increasingly to align with the market cost align with the market cost Administrative misaligned with the market\. This results in norms applied to local norms applied to translation costs inadequate quality of project preparation consultants fees, translation fees, workshops and other (continued) and supervision\. fees, workshops and other costs related to the costs related to the preparation and preparation and implementation of budget- implementation of ODA- funded projects\. funded projects\. (Continued) 42 Annex 2\. Policy Matrix for Public Investment Reform Program – PIR 1 (continued) Area Issue Problem to address Prior action under DPL 1 Trigger for DPL 2 Project quality also suffers from caps on 7\. The Borrower, through total preparation costs set in percent of total MOC, has issued a Decision Administrative project costs are not flexible enough to to clarify that project costs accommodate the diversity of projects\. preparation costs set in (continued) percentage of total project cost are for reference only and are not budget caps\. The absence of technical guidelines and the 10\. The Borrower, through lack of clarity on admissible expenses have MOF and MONRE, has Financial been among the main obstacles to the issued a joint Circular to management preparation and review of SEAs and EIAs, define admissible expenses Environmental as mandated by the the Law on for the preparation and (continued) budgets Environmental Protection review of SEAs and EIAs and, through MONRE, has issued a Decision to set adequate technical guidelines in each case\. The Law on Amendments mandated the 11\. The Borrower, through review of circulars dealing with payment MOF, has issued Circulars to and disbursement procedures applicable to streamline payment Payment and budget-funded projects\. ODA-funded procedures and clarify and disbursement projects also include some areas in which simplify payment-supporting disbursement checks can be improved to documents for ODA-funded streamline payment processes as well as projects\. payment-supporting documents\. (Continued) 43 Annex 2\. Policy Matrix for Public Investment Reform Program – PIR 1 (continued) Area Issue Problem to address Prior action under DPL 1 Trigger for DPL 2 Few public investment projects ensure full 12\. The Borrower has issued a cost recovery\. But transparent mechanisms Decision to pilot the use of to bridge the viability gap in Public-Private the PPP Framework which Partnership (PPP) projects are not available, contains provisions on Financial Subsidies and which results in insufficient private government participation, management guarantees participation and the granting of ad hoc including financing\. (continued) guarantees\. A framework to value public projects and ensure adequate budget support in a competitive manner is needed\. The framework should apply to all pubic projects regardless of source of funding\. The terminology used for pre-feasibility 8\. The Borrower has issued a studies and feasibility studies varies across Decree to harmonize budget- and ODA-funded projects\. The terminology in Project gaps in terminology make it more difficult documentation on pre- documentation for donors to rely on mainstream documents feasibility and feasibility from Vietnamese systems, and require studies across budget- and Project frequent clarification\. ODA-funded projects\. oversight Discrepancies and inconsistencies in project 9\. The Borrower, through MPI, 13\. The Borrower, through reporting mechanisms across sectors and has issued a Decree to MOHA, has issued a PMUs weaken accountability\. Project establish a consistent Decision to approve the Monitoring and management should be strengthened by monitoring and evaluation Charter establishing the evaluation broadening the use of standardized framework for public Association of Independent monitoring tools to all projects regardless of investment projects Evaluators\. their source of funding and relying more including standardized extensively on independent evaluation of monitoring tools\. projects\. 44 Annex 3: Policy Matrix for Public Investment Reform Program – PIR 2 Thematic Issue Problem to address Prior Action for PIR 2 Area 1\. The Borrower, through MPI and MOIT, has Only investment projects consistent with master plans incorporated SEAs in the development master plans are eligible for funding by the state budget\. According for four regions and one key sector\. to the Law on Environmental Protection of 2005, Project Environmenta national and sectoral development master plans required 2\. The Borrower, through MONRE, has reviewed the selection l screening approved SEAs\. But to date no master plan has experience with the implementation of SEAs and incorporated the recommendations of an SEA\. has designed actions to improve SEAs‘ preparation and use\. Direct interaction between investment owners and 3\. The Borrower, through MPI, has issued a Circular, potential contractors is a source of fiduciary risk\. including technical guidelines, to implement the use Bidding Impersonal, electronic interfaces, reducing discretion by of electronic procurement (e-procurement) in pilot transparency all parties, can in principle reduce processing times and provinces and agencies\. increase transparency in procurement\. While many SOEs have been equitized, the exercise of 4\. The Borrower has issued Decisions to transfer, from ownership rights on behalf of the state remains with the MOC, the right to exercise state ownership in two ministries they used to be affiliated with\. Participation economic groups specialized in civil works, namely Project of these SOEs in the design and implementation of the Housing and Urban Development Group and implementatio Conflict of infrastructure projects owned by their ministries raises a Industrial Construction Group\. n interest conflict of interest\. This is especially the case in MOC, which is responsible for a large fraction of infrastructure spending\. The legal obligations of the parties engaging in civil 5\. The Borrower has issued a Decree to clarify the works contracts are not clearly defined, with rights and obligations of parties engaging in civil disagreements often slowing down project works contracts\. Dispute implementation\. This problem became apparent during resolution the inflation outburst of 2008\. Templates for standard contracts under the Law on Commerce are needed\. (continued) 45 Annex 3: Policy Matrix for Public Investment Reform Program – PIR 2 (continued) Thematic Area Issue Problem to address Prior Action for PIR 2 EIAs are often conducted at a late phase in project 6\. The Borrower has issued a Decree to mandate the preparation\. As a result, Environmental Management timely preparation and review of SEAs and EIAs Environmental Plans (EMPs), which are part of EIAs, tend to be in order to inform preparation of master plans and Project management weak\. These problems arise because of feasibility studies for investment projects, implementation inconsistencies in the legal framework, allowing the respectively\. (continued) submission of EIAs at the same time as construction permits\. Recording of budget revenue and spending is much 7\. The Borrower, through MOF, has issued a slower for ODA funds than for state budget funds due Circular to mandate the sharing of independent to the spending and reporting procedures of project audits of financial statements of ODA-funded Reporting and implementing agencies\. ODA-funded projects are projects with MOF and SAV\. control also subject to less frequent auditing by the State Audit of Vietnam (SAV)\. Caps applying to consultant fees, translation services, 8\. The Borrower, through MOF, has issued the organization of workshops and other ancillary Circulars to align with the market cost norms Financial costs are increasingly misaligned with the market\. applied to consultants, translation fees, workshops management Administrative This results in inadequate quality of project and other costs related to the preparation and costs preparation and supervision\. implementation of budget-funded projects\. The absence of technical guidelines and the lack of 9\. The Borrower, through MOF and MONRE, has clarity on admissible expenses have been among the issued Circulars to define admissible expenses main obstacles to the preparation and review of SEAs and sources of funding for the review of SEAs and EIAs, as mandated by the Law on Environmental and EIAs\. Environmental Protection budgets (continued) 46 Annex 3: Policy Matrix for Public Investment Reform Program – PIR 2 (continued) Thematic Area Issue Problem to address Prior Action for PIR 2 The Law on Amendments mandated the review of circulars dealing with payment and disbursement 10\. The Borrower, through MOF, has issued a procedures applicable to budget-funded projects\. Payment and Circular to streamline payment procedures and ODA-funded projects also include some areas in which disbursement clarify and simplify payment-supporting disbursement checks can be improved to streamline documents for ODA-funded projects\. payment processes as well as payment-supporting documents\. Financial Few public investment projects ensure full cost management recovery\. But transparent mechanisms to bridge the (continued) viability gap in Public-Private Partnership (PPP) projects are not available, which results in insufficient 11\. The Borrower has issued a Decision to pilot the Subsidies and private participation and the granting of ad hoc use of the PPP Framework\. guarantees guarantees\. Therefore a framework to value public infrastructure and public service projects and ensure adequate budget support in a competitive manner, is needed\. The framework should apply to all PPP infrastructure projects regardless of source of funding\. Discrepancies and inconsistencies in project reporting 12\. The Borrower, through MPI, has issued mechanisms across sectors and PMUs weaken Circulars to establish standard templates for accountability\. Project management should be project monitoring reports and set up the criteria Monitoring and Project strengthened by broadening the use of standardized legally required for individuals and institutions to evaluation oversight monitoring tools to all projects regardless of their carry out investment evaluation\. source of funding and relying more extensively on independent evaluation of projects\. (continued) 47  Annex 4: Changes in Policy Matrix for the Second Public Investment Reform Thematic Area Issue Trigger as in PIR 1 Prior Action for PIR 2 1\. The Borrower; through MPI, MARD, and 1\. The Borrower, through MPI and MOIT, has incorporated MOIT; has incorporated SEAs in the SEAs in the draft development master plans for four regions development master plans for two regions and and one key sector\. two key sectors\. Project selection Environmental 2\. The Borrower, through MONRE, has reviewed the experience screening 2\. The Borrower, through MONRE, has reviewed with the implementation of SEAs and has designed actions to the experience with the implementation of improve SEAs‘ preparation and use\. SEAs and has designed actions to improve SEAs‘ preparation and use\. 3\. The Borrower has submitted, for consideration Dropped by the National Assembly, a draft law on Public Project approval Investment providing a common framework for all public projects\. 4\. The Borrower, through MPI, has issued a 3\. The Borrower, through MPI, has issued a Circular, including Bidding Decision, including technical guidelines, to technical guidelines, to implement the use of electronic transparency implement the use of electronic procurement (e- procurement (e-procurement) in pilot provinces and agencies\. procurement) in pilot provinces and agencies\. 5\. The Borrower has issued a Decision to allocate 4\. The Recipient has issued Decisions to transfer, from MOC, the Project the exercise of state ownership rights in two exercise of state ownership rights in two economic groups implementation Conflict of interest Economic Groups specialized in civil works outside specialized in civil works, namely the Housing and Urban MOC\. Development Group and Industrial Construction Group\. 6\. The Borrower has issued a Decree to clarify the 5\. The Borrower has issued a Decree to clarify the rights and Dispute rights and obligations of parties engaging in civil obligations of parties engaging in civil works contracts\. resolution works contracts\. 7\. The Borrower has issued a Decree to mandate 6\. The Borrower has issued a Decree to mandate the timely Environmental the timely preparation and review of EIAs in order preparation and review of SEAs and EIAs in order to inform management to inform preparation of feasibility studies for preparation of master plans and feasibility studies for investment projects\. investment projects, respectively\. (continued) 48 Annex 4: Changes in Policy Matrix for the Second Public Investment Reform (continued) Thematic Issue Trigger as in PIR 1 Prior Action for PIR 2 Area 8\. The Borrower, through MOF, has issued a Circular 7\. The Borrower, through MOF, has issued a Circular to to mandate the sharing of independent audits of mandate the sharing of independent audits of financial Reporting and financial statements of ODA-funded projects with statements of ODA-funded projects with MOF and SAV\. control MOF and SAV\. 9\. The Borrower, through, MOF, has issued Circulars 8\. The Borrower, through MOF, has issued Circulars to align to align with the market cost norms applied to with the market cost norms applied to translation fees, Administrative translation fees, workshops and other costs related to workshops and other costs related to the preparation and costs the preparation and implementation of budget-funded implementation of budget-funded projects\. projects\. 10\. The Borrower, through MOF and MONRE, has 9\. The Borrower, through MOF and MONRE, has issued Financial issued a joint Circular to define admissible expenses Circulars to define admissible expenses and sources of management Environmental for the preparation and review of SEAs and EIAs funding for the review of SEAs and EIAs\. budgets and, through MONRE, has issued a Decision to set adequate technical guidelines in each case\. 11\. The Borrower, through MOF, has issued Circulars to streamline payment procedures and clarify and 10\. The Borrower, through MOF, has issued a Circular to simplify payment-supporting documents for ODA- streamline payment procedures and clarify and simplify Payment and funded projects\. payment-supporting documents for ODA-funded projects\. disbursement 12\. The Borrower has issued a Decision to pilot the use of the PPP Framework which contains 11\. The Borrower has issued a Decision to pilot the use of the Subsidies and provisions on government participation, PPP Framework\. guarantees including financing\. 13\. The Borrower, through MOHA, has issued a 12\. The Borrower, through MPI, has issued Circulars to Monitoring and Decision to approve the Charter establishing the establish standard templates for project monitoring Project evaluation Association of Independent Evaluators\. reports and set up the criteria legally required for oversight individuals and institutions to carry out investment evaluation\. 49 Annex 5: Progress against the Results Framework Outcome indicator Definition and source Baseline: By preparation Target: By completion Actual Comments THEMATIC AREA: PROJECT SELECTION Re-registration of Number of operating FDI Indicator dropped: FDI firms under firms established before requirement for re- the Enterprise July 1, 2006 which are re- registration was Law registered under the new 1,300 firms or 20 percent of 4,000 firms or 60 to 70 N/A removed by GoV with Enterprise Law\. the total percent of the total the issuance of Decree Source: MPI (FIA) 102 in October 2010 1\. Integration of Share of approved regional The indicator has been comprehensive and sectoral master plans exceeded in terms of SEAs in master whose preparation was the number of master 66 percent for regional All regional master plans\. informed by a plans informed by None master plans and one-fifth plans and one key comprehensive SEA\. SEAs for key economic sectors economic sector Source: MPI, MARD, MOIT THEMATIC AREA: PROJECT IMPEMENTATION 2\. Reduction of the Number of Agencies Achieved\. The draft scope for actually using e- new Law on Public discretion in procurement in their Investment and Public public operations Procurement also has a procurement\. chapter on e- None Three Three procurement, Source: MPI indicating the government‘s continued focus on this agenda 3\. Removal of Share of state capital in civil conflict of engineering and civil work 90 percent 20 percent Less than 15 percent Achieved\. In addition, interest in civil companies affiliated with restructuring plans of works for MOC remaining under its the four General Corporations 50  infrastructure\. management\. remaining under MOC management were Source: MOC\. already approved\. All 4 mother companies will be equitized by 2015 and MOC will hold less than50% equity by 2020\. 4\. Improved Compensation of resettled satisfaction population groups is aligned among people with market prices and well- No follow-up large- displaced by implemented as scaled survey to projects\. demonstrated by satisfaction 45 percent measure progress\. But 75 percent existing evidence from in perception surveys (From World Bank study, N/A (World Bank estimate) Bank‘s projects shows building on previous 2005) analytical work\. significant improvement in Source: GSO, MONRE, people‘s satisfaction\. MOC\. 5\. Completion of Share of projects for which EIAs in time to consultations on EIAs were Circular 26 guiding inform feasibility implemented timely during the implementation studies\. preparation\. only came into effect Negligible 50 percent N/A since September 2011\. Source: MPI, MONRE\. Actual implementation time is very short for having information on progress\. THEMATIC AREA: FINANCIAL MANAGEMENT 6\. Use of common Maximum reported time state budget needed for budget recording recording of ODA projects 12 months Achieved with scheme Source: MOF\. 2-3 months 3 months implementation of (CFAA, 2007) regardless of quarterly recording\. source of funding\. 7\. Allocation of Share of total investment 51  budgets for costs spent on preparation Negligible 0\.5 percent Higher than 0\.5 Achieved\. EIAs\. and consultation of EIAs\. percent Source: MONRE, MOF, MPI\. 8\. Effective Share of outstanding ODA oversight of investment portfolio with ODA-funded audits conducted by SAV or Negligible 60 percent 100 percent Achieved\. projects by the with independent audit SAV\. reports received by SAV from implementing agencies\. Source: SAV, MOF\. THEMATIC AREA: PROJECT OVERSIGHT 9\. Increased reliance Share of ―type A‖ projects Large projects yet to on independent which are subject to review be evaluated by project by independent investment independent evaluators\. evaluators\. evaluators\. But this requires further Source: MPI, MOHA, IAE reforms and sufficient time for establishing the new system None 7 to 8 percent None (training institutions, relevant curriculum, certified independent evaluators, changes needed in the budgeting process for making resources available\. 52 Annex 6: Stakeholder Workshop Report and Results N/A 53 Annex 7: Summary of Borrower's ICR and/or Comments on Draft ICR The Government of Vietnam highly appreciates the support from the World Bank through the two PIR operations\. These operations brought about notable positive results, and helped the Government meet its planned objectives\. Specific impacts of the PIR program include the following: Financing: The PIR program is a development policy loan operation so all of the money (US$850 million dollars funded by the Bank and €135 million funded by Government of Japan) was merged to the State budget and managed by the Vietnamese Government following its public investment process and procedure\. Thanks to the programs, the Government used the loans effectively in resolving financial difficulties\. Especially, the PIR1 loan was provided to Vietnam in the midst of the global financial crisis which had severe consequences on Vietnam\. The program provided timely financial support to the Government and the available resources contributed to Vietnam‘s successful implementation of the economic stimulus packages to overcome the global economic crisis in 2009\. Reform program: The program was designed with 22 policy actions in the area of public investment management, related to eight line ministries and agencies, aiming to support the government in further improvement of quality and efficiency of public investment\. The implementation of the policy actions have contributed to the revision of the regulatory framework for public investment management, leading to higher efficiency in using public resources and accelerating the implementation of public projects in Vietnam in general and ODA projects of development partners in particular, including World Bank funded projects\. The contribution to increase in efficiency of resource usage helps the government of Vietnam achieve better development objectives in poverty reduction and economic development\. The implementation of the program relied on a collaborative process, that not only emphasized the ownership of Vietnam in the design, formulate and implement the reform program but also strengthened the partnership between the Government of Vietnam and development partners\. Coordination with other development partners: PIR program was a budget support operation initiated by the World Bank\. The Agence Française de Développement had joined the program as a co-financier\. The preparation and implementation of the program benefitted significantly from constructive, cooperative and effective dialogues between all parties on a flexible basis as needed\. As a result, the program was sucessfully implemented within a very short time span, meeting the objectives and the needs of the Government of Vietnam in a timely manner\. In particular, the task team of the World Bank was very proactive in coordination with the SBV team and related line ministries and agencies in making relevant amendments for the policy matrix, making it in line with on-going reform agenda of the government\. This had lead to a highly relevant policy matrix and brought about positive program impacts\. 54 Annex 8: Comments of Cofinanciers and Other Partners/Stakeholders The Agence Française de Développement (AFD) has joined the six development banks group (ADB, AFD, JICA, KfW, Kexim and WB) since 2003\. The group focuses on the dialogue with the Government in order to improve concrete projects‘ procedures during projects‘ cycle, in the spirit of improving aid effectiveness and harmonization of procedures\. In 2009, the World Bank initiated the PIR operation, in response to an official request of the Government, and invited members of the six development banks group to co-finance the operation\. AFD appreciated the initiative and had been closely working with the task team of the Bank for the preparation of the PIR1 and PIR2 operations, as well as the evaluation of the program at completion\. AFD has brought its specific contributions on the actions relating financial management and PPP\. AFD co-financed the program by two budget support credits, the first one of 100 million EUR approved on January 21, 2010 and disbursed on April 1st, 2010 and the second of 35 milllion EUR approved on May 25, 2011 and disbursed on December 22, 2011\. AFD strongly appreciates the professionalism of the Bank task team in the dialogue with different Government stakeholders on various and complex issues covering public investment reform agenda, especially during the preparation of the Resolution 11\. The team had to deal with different topics during each series of technical meetings in a quite short period of time\. The program received strong contribution and support of the Government\. The SBV played its strong coordination role for the program\. While most ministries were strongly involved in the dialogue process at the highest level with participation of ministerial leaders, some ministries did not pay sufficient attention and efforts in achieving the targets\. Although some outcome indicators of the program could not be measured due to the short time period since the effectiveness of the issued legal documents, AFD is convinced that the PIR operations has strongly contributed to the public investment reform agenda in Vietnam, one of the key reform pillars that Government is continuing to pursue\. In conclusion, AFD assesses PIR as a satisfactory operation\. AFD appreciates this opportunity to co-finance with the Bank and hopes to continue the cooperation with the Bank in future operations\. 55 Annex 9: List of Supporting Documents Thematic Issue Prior Action for PIR 2 Documentation Areas The Borrower; through MPI and MOIT, has SEA Reports and Draft incorporated SEAs in the draft development Master Plans master plans for four regions and one key sector\. Project Environmental selection screening The Borrower, through MONRE, has MONRE report reviewed the experience with the implementation of SEAs and has designed actions to improve SEAs preparation and use\. The Borrower, through MPI, has issued a Circular 17/2010/TT- Circular, including technical guidelines, to BKH dated July 22,2010 Bidding implement the use of electronic procurement transparency (e-procurement) in pilot provinces and agencies\. The Borrower has issued Decisions to Decision 261/QÄ?-TTg transfer, from MOC, the right to exercise state dated February 12, 2010, ownership in two economic groups Decision 262/QÄ?-TTg Conflict of specialized in civil works, namely the dated February 12, 2010 interest Housing and Urban Development Group and Project Official Letter 283/TTg- implementation Industrial Construction Group\. DMDN dated March 05, 2012 The Borrower has issued a Decree to clarify Decree 48/2010/NÄ?-CP Dispute the rights and obligations of parties engaging dated May 07, 2010 resolution in civil works contracts\. The Borrower has issued a Decree to mandate Decree 29/2011 was the timely preparation and review of SEAs issued on April 18, 2011 Environmental and EIAs in order to inform preparation of management master plans and feasibility studies for investment projects, respectively\. The Borrower, through MOF, has issued a Circular 40/2011 /TT- Reporting and Circular to mandate the sharing of BTC amending Circular control independent audits of financial statements of 108/2007/TT-BTC ODA-funded projects with MOF and SAV\. Financial The Borrower, through MOF, has issued Circular 01/2010/TT- management Circulars to align with the market cost norms BTC issued in January applied to translation fees, workshops and 2010 and Circular Administrative other costs related to the preparation and 97/2010/TT-BTC issued costs implementation of budget-funded projects\. in July 2010 56 Annex 9\. List of Supporting Documents (continued) Thematic Areas Issue Prior Action for PIR 2 Documentation The Borrower, through MOF and MONRE, Circular 218/2010/TT- has issued Circulars to define admissible BTC issued on December expenses and sources of funding for the 29, 2010 for EIAs\. Financial review of SEAs and EIAs\. Joint MONRE-MOF management Circular 45/2010 for (continued) Environmental SEA, issued in March budgets 2010, replace Circular 114/2006 Joint MONRE-MOF Circular 50/2012 for SEA, dated March 30, 2012 The Borrower, through MOF, has issued a Circular 40/2011 /TT- Payment and Circular to streamline payment procedures and BTC amending Circular disbursement clarify and simplify payment-supporting 108/2007/TT-BTC documents for ODA-funded projects\. The Borrower has issued a Decision to pilot Decision 71/2010/QÄ?- Subsidies and the use of the PPP Framework\. TTg dated November 09, guarantees 2010 The Borrower, through MPI to issue Circulars Circular 13/2010/TT- to establish standard templates for project BKH issued on June 2, Project Monitoring and monitoring reports and to set up the required 2010 and Circular oversight evaluation legal criteria for individuals and institutions to 23/2010/TT-BKH issued carry out investment evaluation\. on December 13, 2010 57  IBRD 33511R1 102°E 104°E To 106°E 108°E 110°E To Babao Kunming To VIETNA M Kaiyuan To Tiandong CHINA Ha Giang Cao Bang 4 PROVINCE CAPITALS 5 To Lao Cai Re Nanning Lai Chau Town 1 d 9 NATIONAL CAPITAL 3 Bac Can 8 22°N 22°N To RIVERS Tuyen Quang 10 Lang Son Hepu Bla 7 Thai 2 c k Yen Bai Nguyen MAIN ROADS 13 Dien Son La Viet Tri 12 Vinh Yen 14 RAILROADS Bien Phu 11 Bac Giang 15 6 Bac Ninh To HANOI 17 Hai Duong Ha Long PROVINCE BOUNDARIES Muang Xai Hoa Binh 16 18 19 Hai Phong 21 Hung Yen 20 INTERNATIONAL BOUNDARIES Ha Nam 22 23 Thai Binh Nam Dinh Ninh Binh 25 Ma 24 20°N 26 20°N To PROVINCES: Luang 1 Lai Chau 32 Da Nang LAO Prabang Thanh Hoa 2 3 Dien Bien Lao Cai 33 34 Quang Nam Quang Ngai P EOPLE'S PEOPLE'S 27 Gulf 4 Ha Giang 35 Kon Tum D EM \. REP\. of Hainan I\. (China) 5 Cao Bang 36 Gia Lai A Vinh Tonk in 6 Son La 37 Binh Dinh 7 Yen Bai 38 Phu Yen n Ha Tinh n 8 Tu Yen Quang 39 Dac Lac 28 a a a 9 Bac Can 40 Dac Nong 18°N 18 To 18°N Khammouan m m m 10 Lang Son 41 Khanh Hoa 11 Phu Tho 42 Binh Phuoc 12 Vinh Phuc 43 Lam Dong Dong Hoi C 29 13 Thai Nguyen 44 Ninh Thuan o 14 Bac Giang 45 Tay Ninh r d d d 15 Quang Ninh 46 Binh Duong Dong Ha To il 16 Ha Noi 47 Dong Nai Savannakhet 30 17 Bac Ninh 48 Binh Thuan THA ILA ND Hue lll e e e 18 Hung Yen 49 T\.P\. Ho Chi Minh r 19 Hai Duong 50 Ba Ria-Vung Tau 31 32 Da Nang a a a 20 Hai Phong 51 Long An 16°N 16°N 21 Hoa Binh 52 Tien Giang 22 Ha Nam 53 Dong Thap Tam Ky 33 23 Thai Binh 54 Ben Tre 24 Ninh Binh 55 An Giang Quang Ngai 25 Nam Dinh 56 Vinh Long 34 26 Thanh Hoa 57 Tra Vinh Ngoc Linh (3143 m) 27 Nghe An 58 Kien Giang 35 Kon Tum 28 Ha Tinh 59 Can Tho 29 Quang Binh 60 Hau Giang 37 30 Quang Tri 61 Soc Trang 14°N Cent ral Central 14°N Pleiku 31 Thua Thien Hue 62 Bac Lieu 36 Quy Nhon 63 Ca Mau Highlands 38 Tuy Hoa CAMBODIA 39 Buon Ma Thuot 41 40 Nha Trang Gia Nghia 12°N To Da Lat 12°N Kampong Cham 42 To Dong Xoai 43 44 Kampong Chhnang Phan Rang- 45 Thap Cham Mekong Tay Ninh 47 Thu Dau46 Mot 48 Bien Hoa Gu l f 51 49 Ho Chi Minh City Phan Thiet 53 of 55 Cao Lanh Tan An 50 Th a i l a n d Long Xuyen 52 My Tho Vung Tau Phu Vinh Long Ben Tre VIETNAM Quoc 59 56 10°N Rach Gia Can Tho 54 10°N lta 58 60 Tra Vinh Vi Thanh 57 De This map was produced by 61 Soc Trang the Map Design Unit of The g World Bank\. The boundaries, 62 n ko Bac Lieu colors, denominations and Me Ca Mau any other information shown 0 50 100 150 200 Kilometers on this map do not imply, on 63 the part of The World Bank Group, any judgment on the legal status of any territory, 0 50 100 150 Miles or any endorsement or acceptance of such boundaries\. 104°E 106°E 108°E JANUARY 2010

REVIEW

P072018

 ICRR 13258 Report Number : ICRR13258 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 07/30/2010 PROJ ID : P072018 Appraisal Actual Project Name : Transmission US$M ): Project Costs (US$M): 113\.4 122\.4 Development Project Country : Nigeria Loan/ US$M ): Loan /Credit (US$M): 100\.0 122\.4 Sector Board : EMT US$M): Cofinancing (US$M ): Sector (s): Power (100%) Theme (s): State enterprise/bank restructuring and privatization (34% - P) Infrastructure services for private sector development (33% - P) Regulation and competition policy (33% - P) L/C Number : C3559 Board Approval Date : 07/31/2001 Partners involved : Closing Date : 12/31/2006 12/31/2008 Evaluator : Panel Reviewer : Group Manager : Group : Robert Mark Lacey Roy Gilbert IEGSE ICR Reviews IEGSE 2\. Project Objectives and Components: a\. Objectives: The statement of the project’s development objectives (PDO) in the PAD differs significantly from that in the Development Credit Agreement (DCA)\. According to the former, the objective of the project is "to support the Federal Government of Nigeria (FGN)'s overall program of power sector reform and privatization by addressing the requirements of the transmission and dispatch sub -sectors, specifically through (i) facilitating the unbundling of the National Electric Power Authority (NEPA); (ii) establishing a transparently regulated, financially viable, commercially operated Transyco [the Transmission System Operating Company ] with private participation; (iii) removing transmission network and system operation constraints on provision of reliable power supply; and (iv) facilitating development of an efficient wholesale power market to improve the long term performance of the power sector \." The DCA’s statement of the PDO is “to improve the long term performance of the power sector in the Borrower's territory through (i) increasing transmission capacity; (ii) reducing transmission losses; and (iii) facilitating competition through development of an efficient wholesale power market and creation of Transyco \." The key difference lies in the centrality of the ambitious and over -arching outcome objective in the DCA (improved long term performance of the power sector) which is only alluded to in the PAD statement as a consequence of developing an efficient wholesale power market\. It is clear from the ICR and from the Implementation Status Reports (ISR) that the Bank’s project and ICR teams were guided by the PAD statement rather than that in the DCA \. This Review will, therefore, assess the project’s outcome on the basis of this statement of the PDO \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate):  The project originally had three components : (a) An investment component (US$76\.3 million at appraisal, US$90\.4 million at closure) consisting of (i) urgent transmission substation reinforcement (US$26\.6 million at appraisal; US$40\.9 million at closure); (ii) grid metering and protection (US$8\.0 million at appraisal, US$7\.3 million at closure); (iii) supervisory control and data acquisition (SCADA)/energy management system (EMS)/communication (US$36\.5 million at appraisal, US$41\.7 million at closure); and (iv) a management information system for Transyco (US$5\.2 million at appraisal, US$0\.5 million at closure)\. (b) A technical assistance (TA) component (US$12\.3 million at appraisal, US$12\.5 million at closure) supporting the establishment of Transyco, and consisting of change management, preparation and implementation of a business plan, a transmission pricing study, engineering services, capacity building and training, and TA for development and operation of the wholesale power market \. (c) A social and environmental component ((US$1\.7 million at appraisal, US$0\.3 million at closure) to support the establishment of an environmental, resettlement and social unit (ERSU) in Transyco, an environmental audit of transmission substations, and an HIV /AIDS prevention awareness program \. A new component was added to the project in 2005: (d) A pilot implementation of the Commercial Reorientation of the Electricity Sector Toolkit (CREST) in selected parts of the network to test its effectiveness in improving distribution efficiency (US$0\.0 at appraisal, US$12\.0 at restructuring, and US$19\.1 million at closure)\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The new component took advantage of cost savings resulting mainly from depreciation of the US dollar against the SDR\. The restructuring did not involve any change in the PDO, and was approved at the level of the Regional Vice President\. The closing date was extended twice, to June 30 2008, and then to December 31 2008, to allow completion of all components, especially the new one \. 3\. Relevance of Objectives & Design: Relevance of the project's development objectives is substantial \. Power sector reform is consistent with the goals of Nigeria's National Economic Empowerment and Development program, is one of the seven high priority policy areas identified by the Government in 2007, and is also relevant to the Bank's 2005-2008 Country Partnership Strategy (CPS) for Nigeria, and the preceding Interim Strategy (both of which gave high priority to infrastructure investments, including the power sector )\. The specific objectives of sector unbundling, a reinforced transmission system, and increased commercialization and private sector participation, underpinned, inter alia, by the establishment of a well functioning wholesale power market, are cited in the CPS as key policy instruments \. However, IEG concurs with the view expressed in the ICR that the PDO were over -ambitious given the scope and size of the project and the fact that it focused essentially on the transmission sub -sector\. The relevance of design was substantial \. The project was prepared rapidly in response to an urgent request from the Nigerian Federal Authorities for Bank support in power sector reform \. Generation, transmission and distribution all required urgent attention\. Available IDA resources were insufficient to make a meaningful impact on generation -- they would have permitted an additional 100 MW of output, whereas the shortfall was over 3,000 MW\. The Bank and the Authorities chose transmission and distribution as the areas where the Bank could have the maximum impact with the limited financing at hand\. This choice was appropriate since, at the time of project conception, transmission was a binding constraint on power sector development : the transmission capacity available was not adequate to transport even the limited power available \. However, two project sub-objectives -- a financially viable, commercially operated Transyco, and facilitating the development of an efficient wholesale power market – depended for their achievement on both improved transmission and expanded power generation \. Design failed to mitigate the high risk (which in fact materialized) that power generation would continue to fall considerably short of what was both anticipated and required\. Rather than trusting to the Borrower's informal assurances that generation needs would be met largely thanks to anticipated private investment, a covenant (such as that in the ongoing Nigeria Electricity and Gas Improvement Project, approved in 2009) mandating the rehabilitation of power plants, and assuring gas supply for generation, in accordance with an agreed time plan, would have been apposite \. 4\. Achievement of Objectives (Efficacy): The degree of attainment of the project's development objective – to support Nigeria’s overall program of power sector reform and privatization by addressing the requirements of the transmission and dispatch sub -sectors, specifically through (i) facilitating the unbundling of the National Electric Power Authority (NEPA); (ii) establishing a transparently regulated, financially viable, commercially operated Transyco with private participation; (iii) removing transmission network and system operation constraints on provision of reliable power supply; and (iv) facilitating development of an efficient wholesale power market to improve the long term performance of the power sector -- is assessed according to the degree of achievement of the four sub -objectives as follows:  NEPA ) – substantial i) Facilitating the unbundling of the National Electric Power Authority (NEPA) NEPA has been split into 18 companies (6 generation, 1 transmission and 11 distribution)\. Although they are owned by the holding company (PHCN), each of the unbundled entities has its own chief executive officer and some degree of autonomy\. (ii) Establishing a transparently regulated, financially viable, commercially operated Transyco with private participation -- modest : There were some achievements: Transyco was established and is independently regulated by the Regulatory Commission (NERC); and an Environment, Resttlement and Social Unit is fully operational within Transyco (the first time this has been done in Nigeria’s power sector)\. However, due mainly to power shortages and inadequate tariff adjustments,* Transyco has not achieved financial viability, it is not operated on commercial lines, and there is no private sector participation\. *There were no tariff adjustments during the life of the project (2002 through 2008) in any category of the tariff code \. However, a model-based methodology of computing tariffs has replaced ad hoc changes\. This methodology was the basis for a 2008 Multi Year Tariff Order from NERC\. Following this, in 2009, average residential tariffs rose by about 10%, and industrial and commercial tariffs by between 13% and 21%, Further increases of about 70% for residential, and 53% for commercial and industrial, consumers are planned between 2010 and 2012, by which time full, cost-based tariffs will have been reached \. However, the feasibility of this goal depends on considerable improvements in the quality of service \. (iii) Removing transmission network and system operation constraints on provision of reliable power supply -- substantial : According to information provided by the project team, the project increased transmission capacity by 510 Mega Volt Amperes (MVA), thereby making an important contribution to the transmission system ’s increased carrying capability, which rose from about 2,000 MW in 1999 to about 3,800 MW by project closure\. As a result, transmission is no longer an immediate bottleneck to sector expansion \. Project-supported investments led to a decline in country -wide system collapses (prolonged blackouts caused by major breakdowns at key points ) due to transmission from 15 in 2000 to 5 in 2008, although the total number of such collapses from all causes actually rose \. Unplanned transmission interruptions at the 330 kV level fell from 80 hours per year in 2002 to 11\.6 in 2008, and from 210 to 102 hours per year at the 132kV level\. The ICR reports that transmission losses, after falling from 11% to 8% between 2000 and 2007, rose again to 9\.5% in 2008 (a high figure by international standards ) due to inadequate maintenance \. IEG was subsequently informed by the project team that 2008 was a “glitchâ€? and that losses are expected to stabilize and then fall back to 2007 levels\. In 2008 and 2009, the volume of electricity generated was some 2,400 MW, about 63% of the improved overall transmission system ’s nominal carrying capacity of 3,800 MW\. However, data for 2009 supplied by the project team show that the loading on transmission investments financed by the project was 409 MW against an installed capacity of 510 MVA, implying a close-to-full utilization\. Preliminary data for 2010 indicate that the utilization of the overall transmission system has also reached close -to-full levels thanks to increased power generation\. (iv) Facilitating development of an efficient wholesale power market – modest Although the institutional and technical infrastructure for a wholesale market is in place, current excess demand for power leaves no incentive to use a wholesale settlement system, and the market cannot become operational until power shortages cease\. For the same reason, no-one has taken advantage of open access, for which a legal and regulatory framework has been developed \. 5\. Efficiency (not applicable to DPLs): The economic efficiency of the investments in transmission and distribution was calculated at both appraisal and closure on the assumption that, “in a ‘without project’ situation, private individuals and firms will be forced to use their private generators more to the extent of the additional power available as a result of the investments under [the project]â€? (ICR, paragraph 58)\. Based on this assumption, the average ERR at completion was calculated as just over 29%, well above the cut-off threshold of 12%, and higher than the appraisal estimate despite delays in project completion\. Efficiency is rated as substantial \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 26\.6% 74% ICR estimate Yes 29\.2% 86% * Refers to percent of total project cost for which ERR/FRR was calculated\.  6\. Outcome: Relevance of objectives and design was substantial, as was efficiency \. Regarding efficacy, the degree of achievement of two out of four sub -objectives was substantial, while that of the other two was modest \. IEG assesses the overall outcome of the project as moderately satisfactory \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: When considering the long term sustainability of the transmission and distribution system improvements, two significant risks are apparent \. The first, and major one, is of continuing power shortages \. Investments in generation have fallen short of requirements, and the generation sub -sector has suffered from uncertain supplies of gas \.The negative impact of power shortages on Transyco's finances means less funding is available for essential maintenance\. The second significant risk is that planned tariff adjustments will not be feasible -- it is especially difficult to increase tariffs when service quality remains poor \. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: Quality at entry : Rapid preparation (appraisal took place six months after the Concept Review, and Board approval within four months of appraisal ) was undertaken in response to an urgent request by the Nigerian Authorities for Bank intervention in the power sector \. The sector was facing an emergency situation following no investment for over a decade \. As noted above, Nigeria’s transmission capacity was insufficient even to transport the limited power that was available\. The Bank and the Government felt a mutual sense of urgency to demonstrate Nigeria’s commitment to power sector reform and to build stakeholder confidence in the process \. Relatively speedy Board approval proved useful in establishing a policy dialogue with Government and stakeholders after an absence from the sector of more than ten years \. The ICR reports, however, that accelerated preparation meant that the project was not fully ready for implementation in terms of the staffing of the Project Management Unit (PMU), procurement documents, government decisions and sector organization \. Quality at entry is rated as moderately satisfactory \. Supervision : The project’s lack of readiness was overcome by a significant supervision effort \. The supervision team had the appropriate skill mix; frequent turnover in task management was avoided; and the frequency and composition of missions was adequate \. The project was used as an opportunity for deepening and furthering sector policy dialogue on issues such as tariff reform and private sector participation \. The supervision team was also instrumental in persuading the Nigerian counterparts to adopt recent technological innovations in distribution (for example, the use of CREST in the distribution clusters included in the project )\. The one weakness in supervision concerned the quality and coverage of documentation and reporting \. Supervision is rated as satisfactory \. at -Entry :Moderately Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: Government : On the positive side, the Government caused the Electricity Power Sector Reform Bill to be passed into law in 2005, and under its auspices established the Nigerian Electricity Regulatory Commission and a rural electricity agency, unbundled the National Electric Power Authority, and adopted a Multi -Year Tariff Order (including a commitment to provide the necessary subsidies until 2012 when full cost-covering tariffs are anticipated)\. In addition, a gas policy and master plan have been approved which include the beginnings of a commercial framework to encourage the supply of gas for power generation \. There are, however, few practical results to date\. The credibility of the policy and regulatory frameworks for the power sector remains in question, and there has thus far been very limited interest on the part of the private sector \. The consequences are continuing severe power shortages and poor service quality \. Nonetheless, taking account of the progress made in laying the foundations of an environment capable of eventually attracting private investment, Government performance is rated as moderately satisfactory \. Implementing Agency : Although initially the Project Management Unit (PMU), housed in what is now the Power Holding Company of Nigeria (PHCN), experienced some difficulties arising from rapid preparation, it performed well once it had attained capacity and confidence \. By closure, the PMU was successfully handling not only this Bank project but two others also \. Progress in implementation was rated satisfactory consistently after the first two years of the project, and the investments were fully completed by the extended closing date \. Implementing agency performance is rated as satisfactory \. a\. Government Performance :Moderately Satisfactory b\. Implementing Agency Performance :Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: Design : M&E quality was negligible \. The PAD contains a long list of performance indicators for the sector as a whole (for example, energy sent out, average availability, growth of sales, number of billed customers, number of employees), but with no linkage between the outputs of the project (for example, an enhanced transmission network and the establishment of a wholesale power market ) and the achievement or otherwise of these targets \. There is no evidence of any time-bound plan for target achievement \. No prior arrangements were made for allocating institutional responsibility for M&E with the exception of environmental aspects \. Implementation : Intermediate output indicators were developed during implementation and the information collected from a variety of sources, in particular the PHCN data base \. This was used by the PMU and supervision missions to monitor progress in executing the project, and also in the ICR to elaborate the results at closure \. However, the lack of a clear responsibility on the client's side for data collection and reporting meant that these operations were unsystematic and incomplete\. Some data were not collected until after project closure \. Implementation is rated as modest \. Utilization : The data collected were used exclusively for project implementation purposes, and there is no indication that M&E methods developed are being utilized following closure \. Even for strictly project-related purposes, there was only limited use of performance indicators to inform and improve project design and implementation \. IEG's rating of uilization and of overall M&E quality is negligible \. a\. M&E Quality Rating : Negligible 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): The project was designated as Category B for environmental protection purposes \. According to the ICR, the Environment, Resettlement and Social Unit (ERSU) established in Transyco is fully operational and has demonstrated its capacity to oversee preparation of environmental management plans, assessments and audits for the project-funded expansions and improvements at five transmission substations \. The ICR further reports that the Unit’s work is in compliance with the requirements of OP 4\.01\. There is no discussion in the ICR of compliance with fiduciary requirements including audits and financial covenants \. Similarly, it is not known from the ICR whether any procurement issues arose \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately The project’s relevance was Satisfactory substantial, and it supported a necessary and economically efficient increase in transmission system carrying capacity\. However, financial viability of the transmission company has not been achieved, there is no private sector participation, and the wholesale power market is not operational\. Two of the four objectives were substantially achieved, two were modestly achieved\. Risk to Development Moderate Significant The risks to the project-funded Outcome : investments from the continuation of power shortages and the difficulty of raising tariffs while service quality  remains poor are significant\. Maintenance of transmission facilities was already affected in 2008\. Bank Performance : Satisfactory Moderately Project design displayed some Satisfactory shortcomings, albeit due in part to the rapid response to an urgent request from the Authorities\. Borrower Performance : Satisfactory Moderately Although Government did well in laying Satisfactory the legal groundwork for sector reform, much remains to be done to establish policy and regulatory credibility as well as ensuring improvements in power supply\. Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: The following major lessons emerge from the preparation and implementation of this project : Due diligence must be exercised regarding the realism of government goals especially where -- as in this case with privately-financed power generation -- their attainment is critical for the achievement of the PDO \. Care must be taken during preparation to build the necessary capacity to launch implementation successfully \. Otherwise, as in this case, time gained from hasty preparation will be exceeded by the time lost through implementation delays\. 14\. Assessment Recommended? Yes No Why? To verify the ratings and to assess the impact on the project ’s outcome of possible further power sector reform\. 15\. Comments on Quality of ICR: The quality of the ICR is satisfactory, though barely so \. Although it contains a large amount of information and analysis, the discussion of the achievement of the PDO is confusing, and considerable subsequent clarification from the project team was necessary to reach a conclusion about the project ’s outcome\. A fuller discussion of the project's relevance to IDA's country assistance strategy would have been welcome even in the absence, at the time of preparation, of a fully developed Country Assistance Strategy document \. There is no discussion of fiduciary issues such as compliance with financial covenants, auditing requirements, and the Bank's procurement rules \. No detailed project cost breakdowns at appraisal are given in Annex 1, even though these are available \. The project financing table is missing from Annex 1\. a\.Quality of ICR Rating : Satisfactory

REVIEW

P071001

Document of The World Bank Report No\.: 88472 PROJECT PERFORMANCE ASSESSMENT REPORT BOSNIA & HERZEGOVINA BUSINESS ENVIRONMENT ADJUSTMENT CREDIT (IDA 36450) June 27, 2014 IEG Public Sector Evaluation Independent Evaluation Group  ii Currency Equivalents (annual averages) Currency Unit = Marka 2002 US$1\.00 KM 1\.24 2007 US$ 1\.00 KM 1\.24 Abbreviations and Acronyms BAC Business Environment Adjustment KM Marka (local currency) Credit NORAD Norwegian Agency for Development BEEPS Business Environment and Enterprise OHR Office of the High Representative for Performance Surveys Bosnia and Herzegovina BiH Bosnia & Herzegovina (State) PDO Project Development Objective BMO Business Membership Organization PFSAC Public Finance Structural Adjustment DfID UK Department for International Credits Development PPAR Project Performance Assessment Report EBPAC Enterprise and Bank Privatization PPD Public-Private Dialogue Adjustment Credit PTAC Privatization Technical Assistance EC European Community Credit EPA Economic Partnership Agreement RS Republika Srpska FBiH Federation of Bosnia & Herzegovina SECO Swiss Agency for Economic FDI Foreign Direct Investment Cooperation FIC Foreign Investors Council SEE South Eastern Europe FILE Fostering an Investor & Lender- SIDA Swedish International Development Friendly Legal Environment Agency FYR Former Yugoslav Republic SOE State Owned Enterprise GPS Global Positioning System SOSAC Social Sector Adjustment Credits GTZ Gesellschaft für Technische SPIRA Streamlining Permits and Inspection Zusammenarbeit\. Regimes Activity ICIS Improving Investment Climate and TARA Tax Administration Reform Assistance Institutional Strengthening Project UNCTAD UN Conference on Trade and ICR Implementation Completion and Results Development report USAID US Agency for International IEG Independent Evaluation Group Development IEGPS IEG Public Sector Evaluation VAT Value Added Tax IT Information Technology Fiscal Year Government: January 1 – December 31 Director-General, Independent Evaluation : Ms\. Caroline Heider Director, IEG Public Sector Evaluation : Mr\. Emmanuel Jimenez Manager, IEG Public Sector Evaluation : Mr\. Mark Sundberg Task Manager : Mr\. Giuseppe Iarossi  iii Contents Principal Ratings \. vii Key Staff Responsible\. vii Preface\. ix Summary \. xi 1\. Background and Context\. 1 Background \. 1 Context \. 1 2\. Objectives, Design, and their Relevance \. 2 Objectives of the Operation \. 2 Board Conditions \. 3 Second Tranche Conditions \. 3 Restructuring of Objectives \. 4 The Relevance of the Operation’s Objectives, \. 4 Country conditions \. 4 Consistency with Government strategy \. 5 Consistency of the Objectives with the CAS at Closure and Beyond \. 5 Relevance of the Operation’s Design \. 6 The Design of Monitoring and Evaluation \. 7 The Design of the Implementation arrangements \. 8 Restructuring of the Operation\. 9 3\. Implementation \. 10 Implementation progress \. 10 Parallel funding support to implementation \. 11 Major Factors Affecting Implementation \. 13 Implementation of the M&E framework \. 13 4\. Achievement of the Objectives \. 14 Interpretation of the Objectives \. 14 Note on Attribution and assessment of outcomes \. 14 This report was prepared by Giuseppe Iarossi, and Davis A\. Phillips, who assessed the project in October 2012\. The report was peer reviewed by Peter Mousley and panel reviewed by Robert Lacey\. Yezena Zemene Yimer provided administrative support\.  iv Objectives and Outcomes \. 15 Objective 1: Reduce administrative and regulatory barriers with the most critical near- term impact on the three phases of business development\. \. 15 Outcomes of Business Registration Reform \. 15 Short Term Outcomes \. 16 Longer Term Outcome \. 19 Outcome of Reform of the Foreign Investment Promotion Agency\. 20 Short Term Outcomes \. 22 Longer Term Outcome \. 22 Objective 2: Streamlining the environment for business operation\. \. 24 Outcome of Inspection Reform \. 25 Short Term Outcomes \. 26 Longer Term Outcomes \. 28 Outcome of Introduction of Collateral/Pledge Registry \. 30 Short Term Outcomes \. 31 Longer term outcome \. 31 Outcome of Reforms of Chambers of Commerce \. 32 Outcome \. 33 Objective 3: Facilitating business exit\. \. 34 Outcome of Reforms of Bankruptcy Law \. 34 Short Term Outcome\. 35 Longer term outcome \. 36 Objective 4: Strengthen the consultative capacity between the public and private sectors\. \. 37 Outcome of Reform of Public Private Policy Dialogue (PPD)\. 37 Short Term Outcome\. 38 5\. Ratings \. 39 Outcome \. 39 6\. Risk to Development Outcome \. 39 Bank Performance \. 40 Borrower Performance \. 43 Government Performance \. 43 Implementing Agency Performance \. 43 Rating for Overall Borrower Performance \. 44  v 7\. Lessons \. 45 Lessons and supporting evidence from the Outcome assessment \. 45 Developments since the operation closed: how have the lessons been taken into account \. 45 References \. 47 Annex A\. Basic Data Sheet \. 49 Annex B\. List of Persons Met \. 52 Annex C\. Borrower Comments\. 53 Tables Table 1: PDO targets, baselines and achievement \. 8 Table 2: Organizations Implementing the BAC Operation \. 9 Table 3: Implementation Process \. 10 Table 4\. Details of Complementary Donor Capacity Building Support \. 11 Table 5\. Business Registration Reform Progress \. 16 Table 6\. Days Required to Start a Business \. 17 Table 7\. Longer Term Outcome: Business Registration Time \. 18 Table 8\. Starting a Business in South Eastern Europe 2007 to 2012 \. 19 Table 9\. Longer term business registration performance\. 19 Table 10\. Foreign Investment Achievement \. 21 Table 11\. Long Term Foreign Investment Performance \. 23 Table 12\. BiH: Performance on Protection of Investors \. 23 Table 13\. Inspection: BAC targets and achievements \. 26 Table 14\. Inspections Results for BiH \. 28 Table 15\. Inspection Results for RS \. 29 Table 16\. Numbers of Collateral/Pledge Registrations and searches \. 31 Table 17\. Percent of firms using various collateral \. 32 Table 18\. Bankruptcy Filings \. 35 Table 19\. BiH: Bankruptcy Performance Indicators\. 36 Table 20\. Bankruptcy Process Indicators: Country Comparisons \. 36 Table 21\. ISR Ratings of the Operation \. 41  vi Figures Figure 1\. Gross Foreign Direct Investment\. 23 Figure 2\. Level of Inspection Irregularity \. 29  vii Principal Ratings ICR* ICR Review* PPAR Outcome Moderately Moderately Moderately Satisfactory Satisfactory Unsatisfactory Risk to Development Moderate Moderate Significant Outcome Bank Performance Moderately Moderately Satisfactory Satisfactory Unsatisfactory Borrower Performance Moderately Moderately Unsatisfactory Satisfactory Unsatisfactory * The Implementation Completion and Results (ICR) report is a self-evaluation by the responsible Bank department\. The ICR Review is an intermediate IEG product that seeks to independently verify the findings of the ICR\. Key Staff Responsible Division Chief/ Project Task Manager/Leader Sector Director Country Director Appraisal Vicki Diane Peterson Paul J\. Siegelbaum Christiaan J\. Poortman Completion John Daniel Pollner Fernando Montes Negret Jane Armitage  viii IEG Mission: Improving World Bank Group development results through excellence in independent evaluation\. About this Report The Independent Evaluation Group assesses the programs and activities of the World Bank for two purposes: first, to ensure the integrity of the Bank’s self-evaluation process and to verify that the Bank’s work is producing the expected results, and second, to help develop improved directions, policies, and procedures through the dissemination of lessons drawn from experience\. As part of this work, IEG annually assesses 20-25 percent of the Bank’s lending operations through field work\. In selecting operations for assessment, preference is given to those that are innovative, large, or complex; those that are relevant to upcoming studies or country evaluations; those for which Executive Directors or Bank management have requested assessments; and those that are likely to generate important lessons\. To prepare a Project Performance Assessment Report (PPAR), IEG staff examine project files and other documents, visit the borrowing country to discuss the operation with the government, and other in-country stakeholders, and interview Bank staff and other donor agency staff both at headquarters and in local offices as appropriate\. Each PPAR is subject to internal IEG peer review, Panel review, and management approval\. Once cleared internally, the PPAR is commented on by the responsible Bank department\. The PPAR is also sent to the borrower for review\. IEG incorporates both Bank and borrower comments as appropriate, and the borrowers' comments are attached to the document that is sent to the Bank's Board of Executive Directors\. After an assessment report has been sent to the Board, it is disclosed to the public\. About the IEG Rating System for Public Sector Evaluations IEG’s use of multiple evaluation methods offers both rigor and a necessary level of flexibility to adapt to lending instrument, project design, or sectoral approach\. IEG evaluators all apply the same basic method to arrive at their project ratings\. Following is the definition and rating scale used for each evaluation criterion (additional information is available on the IEG website: http://ieg\.worldbankgroup\.org)\. Outcome:The extent to which the operation’s major relevant objectives were achieved, or are expected to be achieved, efficiently\.The rating has three dimensions: relevance, efficacy, and efficiency\. Relevance includes relevance of objectives and relevance of design\. Relevance of objectives is the extent to which the project’s objectives are consistent with the country’s current development priorities and with current Bank country and sectoral assistance strategies and corporate goals (expressed in Poverty Reduction Strategy Papers, Country Assistance Strategies, Sector Strategy Papers, Operational Policies)\. Relevance of design is the extent to which the project’s design is consistent with the stated objec tives\. Efficacy is the extent to which the project’s objectives were achieved, or are expected to be achieved, taking into account their relative importance\. Efficiency is the extent to which the project achieved, or is expected to achieve, a return higher than the opportunity cost of capital and benefits at least cost compared to alternatives\. The efficiency dimension generally is not applied to adjustment operations\.Possible ratings for Outcome:Highly Satisfactory, Satisfactory, Moderately Satisfactory, Moderately Unsatisfactory, Unsatisfactory, Highly Unsatisfactory\. Risk to Development Outcome:The risk, at the time of evaluation, that development outcomes (or expected outcomes) will not be maintained (or realized)\. Possible ratings for Risk to Development Outcome:High, Significant, Moderate, Negligible to Low, Not Evaluable\. Bank Performance: The extent to which services provided by the Bank ensured quality at entry of the operation and supported effective implementation through appropriate supervision (including ensuring adequate transition arrangements for regular operation of supported activities after loan/credit closing, toward the achievement of development outcomes\. The rating has two dimensions: quality at entry and quality of supervision\.Possible ratings for Bank Performance: Highly Satisfactory, Satisfactory, Moderately Satisfactory, Moderately Unsatisfactory, Unsatisfactory, Highly Unsatisfactory\. Borrower Performance: The extent to which the borrower (including the government and implementing agency or agencies) ensured quality of preparation and implementation, and complied with covenants and agreements, toward the achievement of development outcomes\. The rating has two dimensions: government performance and implementing agency(ies) performance\. Possible ratings for Borrower Performance:Highly Satisfactory, Satisfactory, Moderately Satisfactory, Moderately Unsatisfactory, Unsatisfactory, Highly Unsatisfactory\.  ix Preface This is a Project Performance Assessment Report for the Bosnia & Herzegovina (BiH) Business Environment Adjustment Credit (BAC)\. A mission to BiH took place over the period October 22nd to November 2nd, 2013 to assemble data and information for this report\. The report was prepared by Giuseppe Iarossi (Bank) and David A\. Phillips (Consultant) We would like to acknowledge the help of the following Bank staff in supporting this report: Ruvejda Aliefendic, Samra Bajramovic, Paula Genis, Haris Mesinovic, Vicki Peterson, John Pollner, Tarik Sahovic, Margo Thomas, and Yezena Yimer\. Jasmin Vajzovic and Magdalena Raosavljevic joined the mission in the field\. We would also like to acknowledge the many Government and Agency Officials in BiH who kindly gave up their time to assist our visit\. (See annex B) Our main sources of information included the following (see also list of references at end): Following standard IEG procedures, copies of the draft PPAR was sent to government officials and concerned agencies for review and comment\. No comments received\.  xi Summary Objectives and Design The Business Environment Adjustment Credit (BAC) was approved by the Board in 2002 and finally closed in 2007\. Hence it was initiated before the introduction of a new approach to budget support, when they were relabeled as DPLs with OP 8\.60 offering new terms for guidance, including changes in the standards for evaluating budget support operations\. Today we expect all DPLs to have results frameworks, which was not the case in 2002\. The Presidents Report stated that the operation would: “support the Government's reform program to improve the investment climate and further development of a single economic space to promote domestic and foreign investment and private sector growth”\. The objectives of the reform program were to reduce “those administrative and regulatory barriers that would have the most critical near-term impact on the three phases of business development” by: (i) improving business entry through streamlined and transparent countrywide approach to business registration and licensing and strengthened legal framework and capacity for attracting foreign investment; (ii) streamlining the environment for business operation by reducing companies' administrative and regulatory compliance costs through rationalization of inspections and regulations, strengthening of judicial and extra-judicial capacity to resolve commercial disputes; improving enforcement of secured transactions; and leveling the playing field for private sector participation in public procurement, and (iii) facilitating business exit through improved bankruptcy and liquidation systems\. Underlying these objectives is the need to strengthen the consultative capacity between the public and private sectors to promote policies and legislation that are business-friendly\. The policy program of the BAC was developed out of the ongoing dialogue between the donor community and the State Government of BiH that followed the Dayton Accords of 1995, and in line with the strategic priorities of the Government\. The policy areas addressed were consistent with Government objectives which had also been derived partly from a Bank report (FIAS 2001) on the legal, regulatory and administrative costs to business\. The BAC operation was designed as a two-tranche sector adjustment credit totaling $44\.0 million\. It was accompanied by a series of parallel donor capacity building technical assistance activities\. The tranched design proved difficult to implement in practice because the capacity building conditions could not be fulfilled within the target dates and multiple extensions had to be agreed for release of the second tranche\. In this respect the operation had to deal with the triple challenge facing the country, namely: a) post-conflict recovery, b) the transition from a planned to a market economy, and c) a fragmented governance structure created at the Dayton Accords, in particular the division between the two main Governing Entities, the Federation of Bosnia & Herzegovina (FBiH) and Republika Srpska (RS)\. Despite the delays in meeting the performance conditions for second tranche release the operation was not restructured, nor were the performance targets amended\.  xii Outputs and Outcomes By completion the operation had, with the help of donor supported capacity building, implemented a series of specific reforms\. In efforts to reduce administrative and regulatory barriers (Objective 1) a business registry was operational, the laws and regulations governing it were effective, and registrations were going ahead under the new system although they had not accelerated; the Foreign Investment Promotion Agency (FIPA) was in operation although its effectiveness was moderate\. To streamline the environment for business operation (Objective 2) a collateral registry for movable assets was operating well with the active support of the banks, and registrations were increasing; a centralized business inspection system with state of the art technology was in place and had improved efficiency through a selective and coordinated inspections system; and a compulsory membership in the Chambers of Commerce had been abolished but then the policy reform was partly reversed\. To facilitate business exit (Objective 3) a revised bankruptcy law was allowing greater labor mobility but had practical weaknesses\. And lastly, to strengthen the consultative capacity for public-private dialogue (Objective 4) private business membership organizations were formed but the Chambers had been reintroduced in the process, which was a policy reversal\. While new institutional capacity was operating effectively in most cases, the longer term outcome varied between the reform initiatives taken\. In some cases it was also difficult to measure and/or to attribute to the operation\. For example, there has been no evidence of acceleration of business registration over the past five years and performance relative to comparator countries has been moderate\. In the case of collateral registration before-after comparisons over time are very positive but inter-country comparisons suggest that the outcome of the reforms in BiH was also about average\. The reduction in the cost of inspections to business has been significant but usable country comparators are not available\. Other areas have not shown good outcomes\. The foreign investment agency was expanded but had not shown evidence of improved performance by project completion\. Similarly business exit through the amended bankruptcy law has increased but practical problems arose in its application because opposition to closing State Owned Enterprises (SOEs) had exposed weaknesses in the law\. While the objectives of the operation were relevant the partial fulfillment of outcomes was related to a design based on time-bound performance targets which proved to be inappropriate to the long term requirements of post-crisis economic transition\. However, despite the difficulties in delivering results the BAC did play a significant catalytic role in pushing forward key business reforms at a difficult time, a conclusion that is widely supported within the country\. On balance, taking account of the implementation delays, the mixed outcomes, the overall catalytic effect, and the contribution of the other agencies responsible for capacity building, the BAC’s attributable outcome achievement is rated moderately unsatisfactory\. Bank and Borrower Performance Bank performance: Bank implementation performance was adversely affected largely because of the lengthy period of capacity building needed to fulfill reform objectives in a post-crisis transition economy\. This was to some extent aggravated because the capacity building was in the hands of donor agencies rather than being part of the Bank operation and  xiii therefore not directly under Bank control\. The Bank’s project team was nevertheless diligent in the face of a particularly difficult implementation environment\. Much effort was made, largely from the local office, to push through the reforms and achieve the targets\. At the same time the problems of implementation led to ten extensions of the second tranche release and hence of the closing date in order to finally fulfill the objectives under the policy conditions\. This may have given the impression to the Government that the lending conditions were easily re-negotiable\. The lack of adherence to the target dates may have been aggravated by the lack of a fully developed results framework and indicators to guide the implementation of the operation\. Intended half-yearly monitoring surveys that might have better highlighted the problems in meeting targets were not carried out\. In 2005 a proposal was made to management to restructure the tranche release conditions but it was not adopted\. While the President’s Report foresaw the risks of implementation delay in practice they were very difficult to mitigate\. The rating for the Bank Performance has to balance a) flaws in design that affected implementation, b) the significant effort to solve implementation problems through close supervision, and c) management’s willingness to extend the completion deadlines rather than amend the targets\. The rating for Bank performance is Moderately Unsatisfactory\. Borrower Performance: The Government’s performance was significantly affected by elections and changes of Administration during the implementation period, which reduced its level of commitment to the project\. Combined with this were the following factors: a) the multiple agencies within Government that had responsibility for parts of the project, b) the difficulties of implementing market reforms in a post-conflict environment, and c) the dual Entity responsibility reliant on coordinating committees\. The Implementation Status Reports (ISRs) however reported that the Governmental Authorities were at all times making considerable efforts to push forward with implementation, and only once implied a failure to perform, in 2005 when the project rating was reduced to MU\. Delays in delivery of legal reforms and new procedures were a direct reflection of the highly fragmented governance structure and frequent opposition of an Entity or Canton to particular regulatory or procedural changes\. Taking account of the project from start to completion it is concluded that the Government was not able to satisfactorily fulfill its commitments\. The original coordinators of the BAC were the Ministry of Trade and Economic Reform (in FBIH), and the Ministry of Administration and Local Government (in the RS)\. However numerous other agencies were also partly responsible for implementation\. These included the full hierarchy of Governing bodies and courts, and numerous agencies such as inspectorates, registries, and FIPA\. As a result coordination was often ineffective\. Rating for Overall Borrower Performance: Unsatisfactory  xiv Risk to Development Outcome There were a number of risk mitigation mechanisms set out in the Presidents Report that were largely unsuccessful in practice, and hence the risks to the reforms going forward remain essentially the same\. Firstly, there remains a significant risk of weak support for State level reforms because of political opposition from the Entities, RS and FBiH\. Secondly, there is a moderate risk of erosion or reversal of previous reforms especially in the light of opposition to some policies\. Thirdly, there is a moderate risk of the degrading of capacity in the regulatory bodies overseeing systems such as business inspections and the business registry\. Fourthly there is a moderate risk of erosion of compliance with legal and regulatory processes which may degrade regulatory compliance\. These risks can only be mitigated through responsiveness to technical and organizational problems and close, sensitive and time-intensive, supervision with continuity of expert support\. The current support program of the Bank, including the Investment Climate and Institutional Strengthening (ICIS) Project is however proceeding with an awareness of these lessons which is likely to improve the prospects for sustained positive benefits going forward\. The risk rating for the sustainability of Development outcomes is Significant\. Lessons Because of the ‘triple challenge’ facing BiH in some respects the legacy of the operation is unique and not easily susceptible to generalized lessons\. Bearing this in mind, the key lessons are: ï‚ In high risk environments (post crisis, fragmented governance, etc\.) an ‘early wins’ strategy may be required, but should be accompanied by flexibility, early and structured review, and an exit strategy in the event that reforms come off track\. ï‚ Formulation of laws in adjustment operations needs to be accompanied by careful attention to addressing implementation constraints, particularly in post-crisis or transition environments, where capacity is particularly weak and the institutional framework is fragmented\. Other aspects related to the implementation of the laws needs to be properly addressed in the intervention\. In the case of the bankruptcy law for example the legislation needed to be backed up by clearer and more effective enforcement regulations\. ï‚ The choice of a quick disbursing instrument was questionable in the light of the medium-term requirements of capacity building\. Operations that require intensive on-the-ground capacity assistance are not suitable for pure adjustment-type lending because the adjustment timetable is usually inconsistent with the capacity building timetable\. Capacity building projects must be of long duration, especially in a post-conflict situation, to adjust to local conditions and allow sufficient implementation time to build up sustainability\. Programmatic lending instruments would be more consistent with these requirements\.  xv ï‚ In situations with multiple development partners and significant capacity constraints, effective leadership and coordination, both in Government and development partners, is essential\. Richard Scobey Acting Director-General Evaluation  1 1\. Background and Context Background 1\.1 The Business Environment Adjustment Credit (BAC) in Bosnia-Herzegovina was selected for evaluation to help inform the macro evaluation on Investment Climate reforms, as it was considered an example of regulatory reforms conducted in a challenging political environment\. 1\.2 At the time that the Business Environment Adjustment Credit (BAC) was initiated in 2000-2001, the Federation of Bosnia & Herzegovina (FBIH) was facing the unique triple challenge of: 1) reconstruction after civil war (which ended with the Dayton Accords of 1995), 2) the transformation from a centrally planned to a market economy, and, 3) a highly complex governance structure designed primarily to restore peace\. Progress had been made on the rehabilitation of infrastructure and basic institutional development, including the establishment of the central bank, State and Entity treasuries, and issuance of the national currency\. Major policy initiatives had been taken including trade and price liberalization, tax reform, social sector and financial market reforms, and privatization\. Progress had also been made in removing barriers to the movement of goods and people within the country, and a common, national level customs tariff regime had been introduced\. Nevertheless there remained significant needs\. These were considered to be: ï‚ Accelerating privatization to eliminate the unfair competition of privileged state- owned firms\. ï‚ Strengthening the banking sector to build the capacity of financial intermediaries to support private sector growth\. ï‚ Lightening a burdensome tax regime to motivate companies to return from the informal to the formal sector\. ï‚ Liberalizing trade, modernizing customs administration and strengthening competition policy to improve the competitive environment for the private sector ï‚ Improving property rights and access to land to help create an active land market\. ï‚ Reducing corruption\. ï‚ Increasing the independence and capacity of the judiciary\. Context 1\.3 At the time when the BAC was appraised, GDP growth was decelerating but remained at 4 to 5 percent per annum, with relatively low inflation\. However unemployment was at 37 percent\. Even with the reasonable level of cooperation between Government entities at that time fragmented governance (in FBiH and RS) was making decision-making difficult and hampering reform efforts which were required inter alia for integration with the EU\. In 2001, according to a World Bank (FIAS) study, major weaknesses remained within the legal framework for setting up and operating businesses in FBIH which encouraged corruption and raised the cost of doing business\. The 14-step business registration process took months to complete, discouraging firms from formalizing\. There remained a lack of  2 effective regulations and mechanisms for secured lending, such as movable collateral registration, which restricted access to working capital\. The court system was deficient and there were long delays in the resolution of commercial disputes\. Operating businesses faced numerous inspectorates with often overlapping mandates, leading to excessive administrative costs of compliance\. The prospects for recovery therefore depended significantly on accelerated implementation of institutional reforms\. 1\.4 The BAC was one of a series of World Bank adjustment operations initiated over 1999 to 2001 designed to support the recovery and transformation of the economy at the turn of the decade\. These included the Enterprise and Bank Privatization Adjustment Credit (EBPAC), Public Finance Structural Adjustment Credits I and 1I (PFSAC), and two Social Sector Adjustment Credits (SOSAC)\. These operations were the second stage of post-crisis support following an initial series of emergency credits in 1997-99\. The Business Environment Adjustment Credit (BAC) was approved by the Board in 2002 and finally closed in 2007\. Hence it was initiated before the introduction of a new approach to budget support, when they were relabeled as DPLs with OP 8\.60 offering new terms for guidance, including changes in the standards for evaluating budget support operations\. 2\. Objectives, Design, and their Relevance Objectives of the Operation 2\.1 The Presidents Report stated that the operation would: “support the Government's reform program to improve the investment climate and further development of a single economic space to promote domestic and foreign investment and private sector growth\.” Objectives of the reform program were to reduce ‘those administrative and regulatory barriers that would have the most critical near-term impact on the three phases of business development’ by: (iv) improving business entry through streamlined and transparent countrywide approach to business registration and licensing and strengthened legal framework and capacity for attracting foreign investment; (v) streamlining the environment for business operation by reducing companies' administrative and regulatory compliance costs through rationalization of inspections and regulations, strengthening of judicial and extra-judicial capacity to resolve commercial disputes; improving enforcement of secured transactions; and leveling the playing field for private sector participation in public procurement, and (vi) facilitating business exit through improved bankruptcy and liquidation systems\. Underlying these objectives is the need to strengthen the consultative capacity between the public and private sectors to promote policies and legislation that are business-friendly\. Underlying these objectives is the need to strengthen the consultative capacity between the public and private sectors to promote policies and legislation that are business-friendly\.  3 2\.2 The project development objectives were based on selected findings of the 2001 World Bank (FIAS) study\. From interviews with Bank staff, the selected initiatives were those that were considered to be: a) achievable in a relatively short time frame, b) had large potential impact, and c) for which support was readily available\. Accordingly, the process was to start with the recommendations that had already been put forward in the FIAS study and discussed with the Government, then to engage stakeholders to further prioritize the identified actions and confirm complementary donor commitments; and, finally to refine the list based on the Bank’s strengths in specific areas\. The project design also leveraged technical assistance from bilateral donors, which was ongoing or could be mobilized quickly\. 2\.3 The objectives were translated into specific, measurable, operational objectives through the BAC policy program\. The tranche release conditions under the policy program, from the Presidents Report were as follows\. BOARD CONDITIONS ï‚ State Council of Ministers adopted amendments to the Decision on Foundation of Foreign Investment Promotion Agency, satisfactory to the Association, and allocated funding for its operations\. ï‚ Entities adopted Foreign Investment Laws, satisfactory to the Association and fully harmonized with the State Law on Policy of Foreign Direct Investment\. ï‚ State and Entities established a formal mechanism, satisfactory to the Association, for regular consultation with the private sector to consider their views in the formulation of policies and legislation affecting business\. ï‚ Entities formally adopted the concept of common procedures and single database for each of business registration and registration of pledges on movables (i\.e\., collateral registry)\. ï‚ Entities adopted Laws on Registered Pledges on Movables, satisfactory to the Association\. ï‚ Entities conducted an independent baseline survey of administrative and regulatory costs of business\. ï‚ State and Entities drafted an anti-corruption action plan, incorporating public procurement and initiated the public consultation process\. ï‚ Entities eliminated the overlapping authorities of the Financial Police and the Revenue (Tax) Administration\. ï‚ State adopted the Law on Associations and Foundations of FBIH, satisfactory to the Association, allowing associations to cooperate across FBIH\. ï‚ Entities established a working group to draft new harmonized bankruptcy laws\. The working group has already produced a draft that is in the process of being finalized\. SECOND TRANCHE CONDITIONS ï‚ FIPA representative offices are staffed and operating in both Entities\. ï‚ Pilot of the business registry system embodying common procedures, common forms, and single database has been tested in selected courts across both Entities, and a plan for full implementation, satisfactory to the Association, has been adopted\.  4 ï‚ Entities reduce the average number of days to register a business from 80 to 30 days or less in the Federation and from 31 to 23 days or less in the RS, as measured by independent surveys on a semi-annual basis\. ï‚ Entities reduce the number of steps required to register an enterprise to 7 or less\. ï‚ Pilot of the collateral registry system embodying common procedures, common forms, single database and trained participants (judges, clerks, banks) has been tested in selected courts across both Entities, and a plan for full implementation, satisfactory to the Association, has been adopted\. ï‚ Entities have established a business inspection system, satisfactory to the Association, that provides for: the review and rationalization of the mandates of inspectorates operating at Entity and sub-Entity levels; clarification and publication of the mandates of the inspectorates and the inspectors; rational, planned inspection schedules, standard forms and guidelines; amendments to legislation as necessary to implement rationalization of the inspectorates, and regulatory assessment with the goal of appealing obsolete or unnecessary regulations\. ï‚ The average number of aggregate on-site inspector days per inspected business per annum for the Market, Labor, Financial Police and Revenue Administration combined will be reduced from 28 days to 15 days or less in the RS and from 18 days to 12 days or less in the Federation\. ï‚ Entities adopt amendments to the Laws on Chambers of Commerce, satisfactory to the Association, to eliminate mandatory membership\. ï‚ Entities adopt strengthened and harmonized Laws on Bankruptcy and Liquidation, satisfactory to the Association\. Restructuring of Objectives 2\.4 There were no amendments to the operational objectives of the BAC\. The performance targets were reconsidered mid-way through the operation as a result of a need to extend the operation’s closing dates\. The extensions, which numbered ten, were due to failure to meet a number of second tranche release conditions\. However performance targets were not, in the end, amended\. (This is reviewed in more detail in 2\.23 and in section 3 of this report)\. The Relevance of the Operation’s Objectives, COUNTRY CONDITIONS 2\.5 Two surveys of business condition in BiH informed the project’s objectives\. The Bank (FIAS) study addressed the legal and administrative barriers to business in BiH\. It identified three major problems: the absence of an adequate legal and regulatory framework to establish and operate a business; the lack of consistent and transparent business regulations and administrative procedures; and, the lack of effective, efficient, and adequately funded administrative and judicial systems\. A second, 2002 baseline study, found that the most serious barriers to business were corruption, tax rates and administration, ‘unfair competition’ from the informal economy, and access to finance\. The study also found, consistent with the World Bank (FIAS) study, that there were difficulties with the registration of a new enterprise, work permits, customs regulations, and labor regulations\. However  5 inspections, product and service standards and intellectual property regulations were not found to be key obstacles and in Republika Srpska (RS) firms did not rate the functioning of the judiciary as a serious obstacle\. These findings were therefore not entirely consistent with the Bank study in terms of ranking of constraints but they were consistent with the overall reform agenda\. 2\.6 The BAC operation was selectively based on the findings of the above studies\. Its objectives included the removal of key regulatory obstacles and some specific issues of access to finance, labor, and the capacity of the courts\. However they were not entirely in line with the key problems facing the business community\. The project management described the strategy as one of addressing ‘early wins’ across a broad spectrum of issues that could be relatively easily delivered rather than a prioritized, integrated reform approach\. This resulted in a rather piecemeal approach in some reform areas\. However there was ex ante justification for this approach in the difficult, post-conflict environment when it was critical to move the reform process forward rapidly and win support from a fragmented Government\. There was not a full Bank ESW backing for this operation – it was put in place following the first round of emergency loans and before much ESW work had been done\. Hence the design of the operation was a bit rushed and in hindsight appears to have been weak\. CONSISTENCY WITH GOVERNMENT STRATEGY 2\.7 While the operation’s ‘early wins’ approach did not fully address the key business needs its objectives were consistent overall with the Government’s plans for improving the business climate, as set out, for example, in the ‘Action Plan for Implementation of Business Environment Reforms’ adopted by RS and FBiH, which were based on the recommendations of the Bank (FIAS) study\. They were also consistent with the Government’s Economic Development Strategy for 2000-2004 which included acceleration of privatization, strengthening of the financial sector, and establishment of an enabling environment for domestic and foreign investment\. CONSISTENCY OF THE OBJECTIVES WITH THE CAS AT CLOSURE AND BEYOND\. 2\.8 The CAS for BiH at the closure of the project stated that while progress had been made in improving the business climate, BiH lagged behind its regional neighbors\. There had been progress in improving access to finance, improving the efficiency and effectiveness of the business inspection regime and introducing a new business registration system\. But private sector activity was still below regional averages, accounting for about 55 percent of GDP\. Doing Business reports showed that BiH’s relative ranking on ease of doing business was falling\. The key requirements for reforming the business climate included the need to further reduce the time to register a new business; improve accounting standards, rationalize the tax and levy system as it affected businesses, further reducing the regulatory burden on businesses\. There was thus significant unfinished business and the BAC overall objectives of strengthening the business climate therefore remained relevant at closure\. 2\.9 Relevance of Objectives is rated substantial\.  6 Relevance of the Operation’s Design 2\.10 Design of the Operation\. The operation was configured as a two-tranche adjustment operation for $44 million equivalent\. 1 The policy areas addressed by the operation were supported by 10 first tranche conditions followed by 9 second tranche conditions each to be adopted by both FBiH and RS\. Thus 38 separate policy and institutional development actions had to be taken overall\. 2\.11 With the extensive policy program to be carried out in two separate Government Entities the timetable required for disbursements was very short relative to the lengthy institutional development process, especially in a post-crisis, transition economy\. A programmatic lending instrument would have allowed a more extended timetable, and permitted a more phased approach to institution building through a relatively light disbursement conditions at each stage\. This could have avoided the need for the entire set of conditions to be met simultaneously and the resulting repeated time extensions – which called into question the Bank’s determination about its own conditionality (i\.e\. no exit strategy in the event of failure to comply)\. 2\.12 The capacity to implement the institutional and regulatory reforms was managed through parallel funding by donor agencies\. The cooperation of the donors was good but the lack of control of capacity building within the Bank's own operation tended to aggravate the problem of the tight timetable for tranche release, and this was made more difficult by the complex oversight arrangements\. (See further 2\.21)\. 2\.13 Clarity and realism of the objectives\. The objectives as set out in 2\.1 to 2\.3 were operationalized through the policy program as a series of specific goals allowing performance targeting and measurement and in this sense were clear and appropriate\. However, with the benefit of hindsight some of the objectives were excessively ambitious within the difficult environment and the timing of their fulfillment was unrealistic\. 2\.14 The quality of the explicit or implicit results framework\. There was no formal results framework for this operation\. The absence of a framework is due to the fact that in 2002 no framework was required for such operations\. Today we expect all DPLs to have results frameworks\. 2\.15 The lack of a fully developed results framework may have worsened the delays in the release of the second tranche; a more complete framework might have resulted in closer attention being paid to what was practically possible to implement at different times; however, the issue was probably more one of deciding how to effectively manage implementation than the framework of the results as such\. The use of specific short-run outcome targets may also have encouraged an excessive focus on hitting numerical targets 1 Due to the appreciation of Special Drawing Rights against the dollar over 2001-7 the final disbursement in December 2007 amounted to $51\.9 million\.  7 such as days taken for court registration rather than the development of the overall effective registration system\. 2\.16 Extent to which exogenous factors were taken into account and mitigated\. Despite the intentions the design of the operation was inadequate to take into account exogenous factors such as the strength of political opposition as a result of the continuing stand-off between FBiH and RS, and the opposition to State level institutions from both entities, in particular RS\. This inadequacy was particularly clear given the concomitant complex requirements of economic transition\. The latter were reflected in for example the opposition to the bankruptcy law as it affected the redundancy of SOE workers, and the pressures to maintain the role of the State-sponsored Chambers of Commerce\. While special coordinating arrangements were put in place under the Coordination Board for Economic Transition and European Integration (see 2\.21) this was not adequate to deal with these issues, 2\.17 Rating of Operations Design\. On the basis of the above points the relevance of the operations design was modest\. The Design of Monitoring and Evaluation 2\.18 As stated, a group of 5 “PDO indicators” with baselines and targets were used as the basis for monitoring the operation\. These were (for both FBIH and RS) as follows: ï‚ Reduction of average days for registration; ï‚ Reduction of average onsite inspection days; ï‚ Reduction in number of steps for business registration; ï‚ Increase in investment, particularly foreign investment; ï‚ Creation of a movable pledge/collateral registry available at the nationwide level\. 2\.19 There were no separate intermediate outcome indicators\. The PDO indicators and numerical and qualitative targets based on those indicators were used as the project’s sole monitoring benchmarks\. The indicators or targets were not modified during the project\. The PDO indicators were supported by a planned system of reports\. These consisted of a baseline study, and survey reports intended to be produced at six monthly and three yearly intervals\. The fulfillment of targets was supposed to be verified through these surveys, which would also allow better monitoring of the business environment, and help to build capacity for monitoring in the Government\. The PDO targets and the baseline values established at the start of the project, drawn from the 2001 FIAS study and 2002 baseline study, were as indicated in Table 2\.1  8 Table 1: PDO targets, baselines and achievement Indicator Baseline Value Target Value At Target Value Completion Fulfilled Reduction of average number of days FBiH 80 FBiH 30 FBiH 27\.0 Yes for registration and startup RS 31 RS 23 RS 18\.0 Reduction in number of onsite FBiH 18 FBiH 12 FBiH 9\.9 Yes inspection days RS 28 RS 15 RS 7\.5 Reduction in Number of Steps for Foreign Cos 14-15 7 5 Yes business registration Local Cos 12 Increase in foreign investment FDI, 4\.3% of GDP No target FDI, 13\.7% GDP n/a Creation of collateral (pledge) No registry except None Frequent use of Yes registry at national level for real estate registry Source: Project documents 2\.20 The PDO indicators largely corresponded to the second tranche release policy conditions supported by the operation, covering business entry and business operation (but excluding bankruptcy policy - business exit)\. Indicator selection was based on those policy reforms that appeared to be the most quantitatively measurable, (business registration, inspection, collateral registration, and increase in foreign investment)\. 2\.21 The M&E system was managed within the operation, assisted by outside agencies\. The planned system of six monthly reports, which were to be funded by the cooperating donors, did not go ahead\. The baseline study and two monitoring surveys, in 2004 and 2007, were completed by three separate private consulting and survey firms\. There was no formal evaluation study conducted for the operation\. The Design of the Implementation arrangements 2\.22 The entities responsible for implementing different aspects of the operation are set out in the following organizational framework, based on the President’s Report\. These included the legislatures, all levels of State, Entity, Regional and Local Government, finance and justice ministries, and courts\. Nine separate donor agencies were also listed as having administrative or implementing authority\.  9 Table 2: Organizations Implementing the BAC Operation Area Of Program Administrative And Implementing Authority Donor Responsibility Strengthen FDI legal framework and Parliaments FIPA increase operational capacity of the FIPA State Ministries of Governments Commerce, Economic FIAS, EC Relations FIAS, EC Streamline and Establish Countrywide Parliaments Regional and Cantonal Courts approach to business registration (including Industry Ministries DfID, IFC strengthening of commercial courts) Justice Ministries GTZ, DfID Improve access to capital by protection Parliaments Regional/ cantonal courts creditors collateral rights (including EBRD, USAID, IFC, SEED strengthening of commercial courts) Level the playing field for private sector Parliaments State, regional and cantonal participation in public tender (incl\. law) Treasury Ministries Government Finance Ministries EC EC Reduce regulatory compliance burden on Central, Cantonal and State, regional and cantonal/ business (incl\. inspection function, licensing Municipal Governments municipal Governments and permits) DfID Involve private sector in formation of public Governments, State, regional, Governments policies and commercial law (establish Parliaments FIAS, SEED, GTZ, SIDA dialogue and reform of Chamber of Commerce) Harmonize and strengthen bankruptcy and Parliaments Regional Governments, regional, liquidation practice (incl\. strengthen Justice Ministries cantonal courts commercial courts) GTZ GTZ, IFC Source: Presidents Report Annex 5 p37 2\.23 This complex structure was expected to be managed through a hierarchy of coordinating bodies\. A high-level Coordination Board for Economic Transition and European Integration had general oversight responsibility for the BAC while implementation oversight was delegated to the Ministry of Trade and Economic Reform (in FBiH), and the Ministry of Administration and Local Government (in the RS), in coordination with the FBiH and RS Prime Ministers’ Office\. Implementation in practice was also overseen by a working group of technical experts across the relevant ministries of FBiH and RS using a reform action plan that they had devised, based on the FIAS recommendations\. Bilateral donor programs were expected to build capacity through providing experts as needed\. Restructuring of the Operation 2\.24 The operation was not restructured\. There were no changes to the design, scope, scale, implementation arrangements and funding allocations\. In this respect there were also no waivers of conditions despite the four year delay in securing second tranche release and ten separate extensions of the credit\. 2\.25 From interviews with the Bank project management team and donors the reason for the decisions not to restructure despite the multiple extensions was primarily due to the  10 relatively arduous ongoing policy dialogue with BiH and the desire of the Bank and the donor partners to avoid significant departures from agreed policy programs especially since ongoing capacity building work such as the business registry was geared to levels of progress agreed with the donor\. 2\.26 In 2005 the formulation of a restructuring plan was in fact proposed by the Bank which would have allowed partial Tranche 2 release by accepting compliance with most of the conditions but retaining a third ‘floating’ tranche to be released against the final two performance-based conditions (registration and inspection)\. However the restructuring plan was not adopted because it was itself contingent on the fulfillment of a condition on inspections and because it was decided that any restructuring should be done within the context of the restructuring of the whole series of adjustment operations in BiH\. 3\. Implementation Implementation progress 3\.1 The key implementation events of the BAC operation are summarized as follows\. Table 3: Implementation Process Process Original Date Actual Date Concept Review 12/17/2001 12/17/2001 Appraisal n/a 02/25/2002 Approval 05/30/2002 05/30/2002 Effectiveness: 08/15/2002 08/15/2002 Restructuring n/a Mid Term Review n/a First Tranche 08/15/2002 08/15/2002 Second Tranche 12/31/2003 12/07/2007 Closing 12/31/2003 12/15/2007 Source: Project documents 3\.2 Ten conditions were met for first tranche release in 2002\. The second tranche release date of December 2003 was not met and a series of ten extensions were granted, starting with three in 2004 alone, of 1, 2 and 9 months each\. The 2004 BAC survey review showed little progress towards the second tranche conditions\. In May 2007, a second survey showed that all targets had been attained except for the targets for business registration\. A final (tenth) 6- month extension until the end of 2007 was approved in June 2007 so that the fulfillment of the target for registrations could be verified\. 3\.3 It is notable that the Presidents Report (page 18, para\. 54) provided for separate release of the Second Tranche to FBiH and RS\. “As the onus is on each Entity to achieve these goals, disbursement of the second tranche will be made independently to each Entity upon fulfillment of its second tranche conditions\.” The implementation of the operation seems to have set aside this provision which might have accelerated disbursement\.  11 3\.4 As stated previously there were serious delays in meeting certain of the second tranche release conditions (for implementation of business registration and for inspections) which required exceptional approvals beyond 2 years extension\. With the initial extensions granted in 2004 it was already becoming clear that the timetable for complex legal and regulatory reforms was unrealistic within an environment of fragmented Government, including an election\. The one month extensions were interim measures designed to trigger a specific action by the Authorities which would in turn justify a further extension\. For example in 2005 such an extension was granted while efforts were made to fulfill the conditions on business inspections which would itself be a condition of restructuring the final tranche into two tranches with revised conditions\. The final extension granted in June 2007 allowed 6 months to verify that registration targets had been fulfilled using the new business registry which itself had been affected by a delay in finalizing the IT system\. The end-of- project report provided to DfID on the Business Registration capacity building stated reservations about the Bank’s approach\. “The original project timetable was, in hindsight, highly optimistic and the project had to be extended on many occasions\. Although some of these extensions were unavoidable, experience shows in some cases they were based on planning assumptions which were still optimistic given the user environment and the authority and capacity of user and project team resources to deliver\. Moreover, when extending the project, new deadlines tended to be set in short units (3 months at a time), whereas effort on all sides could have been better spent on achieving and managing success in a more flexible, longer planning period\. It is also worth noting that project stakeholders were not always encouraged to prioritize work on this project ahead of other tasks simply because of tight deadlines imposed\.” 3\.5 While one month extensions had reportedly been effective for the previous Enterprise and Bank Privatization Adjustment Credit which was linked to an IMF standby loan, the BAC operation did not have the equivalent leverage\. The DfID report implies that the Bank’s policy towards time extensions impacted somewhat negatively on the consortium efforts\. Parallel funding support to implementation 3\.6 The support of the bilateral donor agencies was key to the implementation of the BAC\. Concurrent and follow-up support was provided in a series of capacity building projects which followed on from either the 2001 FIAS study recommendations or were coordinated with the requirements of the BAC operation over the period of its implementation\. A summary of support is as follows: Table 4\. Details of Complementary Donor Capacity Building Support Agency Activity Covered DfID Business registration\. Legal assistance and development and implementation of IT system 2005 to 2007 Training of court personnel in registration system\. 2006 to 2007  12 USAID - (PRP) Pledge Registry Project, 2002-4, laws on secured transactions, equipment - (JSDP) Justice Sector Development Project\. 2004-8; capacity of High Judicial and Prosecutorial Council, courts, State Ministry of Justice, judicial sector - (FILE) Fostering an Investment and Lender-friendly Environment, 2003-6; project: training of judges, bankruptcy trustees; case management software\. -(SPIRA) Streamlining permits and Inspection Resources Assistance project, 2004; Equipment, systems development, software, and training\. - (TARA) Tax Administration Reform Assistance project\. Unified tax system\. SIDA Trust fund for supporting Training of Inspectors\. Assistance to inspectors from 2003 (for 9 line ministries) in RS and FBIH, including training and equipment\. GTZ Assisting Justice Ministries in reform and redrafting of bankruptcy law, land registry, and public notary regulations\. Source: IEG Field visit 3\.7 Active support from the Office of the High Representative (OHR) of BiH was also important in the preparation of the business registration, bankruptcy and pledge registry laws, and amendments to laws such as that for Chambers of Commerce\. The OHR used the device of a ‘Bulldozer Committee’ during 2000 to 2001 to push through a number of reforms\. 3\.8 There was a consensus that a good level of cooperation between the Bank team and the donor agencies was achieved in view of the critical post-conflict situation in BiH and the difficulties of a fragmented Governance structure in the country\. The principal agencies involved were as follows: 3\.9 DfID was primarily concerned with Business registration\. It developed the linked IT system required in the registration process, and it conducted training of court staff in the use of the system\. Because of delays in enacting legislation system development started late and was only rolled out in 2006\. Problems occurred because of the tardiness or opposition of some cantons in FBiH to adopting the system\. To ensure sustained operation additional ‘handholding’ would have been helpful\. However, by 2007 the system was up and running throughout most of FBiH and RS\. Subsequently there was some backtracking as adjustments had to be made; the link between the courts and the tax authorities was not continuous and more recently disputes between RS and FBiH arose over data entry limited the system’s capability\. Thus, the performance of this component of capacity building was not problem- free but the objectives were largely met after a lengthy delay\. 3\.10 USAID had an extensive complementary involvement in BiH over the period of the BAC operation\. This included provision of equipment and training under a Bank Development and training project, the Pledge Registry Project, a project to training judges and bankruptcy trustees, the SPIRA (Streamlining permits and Inspection Resources Assistance) project, a project to provide inspection equipment, and the TARA (Tax Administration Reform Assistance) project\. Field interviews suggested that the work on inspections and collateral registration had been very good with some minor difficulties\. The collateral registry has been described as a ‘revolutionary’ innovation in that it considerably speeded up the pledging of security for lending\. The inspections IT system has been established as a model of its type\.  13 3\.11 GTZ played a small role, providing expertise for the preparation of the new Bankruptcy law (as well as the land registry and justice Ministries)\. It also supplied expertise in product quality and trade to the Chamber of Commerce\. In field interviews with members of the judiciary its work on the bankruptcy law was regarded as good but needing additional regulations and procedures to ensure its effective operation\. 3\.12 SIDA provided a Trust Fund managed by the Bank from 2003 for training and equipment to support inspectors in nine line ministries in RS and FBiH, prior to the establishment of the central inspectorates\. No report was issued on this input but it provided substantive inputs to inspection programs in the labor and market area\. Major Factors Affecting Implementation 3\.13 Key to the problems of implementation were the complex governance and legal arrangements in BiH\. The system established post-Dayton involved a federalist structure balancing political and ethnic interests, resulting in a state, two entities, one district (Brcko), ten cantons, and 142 municipalities\. The State government is responsible for foreign policy, trade and transport, and monetary policy\. The RS and FBiH Entity Governments have the remaining powers outside those of the State\. 3\.14 The fragmentation of authority created challenges to any reform process, especially where a common approach was needed in the complex transition to a market economy\. The ICR reports that the two Ministries of Justice faced a considerable legislative burden while the inspections reform alone required the creation of completely new Directorates across 9 ministries in RS and 8 in FBiH\. While initially there was some acceptance of the need for a State-based solution, these difficulties could not ultimately be adequately managed by the coordination mechanism, and the Bank’s lack of direct control over capacity building made the fulfillment of specific quantitative targets more burdensome\. 3\.15 One of the features of the implementation period, the so-called Bulldozer Committee, was set up to push through changes\. The committee operated for about a year over 2000- 2001\. While this mechanism was efficient at accelerating decisions it also risked unintended results where the apparent resolution of one issue resulted in the uncovering of others\. 3\.16 The attempt to harmonize six laws (on inspections, business registration, foreign investment promotion, collateral, chamber of commerce, and bankruptcy) in FBiH and RS faced resistance not only from groups opposing a unified State Government\. Two other interests were the residual opponents to market reforms, and a Government bureaucracy concerned to avoid possible job losses associated with the reforms\. Implementation of the M&E framework 3\.17 The project’s set objectives were the five PDOs, and there was no detailed results matrix\. 3\.18 The baseline survey of administrative and regulatory costs of doing business in FBIH was conducted in 2002 to identify implementation targets\. To verify PDO achievement  14 interim surveys were carried out with donor assistance in 2004 and 2007\. The three surveys used the same sampling criteria in order to standardize results\. The 2007 survey reported on the progress of business registration and inspection reform actions as these were the two final sets of conditions as yet unfulfilled\. The presence of field-based Task Team members meant that the project had relatively close supervision and close coordination with other donors providing the technical assistance necessary for the implementation of the reform program\. 3\.19 However the six monthly monitoring surveys by the Ministry of Foreign Trade and Economic Relations (MTER) that were supposed to assess reform achievement against targets were not in fact carried out\. This was stated to be because of a) lack of progress to report during 2003-5 and, b) lack of funding which had been expected to be provided by the Government\. Since specific output targets had to be met the lack of regular monitoring and reporting may have made achievement more difficult, while the lack of funding may be an illustration of the difficulties of coordinating key elements of the broad program\. 4\. Achievement of the Objectives Interpretation of the Objectives 4\.1 As stated in 2\.1 to 2\.3, the formal objectives of this project were operationalized using specific quantifiable targets as set out in the tranche release conditions of the policy program\. Assessment of ‘achievement of the objectives’ is therefore conducted within the framework of the formal objectives through an assessment of the achievement of the specific targets\. Each objective and their accompanying outcomes are assessed in the below sections\. ï‚ Objective 1: Reduce administrative and regulatory barriers with the most critical near-term impact on the three phases of business development; ï‚ Objective 2: Streamline the environment for business operation; ï‚ Objective 3: Facilitate business exit\. Underlying these objectives is the need to strengthen the consultative capacity between the public and private sectors to promote policies and legislation that are business-friendly\. Note on Attribution and assessment of outcomes 4\.2 The outcomes of the BAC actions (as in the case of other adjustment operations) are difficult to directly attribute because of time lags, multiple causation and exogenous factors\. The outcomes were partly linked to the Bank policy dialogue and advisory work but also to the capacity building assistance and advisory work provided by the participating donors, as well as to the ongoing action by the various Governmental Authorities\. The outcomes have also been affected by global conditions such as the 2008 financial crisis\. In the following sections the parallel capacity building by the donors is assessed along with the Bank’s input\. To be able to assess the scale of the outcomes that are attributable to the BAC it is also necessary to identify a counterfactual\. There is no direct counterfactual for regulatory policy action because it is taken by a unique actor (the Government)\. However, possible comparators could be the action taken by Governments of countries similar in terms of  15 geography, history and economic transition status\. Therefore comparable policy changes in other former republics of Yugoslavia are examined side by side with those of BiH, where available and informative\. Objectives and Outcomes 4\.3 The following sections are organized according to the four main objectives\. Each objective is assessed by project component and given a rating based on performance\. Each component also receives a rating\. Both short term and longer term outcomes are assessed\. The key policy outcomes of the operation assessed below impact the three phases of business development: (i) business entry, (ii) the business environment, and (iii) business exit\. Additionally, strengthening public-private policy dialogue is also addressed\. Objective 1: Reduce administrative and regulatory barriers with the most critical near-term impact on the three phases of business development\. 4\.4 This entails improving business entry through streamlined and transparent countrywide approach to business registration and licensing and strengthened legal framework and capacity for attracting foreign investment\. Project components include business registration reform and reform of the Foreign Investment Promotion Agency (FIPA)\. OUTCOMES OF BUSINESS REGISTRATION REFORM Background: Inputs and Outputs 4\.5 The acceleration of the business startup process was one of the two key interventions of the BAC operation\. The 2001 Bank (FIAS) study found that the registration procedure was too long, with lack of mechanisms to ensure consistency and control, no data transparency or sharing, and too many, often illogical and unnecessary steps\. The BAC conditions required that a pilot of the business registry system was tested in selected courts across RS and FBiH, and a plan for its full implementation adopted\. In addition the Entities were to reduce the average number of days to start a business from 80 to 30 days or less in FBiH and from 31 to 23 days or less in the RS and to reduce the number of steps required to register an enterprise to 7 or less, as measured by independent surveys\. 4\.6 A Statewide framework law on business registration was adopted in 2004\. The law went further than the BAC second tranche condition\. It mandated a maximum of 5 days for court business registration after all documents were submitted, and limited the number of required steps to seven\. The new laws also introduced some simplifications of the verification process\. Both FBiH and RS adopted business registration laws on the basis of the State-level framework Law\. The process unified registration within a shared registration database\. 4\.7 By 2008, eight out of ten courts were using the full registration system, the exceptions being Mostar and Central Bosnia cantons\. The registration system did not start as quickly in  16 RS due to a case backlog, and to speed up compliance with the BAC condition the authorities started using the new system before the backlog was cleared\. The court in Banja Luka was using the full system by November 2007, although the RS courts had to stop using it later while changes were made to the data links\. Donor Contribution 4\.8 DfID provided a grant of about $1\.6 million to implement the business registry system\. Faced with three systems for registration of legal entities and a spate of fictitious registrations it was decided to address both legal reform and registration process\. The team worked on the Framework State law with Members of Parliament in FBiH and RS and on the Entity laws adopted in 2005 and regarded this as an example of positive bipartisan cooperation\. The project then focused on designing and procuring software and hardware, and training judges and system administrators in its use\. The development of the IT system was completed with some delay at the end of 2006 and the hardware was installed at 16 locations\. The installation of software at 3 locations was reportedly completed in January 2007\. The project trained 67 officials from 16 courts on how to use the system by April 2007\. 4\.9 While the targets were ultimately met there remained a number of operating problems, which could perhaps have been solved by longer term support by the donor agency\. The RS tax department stated that the new data links were not supported by updated procedures, and duplicated forms still had to be filed in each agency\. There was a reluctance to share data between Government entities\. Another widely cited problem was failure to fully complete forms or the inconsistent interpretation of forms\. A further issue has been the requirement for notary clearance, which is seen widely as costly and superfluous, and from some views an illegitimate amendment to the State law\. 4\.10 The DfID consultants report concluded that while it was delayed the final achievement was a good example of locally-led development and sustained commitment\. However, some interviewees thought that the closure of the project was premature, and there were some differences of opinion as to how far the IT system is workable due to disputes over data entry between RS and FBIH, which might have been avoided with a longer period of outside support\. SHORT TERM OUTCOMES 4\.11 Progress was made in registration efficiency compared to the 2002 baseline up to May 2007, as can be seen from the table\. Table 5\. Business Registration Reform Progress Entity Baseline Mid-term May 2007 Dec 2002 2004 Survey 2007 Average days for registration and FBIH 80 63 44 27 startup RS 31 30 32 18 Steps required to register FBIH 10 7-8 n/a 5 business RS 9 7-8 n/a 5 Number of steps to start FBIH 15 10-12 n/a 8-10  17 operations RS 14 9-11 n/a 8-10 Source: Baseline Study; Midterm monitoring study, BAC survey, Registry data 4\.12 At the end of the project period, between May and December 2007, the total time required to startup a business showed a marked decline\. The BAC project used Registry data as the confirming evidence and this showed that by the end of 2007 court registrations were being completed in an average of 8\.5 days\. The court in Banja Luka was reported as registering new enterprises in three days\. These improvements effectively reduced the overall time for business startup to below the target set for the BAC project\. The number of steps needed to register a business and to start operations also fell, in line with the new law, which improved on the BAC performance target of 7 steps for registration\. 4\.13 The recorded reduction in court registration days reduced the overall days needed to start a business as follows: Table 6\. Days Required to Start a Business Days to start business Days to start business May 2007 (December 2007) (PULS Survey) (Registry data) Court Registration 21\.0 8\.5 Statistics Recording 4\.3 4\.3 Municipal license 5\.8 5\.8 Revenue/ Customs Certification 4\.8 4\.8 Pension/insurance arrangements 3\.1 3\.1 Total 39\.0 26\.5 Source: PUSL survey and Business Registrar data 4\.14 Responses from the business community were mixed\. The Foreign Investors Council (FIC) claims that first time registrations have been taking 5 to 20 days in court, and re- registrations sometimes longer\. It also cites absences by judges, inconsistent judgments and demands for additional documents not required by law\. Sometimes repeated requests for additional information are made and suspensions of registration because of unrelated parallel legal action\. 4\.15 Interviews were held with a sample of ten enterprises in FBiH and RS\. In RS there was a consensus that business startup takes longer than the reported level, and that 26 days was the ‘best case\.’ In one case court and tax registration took 28 days but only when the judge was ‘chased\.’ NGO registration can require several months wait because a very small proportion of time in the commercial court is allocated to this category\. In other cases small errors in documentation were said to have led to unnecessary rejection of an application\. Overall however the enterprise respondents agreed that procedures have speeded up more recently in the courts\. It is the other areas, such as tax administration, work permits, customs and VAT that are now regarded as more critical\.  18 4\.16 In contrast to the skepticism of the business community, the President of the District Economic Court in RS stated that 80 percent of court registrations are completed in 3 days and 20 percent within 5 days provided all documents are in place\. A case backlog in 2009 was caused by the need for enterprises to re-register, but the situation has improved since commercial courts opened in the RS in 2009\. RS currently plans to further simplify business registration\. An inter-departmental working group was formed in 2012 to evaluate the regulations\. Changes will probably include online registration and strengthening of the link between courts and tax administration\. The Court President in Sarajevo also emphasized that the business registration initiative had been successful\. A very large previous backlog of 3200 cases per 1 economic judge had been reduced to 25 cases\. Court time that had previously been as much as a year was reduced potentially to a single day if full documentation was provided\. The extent of accelerated registration in the longer run can be cross-checked with the estimates of the World Bank’s Doing Business Reports alongside the reported improvement levels of the BAC\. Table 7\. Longer Term Outcome: Business Registration Time Governme Base Mid- 2007 2007 2008 2009 2010 2011 2012 nt entity line term Dec 2002 2004 Avg\. days for FBIH 80 63 27 registration RS 31 30 18 and startup DB report 68 63 63 69 69 64 40 Number of FBIH 15 10-12 8-10 steps to start RS 14 9-11 8-10 operations DB report 12 12 12 12 12 12 12 Source: World Bank Doing Business report and BAC survey 4\.17 The Doing Business reports are not in fact consistent with the reports for the operation\. The days and the number of steps required for starting a business over 2007-11 according to the Doing Business reports were significantly greater than those reported for the BAC and unchanged from the high 2004 level in FBiH, with a significant reduction only from 2012\. The reason for inconsistency was not ascertained but there are inconsistencies in definition and sample size that might explain it\. 2 Otherwise it appears that the improvement in registration as a result of the BAC might have been overestimated\. This inconsistency further confirms that while the Doing Business is a convenient tool to quickly measure some regulatory reforms, it has important limitations\.3 Consequently it cannot be viewed as a measure of the quality of the investment climate\. 2 The Doing Business Report findings are based on smaller samples than either the 2007 survey or the registry records\. 3 See IEG 2008  19 4\.18 A measure of outcome is the rate of new registrations (the rate of business entry)\. To assess the relative scale of the outcome in BiH it may be compared to similar reforms in a group of comparator economies in South Eastern Europe, who received similar outside assistance\. Table 8\. Starting a Business in South Eastern Europe 2007 to 2012 Change in cost Change in number of Change in number of (percent of procedures days required per cap\. income)* Bosnia no change minus 41% minus 64% S\.E\. Europe minus 41% minus 47% minus 26% Source: World Bank Doing Business Reports\. * This was not part of the BAC conditions 4\.19 The table shows that BiH performed less well than the average of six other countries\.4This was particularly so in the case of the number of procedures (where BiH had zero improvement) but also in the number of days\. All comparator countries improved significantly compared to BiH on time and steps required except for Kosovo\. However, BiH showed better performance in terms of the reduced cost of starting a business\. The results are ambiguous but Bosnia still remains one of the most difficult locations for starting a business\. LONGER TERM OUTCOME 4\.20 In the longer term the outcome and impact of the new system is observable however not so much in the improvement in the registration process but more in the effects it has on actual registrations and startups\. The Statistical Office provided the following data\.5 Table 9\. Longer term business registration performance 2004 2005 2006 2007 2008 2009 2010 Total 30618 33290 36206 38913 41722 43619 45317 Total annual increment 3127 2672 2916 2707 2809 1897 1698 Of which Manufacturing 4035 4342 4665 4923 5202 5358 5474 Construction 1928 2043 2215 2389 2536 2574 2597 Trade, repairs 9831 10563 11221 11815 12347 12617 12765 Catering 653 692 729 796 848 873 953 Transport,communication 1912 2026 2130 2241 2373 2421 2472 Real estate, other 2510 2761 3039 3325 3651 3930 4149 Social/personal services 4857 5724 6791 7808 8885 9841 10794 Source:Federal Statistics Bulletin, various years\. 4 Albania, Serbia, FYR Macedonia, Montenegro, Kosovo and Croatia\. These countries are a reasonably close match with BiH in terms of scale, geography, post-conflict problems, and transition from central planning\. 5 Court registry records are also available over 2008 to 2012 but a reclassification on January 1, 2011 distorts the trend in activity\.  20 4\.21 The above series, which excludes agriculture, public administration, education and health, shows a downward trend in annual registrations since 2007 when the Registry was launched reflected across all sectors shown\. However this was in common with all countries who experienced a sharp drop in business entry during the 2008 financial crisis and the drop was correlated with the severity of the crisis\.6 The effects of the financial crisis make it impractical to trace up to now a longer term outcome in terms of business entry activity attributable to the BAC\. Summary of Business Registration Reform Attribution and Outcome 4\.22 The outcomes are attributable to both the BAC’s output and the capacity building from DfID\. The systems development funded by DfID was an essential complement to the Bank’s catalytic role, without which it is probably unlikely that the Government would have been able to implement the new system\. Positive outcomes in terms of reduced registration time and cost were achieved but the data on earlier results are ambiguous and the benefits were significantly delayed due to problems in implementation\. By 2012, five years after the project closed, a substantial reduction in court registration time had finally been confirmed and the scope for further reduction in startup time is outside the court process\. Nevertheless, taking South Eastern Europe as a comparator Bosnia’s business registration process improvement was modest\. In the longer term the effects of the reforms on actual business registrations are obscured by the economic crisis which reduced the number of annual registrations\. 4\.23 Taking account of all the above factors the rating of the business registration reforms is Modest OUTCOME OF REFORM OF THE FOREIGN INVESTMENT PROMOTION AGENCY Background: Inputs and outputs 4\.24 The BAC conditions provided that the State should adopt amendments to the decision on Foundation of the Foreign Investment Promotion Agency and allocate funding for its operations; that the Entities should adopt Foreign Investment Laws harmonized with the State Law on Policy of Foreign Direct Investment (FDI), and that FIPA representative offices should be staffed and operating in FBiH and RS\.FIPA would need to expand its operations and collaborate closely with State, Entity, Canton and local governments to promote further investment across BH\. 4\.25 Prior to the launching of the BAC a Promotional Agency had been established in 1996 and a State Law on Policy for Foreign Direct Investment was adopted in 1998, drafted with the assistance of FIAS\. However the Agency that was initially established faced difficulties\. The amended law on the Foreign Investment Promotion Agency (FIPA) was 6 Source: ‘Entrepreneurship and the Financial Crisis’ Leora Klapper and Inessa Love World Bank 2011  21 adopted in 2004, establishing FIPA as a State-level agency\. Amongst changes was the abolition of the ethnically based system for rotating General Managers, and its replacement with a Board comprising a majority of private sector representatives, with a sustainable financing base\. 4\.26 The revamped FIPA was initially established on a lean basis in 2002 with a small staff of 7 and a budget of about €0\.22 million per annum\. Branch offices were successfully set up in Mostar and Banja Luka despite their opposition to a State level initiative\. Following the re-launch in 2004 the number of staff employed rose by 2012 to 28 under a director, out of which 22 were in the main office and a small staff in the branch offices\. The annual Budget which is funded by the Government stands at a significantly increased €1\.6 million according to FIPA data\. 4\.27 The work of FIPA, reorganized in accordance with the BAC condition, is divided into a) provision of data, information, analysis and advice on business and investment, b) identification of investment opportunities, including startup opportunities, privatizations, and local companies seeking foreign partners, and c) assistance to investors through linking with governmental and non-governmental institutions\. FIPA offices, including Sarajevo, Banja Luka and Mostar, are operating with full staffing\. The branch offices are used mainly for promotion and preparation for investor visits while the central office deals with the main investment promotional work\. 4\.28 Under the BAC a baseline foreign investment level was established at 4\.3 percent of GDP but there was no actual performance target set\. By the end of the project period (2007) the FDI rate rose significantly, as shown in the table\. Table 10\. Foreign Investment Achievement Baseline Target Actual 2002 2007 Foreign Investment % GDP 4\.3% n/a 13\.7% Source: ICR 4\.29 Beyond the BAC conditionality on the FIPA and the review of legislation provided for the 2001 Bank (FIAS) study 7 the Bank’s main engagement in this action was providing a review of the new law\. The Bank made representations to the Government to ensure that the Board of FIPA remained under private sector control in accordance with its letter of Development Policy\.8 7 The policy law was designed to promote foreign direct investment and to protect the rights of foreign investors seeking to establish business enterprises, and established guidelines for related laws and regulations by RS and FBiH entities\. 8 Letter of September 16th 2004 from Country Manager to Parliament objected to the appointment of the Head of the Foreign Trade Chamber as a member of the Board\. The Law as currently published retains the Trade Chamber member and thus retains a majority of public sector members\.  22 Donor Contribution 4\.30 Assistance was provided initially by IFC (FIAS) and the EU, and latterly at a smaller scale from UNCTAD, USAID and NORAD\. Assistance consisted of initial funding of advisory staff, equipment, materials and the design of promotional programs\. The Office of the High Representative was instrumental in supporting the State Law\. SHORT TERM OUTCOMES 4\.31 FIPA management stated that the organization faces challenges caused by: a) poor communication between Government agencies, b) a lack of project proposals due to concerns about the business climate, c) a still excessive number of steps required to start up business, especially at cantonal and municipal level, and d) presence of corruption around existing regulations\. Outside stakeholders including the FIC confirmed that, despite its expansion FIPA faces such difficulties because the FBiH and RS Entity Governments are reluctant to fully support a State level Institution even though both Entities adopted the original Law on foreign investment\. A number of interviewees also suggested that the agency needed to have a more proactive program to deal with the difficulties faced by investors due to the general business climate\. LONGER TERM OUTCOME 4\.32 The longer term outcome is in terms of FIPA’s effects on investment, including longer term effects on processing time, and total investment flows\. 4\.33 There was a considerable increase in foreign investment as a percent of GDP between 2002 and 2007, originating especially from Russia, Austria and Serbia\. Even though no causal relationship is implied by the increase in investment and the presence of the upgraded FIPA the increase was consistent with the presence of a professionally established promotional service\. However the 2007 investment level was inflated by large deals including the sale of RS Telecom and investment in oil refining and with the 2008 financial crisis it reasserted a much lower long term rate of about 4 percent of GDP, slightly less than the baseline\.  23 Figure 1\. Gross Foreign Direct Investment 4\.34 Data provided by FIPA on numbers of deals being processed show that there has been a significant increase since 2007 in numbers of transactions characterized by a large number of investments at the minimum capital level but a decline in both total and average value\. Table 11\. Long Term Foreign Investment Performance 2007 2008 2009 2010 2011 2012 8 months Total Transactions 1158 1185 945 3769 4992 3162 Avg\. time to start business (days) 12-54 12-60 12-60 12-55 12-40 11-37 Avg number of steps to close 9-30/45 9-30/45 9-30/45 8/30-45 8/30-45 8-30/45 Source: Ministry of Foreign Trade & Economic Relations, Doing Business Reports and FIPA 4\.35 The transactions and values in the above table are discontinuous between 2009 and 2010 because of a change in the basis of estimate\. They show a decline in transactions over 2007 to 2009 followed by a rise in 2010 to 2012\. The maximum time required to start a foreign investment operation has fallen while the number of steps has remained the same\. 4\.36 An alternative overall indicator of the environment for foreign investors in BiH comes from the Doing Business Report on ‘protecting investors\.’ Table 12\. BiH: Performance on Protection of Investors 2006 2007 2008 2009 2010 2011 2012 2013 Over Protection Ranking \. \. \. \. \. \. 98 100 Extent of disclosure (0-10) 3 3 3 3 3 3 3 3 Director liability (0-10) 6 6 6 6 6 6 6 6 Shareholder suits (0-10) 6 6 6 6 6 6 6 6 Investor protection (0-10) 5 5 5 5 5 5 5 5 Source:Doing Business Reports, various years  24 4\.37 According to the table over 2006 to 2013 the position of BiH did not improve in terms of these four indicators of investment attractiveness\. 4\.38 To assess the performance of FDI while controlling for the external factors such as the financial crisis we can examine comparative FDI data for the seven South Eastern Europe economies of the Former Yugoslavia\. In this respect, the relative FDI inflows in BiH fell from the 2007 peak when BiH was in third place in the group as a recipient of FDI to sixth place ahead of only FYR Macedonia in 2011\. Serbia and FYR Macedonia also experienced a relatively small decline in FDI after 2008 but the decline in BiH was significantly steeper than these two economies\. The longer run position of BiH following 2007 has not yet recovered and it remains the second smallest recipient\. Even bearing in mind the broader global issues affecting investment, prima facie this is not consistent with the presence of a highly effective investment agency\.9 Summary of FIPA Reform Attribution and Outcome 4\.39 The attributable output of the BAC operation is in terms of the new State law and the push for increase in the capability of FIPA\. There is no evidence of an improved outcome – that is in terms of actual FIPA capability\. Some respondents felt that FIPA was not operating effectively and FIPA itself cited weak support from RS and FBIH Governments and an adverse business environment as preventing it from achieving success in mobilizing investment\. In the longer run the changes in levels of FDI up to 2007 and subsequently are not directly attributable to FIPA, nor indirectly to the BAC operation\. However what evidence there is on the value of investment does not suggest a highly effective organization\. 4\.40 The rating of the FIPA reforms is modest\. 4\.41 The overall rating for Objective 1 on improving the environment for business entry is modest\. Objective 2: Streamlining the environment for business operation\. 4\.42 This comprises reducing companies' administrative and regulatory compliance costs through rationalization of inspections and regulations, strengthening of judicial and extra- judicial capacity to resolve commercial disputes; and, improving enforcement of secured transactions\. This objective was implemented through inspection reform, collateral/pledge registry, and reform of the chambers of commerce\. Strengthening of the courts was also addressed under objective 1 (i\.e\. the simplification of the court process for business registration)\. 9 World Investment Report 2012 (UNCTAD)  25 OUTCOME OF INSPECTION REFORM Background: Inputs and outputs 4\.43 The system of inspections was identified in the FIAS study as an important bottleneck for business operation in FBIH\. The BAC conditions required that RS and FBiH establish regulations for a business inspection system that rationalized mandates, procedures and schedules of the inspectorates\. They also required that the average number of aggregate on- site inspector days per business per annum for the Market, Labor, Financial Police and Revenue Administration, would be reduced from 28 days to 15 days or less in the RS and from 18 days to 12 days or less in FBiH\. 4\.44 The Entity Governments adopted inspections laws in 2005 which set up unified Inspections Directorates and they adopted action plans for inspection reform\.10 The laws defined the mandate of the inspectorates and set out inspection schedules and guidelines\.11 The new system became operational in March 2006 in RS and in January 2007 in FBiH\. About 26 different inspections from 8 Federal and 9 RS ministries were concentrated into 10 inspection areas under a single Inspections Directorate, including market inspections (prices, safety, intellectual property, consumer protection) and labor inspections (safety at work, labor contracts etc)\.12 The Inspectorates report direct to Cabinet, maintaining a degree of independence from Parliament and the Civil Service\. 4\.45 The targets of the BAC were difficult to implement because of initial opposition from the line ministry inspectorates\. While the IT system was established relatively quickly in 8 cantons, Central Bosnia and Mostar were holdouts\. From 2009 when it became operational the independence of the inspectorates, especially in the FBiH have also come under pressure from the line ministries who wish to regain control\. The FBiH inspectorate has accordingly cut some links with the remainder of the Government service and kept its staff off the Civil Service payroll\. 4\.46 There was a significant reduction in both numbers of inspection visits and number of days required by the time that the project was closed in December 2007, improving on the targets set out under the BAC, in both FBiH and RS\. A 2007 survey 13 found that the average duration of inspections was 7\.5 days in RS, and 9\.9 days in FBiH\. The survey found that the proportions of firms that received inspections, the distribution of the number of inspections, inspectors and days of inspections among the different types of inspectorate were similar in the RS and FBiH\. The percent of enterprises inspected in FBiH was reduced from 65 percent 10 The RS inspectorate employs about 320 staff of which 230 are actual inspectors, of which there are 13 chief inspectors for the main areas of inspection\. The BiH inspectorate holds a similar capacity 11 The Law regarding duration of tax inspection visits states that they should not exceed 10 days for large enterprises and 7 days for all others, and that control should not exceed 15 working days from the date of control inception\. 12 In addition there are included inspections for agriculture – phytosanitary; forestry, veterinary, water, technical – oil/gas, mining, geological, electro-energy, thermal, professions, traffic, surface, and postal\. 13 2007 enterprise survey was of 302 enterprises\. It was conducted by PULS of Sarajevo (now IPSOS)\.  26 in 2005 to 25 percent in 2007\. The highest number of inspections per annum was conducted by the labor inspectorate, while the revenue administration inspectors stay the longest average time per visit\. The achievement under the BAC operation’s performance targets were as follows\.14\. Table 13\. Inspection: BAC targets and achievements Baseline Mid-Term Actual 2007 Target 2004 Number of onsite inspection FBiH 18 FBiH 12 FBiH 9\.9 FBiH 12 days per enterprise per year RS 28 RS 15 RS 7\.5 RS 15 Source: BiH and RS directorate Donor Contribution 4\.47 Two outside donors provided the bulk of capacity building support to the BAC\. SIDA set up a Trust Fund in 2003 managed by the Bank to support the training of nine line ministry inspectorates, prior to the formation of the inspections directorates\. USAID supported the new unified inspectorates\. It provided through the SPIRA project programmers to work on software development\. It also trained inspectors and hosted conferences (such as ‘safety at work’)\. The Agency provided 85% of the cost of IT system including servers, computers, printers and software and also provided vehicles released from other projects\. SHORT TERM OUTCOMES 4\.48 The short term outcomes of this action are assessable in terms of the savings to firms from the more efficient inspection system\. These have been estimated as substantial\. 15 While the inspections reduced the burden on enterprises the centralized system also allowed other benefits such as crosschecking of records\. According to the ICR this allowed illegal workers to be either incorporated into the system or laid off\. 16The Inspectorates quickly proved to be an important means of monitoring the informal economy and increasing tax revenue\. 14 The data for 2007 are based on ‘regular’ inspection days\. They include income tax inspections bu t not VAT as it had only just been introduced\. 15 The ICR estimated direct savings from this of KM 10\.4 million per annum for companies that were inspected plus saving from reduced frequency of inspections of KM 15\.79 million\. The economic benefits for the recipient companies, assuming that one employee is designated to deal with an inspection visit, amount to an average of 28 days per annum (page 14-15)\. 16 The ICR reports that during the project life the RS inspectorate identified nearly 8% of workers in firms visited as illegal and registered an additional 5,000 workers\. The FBiH Pension fund identified 60,000 additional workers resulting in KM 70 million paid to the Fund\. About 25,000 unregistered workers, representing about 12% of total formal employment in FBIH, who had been illegally receiving benefits, were de-listed from the unemployment bureaus\.  27 4\.49 The Chamber of Commerce in RS considered that the common database was an important improvement provided that it was kept updated\. Clarity of rules is allowing less scope for abuse\. On-the-spot reports entered in the field and warning notices for compliance rather on-the-spot penalties were a major step forward\. 4\.50 Ten enterprises were interviewed about inspections in RS and FBIH\. Their criticisms were limited mainly to tax inspections 17 where in some financial institutions complex inspections had increased the costs to firms\.18 There was some criticism about the rationality of fines imposed for violations of labor regulations, and about non-standard interpretations of the Law\. Market inspections were regarded as most problematic, with complaints about lack of clarity on the jurisdiction of the Entity and Cantonal inspectors\. Some respondents thought that the actual inspection days exceeded the officially reported numbers\. However overall inspection efficiency was seen to have improved and the time/cost burden on enterprises reduced because of the unified inspections and the common database\. 4\.51 Since the conclusion of the project both RS and FBIH have introduced web-based inspection systems\. In the case of RS a Regulatory Guillotine program was conducted in 2006 to streamline inspections further, and an inspection program was developed for 2007- 2009 to systematize procedures\. 19 Following the conclusion of the BAC operation a new law in 2010 adopted a standardized inspection procedure and introduced a state-of-the-art Information Management System20 using a risk-based process\. Under this system simultaneous inspections are mandatory and data entry is done in the field\. Checklists and procedures for inspections are published on the website and are therefore open for enterprises to inspect\. Enterprises are able to file complaints about the system, improving commitment to it\. 21 17 A particular complaint was regarding the VAT inspections (which were not covered by the BAC as the system was introduced later)\. The complexity of VAT rules results in a need for experienced inspectors of which there are too few\. In one case the VAT service suspended a rebate while its inspector was said to have ‘camped’ for several weeks in an exporting company’s offices to understand how it did business\. BEEPS survey results show a large increase in annual days spent dealing with taxes between 2005 and 2009 most likely due to the introduction of the VAT\. 18 One firm was obliged to rent office space for a tax inspection liaison unit\. A firm that had set up a coffee dispenser for its staff was told that it would have to pay the fee applicable to an independently established coffee house\. An inspector confiscated items because they were not adequately labeled (but there was not enough space to provide the full label)\. A firm was fined for incomplete paperwork – it appealed and won its case but has received no remedy\. A fish products exporter had to provide to customs ‘fish for analysis’ even though all relevant inspections had been completed\. 19 www\.inspektorat\.vladars\.net/registar 20 The system has been demonstrated outside the country – e\.g\. in Mongolia\. 21 Customers have used the system to lodge complaints, usually against other competing enterprises rather than the inspectors\. The RS complaint line had 14,000 complaints over 5 years about failure to follow market and labor standards (e\.g\. hiring illegal workers)\.While some corruption is thought still to exist this system is reported to be a major improvement from the previous one\.  28 4\.52 The overall improvement is reflected in a BEEPS survey in 2009 where out of a total of 360 enterprises, 288 (80%) found inspections either no obstacle or a minor one\. Only 7 percent found them to be a severe obstacle\. 4\.53 The reason for the success of inspection reforms was a combination of: 1) a high level of interest in the reforms (after initial hesitation) from both BiH and Respublika Serbska (an unusual situation); 2) the expectation that such reforms would potentially boost Government revenues; 3) the change in focus from punitive to supportive; 4) and the interest in the technology and the high caliber technical assistance which promoted it\. LONGER TERM OUTCOMES 4\.54 The longer run outcome would be measurable in the reduced cost to enterprises for a given level of compliance with the regulations, leading to higher profits and growth\. Data for FBiH since 2007 shows that both the number of inspections and infringements has been reduced which is consistent with a more efficient process\. At the same time the percent of violations per inspection has also fallen suggesting that the benefit of a reduction in the time burden on firms has been achieved with the same level or better compliance\. Table 14\. Inspections Results for BiH 2007 2008 2009 2010 2011 2012 1st half Border control inspections 134543 138934 122065 118735 111574 5773 Inland control inspections 25063 14476 25907 16486 12586 43168 No of Violation penalties 6687 11476 12524 5366 7301 1720 Change in number of inspections -3\.9% -3\.5% -8\.6% -8\.2% -21\.2%* Penalties as share of inspections 4\.2% 7\.5% 8\.5% 4\.0% 5\.9% 3\.5% Value of Penalties (KM million) 4\.03 10\.07 9\.86 4\.93 6\.97 2\.01 Source: BiH directorate *Annualized 4\.55 While the result over the period 2007 to 2009 did not show any clear direction, since 2009 there have been significant reductions in the number of controls at the border and inland, in the number of penalties, and in the number of control decisions issued which suggest that the move towards fewer inspections and a less penal and more advisory control regime has been effective\. This is consistent with the objective of reducing burden relative to compliance level\. 4\.56 The RS directorate also provided data for this report on inspections over 2008 to 2012\. The source and type of data are not directly comparable with those of FBiH but the direction of change is still instructive\.22 22 The inspections Directorate was unable to provide data on average time taken per enterprise per year to compare with the BAC targets This was because inspector time recorded combined time on and off-site\.  29 Table 15\. Inspection Results for RS 2007 2008 2009 2010 2011 2012 (to Oct) No of inspection visits 1121 1353 1668 1415 1508 1351 No of violations reported 113 67 150 262 354 264 Change in number of inspections 20\.7% 23\.3% -15\.2% 6\.6% -10\.4% Penalties as share of inspections 10\.1% 5\.0% 9\.0% 18\.5% 23\.5% 19\.5% Total value of fines imposed (000 KM) 224\.0 301\.0 270\.0 Source: RS directorate 4\.57 Unlike FBiH the table shows a slight decrease in inspection visits, but a rise in the number of violations reported\. There was a downward trend in the inspections burden through the lower incidence of irregularity and penalty imposition, the latter falling from 16 percent to 11% of inspections\. At the same time the data show a slight increase in the average duration of onsite inspections since the introduction of the web-based system in 2010\. Figure 2\. Level of Inspection Irregularity 50 44 43 41 39 37 40 30 20 16 16 15 14 11 10 0 2008 2009 2010 2011 I-III Quarter 2012 % cases with irregularities % cases with penalties Source: RS directorate Summary of Inspection Reform Attribution and Outcome 4\.58 The reform of the inspections system was the result of capacity building efforts mainly by USAID assisted by the BAC’s initiative in regulatory reform and performance targeting\. The reforms were of major importance and resulted in requests for a follow-up project (under the ICIS)\. Beyond the completion of the BAC in 2006 the IFC Regulatory Guillotine followed up with additional regulations and procedures\. The longer term outcome, i\.e\. a reduced cost of inspections for a given level of compliance, leading to higher profits, seems to be occurring but usable data are not available on costs of inspections, only indicative data on time savings\. The results from RS are less easy to interpret as they show increased inspection time but reduced irregularities\. Despite the lack of usable data the consensus of all interviewees for this report, Government and private, was that the inspection  30 reforms had on balance been positive for business profitability and growth, and the new systems also provided a spinoff benefit in building of local software development expertise\. 4\.59 The rating of the inspection reforms is high\. OUTCOME OF INTRODUCTION OF COLLATERAL/PLEDGE REGISTRY Background: Inputs and outputs 4\.60 The introduction of the Registries was a requirement for the enhancement of secured lending\. The BAC conditions required that a Pilot of the collateral registry system and trained participants (judges, clerks, and bank officers) would be tested in selected courts across both FBiH and RS and a plan for full implementation would be adopted\. 4\.61 Prior to the formalization of legislation on movable collateral the mechanisms used had included guarantors, salary deductions and mortgages\. A Law on Secured Lending had been adopted in 2000 and the further need for effective procedures including a pledge registry was identified in the 2001 Bank (FIAS) study\. A state-level framework Law on the Pledge Registry was adopted and it became operational in November 2004 under the State Ministry of Justice\. There was initial opposition to the State law from RS but this was dropped later when the utility of the pledge mechanism started to become understood\. Some respondents held the view that the law, which is currently at State level, should be brought to the RS/FBIH Entity level\. 4\.62 A unified statewide system of pledge registries now allows secured transactions through centralized information on all collateral posted\. Movable assets that can be pledged include equipment, vehicles, livestock, products and materials, intellectual property and accounts receivables\. The main users of the system are banks, MFIs, leasing companies, notaries, lawyers, and enterprises entering into contracts with other entities\. Pledge certificates are also usable by the Courts to collect on debts in the event that the pledged asset is not available\. Registration is renewable each year up to the point at which the underlying obligation to the creditor is fully redeemed\. Deregistration occurs once the obligation is fulfilled\. Donor Contribution 4\.63 USAID under its Public registry Project installed the system and provided training of judges and registry staff in the use of the registry software\. There were minor issues in an otherwise apparently successful project (e\.g\. capacity building did not initially include the transfer of software codes which would have required significant additional cost)\. The sustainability and positive benefit of the USAID assistance are shown in the fact that the Ministry of Justice in FBiH has embarked on a two year follow up project to expand the system using its internal USAID-trained staff and its own funds\.  31 SHORT TERM OUTCOMES 4\.64 The key short term outcome of the registry project was its effects on cutting the time and cost of borrowing which was regarded as significant (since the costs of establishing loan security through the courts were passed on to the borrower)\. However it was not possible to obtain quantitative estimates of cost saving\. 4\.65 To gauge these effects qualitatively interviews were held with a number of Government offices and a major bank\.23 The pledge has been more difficult to enforce in some cases than tangible assets such as real estate and usually both types of assets are required\. However the collateral registration system was regarded as providing an effective and important new channel for secured lending, with on-line registration and avoidance of the court process\. 4\.66 A further short term outcome was the effect on the level and growth of registrations\. The number of registrations during the project period following the adoption of the Law, and for the five years since the closure of the project, is as follows\. Table 16\. Numbers of Collateral/Pledge Registrations and searches 2005 2006 2007 2008 2009 2010 2011 2012 to Sept Pledge registrations* 11170 10223 10677 13778 12058 17163 16433 13266 Registry searches 10912 10368 15833 19806 17581 21511 24103 17349 Source: Collateral Registry* One registration may include up to 5 distinct items to be pledged 4\.67 By 2012, there were 1,371 active users of the system, and a total of over 106,000 cumulative registrations\. Data were not available on the number of de-registrations\. The numbers of new pledge registrations and registry searches showed an increase over 2005 to 2012 of 7 to 8% per annum\. This rate of growth of new collateral registrations outpaced that of other comparable indicators and suggests a shift to this form of secured lending LONGER TERM OUTCOME 4\.68 The key longer term outcome of the registry system is in terms of its effects on the expansion of secured and total lending\. However, no data showing the effect on lending could be provided either by the financial institution interviewed or from sector data on bank lending\. The Business Environment and Enterprise Performance Surveys (BEEPS) did not show a rise in use of movable assets as collateral and they showed a slight fall in collateral overall as a percentage of the amount borrowed\. The main exception was in the case of the pledging of accounts receivable\. 23 Raiffeisen bank  32 Table 17\. Percent of firms using various collateral 2005 2009 Land, buildings 63\.7% 69\.9% Equipment 35\.4 34\.4 Accounts Receivable 7\.1 12\.4 Personal accounts 21\.2 14\.2 Other 9\.7 13\.5 Source: BEEPS surveys 4\.69 To gauge the size of the long term secured lending outcome comparator data from the Doing Business reports show public credit registry coverage in South Eastern Europe\. Public registry coverage in BiH was zero up to 2009, after which it increased to reach 36 percent of all adults by 2012\. The public registry replaced some limited private credit bureau capacity already established\. Apart from BiH only Albania and Montenegro are using the public registry route, both slightly behind BiH in terms of expansion of coverage\. However progress while positive, is still relatively limited in all three\. The other South East European countries (Slovenia, Serbia, FYR Macedonia and Croatia) have emphasized private credit bureaus, and all four have made relatively rapid progress near to or at 100 percent coverage over the past five years\. Summary of Collateral Registry Reform Attribution and Outcome 4\.70 The pledge law was a catalyst for an important improvement in secured lending which was component of the improvement of business operation\. The BAC had an overarching role in this respect while capacity building by USAID as in other cases was an essential complement to the WB’s initiative\. The Central Register was the first such system to function across both FBiH and RS and as such was instrumental in encouraging the set up of other State-wide institutions\. The benefits of the collateral registry are not yet apparent in the longer term in terms of secured lending but are considered to have been effective in reducing borrowing cost, which would translate into higher profits for borrower and lender\. In comparison with other states of South Eastern Europe using public registries BiH has shown good results\. 4\.71 The rating of the collateral registration reforms is Substantial\. OUTCOME OF REFORMS OF CHAMBERS OF COMMERCE Background: Inputs and outputs 4\.72 As part of the support to improve the business operating environment the BAC conditionality required that FBiH and RS adopt amendments to the Laws on Chambers of Commerce to eliminate mandatory membership\. The Chambers of Commerce were artifacts of the central planning system of the former Yugoslavia, operating with central, regional and sectoral branches designed to act as an interface between the State and a business community that was mostly under State or collective control\.  33 4\.73 The reform of the Chambers was one of the measures taken up by the so-called ‘bulldozer committee’ run by the Office of the High Representative, and adopted by the BAC\. Obligatory membership in the chambers of commerce system was abolished through amendments in 2003 to the FBIH and RS laws on the Chambers of Commerce\. 4\.74 The purpose of the measure was to reduce the influence of what was regarded as an outdated institution not providing added value to the business sector and to allow voluntary Business Membership Organizations (BMOs) to develop\. The amendment was opposed by the Chamber leadership in both RS and FBiH\. In discussions in the field the RS Chamber claimed a double standard whereby the new Foreign Trade Chamber was allowed to retain compulsory membership and thereby enhance its position vis-à-vis the Chamber of Commerce\. The FBiH Chamber claimed that the freeing of national membership was ineffective because entry membership is at the Cantonal level and has remained compulsory\. Donor Contribution 4\.75 Capacity building assistance was not provided in connection with the BAC since the purpose was to weaken the Chambers\. This was a cause for complaint by the RS Chamber who nevertheless applied for and received assistance under an EPA program for GTZ to fund training of staff\. This diversified the Chamber’ services but showed some lack of donor policy coordination\. OUTCOME 4\.76 In the RS as a result of outreach efforts membership and fee revenue recovered slightly after 2004 and fees stabilized at about half of their former level\. The Chamber diversified, introducing new services such as training in quality standards, and trade seminars, although these are regarded by enterprises interviewed as of only moderate quality\. Service revenue increased in relation to membership fees, reaching about 50 percent of the total\. The RS Chamber managed to avoid layoffs and expand, bringing in new staff\. The FBiH Chamber also tried to diversify into training programs in standards, corporate governance, and product law\. 4\.77 The FBiH Chamber has been superseded to a large extent by the private voluntary Employers Association that has been given the role of the Government’s formal dialogue partner within the FBiH Social and Economic Council (see below)\. In RS the Chamber remains the formal dialogue partner of the Government within the Council\. 4\.78 As a result of continuing opposition the RS Chamber re-established compulsory membership in 2009, although fees remain voluntary and payment can only be encouraged through denial of access to services\. FBiH is also now contemplating the reintroduction of compulsory membership and the measure has been under Parliamentary consideration for some time\. The reintroduction of compulsory membership is a reversal resulting from a less than well-conceived policy change\. Summary of Chamber of Commerce reform attribution and outcome  34 4\.79 The BAC condition was designed to help improve the operating environment for business\. It had a direct effect on weakening the position of the Chambers of Commerce vis- à-vis other BMOs, which was its intention\. This in turn allowed scope for private BMOs to develop such as the Employers’ Associations\. However, the measure was not well conceived, partly because it was pushed forward with inadequate forethought by the OHR and was then adopted under the BAC\. As a result there has been a partial reversal, though the effects of this reversal are not yet clear\. 4\.80 The rating of the Chamber of Commerce reforms is Negligible 4\.81 The overall rating for Objective 2 (improvement of the business operating environment) is modest\. Objective 3: Facilitating business exit\. This implies facilitating business exit through improved bankruptcy and liquidation systems\. OUTCOME OF REFORMS OF BANKRUPTCY LAW Background: Inputs and outputs 4\.82 Bankruptcy practice was identified by the 2001 Bank (FIAS) study as a significant, if not major, problem for enterprise development in BiH\. The BAC conditions were that entities should establish a working group to draft new harmonized bankruptcy laws and should adopt the strengthened and harmonized Laws on Bankruptcy and Liquidation\. 4\.83 While the Law in the FBiH was up to date, developed and adopted in 1998 with the assistance of USAID, the system in place in the RS was still based on the laws of the Former Yugoslavia in which bankruptcy orders were issued by judges based on relatively arbitrary assessments of rights to assets\. New bankruptcy laws for the FBiH and RS were adopted in 2003 based on a Western (German) model allowing for reorganization and proportional compensation according to rules of priority\. The Bank was active in asking for an amendment to the Law in 2004 to facilitate privatization by restricting workers’ priority compensation packages\.24\. 4\.84 The laws were passed amid union protests\. This pressure prevented the FBiH authorities putting SOEs into the bankruptcy process whereas RS created a Trust Fund which provided for a notice period (60 days) and sent laid-off workers to employment bureaus\. Given the opposition of the trade unions and the complexity of governance the adoption of the bankruptcy and liquidation laws was however a signal achievement\. 25 24 Compensation was reduced from an unlimited period to 6-9 months of minimum salary and contributions and mandated a maximum of two months for laying off of workers 25 Acceptance by the employees was assisted by the Government decision to make back payments of overdue SOE wages at the time that the amended laws were being introduced\.  35 Donors Contribution 4\.85 The drafting of the new Bankruptcy law adopted in 2003 was assisted by GTZ (now GIZ) who also provided assistance for regulations on land registration and notaries\. The USAID FILE project provided follow-on assistance with training of judges and bankruptcy receivers\. SHORT TERM OUTCOME 4\.86 The short term outcome of the new bankruptcy legislation can be identified in terms of the level and growth of bankruptcy cases, and the rate of resolutions under the new system\. From 2005 the new bankruptcy filings rose from less than 100 to over 200 per annum in FBIH, and from 121 to over 200 per annum in RS\. The number resolved each year has not quite kept pace with the number of new filings, though occasionally exceeding it (in FBIH in 2007 and RS in 2005 and 2008)\. A jump in unsolved cases has occurred since 2010\. Table 18\. Bankruptcy Filings Entity 2005 2006 2007 2008 2009 2010 2011 2012 1st half Unsolved at start of year FBIH 188 214 237 230 277 303 315 347 RS 311 225 261 289 288 289 365 377 New Filings FBIH 93 105 92 135 188 198 236 91 RS 121 141 174 164 171 257 217 59 Cases Resolved FBIH 66 84 95 88 167 183 204 64 RS 207 105 146 166 170 197 205 46 Resolutions/new filings % FBiH 71% 80% 103% 65% 89% 92% 86% 70% RS 171% 74% 84% 101% 100% 77% 94% 78% Source: HJPC annual reports for 2005, 2006 and 2007\. 4\.87 In both FBiH and RS the number of resolutions as a percent of new filings has on average remained below 100% leading to a steady increase in the number of unresolved cases despite the increase in the number of actual resolutions, suggesting that further capacity is required in the RS economic courts and in the economic division of the FBIH courts\. This seems to support the2012 Doing Business report (p97) which shows that the time required for the resolution of insolvency has not been reduced (see below)\. The cost of insolvency procedures as a percentage of the average value of an estate has also remained the same, at 9 percent, and recoveries have averaged a relatively stable 35 percent of asset value\. 4\.88 While the Law was successfully adopted there have been problems with its practical outcome\. In particular, delays by enterprise managers in filing have allowed enterprises to run down to the point where reorganization is no longer a practical option, and wage arrears cannot be paid\. The court presidents in both RS and FBIH agreed that the proportion of  36 enterprises that were reorganized was too low\.26 The trustee is regarded as an ‘enemy’ depriving the workers of rights, and there is a danger of weakening the justice system because of the pressure on politicians to intervene\. 27 4\.89 Once in bankruptcy the length of time required for winding up an enterprise has also frequently been significantly extended by out-of-court disputes over claims\. The FIC has criticized several aspects of bankruptcy practice\. 28 There is a consensus that additional training is needed for bankruptcy judges and receivers, and improved incentives for the judiciary to become involved in the special and difficult problems of enterprise reorganization\. LONGER TERM OUTCOME 4\.90 The Doing Business Rankings provide longer term indicators of the progress in the bankruptcy practice\. Table 19\. BiH: Bankruptcy Performance Indicators 2005 2006 2007 2008 2009 2010 2011 2012 2013 Rank \. \. \. \. \. \. 78 84 83 Time (yrs) 3\.3 3\.3 3\.3 3\.3 3\.3 3\.3 3\.3 3\.3 3\.3 Cost (% of estate) 8 9 9 9 9 9 9 9 9 Recovery rate % 32\.7 32\.6 34\.3 35\.5 35\.9 35\.9 34\.7 35\.0 35\.4 Source: Doing Business Reports: Various Years 4\.91 These indicators show that the time required to complete the bankruptcy process has remained at 3\.3 years while the cost and recovery rate have also remained about stable over the past few years\. To assess these results the table shows BiH results against a comparator set of countries of South Eastern Europe (Albania, Croatia, FYR Macedonia, Serbia and Slovenia)\. Table 20\. Bankruptcy Process Indicators: Country Comparisons Indicator 2004 2013 BiH Time (years) 3\.3 3\.3 26 The Court President cited 300 cases of bankruptcy since 2007\. Out of these only 25 companies had been reorganized and the remainder had to be closed\. There was considered to be a lack of accountability of management to trustees and workers\. 27 Threats have been made against senior members of the judiciary involved in SOE bankruptcy cases\. 28 Among many proposals the FIC wants to strengthen liquidation rules; clarify documents to be submitted to court; obtain a provision to allow titles to be transferred to Financial Institutions\. It regards Bankruptcy proceedings as too lengthy; training is inadequate; courts lack resources; receivers are of variable quality and should have stricter entry qualifications; there should be larger penalties for managers who file late\. Source: FIC White Book (p66)  37 Cost (% assets) 8\.0 9\.0 Recovery rate % 32\.7 35\.4 S\.E\. Europe time (years) 2\.36 2\.22 Cost (% assets) 13\.2 11\.8 Recovery rate % 32\.9 38\.2 Source: Doing Business Reports 4\.92 Over the last 10 years the average time required in BiH has not improved\. It remained the longest compared to the average of six comparator countries where, on the contrary, improvements have been recorded\. Bankruptcy cost in BiH has remained low at between 8 and 9 percent of estate value although it has risen recently\. The BiH recovery rate has improved over the period but less so than for the comparator countries\. Summary of Bankruptcy Reform Attribution and Outcome 4\.93 The BAC intervention acted as a catalyst for the reform and development of the Bankruptcy laws, assisted by complementary capacity building from bilateral donors\. Attributable short term outcome was in terms of an increased rate of filings and resolutions but there were unresolved problems associated with the operation of the Law (now being addressed by the follow-up ICIS operation) which suggest that a more sustained approach would have been advisable including further building of judicial capacity to enforce it\. There is also a rising backlog of unresolved cases and an increase in cost per case relative to comparator countries\. Longer term outcomes have not been positive since system performance has not improved over five years since the end of the project\. 4\.94 The rating of the bankruptcy reforms is Modest\. 4\.95 The overall rating for Objective 3 on facilitating business exit is Modest\. Objective 4: Strengthen the consultative capacity between the public and private sectors\. 4\.96 This implies improving the policy dialogue for business operation and leveling the playing field for private sector participation in public procurement\. OUTCOME OF REFORM OF PUBLIC PRIVATE POLICY DIALOGUE (PPD) Background: Inputs and outputs 4\.97 Improvement in the policy dialogue was part of the attempt by the BAC to improve the environment for business operation\. Prior to the establishment of a formal process, discussions between Government and the private sector occurred irregularly and infrequently, often with the management of the largest and most influential firms, including loss-making state-owned enterprises\. The BAC conditionality required that Entity Governments establish a mechanism for regular consultation with the private sector to consider their views in the formulation of policies and legislation affecting business\. This involved inter alia replacing the traditional Chamber of Commerce-based process\. A formal process was established as a result of the PRSP of 2000, consisting of a Social and Economic  38 Council in FBiH which was created in 2002 and devolved to Cantonal level\. A similar entity had existed in RS since 1997 and was ratified by a Law in 2008\.29 However there is not a State level Council\. SHORT TERM OUTCOME 4\.98 As stated previously, contrary to the intent of the BAC, the RS Chamber was retained within the public-private dialogue as formal partner of the Government and Labor bodies, to some extent crowding out the new private Employers Association (founded in 2001)\. The RS Chamber participates in standing committees on business issues\. Parliamentary draft bills are usually sent to the Chamber for comment and in some cases it has managed to get decisions reversed–for example in the case of a water tariff\. The Chamber receives advance notices of relevant debates and participates in the preparation of subsidiary legislation\. 4\.99 The FBiH Chamber by contrast lost part of its authority to the Employers Association (founded in 2002) which now sends delegates to meet with the Government and the Unions\. The FBiH Employers Association, which has 90 percent private membership, has been given the right to join the parliamentary working groups and examine draft laws\. 4\.100 An alternative, informal, channel of dialogue, the Foreign Investors Council, was founded in 2006 with the assistance of USAID\. Currently the FIC supports 34 investors with a further 8 expected to become members\. It produces a regular policy ‘White Book’ with proposals for policy changes and it has an arrangement with the FBiH Prime Minister’s Office to hold 3 monthly meetings on White Book proposals\. It has also arranged visits by the Prime Minister to member companies\. 4\.101 While formal dialogue mechanisms have been created, interviews with firms suggested that the initial interest in the Social and Economic Councils had weakened because of lack of preparation and structure, ineffective moderators, and lack of a specific agenda\. Dialogue has also been limited in some views by reluctance on the Government side to expose itself to the scrutiny of private business or the media whom it fears will look for evidence of malfeasance, whether justified or not\. Summary and Attribution of Action to support policy dialogue 4\.102 While the level of dialogue has improved, apart from setting a requirement to setup a mechanism, interviews suggested that The BAC did not itself play a significant role in establishing the Public-Private Sector dialogue and therefore any improvement cannot be attributed to it\. The new mechanism was actually set up through the previously formed Economic and Social Councils, the FIC with USAID support, and the IFC through its Regulatory Guillotine process\. The overall outcome attributable to the BAC has been less 29 The Law on the Economic and Social Council (Official Gazette of the Republic of Srpska, no\.110/08) was adopted in 2008\.  39 than satisfactory because of the continuing influence of the Chamber in the RS and the apparent lack of material support to the Economic and Social Councils\. 4\.103 The rating of the PPD registration reforms is Modest\. 5\. Ratings Outcome 5\.1 Based on the aforementioned rankings the overall outcome attributable to the BAC operation is rated Moderately Unsatisfactory (MU)\. 5\.2 The operation’s objectives were substantially relevant, while the relevance of the design and efficacy were modest\. The BAC operation supported the establishment of economic reforms that were consistent with the overall reform agenda\. There were three major constraints identified in BiH, namely: (i) absence of an adequate legal and regulatory framework to establish and operate a business; (ii) lack of consistent and transparent business regulations and administrative procedures; and lastly, (iii) lack of effective, efficient, and adequately funded administrative and judicial systems\. Progress was achieved through reforms made to business registration, the Foreign Investment Promotion Agency (FIPA), inspections, the collateral/pledge registry, bankruptcy law, and public-private policy dialogue\. While objectives were consistent with Government strategy to improve the business climate, the project design allowed for a relatively short timetable for disbursements relative to the capacity development needs of a post-crisis transition economy\. There were 38 separate policy and institutional development actions that had to be met\. Additionally, the project design focused on the use of specific short-run outcome targets rather than on overall effective systems\. At the same time, complex governance and legal arrangements coupled with fragmentation of authority posed challenges during project implementation\. While progress was made in achieving targeted outcomes, the project had significant and persistent delays with no amendments to the operational objectives of the BAC\. Taking all of this into account, IEG rates the outcome moderately unsatisfactory\. 6\. Risk to Development Outcome 6\.1 The President’s Report for the BAC listed the main risks as, (i) the complex governance structure of Entities, Cantons, municipalities and cities; (ii) the possible loss of momentum due to elections; and (iii) opposition from both inherited Socialist attitudes and emerging vested interests in the current system\. It asserted that these risks were manageable\. In the case of registrations it considered the risk minimal because the Cantonal and regional courts would receive equipment and training\. Surveys would be conducted to monitor the costs of doing business and guide reform toward release of the second tranche\. Furthermore risks would be minimized by donor-funded local economic development initiatives\. Finally, the coordinating authority, Coordination Board for Economic Transition and European Integration, would reduce risk by providing continued support for the reform program and the Governments' anti-corruption programs and many of the laws, regulations and structures set up under the operation would mitigate the risk that vested interests may oppose change\.  40 6\.2 On the basis of the outcomes that have been spelled out in section 4, these risk mitigation assurances were largely not fulfilled and the risks to the reforms going forward remain largely similar\. Firstly, based on local discussions there remains a significant risk of weak support for continuing reforms because of political opposition to State level changes\. Secondly, there is a moderate risk of erosion or reversal of previous reforms especially if opposition (e\.g\. from Cantonal Governments) is allowed to continue or develop, as occurred in the case of the business registry and the Chambers of Commerce\. Thirdly, there is a moderate risk of the degrading of capacity in the regulatory bodies overseeing systems such as business inspections and the business register\. Fourthly there is a moderate risk of erosion of compliance with legal and regulatory processes which may degrade legislation such as the bankruptcy process, and the independence of the inspection system\. 6\.3 The level of risk to development outcomes when applied to the already marginal outcomes of the BAC, rated MS, would mean that the risk-adjusted expected value of development otucmes could plausibly fall to MU\. 6\.4 These risks can only be mitigated through responsiveness to technical and organizational problems and close, sensitive and time-intensive, supervision with continuity of expert support\. The current support program of the Bank, including the Investment Climate and Institutional Strengthening (ICIS) Project is however proceeding with an awareness of these lessons, which is likely to improve the prospects for sustained positive benefits going forward\. 6\.5 The risk rating for the sustainability of Development outcomes is Significant\. Bank Performance Quality at Entry 6\.6 The strategic relevance of the operation was largely satisfactory and in line with the economic reform objectives\.30 However the realism of the reform targets laid out was flawed because a lengthy period of capacity building would be needed to fulfill reform objectives in a post-crisis transition economy\. This was aggravated because the capacity building to implement the critical reforms was in the hands of donor agencies rather than being part of operation\. 6\.7 The choice of instrument was a two-tranche adjustment operation\. The policy areas addressed by the operation were supported by a large number of specific policy conditions, including 18 policy triggers in two Entity Governments for second tranche release\. The timetable was very short relative to the capacity development needs, considering the environment and risks of political opposition\. The capacity to implement the reforms was also to be managed through parallel funding by donor agencies and the operation involved complex oversight arrangements\. The Coordination Board for Economic Transition and 30 As an adjustment operation it did not have explicit environmental, gender and social development or fiduciary requirements\.  41 European Integration was inadequate to deal with the political opposition that emerged later, as a result of the continuing stand-off between FBiH and RS and their opposition to State level institutions\. Considering the unknowns at project entry the analysis of risk and the results framework were insufficient\. However, it must be noted that the BAC was designed during a ‘window of opportunity’ when post-war progressive governments were in office in FBiH and RS who wanted to take ambitious action, and there appeared ex ante to be reasonable grounds for supporting them\. The objectives were also supported by sector studies that were used to identify reforms and was consistent with a strategy of going for ‘early wins\.’ 6\.8 The rating for QAE is Moderately Unsatisfactory\. Quality of Supervision 6\.9 A QAG panel in September 2006 assessed the supervision of BAC as Highly Satisfactory overall\.31This was largely because the Bank’s management team was regarded as doing a very effective job in the particularly difficult implementation environment, and the findings of this report concur with that assessment\. Much effort was made, largely from the local office, to push through the reforms and achieve the targets\. The QAG assessed the focus on Development Effectiveness and Supervision Inputs and Processes as Highly Satisfactory, while Supervision of Fiduciary/Safeguard Aspects and Candor and Quality of ISR dimensions were rated Satisfactory\. The QAG cited the timely and proactive problem solving approach with the project being actively supported by Sector and Country management\. The QAG panel on the other hand identified a lack of client commitment, and inability to reach consensus between Government entities and stakeholders as underlying causes of persistent delays in implementation of Second Tranche measures\. 6\.10 However, despite the high rating by QAG it is questionable why the operation received satisfactory performance ratings in every supervision report except for one in March 2005\. The second tranche release date of December 2003 was not met and a series of ten extensions were granted, starting with three in 2004 alone, of 1, 2 and 9 months each\. The 2004 BAC survey review showed little progress towards the second tranche conditions\. In May 2007, a second survey 32 showed that all targets had been attained except for the targets for business registration\. A final (tenth) 6-month extension until the end of 2007 was approved in June 2007 so that the fulfillment of the target for registrations could be verified\.33 Table 21\. ISR Ratings of the Operation Date DO Rating IP Rating 07/01/2002 S S 12/30/2002 S S 31 QAG Quality of Supervision Report 2006 32 BAC Review, PULS Consultants (now IPSOS), May 2007 33 The final, tenth, extension notification to the Government was sent in June 2007  42 06/19/2003 S S 11/05/2003 S S 06/17/2004 S S 12/21/2004 S S 03/24/2005 MU MU 10/21/2005 MU MS 06/27/2006 MU MS 04/28/2007 MS MS 12/27/2007 S S Source: project documents 6\.11 The final ISR rated the overall outcome as Satisfactory\. The ICR rated the operation as Moderately Satisfactory because the cost of the delays weakened what it concluded were otherwise satisfactory outcomes\. This cost was however mitigated, it argued, because the delays permitted an institutional learning process which improved the outcomes\. 6\.12 The reasons given in the ISR for the reduction to an MU rating in March 2005 were as follows: While both Governments are achieving progress in attaining the targeted outcomes, these achievements are being done with significant and persistent delays\. The team expected both inspection and business registration laws to be adopted by both Parliaments at the beginning of 2005, with inspection and business systems in place and functioning by the end of March 2005\. The efforts on establishing these systems are financed by different donors, DfID, USAID and SIDA - and they stand ready to start systems implementation, which is linked to the formal adoption of the legislation\. To date, the Federation Government has already adopted both laws, while the RS Government is targeting adoption of the laws by March 25, after which the State Government is planning to apply for further project extension of one month to accommodate Parliamentary proceedings\. If the adoption by both Governments does not take place by the end of March, the team recommends providing no further extension of the closing date of the project (ISR/03/24/2005)\. 6\.13 A proposal was made subsequently to restructure targets so that implementation could be completed more easily, but this did not in the end go ahead\. While the March 2005 ISR recognized that the delays were becoming a serious issue the problem could have been understood and addressed prior to this\. The sense within the project team was that credit was due for progress achieved in a difficult environment\. However progress should be gauged against targets rather than against starting points\. For this operation the targets were being missed by a wide margin\. It would therefore have been justifiable either to put the project into the unsatisfactory category where it would get special attention as a project at risk, or to restructure it through revision of the targets\. 6\.14 The multiple brief extensions may have given the impression to the Government that the lending conditions were negotiable ex post\. The approach to extensions was also not necessarily supported by the cooperating donors\. The lack of adherence to the target dates may have been aggravated by the lack of a fully developed results framework and indicators to guide the implementation of the operation\. Intended half-yearly monitoring surveys which  43 might have better highlighted the problems in meeting targets were not carried out\. In 2005 a proposal was made to management to restructure the tranche release conditions but it was not adopted\. While the President’s Report foresaw the risks of implementation delay in practice they were very difficult to mitigate despite the close on-the-ground supervision effort by the project team\. Thus the high quality supervision effort, noted by the QAG, could not offset the problems of deciding whether targets should be adhered to, dropped or extended\. 6\.15 Taking the above points of a) flaws in the design of implementation but b) the considerable efforts made on the ground to offset these, the rating for supervision is Moderately Unsatisfactory\. Rating for Overall Bank Performance 6\.16 The rating for the Bank Performance balances a) some design flaws, b) the significant effort to remedy the issues through close supervision, and c) management’s willingness, under pressure, to extend the completion deadlines rather than amend the targets\. The rating is Moderately Unsatisfactory\. Borrower Performance GOVERNMENT PERFORMANCE 6\.17 The Government’s performance was significantly affected by elections and changes of Administration during the implementation of the BAC which reduced its level of commitment to the project\. Combined with this disadvantage were the following factors: a) the multiple agencies within Government that had responsibility for parts of the project, b) the difficulties of implementing market reforms in a post-conflict environment, and c) the dual Entity responsibility reliant on coordinating committees\. The ISRs however reported that the Governmental Authorities were at all times making considerable efforts to push forward with implementation, and only once implied a failure to perform, in 2005 when the project rating was reduced to MU\. Delays in delivery of legal reforms and new procedures were a direct reflection of the highly fragmented governance structure and frequent opposition of an Entity or Canton to particular regulatory or procedural changes\. While this serves as an explanation for understandable delays it has to be recognized that in the end the Government was not able to satisfactorily meet its commitments\. 6\.18 Government performance is rated Unsatisfactory\. IMPLEMENTING AGENCY PERFORMANCE 6\.19 The original coordinators of the BAC were the Ministry of Trade and Economic Reform (in FBIH), and the Ministry of Administration and Local Government (in the RS)\. However multiple other agencies were also responsible for implementation\. These included the full hierarchy of Governing bodies and courts, and numerous agencies such as inspectorates, registries, and FIPA\. As a result coordination was often ineffective\. The totality of implementing agencies, duplicated in FBiH and RS, were to be coordinated at the  44 top level by Coordination Board for Economic Transition and European Integration\. The coordination of the implementing agencies became more difficult with the take-over of Government by non-reformist political groups\. 6\.20 Implementation agency performance is rated unsatisfactory\. RATING FOR OVERALL BORROWER PERFORMANCE 6\.21 Based on the above points the overall rating is Unsatisfactory  45 7\. Lessons Lessons and supporting evidence from the Outcome assessment 7\.1 BiH suffered from a triple problem: a) the aftermath of civil conflict including the presence of a constitution imposed to settle a conflict rather than to develop the economy; b) the need to transition from a socialized to a market economy, and c) a highly fragmented Governance structure inconsistent with decisive action at the State level\. Taking this into account the main lessons were as follows\. ï‚ In high risk environments (post crisis, fragmented governance, etc\.) an ‘early wins’ strategy may be required, but should be accompanied by flexibility, early and structured review, and an exit strategy in the event that reforms come off track\. ï‚ Formulation of laws in adjustment operations needs to be accompanied by careful attention to addressing implementation constraints, particularly in post-crisis or transition environments, where capacity is particularly weak and the institutional framework is fragmented\. Other aspects related to the implementation of the laws needs to be properly addressed in the intervention\. In the case of the bankruptcy law for example the legislation needed to be backed up by clearer and more effective enforcement regulations\. ï‚ The choice of lending instrument was questionable\. Operations that require intensive on-the-ground capacity building are not suitable for pure adjustment-type lending because the adjustment timetable is usually inconsistent with the capacity building timetable\. Capacity building projects must be of long duration, especially in a post- conflict situation, to adjust to local conditions and allow sufficient implementation time to build up sustainability\. Programmatic lending instruments would be more consistent with these requirements\. ï‚ In situations with multiple development partners and significant capacity constraints, effective leadership and coordination, both in Government and development partners, is essential\. As shown in this evaluation effective coordination and implementation was undermined by (a) fragmented development partners, (b) a division of labor, with donors providing essential TA, disjoint from WB assistance, and (c) weak capacity and political ownership\. Developments since the operation closed: how have the lessons been taken into account 7\.2 The 2007 CAS (Country Partnership Strategy) found that to a significant extent the obstacles facing the business community in BiH remained in place, with BiH being at the low end of the doing business rankings for the sub-region\. This remains largely the case\. The BiH Doing Business rankings have lagged behind other countries in the region since the closure of the operation\. The 2013 Doing Business Report ranks BiH last within the Balkan region in terms of ‘ease of doing business’ and 126th overall in the World out of 183 countries\. BiH ranks in the lower half of the worldwide Rankings in eight reported areas, the only exceptions being access to credit and dealing with insolvency\. Some lack of cooperation between FBiH and RS remains apparent from observation although most recently  46 improvements have finally taken place in some areas such as business registration where data was being withheld by one or other Entity\. The need for a long term approach to institutional change has however been clearly recognized through the follow-up operations that have taken off from the work of the BAC and are continuing to push forward on a range of reforms\. 7\.3 These operations have included The IFC Sub-national Competitiveness Project, which focused on further regulatory simplification including improved procedures for obtaining licenses and permits and for FDI\. This project took account of lessons of the BAC by a) narrowing down the policy reform agenda and b) ensuring cooperation from stakeholders through advanced support for regulatory changes\. The IFC Investment Climate Project also focused on regulation, especially with regard to agribusiness and was implemented in close collaboration with the private sector with outreach to all levels of authority in order to secure better vertical coordination\. The Improving Investment Climate and Institutional Strengthening Project has made further changes in quality inspection, registration and bankruptcy, with greater provision for participation of each state entity and of the Cantons (Central Bosnia and Mostar) that did not cooperate with the BAC program\. 7\.4 In summary the difficulties of supporting complex institutional change in a political divided country were seriously underestimated in hindsight\. However many of the design and process lessons of the BAC have been taken into account, in principle, in the coverage and approach of the new generation of projects in BiH, although risks remain and the business environment remains weak\.  47 ANNEX A References BEEPS enterprise surveys\. 2005 – 2009\. BiH Foreign Investors Council\. 2011, “White Book” EDA\. 2002\. “BAC Baseline Study”\. FBiH Chamber of Commerce\. 2000\. “Chambers of Commerce and Industry in BiH”\. Global Competitiveness Report\. 2012\. IMF\. 2012\. Article IV Report Bosnia Independent Evaluation Group\. (2008)\. Doing Business: An independent evaluation\. Washington DC: World Bank International Crisis Group, 1999\. “Why Will No One Invest In Bosnia And Herzegovina?” ICC Balkans Report No 64, International Finance Corporation\. 2012\. “Project Appraisal Document for the Sub -national Competitiveness Project in Bosnia and Herzegovina”\. PULS (now IPSOS)\. 2007\. “BAC Business Environment Credit Field Survey” UK Department for International Development and DAI, Europe, 2007\. “Reform of Business Registration in Bosnia & Herzegovina: Final Project Report”\. World Bank (FIAS), 2001 “Commercial Legal Framework & Administrative Barriers to Investment,” _____\. 2008, “BAC Implementation Completion and Results Report” _____\. 2002, Presidents Report and Legal Documents _____\. 2010 “Inspections Reforms: Do models exist?” Cesar Cordova-Novion and Tarik Sahovic, ICAS, _____\.2011a “Entrepreneurship and the Financial Crisis” Leora Klapper and Inessa Love\. _____\. 2011b \. “Project Appraisal Document for the Investment Climate Institutional Strengthening Project” _____\. 2012a\. “Project Appraisal Document on Enhancing small medium enterprises access to finance”\. _____\. 2012b\. “Project Appraisal Document for the Sub-national Competitiveness Project in Bosnia and Herzegovina”\. International Finance Corporation (IFC) _____\. 2012c\. 2007-2013\. Doing Business Reports (Bosnia and SE Europe)\.  49 ANNEX A Annex A\. Basic Data Sheet BOSNIA & HERZEGOVINA BUSINESS ENVIRONMENT ADJUSTMENT CREDIT (CREDIT NO\. IDA 36450) Key Project Data (amounts in US$ million) Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total project costs 44\.0 51\.9 1\.18 Loan amount 44\.0 51\.9 1\.18 Cofinancing - - - Cancellation - - - Cumulative Estimated and Actual Disbursements FY2002 FY2008 Appraisal estimate (US$M) 19\.0 44\.0 Actual (US$M) 20\.2 51\.9 Actual as % of appraisal 106\.3 1\.18 Date of final Disbursement: December 7, 2007 Project Dates Original Actual Initiating memorandum 12/17/2001 12/17/2001 Negotiations 09/09/2001 02/25/2002 Board approval 12/28/2000 05/30/2002 Signing 06/10/2002 Effectiveness 05/15/2002 05/15/2002 Closing date 12/31/2003 12/15/2007 ANNEX B 50 Task Team Members Responsibility/ Names Title Unit Specialty Lending Vicki Krecic Peterson Task Team Leader ECSPF Ulrich Albert Hewer Program Manager ECSPF Martin R\. Slough Senior Financial Specialist ECSPF Devesh Chandra Mishra Lead Procurement Specialist ECSPS Senada Havic CFABB Nermina Sljivo ECCBA Yibin Mu Senior Financial Economist CCGCM Gwen Swinburn Consultant ECSSD Michel Zarnowiecki Consultant ECS-ECA Geeta Batra Head IBRT Hans Shrader Program Manager CFA-IFC Supervision Vladimir Kreacic Task Team Leader ECSPF Hormoz Aghdaey Task Team Leader ECSPF John Pollner Task Team Leader ECSPF Haris Mesinovic Consultant ECSPF Tarik Sahovic PSD Specialist CICRS Lamija Hadzagic Financial Management Specialist ECSPS Nicholay Chistyakov Senior Finance Officer LOAFC Jasna Mestnik Finance Analyst LOADM Damir Leljak Finance Assistant LOADM Van Vu Nichols Portfolio Officer ACTCF Svitlana Lewis Resource Management Officer ECSPF Paula Genis Operations Officer ECSPF  51 ANNEX A Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY01 27 107\.50 FY02 42 197\.16 FY03 3 12\.56 FY04 0\.00 FY05 0\.00 FY06 0\.00 FY07 0\.00 FY08 0\.00 Total: 72 317\.22 Supervision/ICR FY01 0\.00 FY02 0\.00 FY03 7 107\.06 FY04 19 138\.26 FY05 32 80\.06 FY06 27 105\.78 FY07 22 95\.36 FY08 7 58\.61 Total: 114 585\.13 Other Project Data Borrower/Executing Agency: Follow-on Operations Operation Credit no\. Amount Board date (US$ million) Small and Medium Enterprise Access To Finance 70\.0 Dec 2009 project(First and Additional) P111780 120\.0 April 2012 IFC (ICAS) Sub-national Competitiveness project 2\.1 June 2007 Improving Investment Climate and Institutional Strengthening project (Trust Fund)\. 5\.0 April 2011 ANNEX B 52 Annex B\. List of Persons Met Bakic, Samir Assistance to Minister, Federal Ministry of Finance Baksic, Alija-Remzo Director, Association of Employers, FBiH Bejtovic, Adela Head Of Cabinet, Sarajevo Municipal Court Bukvic, Nedim Program Officer, SIDA Car, Demo FBiH Inspections Directorate Cudic, Bojan Senior Associate, RS SME Development Agency Grujic, Felica Director, FIPA (Council Of Ministers) Hajric, Mirza General Director, former FIPA Idrizovic, Mira Assistant to President, FBiH Chamber of Economy Komsic, Julian Director, PULS (IPSOS) Consulting Korica, Slavica Exec Director, Promotion & Analysis, FIPA Kovacevic, Bojan Senior Legal Associate, RS SME Development Agency Krunic, Miroljub Assistant Minister, FBiH Ministry of Finance Lacevic, Samir Banks Association of BiH Milanovic, Savko Adviser, RS Inspections Directorate Milin, Vladimir Development Specialist, USAID Milunovic, Igor Dep\. Gen Director, RS Inspectorate Miovcic, Zdravko Director, EDA Development Consultants Misic, Mijo Executive Secretary, Banks Association Miskin, Natasa Program Officer, Embassy of Sweden (former of DfID) Mutapcic, Demaludin Notary Omerovic, Bojana Executive Director, Foreign Investors Council Prastalo, Gordana RS Ministry of Finance Puskarevic, Vojislav Director, Raiffeisen Bank Ristic, Dragica RS Chamber of Commerce and Industry Salihovic, Goran Court President, Sarajevo Municipal Court Surtov, Boris RS Inspections Directorate Tirak, Ibrahim Director, FBiH Inspectorate Vranic, Goran Head of Planning, RS Inspections Directorate  53 ANNEX C Annex C\. Borrower Comments

REVIEW

P001837

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 16794 IMPLEMENTATION COMPLETION REPORT ISLAMIC REPUBLIC OF MAURITANIA AGRICULTURAL SECTOR ADJUSTMENT AND INVESTMENT PROJECT (Cr\. 2093-MAU) June 26, 1997 Technical Agriculture 3 Country Department 15 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit = Ouguiya (UM) UM per US dollar 1989 = 83 UM 1993 = 121 UM 1990 = 81 UM 1994 = 124 UM 1991 = 82 UM 1995 = 130 UM 1992 = 87 UM 1996 = 137 UM WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ASAIP Agricultural Sector Adjustment and Investment Project ASP Agricultural Services Project CCCE Caisse centrale de cooperation dconomique (French Aid Loan Agency) CFD Caissefrancaise de developpement CNRADA Centre national de recherches agricoles (National Agricultural Research Center) GSA Commisariat pour la securiti alimentaire (National Agency for Food Security) MRD Ministry of Rural Development MRDE Ministry of Rural Development and Environment MTSA Medium-Term Sector Adjustment Program for Agriculture PCR Programme de consolidation et de relance (2nd Structural Adjustment Program 1989-9 i PDIAIM Programme de developpment integre de l 'agriculture irriguee en Mauritanie (Integrated Development Program for Irrigated Agriculture in Mauritania) PREF Programme de redressement economique etfinancier (Ist Structural Adj\. Program 1985- 88) PU Planning Unit of MRDE SAP Structural Adjustment Program SONADER Societe nationale pour le developpement rural (National Agency for Rural Development) SONIMEX Societe nationale d'import-export (Import-Export Agency) UBD Union des banques de developpement (Development Bank Union) UCAF Union des cooperatives agricoles de Foum Gleita (Union of F\.G\. Agricultural Cooperatives) UNCACEM Union nationale des cooperatives agricoles de credit et d 'epargne de Mauritanie (National Agricultural Credit and Saving Union) UNDP United Nations Development Program WFP United Nations World Food Program FISCAL YEAR January 1 - December 31 Vice-President : Jean-Louis Sarbib Country Director : Hasan Tuluy Technical Director : Jean-Paul Chausse Task Manager : Abdelkrim Oka  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT ISLAMIC REPUBLIC OF MAURITANIA AGRICULTURAL SECTOR ADJUSTMENT AND INVESTMENT PROJECT (Cr\. 2093-MAU) Table of Contents Page PREFACE \. j EVALUATION SUMMARY \.ii PART 1: PROJECT EVALUATION \. I INTRODUCTION \. \. I A\. PROJECT OBJECTIVES \. I B\. I ACHIEVEMENT OF OBJECTIVES: ADJUSTMENT COMPONENT \. 3 B\.2 ACHIEVEMENT OF OBJECTIVES: INVESTMENT COMPONENT \. 9 C\. MAJOR FACTORS AFFECTING THE PROJECT \.0 I D\. PROJECT SUSTAINABILITY \. II E\. BANK PERFORMANCE \. I I F\. BORROWER PERFORMANCE \. 11 G\. ASSESSMENT OF RESULTS \.11 H\. KEY LESSONS LEARNED \. 12 I\. FTURE OPERATIONS \. 13 PART II: STATISTICAL ANNEXES \. 14 TABLE 1: EVALUATION SUMMARY \. 14 TABLE 2: WORLD BANK LOANS/IDA CREDITS \. \.16 TABLE 3: PROJECT CALENDAR \.1 7 TABLE 4: CREDIT DISBURSEMENTS - ESTIMATED AND ACTUAL \. 17 TABLE 5 A: KEY INDICATORS OF PROJECT IMPLEMENTATION, ADJUSTMENT COMPONENT \.1\. 8 TABLE 5 B: KEY INDICATORS OF PROJECT IMPLEMENTATION, INVESTMENT COMPONENT \. 20 TABLE 6: KEY INDICATORS OF PROJECT OPERATION \. 20 TABLE 7: STUDIES INCLUDED IN THE PROJECT \. 21 TABLE 8 A: PROJECT COSTS \. 23 TABLE 8 B: PROJECT FINANCING \. 23 TABLE 9: ECONOMIC COSTS AND BENEFITS \. 24 TABLE 10: STATUS OF LEGAL COVENANTS \. 25 TABLE I 1: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS \. 30 TABLE 12: BANK RESOURCES - STAFF INPUTS \. 30 TABLE 13: BANK RESOURCES - MISSIONS \. 31 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\.  Appendices: A\. Mission's aide-memoire B\. Resume of Borrower's contribution C\. Borrower's contribution (in French)  IMPLEMENTATION COMPLETION REPORT I ISLAMIC REPUBLIC OF MAURITANIA AGRICULTURAL SECTOR ADJUSTMENT AND INVESTMENT PROJECT (Cr\. 2093-MAU) PREFACE This is the Implementation Completion Report (ICR) for the Agricultural Sector Adjustment and Investment Project (ASAIP) in Mauritania for which Credit 2093-MAU, in an amount of SDR 19\.4 million (equivalent to US$ 25 million), was approved on February 13, 1990 and made effective on April 27, 1990\. The adjustment component represented SDR 14 million and the investment component SDR 5\.4 million\. The credit was closed on December 31, 1996, one year after the original closing date of December 31, 1995\. The first tranche of SDR 7 million for the adjustment component, released on May 4, 1990, was fully disbursed by May 8, 1990\. The second tranche, also of SDR 7 million, was released on May 25, 1994\. Final disbursement for the investment component took place on May 8, 1997, at which time a balance of SDR 20,203\.47 was canceled\. Cofinancing for the project was provided by France in the amount of US$ 8 million, the Federal Republic of Germany in the amount of US$ 2\.0 million, and the World Food Program (WFP) in the amount of US$ 1\.0 million\. Government contribution was equivalent to US$1\.0 million\. The ICR was prepared by Mr\. Abdelkrim Oka (Task Manager, AFTA3), assisted by Ms\. Annick Lachance (Consultant) and Messrs\. Mohamed Tolba (Agronomist, Mauritania Resident Mission) and William Cooper (Consultant)\. The report was reviewed by Mr\. Jean-Paul Chausse (Technical Director, AFTA3) and by Mr\. Hasan Tuluy (Country Director, AFC15)\. Ms\. Andrea Vasquez (Staff Assistant, AFTA3) provided support in the processing of the report\. Preparation of this ICR was begun during the IDA's final supervision mission held in April 1997\. The report is based on material available in the project file and on consultations with previous task managers and Bank staff involved in the project's preparation and implementation\. The Borrower contributed to the preparation of the ICR in working sessions held during the final supervision mission and prepared its evaluation of the project's implementation and impact, which is appended to the ICR\. Some cofinanciers provided comments which are reflected in the ICR\.   ii IMPLEMENTATION COMPLETION REPORT ISLAMIC REPUBLIC OF MAURITANIA AGRICULTURAL SECTOR ADJUSTMENT AND INVESTMENT PROJECT (Cr\. 2093-MAU) EVALUATION SUMMARY Introduction 1\. The Agricultural Sector Adjustment and Investment Project (ASAIP) in Mauritania, IDA Credit 2093-MAU for SDR 19\.4 million, was approved on February 13, 1990 and made effective on April 27, 1990\. It was the first agricultural sector adjustment project financed by IDA in Mauritania\. Earlier IDA-financed projects in the agricultural sector addressed institutional strengthening, small-scale irrigation, environmental protection, and livestock development\. A hybrid project, with adjustment (US$ 18 million) and investment (US$ 7 million) components, the project's design was consistent with IDA's Country Assistance Strategy and other IDA- financed macro-economic and sectoral adjustment being pursued at the time\. Project Objectives 2\. Adjustment and investment components were designed to complement each other\. The adjustment component was to support implementation of the Government's Medium-Term Agricultural Sector Adjustment program (MTSA, 1988) which had three major objectives: (i) to improve incentives to farmers and private investors; (ii) to increase the effectiveness of the public sector (Ministry for Rural Development (MRD) and SONADER, the national rural development agency) and improve programming and monitoring of sector investments; and (iii) to identify development techniques and institutional arrangements conducive to a less drought- vulnerable livestock sector and more sustainable desertification control\. The objectives of the investment component were to test new irrigation techniques and strengthen the management of cooperative perimeters in a sustainable way\. Assessment of Objectives\. 3\. The project's objectives were clearly stated and understood, and supported the sector's development strategy as defined in the MTSA\. However, the operation was complex\. The large number of measures needed to implement the policies continually challenged the Borrower's commitment to the reform program and seriously taxed its implementation capacity\. The three- year delay in the release of the second financing tranche provides evidence of the project's complexity and the difficulties the Borrower faced in meeting the conditionalities\. As for the investment objectives, they were relevant and within the Borrower's capacity to implement\. The complementarity between adjustment and investment was satisfactory\. Although most adjustment objectives were not fully met, they remain valid and will be pursued under planned follow-up operations as detailed in the May 1997 Country Assistance Strategy (CAS)\. Implementation Experience and Results 4\. The objectives of the adjustment program were partly achieved\. Rice marketing and pricing was to a considerable degree liberalized, the land tenure system was launched,  iii restructuring of the agricultural development agency SONADER was completed, seed multiplication and extension services were improved, and the Government's capacities in sector planning and programming were strengthened\. However, the agricultural cooperative credit system is still struggling to improve the credit repayment rate and reduce its administrative costs; restructuring of the Ministry for Rural Development (MRD) has not yet been completed; irrigation works in the Senegal River valley have not sufficiently developed the use of available water resources, and the results of livestock and environmental interventions remain limited\. The investment objectives were satisfactorily achieved\. Sustainability 5\. Despite shortcomings in achieving the sector reform objectives supported by this project, prospects for their sustainability are positive\. Following project completion, the Government has continued to implement the liberalization of cereals marketing and pricing; is expanding the land tenure reform; is pursuing the institutional restructuring of MDR and SONADER; and is attempting to strengthen the operation of the agricultural credit system\. In addition, the Government has decided to deepen and extend the reform program through a proposed integrated development program for irrigated agriculture (PDIAIM) which is under preparation\. 6\. Actions undertaken under the investment component are sustainable\. Acceptable rates of return on investments are expected to be achieved; producers are beginning to take charge of their own affairs and manage their farms more efficiently; new cropping and perimeter management techniques are being accepted, and diversification of irrigated crops is beginning to be practiced\. The progressive disengagement of the State in agricultural activities is having a positive influence on the sustainability of project investments\. IDA and Borrower Performance 7\. Overall, IDA performance was satisfactory\. The Bank provided considerable assistance to the Government during preparation and appraisal of the project and worked effectively with other donors\. However, the Bank was too ambitious in its goals\. Project design was too complex, particularly in the number and detail of the measures needed to implement the reform program which was beyond the Borrower's implementation capacity\. Supervision of the investment component was satisfactory\. The frequency of supervision was acceptable but the missions were often inadequately staffed\. The effort would have been more effective if the Bank had mounted multi-disciplinary supervision teams\. 8\. Borrower performance was satisfactory concerning the investment component but deficient with respect to the adjustment component\. This was attributable to the slow decision- making process, frequent changes in ministers which prevented a sustained policy dialogue, weak institutions and a serious shortage of experienced administrative and managerial staff\. However, within these constraints, which were recognized during project preparation and addressed under the project's institutional development component, the Borrower's performance is considered satisfactory overall\.  iv Key Lessons Learned 9\. The following lessons can be drawn from this project: (i) Proiect design\. Despite the inherent complexities of a sector adjustment operation, project design should be kept simple, realistic and not too ambitious\. The Government's capacity to implement the operation should be honestly evaluated and assistance to strengthen it should be included in the project if necessary\. Even if the policy reform objectives are clearly defined, the measures needed to implement them should be worked out in detail and agreed and understood by the Borrower prior to implementation\. Similarly, the conditionalities for tranche release should be unambiguous\. This was not always the case in this operation\. (ii) Supervision\. This project was the first agriculture sector adjustment operation in Mauritania\. It introduced modern irrigated agriculture where it did not exist before, piloted by a weak and inexperienced administration\. Consistent and high- quality supervision by experienced Bank staff was therefore clearly essential, and it was not always provided (staff turnover was high)\. Continuity in staffing for supervision is crucial\. And because of the multi-disciplinary nature of hybrid operations, it is to be expected that more supervision resources need to be allocated than would normally be the case for either investment or adjustment operations\. (iii) Government's changing role\. Government's withdrawal from the traditional functions of management and control (e\.g\. through decentralization, privatization, etc\.) should be done gradually, and adequate support should be provided to help ease the transition\. Local staff should be trained under a structured program, financed by the project\. In this project, the change-over may have been too abrupt\. (iv) Hybrid operations\. The hybrid character of the operation, where investments supported reform actions, proved to be effective and made the reform program more meaningful to those responsible for its implementation\. Investments helped create an enabling environment and demonstrated to the beneficiaries that the reforms introduced under the project produced positive results\. (iv) Economic viabilitv\. Under current circumstances in Mauritania, irrigated rice production for the domestic market (geared essentially to broken rice) is not economically viable unless it is associated with other irrigated crops (diversification) and unless this production system is integrated with the rest of the agricultural sector\. This issue needs to be addressed in follow-up operations\.  v Future Operations 10\. The Government has drawn lessons from this project experience and is reflecting them in the design of its Integrated Development Program for Irrigated Agriculture (PDIAIM)\. The broad outlines of the PDIAIM were discussed at a round table in Nouakchott in October 1995 and accepted by the donors including IDA and the Government\. The PDIAIM will pursue the reform measures initiated under the ASAIP, focusing on land tenure, credit, farmers' organizations, extension and research, and rural infrastructure\. Some investment components of the PDIAIM are under preparation or implementation with donor support\. As for adjustments, France and Germany are supporting the credit aspects and the European Union the land tenure aspects\. IDA has granted a PPF advance for the preparation of a hybrid project within the framework of the PDIAIM\. Appraisal is scheduled for 1998\. In addition, the Government is preparing, with IDA assistance, a Rural Development Strategy that will reinforce the agricultural sector development program\. Finally, a number of sector studies are planned in connection with the Country Assistance Strategy for 1997-2000, dealing with off-farm linkages and growth opportunities, communication, diversification and technological transformation, and rural services\.  IMPLEMENTATION COMPLETION REPORT ISLAMIC REPUBLIC OF MAURITANIA AGRICULTURAL SECTOR AND INVESTMENT PROJECT (Cr\. 2093-MAU) PART I: PROJECT EVALUATION INTRODUCTION 1\. Mauritania's economy declined from a period of 8 percent annual growth during the 1960s to a state of stagnation that persisted in the mid-1970s and early 1980s\. Factors that contributed to this stagnation include: (i) frequent droughts; (ii) the drop in demand for steel on the world market, and hence in demand for iron ore which Mauritania exports; and (iii) inappropriate macro-economic and sectoral policies\. 2\. In 1984, to improve its deteriorating economic and financial situation, the Government drew up an economic and financial recovery program for 1985-1988 (Programme general de redressement economique - PREF)\. IDA supported the PREF through a Structural Adjustment Credit (Cr\. 1812-MAU, FY87)) which was implemented satisfactorily\. In 1988, the Government followed up with a second adjustment program -(Programme de consolidation et de relance - PCR), which had as its main objectives: (i) consolidation of the gains from economic recovery through reduction of the budget deficit and strict monetary management; (ii) improved selection of projects and streamlining of Government's operating expenditures; (iii) improved incentive system for the private sector; and (iv) reorganization of state enterprises and financial institutions in order to create a climate conducive to growth\. In connection with the PCR, the Government formulated, also in 1988, a Medium-Term Sector Adjustment Program for Agriculture (MTSA) to: (i) improve incentives for farmers and private investors; (ii) increase the efficiency of the public sector, (the Ministry of Rural Development (MRD) and SONADER, the national rural development agency) and improve the planning and monitoring of the sector's public investment program; and (iii) identify technologies and institutional support conducive to a less drought- vulnerable livestock sector and to more sustainable desertification control\. The Agricultural Sector Adjustment and Investment Project (ASAIP) was designed to support the implementation of the MTSA\. A\. PROJECT OBJECTIVES 3\. Description of project objectives\. The project was a hybrid operation consisting of an adiustment component and an investment component\. 4\. The adiustment component was designed to deepen and broaden the agricultural sector reforms begun under SAP I (which included a statement of agricultural policy and an action plan on cereals trade and pricing), and to help implement the much broader reforms envisaged under the MTSA\. The MTSA policy agenda supported by the ASAIP contained ten specific medium- term reform objectives, as follows:  - 2 - (i) Deregulate marketing and liberalize prices of agricultural outputs and inputs; (ii) Establish a viable agricultural credit system to support private sector and farmers; (iii) Ensure more secure land tenure; (iv) Improve the operational efficiency and financial performance of SONADER; (v) Improve the operational efficiency of MDR; (vi) Increase crop intensification and diversification through extension and research; (vii) Improve sector investment planning and monitoring; (viii) Devise and adopt more efficient means and technology to utilize irrigation potential made available by the construction of the Manantali and Diama dams; (ix) Develop less drought-vulnerable animal husbandry; and (x) Develop sustainable environmental protection activities\. 5\. The objective of the investment component was to help the Government test new irrigation techniques and strengthen sustainable management of cooperative perimeters\. This component included support for (i) the management of a 2,000 ha collective perimeter and of the Foum Gleita dam on the Gorgol River, and of 1,500 ha of flood-recession land located around the Foum Gleita reservoir of the dam; and (ii) environmental protection operations benefiting 1,500 persons belonging to farming, stockraising and fishing families in the area\. 6\. Assessment of objectives\. Project objectives, while numerous, were precise, clearly- stated and in accord with the sector's development strategy\. A large number (about 190) of specific measures, detailed in a matrix to guide and monitor implementation progress, covered virtually all aspects of sectoral strategy\. These measures mainly concerned the development of irrigated agriculture\. Rainfed areas and the livestock sector, although mentioned in the sector analysis, were relatively neglected\. The objectives of the reform program were ambitious and seriously challenged the Borrower's commitment to the program and its implementation capacity\. As it turned out, the Borrower was unable to fulfill the policy reform conditions attached to the release of the second tranche on time (estimated to occur about one year after effectiveness), and second tranche release was delayed by about three years\. 7\. The hybrid nature of the operation was justified by the obvious complementarity of the adjustment component which was designed to support policies and reforms to promote irrigated agriculture, and the investment component which was designed to test new irrigation methods for small producers on collective perimeters\.  - 3 - B\.1 ACHIEVEMENT OF OBJECTIVES: ADJUSTMENT COMPONENT (a) Liberalization of cereals markets andpricing 8\. Three main areas were addressed under this objective: (a) abolition of the rice import monopoly; (b) liberalization of cereals sales and purchase prices; and (c) creation of a system of protective tariffs intended to protect rice producers, without however unduly penalizing consumers\. The results of measures taken to achieve the objective can be summarized as follows: 9\. With respect to rice imports, SONIMEX, a public monopoly, was to be replaced by a pool of traders involved in the marketing of domestic production\. This was done, but the pool is made up of only four to five private traders and SONIMEX (49 per-cent of whose stock was bought by private parties, some of whom are members of the pool)\. The need for pool members to have adequate resources to finance rice purchases and the difficulties involved in obtaining hard currency to pay for imports made it difficult to expand the pool\. This has put the current members in the position of being a defacto oligopoly\. 10\. The marketin of domestic and imported rice has, in theory, been liberalized\. However, the Govemment retains some control over prices by fixing, for each paddy harvest, a so-called "'orientation" price which incorporates an element of protection of local production\. This is followed by a "consultation" between the Government, the pool members and the producers to ensure the sale of domestic production, and to agree on the level of imports needed to bridge the supply gap\. This informal agreement is advantageous for domestic producers since it guarantees that their production will be sold, but it provides no incentives for them to improve yields and reduce production costs\. The consumer, unfortunately, is penalized by a market price which is kept artificially high\. As for the members of the pool, agreeing to buy the more costly domestic rice allows them to make up losses on the favorable margins they can obtain on the imported rice\. Also, the pool has been able to obtain loans to purchase local paddy, in 1995 from UNCACEM, at a more favorable rate than that charged by commercial banks, and, in 1996, from commercial banks at interest rates subsidized by the Government\. This excessively administered and subsidized system invites possible abuses and is, therefore, not viable\. 11\. Protective tariffs on imported rice were put in place in the form of a 45 percent tariff applied to an average price quote, arrived at by means of a complex formula\. This posted value was to be readjusted every 3 months in order to reflect fluctuations in the international market while at the same time attenuating those fluctuations\. Since 1994, however, the posted value has been adjusted only twice\. Although protective tariffs have been applied in a conscientious manner, the system has proven excessively complicated and difficult to manage\. It is being replaced by a much simpler formula agreed upon with the IMF and the World Bank\.  - 4 - Measures of ASAIP (as in World Bank President's Report) CONDITIONS FOR BOARD PRESENTATION - Government to issue the Sector DevelopmentPolicy Statement\. - Government to issue a decree setting all the measures described in par\. 35 & 36 regarding freedom of private sector in marketing of local rice, CSA withdrawal from rice and food aid marketing, new cereal prices for 1988/89 and the new formula for setting cereal prices thereafter, and programming of food imports\. - Governmentto complete bidding procedure for sales of the four public sector rice mills to the private sector\. - MDR to complete inventory of all land distributedto date in application of the Land Reform Law\. - Governmentto establish the interministerialland reform coordination committee\. - Governmentto specify minimum and maximum sizes of parcels to be distributedto individual farmers in applicationof the Land Reform Law\. - SONADERJUBD to sign contractual agreement including action plan for SONADER withdrawal from credit delivery\. - SONADER to reduce its staff by 10 %, to increase water charges by 15%, and to declare that, starting in 1990, no credit will be provided to farmers that have not repaid 100% of their debts vis-a-vis SONADER\. Land Tenure - MDR to agree with IDA on its 1989-91 investment program\. CONDITIONS FOR FIRST TRANCHE RELEASE - Satisfactory Review by IDA of progress made in implementation of the MTSA program\. - Government to start implementing custom duties on cereal imports and the formula linking the wholesale price of rice to the world price\. - Government to complete transfer of rice mills to the private sector\. - Governmentto issue the revised application decrees and ministerial orders of the Land Reform Law\. - SONADERto further increase water charges by 15%\. - SONADERto issue and implement a three-yearaction program for its gradual withdrawal from input delivery\. - Govt to finance SONADER's budget deficit for 1990\. CONDITIONS FOR SECOND TRANCHE RELEASE - Satisfactory Review by IDA of progress made in implementation of the MTSA program - Satisfactory implementationofall the provisionsofthe revisedapplicationdecreeand ministerialordersof the Land Reform Law\. - Governmentto complete study of reorganization of land tenure-related public sector services and start implementing its recommendations - Governmentto complete land distribution plan (with schedule) in the Senegal valley and start implementationof this Plan in the Delta region\. - UBD to complete reorganization of its agricultural credit department\. - UBD to issue new lending criteria for credit in rural areas\. - SONADER to issue and implementnew design, construction and 0 & M criteria for publicly-fundedirrigation perimeters\. - MDR to issue and implement action plan and medium-term priority investment program for irrigation development - SONADER to further increase water charges to full recovery of 0 & M costs\. - SONADER to complete its staff reduction and its reorganization and management reforms\. - Govt\. to issue a decree revising composition of the Board of SONADER, and its procurement procedures, and to finance its budget deficit for 1991\. - MDR to complete reorganizationof Cellulede Planification and definition of its 1991-91 work program\.  -5- (b) Agricultural Credit 12\. In 1989, SONADER's credit portfolio was transferred to the Government's development bank (UBD)\. On the strength of its lending policies and financial resources, UBD increased its lending volume exponentially over the 1989/90-1991/92 seasons, without, however, adequately checking how funds were to be used and without requiring recovery of existing loans\. The low credit recovery rate (46 percent) led Government to decide, in May 1992, to remove agricultural credit management from UBD and to create a mutual credit structure, in the form of agricultural credit cooperatives (CACE) in the Trarza and Haut Fleuve regions, and an apex organization for agricultural credit cooperatives (UNCACEM)\. The Bank supported the Government's decision\. 13\. UNCACEM and the CACEs became operational in 1993\. They had adequate regulatory and financial frameworks and good accounting and financial procedures\. The IDA credit supported the organization, contributing 121 million UM between 1993 and 1995 to finance groups within the CACE of the Haut-Fleuve region\. 14\. UNCACEM inherited the liabilities of UBD's portfolio and was responsible for clearing the accumulated arrears\. Despite a rigorous policy of credit recovery, including legal action against defaulters (liens, property seizures, judgments, etc\.), the recovery rate was very low (almost zero in the first year), essentially because the judicial system was not equipped to achieve credit recovery through litigation, particularly in the Haut-Fleuve region\. As a result, from 1994 onward, UNCACEM only extended credit to clients who were current with their credit repayments\. As a result, the number of cooperative members eligible for credit dropped from 700 in 1993/94 to 160 in 1996/97\. In 1996/97, credit was extended to about 40 percent to the large private farmers and to 15% of the cooperative members\. On the other hand, the rate of recovery for seasonal credit improved from 58% in 1994/95 to 90% in 1996/97, while total loans extended to producers went from 274 million UM in 1992/93 to 498 million UM in 1996/97\. In addition, with financial assistance from Government and CFD, UNCACEM was able to mobilize 619 million UM for comercialization credit to help the pool purchase the 1995/96 domestic rice production\. For the 1996/97 campaign, the Government helped the pool to mobilize 1,100 million UM from commercial banks by paying the interest costs\. This manoeuver clearly demonstrated the advantages of financing marketing activities, but the method utilized (credit rate bonification) is not sustainable\. 15\. Under the project, agricultural credit has helped bring an average of about 9,500 ha into paddy production each year since 1992/93, out of a total of 18,000 ha\. It has also helped purchase pumps, tractors and harvesters, and buy and market about 15,000 tons of paddy in 1996 and 2600 tons in 1997\. Indirectly, agricultural credit has helped to regularize land tenure by inducing credit cooperative members to commit to this task as a condition of credit access\. However, due to the low volume of loans granted, the management costs of the CACEs and UNCACEM are too high: 9 percent of the value of loans granted, whereas the norm is about 5 percent\. Clearly, the loan volume would need to increase considerably to keep management costs within acceptable limits\.  -6- (c) Land Tenure 16\. In 1990, a decree was passed to introduce measures to (i) decentralize land attribution; (ii) define the steps leading to property acquisition; (iii) effectively involve the population concerned; and (iv) guarantee secure tenure\. These measures were described in more precise detail over the 1989-93 period, as experience with the new system was gained and needs became better known, through laws and administrative circulars, particularly concerning the keeping of the land registry (1990); the notion of vital space for rural settlements (1991); and modes of representation and consultation of the population (1992)\. Most of the necessary legal arsenal was perfected during this period\. Another law, introduced in 1990, defined the mandates of the entities in charge of land tenure policy, especially the Ministry of the Interior (Office of Land Tenure Review), the MDRE (Office of Land Tenure), and the Ministry of Finance (the Domaines, or land management office)\. 17\. On these regulatory and institutional foundations, a test operation on land tenure regularization was begun in 1991 for cultivated parcels in the Trarza Est region\. This operation successfully demonstrated the feasibility of the new system and the advantages for agricultural producers (incentives to better manage the capital of land and water, make long-term investments and gain easier access to credit\.) This led the Government to expand the land tenure reorganization, first to the Gorgol in April 1993, then to Trarza-Ouest in January 1994, and to the whole of the Moyenne Vallee and Haute Vallee since 1995\. As of 31 December 1996, requests for land titles covered 39,594 ha in the Trarza, of which 27 per-cent concerned collective perimeters (176 farms) and 73 per-cent private operators (648 farms)\. Of this total, 15,354 ha of agricultural land were regularized (for an average surface area of 40 hectares), as were 23 gazetted land reserves (17,700 ha), 35 vital spaces (1,619 ha) and 3 gazetted forests (975 ha), for a total regularized area of 35,648 ha\. Clearly, the land tenure system initiated under the project has been successfully launched and is fully expected to be sustainable\. (d) Reorganization of SONADER 18\. SONADER was first restructured in 1989 on the basis of studies financed by the Kuwaiti Development Fund and the World Bank, and disengaged itself from activities that were peripheral to its main mandate\. It sold the Ka6di and Boghe rice mills, withdrew from marketing activities, transferred agricultural credit activities to the newly mandated agencies (UBD, then UNCACEM), and transferred agricultural input activities including the management and maintenance of agricultural equipment to private operators\. A second restructuring took place in 1995, which put order in its finances and significantly reduced staff (down from 540 to 265)\. Water fees for producers in the irrigated perimeters were increased and farmers were made responsible for water resource management through co-management protocols with SONADER which ceded ownership of water works to them\. Technical and financial management will thus be progressively and completely transferred to farmers\. In addition, the composition of SONADER's Board of Directors was changed to include a farmers' representative\. SONADER's restructuring is considered to have been successfully implemented\. (e) Restructuring and strengthening of MRD 19\. The Government's disengagement from agricultural production functions argued in favor of transforming the MRD into the Ministry of Rural Development and Environment (MRDE)\. This restructuring was carried out in March 1993, based on a study financed by CFD\.  - 7 - Unfortunately, the restructuring program was not supported by budgetary provisions and other measures such as staff training and information dissemination\. At the regional level, the restructuring program only became effective with the implementation of the Agricultural Services Project (ASP) in 1995, which provided financing for the construction of offices, transportation for field agents, in-service training and skills upgrading for staff, and a clear work program\. MDRE's salary budget increased by about 12 percent in real terms but declined in constant terms of 1985\. Clearly, the basis for a more efficiently organized ministerial department has been laid but the restructuring program is not complete and needs to be pursued under follow-up operations\. (6) Research, seed multiplication and extension 20\. Research\. The National Agronomic Research Plan (NARP) was prepared and adopted in November 1990 but could not be implemented for lack of funds\. A new plan was drawn up in 1995 as one component of the Agricultural Services Project (ASP)\. This plan defines priorities for crop and animal research for the next ten years, based on constraints identified in collaboration with producers and stockraisers\. It consists of five programs corresponding to the five main production systems: (i) irrigated; (ii) rainfed/flood recession; (iii) sylvo-pastoral; (iv) oases; and (v) peri-urban\. The research component of the ASP was unfortunately launched only in 1997 because of delays incurred by the Borrower in fulfilling disbursement conditions\. In the meantime, research activities have begun in the areas of intensification (financed by CFD) and diversification (financed by the European Union)\. 21\. Seed multiplication\. A rice seed production/marketing system was set up under the Seed Development Project (SDP), with UNEF/UNDP financing\. Pre-foundation seed is produced by the research services (CNRADA), sold to private producers of foundation seed, and the latter are bought by seed-growing farmers for the production of commercial seed\. The Monitoring Service within the SDP's Management Unit monitors the quality of seed and certifies it\. In the rainfed zones, the SDP set up a system of collecting traditional seeds in village storehouses, using new techniques of selection, decontamination and preservation\. The supply of rice seed is currently covered without difficulty by this system\. 22\. Extension\. A central directorate of research, training and extension was created in 1993, and a unified extension service was set up within each regional delegation\. Today, extension reaches a large portion of the country's cropping zone, and the messages covered are beginning to include aspects other than crops, e\.g\., stockraising, forestry and environmental protection\. (g) Public investment program 23\. To improve the planning and monitoring of investments and increase their contribution to agricultural sector growth, the Planning Unit (PU) of MRDE was reorganized in December 1988, prior to the ASAIP, to include an Office of Economic Studies and Rural Policies, an Office of Programming, Budgeting and Monitoring, and a Computer Applications Unit\. In July 1993, under the ASAIP, responsibility for the PU was entrusted to the Minister's Economic Adviser\. A training program in project analysis and investment budget design and monitoring was developed in 1992 and four managers were trained\. IDA supported the PU by financing vehicles, computer equipment and staff incentives\. The PU has contributed to the Bank's public expenditure review missions of 1991 and 1995, to the preparation of the Paris Consultative Group in May 1994, and to the preparation of a consolidated investment budget for the rural sector\. The Unit has  - 8 - published reports and programs of the CREDO and yearbooks of rural development data and has developed a database on the primary sector\. These activities are irrefutable evidence of institution building\. (h) Irrigation 24\. In 1989, the pace of perimeter development in the Valley began to slow down\. By 1994, half of the private and public perimeters had been abandoned for various reasons: inadequacies in the works or equipment; soil depletion due to faulty drainage; deterioration of the agriculture terms of trade; strict adherence to credit recovery conditions; rigor in the payment of water fees; disengagement of the State from activities that were inadequately or not at all taken up by the private sector; good rains which favored a return to traditional rainfed or flood recession crops\. In response, measures were taken to improve the viability of irrigated farms: (i) the Water Code became law; (ii) a Code of Irrigated Perimeters was drawn up to define and regulate the respective roles of the Government and beneficiaries; (iii) the registry of irrigated perimeters was updated in 1990, and again in 1994 in connection with SONADER's study of irrigated perimeters; (iv) the post-dam study was finalized and new norms for the equipping of irrigated perimeters were articulated by the MRDE; (v) based on studies conducted by SONADER in 1994, a consolidation program for small perimeters was launched; (vi) a start was made on applying the Government's new intervention policy concerning hydro-agricultural infrastructure; and (vii) a priority program to rehabilitate small dams outside the Senegal River Valley was implemented\. It should be noted, however, that the legal texts allowing for the application of the Water Code has not been finalized, and that the Code on Irrigated Perimeters was judged unnecessary since it overlapped with the Water Code as well as with the specification manual on land tenure\. (i) Stockraising 25\. In connection with the ASAIP and the Second Livestock Project, 39 pastoral associations (PA) were created, of which 34 had a veterinary product depot and 25 a dairy product mini- project\. In addition, 68 watering places were rehabilitated and 13 new ones created\. Initially, these associations covered a large territory, which limited their effectiveness\. In 1993, 22 of these PAs were reorganized into smaller and more operational entities\. Two pastoral perimeters (PP) were set up on a pilot basis to perfect a rational methodology of participatory pasture management\. It is still too early to assess the results, and the experiment will continue under the Rainfed Natural Resource Management Project (RNRMP)\. () Environmental Protection 26\. Progress in this area is limited\. An environmental code and an environmental strategy are under preparation, with UNDP assistance, in the context of the desertification convention\. In addition, a draft law on forests and wildlife and game management was finalized, and several studies were conducted, including one on charcoal and one on the management of two gazetted forests (Gani and Diorbivol)\. Overall, commitment to environmental issues is limited and progress is slow\.  - 9 - B\.2 ACHIEVEMENT OF OBJECTIVES: INVESTMENT COMPONENT 27\. The investment program was successfully implemented\. Pilot activities in the Foum Gleita perimeter were carried out satisfactorily, and analyses performed by SONADER indicate that the component will achieve an estimated financial rate of return ranging from 15% to 24 %, depending on the scenario in question\. Other results are detailed below: (a) Local cooperatives were integrated into a Union of Agricultural Cooperatives (UCAF)\. UCAF participated in the planning and implementation of activities in the perimeter areas and in the management of the water fees fund\. A revolving fund was set up to ensure the self-financing of the agricultural campaign\. Producers were closely involved in the design of this system, which explains the 100 % reimbursement rate over the five years of the fund's operation\. The revolving fund has grown significantly, due to producers reinvesting a portion of their profits\. As a result, IJCAF has established a good capacity to prefinance agricultural campaigns\. (b) A rational water management system was set up, along with training and awareness campaigns\. As a result, water consumption per irrigated hectare was reduced by 50% between 1990 and 1995\. (c) Agricultural production improved after a decline during the 1992-94 period\. Yields per hectare stabilized at an acceptable level and cooperative members were advised to diversify their crops\. Women's cooperatives cultivated vegetable gardens on 16 ha in 1993, 25 ha in 1994 and 36 ha in 1995\. (d) Extension services were strengthened, which resulted in more effective dissemination of information to farmers (line planting, mulching, weeding, leveling, flooding, introduction of certified seed)\. Extension services covered about 30 % of farmers and the adoption rate was abou 40%\. (e) Integrated stockraising was strengthened with the creation of an agro-pastoral association in 1991, which now has 210 members and provides animal health services through 35 trained livestock auxiliaries equipped with medical kits and a pharmacy\. In addition, two stabling areas and a pit silo for the composting of urine-soaked straw were built\. As a result, the livestock population grew from about 1,000 cattle and 3,000 small ruminants in 1987 to more than 5,500 cattle and 21,000 small ruminants by 1993\. (f) Fishing in the dam's reservoir was developed through the creation of pre-cooperative groups which were targeted by extension services and provided with light fishing gear\. The average gross income of a fisherman, estimated at 370,000 UM per year, is greater than that of a rice producer with a standard-size family parcel\. (g) Environmental protection was promoted through the planting of windbreaks along canals and drains, over a total distance of 20 km; distribution and planting of 12,000 shade trees; placement of a small eucalyptus plantation near abandoned parcels; and the creation of 44 ha of green space\. The windbreaks were set up so as to be both protective and productive, a technique that has resulted in the harvest of both firewood and construction lumber\.  -10- C\. MAJOR FACTORS AFFECTING THE PROJECT (a) Factors not under Government's control 28\. Factors not under Government's control that affected the project were: (i) dependence on external aid; and (ii) fluctuation in world prices for rice\. * Mauritania depended heavily on external aid to finance the investments and institutional support that accompanied the ASAIP\. This aid was specifically earmarked and subject to the financing procedures and schedules particular to each donor\. This reduced the Government's ability to follow a coherent action plan for its operations and to coordinate activities over which it had little control\. A pro-active approach vis-a-vis the donors and better planning and coordination by the Government would have improved project outcomes\. * The significant increase in the price of rice on the international market in 1995 was viewed as good news by national producers as local production became more competitive, and also by the Government which saw its economic justification for investments in the Valley improve\. However, since Mauritanian consumers prefer broken rice, traders imported massive quanitities of broken rice from Asia, at very favorable prices\. Although tariffs were established to ensure the sale of domestic production, this was done in a way that did not conform to the spirit of the liberalization policy on cereals marketing and pricing\. (b) Factors within the Government's control 29\. In several areas, the Government could have played a more decisive role\. For example: - A good monitoring and evaluation system and more rigorous planning and coordination would have produced better results, and sooner\. The Planning Unit within MDRE, financed by the credit, was nominally in charge of these tasks\. However, the PU was not transformed into a Directorate of Studies and Planning and given a clear mandate, as planned for under the project, and there is no provision for its operational expenses in the Ministry's recurrent budget, for reasons that are unclear\. * In the area of agricultural credit, the Government had a tendency, especially at the beginning of the project, to interfere in decisions on loan applications and awards made by UNCACEM, an autonomous agency which receives its funding from the Government\. As a result, UNCACEM was forced, in 1993, to grant loans without adequate credit checks, often to persons who had not paid off previous debts\. The situation has improved, but a large portion of UNCACEM's arrears are holdovers from that period\. * The National Federation of Transporters, which has a monopoly on road transport and fixes its prices unilaterally, carries imported agricultural inputs to the farmers and local production to the markets\. The high cost of land transport handicaps the marketing of local rice with respect to price\. The Government should have introduced competitive  - 11 - mechanisms into the transport sector to bring about a drop in prices\. A similar constraint weighed upon air transport, to the extent that Air Afrique has a monopoly it shares with Air France for cargo not handled by Air Mauritania\. Attempts at diversification for export purposes seem impossible until concrete measures are taken in this area\. D\. PROJECT SUSTAINABILITY 30\. Despite shortcomings in achieving the stated reformn objectives, prospects for their sustainability are positive\. Following project completion, the Government has continued to implement the liberalization of cereals marketing and pricing; is expanding the land tenure reform; is pursuing the institutional restructuring of MDR and SONADER; and is attempting to strengthen the operation of the agricultural credit system\. In addition, the Government has decided to deepen and extend the reform program through its proposed integrated development program for irrigated agriculture (PDIAIM)\. 31\. Actions undertaken under the investment component are considered sustainable\. From an economic standpoint, rates of return, estimated at 15% and 24% for two different scenarios, are expected to be met because (i) producers are able take charge of their own affairs and manage their farms; (ii) cropping and perimeter management techniques (including financial management) have progressively improved; and (iii) diversification of irrigated crops and integration with flood-recession cropping, stockraising, forestry and fishing is being introduced\. The progressive disengagement of the state (i\.e\. SONADER), accompanied by training of personnel to take over, is having a positive influence on the sustainability of project investments\. E\. BANK PERFORMANCE 32\. Overall, IDA performance was satisfactory\. The Bank provided considerable assistance to the Government during preparation and appraisal of the project and worked effectively with other donors\. However, the Bank was too ambitious in its goals\. Project design was too complex, particularly in the number and detail of the measures needed to implement the reform program which was beyond the Borrower's implementation capacity\. Supervision of the investment component was satisfactory\. The frequency of supervision was acceptable but the missions were often inadequately staffed\. The effort would have been more effective if the Bank had mounted multi-disciplinary supervision teams\. F\. BORROWER PERFORMANCE 33\. Borrower performance was satisfactory concerning the investment component but deficient with respect to the adjustment component\. This was attributable to the slow decision- making process, frequent changes in ministers which prevented a sustained policy dialogue, weak institutions and a serious shortage of experienced administrative and managerial staff\. However, within these constraints, which were recognized during project preparation and indeed addressed under the project's institutional development component, the Borrower's performance is considered satisfactory overall\. G\. ASSESSMENT OF RESULTS 34\. Given that the project's objectives were ambitious, overall results are relatively satisfactory\. The project had a positive impact on land tenure reform; gave small producers more  - 12 - equitable access to the means of production; reduced the role of the Government in the economy with the liberalization of the cereals and agricultural input trades; privatized production units; and successfully restructured SONADER to better assist producers\. Other objectives supported by the project were not achieved: rice production in the Delta has not become economically viable; the cost and benefits of protection measures are not shared equally by producers and consumers; and there were no discernible positive spillover effects on other sectors of the economy\. However, there are clear trends toward improvement of irrigated agricultural production, which deserve to be pursued under follow-up operations\. H\. KEY LESSONS LEARNED 35\. The following lessons can be learned from this project: (i) Proiect design\. Despite the inherent complexities of a sector adjustment operation, project design should be kept simple, realistic and not too ambitious\. The Government's capacity to implement the operation should be honestly evaluated and assistance to strengthen this capacity should be included in the project if necessary\. Even if the policy reform objectives are clearly defined, the measures needed to implement them should be worked out in detail and agreed and understood by the Borrower prior to implementation\. Similarly, the conditionalities for tranche release should be unambiguous\. This was not always the case in this operation\. (ii) Supervision\. This project was the first agriculture sector adjustment operation in Mauritania\. It introduced modem irrigated agriculture where it did not exist before, piloted by a weak and inexperienced administration\. Consistent and high- quality supervision by experienced Bank staff was therefore clearly essential, and it was not always provided (staff turnover was high)\. Continuity in staffing for supervision is crucial\. And because of the multi-disciplinary nature of hybrid operations, it is to be expected that more supervision resources need to be allocated than would normally be the case for either investment or adjustment operations\. (iii) Government's chaneing role\. Government's withdrawal from the traditional functions of management and control (e\.g\. through decentralization, privatization, etc\.) should be done gradually, and adequate support should be provided to help ease the transition\. Local staff should be trained under a structured program, financed by the project\. In this project, the change-over may have been too abrupt\. (iv) Hybrid operations\. The hybrid character of the operation, where investments supported reform actions, proved to be effective and made the reform program more meaningful to those responsible for its implementation\. Investments helped create an enabling environment and demonstrated to the beneficiaries that the reforms introduced under the project produced positive results\. (iv) Economic viability\. Under current circumstances in Mauritania, irrigated rice production for the domestic market (geared essentially to broken rice) is not economically viable unless it is associated with other irrigated crops  - 13 - (diversification) and unless this production system is integrated with the rest of the agricultural sector\. This issue needs to be addressed in follow-up operations\. 1\. FUTURE OPERATIONS 36\. The Government has drawn lessons from this project experience and is reflecting them in the design of its Integrated Development Program for Irrigated Agriculture (PDIAIM)\. The broad outlines of the PDIAIM were discussed at a round table in Nouakchott in October 1995 and accepted by the donors including IDA and the Government\. The PDIAIM will pursue the reform measures initiated under the ASAIP, focusing on land tenure, credit, farmers' organizations, extension and research, and rural infrastructure\. Some investment components of the PDIAIM are under preparation or implementation with donor support\. As for adjustments, France and Germany are supporting the credit aspects and the European Union the land tenure aspects\. IDA has granted a PPF advance for the preparation of a hybrid project within the framework of the PDIAIM\. Appraisal is scheduled for 1998\. In addition, the Government is preparing, with IDA assistance, a Rural Development Strategy that will reinforce the agricultural sector development program\. Finally, a number of sector studies are planned in connection with the Country Assistance Strategy for 1997-2000, dealing with off-farm linkages and growth opportunities, communication, diversification and technological transformation, and rural services\.  - 14 - IMPLEMENTATION COMPLETION PROJECT ISLAMIC REPUBLIC OF MAURITANIA AGRICULTURAL SECTOR ADJUSTMENT AND INVESTMENT PROJECT (CREDIT 2093-MAU) PART 11: STATISTICAL ANNEXES Table 1: Evaluation Summary A\. Attainment of Objectives Substantial Partial Negligible NotApplicable Macro-economicpolicies E E 0 E Sectoral policies Q E3 0i Financial objectives aEl a o Institutionaldevelopment a 0 o a Physical objectives 0 E E E Poverty alleviation E 0 E E Gender issues a E E 0 Other social objectives E E E 0 Environmentalobjectives E 0 E E Public sector management El El El1 Private sector 0 E E E development B\. Project Sustainability Probable Improbable Uncertain (1) (/) (//) 0 El El  - 15 - Highly C\. Bank performance satisfactorv Satisfactory Unsatisfactory (/) (1) ) Identification 5 O Support for preparation [1 0 Appraisal 5 5 Supervision C] 0 Highlv D\. Borrower performance satisfactoa Satisfactoa Unsatisfactory (/) (1) (1) Highly E\. Assessment of results satisfatory Satisfactorv Fair Poor 0/) 0/) 0/) (/)  - 16- Table 2: World Bank Loans/IDA Credits Year of Loan/Credit Purpose approval Status Preceding this operation Rural Sector Technical Strengthening of MRD's 1983 Completed Assistance Project Environmental Protection (Cr\. 1414-MAU) Department\. Second Livestock Project Promotion of animal health, 1986 Completed (Cr\. 1658-MAU) introduction of fees for services rendered, and creation of pastoral associations\. Following this operation Agricultural Services Strengthening of national extension 1994 Ongoing Project (Cr\. 2575-MAU) and research services\. Rainfed Natural Resource Halting environmental 1997 Board presentation Management Project deterioration in the rainfed zone\. took place on June Increased incomes, poverty 17, 1997\. reduction and improvement of living standards for rural populations\. Integrated Development Improvement of the institutional 1998 Under preparation, Program for Irrigated environment, restructuring of with Board Agriculture in Mauritania perimeter management, farmer presentation training, consolidation of existing scheduled for July perimeters, marketing, and 1998\. environmental protection\.  -17- Table 3: Project Calendar Stages in project cycle Estimated Date Actual Date Identification June 1987 September 30, 1988 Appraisal Oct\./Nov 1988 Oct\.2 -Nov 14, 1988 Negotiations February 15, 1989 April 25-29, 1989 Letter of Agricultural Policy N/A April 22, 1989 Board presentation April 25, 1989 February 13, 1990 Signing September 1989 February 26, 1990 Effectiveness September 1989 April 27, 1990 First tranche September 1989 April 27, 1990 Second tranche June 1991 May 25, 1994 Project completion December 31, 1994 December 31, 1996 Credit closing December 31, 1995 May 8, 1997 Table 4: Cumulative Credit Disbursements - Estimated and Actual (in US$ millions) FY90 I FY91 I FY92 I FY93 I FY94 I FY95 I FY96 FY97\. Appraisal Estimate I", II -l , I Actual Actual as%ofAppraisal 103 | 531 56| 57| 99 106 106 107| Date of final disbursement: May 8, 1997  - 18- Table 5 A: Key Indicators of Project Implementation, Adjustment Component NO NAME OF INDICATOR STATUS PRICES AND MARKETING I Liberalization of paddy/rice marketing\. Decree 89-056 of 4/17/89 defining cereals policy 2 Elimination of commercial restrictions on the sale of food aid to private parties Admin\. circular n°002 /CSA of 01/15/89 3 Elimination of SONIMEX's monopoly on purchase of CSA's rice Decree n°90-144 of 10/13/90 4 Liberalization of sale price of imported rice by SONIMEX Order n° 91-09 of 4/22191 5 Total withdrawal of CSA from marketing of cereals coming from marketed food Auction at CSA storehouses in Nouakchott aid\. AGRICULTURAL CREDIT 6 Examination and promulgation by Government of basic legal texts governing Laws 67-171 and 93-015 on cooperation agricultural credit 7 Signing of protocol for transfer of agricultural credit from SONADER to UBD Protocol signed 11/17//88 LAND TENURE 9 Publication of decree establishing National Land Tenure Commission Decree 89-123 of 9/14/89 establishing Interministerial Committee for Post-Dam Period and Land Tenure 1 0 Publication of circular on criteria for viability in the sense of Article 3 of Decree Circular n°O 19 of December 5, 1984 n°020 (inventory of minimum infrastructures) I I Publication of circular on notion of vital space in the sense of Article 4 of Decree Circular n° 14 of June 1990 on ownership of wells and boreholes n°90-020 and Articles 1162-63 Circular n°026 of 10/12/91\. Vital space of rural settlements\. 12 Circular defining methods of processing land requests, arrangements pertaining to Circular n°023 of 8/28/90\. Assignment of parcels to agricultural use and individualization\. Instructions concerning application of Article 65 of Decree regularization of attribution\. n°90-020 (prior rights)\. 13 Creation of commissions with regulatory authority to prepare decisions of Decree 90-020 of January 30, 1990 attribution or adjustment of parcels\. SONADER 14 Publication of an action plan, accepted by the World Bank, for withdrawal from Completed\. Withdrawal complete since 1991 input distribution to farmers over the next 3 years\. 15 Introduction of water fees covering totality of operation and maintenance costs of Completed\. irrigated producer groups (GPI) 16 Publication of Decree modifying statutes Decree 92-069 of 11/23/92 IRRIGATION 17 Draft Code of Irrigated Perimeters and adjustment of Water Code Draft Code of Irrigated Perimeters drawn up during the post-dam period (EAB)  - 19- NO NAME OF INDICATOR |_STATUS 18 Publication of directives on new norms for equipping perimeters MRD's directives to SONADER REORGANIZATION OF MRDE __ 19 Completion of MDRE's reorganization Reorganization in accordance with Decree 029 of 4/1/91 20 Publication of decree defining mandate of MRDE and central organization of its departments 21 Finalization of department's organization , management and centralization plan Decree n°22/93 of March 3, 1993 RESEARCH - TRAINING - EXTENSION 22 Preparation of national plan for agronomic research Completed, submitted to donors in November 1990\. New plan under Ag\. Services Project 23 Design of national extension system applicable to rainfed and irrigated zones\. Letter of policy drawn up in connection with Agricultural Services Project LIVESTOCK - ENVIRONMENT 24 Study of modification of Forestry Code with a view to abolishing unregulated Principle taken into consideration, but problems of grazing land tenure grazing remain to be studied 25 Drawing up of a master plan (priority zones for technical intervention, etc\.) Schema presented in regional action plans 26 Design of Environmental Code Begun 27 Start of study of charcoal sub-sector Partial study done in connection with improved stoves project 28 Study of livestock marketing Completed by BDPA  - 20- Table 5 B: Key Indicators of Project Implementation, Investment Component Nature of works Planned Actual Resurfacing of interior dirt tracks nq 70\.6 km Resurfacing of canal sides 51\.3 51\.8 km Shoulder of S21 I I u Enrockment and const\. of abutments nq 267 m3 Recalibration of Gorgol Noir nq 6,000 m3 Leveling of parcels nq 205 ha Clearing of drain outlets 900 nq 4,207 m3 Footbridges nq 3 u Culverts 6 5 u -_- Clearing of drain outlets (mechanical) nq 613 m3 Repair of breaks nq 2,672 m3 Clearing of main drains (mechanical) nq 4\.7 km Clearing of principal drains (mechanical) nq 0 km Clearing of secondary drains (mechanical) nq 5\.9 km Clearing of secondary canals (manual) nq 93\.2 km Weeding - main canals nq 129 km Weeding secondary canals nq 217\.9 km Weeding - main drains nq 12\.5 km Weeding - secondary drains nq 160\.1 km Table 6: Key Indicators of Project Operation Not Applicable  - 21- Table 7: Studies Included in the Project Study Purpose as defined in Status Impact of the Study Appraisal/Redeflned (i) Land Tenure Sub-Component Study of reorganization of public land tenure Definition of the roles of different Complete in 1993 Organization of the Land administration ministries\. Tenure Administration Reorganization of public and private land Synthesis of various studies Completed in 1993 Surveys done in entire valley\. tenure, summary of results and plan of action 1993-97 Study of rational methods for future Completion of a framework Completed in 1992 Framework adopted determination of spaces and reserves Land registry and pre-registry for Trarza Est Completed in System is operational \. region November 1993 Improved security\. (ii) Credit sub-component \.______ Study of agricultural credit assets and of Balance sheet of UBD Directorate Completed in Transfer of UBD credit UBD (fixed assets and portfolio) November 1993 portfolio to UNCACEM (iii) Irrigation sub-component \. Study preceding new guidelines for less Establish technical norms and costs for Completed in 1991 Administrative directives in costly and more viable methods of hydro agricultural civil works 1993 establishing equipment construction, operation and maintenance of norms\. irrigation networks Studies of rehabilitation of existing Diagnostic evaluation and status update Completed in 1994 Better knowledge for future perimeters (EAB and others) of existing schemes action Priority program of rehabilitation and Preparation of a National program for Finalized in 1990 Led to investment in Tagant expansion of small dams beyond Senegal Dams construction and Assaba (France, UNDP) River Valley Study preceding priority medium-term Preparation of an Integrated Completed in 1995 Program framework adopted investment program for irrigation Development Program for Irrigated by donors development Agriculture in Mauritania (PDIAIM) Study preceding calculation of water fees Assessment of real water costs and Finalized in 1993 Transfer of infrastructure in covering all operation and maintenance costs maintenance fees\. process in the large irrigated perimeters I I  - 22- Study Purpose as defined in Status Impact of the Study Appraisal/Redefined (iv) MRD sub-component l Study of MRD's reorganization More efficient Ministry Completed in Restructuring of MRD took December 1992 place in 1993 Analysis of legal and regulatory texts 'Review of legal texts on MRD Completed in 1996 conceming MRD organization (v) SONADER sub-component Study of SONADER's reorganization A more efficient organization Completed in 1989 First phase implemented\. Study on master plan for SONADER's Adoption of a Mission letter Completed in 1992/93 Proposals accepted\. Study of master plan for SONADER's Better administration and financial Completed in 1992/93 Computerization of Admin\. & administrative and financial management performance financial management implemented\. Study of SONADER's financial, accounting Better administration and financial Completed in 1994 Computerization of Admin\. & and budgetary management and proposal for performance financial management computerization of management system Study of SONADER's human resources To assess personnel needs Completed in 1995 Staff reduced Study of management and maintenance of Preparation of a model of contract for Completed in 1994 Legislation under collective works within hydro-agricultural transfer of responsibility to farmers consideration\. installations\. organization\. (vi) Research sub-component National Research Plan Define research priorities Completed in 1994, IDA supported research reviewed in 1997 program financed under AS project (vii) Environmental sub-component_______ ___ _____________ Multisectoral anti-desertification plan Coordinate actions for better results Completed in 1991 Limited implementation (regional action plans) through lack of funds\. National environmental strategy Protect environment Under preparation Slow progress  - 23 - Table 8 A: Project Costs Appraisal Estimate Current (US$ M) estimate (US$ M) Categories Local Foreign Total Total Currency Currency Quick disbursing 0\.0 24\.0 24\.0 25\.3 Institution building 1\.7 4\.8 6\.5 8\.9 Irrigation investmnents 3\.2 3\.3 6\.5 7\.9 Total 4\.9 32\.1 37\.0 42\.1 Table 8 B: Project Financing Appraisal Estimate Current Estimate (US$ M) (US$ M) Source of financing Local Foreign Total Local Foreign Total currency currency currency currency IDA 2\.1 22\.9 25\.0 2\.7 24\.0 26\.7 CCCE/CFD 0\.8 7\.2 8\.0 1\.1 10\.1 11\.2 Federal Republic of 0\.0 2\.0 2\.0 0\.0 2\.2 2\.2 Germany World Food Program 1\.0 0\.0 1\.0 1\.0 0\.0 1\.0 Government 1\.0 0\.0 1\.0 1\.0 0\.0 1\.0 Total 4\.9 32\.1 37\.0 5\.8 36\.3 42\.1 \.- - -\. \. \.  - 24- Table 9: Economic Costs and Benefits (UM Million) YEAR COST OF NET OPERATING OPERATING PROJECT OR INCOME BALANCE l __ POST-PROJECT Investment Phase 1991 110\.64 36\.87 -73\.77 1992 173\.93 -15\.75 -189\.68 1993 104\.52 15\.33 -89\.19 1994 152\.71 -1\.51 -154\.22 1995 140\.34 114\.21 -26\.13 1996 157\.081 218\.12 61\.04 MaintenanceTPhase 1997 30\.00 257\.00 227\.00 1998 30\.00 257\.00 227\.00 1999 30\.00 257\.00 227\.00 2000 30\.00 322\.49 292\.49 2001 30\.00 322\.49 292\.49 2002 30\.00 322\.49 292\.49 2003 30\.00 380\.36 350\.36 2004 30\.00 380\.36 350\.36 2005 30\.00 380\.36 350\.36 2006 30\.00 380\.36 350\.36 2007 30\.00 380\.36 350\.36 2008 30\.00 380\.36 350\.36 2009 30\.00 380\.36 350\.36 200 30\.001 380\.36 350\.36 TOTAL 1259\.22 5148\.62 3889\.4 INTERNAL ECONOMIC RATE OF RETURN = 24,32%  - 25 - Table 10: Status of Legal Covenants Agree- Section Type of Present Original Revised Description of Covenant Remarks ment covenant Status Fulfillment Fulfillment Date Date C20930 3\.01 5,10 C The Borrower declares its commitment to the objectives of Structuring of the the Project as set forth in Schedule 2 to this Agrmt &, to Planning Unit (C4) this end, shall carry out Part C4 & 5 of the projects through achieved but staffing MDRE w/due diligence & efficiency & in confornity recently reduced w/appropriate agricultural practices, & shall provided, drastically due to promptly as needed, the funds, facilities, services & other budget shortage\. resources required for the Project\. 3\.02(aXi) 5,10 C Without any limitation or restriction upon any of its other Building of access obligations under this Agreement, the Borrower shall: (i) road (A2) replaced by cause SONADER to carry out Parts Al through 6, B& CI drinking water supply &2 of the Project and to perform, in accordance w/the to villages in the provisions of the SONADER Project Agreement, all the scheme\. Work in other obligations of SONADER therein set forth; process and will be completed before 12/31/96\. 3\.02(aXii) 5,10 CP UNCACEM to carry out Part A\.7 of the Project and to Credit repayment is perform, in accordance with provisions of the UNCACEM low\. Audit is late\. Project Agreement, all the other obligations of UNCACEM therein set forth; and 3\.02(aXiii) 5,10 C Take or cause to be taken all action, including the Met regularly provision of funds, facilities, services & other resources necessary or appropriate to enable SONADER & UNCACEM to perform such obligations, & shall not take or permit to be taken any action which would prevent or interfere with such performance 3\.02(bXi) 5,10 C The Borrower shall: (i) make the proceeds of the Credit No comments allocated from time to time to Categories 1,2(b), 4(b) & 5(b) of the table set forth in para\. I of Schedule I to this Agrmt available to SONADER under the SONADER Subsidiary Grant Agreement; 3\.02(b)(ii) 5,10 C Make the proceeds of the Credit allocated from time to No comments time to Category 3 of said table available to UNCACEM under UNCACEM Subsidiary loan Agreement, both on terms & conditions which shall have been approved by the Association\.  - 26- Agre- Section Type of Presnt Original Revised Description of Covenant Remarks meet covenant Status Fulfillment Fulfillment Date Date 3\.02(c) 5,10 C The Borrower shall exercise its rights under the Met regularly SONADER Subs\. Grant Agrmt & the UNCACEM Subs\. Loan Agrmt in such manner as to protect the interests of the Borrower & the Association & to accomplish the purposes of the Credit &, except as the Assoc\. shall otherwise agree, the Borrower shalI not assign, amend, abrogate or waive the SONADER SGA or the \.___________ ___________ UNCACEM SGA for any provision\. 3\.03(a) 5,9,10 C The Borrower & the Association shall from time to time, at Met regularly\. the request of either party, exchange views on the progress achieved in carrying out the Program & the actions \.________ ____________ ______________ ______________ specified in Schedule 4 to this Agreement\. 3\.03(b) 5,9,10 C Prior to each such exchange of views, the Borrower shall Progress reports are fumish to the Association for its review & comment a regularly prepared report on the progress achieved in carrying out the and submitted to IDA\. Program, in such detail as the Association shall reasonably request\. 3\.04 5,9,10 C Except as the Borrower & the Association shall otherwise No comments agree, procurement of the goods & consultants' services for the Program & for Parts C\.4 &5 of the Project, and to be financed out of the proceeds of the Credit, shall be govemed by provisions of Schedule 3 to this Agreement\. 3\.05 5,9,10 C The Borrower shall, during the execution of the Project, Ceillule's staff maintain the Cellule, the Interministerial Committee & the plummeted over the Technical Project Unitor any other entity for coordination last year due to & supervision acceptable to the Borrower and the budget constraints\. Association, with adequate staffing & responsibilities\. 3\.06(aXi) 5,9,10 C Without any limitation or restriction upon any of its other No comments obligations under this Agreement, the Borrower shall: (a) i) not later than 11/30 during each yr the Project is carried out, review SONADER's budget referred to in Section ________ __________ ____________ _2\.08 of the SONADER Project Agreement; & 3\.06(aXii) 5,9,10 C Promptly thereafter take all necessary measures, including Met regularly\. the provision of funds, to enable SONADER to carry out its budgeted operations\. 3\.06(b) 5,9,10 C Not later than 6/30/90, second staff with expertise in No comments forestry, public health & fisheries to SONADER's regional directorate of Foum Gleita\.  - 27- Agree- Section Type of Present Original Revised Description of Covenant Remarks ment covenant Status Fulfillment Fulfillment Date Date 3\.07(a) 1,2 C The Borrower shall maintain, or cause SONADER & No comments UNCACEM to maintain, records & accts\. adequate to reflect in accordance w/consistently maintained sound acct\. practices the expenditures financed out of the proceeds of I_________ _________ the Credit\. 3\.07(bXi) 1,2 C The Borrower shall: (i) have the records & accounts Status Code: C referred to in para (a) of this Section, including those for (MDRE & the Special Accounts, for each fiscal yr audited in SONADER) Status accordance w/appropriate auditing principles consistently Code: CP applied by independent auditors acceptable to the (UNCACEM) - Association\. UNCACEM audits late due to lack of financial resources\. European Union & KfW have formally agreed to provide funding\. Selection of auditors being finalized\. 3\.07(bXii) 1,2 C Furnish to the Association as soon as available, but in any Status Code: C case not later than 6 months after the end of such yr\. a (MRDE & certified copy of the report of such audit by said auditors, SONADER) Status or such scope & in such detail as the Association shall have Code: CP reasonably requested; and (UNCACEM) - Certified copy of auditors reports for UNCACEM overdue (see above)\. 3\.07(bXiii) 1,2 C Furnish to the Association such other information No comments\. concerning said records & accounts and the audit thereof as the Association shall from time to time reasonably request\. 3\.07(c)(i) 1,2 C For all expenditures w/respect to which withdrawals from No comments\. the Credit Acct\. we made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with para (a) of this Section, records & accounts reflecting such expenditures; 3\.07(c) ii) 1,2 C Retain, until at least I year after the Association has received No comments (iii) the audit report for the FY in which the last withdrawal from the Credit Acct\. was made, all records (contracts, orders, invoice bills, receipts & other documents) evidencing such expenditures; (iii) enable the Association's representatives t examine such records; and  - 28- Agree- Section Type of Present Original Revised Description of Covenant Remarks ment covenant Status Fulfillment Fulfillment ______ _ _______ _________ __Date Date 3\.07(cXiv) 1,2 C Ensure that such records & accts are included in the annual No comments audit referred to in parm (b) of this Section & that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such FY, together w/the procedures & internal controls involved in their preparation, can be relied on to support the related withdrawal\. 3\.08 5,9,10 C The Borrower & the Association agree that the obligations No comments set forth in Sections 9\.03 through 9\.08 of the General Conditions (insurance, use of goods & services, plans & schedules, records & reports, maintenance & land acquisition): (a) in respect of Parts A\. I through 6,B & C\. l&2 shall be carried out by SONADER Proj\. Agrmt; & (b) in respect of Part A\.7 be carried out by UNCACEM ___________ (section 2\.03 of UNCACEM PA Project 2\.01(bXi) (ii) 5,9 F Without limitation upon the provisions of parm (a) of this No comments Section, UNCACEM shall; (i) provided agric\. credit on the basis of the criteria & principal terms & conditions set forth or referred to in the Schedule to this Agrmt; and (ii) exercise its rights in relation to each credit so provided in such a manner to protect interest of the Assoc\. & UNCACEM & comply with Proj\. Agrmt\. 2\.05(c) 9,10 CP 01/27/1997 UNCACEM shall: not later than 3/31 of each yr during No comments which Part A\.7 of the Project is carried out, prepare a report on its agricultural credit operations during the previous calendar yr including recommendations for any improvements to be made; 2\.05(d) 9,10 CP UNCACEM shall: not later than 4/30 of each yr during No comments which Part A\.7 of the Project is carried out, discuss said rpts with the Borrower & the Association\. 2\.05(e) 9,10 CP UNCACEM shall: (e) promptly thereafter take all measures No comments agreed upon by UNCACEM, the Borrower and the Association to improve UNCACEM's agric\. credit operations\. 2\.06 9 C UNCACEM shall not supply equipment and inputs to No comments farmers\. 2\.06(b) 9 C SONADER shall, not later than 6/30/90, enter into No comments agreements acceptable to the Borrower & the Association, setting forth the parties' respective obligations: (b) with the Centre National de Recherches Agricoles, with regard to agricultural research\.  - 29- Agree- Section Type of Present Original Revised Description of Covenant Remarks ment Covenant Status Fulfillment Fulfillment Date Date 2\.07(a) (b) 9 C SONADER shall: (a) sell inputs delivered to farmers at No comments their full cost, including transport; and (b) until its complete withdrawal from agric\. credit activities, not provide credit to farmers who have not fully repaid their debts to SONADER\. 2\.09 9,10 C SONADER shall, not later than 6/30/90, establish in its No comments regional Directorate of Foum Gleita a division, responsible for the operation & maintenance of irrigation systems in the Project Area & with such staffing levels & other resources as shall be acceptable to the Association\. 2\.1 0(a) 9,10 C SONADER shall: (a) with the assistance of engineering No comments experts, whose qualifications, experience & terms of reference shall be satisfactory to the Association, annually inspect the Foum Gleita dam & its related structures for deficiencies in its condition or in the quality & adequacy of its maintenance & operations; __________ 2\.10(b) (c) 9,10 C SONADER shall: (b) immediately after each such No comments\. inspection, issue a report thereon, prepared by said engineering experts, & promptly take or cause to be taken all remedial action, if any, recommended in said report; and (c) not later than 6/30/90, furnish the first such report to the Association\. Classification of agreements Status I Accounts/audits C Complied with 2 Financial performance/generate revenue from beneficiaries CD Compliance after delay 3 Flow and utilization of Project Funds NC Not Complied with 4 Counterpart funding SOON Compliance Expected in Reasonably Short Time 5 Management aspects of the Project or of its executing agency CP Complied with Partially 6 Environmental covenants NYD Not yet due 7 Involuntary resettlement 8 Indigenous people 9 Monitoring, review and reporting 10 Implementation 11 Sectoral or cross-sectoral budgetary or other resource allocation 12 Sectoral or cross-sectoral regulatory/institutional action 13 Other  - 30 - Table 11: Compliance with Operational Manual Statements Not Applicable Table 12: Bank Resources - Staff Inputs Stage of project Planned Revised Actual cycle l__________________ Weeks US$ Weeks US$ Weeks US$ Up to appraisal nq nq nq nq 84\.2 151,250 Appraisal nq nq nq nq 35\.1 57,159 Negotiations to Board nq nq nq nq 40\.1 86,940 presentation Supervision nq nq nq nq 197\.4 387,024 Completion 14,5 33\.875 16,5 34\.395 7\.0 14,300 Total 363\.8 696,673  - 31 - Table 13: Bank Resources - Missions PerformanceRatlng Number Specialized Implemen- Develop- Stage of Month/ of Days in Staff Skills itation meat Types of Project Cycle Year Persons Field Represnted Status Objectives Probems Preparationthrough 3 Pre-appraisal Appraisal 10-11/88 2 14 IE,E - - - Pre-negotiation 03/89 2 7 IE, E - - - Post-Negotiation I 06/89 2 14 IE, LT - - - Post-Negotiation II 11-12/89 2 14 IE, LT - - - Supervision 1 06/90 2 14 E, IE 2 2 - Supervision 2 07/90 1 6 Ext 2 2 - Supervision 3 09-10/90 1 10 IE 2 2 - Supervision 4 03/91 1 6 E 2 2 - Supervision 5 6-7/91 3 14 E, LT, IE 2 2 - Supervision 6 05/92 4 11 E, LT, C, RE 2 2 - Supervision 7 03/93 I II ES/NRM 2 2 - Supervision 8 S/93 1 10 LT 2 2 - Supervision 9 11/93 I 7 ES/NRM 2 2 - Supervision 10 10-11/94 1 4 ES/NRM S S - Supervision 11 10-11/95 3 15 ES/NRM, IE, M&E S S - Supervision 12 2/96 1 4 Agr\. S S - Supervision 13 5-6/96 2 6 ESINRM,IE S HS - Supervision 14 10-11/96 2 7 ES/NRM, IE S HS - Supervision 15 3/97 2 3 ES/NRM, IE S HS - Completion 4/97 2 13 ES/NRM, M&E _ _ S = Satisfactory; HS = Highly Satisfactory Specialized Staff: E = Economist; IE = Irrigation Engineer; LT = Land Tenure; ES = Environment Specialist; NRM = Natural Resource Management; RE = Rural Engineer; C = Credit; Ext = Extension; M&E = Monitoring and Evaluation; Agr = Agronomist 3 Prior to Pre-appraisal 7 WB missions have visited the country\.   Appendix A BANQUE MONDIALE PROJET D'AJUSTEMENT ET IVESTISSEMEENT DU SECTEUR AGRICOLE EN MAURITANIE (PASA) Credit IDA No 2093 MISSION DE FIN D'EXECUTION DE PROJET (5-23 avril 1997) Aide memoire 1\. Une mrission de fm d'execution e!u PASA composee de Messieurs Karir; Oka, responsable du Projet d'Ajustement du Secteur Rural (PASA) a la Banque Moildiale, \.Mohamcd Ould Tolba, specialiste agricole a la Mission Rdsidente de la Banque a Nouakchott et Madaroe Annicl; Lachance, consultante, a sejoumd en Maunitanie du 5 au 23 Avril 97\. Au cours de son sj our la mission a travailld en 6troite collaboration avec les cadre \. du Ministfte du Ddveloppement Rural ct de I'Environuement et des autres administrations cc acemecs par le PASA\. 2\. L'exercice a consist6 \. ivalLer le travail accompli dans le cadre de la mist en oeuvre du PASA et les r6sultats et impacts obtenus\. Lcs conclusions de la mission sont rdsum6cs ci- dessous et serQut reprises dans le Rapport de fin d'ex6cution de projet qui sera finalis6 par la i3anque rmondiale au cours des semaines qui suivent cette mission\. Rappel drs objectifs du PASA 3\. Le Projet etait une operation hybzide comportant un voJet Ajustement et wU volet lnvcstissement; la composante Ajustement avait pour objectif de mettrc en oeuvw': les reFormcs envisagdcs dans le cadre de l'Ajustement Structurel a Moyen Terme (A iMTJ\. Ces reformes concemnaient la commorcialisation et les prix des ccr6ales, le credit agrifAle, le foncier, la r6organisation du MDR et de la SONADER, la rechcrche et la vulgarin Aiion, Le programme d'investisserment public, l'irrigation, 1'6levage ainsi quc la protection de I'environnement\. L'objectif du volct Investissernent dtait d'aider le Gouvernemert a testcr de Douvelles tcchniques d'irrigation et de gestion durable des pdrihmtres collectifs\. RWalisations du PASA Composa?ie 4justement 4\. Commercial_ e des cjT6ales Les principales mesures prises dana le domaine de la commercialisation ont Wt (i) la fin de I'achat -a des prix subventioun&s- de la production domestique par le Commissariat a la S6curit6 Alimentaire (CSA), (ii) (a fibdralisation des prix de vente et d'achat des c6rdales, (iii) la privatisatioD des ur tls de transfonnation du riz, (iv) la fin de la subvention aux intrants agricoles (v) la supj \.-ession du moitopole d'importation de niz par la SONTMEX, (vi) la fin de la distribution de 1 aide 'alirmntaire gratuite, sauf dans les cas d'urgence et (vii) la mise cn place d'un syste'nme  2 tarifaire visant a proteger la production de riz tout en cr6ant un clirnat de concurrence entre production nationale et importations\. 5 \. Malgrd toutes ces reformes l'objcctif recherchd de libiralisation de la filiere riz n'a pas c& complktement atteint (i) le noibre d'importateurs et donc la concurrence pour 1'iniportation de riz restent limites a cause de la surface financicre qu'exige une telle op6ration et de la rarct6 des devises, (ii) 1'entente entre les membres du pool et Ic Gouvermemcnt pour l'achat de la production natioile, bien qu'elle soit salutaire pour les agriculteurs n'est pas une solution pour le long terme et n'incite pas les producteurs a reduire lcurs\.couts et dtre plus compdtitifs, (iii) le syst6me de bonification des intercts sur les credits pour I'achad de la production nationale ri'est pas une solution soutenable pour le moyena et lc aong tennc\. 6\. Cirdit cn 1989 le porte feui]le de la Soci6t6 nationale pour le developpement iural (SONADER) a etc transfire a l'Union des banques pour le doveloppement (UBD)\. Celle-ci a qctroy6 des volumes de prdts importants entre 1989 ct 1992 sans vdrification vdrtabIe de leur destination et sans exigence d'apurement des prdts deja consentis\. Les rdsultats alarmants du credit agr~cole durant cette p6riode incittrent le Gouvernement et les bailleurs de fonds a inettre eii placc une structure dc crddit mutualiste a travers la creation de l'Union nationale des cooperatives agricoles de credit et d'epargne de Mauritanie (IJNCACEM) et ses deux Cooperatives agricoles de credit et d'6pargac (CACE) du Trarza et du Haut Fleuvc\. 7\. L'UTNCACEM a 6t6, des le depart, handicapde par le passif du porte feuille de l'UBD dont elle aihdrit6\. Elle appliqua une rigueur dans le recouvrement des colts qui etait ndcessaare pour rompre avec les anciennes pratiques du credit agricole de l'UBD et de la SONADER\. Cette rigueur a ren\.du le nombre de clients de l'TUNCACEM 6ligibles au cr6dit de plus on plus reduit pour ne representcr en 1996 quo 40% des gros exploitants priv6s et 15% des cooperatives\. En contre partie il y eu unc nette amdlioration du taux de recouvrement des prets de campagne qui est passe de 58% en 1994 a 90% en 1996\. L'UNCACEM a en 1995 diversifie ses actions par le fnancemenit de la commercialisation du riz mais n'a pas pu rdpter l'operation en 1996 faute de moyens financiers\. \.8 F jcaic: en 1990, un decret (90 020) a 6tte adoptd pour introduire les mesures suivantes: (i) renforcement de la decentralisation pour l'attribution des terres, (ii) definition des phases progressivcs de la propriete, (iii) implication syst6matique des populatioxs concernmes et (iv) s6curisation des droits fonciers des populations locales\. Sur le plan fonctioninel, I'Arr&d 12-206 a fixe les attributions des services charg6s\.de la politiiue fonciere au Minist6re de 1' intcricur (RIviseur foncier), au Ministere du DRE (Bureau foncier) et au Minist*re des Finances (Direction des dornaines)\. 9\. Sur ces bases r6glementaires et institutionneUes, une operation test de rigularisation fonci&re s'est engag6e a partir de 1991 pour I Trar2a-est\. Les r6sultats concluant5 de cctte op6ration Ont conduit lc Gouveniement, appuye par les Bailleurs de fonds, a 6tendre l'opration de r6gularstion foncire au haut ficuve en 1993 et au Traa-ouest eni 1994 puis A I'ensemble de la moyenne et haute vallee depuis 1995\. 10\. RsiucwationdlS AE: La SONADER a etd rcstructur6e a deux reprises durant la p6riode PASA\. Ces restructuration ont pcrmis: (i) lc desengagement de la Soci6td  3 de la commercialisation et de la transformation du paddy ainsi que l'arret du recouvrement des redevances fixes en nature; (ii) le transfert A d'autres op&rateurs des activites de credit, d'approvisionnement en intrants et 6quipement agricoles airnsi que de la gestion et la niaintcnance de ces dorniers; (iii) la clarification des missions de I' 6tablissement et une meilleuro definition de ses modalit6s d'intervention et de r6muniration; (iv) la mise en place d'un systeme de gestion fmancierc, comuptable et budgetaire informatis6 et l'assainissement r9nancier du bilaln dc 1'entreprise au 31-12-92, et (v) la diminution de ses effectifs en nersonnel\. 11\. Ets=cturatioa du MDR: LeMDNR a t6 restructur6 cn 1993, suite aune 6tude finane6e par la CED\. Cette restructuration a peris, entre autres, de (i) mnieux prendre en coinpte la dimcsion Environnrnment du developpement rural, (ii) crder au niveau des Wilayas de Delgations Rigionales regroupant tous les services du D6veloppemcnt rural; et (iii) ueux redaployer Ic personnel sur lc terrain\. J 2 Rbcherche\. multiplication desscxmences et vulzarisation: Dans le cadre du PASA Um Plan National de la Recherche Agronomique (PNRA) a dt6 pr6par6 mais n'a pas counu de suite faute de mnoyens financiers\. Un nouveau PNRA a 6te prepare eni 95 comnme composante du PSA\. Ce PNRA va &t-e exccuter dans le cadre du m&ne Projet\. Par ailleurs u,L systeme de production-conmercialisation des semences de riz a et6 mis en place dans le cadre du Projet de D1velopperent des Semences (PDS) sur financement du FENUIPNUD\. Le PDS a mis aussi en zone pluviale un sysamte de collecte et de stockage amcliore des semences traditiorneUes\. Enfin une Direction de la recherche-vulgarisation-formation (DRFV) a ete creee au niveau national ainsi que des scrvices rdgionaux de vulgarisation au sein des DB16gations r6gionales du MDRE\. I \. Progamme des investissernents publics : afui d'ameiiorer la planification ett le suivi des investissements ainsi que leur contribution a la croissance de 1' agriculture, la Cellule de planification (CP) duI MDRE a e reorganisee et appuyec financi6rement dans le c-adrc du PASA- 14\. Irrigation: des mesurcs visant a am\.6l1iorer la viabilite des exploitations agricoles irrigu6eS ont ete prises : (i) promulgation de l'ordonnance portant code de l'eau , ()i) e'aboration d'un code des p6rimAtrcs irriguds definissant les riles respectifs de I Etat et des beneficiaires, (iii) mise A jour du registre des pdim6tres irriguds en 1990, puis en 1994, (iv) etude apr6s barrages, (v) etudes de redressemnent de p6rimetres et d6but d'un programme de redrcssement pour ces p6rim&tres cnfin (vi) time amorce de I'application de la nouvelle po'tique d'intervention de l'Etat en mati6re d'am6nagement hydro-agricoles (infiastructures du Gouere)\. 15\. F\. e : Des actions d'organisation des eleveurs dans le cadre d'Associations Pastorales (AP), disposant pour la plus part de mini-projets de production laitiere et de ddp8ts de produits v6t&rinaires, ainsi que des investissements en alimentation cn eau ont etd rdalis6s dans le cadre du Projet Elevage II\. 16\. Protection de IEnvironnemene; la Mauritaniie pr6pare, depuis deux ans, uii code de VL'nvironnement et une Stratdgie environnenmentale avec I'assistance du PNUD daus le cadre de la Convention sur la ddscrLification\.  4 Coposante investissement 17\. LIes actions pilotes dans IC 26rim6tre de Foum-Gleita ont At executees avec satisfaction et les analyses faites par la SONADER montrent des taux de rentabilit6 &conomtquc cnfre 14 et 24 %\. D'autres resultats inmportants ont 6tc enregistres: (i) organisation en 1994 de 1'Union des coopmratives agricoles de Foun-Gleita (UCAF), devenue I'lntcrlrocuteur de la SONADER pour la gestion des redevances d'eau et 1'entretien du Pirimetre;(ii) gestion par l'UCAF d'un fonds de roulenient pour le financernent de la cam,pagne agricole au profit de ses membres; (iii) relance de la production agricole, en dacIin cntre 92 et 94\. et tenforcexnent de la vulgarisation, (iv) organisation des eleveurs en association agro-pastorale, formation d'auxiliaires v&ttrinaires en sante aniimale et mise en place d'une pharmacie v6t6rinaire, (v) organisation des pclheurs en groupos coop6ratifs et appui a ces groupes en matiere de vulgarisation et d'equipement; (vi) plantation de brises vent le long des canaux et drains et (vii) amelioration de la fourniture des services de santi humaine\. Evaluation des resultats i S\. Compte tenu des objectifs dc depart Lres ambitieux, on peut considerer que les resultats globaux ancints par le projet sont relativement satisfaisants surtout compte tenu de la rd6ahit sociale et politique existante\. Le projet a eu LU impact tres positif dans la domaine de la r6forirne fonci6re, assurant un acces plus iSquitable aux moyons de production pour les petits producteurs, et perriis une reduction du r6le de I'etat dans l'6conomie avec la libdralisation du commerece des c6r6ales ct des intrants agricoles, la privatisation des unites do production, et la restructuration de soci-tes publiques telles que la SONADER Il s'agit IA cependant de r6sultats interzindiaires car les rdformes appuy6es par le Projet visaient en termes de finalith a pern-ettre que: (a) le d6vcloppemeat de la production du riz dans le delta devienne fiscalemnent et dconomiquement viable; (b) le couit de protection initiale soit egalement reparti entre producLeurs et consommateurs; (c) la valeur ajoutee so it repartie dquitablement; ct (d) le projet produise des retomb6es positives dans les secteurs aum-es que l'agiculture grace i la libdralisation complite des activit6s economiques en amont et en aval\. Ces objeotifs n'ont pas et6 atteints: d'une manirre globale, la production rizicole n'a pas encore atteil't la viabilit6 economiquc escomptee et la protection dtu secteur agricole est encore lcevde\. TI y a eu cependant u-ne nette tendAnce a I'amnlioration avec plusieurs perimetres qui degagent des mnarges beneficiaires satisfaisantes\. ll y a eu aussi un effort de recherche de solutions alternatives avec un debuLt de diversification des cultures et d'integration de I'Ielvage, et dela sylviculture pour rendre les investissements et les exploitations plus rentables\. 11 est clair que le processus est bien cngagd et dans la bonne direction, mais avance plus lentement que prevu II est cvident aussi que les personnes et groupemeiits pratiquant I'irrigation pour la Dremi&re fois ne pouvaient pas tous rTussir: un processus de silection doit naturellemcnt se faire et il cst en train de s'op6rer\. II cst donc un peu 16t pour faire des pronostics mais si le Gouvemement poursuit les efforts iiiiti6s au cours de la p6riode dc mise en ocuvre du PASA, il y a de fortes raisons de croire quc Ic resu1tat final sera positif\.  5 Leonoscl apprises i9\. Lcs principales le9ons tirees de cc projets sont les suivantes: (a) I'ajustement est uin processus continu qui ne peut se limiter a la durce de vie d'un Aecord de credit Des dispositions pardculieres doiveut donc trc prises pour que gouvenement et bailleurs de fonds puissont assurer cette continuitd; (b) ls rdformes et autres mesures entrant dans le cadre des PASA n'ont de sons que s'il existe des actions d'investissement auxqucllcs ces reformes sont destindrs, sinon ces rvformes ne sontjamais appliqu&es\. Dc la meme mani6ro, des actions d'iavestissement, m6me techniquement bien con9ues, ont tres peu de chances de reussir et durer si ellks nc sont pas accompagnees ou pric6dies par des mesures d'ajustcmcnt qui pernettent de crier Uli environnement propice\. Sanis ces rcformes, les investissements ne sont pas viabics\. Les operAtions bybrides constituent ainsi tin tres bon instrument d'ailleurs souvent ignore; (c) le desengagement de l'Etat de certaines fonctions doit etre bien pensE et planifih ot doit 0tre execut6 de mani6re a permemre aux nouveaux op6rateurs d'assurer efficacement la releve\. Le disengagement de l'Etat n'implique pas l'absence de 1'Etat dans son role de rdgulawur et de gardien des droits et libert6s dcs institutions qui vont le rempler; \. (d) la pleine implication des b4n6ficiaires tout au long de processus ainsi quo dans la gestiot) des inoyans de production est une condition\.de sucts pour toute operation (gestion rationnelle de la ressource eau, gestion ct entretien des infrastructures, credit\., commercialisation, etc\.); et (e) dans le contexte actuel, la production de riz cn iurigue' en Mauritanie pour-des besoins dc consommation nationale (essentiellement riz brisk) ne pout tre 6conomiquement viable que si clc est associce a d'autres cultures irrigu6es (diversification) et si iI y a int6gration de ce \.cystLmc de production au reste du sectcur agricole\.  Appendix B Page 1 of 3 ISLAMIC REPUBLIC OF MAURITANIA SUMMARY OF THE COMPLETION REPORT OF THE AGRICULTURAL SECTOR ADJUSTMENT PROJECT (Cr\. 2093-MAU) (Translation of original document in French) I\. INTRODUCTION 1\. The Agricultural Sector Adjustment/Investment Project (ASAIP) is a hybrid project consisting of a sectoral adjustment component and an investment component\. Its adjustment component is a follow-up to the Structural Adjustment Credit (SAC) completed in 1988, whereas the investment component can be considered the follow-up and consolidation of the Gorgol Noir Irrigation Project (Cr\. 1068-MAU)\. In connection with the preparation of the Medium Term Agricultural Sector Adjustment Programn (MTSA, 1989-1991), a set of institutional and general policy measures were identified\. Of these, a number of core measures were judged crucial to the achievement of the ASAIP's objectives\. These were selected for close monitoring and became the object of a matrix that was updated by each joint supervision mission\. II\. OBJECTIVES AND COMPONENTS OF THE PROGRAM 2\. The adjustment component was intended to support the MTSA undertaken by Government, and in particular: (i) the deepening and broadening of liberalization of cereals marketing and pricing (marketing and pricing component); (ii) the creation of an institutional and financial capacity in the area of agricultural credit (agricultural credit component); (iii) reforms intended to improve land tenure legislation and administration (land tenure component); (iv) a program to improve the efficiency of the public sector by restructuring SONADER (SONADER reorganization component), by improving public investment in agriculture, and by increasing the operational efficiency of the Ministry of Rural Development and Environment (MDRE) (MDRE reorganization component and PIP); (v) the strengthening and adaptation of research and extension structures (research and extension component); (vi) measures intended to make stockraising less vulnerable to drought (livestock component); and (viii) the design of sustainable environment protection activities (environmental component\.) 3\. The project's investment component had the following objectives: (i) increase net profits of the farmers of Foum-Gleita by maintaining the dam and the irrigation and drainage networks on the 1,950 net hectares of equipped parcels; (ii) bring under cultivation some 1,500 hectares of flood recession land located essentially around the dam reservoir; (iii) promote agro-sylvo- pastoral activities and the integration of agriculture and stockraising in the project area; (iv) protect the environment; (v) conduct research and extension; (vi) develop a supporting infrastructure; (vii) and implement a set of social measures (dispensary, schools, drinking water supply)\.  Appendix B Page 2 of 3 HI\. ACHIEVEMENT OF OBJECTIVES 4\. The reforms planned under the adjustment component were carried out\. In particular: (i) the Government withdrew from the cereals subsector, allowing private operators to take over, and prices were liberalized; (ii) a mutualist agricultural credit structure was created, and now manages its portfolio according to strict guidelines and has achieved rates of recovery on the order of 90%; (iii) at the institutional and regulatory level, essential groundwork was laid in the area of land tenure and, depending on the region, the registration of irrigated lands is either completed or underway; (iv) the MRDE was reorganized and decentralized, and its Planning Unit became operational; (v) SONADER, the agency in charge of developing irrigated agriculture in the Senegal River Valley, was restructured, its costs (especially for payroll) were greatly reduced, its management was streamlined, and it will henceforth be financed on the basis of payment for services rendered for a diverse clientele; (vi) research and extension were redefined in the context of a National Plan for Agronomic Research (NPAR) and under the Agricultural Services Project (ASP); (vii) regarding the livestock component, the project helped create a stockraising system that is less vulnerable to drought, through pilot activities in environmental protection and pasture and water point management; training of responsible pastoral associations; and, in particular, determination of financial costs of disease prevention and protection activities; (viii) regarding the environment, the project's impact is felt more in the institutional area and in terms of expanded knowledge, rather than in terms of concrete achievements\. 5\. The investment component yielded concrete and substantial results as far as the dam and irrigated perimeter of Foum-Gleita (1,950 ha) are concerned\. The following advances are especially noteworthy: (i) improvement and maintenance works on the perimeter; (ii) the creation of a rational water distribution system and its implementation with a view to minimizing wastage; (iii) a clear definition of the division of labor between SONADER and the cooperatives; (iv) agricultural production which -- after a temporary decline during the 1992-94 period, due to climatic fluctuations, pest infestations and the unavailability of seasonal credit -- became diversified and achieved satisfactory levels; (v) the extension/training function, which was reorganized and made more efficient due to increased monitoring by extension agents and the application of the "training and visit" approach; (vi) farmer organization, which was strengthened through the reorganization and increased accountability of cooperatives, which are henceforth responsible for input supply and for the gathering, if not the marketing, of their products; (vii) fishing, which was organized within the dam's reservoir, with steadily increasing catches; (viii) in the environmental area measures were taken to fight dune encroachment and wind erosion, especially by means of windbreaks; and (ix) in the area of health and social infrastructures, significant results were achieved, including a reduction in the incidence of waterborne diseases, and the rehabilitation of dispensaries and schools\. IV\. GENERAL ASSESSMENT OF THE PERFORMANCE OF BOTH PARTIES 6\. The Mauritanian Government is pleased with the collaboration of all the donors who supported the implementation of the ASAIP and who were a force for coherence and efficiency\. The Government honored all its commitments, despite the continuous updating of the initial matrix of measures, which had some consequences for the project's steering and implementation capacity\.  Appendix B Page 3 of 3 V\. SUSTAINABILITY 7\. The ASAIP made it possible to lay the groundwork for a policy of liberalization and sustainable development of agricultural activities, through the formulation of a number of policy and strategy documents drawn up for various subsectors\. The ASAIP was mainly of an institutional nature, however, and cannot be considered a truly national rural development program\. The recovery achieved thus far is still too fragile and must be considered a first stage in a longer term process\. This is why quick support for it is envisaged in the form of interventions tackling the problems of the three main ecological zones (Senegal River Valley (PDIAIM), rainfed zone (RNRMP), and arid zone (Oasis 1I Project)), and by means of horizontal interventions in specific subsectors (livestock policy, environmental protection program) or in specific functional areas (Agricultural Services Project for the research/training/extension triad)\. 8\. Concerning the adjustment component, the ASAIP made it possible, despite delays and flaws in implementation, to make noticeable progress in the agricultural sector\. In order to maintain the spirit of the ASAIP, project activities have been pursued beyond the project's official 1990-94 implementation period by: (i) continuing efforts at liberalizing the marketing and pricing of cereals; (ii) improving the methods of implementing land tenure reform; (iii) continuing the decentralization of MRDE and the reorganization of SONADER; (iv) stepping up the process of reorganizing socio-professional organizations and making them more accountable; and (v) strengthening the extension and research components under the Agricultural Services Project\. In addition, the Government is determined to pursue the initiatives begun under the ASAIP through a number of investment operations, such as the PDIAIM (now under preparation), so that adjustment measures such as those undertaken in connection with the ASAIP can be accompanied and consolidated by investment programs\. VI\. CONCLUSION 9\. The ASAIP, including the post-ASAIP phase, achieved concrete and highly useful results that should contribute to the harmonious development of the agricultural sector, especially in the institutional and regulatory areas\. Nevertheless, many initiatives begun under the ASAIP need to be pursued and consolidated, and numerous institutional and regulatory accomplishments need to be reviewed and updated in the light of current sectoral and international trends\. However, it is now time to make the transition from a policy of adjustment to a development mentality that encompasses: (i) an economic rationale (ensuring the viability and profitability of existing structures); (ii) a social rationale (consolidating and fostering the gains in agricultural sector revenues and in the sector's capacity for intervention); and (iii) an environmental rationale (laying the groundwork for sustainable development\.) 10\. With this in mind, the agricultural development strategy will henceforth be based upon the following four basic themes: - helping ensure food security; - improving farmers' incomes and rural employment, as well as reducing poverty; - fostering the integration of agriculture into the national and international markets; - protecting and conserving natural resources in the interest of sustainable development\. Nouakchott, June 1997\. Ministry of Planning  Appendix C REPUBLIQUE ISLAMIQUE DE MAURITANIE Honneur - Fratemite - Justice MINISTERE DU DEVELOPPEMENT RURAL ET DE L'ENVIRONNEMENT RAPPORT D'ACHEVEMENT PROJET D'AJUSTEMENT DU SECTEUR AGRICOLE (Cr6dit 2093) Juin 1997   ABREVIATIONS ET SIGLES ACOPAM Appui Associatif et Cooperatif aux Initiatives de Developpement a la Base dans le Sahel ASMT Ajustement Sectoriel a Moyen Terme AVB Agent de Vulgarisation de Base CACE Cooperative Agricole de Credit et d'Epargne CAIE Centrale d'Achat des Intrants d'Elevage CAS Strategie d'Assistance au Pays CSA Commissariat a la Securite Alimentaire CNED Conseil National de l'Environnement - Developpement CNERV Centre National d'Elevage et de Recherche Vterinaire CNRADA Centre National de Recherche Agronomique et de Developpement Agricole CP Cellule de Planification (MDRE) CSC Contre-saison chaude CSF Contre-saison froide DEAR Direction de l'Environnement et de l'Amenagement Rural (MDRE) DRAP Direction du Developpement des Ressources Agro-Pastorales (MDRE) DRFV Direction de la Recherche, Vulgarisation et Formation (MDRE) EPA Etablissement Public a Caractere Administratif GMP Groupe motopompe ha hectare IDA Intemational Development Association kg Kilogramme MDRE Ministere du Developpement Rural et de l'Environnement OMC Organisation Mondiale du Commerce PANE Plan d'Action National pour l'Environnement PASA Programme d'Ajustement du Secteur Agricole PDIAIM Programme de Developpement Integre de l'Agriculture Irriguee en Mauritanie PDS Projet de Developpement des Semences PGRNP Programme de Gestion des Ressources Naturelles en Zone Pluviale PME Petites et Moyennes Entreprises PMLCD Programme Multisectoriel de Lutte Contre la Desertification PIP Programme d'Investissements Prioritaires PNRA Plan National de la Recherche Agricole PSA Projet des Services Agricoles SONADER Societe Nationale pour le Developpement Agricole SONIMEX Societe Nationale d'Import-Export t tonne UBD Union des Banques de Developpement UCAF Union des Cooperatives Agricoles de Foum-Gleita UM Ouguiya UNCACEM Union Nationale des Cooperatives de Credit et d'Epargne de Mauritanie   TABLE DES MATIERES fun I\. INTRODUCTION \. 1 II\. OBJECTIFS ET VOLETS DU PROGRAMME \.1I A\. Composante Ajustement \.I B\. Composante Investissement \.1\. III\. REALISATION DES OBJECTIFS \.2 A\. Composante Ajustement \.2 1\. Commercialisation et prix \.2 2\. Credit agricole \.4 3\. Le Regime foncier \.5 4\. Reorganisation de la SONADER \.7 5\. Reorganisation du MDRE et Programme d'Investissement Prioritaire (PIP) \.8 6\. Recherche et vulgarisation \. 10 7\. Elevage \. 11 8\. Environnement \. 12 B\. Composante d'investissement \. 13 1\. Travaux d'amelioration et d'entretien \. 13 2\. Production agricole \. 13 3\. Vulgarisation - formation \. 14 4\. Organisation paysanne \. 15 5\. Recherche \. 16 6\. Elevage \. 16 7\. Peche \. 17 8\. Environnement \. 17 9\. Sante et infrastnuctures sociales \. 18 10\. Assistance technique \. 18 IV\. APPRECIATION GENERALE DES PERFORMANCES DES DEUX PARTIES \. 19 V\. DURABILITE \. 19 VI\. CONCLUSION \. 19   I\. INTRODUCTION Le "Programme d'Ajustement du Secteur Agricole" (PASA) est un projet mixte comportant une composante d'ajustement sectoriel et une composante d'investissement\. Concernant la composante d'ajustement, it fait suite au "Credit d'ajustement structurel" acheve en 1988, tandis que pour la composante d'investissement, it peut &re considere comme la poursuite et consolidation du "Projet d'irrigation du Gorgol Noir" (Credit 1068- MAU) qui, entre 1980 et 1987, avait pour objet la construction/achevement du barrage de Fourn-Gleita et l'amenagement, en aval du barrage, d'un perimetre irrigue de 2\.000 ha, suivi de l'installation de 1\.100 familles sur 600 ha acheves (objectifs reduits en cours de projet)\. Dans le cadre de la preparation du programme d'ajustement a moyen terme (1989 - 1991) du secteur agricole (AMTS), un ensemble de mesures de nature institutionnelle et de politique generale ont e identifiees\. Ces mesures ont fait l'objet de Communications adoptees en Conseil des Ministres, en mai 1987 et le 15\.06\.1988\. Parmi ces mesures, et dans le cadre du credit IDA, un noyau de mesures jugees essentielles a la realisation des objectifs du PASA a ete identifie pour &re suivi de pres, et a conditionne les deblocages des tranches de credit d'ajustement, objet d'une matrice des mesures remise a jour a l'occasion de chaque mission conjointe de supervision\. Le dernier decaissement du volet institutionnel ajustement a e effectue en aouit 1994, ce qui marque, en principe, la fin du PASA, bien que la phase posterieure (dite aussi post PASA) puisse &re consideree comme une phase de renforcement et de consolidation avec une extension des mesures a l'ensemble du territoire\. Quant au volet investissement, les decaissements se sont prolonges jusqu'au 31\.12\.1996\. II\. OBJECTIFS ET VOLETS DU PROGRAMME A\. Composante Ajustement La composante Ajustement devait apporter un appui a I'ASMT entrepris par le Gouvernement, en particulier elle devait appuyer: i) I'approfondissement et 1'extension de la liberalisation du marche et des prix des cereales (volet commercialisation et prix), ii) la mise en place d'une capacite institutionnelle et financiere pour le credit agricole (volet credit agricole), iii) les reformes destinees a ameliorer la Iegislation et l'administration en matiere fonciere (volet foncier), iv) un programme d'amelioration de l'efficacite du secteur public en restructurant la SONADER (volet reorganisation de la SONADER), en ameliorant les investissements publics dans l'agriculture et en augmentant l'efficacite operationnelle du MDRE (volet r6organisation du MDRE et PIP), v) le renforcement et l'adaption des structures de recherche et de vulgarisation (volet recherche et vulgarisation), vi) des mesures destinees a rendre l'elevage moins vulnerable aux secheresses (volet elevage), et vii) la mise au point des activites de protection de 1'environnement durables (volet environnement)\. Quant au volet irrigation, il a e integre dans la composante Investissement du PASA\. B\. Composante Investissement Cette composante du Programme avait notamment pour objectif: i) d'augmenter les recettes nettes des exploitants de Foum-Gleita par l'entretien du barrage et des reseaux d'irrigation et de drainage sur les 1\.950 ha nets de terres amenagees, ii) la mise en exploitation de 1\.500 ha de terres de decrue, essentiellement sur le pourtour de la retenue du barrage, iii) la promotion des activites de production agro-sylvo-pastorale et  -2 - I'integration de l'agriculture et de l'elevage dans la zone du projet, iv) la protection du milieu 6cologique, v) la recherche et la vulgarisation, vi) le developpernent d'une infrastructure d'appui vii) ainsi qu'une s6rie de mesures a caractere social (dispensaire, 6coles, approvisionnement en eau potable)\. III\. REALISATION DES OBJECTIFS A\. Composante Ajustement 1\. Commercialisation et prix a) Obiectifs Pour atteindre l'objectif prioritaire d'augmenter la production nationale de cereales, la filiere cerealiere devait etre liberalisee, notamment en dereglementant la commercialisation et en lib6rant les prix des produits et intrants\. Cette lib6ralisation de la filiere devait se traduire, en particulier, par i) le retrait progressif des op6rateurs publics au profit des operateurs prives, retrait accompagne par la mise en place d'une politique de comrnercialisation efficiente assurant la promotion du secteur prive grace a une r6mun6ration adequate de ses services, ii) la mise en place d'une politique d'incitation au secteur priv6 pour l'amener A participer non seulement a la production mais aussi aux autres activites en amont et en aval de la production, et iii) I'adoption d'une politique des prix au producteur suffisamment incitatrice accompagnee d'un systeme de protection de la production nationale a travers des droits a l'importation afin de favoriser le d6veloppement du secteur prive a tous les niveaux de la filiere tout en limitant les effets negatifs sur le consommateur\. b) Realisations et rksultats obtenus bl) Filiere riz Los unites de transformation detenues par le secteur public (SONADER, CSA) ont ete privatis6es, le monopole d'importation de la SONIMEX supprim6 a compter du ler janvier 1991 et l'autorisation d'achat par le CSA "aux petits agriculteurs enclaves encadres par la SONADER" d'abord limit6e a 6\.000 t a partir de la campagne 1991/92, puis abolie completement en 1994\. Au 31\.12\.1996, l'intervention de l'Etat se limitait a: * fixer un prix d'orientation du paddy pour une qualite donnee et ceci apres concertation entre inmportateurs, transformateurs et agriculteurs; * proteger le marche national par un systeme de prix de ref6rence et de prelevements tarifaires forfaitaires au poids de produit importe\. La valeur mercuriale mise en place en janvier 1991 a Wt6 actualisee chaque debut de trimestre jusqu'a ce que la monnaie nationale soit devalu6e (dernier trimestre 1992)\. Depuis cette date, la valeur mercuriale n'a ete revisee qu'a deux reprises janvier 1994 et janvier 1995)\. Au 31\.12\.1996, la taxe a l'importation sur le riz appliquee dorenavant etait de 16,017 UM/kg; * inciter les differents intervenants dans la filiere a s'organiser pour assurer la comrnercialisation de la production nationale\. C'est dans ce cadre que, le 28\.02\.1993, les imnportateurs ont sign6 un accord cadre donnant lieu a la creation d'une structure informelle appelee "pool des importateurs" ayant pour chef de file la SONIMEX\. Ce pool avait deux objectifs fondamentaux: * r6gulariser les importations et arriver a une adequation entre la production nationale et les quantites importees, tout importateur s'engageant a acheter une part de la production locale,  - 3 - acheter le paddy local a un prix garanti pour une qualite donn6e, assurer la transformation et l'ecoulement du riz produit\. Au titre des campagnes d'intervention du pool, les resultats ont e les suivants: 1993/94 quantite 15\.378 t prix moyen 26 UM/kg valeur 400 mio UM 1994/95 12\.940 t 31,5 UM/kg 404 mio UM 1995/96 16\.200 t 40 UM/kg 648 mio UM 1996/97 25\.600 t 42 UM/kg 1\.075 mio UM b2) Autres cereales (ble\. sor-ho, mil\. maes) Jusqu'en 1990, le deficit cerealier etait couvert essentiellement par les dons en aide alimentaire\. Les importations etaient limitees en ble destine a l'industrie locale (semoule, pates) et croissantes en farine destin6e aux boulangeries\. A partir de 1991, les effets conjugues de la secheresse et la baisse de l'aide alimnentaire ont entraine des importations massives de ble de la part du secteur commercial prive et la m6vente des dons d'aide alimentaire destines a la commercialisation\. Pour r6tablir une concurrence loyale, mais surtout pour un ecoulement sur le marche des cereales traditionnelles, le Gouvernement avait mis en place pour le ble en grain, a compter du ler juillet 1992, le meme principe de protection (valeur mercuriale) que pour le riz\. c) Difficultes rencontrees Si la filiere cerealiere se caracterise aujourd'hui par l'absence d'intervention de l'Etat sur le marche int6rieur, elle reste confrontee a un certain nombre de difficultes essentielles: Mevente de l'aide alimentaire dont par ailleurs le volume a diminue significativement; * Fluctuation des prix des cereales traditionnelles selon les saisons et les annees et des difficult6s d'6coulement des regions excedentaires en raison, notamment, de l'insuffisant developpement du reseau routier; * Absence de capacit6s de stockage et des couts de transports interieurs eleves, * Caractere informel du pool des importateurs; d) Persgectives II s'agira de: * Am6liorer le r6seau routier et reduire les couits de transport en stimulant la concurrence dans le domaine des transports; * Mettre en place un observatoire des filieres agro-alimentaires apte a suivre l'evolution des prix et des flux de tous les produits agricoles\. Celui-ci foumira egalement des informations aux acteurs economiques et constituera le cadre de concertation Etat - prive necessaire et conforme a un cadre liberal; * Developper les unites de collecte, de stockage, de conditionnemnent et de transformation pour assurer des debouches flables aux producteurs, ameliorer l'efficacite des filieres, approvisionner r6guli6rement les marches a des prix abordables et en produits de qualite; * Inciter a la cr6ation d'organisations professionnelles de producteurs qui prennent en charge les activites a l'aval de la production et ben6ficiant de la valeur ajoutee qui peut en decouler; * R6partir de facon plus equitable la valeur ajoutee de chaque filiere entre les differents operateurs;  -4 - Etudier l'impact reel du systeme de tarification decoulant du respect des engagements pris dans le cadre de l'OMC\. Cette etude devrait deboucher sur des recommandations en matiere d'appuis appropries A la filiere cerealiere pour garantir sa perennite dans un contexte de competitivite et d'efficacite\. 2\. Credit agricole a) Obiectifs L'objectif du Gouvernement defini dans la Lettre de politique agricole de 1988 etait, a l'horizon 1991, de mettre en place un systeme national de credit agricole, dote de I'autonomie financiere et de la personnalite juridique, destine a promouvoir et a accompagner l'efforts des exploitants agricoles prives et ceux du systeme cooperatif\. Au moment de la preparation du PASA, des operations ponctuelles de credit agricole etaient menees par deux institutions differentes, la SONADER et l'UBD (Union des Banques de Developpement), dans un environnement institutionnel relativement peu experimente pour repondre aux besoins des differents types d'exploitants agricoles et en l'absence d'un cadre reglementaire et financier appropri6\. Par consequent, il s'agissait de mettre en place un systeme bancaire viable a l'appui des secteurs prive et collectif b) Realisations et resultats obtenus Le portefeuille SONADER a e transfere a l'UBD en 1989 conformement aux directives du PASA\. Forte des orientations politiques et des moyens financiers mis en place par l'Etat et differents bailleurs de fonds, l'UBD a developp6, de maniere exponentielle, pour les campagnes 89/90, 90/91 et 91/92, les attributions de prets sans mise en place d'une politique de recouvrement coherente et rigoureuse\. Des performances alarmantes (taux de recouvrement de 46%) et des retards pris dans la restructuration de l'institution de 1990 a 1992 ont finalement amend le Gouvemernent A decider, en mai 1992, la creation d'une structure mutualiste, sous forme de deux cooperatives agricoles de credit et d'epargne (CACE Trarza/Rosso et Haut Fleuve/Kaedi), d'une Union Nationale des Coop6ratives Agricoles de Credit et d'Epargne de Mauritanie (UNCACEM/Nouakchott), ainsi que la inise sur pied d'un Comite de Pilotage\. Un cadre reglementaire et financier etait mis en place en decembre 1992 et les procedures comptables et financieres ont Wt6 adoptees par la BCM en 1993, date de debut des activites de l'UNCACEM et des CACE\. Cependant, le redressement financier des exploitations en impayes dans le portefeuille de l'ex-UBD s'est revele un echec, le taux de recouvrement des nouveaux prets consentis aux clients redresses ainsi que le recouvrement des dettes anterieures sont quasi nuls\. Depuis 1994/95, l'UNCACEM poursuit ses activites avec les seuls clients en regle dans le remboursement de leurs ech6ances (160 sur 700 au depart)\. ll sen est suivie une baisse du nomnbre de societaires eligibles et des accords de prets, mettant beaucoup d'agriculteurs dans l'impossibilite d'entamer la campagne agricole ou les obligeant de trouver d'autres sources de credit\. En contrepartie, on enregistre une nette amelioration du taux de recouvrement qui passe de 58% en 1994 a 75% en 1995 et 90% en 1996\. Une procedure generale de recouvrement elaboree en 1994 et un systeme de suivi permettant d'identifier et de situer les exploitations beneficiaires des credits (operationnel en 1997) montre levolution favorable du cadre institutionnel et juridique du credit agricole\. L'audit externe des exercices 93, 94 et 95 realise en 1996 confirine que l'ensemble des textes produits par l'UNCACEM et les techniques utilisees lui ont permis d'arriver a un bon niveau d'organisation administrative et comptable\.  - 5 - Le volume de prts octroyes est pass6 de 273 millions UM en 1992/93 A 1,117 milliards UM en 1996/97\. Malgre ces bons r6sultats financiers, lobjectif d'un systene de cr6dit viable, destin6 a promouvoir l'ensemble des exploitations agricoles individuelies et collectives n'est pas encore atteint\. En effet, du point de vue des b6neficiaires du credit, le nombre de societaires eligibles au credit est en forte diminution (le nombre de prets court terme est pass6 de 467 en 1993/94 A 159 en 1996/97) et la r6partition cr6dits collectifs/individuels qui etait a 50/50 en 1992/93, a atteint 75% d'individuels et 25% de collectifs en 1996/97\. Le probleme de financement des groupements (ou des petits exploitants) reste donc pose en 1997\. c) Difficult6s rencontrees et Dersuectives Le credit agricole reste soumis a un certain nombre de contraintes panni lesquelles on peut citer: * le taux de recouvrement, bien quen nette progression, ne permet pas encore de garantir la perennite du systeme de credit agricole, * les ressources adaptees aux besoins reels et croissants de financement du secteur (long terme destines a la rehabilitation et lextension des perimetres, court et moyen terme destines a la diversification de la production, a la collecte, au stockage, a la transformation et a la commercialisation) ne peuvent durablement etre finances par des appuis ext6rieurs, - le financement d'une monoculture telle que le riz demeure extremement risqu6, un cadre institutionnel encore fortement centralise ne peut r6pondre aux besoins reels d'exercice de la solidarite, - des couts de recouvrement et d'operation de l'UNCACEM, fix6s en principe a 5/o, sont encore trop eleves\. Ainsi, les objectifs etablis par le Gouvemement en matiere de credit sont les suivants: - appui au recouvrement total des prts accordes, * renforcement institutionnel de l'UNCACEM (sa d6centralisation, la constitution de ressources propres par la collecte de l'epargne, le renforcement des capacit6s humaines et l'appui aux organisations professionnelles), * 1'extension des produits bancaires (notamment credit de conmmercialisation plut6t que cr6dit de campagne, approche globale de l'exploitation et de sa rentabilit6), * amdlioration de l'environnement de l'institution (des exploitations viables, des debouches fiables, des infrastructures routieres et hydrauliques operationnelles), * mise en oeuvre dun systeme mutuel d'assurances et de garantie de pr&s (PME agricoles hors UNCACEM)\. 3\. Le Regime foncier a) Obiectifs Le developpement considerable de l'irrigation par le secteur prive a ete rendu possible, en partie, au cours des ann6es 1985 - 1988, par la distribution de terres en application de l'Ordonnance de r6forme fonciere de 1983 (N° 83\.127) et de son Decret d'application (N° 84\.009), avec pres de 35\.000 ha distribu6s, dont 8\.000 ha amnages jusqu'en fin 1988\. Toutefois, faute d'un cadre r6glementaire precis et de services administratifs specialises, les occupations de terrain se sont souvent faites de facon anarchique et sur simple octroi par les autorit6s territoriales d'un droit  d'occupation pr6caire et revocable d'une duree d'un an\. Cette situation etait potentiellement grave\. C'est pourquoi, le volet foncier a fait l'objet d'une attention particuliere dans le cadre du PASA et des ameliorations substantielles devaient ere apportees dans I'application de la reforme fonciere en vue de niieux contr6ler le d6veloppement rapide de l'occupation des terres dans les regions agricoles productives, garantir I'attribution equitable des terres, inciter a leur mise en valeur et enregistrer les droits fonciers, dans 1'esprit d'un regime de droits fonciers garantis\. b) Realisations et resultats obtenus Dans le cadre du PASA, au niveau institutionnel et reglementaire, le Decret 90\.020 (qui abrogeait et remplacait le D6cret 84\.009) a permis d'introduire plusieurs mesures: i) le renforcement de ta decentralisation pour les attributions, ii) la definition de phases progressives d'accession a la propriete, iii) l'implication systematique des populations concernmes et iv) la securisation des droits fonciers des populations locales\. Les dispositions pr6vues par ce Decret ont e detailles et precisees au fur et a mesure des besoins par des Arretes et des Circulaires (27 au total), au cours de la periode 1992/93, notamment: i) la notion d'espace vital des agglomerations rurales (1991), ii) la tenue de registres des terres (1990), et iii) les modalites de presentation et de consultation des populations locales\. Sur le plan fonctionnel, lArre& N° 12\.206 de 1990 a fixe les attributions des services charges de la politique foncicre, notanmment le Ministere de l'Int6rieur (Reviseur), le MDRE (Bureau des Affaires Foncieres) et le Ministere des Finances (Domaines)\. De meme a ete cr66e, en 1989, un Comite interminist6riel charge du foncier et de l'Apres-barrages, qui a pour attribution, en particulier, d'examiner et d'adopter les schemas des structures foncieres\. Sur ces bases reglementaires et institutionnelles c'est engagee, A partir de 1991, une operation test de r6gularisation des terres irriguees et mises en valeur dans le Trarza Est\. Cette operation, conduite avec pragmatisme, a demontre l'inter& d'une regularisation fonciere, la faisabilite de l'action et l'applicabilite des textes\. Ce qui a conduit les autorites nationales, avec l'appui des bailleurs de fonds, a etendre la r-organisation fonciere d'abord au Gorgol, en avril 1993, et au Trarza Ouest, en janvier 1994, puis a 1'ensemble de la moyenne et haute vallee, depuis 1995\. Au 31\.12\.1996, les demandes couvraient 39\.594 ha au Trarza, dont 27% pour les perimetres collectifs (176 exploitations) et 73% pour les operateurs prives (648 exploitations)\. Par ailleurs, 15\.354 ha ont ete regularis6s pour une superficie moyenne de 40 ha, 23 r6serves foncieres classees (17\.700 ha), 35 espaces vitaux (1\.619 ha) et 3 forets classees (975 ha) pour un total de 35\.648 ha de superficies regularisees\. c) Difficultes rencontr&es et DersDectives La solution de la question fonciere a fait des progres constants ces dernieres annees malgre certaines difficultes et lenteurs rencontr6es, par exemple: * la n6cessaire regularisation de l'etat civil des demandeurs, la necessaire formation et vulgarisation pr6alables des cadres techniques, des administrations et des populations\. De gros efforts en matiere de sensibilisation restent a faire; * A ce jour, seules les terres irriguees (perimrtres) peuvent faire l'objet de demande de r6gularisation, or les populations utilisent d'autres terres egalernent affectees par le r6gime du Fleuve (d6crue);  - 7 - * Ia mise en application de la loi fonciere conduit a l'emergence d'un marche foncier, la terre devenant un bien echangeable et transmissible\. Une attention particuliere (enregistrement, contr6les, textes r6glementaires) doit y etre apportee par le Gouvemement; * Ia regularisation, sous forme collective ou individuelle, devrait faire l'objet d'analyse fine en terme de comportement differencie au niveau de la mise en valeur de la terre; un titre collectif est pertinent s'il y a coexistence entre des unites sociales; * 1'extension de la reforme fonciere dans la vallee aux terres autres que celles reservees a l'irrigation, de mene que dans la zone pluviale, reste a mettre en oeuvre; de gros efforts en matiere de sensibilisation seront necessaires, des moyens humains et materiels restent a mettre en oeuvre\. C'est pourquoi, cette action devra s'inscrire dans la duree en faisant porter leffort sur l'arndlioration du dispositif existant pour reellement atteindre les objectifs traces, et sur une approche pragmatique associant etroiternent les populations concernees\. 4\. RWorganisation de la SONADER a) Obiectifs Cre6e en 1975 et con,ue commne principal artisan de la promotion du developpement de l'irrigud dans la Valle, la SONADER a connu des dysfonctionnements essentiellement dus i) a l'ambigute des missions qui lui etaient confiees, ii) a la precarite des modes de financement de son fonctionnement et des charges r6currentes de ses projets, iii) a la configuration de sa structure essentiellement determiinde par les projets et iv) par un environnement peu incitatif marque par l'absence d'une politique agricole globale et coherente\. C'est pourquoi, dans le cadre de la mise en oeuvre du PASA, la Societe a fait l'objet de mesures particulieres visant: i) le recentrage de ses missions autour des activites d'ingenierie, de conseil agricole et de suivi- 6valuation, ii) la rationalisation de ses interventions et leur coordination avec celles des autres intervenants, iii) son desengagemnent complet de ses activites peripheriques (credit, fourniture d'intrants, transformation du paddy, etc) afin de r6duire son cout de fonctionnement tout en favorisant la promotion d'operateurs specialis6s, iv) I'amelioration de son equilibre financier et la reduction des charges qu'elle represente pour l'Etat et v) l'accroissement de sa productivite et de son efficacite operationnelle\. b) Realisations et resultats obtenus Durant la periode du PASA et post PASA, la realisation de la quasi totalite des mesures d'ajustement a permis d'atteindre des resultats appreciables dans les domaines suivants: * DPknag ement: i) transfert effectif de l'activit6 cr6dit agricole aux institutions financieres sp6cialisees, ii) transfert de l'activite approvisionnenent en intrants et equipements agricoles aux foumisseurs prives et organisations socioprofessionnelles, iii) transfert de la gestion et maintenance du materiel agricole (tracteurs, GMP) au secteur prive, iv) vente des rizeries de Boghd et Kaedi et v) desengagement de la conmnercialisation et arret du recouvrement des redevances en nature (paddy)\. * Viabilit6 financiere: i) allegement considerable des charges de structures (masse salariale, fonctionnement courant), ii) recettes generees par la maitrise d'oeuvre particuliere et diversification des ressources financi6res par la p6netration du marche d'6tude et de contr8le des travaux, et enfin iii) determination d'un systeme de financement du fonctionnement de la Societe base sur la remuneration des prestations de  - 8 - service pour le compte d'une clientele diversifiee et approuve par l'Etat sous forme d'une Lettre de mission\. *R6orfanisation inteme: restructuration par etapes successives basee sur plusieurs etudes, notamnent sur les plans suivants: i) desengagement de toutes fonctions marchandes et reduction des effectifs de personnel et leur maintien a 372 agents, ii) redefinition et clarification des missions et des modalites d'intervention et de remuneration, iii) mise en place d'un systeme de gestion financiere, comptable et budg6taire approprie et son informatisation, iv) assainissement financier a travers la restructuration de son bilan au 31\.12\.1992 et la r6duction de ses charges, et enfin v) depart volontaire de 100 agents (debut 1996) ramnenant son effectif a 265 personnes\. * Reglementation: sur ce plan, il faut mentionner: i) la publication d'un Decret relatif a la reorganisation de la SONADER (N° 95\.022), ii) la signature d'une Lettre de mission Etat-SONADER couvrant la periode 1994 - 1996, iii) la promulgation d'une loi relative au regime fiscal et douanier de la Societe\. c) Difficultes rencontrees et Derspectives La mise en oeuvre de la restructuration de la SONADER, bien qu'ayant ben6ficiee du soutien de l'Administration, s'est heurtee a des lenteurs dues a l'environnement de la Societ\. C'est ainsi que, malgre la realisation de la plupart des mesures relatives a la r6organisation de la SONADER, un certain nombre de problemes persistent et empechent la Societe de beneficier pleinement des effets induits des ajustements deja op6r6s\. Ces problemes sont notamment: i) la persistance d'un regime de passation des marches inadapte au niveau d'activit6 et A l'efficacite recherches, ii) un regimne fiscal et douanier pas suffisamnment incitatif, iii) le non achevement de l'assainissement des organisations paysannes, iv) I'absence ou l'insuffisance de la responsabilisation des organisations socioprofessionnelles paysannes, notamment en matiere de gestion- maintenance des ouvrages collectifs, v) le fonctionnement imparfait du systeme de remuneration des prestations de service, vi) le non achevement de la mise en application de l'organigranume cible et de la restructuration des ressources humaines (redeploiement, plan de formation, disproportion entre personnel productif a activite facturable et personnel de soutien), vii) des insuffisances et retards dans I'application du nouveau systeme de gestion\. 5\. Reorganisation du MDRE et Programme d'Investissement Prioritaire (PIP) a) Obiectifs Au moment de la preparation du PASA, le r6le de l'Etat dans le developpement agricole etait caracterise par son implication directe dans la production, la transfonnation et la conunercialisation, avec une disproportion firappante des moyens et des taches confides entre les structures centrales et les structures regionales et une multiplicit6 de projets autonomes, source de contradiction des objectifs, duplication des activites et mauvaise allocation des ressources\. Dans le cadre de la composante renforcement institutionnel du PASA, il etait ainsi pr6vu, en vue d'am6liorer l'efficacite operationnelle du Ministere, notaniment sur le plan de la planification et le suivi-6valuation des investissements, de: * restructurer le MDRE en mettant l'accent, entre autres, sur le renforcement de ses capacites en matiere de programmation et de suivi a travers une reorganisation de la Cellule de planification, * etudier et mettre en place des nouveaux systemes de gestion (budget, personnel et materiel) et de programmer et suivre les investissements publics\.  9- b) Realisations et resultats obtenus Ils se situent a trois niveaux: Cellule de planification: en vue de rendre la Cellule plus operationnelle, celle-ci a e reorganisee en decembre 1988 en deux bureaux, soutenus d'une unite informatique: bureau des etudes econorniques et politiques rurales et bureau de la programmation, budgetisation et suivi, dans le but de la mise en place d'une structure de planification approprie pour le suivi regulier du PASA et l'elaboration et le suivi du programme d'investissement du secteur agricole\. Dans le souci d'une meilleure integration de la Cellule a l'ensemble des activit6s du Departement et dans le but de la porter a un niveau plus OMeve de decision au sein du Ministere, la responsabilite de la Cellule a e confiee, en juillet 1993, au Conseiller econornique du Ministre\. A cette occasion, un troisinme bureau (infornations rurales) a e mis en place\. Enfin, un programme de formation, dans les domaines des etudes et analyse des projets et l'elaboration/execution des budgets de projets d'investissement, a et mis en oeuvre dont quatre agents ont pu beneficier\. Ministere: dans le but de recentrer ses activites sur la planification, la programmation, le suivi et le controle, la restructuration du MDRE a e operee en mars 1993, basee sur les principes de la decentralisation et deconcentration progressive, une meilleure adequation formnation et emploi, une amelioration des conditions de travail et de remuneration\. Elle s'est notamment traduite par: * la creation, au niveau de chaque Wilaya, d'une delegation regionale investie de 1'ensemble des missions confi6es au Departement requerant une decentralisation des moyens et des ressources; u une integration fonctionnelle et dynamique des programmes sous-sectoriels (agriculture, elevage, environnement, etc) et des services publics agricoles (recherche, vulgarisation, formation) a travers l'emergence de nouvelles directions techniques (DRAP, DEAR, DRFV) et une redefinition des missions, des r6les des structures administratives et des organismes sous tutelle; o une meilleure prise en compte des questions foncieres et domaniales par la creation, au niveau de chaque Wilaya, d'un bureau des affaires foncieres rattache a la Delegation regionale et coordonne au niveau central par un bureau loge au Cabinet du Ministre\. Apres des debuts laborieux dus, notamment, au manque de ressources, aux resistances inherentes a tout changement en l'absence de mesures d'accompagnement (sensibilisation, formation), la restructuration n'a pu reellement s'engager sur la voie du succes au niveau regional qu'avec la mise en place du PSA qui a apporte les ressources financieres indispensables pour la construction des locaux, les moyens de deplacement des agents de terrain, un programme de formation et recyclage continus, un programme de travail clairement etabli et des salaires et indemnites de deplacement uniformes\. Proaranume *lnvestissement Prioritaire: peu de resultats concrets ont pu etre obtenus, notamment du fait de l'absence d'une maniere claire de traiter et d'analyser les donn6es par les parties impliquees (Cellule de Planification/MDRE et Direction du Plan)\. Toutefois, depuis 1997, le suivi est desornais sous la responsabilite du MDRE et une base commune est en cours de constitution (MEMAU) pour resoudre ce probleme\. En ce qui conceme l'analyse plus fine du PIP, la nomenclature utilisee ne permet pas encore de distinguer r6ellement les fonds consacres aux differents sous-secteurs\. La finalisation de la strategie sectorielle en cours representera une amelioration sensible sur le plan du suivi et de la programmation des investissements dans le secteur rural et ses differents sous-secteurs\.  - 10 - c) Difficultes rencontrees et perspectives Les difficultes rencontrees avaient trait, notamment, i) aux moyens limites (surtout avant le d6marrage du PSA), ii) a la confusion consecutive aux changements operes sans veritable preparation, formation et sensibilisation prealables, iii) a l'absence d'un organe efficace charge formellement de la mise en oeuvre et du suivi de la restructuration et iv) a l'instabihite du personnel de la Cellule de Planification et A la reduction de ses moyens au terme du PASA, sans une reprise par le budget de fonctionnement du Ministere\. Une evaluation du chemin parcouru sur la voie de la restructuration reste A faire afin d'etablir le bilan et de definir clairement les perspectives\. Toutefois, dans le cadre d'un tel bilan, l'accent devrait etre mis, en particulier, sur: i) les questions relatives A la centralisation/ decentralisation des projets, ii) les capacites du MDRE (besoins en formation, incitations A la performance), iii) les mecanismes permettant la polarisation des directions techniques sur les activites de progranunation et de contr6le et leur articulation avec la Cellule de planification, iv) les mecanismes permettant de limiter le foisonneinent des structures a caractere provisoire (cellules, projets) et v) l'instabilite du personnel, en particulier celui de la planification\. 6\. Recherche et vulgarisation a) Obiectif L'objectif du volet recherche-vulgarisation etait de contribuer A intensifier et diversifier les cultures par: i) l'adoption d'un programme national des recherches prioritaires dans les zones irriguees, ii) la mise en place d'un systeme national de production de semences pour les zones pluviales et irriguees, iii) la reorganisation des services de vulgarisation et iv) une meilleure liaison recherche-vulgarisation\. b) Realisations et resultats obtenus Un Plan National de la Recherche Agronomique (PNRA) a ete adopte par le Gouvernement en 1995 dans le cadre du PSA\. Ce Plan definit les priorites de la recherche pour la decade A venir a partir de contraintes identifiees avec les agriculteurs et eleveurs\. II comprend les cinq programmes suivants: i) systeme irrigue, ii) pluvial-decrue, iii) sylvo-pastoral, iv) oasien et v) peri-urbain\. La composante recherche du PSA n'a pas encore demarre, mais des actions concretes de recherche dans le cadre du PNRA ont deja ete engagees dans le domaine de la diversification et de l'intensification dans le secteur irrigue\. Un systeme de production-commercialisation de semences de riz contr6lees et certifiees a et mis en place dans le cadre du Projet de Developpement des Semences (PDS), de meme qu'en zone pluviale, un systeme de collecte de semences traditionnelles produites avec de nouvelles techniques de selection, d'epuration et de conservation\. c) PersDectives Le volet recherche du PSA devrait demarrer en 1997, ce qui permettra de financer des essais notamment sur les speculations destinees a l'exportation (diversification/ intensification dans le cadre du PDIAIM) et de demarrer l'ensemble des activites prevues dans le cadre du PNRA\.  - I1 - Enfin, les chercheurs devront etre plus presents sur le terrain avec les vulgarisateurs et les paysans et orienter leurs actions vers des essais en milieu paysan\. Par ailleurs, suite aux stipulations de la lettre de politique sous-sectorielle recherche-formation-vulgarisation (1994), des mesures doivent etre prises pour attirer et retenir des chercheurs qualifies (remuneration, statut)\. Cependant, les ressources restant toujours firnitees, I'utilisation des capacites sous-regionales de recherche (ADRAO et autres) doit etre envisagee dans l'avenir\. 7\. Elevage a) Objectif II s'agissait, dans le cadre du PASA, de contribuer a la mise au point d'un systeme d'eIevage moins vulnerable aux secheresses par des actions pilotes de protection du milieu naturel et de gestion des paturages et points d'eau, de formation d'associations d'eleveurs responsables et, enfin, de participation des dleveurs a la politique et, en particulier, aux charges financieres des actions de protection sanitaire et d'intensification de la protection\. b) Realisations et resultats obtenus En fait, les actions menees dans le cadre du PASA se confondent souvent avec celles realisees dans le cadre du projet Elevage II ayant bdneficie de l'appui du meme bailleur de fonds, l'IDA\. En matiere de gestion des paturages et points d'eau, i) de nombreuses etudes ont e realis&es, notamment sur les systemes de production, la comniercialisation des produits animaux, I'dpidem iologie et les qualites bact6riologiques du lait, ii) deux perimetres pilotes pastoraux ont e mis en place dans les secteurs de Tintane et de Timbedra dans lesquels il est procede annuellement a des inventaires des ressources animales et pastorales, enfm, iii) essentiellement dans le cadre du projet Elevage II, 68 points d'eau ont ete rehabilitds et 13 nouveaux points ont ete realises\. Sur le plan de l'organisation de la profession, 39 associations pastorales ont ete creees dont 34 detenaient un ddp6t de produits veterinaires et 25 un mini-projet de production laitiere\. Couvrant initialement de larges territoires ce qui limitait leur efficacite, 22 de ces associations furent restructurees, en 1993, en organisations plus petites et plus operationnelles\. Par ailleurs, au niveau central, le r6le du des intrants delevage fut renforce et celui-ci transforme en societe d'economie mixte sous l'appellation "Centrale d'Achat des Intrants d'Elevage" (CAIE), avec ouverture de son capital aux associations pastorales\. Concemant l'integration agriculture - elevage dans les zones irriguees et a haute pluviom6trie, a l'exception de quelques essais de cultures fourrageres realises avec succes par le CNRADA et la SONADER, tout reste a faire dans le cadre du PDIAIM, notamment l'amenagement de couloirs d'acces au fleuve pour permettre l'abreuvement des animaux sans creer des conflits avec les cultivateurs\. c) Difficultes rencontrees et DersDectives Les difficultes rencontrees sont dues, essentiellement, a la dispersion des actions et des moyens sur un territoire extremement vaste et au manque de coordination entre directions techniques ou organismes se repartissant actuellement les taches (DRAP, DRFV, DEAR, CNERV et Hydraulique)\. Pour I'avenir, le recensement de l'elevage par echantillonnage doit etre fait rapidement, car la connaissance du secteur demeure insuffisante pour planifier son developpement sur des bases serieuses\. Les organisations  - 12 - d'eleveurs devraient etre les structures de base pour l'implication et la responsabilisation des collectivites dans la gestion rationnelle des ressources naturelles, au meme titre que les communautes villageoises, car elles sont les vrais interlocuteurs des eleveurs nomades et doivent pouvoir constituer un contre-pouvoir face aux agro-eleveurs sedentaires des villages\. Dans cette optique, il serait necessaire de consolider les acquis, notamment au niveau des competences et de l'organisation sociale des eleveurs\. Enfin, I'augmentation des recettes des eleveurs est imperative pour repondre a la nouvelle donne creee par la privatisation des services de sante animale\. Seule une valorisation optimale de 1'ensemble des produits (viande, lait, peaux et cuirs) peut generer ces recettes\. 8\. Environnement a) Obiectif Dans le cadre du PASA devaient etre mises au point des activites de protection de 1'environnement durables, notamrnent grace a des actions pilotes visant A intensifier la lutte contre l'ensablement\. II s'agissait egalement d'amorcer la restauration du couvert vegetal au niveau des forets naturelles, de promouvoir le reboisement et des energies alternatives au bois et au charbon de bois et de mettre en place un cadre institutionnel adequat\. b) Realisations et resultats obtenus L'impact du projet sur le plan environnemental se situe davantage au niveau institutionnel et a celui de l'approfondissement des connaissances qu'a celui des realisations concretes\. C'est ainsi qu'un Plan d'Action National pour l'Environnement (PANE) et un Programme Multisectoriel de Lutte Contre la Desertification (PMLCD) ont dtd elabores et diverses etudes (exemple filiere charbon) ont e realisees\. Des resultats concrets se situent par contre au niveau de certains projets et actions geographiquement limitees (reboisement, mise en place de rangees de brise-vent, bois villageois, protection contre l'ensablement, ceintures vertes, regeneration des gommeraies, etc)\. Un impact beaucoup plus large peut toutefois ere constate en ce qui concerne la vulgarisation et l'acceptation par les populations des foyers ameliores permettant des economies sensibles de combustible\. Cependant, la tache est immense et beaucoup reste a faire, dans le cadre des nouveaux programmes (notamment PDLAJM et PGRNP) en preparation et integrant plus efficacement la composante environnementale en terme d'impact au niveau des infrastructures et d'action corrective\. c) Difficultes rencontr&es et DersDectives D'une maniere generale il faut admettre que la plus grande difficulte se situe toujours sur le plan de la prise de conscience des populations\. De tres gros efforts de sensibilisation sont encore a faire en matiere de protection de l'environnement et d'utilisation rationnelle des ressources naturelles\. Dans le cadre du PANE et du PMLCD, de meme que dans celui des deux programmes cites ci-avant (PDLAIM et PGRNP), il s'agira de mettre en oeuvre et de realiser des programmes regionaux dans l'ensemble du pays, en mettant en particulier l'accent sur l'integration de la strategie nationale de conservation de la nature et la necessite d'elargir les domaines dtintervention a l'ensemble des aspects relatifs a l'environnement tant biologique que physique (milieu rural, milieu urbain et milieu manrn)\. Toutes les actions liees a l'environnement et A la preservation de la nature seront desormais pilotees par le Conseil National de l'EnvironnementlDeveloppement (CNED) et auront comme objectifs: i) la poursuite et l'intensification de la lutte contre l'ensablement, ii) la protection et la gestion des ressources naturelles, iii) la  - 13 - protection et la gestion des ressources forestieres et iv) I'amIlioration du cadre institutionnel et juridique des interventions dans le domaine de l'environnement\. B\. Composante d'investissement Les principaux volets de cette composante et qui seront examines ci-apres, etaient: i) les travaux d'am6lioration et d'entretien, ii) la production agricole, iii) la vulgarisation - formation, iv) I'organisation paysanne, v) la recherche, vi) I'elevage, vii) la peche, viii) 1'environnement, ix) la sante et les infrastructures sociales et, enfin, x) I'assistance technique\. 1\. Travaux d'amelioration et d'entretien a) Obiectif Les principaux objectifs en matiere d'amelioration et d'entretien de l'exploitation consistaient en la mise en place: i) d'un systeme de distribution rationnel d'eau et son application dans le but de minimiser le gaspillage de 1'eau, ii) d'une methode plus systematique d'entretien du perimetre, avec une definition claire de la repartition du travail entre la SONADER et les cooperatives\. b) Realisations et resultats obtenus Au niveau de l'irrigation, les cooperatives ont compris la necessite d'6conomie d'eau A travers les programmes de sensibilisation et de formation initids par le projet\. C'est ainsi que la consommation d'eau A l'hectare est passee de 40\.000 m3 en 1990 A 21\.000 en 1995\. Par ailleurs, le barrage de Foum-Gleita a fait regulierement l'objet d'inspections techniques par une expertise etrangere dont les rapports ont certifie notamment la stabilite de cet ouvrage et de ses eldments annexes\. Depuis 1996, l'interpretation des donnees d'auscultation est assuree par un cadre de la SONADER qui a beneficie d'une formation appropriee en Suisse\. Concemant les travaux realises, sur le plan des des infrastructures routieres, la construction d'une piste dtacces plus courte pour le raccordement a la piste Ka&di - M'Bout et d'un pont fianchissant le Gorgol a ete remplacee par un programme d'alimentation en eau des villages du perimetre\. Quant aux travaux d'amelioration et d'entretien du perimetre proprement dit, ils ont concemr, notamment, la refection des pistes, le rev&ement des berges des canaux ainsi que le curage et le desherbage des canaux, drains et ouvrages 2\. Production agricole a) Objectif En vue notament d'ameliorer le revenu des exploitants agricoles, il dtait prevu d'intensifier et de consolider la riziculture irriguee, d'introduire des cultures maraich6res et fruitieres et de promouvoir la culture de ddcrue sur le pourtour de la retenue du barrage\. b) Realisations et resultats obtenus * Cultures irrimu6es : Les superficies cultivees annuellement en riz durant les campagnes allant de 1990 a 1994 ont ete respectivement de 2\.660 ha, 2\.792 ha, 1\.492,5 ha et 998 ha, soit des intensites culturales de respectivement 136%, 143%, 116%, 77% et 51 %\. Une remont6e des emblavures a eu lieu en 1995 (1\.143 ha) et en 1996 (1\.200 ha)\. Cette baisse des emblavures, A partir de 1992, s'explique entre autres par:  - 14 - - le deficit d'eau dans la retenue du barrage bloquant ainsi la conduite de la campagne de CSC 1993, - le retard pris par les semis/repiquages suite la mise en place trop tardive, pour la campagne d'hivemage 1992, du credit agricole, de meme que, sur certaines parcelles, a la preparation retardee des sols suite a la recolte tardive du riz de CSC, - la non disponibilite du credit agricole suite au non paiement par les cooperatives des arrieres de credit, dont le remboursement avait ete exige en totalite par l'institution de credit (UNCACEM) avant tout nouvel octroi de credit, - l'invasion du perimetre par des rats aimsi que son enherbement excessif en 1994, - I'alcalinite des sols sur 700 ha actuellement abandonnes par les paysans\. Face a ces multiples contraintes ayant entra^in une regression des superficies cultivees, dfferentes mesures ont e prises ayant permis, en particulier, de rehausser les superficies cultivees a 2\.323 ha en 1995 et 2\.385 ha en 1996, soit des intensites culturales de respectivement 119% et 122% (et meme de 186% et 191% en tenant compte des 700 ha de sols alcalins non mis en culture), avec des rendements moyens en CSC de 3,7 t/ha et en hivemage de 4,2 t/ha\. * Cultures maraich&res: Les cooperatives feminines ont cultiv6 16 ha en 1993, 25 ha en 1994 et 36 ha en 1995\. La speculation dominante a e l'oignon, facile a transporter et a ecouler, qui a lui seul occupe dans les assolements des superficies allant de 60 a 70%\. Le rendement moyen obtenu a ete de l'ordre de 16 t/ha d'oignon, soit une production d'oignon de 739,2 t pour les 3 annees\. Les autres speculations mineures sont representees par l'aubergine, le chou pomme, les tomates, etc\. Des superficies autrement plus importantes, de l'ordre de 150 ha sur les 500 ha amnenages, sont emblavees chaque annee dans la zone de Lexeiba (qui 'oneficie de l'eau de la retenue du barrage de Foum-Gleita) encadree par le projet depuis 1995\. Les rendements y depassent 20 t d'oignon a l'hectare\. * Cultures de decrue: Les cultures de decrue autour de la retenue sont pratiquees par environ 4\.000 familles reparties entre une dizaine de villages\. Elles ont e realisees sur 1\.200 ha en 1993, sur 1\.400 ha en 1994 et 1\.700 ha en 1995\. La culture dominante y est le mais, avec des rendements oscillant entre 0,8 et 1,4 t/ha, avec une moyenne de 1 t/ha sans et de 1,3 t/ha avec traitement des semences au Thiram\. 3\. Vulgarisation - formation a) Objectif En matiere de vulgarisation, il s'agissait de generaliser la mise en oeuvre de l'approche "training and visits" et d'acquerir des moyens logistiques (motos) assurant la mobilite des agents de vulgarisation de base (AVB)\. b) Realisations et resultats obtenus La realisation de ces objectifs a permis d'une part une utilisation rationnelle du personnel (le nombre d'AVB a pu etre reduit de 20 en 1990 (= I AVB pour 90 ha) a 6 en 1996 (= I AVB pour 300 ha) et, d'autre part, une extension du chanp d'action du service de vulgarisation aux perimetres prives de Lexeiba et aux cultures de decrue autour de la retenue du barrage\. II est a noter que les taux de participation, d'adoption et de diffusion des themes techniques vulgarises ont connu une evolution progressive et ont engendre des revenus nets additionnels satisfaisants\.  - 15 - 4\. Organisation paysanne a) Obiectif Suite aux mesures de desengagement prises dans le cadre du PASA et notamment en matiere de commercialisation, les problemes d'dcoulement de la production du perimetre de Foum-Gleita, de surcro^it tres enclave par rapport aux autres grands perimetres, se sont accrus\. II etait donc imperatif que les producteurs s'organisent pour ecouler leurs produits et s'approvisionnent en intrants\. b) Realisations et resultats obtenus En 1990, le prix moyen d'achat du paddy aux producteurs etait descendu a 10 UM/kg et les agriculteurs ont eu davantage recours aux credits pratiques par les usuriers, avec un taux tres elevd souvant proche de 100%\. Cette situation, outre ses consequences sur le niveau de vie de la population, avait pour effet de reduire la capacite des exploitants a faire face au remboursement des credits intrants et au paiement de la redevance fixe\. La viabilite du perimetre etait alors dangereusement compromise\. Pour repondre a ces difficultes, la SONADER, en collaboration avec ACOPAM, a entrepris, des 1990, une experience test de mise en place d'un systeme de financement de la conumercialisation\. Les producteurs ont ete largernent associes a la definition du systeme et a son perfectionnement\. Depuis 1994, ils assument la responsabilite complete de sa gestion A travers une Union des Cooperatives Agricoles de Foum-Gleita (UCAF), qu'ils ont constitues a cet effet\. Apres cinq annees de conimercialisation, le taux de remboursement est de pres de 100%\. Les raisons de ce succes sont a attribuer notanument au degre d'appreciation des beneficiaires, de m&ne qu'au fait que, de carnpagne en campagne, I'epargne des cooperatives s'accroit (de pres de 500\.000 UM en 1991 a 3,25 millions UM en 1995), ce qui a eu pour consequence d'augmenter le nombre de coop6ratives beneficiaires de 4 en 1990 A 17 en 1995\. Ainsi I'epargne constitu6e a pernis d'accroitre le fonds de roulement de l'UCAF et rendu possible le prefiancement, depuis la CSC 1995, des intrants agricoles (semences certifiees et uree)\. Plusieurs raisons peuvent expliquer le taux de remboursement e1eve: i) la confiance instauree entre l'UCAF et les cooperatives de base, ii) la gestion directe et la responsabilisation de l'UCAF, iii) I'autofinancement partiel par les cooperatives de base, iv) la rigueur dans l'octroi des credits\. Par ailleurs, en 1996, l'UCAF a signe avec la SONADER une convention relative A la cogestion des recettes de la redevance fixe destinees au paiement des charges liees A l'entretien du perimntre\. Ainsi l'UCAF se voit impliquee dans la programmation, 1'execution et le suivi de tous les travaux d'entretien de l'exploitation\. Depuis 1994, un volet Femmes a ete mis en place et est encadre par le projet en vue de la promotion des activites feminines\. Deux activites sont predominantes, a savoir le maraichage (en CSF) et les travaux d'atelier de couture et de teinture\. En matiere de maraichage, 23 groupements feminins ont cultives, en CSF 1994/95, une superficie totale de 24,7 ha\. Les speculations dominantes ont etd l'oignon (60%), les carottes et le chou pommn\. En CSF 1995/96, ce sont 26 groupements avec une superficie totale de 23,3 ha, qui se sont consacres au marechage\. Concemant la couture et la teinture, 4 centres organises en groupements sont fonctionnels\. Ils s'emploient notamment A confectionner des habits pour fenumes et enfants\. L'installation en cours d'une station de radio FM a conime objectif principal de relayer l'action de vulgarisation et de promouvoir le developpement socio-economique de la zone du projet, en collaboration avec Radio Mauritanie\.  - 16 - 5\. Recherche a) Objectif Ce volet devait concevoir et executer un programme de recherche adaptive repondant aux besoins du projet et aboutir, d'une part, a une utilisation rationnelle du perimetre et des ressources en eau, pour rentabiliser au mieux le barrage, et d'autre part, a ameliorer le revenu des exploitants et leurs conditions de vie\. b) Realisations et resultats obtenus Le programme comprend notanmment les themes prioritaires suivants: i) essais de varietes de riz d'hivemage a cycle vegetatif court laissant aux cultivateurs le temps pour preparer et semer une culture de CSF avant la fin du mois de novembre, ii) periode optimale d'ensemencement pour le riz de CSC, iii) diversification des productions en s'interessant particulierement au ble et a l'orge de CSF, aux 1egumineuses, legumes et cultures fourrageres, iv) traction animale pour la preparation du sol, et v )techniques d'irrigation (planches, billons, etc)\. En 1995, les priorites en matiere de recherche ont ete redefinies et le programme axe sur la riziculture, la diversification des cultures en irrigue, la culture de decrue et la lutte contre la degradation des sols\. Neanmoins, au bout de 4 ans, peu de recommandations fiables peuvent &tre faites, les resultats de certaines campagnes ayant e peu significatives suite aux degats causes par des evenements climatiques (vents chauds, exces d'eau) ou des invasions de depredateurs (sauteriaux, borers, rats)\. Toutefois, il se confirme que: i) en culture de riz, les cycles les plus courts (mais toujours trop longs !) sont de l'ordre de 115 jours en CSC et de 120 - 125 jours en hivemage; sur le plan varietal, certains IR (en CSC) et le BG 400-1 (en hivemage) se montrent nettement plus productives que les varietes habituelles TN1 (en CSC) et Jaya (hivemage), ii) l'orge, plus resistante que le ble et d'une valeur trois a quatre fois plus elev6e a la vente, presente une altemative interessante au mais, iii) en culture d'oignon, speculation tres interessante en CSF, les varietes Violet de Gahni et IRAT 69 sont nettement plus productives que la variete locale, iv) pour le mais et le sorgho, des varietes interessantes car plus productives semblent exister, des essais de confirmation, notamment en milieu paysan, s'imposent toutefois avant de generaliser leur emploi, et enfin, v) le niebe, iegumineuse enrichissante notamment pour des sols soumis a la mono-culture du riz, fournit une graine appreciee par la population et des fanes utilisees comme fourrage\. 6\. Elevage a) Obiectif L'integration agriculture - elevage et la pratique de 1'l1evage au titre de la diversification des activites en vue d'une augmentation du revenu des exploitants etaient les objectifs essentiels\. b) Realisations et resultats obtenus Le projet a encourag6 la mise en place d'une association agropastorale dans la zone de Foum-Gleita\. Cette association, creee en 1991, compte aujourd'hui 210 membres et assure la sante animale du cheptel par le biais de 35 auxiliaires d'elevage fomnms et equipes en trousses veterinaires et d'une pharmacie dotee en medicaments par le projet\. Par ailleurs, le projet a realise deux aires de stabulation et un silo fosses pour le traitement de la paille (compost)\. Par ailleurs, en partie grace a cette assistance du projet, on constate que le cheptel a connu un essor remarquable\. Comptant environ 1\.000 bovins et 3\.000 petits ruminants en 1987 (estimation sous-secteur  - 17 - d'elevage de M'Bout), il est passe jusqu'en 1993 (suivant un recensement du projet couvrant seulement 27 villages sur les 50 que compte la zone du projet) a plus de 5\.500 bovins et 20\.800 petits ruminants\. Cependant, une multiplication des effectifs par 5 ou 6 en seulement 6 ans ne peut s'expliquer par la seule croissance normale des troupeaux, elle fait supposer de nombreux apports exterieurs: troupeaux transhumant auparavent en dehors de la zone, achats de betail grace aux revenus procures par le pdrimetre\. Les prix moyens d'un bovin et d'un petit ruminant etant actuellement respectivement de 60\.000 et de 5\.000 UM, ce cheptel represente en 1993 et sur la base du recensement incomplet, une valeur de plus de 400 mio UM\. 7\. Peche a) Obiectif II s'agissait d'utiliser au mieux le potentiel halieutique de la retenue du barrage et de generer des revenus\. b) Realisations et r6sultats obtenus Le potentiel halieutique de la retenue du barrage a e estime a 850 t par an, un potentiel non negligeable en vue de diversifier et d'ameliorer l'alimentation des populations de la zone\. Pour cette raison, la composante peche du projet s'est appliquee a organiser les pecheurs en cooperatives et a leur faciliter l'acces aux credits d'equipement\. Le nombre des pecheurs operant avec des pirogues et filets maillds et palangres sur la retenue semble se stabiliser autour de 75, les prises auraient evolue, suivant les auteurs et annees, entre 300 t (1987), 410 t (1992) et 562 t (1994) de poisson frais par an\. Le poisson etant generalement commercialise a l'&tat seche, les 562 t representent 187 t de poisson seche qui, valorise a 150 UM/kg, procure un revenu brut de 28 mio UM\. Le revenu brut moyen d'un pecheur serait alors de 370\.000 UM/an, certainement le multiple d'un bon riziculteur\. 8\. Environnement a) Obiectif A cote de la protection de l'environnement, un volet Reboisement devait notamment faciliter l'approvisionnement en bois de feu des populations, proteger le perimetre par la plantation de brise-vent et diversifier l'alimentation par l'introduction d'arbres fruitiers\. b) Realisations et resultats obtenus Les realisations au cours de cette phase de consolidation ont consiste notamment en: la plantation de brise- vent le long des canaux et drains sur une longueur totale de 52 km(l) en plus des 10 km(l) plantes avant 1990\. A ce jour, 61,1 km de brise-vent sont vivants et entretenus regulierement par les paysans\. D'autre part, la protection de la retenue effective sur 508 ha en vue de diminuer son envasement au niveau des Monts Wawa, ou l'erosion est importante, a permis: i) la r6g6ndration des especes arbustives, ii) la limitation de l'erosion et iii) une prise de conscience des populations de l'importance de la reconstitution du milieu 6cologique\. Concernant les arbres d'ombrage, 12\.000 plants ont ete distribues et plantes au niveau des jardins mara^ichers et autres espaces appropries\. Par ailleurs, une plantation irriguee d'eucalyptus de 5 ha a 6te installee au niveau de parcelles abandonnees\. En outre, une superficie de 44 ha a e rdservee aux espaces verts\. En 1994, 1\.000 arbres ont e installes sur cette espace, et 400 autres en 1995\. 11 s'agit-la d'une action  - 18 - qui devra se poursuivre pendant plusieurs annees encore avant que I'on puisse parler d'espaces verts, car suivant les essences retenues, la densite a terme devra atteindre entre 50 et 150 arbres/ha, soit sur 44 ha entre 2\.200 et 6\.600 arbres\. Enfin, un verger a ete installe au niveau de la ferme experimentale\. 11 comprend 83 manguiers, 944 bananiers, 22 goyaviers et 96 agrumes\. L'impact de ce verger a ete le suivant: i) diffusion, au niveau des groupements feminins, avec installation de 150 rejets de bananier et de manguier, ii) vente de bananes pour un montant de 40\.280 UM, iii) entretien du verger assure entierement par les beneficiaires\. En vue de realiser une economie substantielle de bois de chauffe, 700 foyers ameliores ont e installes par les villageois\. La diffusion a e rapide et son impact economique important en terme d'economie de bois (de l'ordre de 50%)\. De nombreux foyers fabriquent maintenant eux-memes ces foyers en banco cuit (prix de revient 18 briques A 3 UM = 54 UM par foyer) et un recensement effectue par le projet en 1996 fait etat d'au moins 800 foyers fonctionnels\. 9\. Sante et infrastructures sociales a) Obiectif Couvrir les besoins des population en matiere de sante et lutter, en particulier, contre les maladies vehiculees par l'eau\. b) Realisations et resultats obtenus Les services tres rudimentaires de sante au demarrage du projet demandaient en consequence a etre arneliores de fa=on substantielle, particulierement suite a la recrudescence constatee des maladies vehiculees par l'eau (paludisme, diarrhdes, gastr-enterites, parasitoses intestinales)\. Au cours du projet, le dispensaire existant depuis 1986 a ete agrandi, modernise et equipe\. Ainsi, depuis 1991, il offre tous les types de consultations (internes et externes)\. L'6vacuation des cas graves s'est amnelioree et a nettement progresse avec l'acquisition par le projet, en 1994, d'une ambulance tout terrain\. Un medecin est affecte A Foum Gleita depuis le debut de l'annee 1995\. Actuellement, le dispensaire couvre environ 25\.000 habitants et le nombre de consultations extemes est de l'ordre de 10\.000 a 12\.000 par an\. Le paludisme a represente l'affection dominante tout au long de la duree du projet\. Le nombre de cas de gastro-enterites diminue depuis 1991, passant de 716 cas a 413 en 1995\. Pour les parsitoses intestinales, le nombre des cas est stationnaire pendant toute la duree du projet, avec cependant une diminution notable en 1995\. Concernant les travaux realises, la construction initialement prevue d'une piste d'acces plus courte pour le raccordement a la piste Kaedi - M'Bout et d'un pont franchissant le Gorgol a ete remplacee par un programme d'alimentation en eau des villages du primrtre\. C'est ainsi que 5 forages equipes de pompes manuelles (a pedale) ont ete realises ainsi que l'adduction d'eau du village de Foum-Gleita a partir du forage situ6 au pied du barrage\. Toujours en ce qui concerne les infrastructures sociales, 3 maisons cooperatives et une ecole ont ete construites et une autre ecole a e rehabilite\. 10\. Assistance technique Le projet a beneficie d'une assistance technique appreciable consistant en l'affectation d'un conseiller en mission de longue duree (de 1992 a la mi 1995) et de la mise en oeuvre de nombreuses missions d'appui fort utiles pour la programmation et le suivi technique des volets concemrs\. Ces missions ont represente un grand  - 19 - atout notamment dans l'elaboration des programmes permettant d'orienter les activites des differents volets du projet\. C'est ainsi que: i) dans le cadre de la composante Amelioration de l'exploitation et gestion de l'eau, 3 missions d'appui ont eu lieu pour la surveillance du barrage ainsi que des ouvrages et equipements lies au barrage, et 6 mission d'appui dans les domaines de la gestion de l'eau, la rationnalisation de la distribution de l'eau, la maintenance des ouvrages d'infrastructure, 1'entretien des reseaux d'irrigation et de drainage, le suivi des variations de niveau de la retenue d'eau du barrage, le probleme de l'alimentation en eau potable et, enfin, l'organisation d'un atelier sur la gestion technique des grands perimetres\. de meme que ii) 3 missions en matiere d'elevage, iii) 2 missions dans le cadre du volet vulgarisation, et iv) 1 mission pour chacun des volets environnement, peche et sante\. IV\. APPRECIATION GENERALE DES PERFORMANCES DES DEUX PARTIES Le Gouvemernent mauritanien se felicite de la collaboration conjointe de l'ensemble des bailleurs de fonds qui ont appuye la mise en oeuvre du PASA et qui a et une source de coherence et d'efficacite\. Le Gouvemement a honore l'ensemble de ses engagements, malgre un processus de reactualisation permanent de la matrice initiale\. Ceci n'a pas ete sans incidence sur la capacite de pilotage et de mise en oeuvre du projet\. V\. DURABILITE Le PASA a permis de mettre en place les fondements d'une politique de liberalisation et de developpement durable de l'activite agricole grace a la formulation d'un certain nombre de documents de politique ou de strategie elabores par sous-secteurs\. Cependant, le PASA a surtout eu un caractere institutionnel et ne saurait constituer un veritable programme de developpement rural national\. Le redressement obtenu reste fragile et doit ere considere comme une premiere etape dans un processus a plus long terme\. C'est pourquoi, il a et6 envisage de le conforter rapidement en traitant des problemes lies aux trois grands ensembles ecologiques (vallee avec le PDLkIM, zone pluviale avec le PGRNP, zone desertique avec le projet Oasis II) et des types d'intervention horizontales par filiere (politique de l'elevage, programme en faveur de 1'environnement) ou par fonction (PSA pour le triptyque recherche, formation, vulgarisation)\. Particulierement en ce qui concerne la composante d'ajustement, le PASA a permis, malgre des retards et des imperfections dans sa mise en oeuvre, de faire des progres notables dans le secteur agricole\. Afin de maintenir l'esprit du PASA, les actions ont e poursuivies au dela de sa periode 1990/94 de mise en oeuvre officielle: i) en continuant la liberalisation du commerce et des prix des cereales, ii) en ameliorant les modalites de mise en oeuvre de la reforme fonciere, iii) en poursuivant la decentralisation du MDRE et restructuration de la SONADER, iv) en intensifiant le processus d'assainissement et de responsabilisation des organisations socioprofessionnelles, v) en renforcant les composantes vulgarisation et recherche dans le cadre du PSA\. Par ailleurs, le Gouvemement est fermement decide de poursuivre les actions initiees dans le cadre du PASA a travers des operations d'investissement comme le PDLIAM en cours de preparation, afin que des mesures d'ajustement conmme celles demarrees dans le cadre du PASA soient accompagnees et consolidees par des programmes d'investissement\. VI\. CONCLUSION Le PASA, y compris la phase post PASA, a permis des realisations concretes et fort utiles pour le developpement harmonieux futur du secteur agricole, notamment sur le plan institutionnel et reglementaire\. Neanmoins, beaucoup d'actions amorcees dans le cadre du PASA doivent etre poursuivies et consolidees et  - 20 - de nombreux acquis institutionnels et rdglementaires doivent etre revus et actualises a la lumiere de l'evolution du secteur et du contexte international\. Toutefois, il faut maintenant passer d'une politique d'ajustement a une logique de developpement integrant: i) une logique economique (viabiliser et rentabiliser l'existant), ii) une logique sociale (securiser et favoriser la croissance du revenu agricole et ses capacites d'action), et iii) une logique environnementale (asseoir les bases d'un developpement durable)\. Dans la perspective incontournable d'un developpement equilibre des trois grandes zones agro-ecologiques (vallee, zone pluviale et oasis), la strategie de developpement agricole s'articulera dorenavant autour des quatre orientations suivantes: * contribuer a la garantie de la securite alimnentaire, * ameliorer les revenus des agriculteurs, 1'emploi rural et lutter contre la pauvrete, * favoriser l'integration de l'agriculture au marche national et international, * proteger et conserver les ressources naturelles afin d'assurer un developpement durable\. Les trois grands programmes en cours d'execution ou de prdparation au niveau regional: * le Programme de Developpement Intdgre de l'Agriculture Irriguee en Mauritanie, * le Programme de Gestion des Ressources Naturelles en Zone Pluviale, * Ieprojet Oasis II, garantiront le developpement equilibre recherche des zones agro-ecologiques\. Ces programmes seront compldtes par des interventions horizontales par filiere (Elevage) ou par fonction PSA (Projet des Services Agricoles), Foncier et Credit\. Cette vision correspond notamment aux recommandations formulees par la Banque Mondiale dans le cadre de la Seconde Revue des Ddpenses Publiques (1995) qui, en ce qui conceme le secteur du developpement rural, sont les suivantes: "Les differents aspects que revet le ddveloppement rural ne doivent pas resulter en une dispersion des actions qui rend plus difficiles leur coordination et leur suivi\. En consequence, il conviendrait de: * Entreprendre une recomposition du programme d'investissement dans le but de mises en relations geographiques et thematiques aux fins de coordination, recherche de synergies et d'economies, et amelioration de la cohdrence avec la politique sectorielle\. * Mettre en place, au sein du MDRE, une organisation des responsabilites coherente avec cette recomposition (spdcifiant les prerogatives respectives des services centraux et des services regionaux) ainsi que des procedures de consultations/coordination regulieres entre les Directions\. * Ameliorer le suivi des projets (notamment l'appreciation des charges recurrentes et l'application d'indicateurs pertinents), enrichir la programmation et la budgetisation des connaissances acquises en cours d'execution\. * Elaborer et mettre en oeuvre une serie d'actions visant A ameliorer de facon sensible la performance des modes de reglement des questions foncieres et du systeme de credit agricole\.  -21 - * Identifier avec les EPA (Etablissements Publics a caractere Administratif) sous tutelle, les moyens par lesquels ils pourraient accroitre leurs ressources propres, notamment par la facturation dc leurs prestations et lelargissement de l'eventail des operateurs qu'ils servent\." Bien conscient de l'importance et du caractere inacheve des mesures ayant fait l'objet du PASA, le Gouvernement propose d'inclure la poursuite de ces mesures d'ajustement, de meme que la consolidation des investissements realises au niveau de Foum-Gleita, dans le PDIAIM, tout en les consolidant par des actions d'investissement\. De plus, il prepare, avec l'assistance de l'IDA, une Strategie du developpement rural qui devrait recommander une serie de mesures comparables a celles du PASA\. De nombreuses etudes sectorielles a mettre en oeuvre a court et moyen terme, notamment dans le cadre de la Strategie d'assistance au pays (CAS), completeront ces actions en faveur du secteur rural\.    IMAGING Report No\.: 16794 Type: ICR

REVIEW

P060908

Document of The World Bank Report No: ICR00001329 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-24371) ON A GRANT IN THE AMOUNT OF SDR11\.5 MILLION (US$14\.84 MILLION EQUIVALENT) TO NACIONAL FINANCERA, S\.N\.C\. FOR A MEXICO MESOAMERICAN BIOLOGICAL CORRIDOR PROJECT June 25, 2010 Sustainable Development Department Colombia and Mexico Country Management Unit Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective June 25, 2010) Currency Unit = Mexican Peso MX$1\.00 = US$ 0\.788567 US$ 1\.00 = MX$12\.6792 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AECI Spanish International Cooperation Agency (Agencia Española de Cooperación Internacional) BNPP Bank-Netherlands Partnership Program CPS Country Partnership Strategy (formerly Country Assistance Strategy) CCAD Central American Commission for Environment and Development (Comisión Centroamericana de Ambiente y Desarrollo) CDI National Commission for the Development of Indigenous Peoples (Comisión Nacional para el Desarrollo de los Pueblos Indígenas) CEIBA Interdisciplinary Center for Biodiversity and Environment (Centro de Estudios Interdisciplinarios de Biodiversidad y Ambiente) CEPAL Economic Commission for Latin America and the Caribbean (Comisión Económica para América Latina y el Caribe) CICY Scientific Research Center of Yucatan (Centro de Investigación Científica de Yucatán) CINVESTAV Research and Advanced Studies Center (Centro de Investigación y Estudios Avanzados) CONABIO National Commission for the Knowledge and Use of Biodiversity (Comisión Nacional para el Conocimiento y Uso de la Biodiversidad) CONACYT National Council for Science and Technology (Consejo Nacional de Ciencia y Tecnología) CONAFOR National Forestry Commission (Comisión Nacional Forestal) CONANP National Council for Natural Protected Areas (Consejo Nacional de Areas Naturales Protegidas) (The acronym CONANP is also used to designate the National Commission for Natural Protected Areas, created in 2000) CTF Clean Technology Fund EA Executing Agency ECOSUR The Southern Border College (El Colegio de la Frontera Sur) Ejido Territorial unit managed and owned by villagers under the Mexican Agrarian Reform Law EZLN Zapatista Army of National Liberation (Ejército Zapatista de Liberación Nacional) FAO Food and Agriculture Organization FCPF Forest Carbon Partnership Facility FMCN Mexican Conservation Fund (Fondo Mexicano para la Conservación de la Naturaleza) GEF Global Environment Facility GIS Geographic Information System GOM Government of Mexico GTZ German Technical Assistance Agency (Deutsche Gesellschaft für Technische Zusammenarbeit) IBRD International Bank for Reconstruction and Development INE National Ecology Institute (Instituto Nacional de Ecología) INI National Institute of Indigenous Peoples (Instituto Nacional Indigenista) JICA Japan International Cooperation Agency LAFS Latin American Food Show MMBC Mexico Mesoamerican Biological Corridor, The Project NAFIN National Financier (Nacional Financiera) NCC National Corridor Council NEA National Executing Agency NGO Non-governmental Organization NPA National Protected Area NTFP Non-timber Forest Product NTU National Technical Unit PAD Project Appraisal Document PCU Project Coordination Unit PDRS Sustainable Rural Development Program of Marqués de Comillas (Programa de Desarrollo Rural Sustentable de Marqués de Comillas) PECC Special Program on Climate Change (Programa Especial de Cambio Climático) PESA Special Program for Food Security (Programa Especial para Seguridad Alimentaria) PMR Project Management Report PPP Puebla-Panama Plan (Plan Puebla Panamá) PROCYMAF Community Forestry Project (IBRD) (Programa de Silvicultura Comunitaria) PRODER Regional Sustainable Development Program, implemented by SEMARNAT (Programa de Desarrollo Regional Sustentable) PRODESCA Capacity Development Program in Rural Areas (Programa de Desarrollo de Capacidades en el Medio Rural) PSMARN National Environment and Natural Resources Program (Programa Sectorial de Medio Ambiente y Recursos Naturales) REDD Reducing Emissions from Deforestation and Degradation RMBC Regional Mesoamerican Biological Corridor RTU Regional Technical Unit SAGARPA Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación) SCC State Corridor Council SCT Ministry of Communications and Transport (Secretaría de Comunicaciones y Transporte) SEA State Executing Agency SECOFI Ministry of Commerce and Industrial Development (Secretaría de Comercio y Fomento Industrial) SEDESOL Ministry of Social Development (Secretaría de Desarrollo Social) SEMARNAT Ministry of Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) (formerly Secretaría de Medio Ambiente, Recursos Naturales y Pesca, SEMARNAP) SEP Ministry of Public Education (Secretaría de Educación Pública) SHCP Ministry of Finance (Secretaría de Hacienda y Crédito Público) SINAP National System of Protected Areas (Sistema Nacional de Areas Protegidas) SRA Ministry of Agrarian Reform (Secretaría de Reforma Agraria) SSA Ministry of Health (Secretaría de Salud) UADY University of Yucatan (Universidad Autónoma de Yucatán) UNAM University of Mexico (Universidad Autónoma de México) UNDP United Nations Development Programme UMA Management Unit for the Conservation of Wildlife (Unidad de Manejo Ambiental) Vice President: Pamela Cox Country Director: Gloria M\. Grandolini Sector Director: Laura Tuck Sector Manager: Karin Kemper Project Team Leader: Ricardo Hernandez ICR Team Leader Ricardo Hernandez/Brenna Vredeveld  MEXICO MEXICO MESOAMERICAN BIOLOGICAL CORRIDOR PROJECT CONTENTS Data Sheet A\. Basic Information…………………………………………………………………\.i B\. Key Dates…………………………………………………………………………\.i C\. Ratings Summary…………………………………………………………………\.i D\. Sector and Theme Codes…………………………………………………………\.ii E\. Bank Staff…………………………………………………………………………\.ii F\. Results Framework Analysis………………………………………………………\.iii G\. Ratings of Project Performance in ISRs……………………………………………\.iv H\. Restructuring ………………………………………………………………………iv I\. Disbursement Graph………………………………………………………………………\.v 1\. Project Context, Global Environment Objectives and Design\. 1 2\. Key Factors Affecting Implementation and Outcomes \. 13 3\. Assessment of Outcomes \. 29 4\. Assessment of Risk to Development Outcome\. 63 5\. Assessment of Bank and Borrower Performance \. 63 6\. Lessons Learned\. 70 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners\. 73 Annex 1\. Project Costs and Financing\. 74 Annex 2\. Outputs by Component\. 78 Annex 3\. Economic and Financial Analysis \. 89 Annex 4\. Bank Lending and Implementation Support/Supervision Processes\. 90 Annex 5\. Beneficiary Survey Results \. 92 Annex 6\. Stakeholder Workshop Report and Results\. 98 Annex 7\. Summary of Borrower’s ICR and/or Comments on Draft ICR \. 99 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 106 Annex 9\. List of Supporting Documents \. 107 Annex 10\. Original Description of Project Sites – Corridors and Focal Areas \. 109 MAP A\. Basic Information Mexico Mesoamerican Country: Mexico Project Name: Biological Corridor Project (GEF) Project ID: P060908 L/C/TF Number(s): TF-24371 ICR Date: 06/30/2010 ICR Type: Core ICR NACIONAL Lending Instrument: SIL Borrower: FINANCIERA Original Total USD 14\.8M Disbursed Amount: USD 14\.8M Commitment: Revised Amount: USD 14\.8M Environmental Category: B Global Focal Area: B Implementing Agencies: CONABIO Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 03/04/1999 Effectiveness: 01/31/2002 01/31/2002 Appraisal: 10/03/2000 Restructuring(s): Approval: 11/28/2000 Mid-term Review: 06/01/2004 01/18/2005 Closing: 06/30/2008 12/31/2009 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Global Environment Outcome Low or Negligible Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Unsatisfactory C\.2 Detailed Ratings of Bank and Borrower Performance Bank Ratings Borrower Ratings Moderately Moderately Quality at Entry: Government: Unsatisfactory Unsatisfactory Moderately Implementing Moderately Quality of Supervision: Unsatisfactory Agency/Agencies: Unsatisfactory Overall Bank Moderately Overall Borrower Moderately Performance: Unsatisfactory Performance: Unsatisfactory i C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): GEO rating before Satisfactory Closing/Inactive status D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 64 64 General agriculture, fishing and forestry sector 27 27 Sub-national government administration 9 9 Theme Code (as % of total Bank financing) Biodiversity 23 23 Environmental policies and institutions 22 22 Export development and competitiveness 11 11 Other rural development 22 22 Participation and civic engagement 22 22 E\. Bank Staff Positions At ICR At Approval Vice President: Pamela Cox David de Ferranti Country Director: Gloria M\. Grandolini Olivier Lafourcade Sector Manager: Karin Erika Kemper John Redwood Project Team Leader: Ricardo Hernandez Murillo Raffaello Cervigni ICR Team Leader: Ricardo Hernandez Murillo ICR Primary Author: Brenna Elizabeth Vredeveld ii F\. Results Framework Analysis Global Environment Objectives (GEO) and Key Indicators(as approved) The global objective of the project is the conservation and sustainable use of globally significant biodiversity in five biological corridors in southeast Mexico, through mainstreaming of biodiversity criteria in public expenditure, and in selected local planning and development practices\. Revised Global Environment Objectives (as approved by original approving authority) and Key Indicators and reasons/justifications n/a (a) GEO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Conservation and sustainable use of globally significant biodiversity through Indicator 1 : mainstreaming of biodiversity criteria in public expenditure Biodiversity criteria Protection of incorporated in Investments in regional- biodiversity objectives and Value rural development not through public operational rules of (quantitative or contributing to reduce investments public investment Qualitative) high rates of loss of support for in situ programs and habitat conservation and greater allocation sustainable use of funds Date achieved 01/01/2002 12/31/2009 12/31/2009 The project made highly significant contributions to GEO by mainstreaming BD Comments in operational rules of SAGARPA, the single largest public source in rural (incl\. % Mexico US$30\.9 billion in 2009\. MMBC directly reoriented US$34,869,811 to achievement) bio-friendly activities\. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years After 7 years: a) rate of native habitat loss is decreased; b) degree of perturbation Indicator 1 : of populations of corridor-specific indicators species (e\.g\., selected birds, mammals, insects, plants) is decreased\. No indicator or baseline Rate of native Deforestation was Value established during habitat loss is reduced from 1\.5 to (quantitative or preparation\. Proxy chosen decreased, and/or 1\.0%/year (2002- Qualitative) for loss of habitat was area under native 2007; 1993-2002) iii  deforestation in the vegetation cover is in the 4 corridor participating states and increased\. states\. Presence of for perturbation the indicator species presence of indicator Degree of was reported for 4 species suggested in the perturbation of corridors: Chiapas PAD: selected birds, populations of Sierra Madre del mammals, insects, plants corridor-specific Sur, Selva Maya indicator species Zoque, Campeche (e\.g\., selected and Quintana Roo birds, mammals, Sian ka'an- insects, plants) is Calakmul decreased Date achieved 01/01/2002 12/31/2009 12/31/2009 No monitoring from the start\. Though a significant shortcoming in project Comments design, substantial efforts to use proxy for native habitat and perturbation, plus (incl\. % 40,000 producers improved their capacities and use/conservation practices in achievement) focal area plots\. Communities in focal areas are engaged in different forms of local planning Indicator 2 : aimed at conservation and sustainable use a) Awareness a) TA in 16 focal raising in at least areas, subprojects 80% of the 120 in 149 target communities communities, b) b) Problem Land planning in 62 assessment in at communities No awareness of corridor least 50% (52%), c) 111 TA Value relevance, problem c) Priority setting to set community (quantitative or assessment or priority in at least 30% of priorities for the Qualitative) setting capacities existed the 120 target conservation of BD communities (92%), d) d) Development of Participatory action action plans in at plans for 15 social least 10% of the and productive 120 target organizations communities (12%) Date achieved 01/01/2002 12/31/2009 12/31/2009 Through environmental education, capacity building, subprojects, and TA, Comments MMBC was successful in engaging 120 target communities\. SAGARPA (incl\. % increased cofinancing\. However, indicators were not updated to ensure consistent achievement) reporting after the 2005 amendment\. Indicator 3 : Reduction of high-impact resource use practices detrimental to biodiversity In focal areas, no The project did not No sustainable productive more than 30-50% produce a baseline projects are being of producers are to follow up on this supported by Value associated with indicator\. Proxy: development programs; (quantitative or high-impact 47,042 producers these programs focus on Qualitative) resource use (more than 50% of traditional (non- practices producers in the biodiversity-friendly) detrimental to focal areas ) have productive models biodiversity in adopted sustainable iv  native ecosystems biodiversity- friendly productive activities Date achieved 01/01/2002 12/31/2009 12/31/2009 While there was no baseline, the proxy indicates a significant number of Comments producers in target areas engaged in BD-friendly activities due to the project's (incl\. % interventions\. The shortcoming is in the ability to capture the significant achievement) measures undertaken\. Increased share of production is generated by financially sustainable, Indicator 4 : biodiversity-friendly selected practices of use of natural resources Sustainable/biodive rsity-friendly In focal areas, at production was Only individual plots least 30-50% of established through promoted by NGOs or production (in area subprojects research groups had or producers) is Value financed or piloted biodiversity- generated by (quantitative or cofinanced by the friendly models, but no selected, Qualitative) MMBC on 22,580 significant areas were financially ha, which represent under production at the sustainable, approximately 32% start of the project biodiversity- of the productive friendly practices areas of the focal areas Date achieved 01/01/2002 12/31/2009 12/31/2009 While appreciable efforts were made, the project design did not have a baseline Comments nor specify the exact means of measurement\. Therefore, a proxy indicator was (incl\. % used: 32% of the productive areas, suggests this indicator is likely to have been achievement) achieved\. Increased proportion of public programs and spending take into account Indicator 5 : biodiversity criteria 40% of programs At Project design, it and 20% of public was not identified spending take into which individual account programs would be biodiversity: a) targeted\. Therefore, Public investment programs two proxy programs did not consider Value reoriented from indicators were biodiversity criteria (quantitative or potentially harmful used\. Proxy 1: explicitly in their Qualitative) to friendly or MMBC contributed objectives and/or neutral activities; to mainstreaming operational rules b) programs BD in SAGARPA actively promoting operational rules\. activities for the Proxy 2: MMBC sustainable use of directly reoriented biodiversity US$34,869,811\. Date achieved 01/01/2002 12/31/2009 12/31/2009 Comments The proxy indicators suggest that it was largely achieved by incorporating BD (incl\. % criteria in objectives and operational rules of public spending ensuring over 40% achievement) of public programs and 20% of public spending take into account biodiversity v  considerations\. G\. Ratings of Project Performance in ISRs Actual Date ISR No\. GEO IP Disbursements Archived (USD millions) 1 06/27/2001 Satisfactory Satisfactory 0\.00 2 12/20/2001 Satisfactory Satisfactory 0\.00 3 05/17/2002 Satisfactory Satisfactory 0\.75 4 12/19/2002 Satisfactory Satisfactory 0\.83 5 06/18/2003 Satisfactory Satisfactory 0\.96 6 09/26/2003 Unsatisfactory Unsatisfactory 1\.07 7 12/22/2003 Unsatisfactory Unsatisfactory 1\.07 8 06/16/2004 Unsatisfactory Unsatisfactory 1\.33 9 09/17/2004 Unsatisfactory Unsatisfactory 1\.50 10 12/20/2004 Unsatisfactory Unsatisfactory 1\.56 11 04/30/2005 Unsatisfactory Unsatisfactory 2\.00 12 06/29/2005 Moderately Satisfactory Moderately Satisfactory 2\.12 13 06/01/2006 Moderately Satisfactory Moderately Satisfactory 3\.43 14 12/27/2006 Moderately Satisfactory Moderately Satisfactory 4\.61 15 06/24/2007 Satisfactory Satisfactory 5\.75 16 12/19/2007 Satisfactory Satisfactory 8\.45 17 06/12/2008 Satisfactory Satisfactory 9\.05 18 11/09/2008 Satisfactory Satisfactory 11\.82 19 05/29/2009 Satisfactory Satisfactory 13\.07 20 12/01/2009 Satisfactory Satisfactory 14\.23 H\. Restructuring (if any) Not Applicable vi I\. Disbursement Profile vii   1\. Project Context, Global Environment Objectives and Design 1\.1 Context at Appraisal Country and Sector Background 1\. Mexico is classified as one of the world’s top five “mega-diverse” countries:1 it represents approximately 12% of the world’s biodiversity, compared to only 1\.5% of its land surface, and has high levels of endemism\.2 At the national level, however, only about 12\.9% of priority terrestrial sites for biodiversity actually coincide with federal, state and municipal natural reserves (3\.91% of national territory)\.3 This is also true in south and southeast Mexico: its Mesoamerican region\.4 Mesoamerica is considered a global “hotspot” in terms of biodiversity; it has a high level of species richness and is also one of the most threatened5 regions in the world\. 2\. The four states of the project area (Chiapas, Campeche, Quintana Roo, Yucatan) comprise a variety of high-priority ecoregions and biomes, including Tehuantepec and Yucatan moist forests, Yucatan dry forests,6 Quintana Roo wetlands, and Chiapas temperate cloud forests\.7 Flora and fauna in these states show a significant proportion of endemic species and a variety of ecosystems of high priority for conservation: lowland rainforests, cloud forests, dry forests, wetlands and savannas\. Among these, the ecosystems bordering the Guatemalan and Belizean territory constitute the largest mass of continuous forest ecosystems in all of Mexico and Mesoamerica\. The mosaics of different ecosystems and different age patches within each of these ecosystems constitute a unique laboratory of ecological relations and are of strategic importance for continuing speciation and sheltering of species in the face of the continuing reduction of forest cover and global climate change\. 1 There are more than 170 countries in the world\. Of these, 12 alone harbor between 60% and 70% of the planet’s total biodiversity and thus earn the privilege of being called mega-diverse\. Mexico is one of them\. Mexico, together with Brazil, Colombia and Indonesia, is considered one of the most bio-diverse countries, ranking first place in reptile diversity, second in mammals, fourth in amphibians and vascular plants and tenth in birds\. 2 Endemism is the ecological state of being unique to a particular geographic location, such as a specific island, habitat type, nation or other defined zone\. To be endemic to a place or area means that it is found only in that part of the world and nowhere else\. Endemism reported on the national level: 50–60% of plant species (15,000 species); 32% of mammals; 10% of birds; 57% of reptiles; and 65% of amphibians\. Ref: CONABIO\. 2006\. Capital natural y bienestar social\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 3 CONABIO\. 2009\. Capital natural de México, vol\. II: Estado de conservación y tendencias de cambio\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. Urquiza-Haas, T\., M\. Kolb, P\. Koleff, A\. Lira-Noriega, and J\. Alarcón\. 2000\. Methodological Approach to Identify Mexico’s Terrestrial Priority Sites for Conservation\. Gap Analysis Bulletin No\. 16:61-71\. 4 Mesoamerica or Meso-America is a region and cultural area in the Americas, extending approximately from central Mexico to Guatemala, Honduras and Nicaragua\. Prehistoric groups in this area are characterized by agricultural villages and large ceremonial and political-religious capitals\. This cultural area included some of the most complex and advanced cultures of the Americas, including the Olmec, Teotihuacan, Maya and Aztec\. 5 www\.biodiversityhotspots\.org/ of the world’s twenty-five biologically richest and most threatened ecosystems the Mesoamerican forests comprise the third largest among the world’s hotspots\. Their spectacular endemic species include quetzals, howler monkeys, and 17,000 plant species\. The region is also a corridor for many neotropical migrant bird species\. The hotspot’s montane forests are important for amphibians, many endemic species of which are in dramatic decline due to an interaction among habitat loss, fungal disease and climate change\. 6 The Yucatan Peninsula boasts an impressive diversity of flora and fauna: over 900 plant species and 200 animal species have been found in a hectare of tropical evergreen forest, some 70 species of herpetofauna (amphibians and reptiles), 320 species of birds and 120 species of mammals are known to inhabit the peninsula\. 7 The temperate clouds forests in Chiapas are an ecosystem that covers 1% of the national territory but contains 10% of the country’s floral diversity\. 1 3\. In addition to the biological importance of the project’s area in its own right, these ecosystems form part of a critical link in the Regional Mesoamerican Biological Corridor (RMBC)\. The concept of a regional eight-country initiative was discussed at the Rio Summit in 1992\. In 1994 the University of Florida published a report on the feasibility of establishing a corridor in Central America\. The agreement formalizing the commitment of the region to establish a corridor linking five states in Mexico with Guatemala, Belize, Honduras, El Salvador, Nicaragua, Costa Rica and Panama was signed in February 1997 and officially adopted at the Presidents’ Summit in July 1997\.8 4\. Historically, Mexico’s many indigenous groups played an important role in shaping the region’s biodiversity; they have domesticated a great array of plants, maintaining a high degree of genetic variation (including semi-domestic forms) and the knowledge on how to use the domesticated plants’ wild relatives\. This process is strongly linked to traditional patterns of land use, in which genetic exchange with wild relatives plays an important role in maintaining genetic variability and agro-biodiversity\. 5\. At appraisal, primary threats to natural resources and biodiversity in this region resulting from human activities included large-scale conversion of forests and other pristine ecosystems to agriculture as a stepping-stone to extensive cattle ranching (this process has been particularly intense in the tropical lowlands) and uncontrolled tourism development and overfishing along the coasts of Quintana Roo, Yucatan and Campeche\. 6\. The hypothesis was that these practices resulted from the interplay of two major forces: on the one hand, the demand for development opportunities and activities expressed by communities residing in the project area; and, on the other hand, the supply of development programs provided by government agencies\. Without the integration of biodiversity considerations in both of these forces, many of the activities would result in continuing threats to biodiversity\. Government Actions 7\. At appraisal, priority natural resources management conservation challenges for Mexico included: (i) high deforestation rate (one of the highest in Latin America); (ii) unsustainable land use practices, including slash-and-burn agriculture and extensive cattle ranching; (iii) unsustainable levels of exploitation and loss of habitat for aquatic resources; (iv) unsustainable tourism development and increased urbanization; (v) limited participation of rural populations in conservation and natural resources management efforts; and (vi) loss of biodiversity and agro-biodiversity\. 8\. To address these threats, key courses of action that the Government of Mexico (GOM) pursued included: the consolidation of the Ministry of Environment and Natural Resources9 (SEMARNAT); a strategic shift toward increased decentralization of environmental management to states and municipalities; the development of an integrated 8 Download the project document at http://www\.biomeso\.net/GrafDocto/PRODOC-CBMESPAÑOL\.pdf\. 9 The Ministry of Environment, Natural Resources and Fishing (SEMARNAP) was established in 1994; it was converted into the Ministry of Environment and Natural Resources (SEMARNAT) in 2000\. 2 model of sustainable development with a regional focus (PRODERs); increased public participation; and a stronger commitment to international environmental issues and the global commons\. 9\. A key step toward institutional coordination in order to put the above into practice came with the 1998 signing of a framework agreement—“Foundations for Inter- institutional Collaboration” (Bases de Colaboración Inter-institucional)—by the Ministries of Environment (SEMARNAT), Agriculture (SAGARPA), Social Development (SEDESOL), Transport (SCT) and Agrarian Reform (SRA), to be later joined by the Ministries of Education (SEP), Health (SSA) and Trade (SECOFI)\. The agreement represented ministerial commitments to join efforts in promoting sustainable development in priority regions of the country\. Moreover, in early 1999, in an effort to mitigate damages from recent natural disasters (forest fires and floods) and to prevent future ones, the President of Mexico launched a countrywide initiative to promote the adoption of more environmentally conscious agricultural practices\. For southeastern Mexico (one of the areas most vulnerable to natural and human-induced environmental degradation), this initiative was a good opportunity to move toward a path of sustainable development\. 10\. However, the GOM faced obstacles to achieving the harmonization of the different agencies’ programs and implementing integrated, on-the-ground interventions that demonstrated the incorporation of biodiversity criteria into policy instruments\. Chief among these obstacles was the lack of a unifying mechanism through which to reorient public expenditures along with the demand and supply of sustainable development initiatives\. The creation of the Mexico Mesoamerican Biological Corridor using GEF resources proposed to meet this need, to induce in the medium to long term a much wider adoption of on-the-ground, tested practices compatible with biodiversity conservation and sustainable use\. Rationale for Bank Assistance and GEF Involvement 11\. At the time of appraisal, the Bank had been assisting the GOM in the conceptual analysis of institutional coordination and regional development through Economic and Sector Work and in piloting, under the Rural Development in Marginal Areas Adaptable Program Loan (APL),10 institutional mechanisms (such as regional councils) to promote participatory, decentralized management of rural development programs\. Other natural resource management projects supported by the Bank at the time (Community Forestry Project P007700, closed in December 2003; On-Farm and Minor Irrigation Networks Improvement Project P007701, closed in March 2002) contributed to strengthening the institutional and regulatory framework for sustainable natural resources management\. 12\. In line with the government actions described above, at the time of appraisal the Country Partnership Strategy (CPS, June 1999) for Mexico identified three themes central to the support provided by the World Bank Group to Mexico: i) social sustainability, ii) removing obstacles to sustainable growth, and iii) effective public 10 The Bank’s Rural Development in Marginal Areas APL was implemented under the Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA) in two phases (P007711 and P057530)\. 3 administration\. Within this broad framework, the CPS identified several priority areas for intervention by the Bank in the environmental sector, which guided the project: i) institutional development, ii) decentralization of environmental management, iii) improved management of natural resources (e\.g\., forests, water and biodiversity), and iv) design of sector policies\. 13\. With the support of various GEF operations, the World Bank assisted in strengthening the institutional policy and infrastructure responsible for the system of protected natural areas in Mexico, including the creation of a trust fund with resources from the pilot phase of the GEF\. The purpose of this corridor project was to help the government to address the sustainable management of biodiversity beyond these protected areas\. GEF funds for this project have augmented those already invested, in order to focus on biological corridors as a complementary strategy for biodiversity conservation\. The involvement of the GEF is justified on the basis of the project’s innovative approach to the integration of biodiversity criteria into development programs, and to biodiversity management within a productive landscape\. During the implementation of the RMBC, together with its regional partners Mexico promoted the formation of an integrated system composed of protected areas\. The MMBC strategy focuses on connectors for the conservation and sustainable management of natural resources, including biodiversity, in the natural and productive landscapes surrounding natural protected areas of southern Mexico\. 1\.2 Original Global Environment Objectives (GEO) and Key Indicators (as approved) Original Global Environmental Objective 14\. The project’s global environmental objective is the conservation and sustainable use of globally significant biodiversity in five11 biological corridors in southeast Mexico, through the mainstreaming of biodiversity criteria in public expenditure and in selected local planning and development practices\. 15\. At appraisal, the project was one of the first in the world to apply the innovative corridor concept for the purpose of biodiversity conservation hand-in-hand with sustainable local development\. It covers a total of approximately 6\.8 million hectares of land and 448,798 hectares of sea surface in the states of Campeche, Chiapas, Quintana Roo, and Yucatan, and it connects the habitats of 23 protected areas (2\.86 million hectares)\. Key Indicators 16\. The project’s key performance indicators for outputs and outcomes were included in the PAD (p\. 8), as follows: 11 Note: Although the PAD logframe mentions six corridors, the PAD Project Development Objective states five corridors\. Unfortunately, the document’s logframe was not updated after the Tabasco Corridor was dropped during the preparation, and the project focused on the remaining five corridors and four states\. 4  a) After seven years, in focal areas (15% of the Corridor’s12 total surface): i\. Rate of native habitat loss is decreased, and/or area under native vegetation cover is increased (with specific targets varying across individual focal areas); ii\. Degree of perturbation of populations of corridor-specific indicator species (e\.g\., selected birds, mammals, insects, plants) is decreased\. b) Communities (and/or producer groups) in focal areas are engaged in different forms of local planning (depending on levels of organization) aimed at conservation and sustainable use: i\. Awareness raising (in at least 80% of communities);13 ii\. Problem assessment (in at least 50% of communities); iii\. Priority setting (in at least 30% of communities); iv\. Development of action plans (in at least 10% of communities) c) In focal areas, no more than 30% to 50% (depending on each focal area) of production (in area or producers) is associated with selected, high-impact resource use practices detrimental to biodiversity (e\.g\., uncontrolled use of fire in agriculture, inadequate waste disposal, overfishing, overhunting) in native ecosystems\. d) In focal areas, at least 30% to 50% (depending on individual focal areas) of production (in percentage of area, or of producers or value) is generated by financially sustainable, biodiversity-friendly practices of natural resources use (forest products, honey, maize, vegetables, ecotourism activities, etc\.) in the productive landscape\. e) In the various corridors, at least 40% of existing and new public programs and at least 20% of public spending with impacts on the natural resource base take into account biodiversity considerations, including: i\. Programs reoriented from potentially harmful to biodiversity-friendly or - neutral activities; ii\. Programs actively promoting activities aimed at the sustainable use of biodiversity\. 1\.3 Revised GEO (as approved by original approving authority) and Key Indicators, and reasons/justification 17\. Not applicable\. The original Global Environmental Objective and Key Indicators were not revised\. 12 “Corridor” is used to refer to: the collective area of the five different corridors included in the project, the project itself, and as a recognized concept/initiative within Mexico\. On the other hand, “corridor” is used to refer to the individual corridors included in the project or the associated concepts and strategies that are applicable in any location, not just within the project areas or in Mexico\. 13 The estimate of the number of communities referred to in original targets as 80, 50, 30 and 10% is based on the PAD reference of 130 target communities in focal areas: 80% = 104 communities; 50%=65 communities; 30%=39 communities and 10%=13 communities\. 5 1\.4 Main Beneficiaries 18\. The project’s main beneficiaries were communities and rural producer groups\. The project’s global environmental objective was the conservation and sustainable use of globally significant biodiversity through mainstreaming of biodiversity criteria in public expenditure in strategic lines, as defined in PAD Annex 7, by strengthening of productive practices of indigenous and rural populations to be compatible with conservation, including the production of aggregate value from local raw material\. Among others, the project supported agroforestry and forest management activities, including chicle gum, vanilla and organic coffee production as well as apiculture\. 19\. Producers who live in the corridors were specifically targeted by project activities that promoted conservation and sustainable development\. In these areas, most are organized in ejidos and indigenous communities\. Indigenous peoples benefited in particular,14 because they live in areas that still maintain extensive forest cover in southeast Mexico; they are considered the strongest allies in the conservation process due to their broad knowledge of the natural resource base and its uses\. As anticipated during project design (see PAD), mestizo15 people also benefited from the project; in many cases they manage forestry and agroforestry systems that are recognized for playing an important role in biodiversity conservation\. Those who derive their livelihood from ecotourism and ethnotourism also benefited through the project’s promotion of biodiversity and cultural diversity conservation\. 20\. Because the project focused on enhanced biodiversity conservation by developing and testing a bioregional approach to biodiversity management (e\.g\., improved ecological, biological and genetic connectivity of fragmented habitats), its activities also incorporated institutional-level beneficiaries throughout implementation (thus contributing to future national, regional and global replication and adaptation of the project’s corridor model): i\. The research community and NGOs16 with environmental and social objectives aimed at promoting biodiversity conservation and various forms of sustainable use of natural resources benefited from the project’s reorientation of public expenditure in support of their common goals; 14 Predominantly Maya\. In Calakmul also Chol, Tzotzil, Tzeltal, Zoque, Nahua Mame, Lacandón, Mestizos, Mam, Mochó, Cakchiquel, Kanjobal, Tojolabal and Totonaco\. See Ethnicity in table in Annex 2\. Outputs by component\. 15 Mestizo literally means half-breed\. In Mexico it refers to everyone—in this case peasants—who do not belong to an indigenous group or are not of European ancestry\. 16 Civil society participants included: Tropical Rural Latinoamérica, A\.C, UNAM Instituto de ICAAN-NABCI, Centro de Investigaciones Tropicales (CITRO), Universidad Veracruzana, Xalapa, Onca Maya A\.C\., Conservación de la Naturaleza, Universidad Autónoma de Juárez de Tabasco, UNAM Instituto de Ecología, Natura Mexicana A\.C, Instituto de Tecnología Social, Centro de Investigaciones Tropicales, Instituto de Tecnología Social TECSO, Pronatura Chiapas A\.C, Pronatura Yucatán AC, Ecosistemas A\.C, Centro GEO, Jaguar Conservancy A\.C\., Ecosur, Quintana Roo, Centro Interdisciplinario de Biodiversidad y Ambiente, A\.C\. (Ceiba), CINVESTAV, Mérida, Yaax Beh A\.C\., Colegio de la Frontera Sur Unidad Chetumal, Ecosur Chetumal, Universidad Autónoma Metropolitana Iztapalapa, Consejo Civil para la Cafeticultura Sustentable en México, CICY Mérida, UNAM Instituto de Biología\. 6  ii\. Federal, state and municipal governments17 increasingly interested in conservation (through the provision of training and technical assistance) benefited, particularly on a national level, from project activities that helped to stabilize agricultural frontiers in primarily tropical forest areas of the Yucatan Peninsula and Chiapas and to maintain ecosystem integrity through sustainable natural resource management subprojects\. This was one of the first projects to employ the innovative concept of biological corridors to target biodiversity conservation along with sustainable local development\. Experiences from and lessons learned during project implementation will contribute to future national, regional and global applications and adaptations of the biological corridor model\. 1\.5 Original Components (as approved): 21\. The project had four components: (A) Design and Monitoring of Biological Corridors; (B) Corridor Integration into Development Programs; (C) Sustainable Use of Biological Resources; and (D) Project Management and Coordination\. Total project costs at appraisal amounted to US$90\.05 million, with US$14\.84 million from the GEF (expressed as 11\.5 million SDR in the original Grant Agreement), US$1\.24 million from CONABIO, US$0\.29 million from project beneficiaries, US$2\.44 million from GTZ,18 US$66\.99 million from the Government of Mexico, and US$4\.25 million from IBRD\.19 Component A\. Design and Monitoring of Biological Corridors (US$5\.91 million, GEF US$4\.26 million) 22\. The objective of this component was to finance the detailed definition of priorities in the focal areas for conservation and sustainable use of biodiversity, through processes of participatory community planning, and on the basis of expert scrutiny of biological/ecological field and cartographic information\. It financed the establishment and operation of an integrated monitoring and evaluation system to track project performance through monitoring bio-ecological, socioeconomic and institutional indicators at the corridor and focal area levels\. 17 Government participants included CONABIO Dirección de Análisis y Prioridades, Banchiapas, Secretaría de Medio Ambiente de Chiapas, Secretaría de Desarrollo Urbano y Medio Ambiente de Yucatán, SEMARNAT, Instituto Nacional de Ecología (INE), Comisión Nacional de Áreas Protegidas, Instituto de Historia Natural del Estado Chiapas\. (IHNE)\. 18 GTZ cofinancing focused on the promotion of economy and commerce, state modernization and environmental protection\. GTZ collaborates in the region’s Indigenous Peoples Sector Network on Rural Development/Management of Natural Resources, through the Coordination Office for Indigenous Peoples in Latin America and the Caribbean\. 19 PAD Annex 4\. Incremental Cost: “it is estimated that some US$4\.25 million would be financed by the World Bank Loan ‘Rural Development in Marginal Areas’, which includes in its list of target areas two regions in Chiapas comprised in the Corridor project area\.” The Bank’s Rural Development in Marginal Areas APL was implemented under the Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA) in two phases (P007711 and P057530) without having cofinanced MMBC activities\. 7 23\. Specific activities financed under this component included: a) Analyzing relevant existing information to design and implement biological connectors, with a focus on biological data, current land use patterns, user rights and the role of agro-biodiversity\. b) Involving stakeholders in local planning for the management of biodiversity in focal areas to be implemented according to a typology of community capacities and organization designed for the project (PAD, Annex 11)\. This activity specifically included: (i) raising awareness among stakeholders on the economic and environmental benefits of the corridors; (ii) promoting the assessment of natural resource management problems and issues; (iii) assisting in the definition of priorities for natural resource and biodiversity management; and (iv) natural resource management strategies at community and organizational levels (local, regional)\. c) Implementing a monitoring and evaluation (M&E) protocol at different scales with a geographic information system (GIS) that integrates biological, ecological, socioeconomic and institutional information\. It includes both formal scientific aspects and evaluation of change by project beneficiaries\. Implementation of the M&E protocol will entail the establishment of baselines for the project’s indicators\. This will be done by gathering, organizing, analyzing and validating existing data (biological, ecological, socioeconomic and institutional) on corridors and focal areas\. Only when required data are not available would the project finance the ad hoc generation of baseline information\. Component B\. Corridor Integration into Development Programs (US$71\.72 million, GEF US$3\.98 million) 24\. The objective of this component was to remove institutional, technical and informational barriers that prevent the adoption, in regular rural development programs, of win-win natural resources and biodiversity management options\. At appraisal, Mexico’s Federal Government funded about 50 programs for social, agricultural and infrastructure development (some with state and/or municipal counterparts) in the project area\. An analysis undertaken during preparation showed that at least half of them had direct relationships with the conservation and sustainable use of natural resources and biodiversity\. To account for the variation across corridors (biodiversity relevance of the individual programs and the institutional, technical and political opportunities for their reorientation), the implementation modalities of this component were made specific to the characteristics of each corridor and its areas of intervention\. 25\. Specific activities financed by this component included: (i) studies and consultations to analyze the positive and negative biodiversity impacts of development programs; (ii) development and periodic update of corridor strategies in individual corridors, agreed upon at the level of the State Corridor Council (SCC) created by the 8 project and addressing short-, medium- and long-term threats and opportunities in order to promote conservation and sustainable use of biodiversity, taking into account the results of studies on biodiversity impacts, and current patterns of government programs for rural development in the corridors; (iii) institutional strengthening, capacity-building and awareness-raising activities, such as appropriate training of public officials, to promote provisions for conservation and sustainable use of biodiversity for inclusion in selected state and municipal development plans; and (iv) technical assistance to redesign development programs shown to have actual or potential negative biodiversity impacts, field-test modified programs, incorporate biodiversity indicators into M&E systems of development programs, and prepare and disseminate lessons learned\. 26\. Activities under this component were financed at no more than 80% by the GEF (with the exception of corridor strategies that could be financed 100% considering their importance to kick off the mainstreaming process)\. However, GEF resources would be incremental to baseline government funding of much larger amounts (with estimated ratios of 1 to 20), which were to be reoriented in biodiversity-compatible directions as a result of the project’s interventions\. Component C\. Sustainable Use of Biological Resources (US$9\.31 million, GEF US$4\.01 million) 27\. The objective of this component was to develop an integrated approach to promote sustainable use of biodiversity in focal areas within the five selected corridors\. The approach included activities aimed at: (i) maintaining native ecosystems (forests, coastal ecosystems, marshes, etc\.), wildlife viewing, studies of population dynamics for targeted wild species (native only), rule establishment for ecotourism, forest enrichment with desirable species, extraction schemes for NTFP, etc\.; (ii) restoring degraded ecosystems, such as the restoration of water flow to original ecosystems (wetlands, marshes known as “ciénagas” in the region), planting of native trees in patches of vegetation that are isolated and not close to a river (called “petenes” in the Mayan regions), reforestation with native species compatible with biodiversity conservation objectives, pilots for rebuilding dunes by replanting with native species, etc\.; and (iii) developing the sustainable use of biological resources in productive landscapes, such as capacity building for alternative use of wood products (non-timber species), establishment of rules for extraction of ornamental plants, sustainable use of plant biodiversity in home gardens, tests of native species as cover crops, pilot projects for the improved use of local species and varieties (fauna and flora), studies on market access for organic products and/or “sustainably managed” biological resources, certification, etc\. 28\. Specific activities in this component included: a) Capacity building and training programs on sustainable use of biological resources for producers and their organizations’ front-line agents\. These included workshops, field visits, short study tours, networking by producers, specific training in the development of organizational capacity and managerial skills, particularly for vulnerable groups such as women and indigenous peoples, for a 9  total amount of about US$0\.6 million supported by the GEF grant; b) Studies at rural community level to identify practical steps in the implementation of community- and producer group-based subprojects, including constraints and opportunities for developing biodiversity-friendly markets, and fine-tuning of selected practices to specific biophysical, social and cultural conditions\. Studies and capacity building were considered barrier-removal activities and were therefore financed 100% by the GEF; c) Development and implementation of pilot projects for the sustainable use of biodiversity\. Pilot projects were to be demand driven, on the basis of broad categories of eligible expenditure, and were to be financed by GEF resources either at 80% or at 33%, depending on a) the level of organization of the requesting community or other legal entity, and b) the presence of vulnerable groups\. (See PAD, Annex 2\.) Component D\. Project Management and Coordination (US$3\.10 million, GEF US$2\.59 million) 29\. This component financed the establishment and operation of a National Technical Unit (NTU), and of two Regional Technical Units (RTU) (one for Chiapas; one for the Yucatan Peninsula: Campeche, Yucatan and Quintana Roo), as well as operational costs of the National Corridor Council and State Corridor Councils\. 30\. The RTUs were responsible for day-to-day management of project activities, ensuring compliance with project objectives and procedures, procurement, reporting to the NTU, informing the National Corridor Council and State Corridor Councils about project progress and operation, and taking into account their recommendations\. 31\. The NTU, in coordination with the RTUs, prepared and executed the Consolidated Annual Operational and Budget Plan (AOP), based on annual corridor operational plans proposed by the Regional Units\. The NTU ensured the liaison between the project and related activities in the broader Mesoamerican Corridor initiative\. 1\.6 Revised Components 32\. Not applicable (no revisions) 1\.7 Other significant changes 33\. Effectiveness\. The Grant Agreement was signed on November 30, 2000, on the last day of the then out-going GOM administration, followed by three extensions of effectiveness (original date: February 28, 2001) until the project was declared effective 10 on January 30, 2002\.20 Three amendments were made to the Grant Agreement (November 2001, September 2004, November 2005), as follows: 34\. First amendment (November 2001): The integration of the State and National Corridor Councils (SCCs and NCC, respectively) with representatives from state and municipal governments as well as local producers, as a condition of project effectiveness, was revised to specify that only the eight state and municipal membership positions in each SCC needed to be filled before the project could access GEF grant resources\.21 This allowed the Project Coordination Unit to access resources to carry out consultation workshops (with rural producers, NGOs, academia and the private sector) in order to achieve the full SCC representation, but which had not been conducted during the final stages of project preparation\. The consultation workshops were held between 2002 (after the project became effective in January 2002) and 2004\. 35\. Second amendment (September 2004): The amendment included the redenomination of GEF funds, originally expressed in terms of SDR (Special Drawing Rights), to United States dollars (USD)\. The amount of GEF grant for the project was from then on quoted as US$14,840,000\. 36\. Third amendment (November 20, 2005): With the results of the External Evaluation conducted as part of the Midterm Review process, changes included: a) The trigger indicators (signaling transition of the project from phase I to phase II) were adjusted\. b) Changes were made to the schedule of expenditures based on project progress\. c) The term “primary tropical moist forest”, used in the Grant Agreement and the Implementation Letter, was aligned with 2002 OP/BP 4\.36, Forests Safeguard Policy\. d) Funding for expenditure categories “goods,” “consultant services and training,” “subprojects” and “operating costs” was increased to 100%\. e) The amount of GEF resources available for each subproject was increased from US$20,000 to US$50,000, which led to the adjustment of the target of 565 total subprojects to 120 (Operating Rules, Annex 4)\. f) The Procurement and Consultant Guidelines, May 2004 edition, were officially adopted\. g) The project’s focal area concept was expanded: “focal area” means a locality, identified in the Implementation Letter as a “Phase I” or “Phase II” area, and located within a biological corridor and any other locality to be agreed between CONABIO and the Bank\. 20 Project effectiveness was delayed for over one year due to what proved to be an incorrect design assumption\. The need for an amendment was identified by the new task manager appointed in September 2001, during his first mission that same month\. The project became effective in January 2002\. (For further details, see ISR #6\. 09/26/2003\.) 21 While this condition was meant to achieve broader participation from civil society from the start, it proved to be unrealistic and turned into an obstacle\. The amendment granted CONABIO access to GEF resources to complete the task for which it could not or would not devote its own resources\. 11 37\. It is important to re-emphasize that throughout all the three amendments, the Project’s Objectives and Key Indicators as specified in the PAD, were never revised or amended through the formal Bank procedures\. This is not surprising given the fact that, as summarized above in paragraphs 32-34, the amendments were not meant to address the indicators\. Project Extensions 38\. On January 22, 2007, the project closing date was extended from June 30, 2008 to December 31, 2009\. This request was made by the GOM, taking into consideration new projections of implementation progress based on the improved performance of the new Project Coordination Unit appointed by the GOM after the Midterm Review to turn around the project’s unsatisfactory performance at that time\. Reallocation 39\. As a result of the extension of the project closing date, authorized by the World Bank and the GEF, the GOM (through SEMARNAT) agreed to provide compensation for local staff during 2008 and 2009, thus making more resources from the GEF grant available for equipment and subprojects\. In light of this, a request was made to reallocate “unallocated” funds from the grant and the remainder available in “goods\.” This request was approved by the World Bank (Table 1)\. 40\. A standard four-month grace period was approved by the Bank in 2009 in order for the Borrower to submit documentation for expenses incurred prior to the December 31, 2009 closing date\. By the end of this period (April 30, 2010), NAFIN submitted documentation supporting total disbursement of the grant (US$14\.84 million) including the special account (US$650,000)\. 12  Table 1: Reallocation of grant proceeds by expenditure category Amendment Amendment Amendment Reallocation Original Actual # Category 2001 2004 2005 2009 % SDR Equivalent USD Goods for Parts A and D of the 1 project 183,315 190,000 245,183 245,182 114,624 204,004 178% Consultants’ services and 2 training 8,954,817 8,950,000 11,549,391 9,044,783 9,175,343 8,718,373 95% Goods and works under Part 3 C of the project 1,127,522 1,130,000 1,458,191 0 0 0 0 Operating costs under Part D of 4 the project 916,003 920,000 1,187,200 2,700,000 3,100,033 2,896,158 93% 5 Unallocated 318,343 310,000 400,035 400,035 0 0 0 Sustainable Use 6 Subprojects 0 0 0 2,450,000 2,450,000 3,021,465 123% Subtotal 11,500,000 11,500,000 14,840,000 14,840,000 14,840,000 14,840,000 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry Project preparation 41\. A large body of research and scientific evidence was produced or gathered to strengthen the project concept, which was innovative and carried a number or risks, including the challenge to communicate project objectives to the GOM agencies involved in rural development, and the lack of information on sustainable practices\. 42\. A cross-sectoral coordination experience became the foundation of the corridor approach: the Foundations for Inter-institutional Collaboration Agreement was signed in 1998 to coordinate regional and rural development efforts from the Ministries of Environment (SEMARNAT), Agriculture (SAGARPA), Social Development (SEDESOL) and six other ministries\. In the September 28, 2000 PAD Review Meeting minutes, it was agreed that the overall risk rating for the project should be “Substantial” given the change in GOM administration, and the project team was advised to consult with the new administration in order to ensure its support for the project\. This seminal initiative was discontinued when the GOM administration changed (December 1, 2000)\. Lessons learned and incorporated 13 43\. Lessons learned regarding institutional development and the broader policy environment led to the identification of key activities: Resources for training of officials at different levels were budgeted; the policy environment was to be systematically improved through the promotion of public participation to strengthen social organizations and build capacities on sustainable development\. The project built on the experience of the Technical Advisory Committees of the Protected Areas and adopted State Corridor Councils as participatory and transparent forums at the corridor level to make decisions on strategic aspects of the projects\. 44\. Similarly, the main lesson of working with small rural producer organizations is that one must identify the existing patterns of natural resource management and build on them, combining local traditional knowledge with modern technology and working together in search of technological alternatives that are appropriate for current socioeconomic conditions\. In addition, it is important to provide support and incentives to improve crop marketing\. Corridor design22 45\. Workshops conducted with stakeholders in the four participating states (Campeche, Quintana Roo, Chiapas and Yucatan) included discussions on the project’s goals and components and were held with officials of federal and state institutions, NGOs involved in environmental issues, academia and local producers\. Workshops were also organized with experts to identify criteria for Corridor design and potential project focal areas in order to develop pilot subprojects with the communities\. 46\. Corridor consultation groups in each state also contributed to the creation of an agreed list of sustainable development subprojects to be financed with project resources and eventually lead to the creation of the State Corridor Councils (SCCs), with institutional, social and private sector participation\. 47\. To ensure the continued participation of stakeholders and officials throughout project implementation, workshops were designed for officials, partners, small producers and rural organizations to share experiences, combine local traditional knowledge with modern technology, and publicize relevant economic incentives, fair trade and niche market opportunities\. Social Considerations 48\. A social assessment (SA) was performed for each of the corridors, with special attention to indigenous peoples and gender, including participatory workshops with communities with the support and participation of social specialists\. As a result of the social assessment, five key issues were identified for project implementation: • the need to consider the region as a living space 22 Although the process of appointing representatives to the corridor councils was not completed during preparation, numerous meetings were held with stakeholders, officials and experts who contributed to the project design\. 14  • the relationship between local culture and environment • land tenure and distribution • economic activities • social organization 49\. Of the total 1,163,490 inhabitants living within Corridor areas, 45% are indigenous: 23 indigenous languages are spoken, eight of which originate in the region\.23 An Indigenous Peoples Plan (IPP) (see PAD, Annex 12) was formulated in order to ensure that local indigenous peoples would be able to participate in the project, receive culturally compatible benefits and not be negatively impacted by project activities\. The studies conducted as part of the SA analyzed the degree of organization of the indigenous groups and opportunities to increase their access to improved technologies applicable to their management and use of natural resources\. The following key factors were identified to enhance indigenous peoples’ effective participation in the project: a) strengthening of social organization; b) training in legal issues (such as land tenure); c) promotion of a gender approach to the generation and distribution of income and to community decision making; and d) enhancement of their technical capacity to manage sustainable development projects\. 50\. In response to the SA’s results, a special window was created to finance pilot projects presented by vulnerable groups (such as indigenous communities and women’s groups), representing approximately 10% of total project resources during project implementation\. This special window was created due to the low level of organization among some 70% of these vulnerable groups, in order to improve their access to resources to fund their sustainable development initiatives\. Project design also envisaged their access to project resources through capacity-building workshops, pilot projects, studies and involvement in local planning activities for biodiversity management in focal areas\. In the end, the project design took into account differences in the degree of organization of stakeholder communities and groups by creating and applying a typology that included a spectrum from weak (type 1a) organization to strong (type 2b) organization\. (See PAD, Annex 11\.) 51\. Taking into consideration the particular conditions of one project focal area—La Cojolita, in the Lacandona Jungle, Chiapas—characterized by social conflicts over land tenure (between resident communities and the federal and state governments), the project IPP specified that additional consultation activities would be carried out during the first year of implementation in order to develop a site- and context-specific Indigenous Peoples Plan with and for the three indigenous communities living in the focal area\. Project design also allowed the National Corridor Technical Unit to use GEF resources in order to assist the indigenous communities through a training in agricultural legal issues so that they could better negotiate the land tenure conflict\. These activities were included as an obligation in the Grant Agreement and were considered a condition for the use of project resources in La Cojolita\. 23 Updating of data related to the indigenous population living in the corridors was conducted by the National Commission for the Development of Indigenous Peoples (CDI, previously the National Institute of Indigenous People, INI), through a collaboration agreement with the MMBC in 2007\. 15 Risk Assessment 52\. Risks identified during project preparation were classified in two main categories: i) technical aspects related to the design of corridors and the subprojects to be carried out in the focal areas; and ii) institutional, political, social and public policy aspects to integrate biodiversity into public programs and to encourage local development practices\. Classification of the risks showed that, in general, they were manageable\. (See PAD, p\. 30\.) 53\. To mitigate the first risk, project design incorporated a series of activities that combined the efforts of NGOs and institutions in order to promote the sharing of technical information on: i) the creation of corridor maps based on consensus; ii) the definition of focal areas based on technical studies; and iii) the reorientation of public policies, development plans and programs to be favorable to biodiversity\. 54\. In terms of institutional, political, social, and public policy risks, mitigation measures included: i) inclusive participation of all stakeholders in project activities in each of the corridors; ii) efficient and useful training for all stakeholders, emphasizing training on the project’s technical aspects for public officials at different levels and in different sector agencies in order to facilitate the implementation of plans and programs that integrate biodiversity criteria, as well as to highlight the importance of supporting local development agendas that have conservation-friendly aspects; and iii) a comprehensive communication strategy\. 55\. Despite the deficiencies in design and implementation, monitoring activities contributed to mitigate institutional risk by bringing together academia, NGOs and other institutions in an M&E network (formed in 2006) and by promoting the flow of information and knowledge among different local groups and policy makers\. 56\. During the project’s final design stage, a small NGO led by a former Bank social development specialist working in the La Cojolita focal area in Chiapas demanded that the team carry out a more in depth consultation with the three indigenous communities within the Lacandona community\. In order to avoid any delays, highly detailed mitigation measures for this area (more so than in any other area of the Corridor) were incorporated into the IPP as well as the Grant Agreement\. They included ongoing consultations with stakeholders and participatory planning to define the specific actions to be financed as part of the design and sustainable use of the part of the Corridor in La Cojolita\. During supervision, the Bank team and the MMBC team within CONABIO maintained a constant presence in the area, conducted consultation workshops and created a detailed social and agricultural diagnostic to facilitate smooth implementation\. The same NGO had suggested that the project coordinator to give a presentation of the project’s achievements at the Fourth GEF Assembly held in Uruguay in May 2010\.24 24 The World Bank ended up supporting the project director to attend the GEF Assembly and present on the MMBC project\. 16 Borrower Commitment 57\. During preparation, the GOM fully supported the MMBC initiative\. The eight ministries that had signed onto and participated in the Institutional Coordination Framework (Foundations for Inter-institutional Coordination; Bases de Colaboración Inter-institucional) pledged to refocus their development programs to better integrate biodiversity criteria\. During the design and preparation of the project, the GOM indicated that relevant ministries could designate parts of their budgets for activities within the project area in order to encourage the reorientation of development activities within the individual corridors\. The National Council for Natural Protected Areas (CONANP)— composed of researchers, NGOs, industry and local producer organizations—and Mexico’s GEF Focal Point also supported the Corridor project proposal\. In addition, during negotiations an agreement was reached on a Schedule of Obligations of Counterpart Resources, including projections regarding the counterpart funding (federal resources) to be allocated to the Corridor areas for the duration of the project\. 58\. During the first part of project execution, the GOM was not supportive of the project\. The outcome of a national election signaled an impending change in the government administration\.25 The outgoing administration had supported the preparation of the project and thus accelerated the signing of the Grant Agreement on November 30, 2000, before having the opportunity to complete the social consultations for the formation of the State Corridor Councils (SCCs)\. A new Minister of Environment was appointed in September 2003\. The project operated under 90-day plans closely monitored by the Bank, NAFIN and the Ministry of Finance (SHCP) in 2004\. After the MTR in January 2005, a new project team was appointed, followed by the appointment of a new head of CONABIO\. The project took off with a renewed commitment from the GOM, but with the handicap of a four-year delay in implementation, overcoming major shortcomings that had led to an Unsatisfactory rating in the ISRs from September 2003 to December 2004\. These ratings were gradually upgraded to Moderately Satisfactory in June 2005 and Satisfactory in June 2007\. Institutional Arrangements 59\. As the financial agent for the project, the Borrower was Nacional Financiera (NAFIN)\. The role of the financial agent is critical in reviewing project execution and processing disbursements, but the agent had limited experience in project execution\. The National Commission for the Knowledge and Use of Biodiversity (CONABIO), a federal-level, public-sector, inter-ministerial commission in charge of developing the National Biodiversity Strategy and Action Plan, was appointed as the executing agency due to its experience in and international recognition for work on environmental issues, and because the project’s objectives coincided with CONABIO’s mandate to promote the integration of biodiversity criteria into the development programs of the eight Ministries that signed the Foundations of Inter-institutional Collaboration agreement and that make up its Board\. The National Technical Unit for the project was incorporated as a 25 The project’s Grant Agreement was signed on November 30, 2000, the last day of the administration of President Ernesto Zedillo\. 17 department in CONABIO with two Regional Technical Units located in the Yucatan Peninsula (for the states of Campeche, Quintana Roo and Yucatan) and Chiapas\. 2\.2 Implementation 60\. The project became effective on January 20, 2002, more than a year after it had been approved by the Board of Executive Directors and signed by the GOM on November 30, 2000\. The Grant Agreement was signed with CONABIO, which seemed the best institution to host the project but it had not participated in the preparation\. The Bank team underestimated both the difficulty of meeting the effectiveness conditions and the lack of experience of the new administration\. For the first time in 70 years, a different political party had won the election, and new, inexperienced officials took office\. Major programs were nearly paralyzed, particularly the more complex projects with international donors\. Other Bank projects were equally affected\. Creation of the National and State Corridor Councils 61\. Creation of the four SCCs and the NCC was originally a condition of effectiveness, because the consultations to form the councils had not been completed during preparation\. The GOM would not or could not provide support for this activity\. As previously explained, the project’s Grant Agreement was signed at the same time that newly appointed officials took office throughout the government leading to paralysis in many sectors\. Grant resources were needed to fund social sector workshops that would contribute to the formation of State Councils\. As a result, project effectiveness was delayed for over one year until the first amendment (November 2001)26 was signed, thus freeing up these resources\. The social sector information workshops were then held between 2002 and 2004\. 62\. The election of national and state government officials, members of NGOs, academia and the private sector as representatives to each SCC was a relatively quick process\. Workshops with producers in the project focal areas and their election to the SCCs constituted a much longer process, since their organizations are weaker and divided by region or product\. This was especially the case in Chiapas,27 where the MMBC and the Puebla-Panama Plan were identified by stakeholders as two parallel projects in the same geographical area\. This situation created confusion and reactions against the MMBC28 in a context characterized by polarized views of regional development as a result of the 1994 armed conflict\. Expectations raised by the change in the federal government in 2000 altered the dormant conflict and the Zapatista rebel group marched to Mexico City to negotiate with the new administration\. 26 The need for an amendment was identified by the new task manager appointed in September 2001 during his first mission, and the project was declared effective in January 2002\. 27 By July 2003, the other three SCCs (Yucatan, Campeche and Quintana Roo) had been formed while that in Chiapas was still being constituted\. 28 The Plan Puebla-Panamá was an infrastructure project launched by the previous GOM administration (Zedillo), which had not been well received by affected stakeholders\. The confusion stemmed from subsequent presentation, by the incoming GOM administration (Fox), of the MMBC as the “green” arm of the PPP\. 18 63\. In the end, the Chiapas SCC was established in late 2004 with a well-represented social sector: 11 representatives of producer organizations (from the 11 areas in which the project would intervene), whereas, in accordance with the Operations Manual, only three producers were elected to each of the SCCs of the Yucatan Peninsula (Campeche, Quintana Roo, and Yucatan)\. However, the more extensive and comprehensive consultations together with greater producer representation in Chiapas contributed to increased MMBC project visibility, leading to the implementation of a greater number of subprojects in that state relative to the other participating states\. (See Section 3\.2, Key Performance Indicators\.) Implementation Risk and Personnel Changes 64\. In accordance with Bank Procurement Guidelines, selection of the project coordinator began in the first quarter of 2001 with a public invitation to apply posted on CONABIO’s website and the creation of a multisectoral selection committee\.29 Without providing an explanation, SEMARNAT objected to hiring the candidate chosen by the selection committee, who happened to be a former high-level official of the outgoing administration\. The World Bank task team leader attempted to support the selection of this candidate based on Section 3\.04 of the Grant Agreement,30 but was unsuccessful in convincing SEMARNAT to agree\.31 As a result, during the first years of project implementation, the project had a coordinator whose lack of vision and experience contributed to poor project performance32 as well as to the slow recruitment process for Regional Technical Unit staff in both the Yucatan Peninsula and Chiapas\. The perceived absence of management leadership further hindered progress in achieving results between 2002 and 2004\. 65\. From September 2003 (ISR #6) through April 2005 (ISR #11), the project was rated Unsatisfactory33 due to slow project progress and the corresponding lag in disbursement\. In response, an external institutional specialist from the FAO/CP was hired to support the Project Coordination Unit and to improve its administrative capacity (2003–2007)\. However, implementation obstacles due to poor staff qualifications persisted\. 66\. During the June 2004 supervision mission, the Bank task team and CONABIO created a 90-day plan that included CONABIO’s commitment to have an external evaluation34 and to change the project coordinator\. Stricter supervision was also provided by Nacional Financiera (NAFIN), the Ministry of Finance (SHCP), the Ministry of Environment and Natural Resources (SEMARNAT) and the World Bank\. The Bank team 29 The committee consisted of a researcher from the National University, a representative of indigenous and peasant producers from Chiapas, the Director of the Mexican Conservation Fund (FMCN), and a representative of the Ministry of Environment and Natural Resources (SEMARNAT)\. 30 Section 3\.04 of the Grant Agreement: “[The United Mexican States], through its representatives on the [selection committee], shall: (a) cause the Recipient, acting as trustee of the Trust, to hire and thereafter maintain throughout project implementation, personnel in numbers and with experience and qualifications satisfactory to the Bank\.” 31 June 8, 2001, the World Bank gave its no objection to the contract for the project coordinator\. 32 Including a greater focus on localized actions at the expense of the project’s broader objectives (i\.e\., public policy mainstreaming and corridor connectivity)\. 33 Unsatisfactory ratings were given for Agreed Procedures and Schedules, Monitoring and Evaluation and Project Management\. 34 The external evaluation was conducted as part of the project’s Midterm Review (January 2005)\. 19 conducted a supervision mission every 90 days in order to review project progress\. The first and second 90-day plans, covering the period from July to December 2004, were satisfactorily completed\. 67\. The Midterm Review (including a third 90-day action plan) was conducted in January 2005 (after the external evaluation was completed in the second half of 2004)\. The main conclusions of the independent evaluation were: (i) project objectives continued to be relevant and feasible; (ii) the institutional design, approach and instruments continued to be valid; (iii) the main change the project required was to focus on reorienting policy and public expenditure; and (iv) the main areas requiring attention were the operation itself and technical assistance to support communities’ demands to take advantage of a reoriented government “supply\.” The Bank mission concurred with the main conclusions of the independent evaluation after discussing it with relevant stakeholders, including members of the NCC and SCCs\. The full report can be downloaded from the project files and CONABIO’s website\. 68\. As a result, a third amendment was approved (November 2005) and a more qualified project coordinator, with appropriate administrative and management skills, was recruited\. New technical staff members were also selected, and were better able to link local development interests with available institutional programs (i\.e\., reoriented public spending) to successfully support local efforts for sustainable development, conservation and natural resource management (the subprojects)\. The new team’s increased capacity for project management in conjunction with federal, state and municipal partners was readily observed during Bank supervision missions\. As a result, implementation of project components improved because they were now more in line with project goals\. The project was reclassified as Moderately Satisfactory in June 2005 (after 19 months)\. Fostering Local Support in Light of Implementation Delays 69\. Because on-the-ground project implementation was delayed longer than expected, the confidence of local producers and communities in the project (and in the general idea of the Mesoamerican Biological Corridor, MBC) began to wane (especially as local perceptions increasingly associated the MMBC project with the negatively viewed PPP)\. To bolster interest in and positive opinions of the MBC and the project (both in Mexico and regionally), the social experts on the Bank’s task team applied for a US$350,000 grant from the World Bank-Netherlands Partnership Program (BNPP) Global and Regional Initiatives to implement a series of workshops collectively titled Strengthening Social Participation in the Regional Mesoamerican Biological Corridor (RMBC) in Guatemala, Panama and Southeast Mexico\. The objectives were to strengthen: (i) the participation of indigenous communities, small-scale producers and women’s organizations through the sharing of experiences in conservation and local organization in the context of the Mesoamerican Biological Corridor; and (ii) individual and community decision making in corridor areas so that local communities could help guide governmental institutions toward efficient decentralization and local and municipal development through informed participation and by making their preferences known\. The workshops provided a forum for these exchanges, which were held in MBC areas in 20 Panama, Guatemala and in Southeast Mexico (Yucatan, Campeche, Chiapas and Quintana Roo) between 2003 and 2004\. The workshops allowed the MMBC to reposition itself in order to retain necessary local interest in MMBC objectives and activities during the unexpected and prolonged lag in project implementation\. It also provided innovative and practical instruments for engaging local communities within the MMBC through opportunities to demonstrate the importance of the MMBC in their daily lives and for the future of economic development in the region\. Implementation of Community Capacity Typology 70\. The typology of community capacities and organization proposed in Component A of the project (see PAD, Annex 11) contributed to improved targeting of resources for subprojects by enabling the project team to better tailor Corridor activities to communities, for example by: i) identifying communities and producers in need of assistance and training in order to improve their awareness of the economic and environmental benefits of the corridors; ii) monitoring the use of the resources provided; iii) including a wide range of beneficiaries with respect to the disparity among their levels of organization; iv) implementing, with Bank Procurement Guidelines, the allocation and control of resources awarded to producer organizations; and v) publicizing the project in Corridor areas and prioritizing natural resource management activities within them\. 71\. Although the logical framework provided benchmarks to ensure the achievement of anticipated project goals outlined in the PAD and to reinforce the relevance of biodiversity mainstreaming, during implementation some indicators limited project interventions to only 16 predefined focal areas\. The Midterm Review highlighted this obstacle and proposed that the focal areas be expanded to include ejidos throughout the Corridor\. This allowed the project to incorporate a greater number of local producers and to maintain the demand-driven structure of subproject implementation while achieving project objectives\. This change was reflected in the third amendment (November 2005), providing the opportunity to work in new areas while using the same budget\. The amount of GEF resources available for each subproject was increased from US$20,000 to US$50,000, which led to adjusting the target of 565 total subprojects to 120, so as not to increase the total amount available under the subproject disbursement category (Operating Rules, Annex 4)\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 72\. An M&E protocol was developed during preparation\.35 Based on this protocol, CONABIO was to prepare a M&E system to link monitoring indicators to project activities in order to track both project impact (overall development) and process (component activities and specific outcomes) at project, corridor, focal area and community levels\. The M&E system should be based on the key project indicators (Section F above) which are also identified as the main indicators in the project’s logical framework\. (See PAD, Annex 1\.) 35 PAD p\. 27: A Monitoring and Evaluation protocol has been developed during project preparation, based on indicators listed in the project’s logical framework\. 21 73\. The M&E system’s design and implementation were affected by the delay in effectiveness and weak institutional capacity\. The MTR highlighted this shortcoming and the need to update M&E indicators during the MTR\. The midterm evaluation mission (January 18–28, 2005 Aide-Mémoire) recommended that a consultant be hired to develop a conceptual framework and the methodology to produce M&E indicators for the MMBC focal areas\. 74\. On June 2005, the FAO/CP consultant prepared a basic proposal for M&E\. However, the team focused on critical actions to put the project back on track and upgrade the project to avoid cancellation\. By the time the new team was appointed in 2005, developing a protocol to capture all the logical framework indicators proved technically and economically more costly and less useful than anticipated\. Under a second FAO/CP contract in December 2005, the specialist assisted CONABIO in implementing the managerial component of the M&E system\.36 The project teams from CONABIO and the World Bank decided to focus activities on the field and monitoring efforts in reorienting investments and mainstreaming biodiversity criteria into development programs as well as initiating a longer-term effort to build a network of research institutions and researchers willing to embrace the corridor concept and related activities in their own work\. 75\. The recommendation to develop an M&E system focused on the project indicators, highlighted by the MTR, did not produce the comprehensive M&E framework required to make up for the deficiencies of the original M&E design\. However, the project sought opportunities for collaboration and exchange with local organizations (NGOs, academic institutions) that have the necessary capacity for monitoring\. This resulted in the Multiscale Monitoring Network being formed in 2006 which brings together specialists in the area for conducting biological monitoring on a regular basis\. The NTU entered into contracts with qualified academic or research organizations to be able to report on relevant habitat and species indicators with robust research findings\. This, together with the use the biological monitoring system of CONABIO helped to address the significant shortcomings in the M&E protocols\. But the issue of tracking performance using the key indicators as specified in the PAD continued to plague the Project\. 76\. There is no record of habitat loss or change in the native vegetation cover in the focal areas (15% of Corridor surface)\. The proxy reported shows deforestation rate was reduced from 1\.5 to 1\.0%/year (National Forest Inventory: 2002–2007; 1993–2002) in the 4 corridor states\. 36 For further details see Aide-Mémoire March 6–16, 2006, attached to June 1, 2006 ISR #13\. 22 Presence of indicator species was reported for four (4) corridors: Sierra Madre del Sur 77\. Panthera onca, Puma concolor, Leopardus pardalis, Leopardus weidii, Herpailurus yaguaroundi, Tapirus bairdii, Pecari tayacu, Mazama americana, Odocoileus virginianus, Nasua narica, Agouti paca, Dasypus Novemcinctus and Ateles geoffroyi were monitored through Cybertracker, direct and indirect observations and surveys in the Chiapas Sierra Madre del Sur Corridor\.37 Selva Maya Zoque 78\. Didelphis sp, Dasypus novemcinctus, Tamandua mexicana, Sciurus sp\., Cuniculus paca, Galictis vittata, Panthera onca, Leopardus wiedii, Herpailurus yagoaroundi, Conepatus semistriatus, Nasua narica, Ateles geoffroyi, Pecari tajacu and Mazama americana were monitored in the convergence of the Sierra Madre del Sur and the Selva Maya Zoque Corridors in Chiapas, using still-picture traps, footprint identification and direct observation inside transects and outside transects, and processed using the EstimateS program (available at http://viceroy\.eeb\.uconn\.edu/estimates)\.38 Sian Ka’an–Calakmul 79\. Panthera onca was monitored with transponders in the Sian Ka’an–Calakmul Corridor, which allowed their movements to be modeled, confirming the connectivity function of the corridors\. In 1930 Mexico hosted around 20,000 jaguars\. The current population is estimated at 3,500\. The Chiapas Corridors and the Campeche and Quintana Roo Sian Ka’an–Calakmul Corridors represent key habitats, linking relicts of tropical forest in the Ocote, Sepultura, El Triunfo, Montes Azules, Calakmul and Sian Ka’an natural protected areas\. In the Calakmul area alone, the jaguar population is estimated at 900 individuals (Ceballos et al\., 2002; Chávez et al\., in press)\. The protection of the jaguar can save 70,000 species of flora and fauna\. (Ceballos 2007: Censo Nacional de Jaguares)\. The jaguar is at the top of the trophic chain, regulates a large number of species in the ecosystem and requires large extensions of conserved habitat (Miller and Rabinowitz, 2002)\. The study39 cofinanced by the project in the two Sian Ka’an– Calakmul Corridors used the results of the jaguar habitat modeling produced by a well- known longitudinal study by Amor Conde et al\. in 2006\. 80\. Moreover, the project commissioned a comprehensive study of the impacts of fragmentation and infrastructure on the jaguar populations in the Quintana Roo and Campeche Sian Ka’an–Calakmul Corridors\. The study produced an evaluation of threats to habitat and jaguar populations, based on the potential jaguar habitat map produced by the Selva Maya-Zoque-Olmeca Project (Amor Conde et al\., 2006), using the algorithm 37 Rabeil, Thomas 2009: Implementación de un sistema de monitoreo de los mamíferos en el Corredor Sierra Madre del Sur\. 38 Muench, Carlos 2007: Evaluacion de especies clave de mastofauna mayor como indicadoras de la salud del ecosistema en Marqués de Comillas\. 39 Unidos para la Conservación [2007]: Modelos de control y conservación para el mantenimiento de corredores\. 23 developed by Miradi™\. It was instrumental in the effort to mainstream biodiversity criteria in the public utility Comisión Federal de Electricidad’s investment planning process, leading to relevant modifications and mitigation measures in the original design for a high-tension transmission line that was planned through the Sian Ka’an—Calakmul Corridor in Quintana Roo and the establishment of a compensation fund for cattle ranchers when their livestock is harmed by wild felines\.40 Biological Monitoring Network 81\. In 2006, the MMBC’s biological monitoring network was formed with the participation of GOM institutions, researchers from various disciplines, members of NGOs, universities, research centers, institutes and independent consultants, all focused on the conceptualization and development of multiscale monitoring and identification of ecological indicators to assess and guide public policies in the region (as part of M&E activity ii)\. The biological monitoring network has contributed to the systematization of the information and data already generated (Component A), including data generated through coordination workshops organized twice a year and participation in relevant seminars and congresses in which progress reports are shared\. Many participating researchers and research centers have incorporated into their institutional agendas studies and research programs linked to the MMBC’s thematic and geographical scope\. For example, some NGOs collaborated to develop systems to monitor jaguars, tapirs, spider monkeys and birds\. To consolidate Corridor information, the MMBC team is also being assisted by the Jorge L\. Tamayo Center for Geography and Geomatics (part of the National Council for Science and Technology network)\. Because these activities only began after the change in the Project Coordination Unit in 2005, the process is not yet complete; comprehensive data for every corridor and focal area are not yet available\. 82\. In general, the generation of relevant baselines, data collection and analysis for project indicators (biological, ecological, socioeconomic and institutional) as part of the M&E protocol remains an ongoing process and a significant shortcoming in measuring the achievement of the operation’s objectives\. On the positive side, the network approach is proving highly efficient; mainstreaming the Corridor monitoring and knowledge sharing objectives in the scientific community’s agenda highlights the relevance of the project’s contributions\. 2\.4 Safeguard and Fiduciary Compliance Safeguards 83\. Safeguard compliance was Satisfactory throughout project implementation\. The Bank supervision team included biologists, foresters, environmental specialists and social scientists to supervise the project’s compliance with Bank policies: i) Environmental Assessment (OP 4\.01), ii) Natural Habitats (OP 4\.04); iii) Forests (OP 4\.36); iv) Physical Cultural Resources (OP 4\.11); v) Indigenous Peoples (OP 4\.10); Gender (OP 4\.20) (in the 40 Jaguar Conservancy [2010]: Aportación para atender el programa emergente de grandes felinos que se tornan perjudiciales en la zona dañada por el Huracán Dean\. 24 original documents although not in subsequent ISRs); and vi) Involuntary Resettlement (OP 4\.12)\. 84\. Environmental Assessment (OP 4\.01): This Category B project was designed to be positive from an environmental standpoint, specifically through the promotion of conservation and sustainable use of globally significant biodiversity in selected communities, ejidos and private lands\. The Satisfactory rating is based on the various activities undertaken to assess the current trends and threats to biodiversity in the project area, and to identify the interventions necessary to reverse the accelerating loss of biodiversity\. These activities included: i) environmental assessment; ii) a study by the Department of Plant Sciences, University of Oxford, United Kingdom, which proposed a number of criteria to identify activities in terrestrial corridors; iii) a study of the specific problems in the northern corridor in the State of Yucatan; iv) technical reports; and v) direct consultations with producers, fishermen and other stakeholders to identify pilot projects for sustainable development\. (See PAD, Annex 2\.) This information was analyzed together with the data generated through the social assessment\. 85\. During project implementation, subprojects were also screened to verify their eligibility\. All assessments made by the RTU were based on a typology and checklist of potential environmental impacts contained in the Operations Manual\. These assessments were in turn delivered to the National and State Councils responsible for subproject approval screening (this included the national environmental authority, SEMARNAT)\. Selection criteria included whether the subproject comprised activities for: i) restoration, ii) maintenance of ecosystem quality, and iii) sustainable use of biodiversity\. As described in Annex 2 of the PAD, the goal of the subprojects was to promote sustainable development for local producers and indigenous communities\. 86\. Natural Habitats (OP 4\.04): The question of whether pristine and valuable habitats should shape the design of the corridors was discussed thoroughly among specialists during project preparation\. The solution was to use the Natural Protected Areas—which included pristine areas and were subject to federal protection—as the “anchors” to be connected by the corridors in order to enhance effective biodiversity protection, reduce anthropogenic pressures (e\.g\., by promoting agro-ecological and silvopastoral activities while containing urban expansion and the production of crops dependent on large quantities of agrochemicals), and preserve natural forest cover to facilitate movement of species\. The southern states of Mexico have a large proportion of their territory under protection (e\.g\., nearly 60% of the municipality of Calakmul is composed of private areas, or is under state and federal protection decrees)\. During implementation, all project activities facilitated the above goals as embodied in Corridor design\. Compliance with this safeguard was therefore Satisfactory because the impact of the project on natural habitats was positive, reducing pressure from human activities and even reversing (in selected areas) the deforestation produced by past livestock expansion (by promoting silvopastoral practices and allowing pastures to revert to tropical forest41)\. 41 Fragmented areas of tropical forests where extensive livestock grazing took place for decades are reverting to forests in a process known as “acahualamiento de potreros” in which surrounding parent trees provide seed and environment for natural regeneration of forest patches\. 25 87\. Forests (OP 4\.36): In line with the Bank’s forestry policy at that time (Forests, OP 4\.36), for the first half of project implementation no subprojects involving forestry activities were funded\. Based on the experience of World Bank Community Forestry projects in Mexico and the region, and in order to allow sustainable forest management practices to be promoted by the MMBC, during the Midterm Review (January 2005) the updated forestry policy (November 2002: Forests, OP 4\.36) was included in the project’s Implementation Letter\. This allowed the project to develop a best-practice framework to support silvicultural (sustainable forest management) activities and the sustainable use of NTFPs and wildlife\. These activities were regulated through management programs approved by SEMARNAT and supervised by a Bank senior natural resources specialist, leading to the Satisfactory rating for this safeguard\. The update in the safeguard also allowed additional areas of the Corridor to be included in project activities and to receive resources for implementing sustainable development subprojects (i\.e\., Marqués de Comillas)\. Subprojects supported sustainable forest management activities in Corridor areas only when they followed the best-practice guidelines and had a management plan (approved by SEMARNAT)\. 88\. Indigenous Peoples (OP 4\.10) and Gender (OP 4\.20): An Indigenous Peoples Plan (IPP) was designed to identify practical ways of involving indigenous communities in the design and implementation of the project, particularly through technical assistance and organizational strengthening so that they could better harness the benefits of their environmentally friendly productive activities\. (See PAD, Annex 12\.) In essence, this involved the creation of a special window to finance pilot projects presented by vulnerable groups (i\.e\., indigenous communities and women’s groups); these projects represented approximately 10% of total project resources; indigenous communities were also given access to those resources dedicated to Component C activities\. (See also Section 2\.1, “Social Consideration\.”) 89\. The January 2005 supervision mission detected an alarming rate of indigenous youth emigration (national and international) from project areas\. In response, the project included a focus on youth within awareness-raising and environmental education activities, in addition to promoting their participation in productive subprojects\. In the case of La Cojolita, Lacandona Rainforest, Chiapas (one of the project’s original focal areas), a series of additional consultation actions were considered during the early years of project implementation in order to adapt the overall strategic guidelines of the IPP\. In addition, the Project Coordination Unit gave support to several indigenous communities in the form of consultancies that provided training in existing land law and conflict resolution\. (For additional details, see Section 2\.1, “Social Considerations” and “Risk Assessment\.”) As a result of these efforts on the part of the World Bank and MMBC project teams, compliance with this safeguard was rated Satisfactory\. 90\. In addition, the series of workshops financed with BNPP resources reinforced actions taken as part of the IPP (Section 2\.2, “Strengthening Social Participation in the Regional Mesoamerican Biological Corridor (RMBC) in Guatemala, Panama and Southeast Mexico”)\. 26 91\. Physical Cultural Resources (OP 4\.11) and Involuntary Resettlement (OP 4\.12) were triggered in order to ensure that if during implementation a situation arose which required the application of these safeguards, an appropriate plan would be in place\. However, such a situation was never encountered, and thus compliance with these safeguards was rated Satisfactory throughout\. Fiduciary 92\. During the first four years of the project, the NTU required intensive training in administrative management\. World Bank financial management and procurement specialists provided support to the NTU and RTU management teams\. 93\. NAFIN, as the financial agent, maintained adequate records to reflect the project’s operational and financial conditions, complying with Bank requirements and providing adequate support for project implementation, and thereby contributing to the successful management of the project and ensuring that financial arrangements were employed in accordance with the terms of the grant\. NAFIN staff accompanied the Bank and GOM missions throughout the project’s life\. 94\. Monitoring of the financial and procurement aspects was conducted on an ongoing basis during supervision missions (twice a year) by the Bank’s Country Office staff\. 95\. Financial management implementation during the project was rated Satisfactory (in terms of timeliness and complete documentation) by Nacional Financiera (NAFIN) and the Bank\. Audit reports have been acceptable to the Bank (Audit Report Compliance System, ARCS), as have Project Management Reports (PMR), including the last PMR for the fourth quarter of calendar year 2009, dated April 13, 2010\. The Grant was fully disbursed and the final audit is due June 30, 2010\. 96\. Capacity for procurement and contracting was consolidated and rated Highly Satisfactory in the May 2009 ex post assessment and Satisfactory in the last ex post review completed on December 1, 2009\. 2\.5 Post-completion Operation/Next Phase 97\. During National Corridor Council meetings, participating ministries and stakeholders demonstrated consensus on and commitment to: i) the significant role played by biological corridors as connectors for genetic exchange between populations otherwise condemned to isolation in NPAs; ii) the possibility of government actions to refocus development; iii) the ability of local planning activities to develop awareness and capacities of local governments and landowners; and iv) the capacity of local sustainable development projects to drive the reorientation of public programs and to provide economic, social and conservation benefits\. Through the framework of the State Corridor Councils, CONABIO has demonstrated the importance of involving local producers and 27 communities through participatory and consultation processes so that they become allies of biodiversity conservation\. 98\. In 2009, the Mexican Congress and the Minister of SEMARNAT reaffirmed their commitment to the corridor concept by expanding the program to include the States of Tabasco, Oaxaca and Veracruz and allocated a budget to support the commencement of MMBC activities in these states\. The expansion of the MMBC to other Mexican states is consistent with SEMARNAT’s National Environment and Natural Resources Program 2007–2012 (PSMARN), and its focus on the transversality42 of public policies for sustainable development and territorial integration (Section 6\.9)\. 99\. This program emphasizes the role of biological corridors in promoting habitat connectivity—allowing movement of species between conserved habitat patches—while also stressing their importance in those areas most affected by climate change\. The PSMARN also highlights the need for biological corridors to promote the integration of development policies in relevant regions, emphasizing policies for regulation, ecotourism, wildlife, forestry and rural development, among others\. For the PSMARN, the strategic use of biological corridors is as “a public policy tool for transversal environmental management and an urgent task that should be extended by the present administration to various parts of the country and linked to disaster prevention, payment for environmental services and the National Climate Change Strategy\.”43 100\. Since 2008, core MMBC project personnel have been funded by the GOM with an annual budget of approximately US$2 million (MXN$25 million) to continue their work toward achieving national Corridor objectives\. The MMBC has been incorporated into the structure of CONABIO/SEMARNAT and MMBC staff members are currently working on: i) diagnostics for the new corridors (Tabasco, Oaxaca, Veracruz), to which around 59% of the resources provided by the GOM have been allocated; ii) management of the Sustainable Rural Development Program (PDRS) in Chiapas jointly with SAGARPA, and in two similar programs in the Sian Ka’an–Calakmul Corridor and in the El Triunfo region in Chiapas; iii) the establishment of the MMBC “eco-label” and payment for environmental services; iv) studies on environmental economics (jointly with CEPAL, 2009); v) promotion and continuity of the multiscale ecological monitoring network; vi) financing of subprojects under the MMBC’s strategic guidelines; and vii) the provision of logistical support to the State Corridor Councils\. 101\. In an effort to comply with the framework of the Special Program on Climate Change (PECC), the MMBC and SAGARPA are working together under the PDRS program in Marqués de Comillas, Chiapas to reorient 25,000 hectares/year of land under production toward sustainable management, and to reduce the use of fire as an agricultural practice in at least 30% of the participating area by 2012\. 42 In this case, transversality is used here to describe the intersection of public policies from various sectors when applied to sustainable development across states and regions\. Such public policies invariably overlap and influence one another as they implement programs and incentives on the ground with similar target groups\. Such programs and incentives often influence the decision-making prioritization process of local communities who live off the land and thus influence land use decisions, no matter whether the original program/incentive focused explicitly on land use or not\. 43 Programa Sectorial de Medio Ambiente y Recursos Naturales (PSMARN) 2007–2012\. 28 Next Phase 102\. To take the work done by the MMBC a step further, the MMBC team is preparing a new GEF-financed project for Mexico, with the Bank’s assistance, to be implemented from 2011 to 2016: “Fostering Sustainable and Competitive Production Systems Consistent with the Conservation of Biodiversity\.” Building on the foundation and corridor context of the MMBC project, the new GEF project focuses on green product and market development in biological corridors through socially and environmentally responsible production and marketing of goods and services, with a specific focus on the protection of biodiversity\. The new project also proposes to support MMBC activities that are expanded into new states (i\.e\., Tabasco, Veracruz, Oaxaca)\. Sustainable production sectors targeted by this new GEF/IBRD-financed intervention include those that were piloted during MMBC project implementation, such as cacao, coffee, forestry, honey, gum, etc\. The initial project concept was approved by the GEF on June 7, 2010 signaling its further development and the availability of GEF resources for its future implementation\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation 103\. Ten years later, the project objectives, outcomes and activities are relevant for the country’s development priorities, as reflected in the Bank’s current CPS for Mexico (2009) and the National Development Plan (2007) which emphasize the environmental issues central to both reviving the economy and securing an environmentally sustainable path\. 104\. The long-term sustainability of corridors and NPAs is strongly linked to their capacity to provide multiple services to regional and local society\. These services go beyond the conservation of biodiversity and include the generation of economic opportunities for local people who live and depend on the natural resources\. Unlike the creation of protected areas, corridors provide geographical and institutional spaces to promote conservation and good management by refocusing investment for sustainable development\. 105\. The MMBC concept is helping to shape future biodiversity conservation and climate change initiatives in the country\. For example, the MMBC was particularly instrumental to Mexico’s first Environmental Development Policy Loan (SAL/DPL) in its shaping of the agreement between SEMARNAT and SAGARPA for the conservation of the humid tropics in southern Mexico\. 106\. Finally, the design and implementation of the MMBC project has provided breakthroughs in necessary crosscutting approaches, offering insights into climate change adaptation alternatives for Mexico\. These insights include experiences with regard to: 29 variety of crops (including native species/varieties and traditional multi-product plots), variety of spaces (corridors incorporating conservation and production areas in a landscape management approach), hillside management (reducing vulnerability with integrated watershed management techniques), and conversion to silvopastoral systems (improving yields and quality while restoring tropical forest areas that had been converted to pastures)\. 107\. For the GOM, the National Strategy of Integrated Biological Corridors (which emerged from the MMBC project) links directly with Objective 844 of the National Development Plan (2007–2012)\. Moreover, the project’s close ties with the larger Mesoamerican region (through the RMBC initiative) has helped prioritize this regional ecosystem in the framework of Mexico’s actions for: (i) South-South cooperation, (ii) its National Development Plan and the Special Program on Climate Change, which is linked to the Climate Change DPL, and (iii) the GOM’s interest in scaling up the implementation and furthering the innovative approach of the MMBC as reflected in the new GEF project proposal under preparation: “Fostering Sustainable and Competitive Production Systems Consistent with the Conservation of Biodiversity\.”45 3\.2 Achievement of Global Environmental Objectives 108\. The project’s global environmental objective was the conservation and sustainable use of globally significant biodiversity in five46 biological corridors in southeast Mexico by mainstreaming biodiversity criteria in public expenditure and in selected local planning and development practices\. Mainstreaming 109\. The project contributed to mainstreaming biodiversity criteria in public expenditure (both in terms of operational rules and investments) and private efforts that combined to achieve reduced deforestation and improved management of natural resources and biodiversity conservation\. 110\. Specifically, the MMBC contributed to mainstream biodiversity criteria in the operational 47 rules of SAGARPA, which is the single largest source of public spending in the four corridor states\. Last year alone SAGARPA allocated US$30\.9 billion48 to its rural development programs in the country\. In the field, the MMBC directly reoriented investments potentially harmful to biodiversity and promoted bio-friendly activities on the order of US$34,869,81149 (ca\. 44 Objective 8 of the National Development Plan (2007–2012): “To ensure sustainability through responsibility in the care for, protection and rational use of natural resources, thus securing both economic and social development without compromising the natural heritage of Mexico nor quality of life for future generations\.” 45 The project concept for the new GEF-financed proposed operation: Fostering Sustainable and Competitive Production Systems Consistent with the Conservation of Biodiversity, submitted by CONABIO, was approved by the GEF (June 2010)\. The project preparation grant was approved on May 12, 2010\. 46 Although the PAD logframe mentions six corridors, the PAD Project Development Objective states five corridors\. Unfortunately, the document’s logframe was not updated after the Tabasco Corridor was dropped during the preparation, and the project focused on the remaining five corridors and four states\. 47 See SAGARPA’s operational rules: http://sagarpa\.gob\.mx/programas/Paginas/default\.aspx The operational rules state as one of SAGARPA’s five objectives: Reverse the deterioration of ecosystems, through actions to preserve water, soils and biodiversity\. 48 See 2009 Federal Government Budget in http://www\.apartados\.hacienda\.gob\.mx/presupuesto/temas/pef/2009/temas/tomos/08/r08_afpe\.pdf 49 The amount allocated to subprojects is relevant as a counterpart funding target of the project\. 30 MXN$439,708,312\.28) in the Corridor areas (see Table 7)\. Through project activities, the operating rules of SAGARPA, the federal institution that provides more subsidies to the country, were adjusted to take into account biodiversity criteria in addition to directly funding various programs through the MMBC\. Furthermore, the project was successful in influencing and working directly with other key institutions to promote in-situ conservation and sustainable use of biodiversity in the target areas\. Among these institutions are: the National Forestry Commission (Conafor), Ministry of Social Development (SEDESOL), National Institute of Women (Inmujeres), and the National Commission for the Development of Indigenous Peoples (CDI)\. 111\. During project life, 2,238 officials at federal, state and municipal level were trained and are now contributing to design and implement selected development plans and programs in ways that integrate biodiversity considerations Additionally, the MMBC worked closely with 14 federal, state and municipal programs in the Corridor areas to include criteria for conservation of biodiversity\. Rural Development Programs where MMBC50 cofinanced subprojects, now include these criteria in their operational rules\. In some cases, the cofinancing provided by MMBC to implement subprojects in accordance with the objectives of MMBC allowed agencies to include some communities in their programs for the first time\. Habitat loss and perturbation of populations 112\. There was no satisfactory monitoring in place from the start of the project that would have made it possible to monitor populations of indicator species and to record its evolution during the project implementation\. This represents a significant shortcoming in the project design, which does not allow the achievement of the stipulated indicators to be properly measured\. That said, using a proxy for assessing the expected outcomes: rate of native habitat loss decreased and degree of perturbation of populations reduced are likely to have been accomplished since over 40,000 producers improved their capacities and sustainable use/conservation practices in focal area plots\. 50 Regional program to combat poverty (CDI), Local Development Program Regional Microregions (SEDESOL), Integrated Management Units Flora and Fauna SEMARNAT (UMAs), Special Program for Food Sovereignty (Programa Especial de Soberanía Alimentaria, PESA), Proarbol program (Conafor): 31 113\. There is no record of habitat loss or change in the native vegetation cover in the focal areas (15% of Corridor surface)\. The proxy reported shows that the deforestation rate was reduced from 1\.5 to 1\.0%/year (National Forest Inventory: 2002–2007; 1993– 2002) in the four corridor states\. 114\. Presence of indicator species was reported for four corridors, and the general conclusion of the regional monitoring network hosted by the project is that indicator species are present in larger numbers in corridors than in isolated patches\.51 ¾ Chiapas Sierra Madre del Sur Corridor:52 Panthera onca, Puma concolor, Leopardus pardalis, Leopardus weidii, Herpailurus yaguaroundi, Tapirus bairdii, Pecari tayacu, Mazama americana, Odocoileus virginianus, Nasua narica, Agouti paca, Dasypus Novemcinctus and Ateles geoffroyi were monitored through Cybertracker, direct and indirect observations and surveys\. Table 2: Species and methods for monitoring Species Local Name Family Scientific Name Monitoring Method Cybertracker: direct and indirect Jaguar* Panthera onca observation (surveys) Cybertracker: direct and indirect Puma* Puma concolor Felidae observation (surveys) Ocelote** Leopardus pardalis Cybertracker: direct observation Margay** Leopardus wenndii Cybertracker: direct observation Jaguarundi** Herpailurus Cybertracker: direct observation Cybertracker: direct and indirect Tapir* Tapiridae Tapirus bairdii observation (surveys) Jabali de collar** Tayassuidae Pecari tayacu Cybertracker: direct observation Temazate*** Mazama americana Cybertracker: direct observation Cervidae Venado cola blanca*** Odocoileus virginianus Cybertracker: direct observation Tejon*** Procyonidae Nasuanarica Cybertracker: direct observation Tepexcuintle*** Agoutidae Agouti paca Cybertracker: direct observation Armadillo*** Dasypodidae Daspus novemcintus Cybertracker: direct observation Cybertracker: direct and indirect Mono araña* Cebidae Ateles geoffroyi observation (surveys) *Key umbrella species **Monitored species with interspecific competition for key species ***Monitored species as key prey species These census methods were included in a more general monitoring system (cf\. 3) that will make it possible to maintain biodiversity and the main functions of the Sierra Madre del Sur Corridor\. Source: Thomas Rabeil, Implementation of a monitoring system of mammals in Chiapas (Sierra Madre Sur Corridor, Pico del Oro focal area, 2007, MMBC 51 Because there was no baseline at the time of design/approval nor was one produced during execution, Corridor monitoring was completed in isolated patches chosen by graduate students in order to prepare their dissertation papers\. The patches chosen had similar conditions to the corridors, but were located outside of them in areas with no project interventions\. See Section 2\.3 (below), Monitoring and Evaluation (M&E) Design, Implementation and Utilization and www\.cbmm\.gob\.mx 52 Rabeil, Thomas (2009)\. Implementación de un sistema de monitoreo de los mamíferos en el Corredor Sierra Madre del Sur\. 32  ¾ Sierra Madre del Sur and the Selva Maya Zoque Corridors in the Chiapas convergence area in Marqués de Comillas:53 Didelphis sp, Dasypus novemcinctus, Tamandua mexicana, Sciurus sp\., Cuniculus paca, Galictis vittata , Panthera onca , Leopardus wiedii, Herpailurus yagoaroundi, Conepatus semistriatus, Nasua narica, Ateles geoffroyi, Pecari tajacu and Mazama americana were monitored in the convergence area, using still- picture traps, footprint identification, direct observation inside transects and outside transects, and processed using the EstimateS program (available at http://viceroy\.eeb\.uconn\.edu/estimates)\. ¾ Campeche and Quintana Roo Sian Ka’an–Calakmul Corridors:54 Panthera onca was monitored with transponders in the Sian Ka’an–Calakmul Corridors, which made it possible to confirm the connectivity function\. In 1930 Mexico hosted some 20,000 jaguars\. The current population is estimated at 3,500\. In the Calakmul area alone, the jaguar population is estimated at 900 individuals (Ceballos et al\. 2002)\. The protection of the jaguar can save 70,000 species of flora and fauna\. (Ceballos 2007: Censo Nacional de Jaguares)\. The jaguar is at the top of the trophic chain, regulates a large number of species in the ecosystem and requires large extensions of conserved habitat\. (Miller and Rabinowitz 2002)\. The study cofinanced by the project (Unidos para la Conservación [2007]: Modelos de control y conservación para el mantenimiento de corredores) in the two Sian Ka’an–Calakmul Corridors used the results of the jaguar habitat modeling produced by a well-known longitudinal study by Amor Conde et al\. in 2006\. 115\. There was no satisfactory monitoring in place from the start of the project that would have made it possible to monitor populations of indicator species and to record their evolution during project implementation\. This likely represents a significant shortcoming in the project design; it does not allow the achievement of the operation’s indicators to be properly measured\. However, the efficiency of the operation improved significantly after the MTR and its relevance is widely recognized by the GOM and civil society\. Although there are no reports on analysis of nonlinear models to assess the impact of the perturbation55 or the change in parameters that determine the demographic dynamics of these populations in the focal areas, the expected outcomes (rate of native habitat loss decreased and degree of perturbation of populations reduced) is likely to have been accomplished since over 40,000 producers improved their capacities and sustainable use/conservation practices in focal area plots\. 53 Muench, Carlos (2007)\. Evaluación de especies clave de mastofauna mayor como indicadoras de la salud del ecosistema en Marqués de Comillas\. 54 Unidos para la Conservación (2007)\. Modelos de control y conservación para el mantenimiento de corredores\. 55 Caswell, Hal (2008) Demographic Research, January\. Perturbation analysis examines the response of a model to changes in its parameters\. It is commonly applied to population growth rates calculated from linear models, but there has been no general approach to the analysis of nonlinear models\. 33 Engagement of communities in focal areas: 116\. Subprojects required promotion, training and technical assistance, and a questionnaire was answered by a large proportion (97%) of subproject participants: 98% of those surveyed56 perceived that the MMBC significantly supported regional development; 96% said that the MMBC is helping to conserve the tropical forest; and 88% were aware of the MMBC’s objectives\. Land management and planning activities were completed in 62 communities (47%)\. 111 community promoters received training (85%)57 and technical assistance to set community priorities for the conservation of biodiversity\. Participatory action plans were developed for 15 social and productive organizations (11%)\. Table 3: Participant communities implementing subprojects by corridor and 16 focal areas Participant Participant Corridor Focal Area Communities, Corridor Focal Area Communities, Subprojects Subprojects Sian Ka’an– 1\. Montaña Montaña: Sian Ka’an– 3\. Carrillo Carrillo Puerto: Calakmul Xmaben, Calakmul (Quintana Puerto Sur Xhazil, (Campeche) 2\. X Pujil-Zoh Ich Ek, Roo) Tiho Suco, Laguna Dzibalchén, 4\. Sur José Xhazil sur, Hopelchen, María Morelos Tepich, Melchor Xmejia, Ocampo, Ich Ek, Petcacab, Suc Tuc, Chacchoben Xmaben, Felipe Carrillo Puerto Sahacabchén, Sur José Ma Morelos y Pachuitz, Othón P\. Blanco: Bolonchén Pedro Santos, Xpujil-ZohLaguna: Buena Vista, Nueva Vida, Kantemó , La Lucha, Palmar , Zoh Laguna, Reforma, Santa Lucia, Paraiso, Nuevo Becal Fco\. J\. Mujica, Calakmul, Ejido El Cedralito, Cristobal Colón, Maya Balam, Ejido Arroyo Sacalaca, Negro, Sabán, Ejido Kiché Las Huay Max, Palias, Ejido Altos de 20 de noviembre, Sevilla, Puebla de Morelia, Graciano Sánchez X Pujil, Ejido Santa Lucía, Conhuas Ejido Kiché Las Palias Chiapas Sierra 5\. Pico del Pico del Loro: Selva Maya Zoque ( 8\. La Cojolita La Cojolita: Madre del Sur Loro El Rodeo, North Chiapas) Frontera Corozal, (South Chiapas) El Suspiro, 9\. Ixcan Lacanja Chansayab, 6\. Cintalapa Las Brisas, Nueva Palestina, Cumbre, 10\. Nahá Ignacio Zaragoza 7\. Frailesca Ventanas del Metzabok Ixcan Porvenir, La Nubes, Cambil, 11\. Selva Chol Maravilla Tenejapa, El Malé , Benemérito de las 56 Of a total of 215 subprojects implemented by the MMBC between 2005 and 2009, 209 assessments were conducted in 29 locations in the five corridors (see Section 3\.6: Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops; Survey II)\. 57 No evidence was provided to confirm that the trained promoters completed the community priority-setting exercises after they were trained\. 34  Participant Participant Corridor Focal Area Communities, Corridor Focal Area Communities, Subprojects Subprojects Canadá, 12\. Selva Américas, Aquiles Serdán, Zoque Guadalupe Victoria Cabañas, Acapetahua, Cuauhtemoc Ejido La Bella ilusión Toxchamen, Nahá Metzabok Bellavista, “Empresa de tostado, Rincón del molido, empacado y Bosque, comercialización de M\. Hidalgo, café organico Unión Buenavista, Lacandonia”; El Porvenir, “Sociedad de Siltepec y La Productores Orgánicos Grandeza, de la Selva Lacandona” Belisario Selva Chol: Domínguez, Alan Bolontina, Villa Hermosa, Bawitz, Nuevo Paraíso, Emiliano Zapata, Las Cruces, Guayaza, Cárdenas, Jomulculja, Ojo de Agua, Nuevo Tepeyac, Monte Redondo, Pamal Navil, Escobilla, San Miguel Carataya, Monte Ordóñez Peñalimonar Cintalapa: Taquiton, Ashlum Tierra Diamante, Nueva Nueva Jerusalen, Nueva Reforma, Joltulina, Los Cacaos, Actiepa Yochib, Santa Rita de las San Miguel, Flores, Las Delicias, Las Maravillas, Punta Braba, Nueva Colombia, La Victoria, Nueva Palestina, San Antonio Bulujib, Loma Bonita, Nuevo Jerusalen, Monterrey, Bella Ilusión, Pablo Galeana, Ignacio Allende, Plan de la Santo Tomas, Libertad, Mamal ik’ Santa Las Violetas, Rosa, Cerro Bola, Ejido Venustiano San Juan, Carranza San Pablo, Selva Zoque: San Diego, Ocotepec, El Pacayal, Tapalapa San Francisco y Emiliano Zapata Frailesca: Villaflores, Chapa de Corzo, Ángel Albino Corzo, Monte Cristo de Guerrero, La Concordia, Guadalupe Victoria, Pijijiapan Northern Yucatan 13\. Hunucmá Hunucmá: Sisal, 14\. Oriente Sinanché, Telchac Pueblo 15\. Area Oriente: Progreso Ixil, Dzidzantún, 16\. Centro Dzumel, Oriente Riá Lagartos, 35  Participant Participant Corridor Focal Area Communities, Corridor Focal Area Communities, Subprojects Subprojects Dzilam González Area Progreso: Progreso, Chuburná, Telchac Puerto, Chelem Centro Oriente: Dzilam de Bravo, Chabihau, San Crisanto, Ixil, Total: 149 communities 117\. Awareness-raising activities (workshops, training, trade promotion of bio-friendly products) were completed in the target communities\. In addition, new focal areas were incorporated, as approved in the amendment to the Grant Agreement signed on November 20, 2005, which expanded the concept and number of focal areas by including in the definition the localities identified in the Implementation Letter, and any other locality to be agreed between CONABIO and the Bank\. As a result of the incorporation of additional areas, a total of 628 communities participated in at least one of the abovementioned activities\. (See Annex 2\.) Training and technical assistance to develop action plans were provided under the strategic line58 Knowledge Sharing, complemented by additional activities leading to design and implementation of action plans under other strategic lines\. (See Annex 2)\. 118\. On the Bank’s side, there were significant shortcomings in the reporting scheme for the achievement of the operation’s objectives since the Project Indicators were not updated/revised to ensure consistent reporting after the amendment was signed\. This did not reflect on the project’s efficiency or its relevance, but it did affect the consistency of the Bank’s reporting instruments\. Reduction of high-impact resource use practices detrimental to biodiversity 119\. The project did not produce a baseline to follow up on this indicator\. The proxy used: a total of 47,042 producers in 15 of the 16 original focal areas and in new communities within the corridors incorporated after the MTR59 have adopted sustainable, biodiversity-friendly productive activities, which would be equivalent to more than 50% of the number of producers60 estimated in the focal areas\.61 58 Strategic lines are defined in PAD Annex 7\. Strategic lines: Strengthening of productive practices of indigenous populations compatible with conservation, including production of aggregate value from local raw material\. The project will support agroforestry and forestry management activities, including chicle gum, vanilla and organic coffee production as well as apiculture\. 59 The MTR highlighted the lack of definition of corridors and focal areas, and the lack of understanding of the purpose of the mainstreaming effort to reorient, rather than replace, investments in sustainable development\. During the MTR, CONABIO proposed to review the limits of the original 16 focal areas to adjust them to ecoregional and socio-economic characteristics, and in particular suggested the incorporation of the southern and western forest areas in the State of Quintana Roo, because of their relevance to the conservation of Calakmul and its vicinity to Selva Maya in Guatemala\. (MTR Aide-Mémoire, January 18–28, 2005)\. The amendment to the Grant Agreement signed on November 20, 2005 expanded the concept (and number) of focal areas by including in the definition the localities identified in the Implementation Letter, and any other locality to be agreed between CONABIO and the Bank\. 60 Total population in the focal areas was estimated at 374,999 (PAD)\. Based on INEGI’s estimate of the proportion of producers among the total population, the total number of producers in the focal areas is estimated at 31,263\. Thus, the reported figure of 47,042 producers who are effectively engaged in reducing their high-impact resource use practices that are detrimental to biodiversity exceeds the original target (30–50% of 31,263 producers)\. 36 120\. The capacity to appropriately measure the achievement of the operation’s indicators was limited by the lack of an appropriate baseline of all producers associated with high-impact resource use practices detrimental to biodiversity in native ecosystems in focal areas\. Such a baseline would have helped to appropriately respond to the question of whether no more than 30–50% of producers continue to use such practices after the project’s intervention\. However, the proxy indicator used does suggest that the involvement of producers in sustainable management with improved livelihoods is more likely to have the expected result\. Increased share of production is generated by selected, financially sustainable, biodiversity-friendly practices of natural resource use 121\. Sustainable/biodiversity-friendly production was established through subprojects financed or cofinanced by the MMBC in 22,580 ha, which represent approximately 32% of the productive areas of the focal areas\. CONABIO used the following proxy: area under sustainable production initiatives supported by subprojects to estimate the share of sustainable production with regard to the total estimated productive land\.62 There were shortcomings in the design of the indicator to assess the share of sustainable production achieved: the measurement and verification means were left undefined for number of producers or hectares, since the project did not have a baseline for either\. This did not compromise the achievement of the operation’s objectives, its efficiency or its relevance, but it did affect the consistency of the reporting on the progress and performance\. Increased proportion of public programs and spending take into account biodiversity criteria 122\. The PAD indicator requires that in the various corridors, at least 40% of existing and new public programs and at least 20% of public spending with impacts on the natural resource base take into account biodiversity considerations, including: a) programs reoriented from potentially harmful to biodiversity-friendly or -neutral activities; b) programs actively promoting activities of sustainable use of biodiversity\. However, no baseline was defined during preparation\. 123\. The mainstreaming target was accomplished by incorporating biodiversity criteria in objectives and operational rules of public spending with impacts on the natural resource base, achieving the objective of ensuring that at least 40% of existing and new 61 The PAD defined Focal Area as the area in which actual project activities are targeted and where progress and impact indicators will be monitored\. The basic building blocks of a focal area are land tenure units (ejidos, communities, private properties); therefore, the boundaries of a focal area result from the boundaries of the land tenure units that constitute it\. When the project was designed, the ministries participating in the National Corridor Council had signed the Institutional Coordination Agreement to assist priority regions\. The focal areas were selected in the priority regions to ensure specific assistance from the institutions (as committed in the project’s Implementation Letter)\. When the new administration was inaugurated, the priority regions strategy was discontinued and the project asked the Bank to allow the new focal areas to be incorporated in the work program, adding new ones or replacing those where the project’s work was no longer promising or feasible\. (Amendment to the Grant Agreement signed on November 20, 2005)\. 62 On average 20% of the land is devoted to primary productive activities in the country\. This represents 68,477 ha in the focal areas\. The area under subprojects (22,580 ha) represents 32\.9% of the productive area in the focal areas\. This is also true for Chiapas (1,515,175 ha agriculture; 7,421,100 ha total) and even less for Campeche: 18,900 ha agriculture+21,499 ha forestry; total 5,792,400 ha)\. (INEGI) 37 public programs and at least 20% of public spending with impacts on the corridors take into account biodiversity considerations\.63 Given the project’s objective to mainstream biodiversity criteria in public spending, baseline government programs were considered an integral part of the project’s financing package: if the project was successful in its mainstreaming efforts, funds for regular development programs that would have had a negative impact on biodiversity conservation in the corridors, would be reoriented in a biodiversity-friendly direction, including: a) programs reoriented from potentially harmful to biodiversity-friendly or -neutral activities; b) programs actively promoting activities for the sustainable use of biodiversity\. (See PAD, p\. 14, Component B and Annex 4 for details\.) 124\. The proxy used by CONABIO to report at the policy level was that the MMBC contributed to mainstreaming biodiversity criteria in the operational rules64 of SAGARPA which is the single largest source of public spending in the four corridor states, and last year alone allocated US$30\.9 billion65 to its rural development programs in the country\. The proxy indicator for the work in the field66 was that the MMBC directly reoriented investments potentially harmful to biodiversity and promoted bio-friendly activities on the order of US$34,869,81167 (MXN$439,708,312\.28) in the Corridor areas\. 125\. Qualitatively speaking, it is possible to confirm that SAGARPA has been the most benefited by the MMBC work, including changes in operational rules, increasing allocation to Corridor areas and a coordination agreement with SEMARNAT to improve the environmental performance of the sector in the Corridor areas (see reference above and contribution to EnvDPL in Section 3\.1\. below)\. SEDESOL incorporated a new objective in its sectoral program: “Objective 5\. Integrate conservation of natural capital in the country’s social and economic development” (http://www\.sedesol\.gob\.mx/archivos/1/file/Prog_Sectorial_WEB\.pdf)\. 126\. The inter-institutional coordination for investments in the field with relevant partners such as SAGARPA has placed the corridor concept on the political agenda\. Most of the achievements reported have a problem of attribution, since deforestation rates and landowners’ decisions depend on multiple factors\. However, in the case of the corridor concept as a public policy approach that is embraced by relevant federal agencies and state governments other than in the participating states, such impacts can be fully attributable to the project since the concept has not been promoted by any other relevant initiative in the country\. The collaboration agreement signed between the Ministry of 63 In a study commissioned by the MMBC for the Bank’s MTR (Aguilar 2005), 52 relevant programs were identified in the Corridor area: Ministry of Environment (SEMARNAT, 17); Ministry of Agriculture (SAGARPA, 9); Social Development/Indigenous Peoples (SEDESOL/CDI, 13)\. SEMARNAT’s programs already had sustainability/biodiversity criteria and the project focused on increasing their contribution to the Corridor areas; SAGARPA has been the most impacted by the MMBC work (see reference above and contribution to EnvDPL in Section 3\.1 below) and SEDESOL incorporated a new objective in its sectoral program: “Objective 5\. Integrate conservation of natural capital in the country’s social and economic development” http://www\.sedesol\.gob\.mx/archivos/1/file/Prog_Sectorial_WEB\.pdf 64 See SAGARPA operational rules: http://sagarpa\.gob\.mx/programas/Paginas/default\.aspx The operational rules state that one of SAGARPA’s five objectives is to “Reverse the deterioration of ecosystems, through actions to preserve water, soils and biodiversity\.” 65 See 2009 Federal Government Budget in http://www\.apartados\.hacienda\.gob\.mx/presupuesto/temas/pef/2009/temas/tomos/08/r08_afpe\.pdf 66 There are two dimensions to mainstreaming: a) policy design, norms and operational rules; and b) increased reorientation of public expenditure for sustainable use/conservation projects\. (MTR Aide-Mémoire, January 18–28, 2005) 67 The amount allocated to subprojects is relevant as a counterpart funding target of the project\. 38 Environment (SEMARNAT) and Ministry of Agriculture (SAGARPA) to halt the expansion of agriculture and livestock and to redirect investment toward conservation and sustainable natural resources management (NRM) best practices compatible with corridor connectivity objectives, was endorsed by SAGARPA and SEMARNAT as a prior action for the rural sector, in the Environment DPL (P095510) that closed in December 2009\.68 127\. During field visits, the team witnessed effective intersectoral coordination and the impact of reoriented investments\. Based on this experience, SAGARPA is expanding its agreement with SEMARNAT—promoted by the MMBC—to mainstream biodiversity criteria in rural development programs and redirect investments in the region, which in turn contributes to its objectives and obligations within the Climate Change Special Program\.69 128\. In coordination with the MMBC project (but not transferred to the project unit for direct execution), GTZ (German Technical Cooperation) on behalf of German Federal Ministry for Economic Cooperation and Development (BMZ) has supported the national commission for protected areas CONANP in the management of the Calakmul biosphere reserve, mainly in the field of land use planning (“ordenamiento territorial”)\. 129\. Other donors have renewed their interest in the region\. The Japan International Cooperation Agency (JICA) co-sponsored the first and second International Connectivity Workshops in 2008–2009, hosted by the MMBC in Chiapas\. The project continues to support target communities and corridor strategies, while the project’s administration has been restructured to incorporate three new states in the program\. Sustainability and expansion have been secured through the formalization of the program and the creation of a dedicated department in CONABIO\. Congress has allocated US$2 million to the corridors in the 2009 budget\. 130\. The reorientation of public expenditure toward sustainable/biodiversity-friendly options (e\.g\., apiculture, shade coffee, reduced tillage, compost, organic production, improved forest management, non-timber forest products, extractive reserves, silvopastoral practices, ecotourism) has reduced the volume of resources available for— and promotion of—activities that negatively impact biodiversity\. As such, the project has contributed to the stabilization of the agricultural frontier as documented in vegetation maps generated by the project, and as demonstrated by the presence of indicator species, according to the records of the research groups that collaborated in the MMBC multi- scale monitoring network\. (See www\.cbmm\.gob\.mx \.) 131\. On the ground, the project’s success has been due to its ability to reduce deforestation and thus habitat degradation by consolidating the work of technical groups, NGOs and local producers who, over several decades, have demonstrated the usefulness 68 http://web\.worldbank\.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid =P095510 69 http://beta\.worldbank\.org/climatechange/news/mexico-seeking-low-carbon-growth-path 39 of agro-ecological activities and subprojects for biodiversity-friendly sustainable development\. 40  Table 4\. Key Performance Indicators PAD and Progress Reported in Comment Implementation Letter ICR Global Environmental Biodiversity criteria incorporated in The project was successful in Objective: Conservation objectives and operational rules of public promoting the corridor concept and sustainable use of investment programs and greater and mainstreaming biodiversity globally significant allocation of funds\. criteria in all major investment biodiversity through the programs in the region, and did mainstreaming of the follow-up of individual biodiversity criteria in subprojects, including a survey public expenditure\. in all,70 focal areas and plots as originally planned (see details below)\. 1\. After 7 years, in focal 1\. After 9 years: There was no satisfactory areas (15% of Corridor monitoring in place from the total surface): There is no record of habitat loss or start of the project that would change in the native vegetation cover in have made it possible to a) rate of native habitat the focal areas (15% of Corridor surface)\. monitor populations of loss is decreased, and/or indicator species and record area under native The proxy reported shows that the their evolution during project vegetation cover is deforestation rate was reduced from 1\.5 to implementation\. increased (with specific 1\.0%/year (National Forest Inventory: targets varying across 2002–2007; 1993–2002) in the 4 corridor While this represents a individual focal areas); states\. shortcoming in the project design, the proxy indicators b) degree of perturbation Presence of indicator species was reported used suggest that expected of populations of corridor- for four corridors: targets are likely to have been specific indicators species achieved\. (e\.g\., selected birds, --Chiapas Sierra Madre del Sur Corridor: 71 mammals, insects, plants) Panthera onca, Puma concolor, The expected outcomes (rate of is decreased\. Leopardus pardalis, Leopardus weidii, native habitat loss decreased Herpailurus yaguaroundi, Tapirus bairdii, and degree of perturbation of Pecari tayacu, Mazama americana, populations reduced) are likely Odocoileus virginianus, Nasua narica, to have been accomplished Agouti paca, Dasypus Novemcinctus and since over 40,000 producers Ateles geoffroyi were monitored through improved their capacities and Cybertracker, direct and indirect sustainable use/conservation observations and surveys\. practices in focal area plots\. --Sierra Madre del Sur and the Selva Maya Zoque Corridors in Chiapas convergence area in Marqués de Comillas:72 Didelphis 70 Keeping track of public investment programs was not possible because the new administration designed a new approach, reducing and regrouping many of the existing rural development programs\. The Bank’s Rural Development in Marginal Areas APL I was closed in June 2003 (P007711) and the APL II in June 2005 (P057530)\. 71 Rabeil, Thomas (2009) Implementación de un sistema de monitoreo de los mamíferos en el Corredor Sierra Madre del Sur\. 72 Muench, Carlos (2007) Evaluación de especies clave de mastofauna mayor como indicadoras de la salud del ecosistema en Marqués de Comillas\. 73 Unidos para la Conservación (2007): Modelos de control y conservación para el mantenimiento de corredores\. 74 Because there was no baseline at the time of design/approval nor was one produced during execution, Corridor monitoring was completed in isolated patches chosen by graduate students in order to prepare their dissertation papers\. The patches chosen had similar conditions to the corridors, but were located outside of them in areas with no project intervention\. Section 2\.3 (below), Monitoring and Evaluation (M&E) Design, Implementation and Utilization and www\.cbmm\.gob\.mx 41  PAD and Progress Reported in Comment Implementation Letter ICR sp, Dasypus novemcinctus, Tamandua mexicana, Sciurus sp\., Cuniculus paca, Galictis vittata , Panthera onca , Leopardus wiedii, Herpailurus yagoaroundi, Conepatus semistriatus, Nasua narica, Ateles geoffroyi, Pecari tajacu and Mazama americana were monitored in the convergence of the use of still-picture traps, footprint identification, direct observation inside transects and outside transects, and processed using the EstimateS program (available at http://viceroy\.eeb\.uconn\.edu/estimates)\. --Campeche and Quintana Roo Sian Ka’an–Calakmul Corridors: 73 Panthera onca was monitored with transponders in the Sian Ka’an–Calakmul Corridor, which made it possible to confirm the connectivity function\. The study cofinanced by the project (Unidos para la Conservación [2007]: Modelos de control y conservación para el mantenimiento de corredores) in the 2 Sian Ka’an–Calakmul Corridors used the results of the jaguar habitat modeling produced by a well- known longitudinal study by Amor Conde et al\. in 2006\. The general conclusion of the regional monitoring network hosted by the project is that indicator species are present in larger numbers in corridors than in isolated patches\.74 2\. Communities (and/or a) Project activities were implemented in Besides the subprojects carried producers’ groups) in all 16 focal areas, leading to subprojects out in the Chiapas Selva Maya focal areas are engaged in implemented in 149 communities: Zoque Corridor focal areas---- different forms (depending Montaña (11), Xpujil-ZohLaguna (14): the technical assistance to the on levels of organization) Sian Ka’an–Calakmul Campeche Lacandona community in La of local planning aimed at Corridor; Carrillo Puerto (7), Sur José Ma Cojolita and Nahá Metzabok conservation and Morelos (14): Sian Ka’an–Calakmul focal areas was satisfactorily sustainable use: Quintana Roo Corridor; Hunucmá (3), completed as reported in a) Awareness raising (at Oriente (5), Area Progreso (4), Centro Section 2(i) “Social least 80% of focal areas’ Oriente (4): Northern Yucatan Corridor; Considerations” of the project’s surface and/or 80% of Pico del Loro (26), Cintalapa (18), ICR\. In terms of efficiency and communities); Frailesca (7): Chiapas Sierra Madre del relevance, the project increased b) Problem assessment (at Sur Corridor; La Cojolita (4), Nahá least 50%); Metzabok (2), Ixcan (6), Selva Chol (24), the resources allocated by c) Priority setting (at least Selva Zoque (2): Chiapas Selva Maya SAGARPA, SEMARNAT and 30%); Zoque Corridor\. Subprojects required SEDESOL in the area, d) Development of action promotion, training and technical cofinanced subprojects in all of plans (at least 10%)\. assistance, and a questionnaire was the 16 focal areas, and answered by a large proportion (97%) of incorporated additional 42  PAD and Progress Reported in Comment Implementation Letter ICR answered by a large proportion (97%) of communities within the subproject participants: 98% of those corridors through Component surveyed75 perceived that the MMBC C: Sustainable Use of Natural significantly supported regional Resources\. Awareness-raising development; 96% said that the MMBC is activities (workshops, training, helping to conserve the tropical forest; and trade promotion of bio-friendly 88% were aware of the MMBC’s products) were completed in the objectives\. target communities\. Moreover, new focal areas were b) Land management and planning incorporated, as approved in the activities were completed in 62 amendment to the Grant communities (47%)\. Agreement signed on c) 111 community promoters received November 20, 2005, which training (85%)76 and TA to set community expanded the concept (and priorities for the conservation of number) of focal areas by biodiversity\. including in the definition the localities identified in the d) Participatory action plans were Implementation Letter, and any developed for 15 social and productive other locality to be agreed organizations (11%)\. between CONABIO and the Bank\. As a result of the incorporation of additional areas, a total of 628 communities participated in at least one of the abovementioned activities\. (See Annex 2\.) Training and technical assistance to develop action plans were provided under the strategic line77 Knowledge Sharing, complemented by additional activities leading to design and implementation of action plans under other strategic lines\. Nevertheless, there were significant shortcomings in the reporting scheme for the achievement of the operation’s objectives since the Project Indicators were not formally updated to ensure consistent reporting after the amendment was signed\. This did not reflect on the project’s efficiency or on its relevance, but it did affect 75 From a total of 215 subprojects implemented by the MMBC between 2005 and 2009, 209 assessments were conducted in 29 locations in the five corridors\. (See Section 3\.6: Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops; Survey II\.) 76 No evidence was provided to confirm that the trained promoters completed the community priority-setting exercises after they were trained\. 43  PAD and Progress Reported in Comment Implementation Letter ICR the consistency of the Bank’s reporting instruments as specified in the PAD\. 3\. In focal areas, no more 3\. The project did not produce a baseline There were shortcomings in the than 30% to 50% census to follow up on this indicator\. capacity to appropriately (depending on each focal measure the achievement of the area) of production (in The proxy used for reporting: a total of operation’s objectives, since the area or producers) is 47,042 producers in 15 of the 16 original project did not produce a associated with selected, focal areas and in new communities within baseline of all producers high-impact resource use the corridors incorporated after the MTR78 associated with high-impact practices that are have adopted sustainable, biodiversity- resource use practices that are detrimental to biodiversity friendly productive activities, which would detrimental to biodiversity in (e\.g\., uncontrolled fire use be equivalent to more than 50% of the native ecosystems in focal in agriculture, inadequate number of producers79 estimated in the areas, in order to appropriately waste disposal, focal areas\.80 respond to the question of overfishing, overhunting) whether no more than 30–50% in native ecosystems\. of producers continue to use such practices after the project’s intervention\. The proxy used does reflect on efficiency and relevance since the involvement of producers in sustainable management with improved livelihoods is certain to have had the expected result\. 4\. In focal areas, at least Sustainable, biodiversity-friendly The indicator selected to assess 30% to 50% of production production was established through the share of sustainable (by area, number of subprojects financed or cofinanced by the production achieved did not producers or total value of MMBC in 22,580 ha, which represent specify the means of products) is generated by approximately 32% of the productive areas measurement and verification; selected, financially of the focal areas\. in addition, an appropriate sustainable, biodiversity- baseline was lacking\. friendly practices of Therefore, the following proxy natural resources use indicator was used: Area under (forest products, honey, sustainable production 77 Strategic lines are defined in PAD Annex 7\. Strategic lines: Strengthening of productive practices of indigenous populations compatible with conservation, including production of aggregate value from local raw material\. Among others, the project will support agroforestry and forestry management activities, including chicle gum, vanilla and organic coffee production, as well as apiculture\. 78 The MTR highlighted the lack of definition of corridors and focal areas, and the lack of understanding of the purpose of the mainstreaming effort to redirect, rather than replace, investments in sustainable development\. During the MTR, CONABIO proposed to review the limits of the original 16 focal areas to adjust them to ecoregional and socioeconomic characteristics, and in particular suggested the incorporation of the southern and western forest areas in the State of Quintana Roo because of their relevance to the conservation of Calakmul and its vicinity to Selva Maya in Guatemala\. (MTR Aide-Mémoire, January 18–28, 2005)\. The amendment to the Grant Agreement signed on November 20, 2005 expanded the concept (and number) of focal areas by including in the definition the localities identified in the Implementation Letter, and any other locality to be agreed between CONABIO and the Bank\. 79 Total population in the focal areas was estimated at 374,999 (PAD)\. Based on INEGI’s estimate of the proportion of producers among the total population, the total number of producers in the focal areas is estimated at 31,263\. Therefore, the reported figure of 47,042 producers effectively engaged to reduce their high impact resource use practices detrimental to biodiversity exceeds the original target (30–50% of 31,263 producers)\. 80 The PAD defined focal area as the area in which actual project activities are targeted and where progress and impact indicators will be monitored\. The basic building blocks of a focal area are land tenure units (ejidos, communities, private properties)\. Therefore, the boundaries of a focal area are a result of the boundaries of the land tenure units constituting it\. When the project was designed, the ministries participating in the National Corridor Council had signed the Institutional Coordination Agreement to assist priority regions\. The focal areas were selected in the priority regions to ensure specific assistance from the institutions (as committed in the project’s Implementation Letter)\. When the new administration was inaugurated, the priority regions strategy was discontinued and the project asked the Bank to allow the new focal areas to be incorporated in the work program, adding new ones or replacing those where the project’s work was no longer promising or feasible\. (Amendment to the Grant Agreement signed on November 20, 2005)\. 44  PAD and Progress Reported in Comment Implementation Letter ICR maize, vegetables, initiatives supported by ecotourism activities, etc\.) subprojects to estimate the in the productive share of sustainable production landscape\. with regard to the estimated total productive land\.81\. While the target is likely to have been met as tracked by the proxy indicator, the consistency of reporting on this indicator was limited\. 5\. In the various corridors, The project design did not identify which The lack of specificity in the at least 40% of (existing programs would be targeted during programs to be targeted is and new) public programs implementation\. CONABIO considered a moderate and at least 20% of public commissioned a study (Aguilar 2005) that shortcoming because neither the spending with impacts on identified 52 programs with relevant Bank’s preparation team nor the natural resource base take impact in the Corridor area: Ministry of GOM could have anticipated into account biodiversity Environment (SEMARNAT, 17); Ministry that investment programs would considerations, including: of Agriculture (SAGARPA, 9); Social change\. On the other hand, the a) programs redirected Development/Indigenous Peoples baseline study was completed from potentially harmful (SEDESOL/CDI, 13); but throughout prior to the MTR and made it to biodiversity-friendly or implementation, programs were regrouped possible to identify the target -neutral activities; and budget allocations varied programs that were reoriented b) programs actively significantly,82 which made it impossible with efficiency, and with promoting activities for to report compliance with this goal in relevant outcomes stemming the sustainable use of terms of number of programs or public from the magnitude and impact biodiversity\. spending\. of public expenditure involved\. The mainstreaming target was The proxy used by CONABIO to report at accomplished by incorporating the policy level: the MMBC contributed to biodiversity criteria in mainstreaming biodiversity criteria in the objectives and operational rules operational rules83 of SAGARPA which is of public spending with impacts the single largest source of public on the natural resource base, spending in the 4 corridor states, and last achieving the objective to year alone allocated US$30\.9 billion84 to ensure that at least 40% of its rural development programs in the existing and new public country\. programs and at least 20% of public spending with impacts The proxy for the work in the field85: the on the corridors take into MMBC directly reoriented investments account biodiversity potentially harmful to biodiversity and considerations\.87 81 On average 20% of the land is devoted to primary productive activities in the country\. This represents 68,477 ha in the focal areas\. The area under subprojects (22,580 ha) represents 32\.9% of the productive area in the focal areas\. This is also true for Chiapas (1,515,175 ha agriculture; 7,421,100 ha total) and even less for Campeche: 18,900 ha agriculture+21,499 ha forestry; total 5,792,400 ha)\. (INEGI) 82 In 2001, SAGARPA reorganized over 40 product-oriented programs into four programs defined by type of intervention: Organization, Training, Production, Commercialization; in 2007, SEMARNAT reorganized six forestry programs into one umbrella program and doubled the budget for the new program: Proarbol\. 83 See operational rules SAGARPA: http://sagarpa\.gob\.mx/programas/Paginas/default\.aspx The operational rules state that one of SAGARPA’s five objectives is to “Reverse the deterioration of ecosystems, through actions to preserve water, soils and biodiversity\.” 84 See 2009 Federal Government Budget in http://www\.apartados\.hacienda\.gob\.mx/presupuesto/temas/pef/2009/temas/tomos/08/r08_afpe\.pdf 85 There are two dimensions to mainstreaming: a) policy design, norms and operational rules; and b) increased reorientation of public expenditure for sustainable use/conservation projects\. (MTR Aide-Mémoire, January 18–28, 2005\.) 45  PAD and Progress Reported in Comment Implementation Letter ICR promoted bio-friendly activities on the order of US$34,869,81186 (MXN$439,708,312\.28) in the Corridor areas\. COMPONENT A: PARTICIPATORY DESIGN AND MONITORING Maps of vegetation, land --30 thematic maps at a scale of 1:500,000 All the cartographic use and geomorphology (North Coast of Yucatan Corridor) information on the Corridors, at available at corridor level: different scales, is available in --37 maps at a scale of 1:500,000 for the GIS module produced by --5 maps per theme88 at Calakmul – Balan ka’ak CONABIO\. Maps were scale of 1:250,000 produced in response to --12 different thematic maps for focal demands from communities and --16 maps per theme at the areas in the r Sian Ka’an, Balan Ka’ak and projects: 12 maps per theme at focal area level at scale of Calakmul Balan Ka’an Corridors the focal area level at a scale of 1:100,000 or better\. 1:100,000 or better were produced\. This approach contributed to its efficiency and relevance, since buy-in and usefulness were guaranteed by the demanding party\. CONABIO is in the process of uploading all maps to its website, but only 10 maps can currently be downloaded from the project’s webpage (www\.cbmm\.gob\.mx) 2\. Communities in focal 2\.1\. 628 communities (including most of 2\.1\. Of the 628 communities areas become involved in the original 120 communities identified for that participated in project local planning for the focal areas) were incorporated in activities, 149 correspond to the corridors in different ways promotion, training and subprojects\. original focal areas (where (awareness raising, 2\.2\. Problem assessment and Corridor subprojects were financed and problem assessment, planning activities were completed in 62 implemented), thus surpassing priority setting, strategies) communities (see Annex 2) the original target\. 2\.1\. Raising awareness in 2\. 3\. Technical assistance and training 2\.2\. Problem assessment in 62 120 communities; were provided (under the strategic line of communities represents 86% of 2\.2\. Problem assessment Knowledge Sharing) to 111 community the original target (72 in 72 communities; promoters, to lead priority-setting communities)\. 2\.3\. Priority setting in 36 participatory processes in 111 There were significant communities; communities\. (See Annex 2\.) shortcomings in the operation’s 2\.4\. 12 community-level 2\.4\. 37 community level maps: capacity to assess the maps and strategies (scale 4 maps at 1:10,000, Yucatan Coast achievement of this indicator of 1:10,000, designed in a Corridor since, although the number of participatory manner)\. 8 maps at 1:10,000, Sian Ka’an–Calakmul, participant communities Quintana Roo exceeded the original target 86 The amount allocated to subprojects is relevant as a counterpart funding target of the project\. 87 http://www\.sedesol\.gob\.mx/archivos/1/file/Prog_Sectorial_WEB\.pdf 88 For a list of themes see PAD\. Annex 2\. Table 7\.:Wood-based artesanal production, Resins, Promotion of crop rotation, Promotion of agroforestry, Ornamental plants, New/non marketed timber species, Maintenance of local agrobiodiversity, Integration crop and animal husbandry, Integrated Pest Management, Integrated Nutrient Management, Fibers, Fauna based artesanal production, Chicle, Beekeeping, Aquaculture, Restoration of ecosystems, Wildlife Viewing, Wildlife Ranching, Hunting, Forestry, Medicinal plants, Ecotourism\. 46  PAD and Progress Reported in Comment Implementation Letter ICR 13 maps at 1:50,000, Quintana Roo (120), the incorporation of new 12 maps at 1:20,000 , Sian Ka’an– focal areas and communities89 Calakmul, Campeche and the lack of individual tracking of the original focal areas does not make it possible to assess exactly how many communities in the original focal areas were “involved in problem assessment”\. 2\.3\. The report on training and technical assistance was received but not an assessment of the priority-setting participatory processes\. 2\.4\. There were no shortcomings in this indicator since three times the target number of community level maps were produced for the Yucatan Peninsula corridors\. 3\. A monitoring and GIS and database are operating since 2004 The generation of relevant evaluation system and have integrated the following baselines, data collection and (comprising biological, information: analysis for project indicators ecological, socioeconomic GIS website (www\.cbmm\.org\.mx) (biological, ecological, and institutional --Active monitoring network since 2006 socioeconomic and indicators) is established with annual meetings with NGOs, research institutional) as part of the and functions regularly centers and government institutions\. M&E protocol remains an GIS and database system: --10 maps of Mesoamerica ongoing process and a 3\.1 General protocol of --36 scientific studies with research centers significant shortcoming in the the M&E system --68 consultancies carried out by NGOs, measurement of the 3\.2 Data collected initially academia and producers’ organizations achievement of the operation’s (baseline) and periodically --2 CDs with territorial and socioeconomic objectives\. On the positive side, to feed M&E system information at the municipal level in areas the network approach is proving 3\.2\.1 Ecological of the Corridor: 2006, 2007\. to be highly efficient, and information (baseline, mainstreaming the Corridor midterm, end of projects) CONABIO website contains ecological monitoring and knowledge 3\.2\.2 Biological and biological information and sharing objectives in the information (baseline, geographical information\. It is updated scientific community’s agenda midterm, end of project) monthly\. The MMBC is hosted on the highlights the relevance of the 3\.2\.3 Socioeconomic CONABIO website\. project’s contributions\. information (baseline, and then every other year) 3\.2\.4 Institutional data (baseline, and then every year) COMPONENT B: CORRIDOR INTEGRATION 1\.1\. 35 Studies of 1) 79 public programs analyzed The 5 strategies were not biodiversity impacts of 2) 15 studies to promote integration of developed (one for each 89 New focal areas were incorporated, based on the amendment to the Grant Agreement signed on November 20, 2005, which expanded the concept (and number) of focal areas by including in the definition the localities identified in the Implementation Letter, and any other locality to be agreed between CONABIO and the Bank\. 47  PAD and Progress Reported in Comment Implementation Letter ICR public programs biodiversity at municipal level completed corridor) as originally 3) 5 strategies with stakeholders conceived but with a sectoral 1\.2\. 14 Studies to promote --Ecological Program Planning of the State approach that responded to the integration of biodiversity of Yucatan\. needs of the strategic lines into state/municipal --Development of regional strategy of identified during preparation90 development plans compensation for environmental services and consolidated throughout in the area of MMBC implementation, such as 1\.3\. 5 Corridor strategies --Regional low environmental impact environmental services, developed with tourism strategy for the focal area of ecotourism and organic stakeholder consensus Felipe Carrillo Puerto, Quintana Roo honey\.91 --Strategy for building a tourism policy for the corridor states in southeast Mexico These changes should have --Strategy for institutional coordination for been formalized and reflected in the management and use of natural a revised Indicator Matrix for resources with environmental criteria in the Project\. the MMBC: Marketing of honey from the Yucatan Peninsula 2\. Biodiversity 2\.1\. Two plans for the States of Yucatan There were no shortcomings in considerations are and Chiapas have incorporated this indicator because goals integrated in the design, biodiversity priorities with the assistance were achieved\. In responding to execution and monitoring of the MMBC communities’ and producers’ of selected public demands, the project completed programs and policy 2\.2\. 14 municipal plans incorporated over 40 additional studies and instruments biodiversity criteria aimed at strategies in Chiapas, including sustainability\. feasibility studies for 2\.1\. At least 2 state ecotourism in 13 municipalities development plans include 2\.3\. Three sectoral programs include in the Zoque region and biodiversity priorities negative filters (activities with negative participatory strategies in 30 impacts on corridor are ineligible for communities and ejidos in 2 2\.2\. At least 15 municipal funding)92 focal areas\. development plans address --Conditional Cash Transfers biodiversity priorities (PROCAMPO) --Support for Livestock Production 2\.3\. At least 5 sectoral (PROGAN) programs include negative --Rural Roads (Caminos Rurales, SCT) filters (activities with negative impacts on 2\.4\. Ten sectoral programs contain Corridor are ineligible for positive incentives (priority for activities funding) with both development and biodiversity): --Risk Capital Trust Fund (FIRCO); 2\.4\. At least 10 sectoral --Umbrella93 Rural Development Program: 90 Strategic lines are defined in PAD Annex 7\. Strategic lines: Strengthening of productive practices of indigenous populations compatible with conservation, including production of aggregate value from local raw material\. Among others, the project will support agroforestry and forestry management activities, including chicle gum, vanilla and organic coffee production, as well as apiculture\. (See Annex 3\.) 91 More information on the project’s strategic lines can be found in Annex 3 and the reports can be consulted on the project’s website: www\.cbmm\.gob\.mx 92 After the project was designed, and before it was declared effective, SAGARPA reorganized 38 rural development programs into four programs\. The three programs cited here concentrate the largest budget and potential (and track record) of environmentally harmful investments\. 93 “Alianza Contigo” was one of the new programs launched by SAGARPA after the reorganization/regrouping of its subsidy programs\. Alianza Contigo consolidated 12 programs that were operating separately at the time of the MMBC’s preparation\. 94 The first three of the CONAFOR programs cited were regrouped with six other programs under the ProArbol umbrella program starting in 2007\. Now the operational rules for the larger program contain positive incentives assigning priority for activities with both development and biodiversity benefits\. 48  PAD and Progress Reported in Comment Implementation Letter ICR programs contain positive “Alianza Contigo” (SAGARPA); incentives (priority for --Rural Aquaculture (PRONAR); activities with both --Regional Funds Program (CDI); development and --Micro-Regions (SEDESOL); biodiversity) --Wildlife Management Units (SEMARNAT); 2\.5\. Biodiversity concerns --Food Security (PESA); consistently integrated in --Forest Plantations (CONAFOR)94; M&E procedures of at --Soil Restoration (CONAFOR); least10 public programs --Payment for Environmental Services (CONAFOR); --Forestry Compensation Fund (CONAFOR)\. 2\.5\. Since biodiversity concerns were mainstreamed through “objectives” and operational rules, each SAGARPA, SEDESOL and SEMARNAT program receiving allocations to grant subsidies is regularly evaluated by third parties reporting to Congress, and the ToRs consistently integrate biodiversity/environmental impacts in M&E procedures for each program\. 3\. Capacity of government 2,238 officials trained at federal, state and A total of 2,044 officials were officials at federal, state municipal levels\. trained\. All in all, training was a and municipality levels is 464 federal major (and successful) effort of strengthened to design and the project that is paying implement selected 557 state dividends through a more development plans and effective mainstreaming and programs in ways that 1,023 municipal allocation of resources from the integrate biodiversity different programs95, and even considerations in the lobbying for budget 3\.1\. 60 officials trained at allocations for the operation of federal level the Corridor Program in the 3\.2\. 60 officials trained at state legislatures\. state level 3\.3\. 140 officials trained at municipal level COMPONENT C: SUSTAINABLE USE Strengthened capacity 1\.1\. 318 training workshops There were no shortcomings in building for diversified 1\.2\. 361 learning courses this indicator because goals production, and improved 1\.3\. 301 dissemination activities were achieved\. Moreover, managerial and “Knowledge Sharing” was organizational skills defined as a strategic line and 1\.1\. 64 training workshops the project prioritized 1\.2\. 112 learning courses knowledge management 1\.3\. 64 dissemination activities among officials, activities (including experts (with the support of farmer-to-farmer JICA) as reported above, and 95 Most of the rural and social development programs are cofinanced by the federal government (up to 70%), while the rest are frequently divided among the state, municipal governments and beneficiaries\. 49  PAD and Progress Reported in Comment Implementation Letter ICR extension) with peasants and landowners in ejidos and communities\. 2\. Sustainable use of The total number of subprojects There were no shortcomings in biodiversity promoted implemented was 215 (179% of subproject this indicator because goals through pilot projects for target adjusted to 120)\. were achieved\. Leveraged maintenance of native investments were a major ecosystems’ functions, Of these: achievement of the project\.96 restoration of degraded During the operation, leveraged ecosystems, sustainable 2\.1\. Small pilots: investments provided 90% of use in the productive --74 subprojects (34\.4% of 215) the investment cost, while the landscape MMBC budget directly 2\.1\. 305 small pilots to 2\.2\. Vulnerable groups: contributed 9\.7%\. This became promote awareness in --144 pilots for indigenous (66\.9% of 215) even more relevant since the communities with limited --50 pilots for women (23\.2% of 215) amount of GEF resources levels of organization available for each subproject 2\.2\. 130 pilots reserved for 2\.3\. Higher level of organization: was increased from US$20,000 vulnerable groups’ --141 subprojects (65\.6% of 215) to US$50,000, reducing the initiatives (indigenous, original target of 565 women) subprojects to 120\. 97 Thanks to 2\.3\. 130 pilots for the counterpart funds raised, a communities with higher total of 215 subprojects were levels of organization implemented, including 144 (financed with matching pilots for indigenous peoples funds from government with an estimated investment of programs) US$0\.6 million\. 3\. Knowledge of 88 prefeasibility, local adaptations of There were no shortcomings in conditions required for alternative technology, best practice, this indicator because goals local adoption of certification, and market access studies were achieved\. The focus on sustainable use options were completed for the project’s strategic strategic lines allowed the improved (including lines: honey, coffee, cocoa, pepper, chicle project to make good use of market access and gum, sustainable forest management, these resources in response to certification, aquaculture, alternative technologies, producers’ demands, prefeasibility, local ecotourism, sustainable trade, and fair contributing to strengthen adaptation of alternative trade\. biodiversity-friendly productive technology) options\. 3\.1\. 32 focused studies Effective communication 4\.1\. A questionnaire was answered by a 4\. The only support to infer that outreach large proportion (97%) of subproject officials are also well informed 4\.1\. Clear understanding participants: 98% of those surveyed98 is their large-scale participation of project objectives and perceived that the MMBC significantly (over 2,000 participants) in components by primary supported regional development; 96% said training activities sponsored by audiences at regional and that the MMBC is helping to conserve the the MMBC, since no such local levels, averaging tropical forest; and 88% were aware of the survey was carried out with 40% for rural stakeholders MMBC’s objectives\. In addition, 97% public officials\. 96 Given the project’s objective to mainstream biodiversity criteria in public spending, baseline government programs are considered an integral part of the project’s financing package: if the project is successful in its mainstreaming efforts, funds for regular development programs that would have had a negative impact on biodiversity conservation in the corridors, would be reoriented in a biodiversity-friendly direction, including: a) programs reoriented from potentially harmful to biodiversity-friendly or -neutral activities; b) programs actively promoting activities for the sustainable use of biodiversity\. See below the description of Component B and Annex 4 for details\. (PAD, p\. 14\.) 97 Grant Agreement, 3rd Amendment, 2005\. 98 From a total of 215 subprojects implemented by the MMBC between 2005 and 2009, 209 assessments were conducted in 29 locations in the five corridors\. (See Section 3\.6: Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops; Survey II\.) 50  PAD and Progress Reported in Comment Implementation Letter ICR and 60% for institutional stated that the subprojects are approved in stakeholders community assemblies, which means that 4\.2) The project was very 4\.2\. Timely production not only the producers’ groups involved in successful in producing relevant and distribution of the 209 subprojects that responded are instruments to disseminate outreach materials based informed of the MMBC objectives and lessons, build support and on communications activities, but a large proportion of the provide technical information to strategy and social and community is informed through their producers and officials\. The cultural backgrounds assemblies\. Bank distributed one of these products in particular at the 4\.2) 6 Documentaries and videos\. 2 videos Fourth GEF Assembly in in indigenous languages were produced Uruguay (May 2010) where the and disseminated\. project coordinator gave a --10 books were published with various presentation of the project’s topics on the sustainable use of achievements\. biodiversity in the areas of MMBC --10 radio spots were produced From 2002 through 2004, there --4 posters promoting the activities of the was lack of implementation of Corridor were printed and distributed the communications strategy --2,238 officials were trained at the exactly as planned in the PAD\. federal, state and municipal levels This may be considered a --628 communities and 75 municipalities moderate shortcoming\. (with 85,000 inhabitants) participated in However, from 2005 on, technical assistance, subprojects and CONABIO did a good job training activities focusing on the project and --250 indigenous peoples communities beneficiaries’ needs, and attended workshops building partnerships that effectively contributed to the achievement of the project’s objectives, its efficiency and its relevance\. COMPONENT D\. PROJECT MANAGEMENT 1\. Effective performance 8 meetings held: Planning to organize a National of the National Corridor 9 April 3, 2002 Corridor Council meeting twice Council 9 June 26, 2003 a year was clearly not realistic, 9 April 12, 2004 unless it is decided to settle for 1\. NCC meets twice a year 9 April 26, 2005 a smaller group of lower-level to review operational 9 May 18, 2006 officials\. Although only one plans and execution, and 9 May 7, 2007 meeting was held per year, the to discuss courses of 9 October 12, 2008 performance of the NCC has action and strategies 9 October 20, 2009 been effective and commendable, as witnessed by the Bank’s Country Director who attended the 2009 meeting\. Although this does not represent a shortcoming in the achievement of the operation’s objectives, in its efficiency or its relevance, it does reflect on the Bank’s performance, since the team failed to formalize these and other changes in a revised Indicator Matrix\. 51  PAD and Progress Reported in Comment Implementation Letter ICR 2\. Effective management 2\.1\. The project’s coordination complied and coordination of with the delivery of information required project at the national for NCC meetings (8 meeting reports and level 18 progress reports are on the MMBC 2\.1\. Timely preparation website) and distribution of 2\.2\. 8 operational plans reviewed by the information to the NCC and executed by the coordination of National Corridor Council the project 2\.2\. Timely preparation of 2\.3\. Disbursement of funds in compliance the Annual Operational with procurement and financial Plan management guidelines\. Capacity for 2\.3\. Timely disbursement procurement and contracting was of project funds in consolidated and rated Highly Satisfactory compliance with in the final ex post assessment (May applicable procurement 2009)\. and audit procedures 3\. Effective performance The mechanism operated satisfactorily, SCCs met every year, of the State Corridor meeting once or twice a year as needed to sometimes twice a year, since Councils review work program and policy participants found it difficult to 3\.1\. SCC meets four times orientation\. participate more often\. a year to review 9 Campeche: May 2003, September The project design’s original operational plan 2003, March 2004, April 2005, plan proved unrealistic\. The preparation and execution May 2006, April 2007, August preparation team and discuss courses of 2009 underestimated the difficulty of action and strategies\. 9 Chiapas: June 2004, September conducting the consultations 2004, April 2005, April 2006, required to form the SCCs April 2007, October 2009 (which led to a legal 9 Quintana Roo: July 2001, August amendment) and also 2002, August 2003, February miscalculated what it takes to 2004, April 2005, May 2006, bring community April 2007, August 2009 representatives and state 9 Yucatan: April 2003, August officials together four times a 2003, April 2005, May 2006, year\. April 2007, August 2009 No SCC meetings were held in 2008, since the project was originally scheduled to close on June 2008\. Although this does not represent a shortcoming in the achievement of the operation’s objectives, in its efficiency or its relevance, it does reflect on the Bank’s performance, since the team failed to formalize these and other changes in a revised Indicator Matrix\. 4\. Effective management After initial delays and a long learning and coordination of curve assisted by an FAO/CP institutional project at regional level development expert, the project teams 4\.1\. Timely preparation started to speed up in 2005\. and distribution of 4\.1\. The RTUs complied with the delivery information to the State of information required for NCC meetings Corridor Councils (27 reports) 4\.2\. Timely preparation of 4\.2\. 24 Operational Plans were effectively 52  PAD and Progress Reported in Comment Implementation Letter ICR the State Corridor Annual reviewed by the SCCs, executed by the Operational Plan RTUs and monitored by the Project 4\.3\. Timely disbursement Coordination Unit\. of project funds in 4\.3 Funds were disbursed in compliance compliance with with Bank procurement guidelines\. applicable procurement and auditing procedures 132\. Although it is still too early to effectively attribute any part of observed gains to a single intervention, there is a definitive link among (i) the project’s mainstreaming efforts, (ii) the rural development interventions by relevant actors, (iii) the trends in the land and resource use that drive, or contain, the rate of native habitat loss99, (iv) the impact of specific human-economic activities promoted in the region, and (v) the prevalence of wildlife, illustrated by their presence in the corridors100, where research and monitoring activities are carried out\. With regard to the corridor concept as a public policy approach that is embraced by relevant federal agencies and state governments other than participating states, such impacts can be fully attributable to the project since the concept has not been promoted by any other relevant initiative in the country\. Local Planning 133\. Planning activities to improve organizational and technical capacities were identified early in the preparation of the project as key tools for the Corridor strategy\. 134\. Subprojects, training and technical assistance were the means to approach the above objective: although the original number of subprojects was reduced from 565 to 120 when the amount of GEF resources available for each subproject was increased from US$20,000 to US$50,000 (3rd Grant Agreement Amendment, 2005); demand kept growing as promotion progressed and project allies and cofinanciers became increasingly important\. 135\. Direct financing for subprojects was modest compared to federal investments in the region\. They were designed to leverage resources from other government programs in order to reorient those programs’ objectives in order to sustain the biodiversity-friendly impacts beyond the execution of the subprojects\. Screening criteria for a subproject to receive cofinancing support from the MMBC included both the activity’s potential contribution to the economic and social development of the Southeast Mexico and the extent of its environmental sustainability/biodiversity friendliness\. 136\. Additional activities supported by the MMBC were guided by the need to strengthen the core activities in the field with: 99 The five corridors cover more than 10% of the total area of the four states (21,976,200 ha total), while the focal areas represent an estimated 347,388 ha (15% of the Corridor area)\. The rate of habitat loss remains high at 195,773 ha/year, which is equivalent to more than half the land surface in the project focal areas where habitat loss has been contained\. Source: National Forest Inventory (2010) National Forestry Commission, SEMARNAT\. 100 For further reference, see documents in the MMBC Monitoring Network web site: http://www\.cbmm\.gob\.mx/CBMM/TEM/DOC/41/41_001\.htm and in particular the report on mammalian fauna monitoring in the Chiapas Corridor: Muench, Carlos (2006) Monitoreo de especies claves de mastofauna mayor como indicadoras de la salud del ecosistema en Marqués de Comillas, Chiapas\. http://www\.cbmm\.gob\.mx/CBMM/TEM/DOC/41/41_001\.htm 53  • Environmental education and capacity building of local communities and government officials regarding biodiversity conservation and sustainable use of natural resources; • Improvement of the existing biodiversity monitoring systems with participation of local communities, NGOs and academia (Environmental Monitoring Network); • Research and management projects addressing key biodiversity management needs; • Expanding partnerships and supporting conservation initiatives from local NGOs; • Active monitoring network since 2006 with annual meetings including NGOs, research centers and government institutions\. • 36 scientific studies with research centers; • 68 studies commissioned by MMBC from NGOs, academia and producer organizations, and 18 publications with academic centers in Mexico; • 2 CDs with territorial and socioeconomic information at the municipal level in areas of the Corridor for 2006 and 2007; • CONABIO website contains ecological, biological information and geographical information\. (www\.conabio\.gob\.mx) Community Engagement Table 5: Subprojects by Sector Sector No\. Subprojects Aquaculture 14 Agrobiodiversity 38 Beekeeping 46 Coffee Production 20 Ecotourism 30 Forestry and Agroforestry 18 Biodiversity Management and Wildlife 15 Maintenance and restoration of ecosystems 16 Handcrafts (wood and others) 10 Environmental health 8 TOTAL* 215 * Number of projects does not correspond with the reported number (149) of subproject participant communities, since there might be more than one project in a community\. (Total communities that participated—628—represent those that participate in at least one of the project activities including trainings, workshops, dissemination events, in addition to subprojects)\. Indigenous Peoples and Gender 137\. The project was based on socially- and culturally-appropriate means of technology transfer, organization and decision making through traditional community processes\. 138\. The MMBC project has facilitated local producer access to many institutional regional and rural development programs\.101 In the case of indigenous peoples, a “coaching” approach was employed to ensure that communities were assisted through the many steps required to help them 101 It has been able to do so in part by building on the achievements of the IBRD Community Forestry project (P007700, closed in December 2003) and its ability to facilitate strengthening the technical and organizational capabilities of local producers\. 54 manage their resources\. Community planning tools mainstreamed through the project helped them to develop a broader vision of their own future\. Consensus building and the participation of community members in decision making to increase social capital helped to ensure the sustainability of the project’s impacts and achievements\. In the region covered by the MMBC, with 85,000 people attended by the project, 36% of the population is indigenous\. 139\. An estimated 30,600 indigenous producers and over 600 women from 226 indigenous communities participated in MMBC subprojects: 73 subprojects for indigenous peoples, including 38 subprojects for women, represent an estimated investment of MXN$12\.4 million pesos (ca\. US$977,979\.68)\. Table 6: Number and percentage of subprojects per community capacity typology MMBC type a type b TOTAL No\. Subprojects 74 141 215 (34\.4%) (65\.6%) (100%) Amount Invested (MXN$) $12,376,266\.40 $24,386,183\.29 $36,762,449\.69 (33\.7%) (66\.3%) (100%) Table 7: Reorienting public investment Number of sub- Financing Financing from other sources Actions Total (MXN$) projects MMBC (MXN$) (MXN$) Subproject CBM-M 190 $29,130,200\.05 $98,154,941\.39 $127,285,141\.44 Project Sagarpa- Prodesca Yucatan Peninsula 12 $0\.00 $1,730,000\.00 $1,730,000\.00 Projects Sagarpa- Prodesca 6 0 910,714\.28 $910,714\.28 Chiapas Project Banchiapas- Chiapas 25 8,230,887\.06 157,283,559\.37 $165,514,446\.43 Other resources 0\.00 113,592,241\.00 $113,592,241\.00 Consultancy and events 28 7,377,021\.93 23,298,747\.00 $30,675,768\.93 CBMM Total 233 $44,738,109\.04 $394,970,203\.24 $439,708,312\.28 % 10\.2% 89\.8% 100% Note: Subprojects with MMBC financial investment are 215 + 18 SAGARPA financed projects where the MMBC contributed in-kind resources, technical assistance and coordination, but not financial assistance\. 55 3\.3 Efficiency 140\. The project did not have an economic analysis in the original PAD\. During appraisal, a choice was made to base the economic chapter on an Incremental Cost Analysis, instead of doing a cost-benefit, or other type of economic analysis\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 141\. While over its nine years of implementation the project did not report on some of the indicators that were intended to measure progress and results (as specified in the PAD), evidence suggests that the overall Global Environment Objective of mainstreaming biodiversity into public investments has been achieved\. The substantial shortcomings in achieving the operation’s objectives (or difficulty to appropriately assess the results), and in its performance during the first part of its implementation (2001– 2004), was largely overcome in the second period (2005–2009)\. 142\. As shown in table 7 above, during 2009 the MMBC directly reoriented investments potentially harmful to biodiversity and promoted bio-friendly activities by significant amounts in the Corridor areas\. Additionally, there is general agreement among the Borrower, the partners, and the donors about the relevance and contributions of the operation\. 143\. The project’s accomplishments and impacts described above explain why the GOM, the NCC and the SCCs consider it successful\. Biodiversity criteria were incorporated into the objectives and operational rules of various public investment programs and Corridor areas received greater allocations of funds for sustainable use and biodiversity conservation activities\. 144\. The GOM, the NCC and the SCCs have expressed their perception that the establishment of the five biological corridors has helped to preserve ecosystem connectivity between 24 protected areas\. As such, the corridor concept has become a model for other regions of Mexico\. Since 2009, the GOM has established new corridors to ensure the conservation of biodiversity in the states of Tabasco, Oaxaca and Veracruz\. The demarcation of the new corridors was conducted by the MMBC team within CONABIO to include territories that enhance connectivity and conservation of landscapes between NPAs in order to stem direct threats of further ecosystem fragmentation\. 145\. When approved, this project was one of the first in the world to apply the innovative corridor concept, in an area of 4\.5 million hectares of land in Campeche, 56 Chiapas, Quintana Roo and Yucatan\.102 Monitoring activities were not appropriate to report on progress of the project indicators defined in the PAD, but fieldwork has provided data confirming that biological corridors promote the survival of emblematic species through improvements in habitat integrity by coupling sustainable use initiatives with conservation of habitats\. It also indicates that the landscape mosaic including remaining forest patches within the corridors provide essential resources for the survival of species that require less space, such as the ocelot (Leopardus pardalis), contributing to genetic connectivity between sub-populations, promoting their regional persistence and thus the maintenance of their current population levels\. 146\. It is important to note that both qualitative and quantitative evidence suggests that the use of adequate indicators (for example through a formal revision in a project restructuring), would have allowed to appropriately assess the project achievements, which might have earned the Project an overall Satisfactory rating\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 147\. During preparation, the results of the social assessment highlighted the need to tailor the activities of the project to the specific conditions of the communities located in the Corridor, taking into consideration their socioeconomic and cultural differences\. To enhance the social impact of the project, the following activities were identified: (1) strengthening social organization; particularly where oriented to income-generating activities; (2) promoting a gender approach in the generation and distribution of income as well as in communal decision making and distribution of labor; and (3) increasing technical capacity to manage sustainable development projects in different fields (as discussed above, Section 2\.1 “Social Considerations”)\. 148\. Thirty-four percent of the subprojects supported by the MMBC were directed to women: family vegetable gardens, wood-saving stoves, solid waste management, and mangrove reforestation\. 151 (42%) subprojects were directed to indigenous communities in the corridors\. In total, 628 communities benefited in 75 municipalities: 59 located in Chiapas, 2 in Campeche, 4 in Quintana Roo, and 16 in Yucatan\. The total project investment directed toward indigenous communities was equivalent to the US$1 million resources described in the PAD\. (See PAD, Annex 2, p\.6\.) 149\. Those communities and producer organizations that receive project resources have been equipped to take advantage of opportunities to promote their products in fair and “green” markets, which value sustainable natural resource use, biodiversity conservation and the biological corridor context\. This can help producers achieve a premium price for their products\. In addition, the use of zero tillage, composting and other biodiversity-friendly practices reduce the need to buy agrochemicals, while 102 PAD, Annex 13\. 57 generally demanding additional labor\. The outcome of this equation: is that the investment remains largely within the same community, contributing to strengthen social capital, providing additional livelihood and income opportunities (the additional labor), while improving income and quality of life\. One idea the MMBC team has been pursuing is the creation and use of a Corridor “eco-label” as a mechanism to strengthen marketing of products from MMBC communities\. 150\. With the aim of developing the potential “eco-label” niche market, the MMBC team signed an agreement with the Latin American Food Show (LAFS) to allow producers to exhibit their products in LAFS fairs held each year, the first being in Cancun (Quintana Roo) in September 2008\. The MMBC also participates in the Biological Resource Collective (PRBC), established by CONABIO in 2002, which provides support those producers who use natural resources sustainably in order for them to develop commercial products\. As a result of these experiences, the MMBC organized two promotional shows with products from the five corridors, presenting them to the dynamic tourism sector of Quintana Roo and the international Fair Trade market: X Caret 2008 and Cancun 2009\. (b) Institutional Change/Strengthening 151\. The National and State Corridor Councils have been institutionalized as participatory spaces where environment sector government institutions can collaborate with stakeholders to promote activities to harmonize public development programs and spending with local demand for sustainable development activities\. This participatory approach has established trust and cooperation among institutions and communities, strengthening the function of the councils in future MMBC activities\. Moreover, the transparency associated with the councils’ participatory decision-making process has helped establish mechanisms for resolving conflicts and improving governability in the region\. GOM resources designated for the MMBC region (i\.e\., to finance logistics for meetings and transportation of stakeholders to attend council meetings) guarantee the operational sustainability of the SCCs after the close of the project\. 152\. The project also contributed to strengthening academia and NGOs, since the corridors and associated conservation and sustainable development subprojects became a subject of discussion in seminars and a theme of research projects\. Seventeen books on project management, sustainable management and use of resources, information systems, fair trade, assessment of forest plantations, etc\., were published as a result of this impact\. These publications provide rich and varied information that will facilitate not only MMBC-based promotion of community efforts of biodiversity conservation and sustainable use of natural resources, but also similar activities and interventions throughout Mexico and the region to be lead by strengthened and informed institutions (See Annex 2: Publications)\. 153\. In particular, government institutions such as SEMARNAT and SAGARPA (as well as the other Ministries that had signed on to the Foundations for Inter-Institutional Collaboration agreement) benefited from the MMBC project\. Through project promotion 58 of and activities for reorienting public investments and development programs, in addition to facilitating the flow of project data and information, many public officials and decision makers were exposed to and trained in the importance of including biodiversity considerations in their investment programs\. As a result, not only did the MMBC contribute to supporting the mandate of the collaboration agreement (signed in 1998, prior to project implementation) and reinforcing sustainable development activities in Corridor areas, but it also strengthened the individual institutions so that their subsequent investment impacts might extend beyond the MMBC region to other areas of Mexico\. (c) Other Unintended Outcomes and Impacts (positive or negative, if any) 154\. The project facilitated institutional re-direction within CONABIO\. Before, CONABIO focused primarily on ecological and biological research and lacked experience working with stakeholders\. Now, the organization values and actively supports participatory conservation with local communities, helping to manage and lead that process\. Moreover, the MMBC team within CONABIO has emerged as a credible institutional stakeholder: a consensus-building institution capable of implementing successful sustainable development projects to the point where it is a sought-after partner in other regions of Mexico with governments and stakeholders from other Mexican states petitioning to be included in the Corridor initiative\. Similarly, the MMBC team has been invited to facilitate dialogue and collaboration between actors among different levels of government (municipal, state, national), and with various stakeholders and governments of Central American countries: as a result of this project, the MMBC team is stepping into the role of facilitating south-south cooperation and exchanges to support sustainable development initiatives within the Regional Mesoamerican Biological Corridor\. 155\. Considering the complex social and environmental nature of the region, the MMBC succeeded in establishing itself as a highly respected program with a great degree of influence and consensus in order to achieve alignment between bottom-up community- driven development and top-down operational policy-driven development, ultimately reinforcing its overall goal to promote the conservation and sustainable use of biodiversity\. As a part of that process, it brought together diverse institutions across all levels (national, state, local) into a participatory network for sustainable development and biodiversity conservation\. The capacity-building opportunities provided by the project through implementation of project activities, has strengthened institutions (and thus the network) to the point where they are leading follow-on initiatives in which they incorporate activities and priorities piloted in during the MMBC project (see Section 2\.5)\. 156\. Corridor activities have contributed to a strategy for adaptation to climate change\. Following the impact of Hurricane Stan (2006) in the coffee-producing region of Motozintla-Chiapas, an assessment supported by GTZ, Banchiapas and UNAM identified five measures that would reduce vulnerability of the region to such extreme climatic events: i) conservation and use of diversity of species and varieties for intercropping (maize-field poly-culture: native maize, beans, squash, chili); ii) diversification of productive activities of land along altitudinal gradients (corridors), iii) watershed management and slope stabilization; iv) protected agriculture (greenhouses); and v) 59 silvopastoral systems\. The MMBC helped to establish the importance of such activities as part of its broader sustainable development objective\. Based on the MMBC experience, it is clear that such actions constitute valuable inputs into any strategy that targets climate change adaptation in rural areas of Mexico\. 157\. In Mexico’s national strategy for Reducing Emissions from Deforestation and Degradation (REDD)103, the set of actions that the MMBC promotes has also been identified as a valuable contribution to preventing negative changes in forest use and soil degradation\. In the REDD pilot project for the state of Michoacán (2009–2010), the strategy consists of four instruments: Forest Programs (PROCYMAF, COINBIO, PSA, etc\.); the Special Program for Food Security (PESA-FAO); the Land Management Program (UNFCCC); and Biological Corridors\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 158\. During 2009, the Project Coordination Unit commissioned the following survey: Sustainable Rural Development Program MMBC-CONABIO-SAGARPA in the Region of Marqués de Comillas, Chiapas\.104 159\. The Sustainable Rural Development Program in the region of Marqués de Comillas (PDRS-MC), Chiapas, has been executed by the MMBC since 2008\. The program seeks to integrate the conservation of natural resources (mainly tropical rainforests) into improved production and social development in local communities\. It is an initiative attempting to provide continuity to efforts in Mexico and Chiapas aiming to achieve environmentally sustainable and socially equitable rural development and production\. The Marqués de Comillas region forms part of the MMBC given its importance for Corridor connectivity\. However, subsistence farming is the most prominent activity (85% of the population is in “asset poverty”105), contributing to a cumulative loss of forest cover in this area ranging from 40% to 50%\. 160\. The PDRS-MC is coordinated by SAGARPA, MMBC, CONABIO, SEMARNAT and the Government of Chiapas\. It initially operated in 29 ejidos, in three focal areas within the Municipalities of Marqués de Comillas, Benemérito de las Américas, Ocosingo and Maravilla Tenejapa\. The total area of participating ejidos is 120,447 hectares\. 161\. The first stage of the fieldwork included interviews, a socioeconomic assessment, and a workshop with ejidatarios, municipal and ejido authorities, civil servants and researchers\. The main findings of the survey were: 103 This activity is supported by the World Bank with resources from the Forest Carbon Partnership Facility (FCPF)\. 104 The study was conducted in September 2009 by the Centro Interdisciplinario de Biodiversidad A\.C (CEIBA) with the help of the United States Agency for International Development (USAID), focusing on achievements/results from 2008\. 105 In Spanish, pobreza patrimonial is defined as the proportion of homes whose per capita income is less that what is needed in order to cover basic consumption costs: food, clothing and footwear, housing, health, public transport and education\. 60 162\. Preliminary quantitative findings: (i) The stabilization of 20,000 ha was achieved, based on agreements with production units, which reward conservation and promotion of biological connectivity associated with productive investment plans for local agricultural and forestry development; (ii) 1,500 families have been incorporated into sustainability processes; (iii) Actions are helping to stabilize 422 hectares of farmland that produce maize with sustainable use methods\. This area excludes the use of fire, and around 50 tons of dry matter was incorporated into the soil by adding Mucuna pruriens106\. As a result, the need for rotating the use of agricultural lands is reduced and there is a possibility for converting 4,222 hectares that are currently abandoned and form part of the fallow lands (of the maize fields)\. The recovery of 350 hectares of abandoned land is ensured by enrichment with useful forest species; (iv) 173 silvopastoral modules were established, which planted 260,000 trees and shrubs, and launched the restoration of 795 hectares of degraded pastures; (v) 53 riverbank restoration modules were established, corresponding to five kilometers of streams or runoff systems\. 163\. Technical evidence: (i) The MMBC team documented scientific evidence regarding the biological connectivity of forest ecosystems and processes of fragmentation in the humid tropics and in the region of Marqués de Comillas; (ii) The MMBC team, as executor of the PDRS-MC, integrated and formalized the program’s working rules at different levels: through the MMBC-CONABIO-SAGARPA agreements, and with the producer organizations; (iii) The MMBC team helped to avoid duplication of programs and actions and to achieve confluence with programs for environmental services, protected natural areas, timber forests, and ecotourism, among others\. 164\. Perception of the participants: (i) 78 % of participants were involved in the design of the subprojects, objectives of the Corridor and implementation of activities as opposed to other public programs, which have not requested such input from local producers; 106 A leguminous shrub (known as velvet bean or cowitch) whose leaves act as natural fertilizer when they fall to ground and mix with the soil\. 61  (ii) Municipal officials who were interviewed approve of the program as it made efforts to involve them in its planning and operation; (iii) In general, participants expressed that the program has brought various economic and environmental benefits\. Economic and social impact in the Corridors of Chiapas and the Yucatan Peninsula 165\. From a total of 215 subprojects implemented by the MMBC between 2005 and 2009, 209 assessments were conducted in 29 locations in the five corridors\. The summarized findings are as follows: Economic: (i) 98% of those surveyed perceive that the MMBC has significantly supported regional development through the subprojects and associated training; (ii) 38% felt that both production and marketing have improved; (iii) 18% have their product on the market; (iv) 54% consider that their income has improved\. Environmental: (i) 96% think that the MMBC is helping to conserve the tropical and/or temperate forest; (ii) 88% are aware of the objectives of the MMBC\. Social: (i) 97% stated that the subprojects are approved in community assemblies; (ii) 86% believe that the transparency with which the MMBC reports on the project objectives has improved relations within the community and organizations and everyone is aware that they are directed to conservation; and (iii)57% of the subprojects were implemented in indigenous communities\. 166\. One of the conclusions of the above evaluation is that the socioeconomic impact of the MMBC since 2005 is evident in production processes that have been improved (ecotourism, cocoa, honey, coffee, gum, pepper, vegetables, etc), and by products currently sold through alternative market channels and in markets for environmental services; as well as by the inclusion of gender and cultural equity in production activities and incentives\. Another impact identified is the strengthening of social capital by supporting activities that improve local capacities for design, management, evaluation and monitoring of productive projects and activities\. 62 4\. Assessment of Risk to Development Outcome Rating: Low 167\. The corridor concept has gained wide acceptance in government, academia and civil society\. Therefore, risks that would endanger continued development of project results are low\. Since the end of 2009, project activities in the corridors of southeast Mexico have been funded by SEMARNAT/CONABIO\. Integration of conservation and sustainable management objectives into public policy planning is a long-term task that requires generating consensus\. The MMBC has become a program of the GOM with the ability to foster that consensus in the four states where the corridor approach was piloted\. 168\. Since 2008, the State of Tabasco has allocated resources to perform diagnostics for the new corridors supported by its State Corridor Council (formed outside of MMBC activities)\. These will connect the Biosphere Reserve Pantanos de Centla (302,707 hectares), the private area Rancho la Asunción (572 hectares), the Laguna de Términos Protected Areas of Flora and Fauna (705,017 hectares) and Usumacinta Canyon (46,128 hectares)\. These corridors have been named “Humedales costeros – Sierra de Huimanguillo”, “Pantanos de Centla – Cañón de Usumancita” and “Sierra de Tabasco”\. Togethr, they comprise 56\.6% of the land area of Tabasco\. 169\. Furthermore, CONABIO/SEMARNAT is currently preparing with the World Bank a GEF-financed project: “Fostering of Sustainable and Competitive Production Systems consistent with the Conservation of Biodiversity”, to be implemented from 2011 to 2016\. The objective of the project is to promote sustainable production chains for goods and services that take into consideration biodiversity criteria, in order to underpin a development strategy in the region and to reinforce this project’s actions and gains made from 2001 to 2009\. 5\. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues) 5\.1 Bank (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Unsatisfactory 170\. The performance of the Bank in identifying, preparing and appraising the operation was Moderately Unsatisfactory given its underestimation of political and institutional obstacles\. As mentioned earlier, the uncertainty posed by the imminent change in the government administration moved the Bank team to appraise without including in project design the baselines for key indicators, leading to over-ambitious indicators (i\.e\., indicators to monitor and report on perturbation of habitats and species populations), which were too general in the sense that it was unrealistic to measure and monitor them effectively\. Yet, linking mainstreaming objectives to the biological corridor concept in project design made it innovative, bold and the first of its kind\. There were no 63 preceding corridor projects from which to draw lessons; rather, the task team relied on prior protected area and community forestry projects from which to glean applicable inputs for design and implementation\. 171\. The resulting project was highly pertinent to both Bank and national priorities\. The Bank conducted an assessment of the current state of key biodiversity and social issues, associated threats and alternatives for confronting them, highlighting the need for a highly participatory process\. The Bank focused its efforts on contributing to better management of natural resources by promoting planning and monitoring tools based on the biological corridor concept\. The goal was to better balance conservation and use of biodiversity and agro-biodiversity within a sustainable development framework\. 172\. The accelerated signing of the Grant Agreement complicated the completion of the stakeholder consultation process (later recognized in the ISR) that was essential to the creation of strategic alliances\. The Bank task team should have anticipated that a change in GOM administration would have presented complications, such as less commitment to the project and the selection of a poorly qualified project coordinator\. In response, the Bank task team provided additional training and institutional support\. Although mounting evidence suggested that project administration was still not improving, it remained slow to insist that more qualified staff be contracted at both the national and regional levels\. In light of the unresolved and rushed social consultations at the time of the signing, the Bank task team coordinated the amendment process in order to facilitate access to GEF resources and complete the consultations\. However, considering this option sooner could have greatly benefited project implementation\. 173\. Sufficient support from the incoming GOM administration did not materialize until the new Minister of Environment, various Undersecretaries, head of CONABIO and a new project coordinator were appointed\. The incoming officials saw the project as an opportunity to promote mainstreaming with a territorial approach and embraced the concept\. As a result, project implementation picked up and it was then that the new GOM administration became an ardent supporter of the project\. 174\. Overall, while the Bank’s focus on substantive goals for the project was satisfactory, its ability to anticipate and respond to political and social obstacles expeditiously during design could have been improved in order to ensure timely project implementation\. (b) Quality of Supervision Rating: Moderately Unsatisfactory 175\. Project effectiveness was delayed for over one year due to what proved to be an incorrect design assumption that it would be possible to establish the project’s State Corridor Councils prior to and as a condition of effectiveness\. The role of the SCCs was such that unless they were credible entities in the eyes of project actors they would not function well and subsequently, achieving goals at the state and local level would be difficult\. Without project funding it was impossible to establish the state councils\. In late 64 2002, the Grant Agreement was amended to include processes for establishing the state councils with civil society participation; they were no longer part of preparation and a condition of effectiveness\. The amendment also conditioned subsequent actions in the states on first forming the state councils and delinked the states to allow each one begin implementation as it formed its respective council\. Original design demanded that all states must form their councils before any state could move forward\. The need for an amendment was identified by the new task manager during the September 2001 mission, who was appointed the same month\. The project became effective in January 2002\. (for further detail, see ISR #6\. 09/26/2003) 176\. In December 2002 the supervision team reported that “the project continues to rate as Satisfactory”, with a focus on putting in place the implementation framework and developing institutional arrangements at the state and local level\. At the time, the team saw no critical risks that threatened the project's ability to achieve the GEO (ISR #4, 12/19/2002)\. 177\. By June 2003, the supervision team recognized that the project coordination unit lacked necessary experience for successful project management\. In response, the task team worked closely with them to provide short-term assistance for training in strategic planning and developing critical actions to move the project forward\. The Bank team reported the PCU had been strong in beginning in forming partnerships required to achieve mainstreaming objectives and that the project coordinator had good experience, credibility and skills in interacting with indigenous groups and local dynamics\. However, this resulted in setbacks to implementation efficiency early on for the project’s larger goals (i\.e\., institutional mainstreaming)\. The expectation was that in the long run the PCU’s strengths would allow the project to catch up\. (ISR #5, 06/18/2003\.) 178\. Given the importance of measuring and demonstrating results, the Bank should have (a) insisted on the collection of baselines early on during implementation, and (b) formally revised the indicators through a deliberate project restructuring process\. However, this was never done and as a result, at project closing it was very difficult to credibly measure and attribute specific outcomes to project interventions as specified in the PAD\. This is a significant shortcoming in the quality of supervision by the Bank\. 179\. In June 2004, the project completed one year with an Unsatisfactory rating after failing to comply with agreed actions necessary to improve implementation\. The World Bank’s Country Management Unit (CMU) and SHCP agreed to a series of 90-day action plans\. The project’s compliance with recommendation in each plan was to be closely monitored by the Bank, SHCP and NAFIN\. The second 90-day action plan was successfully completed in January 2005, allowing for the project’s midterm review as well as a review of CONABIO's proposal to reprogram the project\. Among the key elements that allowed the project to move forward were: (i) the completion of an excellent independent evaluation that provided an opportunity for all relevant actors to objectively discuss problems and obstacles that needed to be overcome; (ii) the appointment of a new project coordinator, who had the necessary vision, background, experience, and personal and institutional skills to direct implementation; (iii) establishment of basic conditions for moving forward in all participating states, including 65 the formation of the state councils; and (iv) the support and commitment from the highest levels of SEMARNAT (Minister Alberto Cardenas and Undersecretary Fernando Tudela) with assistance to help the project its mainstreaming objectives\. 180\. It was not until 2005, after reviewing project advances as part of the third and final 90-day action plan, that the project would finally be rated Satisfactory in the ISR\. 181\. Early in 2005, the quality of project implementation improved greatly with the new project coordinator\. It showed promise of meeting its development objectives: in the last year it became one of SEMARNAT’s key instruments for achieving biodiversity conservation mainstreaming objectives\. Among other actions, project management had: (i) put in place the planning, budgeting and internal monitoring instruments necessary for successful project implementation; (ii) established formal alliances and agreements with relevant GOM entities (especially CONAFOR, SAGARPA, SEDESOL, INI) for mainstreaming biodiversity in public expenditures; (iii) completed priority studies and strategies at the national and state level in order to implement investment programs for biodiversity conservation in the project area; and (iv) identified and prepared with communities and producer groups a first series of subprojects to receive financing through the principal public rural investment programs\. 182\. Although activities in 2005 advanced satisfactorily with regard to strategic interventions at the national, state and institutional levels for mainstreaming biodiversity and reorienting public expenditure, the advances were imbalanced\. The bulk of the achievements were on the institutional side with more limited advances in the field, aside from local-level planning and participatory processes\.(ISR #13, 06/01/2006\.) 183\. By November 2006, the supervision team recognized that despite significant advances in meeting its central objectives to reorient public policy—with a high degree of appropriation/ownership on the part of the key sectoral institutions (e\.g\., SEDESOL, SAGARPA, CONAFOR, CDI) that provide the bulk of rural development financing to the MMBC area—the project could not meet its development objectives within the original timeframe (original closing date: June 30, 2008)\. At least 18 additional months were required\. The following supervision mission focused on evaluating the merits of a project extension\. The World Bank’s GEF Regional Coordinator for Latin America and the Caribbean joined the mission to provide an objective opinion; her conclusion was that the extension appeared justified, assuming certain conditions were met\.107 (ISR #14, 12/27/2006; site visit 11/17/2006\.) 184\. Three task managers managed the project throughout its life\. On average, supervision missions were carried out two or three times a year, with a total of 20 supervision missions\. The FAO-World Bank Cooperative Program (FAO-CP) made strong contributions to project supervision and provided key technical supervision that would otherwise not have been available\. The Bank team: (i) processed three amendments to the Grant Agreement to address the need for more comprehensive social 107 Conditions such as keeping up project implementation pace, demonstrating that with the extension it would be able to achieve the project development objective within the new timeframe, and to show progress in mainstreaming and acceptance of the corridor concept\. 66 consultations as well as recalibration of project activities given the implementation lag (though recognizing the need for such amendments may have been slower than expected); (ii) provided extensive training and assistance to both phases of the PCU to encourage more efficient implementation; and (iii) ensured compliance with all Bank norms and procedures\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory 185\. The preparation and supervision teams failed to highlight the fact that there were significant shortcomings in the operation’s capacity to monitor the achievement of its objectives, even after the MTR\. The team did focus on improving the efficiency of the implementation, initially assisting an inexperienced PCU and later advocating for a change in the project coordination team\. The Bank team never lost perspective of the operation’s relevance and continued to focus on its innovative mainstreaming approach\. 186\. CONABIO reported on project achievements using proxy indicators because (i) it seemed impossible to follow the PAD’s territorial restrictions and to operate exclusively in the original focal areas108, and (ii) the absence of clearer definitions of the project goals in order to make them operational and to produce a baseline for evaluation of concepts such as “reduced loss of habitat” or “population perturbation”\. Although this was not highlighted as a priority by the independent midterm evaluation, the team mentioned it in the MTR Aide-Mémoire, but failed to restructure the project to better reflect indicators and to include verification guidelines in order to report on them in ISRs\. The Bank team should have formally revised the indicators through a project restructuring process in order to facilitate improved reporting that would better reflect important and relevant project achievements\. Indeed, there were significant shortcomings in the operation’s capacity to measure and report on the achievement of its objectives, which prevailed during the whole period of execution\. As a result, the Borrower used proxy indicators that were accepted by the Bank supervision teams\.109 On the other hand, the team was probably too risk averse with regard to the La Cojolita focal area in Chiapas, which led to detailed implementation restrictions110\. Considering the Bank’s performance during project preparation and supervision, the overall rating is Moderately Unsatisfactory\. 187\. However, the Bank team was proactive in promoting partnerships with institutional stakeholders and civil society and in providing technical assistance through FAO/CP staff to overcome the delays resulting from the steep learning curve and expectations raised by the project\. The Bank team promoted the integration of gender and culture and obtained additional resources (BNPP) to promote awareness and consensus- building in the region; all of which contributed to strengthen CONABIO to achieve the GEO and promoting the corridor concept nationwide\. 108 The definition of the focal areas was expanded in the amendment to the Grant Agreement approved in November 2005, but the Bank team failed to update the monitoring indicators that this amendment affected\. 109 The Bank’s performance is being rated Moderately Unsatisfactory precisely because the team failed to update the indicator matrix and propose a project restructuring accordingly\. 110 Considering the special conditions of the focal area La Cojolita, during the first year of project implementation there were additional consultation activities carried out in this focal area\. The conclusion of these activities was a condition for the application of investment resources in La Cojolita\. (PAD, Annex 12, p\.9)\. 67 5\.2 Borrower NOTE: When the government and implementing agency are indistinguishable, provide rating and justification only for Overall Borrower Performance\. (a) Government Performance Rating: Moderately Unsatisfactory 188\. The GOM supported the preparation of the project as it became a high priority for biodiversity conservation in the states of southeastern Mexico\. They collaborated with the entire project team when the new PCU was hired in 2005\. Prior to this, however, lack of support from the GOM to ensure selection of qualified and experienced project staff contributed to implementation delays\. During the period in which the project was declared Unsatisfactory, the support of SHCP and NAFIN were key to prompting SEMARNAT and CONABIO to recognize the need for greater attention to the project\. (At the same time, the Bank recognized that the social consultation and integration of state councils would require additional time and resources, leading to the first amendment of the Grant Agreement\.) CONABIO, SEMARNAT, NAFIN and SHCP followed up on the three 90-day plans (2004–2005) in order to achieve the Moderately Satisfactory rating in June 2005\. At the close of the project, SEMARNAT assumed responsibility for its operation and continuity as part of the overall environmental agenda\. SEMARNAT also increased its operation to the states of Tabasco, Oaxaca and Veracruz with resources from the federal government\. 189\. Project implementation was severely limited during the period 2002 to 2005\. Although the initial efficiency of project implementation had significant shortcomings, the GOM was instrumental in getting a new coordination team appointed in 2005, recognizing its relevance\. (b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory 190\. In light of significant shortcomings in the operation’s capacity to measure and report on the achievement of its objectives, the GOM used proxy indicators that were accepted by the Bank supervision teams, even though the indicator matrix was not updated formally\. Although initial project implementation efficiency suffered significant shortcomings, these were appropriately dealt with and minimized by the new coordination team appointed in 2005 at the same time that they increased the project’s visibility and strengthened its relevance\. 191\. It should be clarified that CONABIO was not involved in the preparation phase, which was led by SEMARNAT (General Directorate of Sustainable Development Programs)\. CONABIO’s performance suffered many setbacks during the first stage of implementation, in contrast to the performance of their new project management team during the second stage (2005—2009), which was much improved\. CONABIO- SEMARNAT made the necessary changes identified in the midterm review (2005), such 68 as the appointment of a new project coordinator with the required technical and management skills to guide the project\. Because CONABIO did not have sufficient experience dealing with Bank operations, NAFIN provided relevant support and overall guidance\. As a result, procurement was rated Highly Satisfactory in the penultimate ex post review and Satisfactory in the last ex post review (2009)\. Since 2002, the project has been audited by an external private firm that issued an unqualified opinion on both the project’s and NAFIN’S financial statements for FY2008\. The audits have been received in a timely manner\. The last project audit report, corresponding to the CY2009, will be furnished to the Bank before June 30, 2010 and will include all withdrawal applications, as well as any expenditure documentation that was processed before April 30, 2010\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Unsatisfactory 192\. Overall borrower performance is considered to be Moderately Unsatisfactory\. There were major shortcomings during the September 2003–June 2005 period when the project was rated Unsatisfactory, before the GOM appointed a new project coordination team\. Nevertheless, during that period the GOM was closely in contact with the Bank to seeking appropriate solutions\. The resulting series of 90-day action plans were closely monitored and finally allowed the project to be gradually upgraded to Moderately Satisfactory and then to Satisfactory in June 2007\. Although initial project implementation efficiency suffered significant shortcomings, these were appropriately dealt with and minimized by the new coordination team appointed in 2005 at the same time that they increased the project’s visibility and strengthened its relevance\. If one could rate the second stage of project implementation (2005—2009) separately, it would be Satisfactory\. 193\. The National Corridor Council, which included institutions linked to the environmental sector, committed to promoting the operation’s objectives, thus facilitating project management with institutions at all three levels of government\. It is worth noting that the active and committed participation of members in the State Corridor Councils, particularly in Chiapas, resulted in a great number of actions implemented at local level that had the consensus of all council members\. Considering the scale and great diversity of stakeholder interests, the project incorporated relevant risks during the design phase; some risks were unexpected and posed challenges to the Borrower, however they were managed in the end, with assistance from the Bank team and other partners (i\.e\., specialist from the FAO/CP)\. Due to its innovative biodiversity conservation activities, positive project results and the high level of impact generated and reflected in the surveys conducted during 2009, the project’s approach has been adopted by other states of Mexico\. 69 6\. Lessons Learned Strategic operationalization of the project PDO was not captured by the output and outcome indicators 194\. The project pursued a policy development objective that contributed to the reorientation of development programs and Mexico’s first Environmental Structural Adjustment Loan\. The mainstreaming objective was difficult to measure quantitatively while also capturing the project’s direct impact on policy development\. CONABIO reports that the project achieved significant policy development objectives given the success in mainstreaming biodiversity criteria in public expenditures as evidenced by their incorporation into the objectives and operational rules of relevant SAGARPA, SEDESOL and SEMARNAT investment programs\. It also became apparent that that while monitoring of vegetation cover and perturbation of species populations and habitats (the original indicators in the PAD) is important, they cannot fully grasp nor reflect biodiversity mainstreaming achievements, especially within institutions\. Guiding criteria to define working areas 195\. While some indicators were vague and no baseline defined, other parts of the project were defined in detail, reducing the capacity for adaptive management\. Conceptually, focal areas were originally designed to provide geographical structure for specific and targeted interventions in the Corridor area\. It was also thought that their limited geographical scope would aid in monitoring and measuring indicators to report on project achievement and impacts\. However, the a priori definition of focal areas, led to difficulties in expanding project activities to the most promising product lines and as opportunities to work with institutional partners and communities emerged\. In order to do so, the Grant Agreement was amended to redefine the scope of the focal areas\. Instead of selecting specific project intervention sites prior to implementation, agreed-upon site selection criteria should be used to identify intervention areas during implementation\. This allows the project to adjust to changing circumstances on the ground, to take advantage of unforeseen opportunities to expand project impact and achievements, and to adequately respond to the demand-driven nature of subproject implementation to achieve wide participation\. Additional sources of support 196\. Trust funds and other assistance available through the World Bank can complement project resources when ad hoc trainings, consultations, or assessments are needed\. This was the case for the MMBC: the Bank team applied for a US$350,000 grant from the World Bank-Netherlands Partnership Program (BNPP) Global and Regional Initiatives to implement a series of workshops and activities collectively titled Strengthening Social Participation in the Regional Mesoamerican Biological Corridor (RMBC) in Guatemala, Panama and Southeast Mexico\. The workshops contributed to improving to the MMBC project by financing and fostering additional cooperation, 70 learning opportunities, technical assistance and facilitating access to other sources of technical and financial support\. Investments in regional development 197\. The project’s success has lain in its ability to consolidate the work of technical groups, NGOs and local producers who, over several decades, have demonstrated the usefulness of agro-ecological activities and use this evidence to promote reorientation of public investment\. Through training and organization, development and conservation can be harmonized if we learn from local groups’ experience and build bridges with public officials\. Conservation based on community participation has great transaction costs, but is more sustainable 198\. In order to achieve community-based agreements for conservation in the corridors, the MMBC worked with ejidos and communities (with the consent of their assemblies)\. The process of designing, implementing, and enforcing a set of rules to conserve public goods in the corridors is equivalent establishing a local collective good in the community\.111 In Chiapas, prolonged consultation processes ultimately led to a greater buy-in and demand for subprojects and thus increased investments in the area\. Activities for strengthening social capital112 should be targeted to organizational networks (NGOs, academia, research institutions, etc\.) 199\. Investments in strengthening institutional and local social capital (NGOs and producers) contributed to the project’s monitoring network\. Investing in institutional partners also contributed to cost-sharing for the more intricate/extensive/expensive monitoring activities: the project helped to establish long-term alliances with regional and mid-level organizations that collaborated on monitoring responsibilities and activities\. These organizations will also contribute in future activities to develop regional markets for MMBC sustainable products\. Building political buy-in and capital for a project 200\. During preparation, the Bank team and management identified that Chiapas was a high-risk, high-reward place to work (especially after the 1994 Zapatista social uprising)\. With a new federal administration taking office on December 1, 2000, there was an additional risk that political support for project activities would wane and undermine goals to conduct extensive consultations in socially complicated areas of the country\. At the decision meeting113, the Bank team was advised to contact the incoming federal administration in order to start building the necessary political buy-in and capital to 111 Ostrom, Elinor\. 1990\. Governing the Commons\. The Evolution of Institutions for Collective Action\. Cambridge University Press, New York\. 112 “The set of norms, networks, and organizations through which people gain access to power and resources, and through which decision making and policy formulation occur” (World Bank, 2003) 113 May 26, 2000\. 71 support project implementation and strengthen alliances with government institutions\. The fact that this was not achieved contributed to the slow implementation pace from 2000-2005\. Corridors are relevant for Adaptation to Climate Change: 201\. During project preparation, the Central American isthmus suffered the brunt of Hurricane Mitch (1998), the impact of which reached the Yucatan Peninsula\. During implementation, the project area was hit by two more hurricanes: Wilma (2005) on the peninsula, and Stan (2006) in Chiapas\. All three extreme events severely affected producers in the Corridor areas, especially those involved in apiculture, coffee, silviculture and tourism\. 202\. The extent of the hurricanes’ impacts demonstrated that the MMBC can provide breakthroughs in the necessary crosscutting approaches to achieve relevant mitigation goals, and it has provided yet more insights into the adaptation alternatives in the field\. Following the impact of Hurricane Stan (2006) in the coffee-producing region of Motozintla, Chiapas (that had been supported by the MMBC), an assessment by GTZ, Banchiapas and UNAM confirmed that the practices promoted by the MMBC project had reduced the vulnerability of the region to such extreme climatic events\.114 Project Level New approaches to intersectoral work 203\. The intersectoral nature of CONABIO made it possible for the MMBC to play a role in facilitating the reorientation of public spending and as a mediator in the promotion of municipal development plans\. When dealing with challenges that require intersectoral collaboration, the project design should involve public institutions which have an intersectoral mandate in order to facilitate the cross sector efforts required by environment, climate change and social issues\. Some projects might require more than one (independent) review as an opportunity to promote required changes, and to support an Intensive Learning ICR 204\. From September 2003 to April 2005, the project was rated Unsatisfactory\. The MTR that was carried out in January 2005 focused on the feasibility of achieving the Global Environmental Objective\. The MTR was instrumental in identifying key actions to put the project back on track, but because there was no significant progress in execution, it was not possible to produce a new indicator’s matrix to adjust to reality\. A partial cancellation and/or and extension of the project were considered at the time, but the independent evaluation did not strongly recommend either course of action\. 114 In particular, four practices were highlighted for their contribution to reducing vulnerability: variety of crops (including native species/varieties and traditional multiproduct plots); variety of spaces (corridors incorporating conservation and production areas in a landscape management approach); hillside management (reducing vulnerability with integrated watershed management techniques); and conversion to silvopastoral systems (improving yields and quality while restoring tropical forest areas that had been turned into pastures)\. 72 205\. Notwithstanding, the Bank team should have taken advantage of the opportunity to restructure the project at that time\. When an opportunity to improve project design is missed, the team should consider conducting an additional external evaluation to realistically evaluate design or implementation flaws and inadequacies that can be corrected\. Though it may be bureaucratic, such changes can help realign project objectives, indicators and activities to on-the-ground implementation realities and significantly improve performance\. It also allows project design to incorporate to-date lessons learned\. At project closure, an Intensive Learning ICR can also help to highlight important lessons and experiences, particularly from project participants\. For this ICR, the team requested FAO/CP resources to embark in an Intensive Learning ICR (BP 13\.55); however, they were not available\. Instead, CONABIO offered to conduct some of the recommended consultation-survey activities on their own, which rendered useful information for this report\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (b) Cofinanciers (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 73  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Table 1: Actual/PAD estimate of GEF and cofinancing Appraisal Appraisal Actual Estimate Estimate Reallocation GEF Percentage Percentage Counterpart Percentage Total GEF GEF (USD (USD of of funds of Components (USD millions) (USD millions) Appraisal Reallocation Appraisal millions) millions) Total Participatory design and monitoring of corridors 5\.91 4\.26 4\.11 1\.93 45% 46% 2\.97 83% Corridor integration into development programs 71\.72 3\.98 3\.56 5\.56 140% 156% 38\.2 61% Sustainable use of biodiversity 9\.31 4\.01 4\.46 4\.46 111% 100% 17\.00 230% Project management and coordination 3\.1 2\.59 2\.71 2\.89 112% 107% 1\.27 134% 14\.84 14\.84 59\.44 82% Total Baseline Cost 90\.05 Physical Contingencies n/a n/a n/a n/a n/a n/a n/a n/a Price Contingencies n/a n/a n/a n/a n/a n/a n/a n/a Total Project Costs 90\.05 Project Preparation Facility (PPF)* n/a n/a n/a n/a n/a n/a n/a n/a Front-end fee IBRD ** n/a n/a n/a n/a n/a n/a n/a n/a Total Financing Required 90\.05 * Note: In Annex 3 of the PAD, there is an estimate of US$897,600 for Physical Contingencies and US$10\.1 million for Price Contingencies, but this is not later reflected in the final cost by Component, therefore we chose to keep the Component Cost recorded in the main body of the Document\. ** Preparation was financed with a GEF PDF B grant + PHRD resources *** Front end fee not found in PAD or legal documents 74 (b) Financing Table 2: Financing Source of funds Appraisal Estimate Actual Percentage of (USD $m) (USD $m) Appraisal GOM 66\.99 38\.2 57\.0% IBRD * 4\.25 * CONABIO 1\.24 1\.27 102\.4% Beneficiaries 0\.29 17\.0 5851\.7% Grand Total 72\.77 56\.47 77\.6% * The Bank’s Rural Development in Marginal Areas APL was implemented under the Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA) in two phases\. The first phase closed in June 2003 (P007711)\. Table 3: Additional sources of financing (not in PAD) Appraisal Estimate Actual Percentage of Source of funds (USD $m) (USD $m) Appraisal International and private cooperation Fomento Social Banamex,A\.C\. 0\.00 0\.01 N/A BNPP Trust Fund 0\.00 0\.35 N/A Subtotal additional sources 0\.00 0\.36 N/A Table 4: Disbursement at closure by category Category Description USD Goods for Parts A and D of the project (except as covered by Category (4) below) : 1 (A) expenditures which are incurred pursuant to Part A\.2(b) 7,022\.79 of the project (B) other 196,981\.15 Consultants’ services and training: 2 (A) expenditures which are incurred pursuant to Part A\.2(b) 248,458\.06 of the project (B) other 8,469,915\.41 3 Goods and works under Part C of the project 0 4 Operating costs under Part D of the project 2,896,157\.75 5 Unallocated 0 6 Sustainable Use Subprojects 3,021,464\.84 Total Disbursed 14,840,000\.00 Original Loan Amount 14,840,000\.00 75  Table 5: Reallocation by category Original Modified Disbursed Available Reallocation # Category allocation allocation (USD) (USD) (USD) (USD)* (USD) 1 Goods Part A and D 114,624 114,623 1 118,253 232,877 Consultant services and 2 training 9,175,343 8,441,356 733,987 -417,502 8,757,841 3 Operating costs Part D 3,100,033 2,811,846 288,187 -150,704 2,949,329 4 Subprojects 2,450,000 1,962,819 487,181 449,952 2,899,952 Subtotal 14,840,000 13,330,645 1,509,355 0 14,840,000 DA - 650,000 -650,000 - - Total 14,840,000 13,980,645 859,355 0 14,840,000 * Amendment signed Nov 23, 2004 exchanged SDR denomination into US dollars\. Therefore the allocation (in USD) above does not correspond with the PAD/Grant Agreement amount in SDR\. Table 6: Reallocation by component Component Category Original Reallocation Modified (US$M) (USD) (US$M) Participatory design Consultant services 4\.26 -150,704 4\.11 and Monitoring and training Goods Part A Corridor Integration Consultant services 3\.98 -417,502 3\.56 into Development and training Sustainable use Subprojects 4\.01 449,952 4\.46 Project Management Operating costs Part 2\.59 118,253 2\.71 D Goods Part D Total (US$M) 14\.84 14\.84 Table 7: Disbursement at project closure versus original and reallocation by category Original Modified # Category Actual Percentage allocation allocation 1 Goods Part A and D 114,624 232,877 204,003\.941 88\.0 % Consultant services 2 and training 9,175,343 8,757,841 8,718,373\.47 99\.5 % 3 Operating costs Part D 3,100,033 2,949,329 2,896,157\.75 98\.2 % 4 Subprojects 2,450,000 2,899,952 3,021,464\.84 104\.1 % Total 14,840,000 14,840,000 14,840,000 100\.0 % 76 77  Annex 2\. Outputs by Component Consultancies and Total (MXN$) Beneficiaries Principal Results Achieved Implementing subprojects by strategic line GEF Others Yucatan Peninsula Corridors Development, Land $3,872,180 $7,696,141 -22,970 people Ecological regionalization identified as COMADEP, A\.C\. Management and Planning of -14 municipal plans priorities: Corridors -61 communities (a) Preservation, protection, restoration Tropica Rural -Indigenous (18%), Women and sustainable use of natural resources; Components A, B, C, D (49%), Men (51%) (b) Location of production activities and CINVESTAV human settlements, consistent with other 11 consultancies: support the laws and regulations and existing Instituto para el formulation and implementation programs in the field; Desarrollo of land use and sustainable rural (c) Maintenance of environmental goods Sustantable de development plans in the Corridor and services; Mesoamerica, A\.C\. areas\. (d) The protection of critical habitats for conservation of wildlife refuge areas to El Colegio de la protect aquatic species and other Frontera Sur instruments for the conservation of (ECOSUR), ecosystems and biodiversity; Unidad Campeche (e) Resolution of environmental conflicts and promotion of sustainable development; (f) Incorporation of environmental variables in the programs of government (federal, state and municipal)\. For the North Coast of Yucatan Corridor 30 thematic maps were generated at a scale of 1:50,000\. For the Calakmul- Balan Ka’ax Corridor 37 maps were created at a scale of 1:50,000\. 12 different thematic maps were created for focal areas in the same corridor at a scale of 1:50,000\. 78 Exchange of Knowledge and $3,182,638\.75 $1,815,750\.00 -17,794 people MMBC project attended 136 Universidad de Strengthening of Local -129 communities organizations through awareness Quintana Roo Capacities -Men (51%), Women (49%) campaigns, evaluation of prioritization problems, project strategy design and/or COMADEP, A\.C\. Components A, B, C planning through training courses, workshops, experience exchanges, Organización de 10 consultancies and 2 technical advice, and support and Ejidos Productores subprojects: workshops were management of pilot projects\. All these Forestales de la held to empower producer activities were included in the key Zona Maya, S\.C\. organizations as well as training performance indicators for the relevant courses to coordinate/alight their components\. Niños y Crías, conservation efforts\. A\.C\. Unión de Cooperativas de Chabihau, S\.C\. de R\.L\. 6 consultants Working with Women $3,598,296\.98 $6,141,082\.83 -624 people Strengthened the organizations and 50 women’s -36 communities groups of indigenous and rural women organizations Component C -Indigenous (66%), Women through sustainable management of their (92%), Men (8%) subprojects, conservation and restoration 50 subprojects: promote activities, and sustainable income- participation of women in generating activities\. Promoting their economic activities in the region participation in decision making related by strengthening and developing to environmental, social and economic organizational capabilities that are sustainability in the biological corridors\. conducive to the sustainability of their initiatives\. Subprojects included : production of octopus, organic vegetables, cultivation and marketing of bananas, vegetables, native melipona (Apidae, Melipona yucatanica), beekeeping, organic honey production, dragon pearl of pitahaya fruit (Hylocereus cacti), environmental sanitation, restoration of mangroves, production of compost-based marine kelp (algae), production and marketing of handicrafts\. 79 Beekeeping for Conservation $4,120,511\.00 $9,249,872\.00 -1,226 people 36 organizations have been strengthened 36 producer -45 communities with an impact on beekeeping activities organizations Component C -Men (77%), Women (23%), in 45 communities\. Indigenous (92%) 4 consultants 36 subprojects and 4 consultancies: contribute to improving beekeeping activities in the Yucatan Peninsula with special attention to the following aspects> organizational strengthening, conservation of collective biological resources, productive efficiency, compliance with quality control standards (safety and traceability), new marketing strategies for the benefit of small producers (differentiation, certification, fair trade, labeling and packaging, etc\.)\. Development of Low-impact $3,357,726\.50 $17,093,490\.45 -3,245 people Provided mechanisms for support and Yaxché Árbol de Ecotourism (aka Environmental -Indigenous (59%), Women advice through backing these subprojects, la Vida, A\.C\. Tourism) (43%), Men (57%) including (i) improvement in equipment, infrastructure and training, (ii) resources 2 consultants Components A, B, C and management guidance for resolution of legal issues, (iii) definition of 21 producer 21 subprojects and 3 environmental load limits (i\.e\., number of organizations consultancies: strengthen the tourists), and (iv) access rights and use, capacities of local initiatives and among others\. promote low-impact tourism with a focus on social inclusion\. 80 Biodiversity Management $1,366,614\.00 $2,355,200\.00 -252 people Extensive UMAs have registered having U YOOL CHE, (Management Units for the -Men (84%), Women (16%), comprehensive land uses (research, A\.C\. Conservation of Wildlife) Indigenous (100%) commercial exploitation, songbirds, ecotourism) as well as proper 2 consultants Components B, C maintenance\. Management plans were prepared to monitor and adjust use 8 producer 8 subprojects and 3 impacts (frequency and intensity)\. organizations consultancies: strengthening the Additional improvement included: (i) Management Units for the strengthening infrastructure—camps, Conservation of Wildlife (UMAs) composting toilets, sighting towers, fire as an instrument of sustainable breaks and trails, tools and equipment; use of biodiversity in areas with (ii) improved signaling—20 signal flags conservation gaps, through with 50 signals for UMAs; and (iii) technical assistance and support training for 125 UMAs members and for networking with business technical assistance for 8 UMAs areas\. approaches and improving biological connectivity\. Sustainable Use of Non-timber $973,000\.00 $2,602,000\.00 -1,385 people Provided support for the consolidation of Consorcio Forest Products (NTFPs) -53 communities management and integration of the chicle Corporativo de -Women (2%), Men (98%), gum production chain consortium Productores y Component C Indigenous (95%) composed of 53 cooperatives\. The exportadores en finished product that was marketed forestería, S\.C\. de 3 subprojects: to ensure the (mainly in Europe) is the first product to R\.L\. viability for a productive activity incorporate the “Corridor” eco-label as a that allows for the conservation of part of its international marketing\. Its Unión de forest areas and maintaining sales volumes are increasing\. The product Productores de biodiversity\. It generated was certified as Chiczá natural gum Chicle Natural significant benefits for chicle gum brand\. Plan Piloto producers (mostly indigenous)\. Chiclero, S\.P\.R\. de R\.L\. Chiapas Corridors Aquaculture with Native $189,150\.00 $574,400\.00 -104 people Construction of 12 modules of 12 producer Species -7 communities aquaculture harvesting on the banks of organizations -Women (20%), Men (80%), streams and tributaries to the Lacantun Component C Indigenous (30%) River, with the participation of SAGARPA\. 12 subprojects: supporting producer groups working to strengthen aquaculture production systems in their region 81 Support for Honey Production $3,230,311\.75 $17,035,368\.00 -900 people Production and organization processes 9 producer -35 communities were consolidated for nine organizations Component C -Women (22%), Men (78%), beekeeping/honey producing Indigenous (95%) organizations, including support for the 9 subprojects: strengthen purchase of hives extraction and storage organizations that keep honey equipment, labels and packaging\. Support bees\. was also provided for the design of new products and reforestation of beekeeping areas\. MMBC resources were used to leverage resources from Banchiapas, CDI and SAGARPA\. Establishment and Development $14,613,514\.70 $292,476,023\.64 -9,934 people 41 organizations were registered with PATPO Shade Coffee Production -206 communities 5,366 coffee producers representing 297 IDESMAC, A\.C\. -Women (22%), Men (78%), locations in 18 municipalities in the Components A, B, C Indigenous (85%) southern corridor of the Sierra Madre of CERTIMEX Chiapas\. 21 subprojects and 7 4 consultants consultancies: support to coffee The MMBC team developed 17 producers and organizations to subprojects to obtain resources from 21 producer strengthen their systems of shade ProArbol program from CONAFOR\. organizations coffee production\. 21 subproject proposals were made to strengthen coffee organizations that are located in Chiapas corridors, all of which were submitted to various institutions for funding and are in the process of being accepted\. 13 organizations with sustainable coffee production are in the process of obtaining organic certification\. MMBC has supported their training\. 82 Payment for Environmental $840,000\.00 ------ -1,598 people 1 subproject: Preparation of the project Cooperativa Services -1 community “Reforestation, ecological restoration and AMBIO Working -Men (95%), Women (5%), carbon sequestration in the Ejido May 3, Group in Ejido Components B, C Indigenous (70%) Mapastepec, Chiapas\.” Tres de Mayo (May 3) 1 subproject and 1 consultancy: 1 consultancy: Preparation of the State contribute to the integration of a program for payment for ecosystem State Payment for Ecosystem services for Chiapas\. Services Group (GESE) in the State of Chiapas, to take advantage of opportunities to generate proposals and projects for the payment of environmental services\. Training, Technical Assistance $4,385,258\.00 $31,775,668\.60 -3,040 people Support for the construction of trails, Asesores en and Consolidation of -8 communities training workshops, capacity building Desarrollo Ecotourism in State Processes -Indigenous (75%), Women and skills regarding creation of Turístico (50%) ecotourism routes, including Palenque Sustentable, S\.C\. Components A, B, C Lagos de Montebello, Sierra Soconusco Route and Route Zoque\. La Otredad 9 subprojects and 5 consultancies: develop a program 3 consultants for consolidation of alternatives for ecotourism centers of the State 9 organizations using working proposals for ecotourism routes in Chiapas corridors\. Strengthen and support organizations, working groups and producers in the region for the proper management of their workplaces in order to promote ecotourism in Chiapas\. 83 Knowledge Sharing $20,493,929\.17 $3,906,211\.00 -3,089 people Project was successful in supporting the IDESMAC -28 communities stated goal of the knowledge sharing Components A, B, C, D -Indigenous (85%), Women activities, already described\. CAMADDS (20%), Men (80%) 17 consultancies and 3 Three subprojects were financed: wood PATPO subprojects: share and agree on saving stoves, cultivation of vanilla, and strategies developed by the ecological technologies\. Instituto de MMBC work in Chiapas, and to Historia Natural y disseminate and extend to Ecología participating producers training opportunities/processes with Grupo GEA different institutional sectors, academia and social Espacios de organizations\. Educación Tecnológica 9 consultants Monitoring and Evaluation $8,467,845\.00 $1,909,065\.00 -2,536 people Establishment of a monitoring system Consejo Civil para -56 communities and network that allows for biodiversity la Cafetícultura Components A, B evaluations in the corridors\. Sustentable, A\.C\. 9 consultancies: to know and CentroGEO identify the main species used as indicators of biodiversity and to 5 consultants create a baseline for monitoring\. Educate and train a network of local monitors that will follow up\. Land Use $1,962,236\.20 $733,968\.00 -9,453 people 5 municipal plans were developed with 32 producer comprehensive consideration of such organizations Component A, B, C issues including: education, health, infrastructure, communications, 5 consultants 32 subprojects and 5 employment, and conservation and consultancies: inhabitants of sustainable use of natural resources of the communities and municipalities municipality\. Municipal authorities and within the Corridor are involved local producers attended the workshops in the design and elaboration of (men, women and youth)\. subprojects and who are committed to conservation in an integrated and sustainable manner\. 84 Sustainable Agricultural $9,535,621\.93 $49,954,212\.00 -5,260 people 32 subprojects for the establishment of Pronatura Sur, Practices and Watershed -45 communities new forms of production and proper A\.C\. Management -Women (80%), Men (20%), management of biodiversity and Indigenous (70%) ecosystems as “community heritage”\. Natura y Components B, C Ecosistemas Mexicanos 32 subprojects and 6 consultancies: reduce 32 indigenous environmental impacts by organizations promoting sustainable livestock practices that help prevent soil and water loss; do so through supporting watershed management, silvopastoral practices and reduced use of fire\. Sustainable Forest Production $2,073,120\.22 $11,779,653\.50 -1,754 people A group of palm (Chamaedorea) Pronatura Chiapas -19 communities producers created for its cultivation and Components B, C -Men (60%), Women (40%) marketing in the southern corridor of the 6 consultants Sierra Madre of Chiapas\. Two tree 9 subprojects and 7 production organizations created to 9 producer consultancies: promote support reforestation and use/cultivation organizations sustainable use of forest of medicinal plants (in the Lacandona resources\. forest)\. Management Units for Wildlife $1,417,980\.00 $4,027,820\.00 -99 people 6 subprojects designed by the MMBC for 6 producer Conservation (UMAs) -6 communities the management/production of white- organizations -Indigenous (45%), Women tailed deer and 18 subprojects that were Component C (41%), Men (59%) presented to SEMARNAT (General Directorate of Wildlife) in the two 6 subprojects: promote and Chiapas corridors\. strengthen productive practices that support wildlife management units (UMAs) as an alternative for the sustainable management of biodiversity\. 85  Table 2: Subprojects by sector Sector No\. Subprojects 1\. 14 Aquaculture 2\. 38 Agrobiodiversity 3\. 46 Beekeeping 4\. Coffee production 20 5\. Ecotourism 30 6\. 18 Forestry and Agroforestry 7\. 15 Biodiversity Management and Wildlife Mantenance and restoration of 8\. 16 ecosystems 9\. Handicrafts (wood and others) 10 10\. Environmental health 8 TOTAL 215 Table 3: Capacity-building workshops Academia Beneficiaries Officials Others Total Events No\. No\. No\. No\. No\. No\. No\. No\. No\. No\. Events People Events People Events People Events People Events People a) Community Planning 6 57 231 3,847 79 396 2 100 318 4,400 b) Technical Assistance 16 33 341 10,445 4 24 0 0 361 105,02 and Support c) Specialized 9 263 324 4,746 14 191 0 0 347 4,988 d) Monitoring and 15 613 110 775 40 216 0 0 165 1,604 Evaluation e) Dissemination 23 494 244 17,544 34 1,411 0 0 301 19,449 TOTAL 69 1,460 1,250 37,357 171 2,238 2 100 1,492 40,943 PAD Indicator: 260 staff trained; 2,238 staff were trained by MMBC from all levels of government (federal, state, municipal)\. PAD Indicator: 64 training workshops; the MMBC conducted 318 community planning workshops\. PAD Indicator: 112 training courses: the MMBC conducted 361 technical assistance and support activities\. Consultancies One hundred eighty nine (189) consultancies were funded with a total cost of US$2,953\.240 over the nine years of implementation\. These resources were directed to financing the activities of the four project components, such as: i) training the technical staff of the project; ii) training of stakeholders and senior officials; iii) technical and cost- benefit studies; iv) technical advice for the formulation of municipal and community participatory plans and projects; v) identification of land conflicts in the Lacandona region of Chiapas; vi) training for bird monitoring and evaluation in focal areas; and vii) scientific studies, which can be found on the GIS website of the MMBC\. 86  Table 4: Publications Books Documentaries Posters Digital cartography and videos “Protecting What Is Ours\.” Manual for Trails of “Diversity of Module of basic land community environmental management, Life(Dutch Grant) Honey from the information in the region, use and conservation of biodiversity by Yucatan 2006\. Mexico rural indigenous communities in Latin Peninsula”(map) Mesoamerican America\. Biological Corridor CD\. “Biodiversity and Responsible Consumption” (in Chujúm, a “Living Spaces\.” Module of basic land English and Spanish) traditional Mesoamerican information in the alternative forest Biological region, 2007\. Mexico management in the Corridor in the Mesoamerican Lacandona forest\. Yucatan Biological Corridor CD\. Peninsula” “Monitoring and Evaluation of Natural Resources” “Sustainable Trade\.” Catalogue of products and “Red Wind: “Living Spaces\.” services Hurricane Dean\. Mexico The impact of Mesoamerican Hurricane Dean in Biological Quintana Roo\.” Corridor in Chiapas Technical manual for the establishment and “Voices in the “Connectivity in management of pepper plantations in the region Lacantún, Echoes Biological of Calakmul, Campeche of the Lacandona” Corridors” “Importance of ecological capital of the region of “For the Corridor” the Mesoamerican Biological Corridor – Mexico” “Evaluation of forest plantations in the area of Sian From Kantemó to Ka’an–Calakmul” Las Nubes” “Model for information and “About Honey” knowledge services within a framework of public management for development\.” ”Honey varieties from the Yucatan Peninsula and “Among Women” their market niches\.” “State program for payment for environmental services\. A proposal for Chiapas\.” “Among aromas and flavors” “Management Units for Conservation of 10 one-minute video Wildlife and the Mexico Mesoamerican clips on sustainable Biological Corridor” use “Mahogany of the Yucatan Peninsula: ecology and regeneration” Catalogue of alternative technology\. Directory of products and producers\. “Municipal Plan for Sustainable Development of Siltepec, Chiapas” Strategy for payment for environmental services in Quintana Roo: hydrological performance “Complex systems and environmental management” “Anatomy of an environmental agrarian conflict in the north of the Lacandona” 87 “Areas of influence of protected natural areas” Voluntary Conservation Areas in Quintana Roo 88  Annex 3\. Economic and Financial Analysis The project did not have an economic analysis in the original PAD\. During appraisal, a choice was made to base the economic chapter on an Incremental Cost Analysis, instead of doing a cost- benefit, cost-effectiveness or other type of analysis\. 89 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Rafaello Cervigni Environmental Economist LCSEN TTL (1998-2000) Ricardo Hernandez Murillo Environmental Specialist LCSEN Environment Lucia Grenna Communication Specialist LCEXT Communication Silvia Moran-Porche Procurement Asst\. LCSPT Procurement Victor Manuel Ordonez Conde Financial Management Specialist CTRLP Financial Management Monique Pelloux Patron Program Assistant LCSIS Assistant Teresa M\. Roncal Operations Analyst LCSAR Procurement Tania Carrasco Consultant LCSEN Social and Indigenous Jozef Draaisma Sr Country Economist LCSPE Economic Analysis Lea Braslavsky Procurement Advisor LC1SD Procurement Supervision/ICR Rafaello Cervigni Sr\. Environmental Economist LCSEN TTL (2000-2001) James Smyle Sr\. Natural Resources Specialist LCSAR TTL (2001-2005) Brenna Vredevelt Junior Professional Associate LCSEN ICR CoTTL (2010) TTL (2005-2010) Ricardo Hernandez Murillo Sr Environmental Specialist LCSEN ICR CoTTL (2010) Efraim Jimenez Consultant EAPCO Procurement Juan Martinez Sr Social Scientist LCSSO Social Takako Mochizuki Consultant LCSAR Gender Silvia Moran-Porche Procurement Asst\. LCSPT Procurement Victor Manuel Ordonez Conde Financial Management Specialist CTRLP Financial Management Monique Pelloux Patron Program Assistant LCSIS Assistant Gabriel Penaloza Procurement Analyst LCSPT Procurement Teresa M\. Roncal Operations Analyst LCSAR Procurement Gerardo Segura Warnholtz Senior Rural Development Specialist LCSAR Forestry Institutional Andrea Semaan Consultant LCSDE Development Juan Carlos Serrano-Machorro Financial Management Specialist LCSFM Financial Management Tania Carrasco Consultant LCSEN Social and Indigenous Jozef Draaisma Sr Country Economist LCSPE Economic Analysis Dmitri Gourfinkel Financial Management Analyst LCSFM Financial Management Institutional Klaus Urban Institutional Development Specialist CP/FAO Development Karina M\. Kashiwamoto Language Program Assistant LCC1C Assistant Lea Braslavsky Procurement Advisor LCSPT Procurement 90 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY99 110\.28 FY00 215\.63 FY01 65\.45 FY02 3\.96 Total: 395\.32 Supervision/ICR FY01 21\.42 FY02 44\.38 FY03 78\.10 FY04 85\.64 FY05 87\.66 FY06 109\.99 FY07 98\.54 FY08 49\.83 FY09 60\.0 * FY10 60\.0 * TOTAL 1,486\.20 * * Estimated based on WPA 91  Annex 5\. Beneficiary Survey Results Survey I\. Evaluation of the Sustainable Rural Development Program CBMM- CONABIO-SAGARPA in the region of Marqués de Comillas, Chiapas PDRS-MC 1\. Of the four participating states, Chiapas is the one with the highest potential for the implementation of the corridor strategies\. Within Chiapas where the Sierra Madre del Sur and Selva Maya Zoque Corridors meet,the Marqués de Comillas municipality is key both for social and ecological reasons\. 2\. During preparation, the social situation in this area (adjacent to the Montes Azules Biosphere Reserve and the Maya Biosphere Reserve in Guatemala, the largest rainforest reserves in the northern hemisphere) required special provisions in the PAD115\. During the implementation, the Chajul Biological Research Station in Montes Azules became the meeting point for training and knowledge sharing activities promoted by the MMBC\. This area also became the laboratory for collaboration with the Ministry of Environment and the Ministry of Agriculture in order to concentrate efforts and resources and to develop demonstration areas for the strategic lines of the MMBC\. 3\. Since 2008, the Sustainable Rural Development Programme (PDRS-MC) has been executed by the MMBC\. The PDRS-MC seeks to integrate the conservation of natural resources, especially tropical rainforests, with improved production and social development for local populations\. It is an initiative to give continuity to the efforts being made in Mexico and Chiapas to achieve environmental, productive and social sustainable rural development\. The PDRS-MC is carried out in a coordinated manner by SAGARPA, MMBC, CONABIO, SEMARNAT and the Chiapas state government\. 4\. With funding from the United States Agency for International Development (USAID), the Interdisciplinary Center for Biodiversity and Environment (CEIBA) carried out an evaluation of the first implementation cycle of the PDRS-MC in September 2009\. The study includes interviews, a socioeconomic survey and workshops with ejidatarios, municipal and ejido authorities, government officials and researchers\. 5\. The importance of the Marqués de Comillas region as part of MMBC has to do with its geographical role in connecting two important protected areas—Montes Azules Biosphere Reserve and Selva Maya (Guatemala)\. In this region, increasing livestock and “slash and burn” corn production is leading to deforestation with a loss of 40% to 50% of forest area\. Despite the depletion of these natural resources and capital, 85% of the population is in food poverty\.116 According to the National Agrarian Registry (RAN) ejido participants in the project own 79,606 ha; but according to the ejidatarios it is 72\.851 ha\. Of this, 8% is designated for community use, 34% for corn production, and the rest for farmland, fallows and meadows\. 6\. During FY2008, PDRS-MC implemented in Chiapas Corridors had a budget of MXN$26,500,000 divided into three components: a) MXN$6,800,000to team of technicians; b) 115 PAD, page 27: Considering the special conditions of the focal area La Cojolita (high level of social conflicts and land tenure problems), the IPDP specifies that during the first year of project implementation there will be additional consultation activities carried out in this focal area\. The activities will involve participatory planning to adapt the global strategic lines of the IPDP to the particular conditions of the area\. The conclusion of these activities will be a condition for the application of investment resources in La Cojolita\. 116 The National Council responsible for the evaluation of social policy in Mexico (Coneval) distinguishes three levels of poverty: Nutritional (Income), Capacities, and Assets\. See: http://www\.coneval\.gob\.mx/contenido/med_pobreza/3967\.pdf 92 MXN$13,100,000 for sustainable use of natural resources for primary production (productive restoration), and c) MXN$6, 600,000 for the acquisition of productive assets (equipment)\. 7\. During 2008 the following results were achieved: Indicator Measurement unit 2012 Target 2008 Progress Local arrangements for forest conservation Ha 50,000 20,000 Families with income > MXN$50,000 per year Families 2,680 1,500 Recovery/restoration of forest frontier Ha 3,600 350 Sustainable diversified agriculture Ha 1,800 422 Sustainable Commercial Agriculture Ha 320 40 Recovery/restoration of degraded pastures Ha 30,000 795 Silvopastoral conversion Ha 10,000 440 Livestock production units Production Units 800 75 Results of the component of Sustainable Use of Natural Resources for the Primary Production (Productive Reconversion) 8\. 1802 Productive restoration subprojects were supported in 2,212 ha by 1802 beneficiaries in 29 communities from four municipalities including: • 173 to reorient the widespread agricultural and livestock activities that cause deterioration of forestcover in the area of Marqués de Comillas; • 920 for backyard improvement; • 420 for milpa settling; • 68 for acahuales enrichment, introduction of fodder trees and pasture land subdivision; • 205 for renovation of pastures and pastureland improvement and restoration of riverside\. Results of the Productive Assets component 9\. 23 subprojects associated with productive chains were financed through the productive assets component including: • 10 aquaculture; • 2 ecotourism; • 1 for housing livestock; • 5 Environmental Management Units of Wildlife (UMA); • 3 greenhouses; 93  • 1 organic agriculture\. 10\. The beneficiaries included 285 people: 77 women and 208 men\. 11\. Training • 59 community producers (26 women and 33 men) on technical skills, capacity building and use of tools; • 952 workshops in ejidos (117 men and 775 women) on environmental issues and natural resource management; • 55 young people (21 women and 32 men) participated in the youth network for the conservation and sustainable management; • Centro-GEO (GIS, mapping and data collection service for the project) generated a GIS for the region\. (See GIS website www\.cbmm\.gob\.mx \.) 12\. Progress of PDRS-MC as of 2008, and next steps a) Sustainable productive restoration\. The survey showed that 85% of the beneficiaries of the PDRS-MC are not burning the brushwood in their fields\. The geographical baseline established by the PDRS-MC will be used to make comparisons to measure restoration over time\. b) Encourage changes in attitude toward the sustainable use of biological resource potential available to the region\. 67 people (5\.19%) are involved in the acahuales enrichment, out of a total 1290 participants\. The low percentage of participation is due to the many limitations associated with timber, including the overexploitation of the rainforest and the fact that there is a lack of forestry organizations to help land owners better use their rainforest resources\. As a result, the PDRS is increasing farmer awareness on sustainable use of their natural resources in order to incorporate them into the timber resource use scheme\. c) Provide tools to reorganize the management of the territory based on the status of the environment, and the requirements for sustainable production and development of infrastructure and services\. This is an activity that has not been carried out yet and is scheduled for the second stage which will generate useful land use tools and practices for the ejidos and their inhabitants\. d) Promote productive chains to ensure livelihoods and ensure participation in markets, especially those that recognize the environmental value of products\. The next step is to support producers in entering markets, establishing long-term business relationships and meeting standards for quality and quantity that markets will demand\. Obstacles that these projects will have to overcome include: remoteness from major markets, lack of entrepreneurial skills, lack of knowledge about the behavior of markets and few organizational capabilities of the producers\. To meet this goal, the next stage of the PDRS-MC will require a focus on overcoming these obstacles and the integration of (participation among) those businesses already developing under production chain models\. 94 e) Orient public investment to support synergies between increased efficiency in primary production activities (agriculture) and the containment of natural resource degradation processes\. 1802 subprojects were cofinanced by the landowners in order to improve natural resource management\. Design of subprojects for the restoration of riversides will need to incorporate economic incentives so that they result in tangible benefits for landowners in the medium term\. f) Increase the efficiency of local institutional management to strengthen the municipalities, ejidos and economic organizations\. In the area where the PDRS-MC operates, ejidatarios have little experience organizing economic groups\. As a result, the MMBC team has provided continuous training to strengthen human and social capital, and thus local institutional management (municipalities and ejidos)\. 13\. 80% of the beneficiaries reported in the survey that during 2008 they participated more in MMBC meetings as opposed to meetings with other governmental programs\. Survey II\. Evaluation of the Economic and Social Impact of Mexico Mesoamerican Biological Corridor in the Peninsula and Chiapas 14\. In September 2009, the MMBC team used GEF resources to conduct a survey in order to determine the impact of the project from 2005–2009, specifically focusing on the subprojects granted to communities located in the focal areas of the five corridors\. 15\. From a total of 215 subprojects117 (8 persons by subproject) 209 surveys were conducted in 29 villages of the five corridors: 105 surveys in Chiapas in 13 communities (both Selva Maya Zoque and Sierra Madre del Sur Corridors), and 104 surveys in 16 communities in the focal areas of the Yucatan Peninsula (Campeche, Yucatan and Quintana Roo)\. The basic indicators chosen to measure the progress of the MMBC focus on ecology, improvement in the quality of life and strengthening of local community capacities\. 16\. The summary of the findings are: • Of the total beneficiaries of these projects, 34% are men and 66% women, indicating strong participation of women\. Resources for the subprojects began to flow in 2007 and have a wide variety of subjects that are detailed in Annex III\. • 86% said they know what the MMBC does: “it promotes the conservation of natural resources\.” • 96% said the support they have received has served to preserve the forest and/or rainforest\. 117 Includes MMBC subprojects and proyects coordinated with SAGARPA for Marqués de Comillas\. 95  • 40% of the surveyed population said that they receive the minimum wage, which at the most is MXN$51\.95 per day; 14% receive up to two times the minimum wage; and only 25% earn more than that, while the remaining 21% includes housewives who participated in the project without pay or those who did not answer the question\. • 90% of respondents said that both the production and marketing of their products have improved since the introduction of the corridor subprojects\. • 90% said that since the MMBC began working in their community they have higher incomes, have improved their quality of life and have more training and communication with others working in similar activities\. 17\. Quotes from government officials and external technicians • SAGARPA: “Commitment was made from producers”\. • SEMARNAT: “Community self-management and coordination with federal and state agencies has been strengthened”\. • CONANP: “From a perspective of conservation and development, the MMBC is one of the best programs\. While the NPAs are representative; they have an island effect for genetic viability, so this project is essential as a tool for development”\. • CONAFOR: “The project has had a positive effect because it helps people's awareness, especially in waste management\.”118 • SEMARNAT: “It [the MMBC project] has become provided important groundwork and documentation support, allowing different government institutions and NGOs to be connected to important resources made available through workshops and studies”\. 18\. Quintana Roo • Executive Director of Consorcio Chiclero, of Quintana Roo “The Corridor is a tool that enhances organizational initiatives and economic aspects of community forestry\. Its contribution is not only financial, but it is an element that connects the regional level and the social alliance of forest communities on a common principle: sustainable management and forest economics”\. • National Commission for the Development of Indigenous Peoples\. “The actions of the Corridor and the benefits it has brought are more visible, particularly for members of some indigenous groups\. One problem has been that funding comes 118 Although waste management is not usually considered in agroecology approaches, the MMBC and the CONAFOR recognized the relevance of reducing waste, reusing and disposing appropriately in the integrated management of watersheds\. This also was considered relevant by communities and governments in the Yucatan Peninsula\. 96  at the wrong time and when it comes, it is a mix of resources with other agencies, and work started in the communities is not completed within the allotted time”\. • Director of the Forests in the municipality of Othon P\. Blanco, Quintana Roo “There is no doubt that the Corridor has enhanced awareness among the population …\. The Corridor has provided support serving as seed capital for communities and producers to obtain complementary resources”\. Information analysis Impact of MMBC resources 19\. MMBC activities have included two phases of intervention\. During the initial stage of preparation, efforts where focused on carrying out studies and consultancies\. The second stage was characterized by subproject implementation, which consolidated Corridor work in the reorientation of public program investments into a new conservation, restoration and management of biodiversity model\. 20\. Socioeconomically, MMBC impacts are supporting production processes and products to enter alternative market channels and markets for environmental services\. Those markets that are targeted take into consideration environmental sustainability, gender equity and the value of cultural origin of the products that the communities offer\. Progress made along these lines in tourism services, cacao products, coffee, honey, gum, pepper, copal, vegetables and handicraft production demonstrate the Corridor’s relevance and its potential for even greater achievements in its next stage of implementation 21\. Another outstanding aspect that the survey reveals is the strengthening of social capital including: strengthening the capacity of design, management, evaluation and monitoring of productive projects, mediation and resolution of land conflicts (especially in Chiapas and particularly in the Lacandona community), and the consolidation of producer networks\. 97 Annex 6\. Stakeholder Workshop Report and Results Not applicable\. 98  Annex 7\. Summary of Borrower’s ICR and/or Comments on Draft ICR El Prestatario considera que el proyecto del Corredor Biológico Mesoamericano México (CBMM) fue la plataforma desde la cual es posible hablar actualmente en México de una política nacional de corredores biológicos\. El proyecto cimentó esta política\. Es por ello que el resultado global es altamente exitoso\. Se reconoce que durante la primera etapa el proyecto tuvo un arranque difícil, debido a errores de diseño, por ser un concepto nuevo y por inexperiencia\. Con el refuerzo de la Coordinación y del equipo técnico en una segunda etapa, el Corredor cumplió con la totalidad de los objetivos y metas planteadas en el proyecto, como fue monitoreado de acuerdo a los indicadores establecidos tanto en las enmiendas al convenio de donación como en los acuerdos con el Banco Mundial formalizados en las ayudas memoria\. El Prestatario está satisfecho con el proyecto ya que, además de la experiencia que se forjó en el camino, ha innovado en mecanismos que promueven la conservación del entorno natural en zonas críticas de biodiversidad a la par de brindar a la población local alternativas importantes de desarrollo económico\. Actualmente, el concepto de corredor biológico es mejor comprendido en un país en el que hace 10 años no existía un mecanismo transversal de esta naturaleza\. El donativo GEF desarrolló la base con la cual se seguirá trabajando en corredores biológicos en México durante muchos años\. Es un proyecto que logró instaurarse en el país y es parte ahora de la agenda ambiental a nivel nacional\. A continuación se describe lo que el proyecto ha realizado a nivel nacional y la importancia que tiene en la actualidad\. Casi diez años de actividades en uno de los proyectos ambientales más novedosos e importantes del continente, por su pertinencia, integralidad regional y por conciliar la conservación de la biodiversidad con su uso y manejo sustentable, es un acontecimiento del que México debe estar satisfecho: El Corredor Biológico Mesoamericano México ha trabajado junto con siete países centroamericanos, para unir ecosistemas naturales en un esfuerzo por preservar el 10 por ciento de las especies de plantas y animales conocidas, y propiciar, al mismo tiempo, mejores oportunidades y calidad de vida para los legítimos dueños de esos espacios del sureste de México\. El trabajo se ha enfocado en favorecer la conectividad entre zonas conservadas - mediante esquemas federales, estatales, municipales y privados- y las zonas en las que los recursos naturales son manejados y usados, principalmente por población rural e indígena que habita en cientos de localidades alrededor de esas áreas protegidas\. El mecanismo fue con una apuesta diferente a las aplicadas hasta hace un decenio en el país: contribuir a la conservación de la biodiversidad a través del aprovechamiento sustentable de los recursos naturales en el trópico húmedo mexicano\. 99 A esta distancia del camino se puede afirmar que dicha apuesta se logró con buenos resultados\. Con su estrategia, el Corredor ha brindado acompañamiento técnico, capacitación y financiamiento a organizaciones en más de 600 comunidades rurales e indígenas asentadas en Campeche, Chiapas, Quintana Roo y Yucatán, con la finalidad de favorecer su desarrollo económico a través del uso sustentable de su entorno\. Esto ha permitido a miles de productores cafetaleros, apícolas, forestales, chicleros, ganaderos, agrícolas y otros utilizar, por ejemplo, abonos orgánicos, bancos vegetales de proteínas, cercas vivas, estufas ahorradoras de leña, manuales de observación de aves y en general producir conservando, lo cual los ha llevado, entre otras cosas, a obtener certificados y sellos orgánicos y por lo mismo a ampliar las posibilidades de comercialización de sus productos, o promover servicios turísticos “amigables” con el entorno\. El aprendizaje ha sido en ambos sentidos: durante el acompañamiento técnico y a través del desarrollo de planes participativos y estudios diversos, se han podido conocer las formas tradicionales en las que las organizaciones rurales e indígenas aprovechan conservando, como en el caso de los chicleros, con lo cual se han desarrollado modelos de aprovechamiento sustentable que incluyen estas formas tradicionales y que pueden ser replicados en otras zonas\. El CBMM ha podido ir mejorando poco a poco sus propuestas, incorporando experiencias, aprendiendo de los errores cometidos en el camino y adaptando su trabajo a las necesidades detectadas en su zona de acción\. En todo este proceso, la conectividad biológica se ha visto favorecida con un impacto importante a favor de la biodiversidad en el territorio del trópico húmedo mexicano, y se han creado redes de monitoreo que permiten un avance en el conocimiento del entorno, lo que ha permitido a otras instituciones conocer la problemática local y de esta manera reorientar sus políticas públicas hacia criterios ambientales\. Los corredores biológicos han mostrado ser herramientas útiles de manejo durable del territorio para la conservación de la biodiversidad en México, y sobre todo, que es posible conciliar el cuidado de la naturaleza con un beneficio económico sensato y sustentable para sus pobladores\. El trabajo desarrollado muestra que los conectores biológicos, aunque no sean estrictamente una extensión del hábitat natural de las especies y exista en ellos población humana, permiten la supervivencia de ecosistemas de valor mundial y de especies bandera, como el caso de jaguar\. Se ha mostrado que los corredores funcionan como espacios para la transmisión de material genético de un lugar a otro\. Se ha concluido la etapa en la que el proyecto operó con financiamiento del GEF- Banco Mundial y se inicia ahora una nueva etapa en la que los logros alcanzados y las lecciones que han derivado de todo el proceso permiten vislumbrar la continuidad de las acciones, mediante una política nacional de corredores biológicos, 100 con el ánimo de seguir contribuyendo a los objetivos plantedos desde el año 2000\. El Gobierno Federal otorga a esta región una atención prioritaria, en el marco de las acciones de cooperación Sur-Sur, del Plan Nacional de Desarrollo, y en congruencia con el esfuerzo por hacer frente a los retos que impone una economía mundial cada día más globalizada\. Ante la crisis económica que vive el mundo, las zonas rurales se perfilan como verdaderas oportunidades para el desarrollo, en las cuales se pueden impulsar proyectos de perspectiva ambiental\. Es ahí donde se insertan las actividades de los corredores biológicos y donde una política nacional encaminada en este sentido encontrará un terreno fértil para ayudar a sostener políticas anticíclicas, que apoyen sustantivamente a los pobladores de las zonas vulnerables con acciones concretas para mejorar su economía\. Los corredores biológicos son sobre todo espacios territoriales de consenso y armonización de políticas públicas, en los que pueden converger estrategias, programas e instrumentos de política pública social, económica y ambiental, y que consolidan una verdadera transversalidad\. Los retos de estabilizar la cobertura de los ecosistemas remanentes, incluso aumentando su superficie, restaurar las áreas críticas deterioradas y reconvertir las prácticas productivas hacia el manejo sustentable, deben enfrentarse con instrumentos de política ambiental que incentiven estas actividades para que representen una alternativa económica viable para la población y se puedan multiplicar en otras regiones del país\. Desde su creación, el Corredor ha desarrollado y puesto en marcha una serie de modelos en busca de una mejor conectividad en los ecosistemas del trópico húmedo mexicano, que permitan conservar el entorno natural y a la vez coadyuvar a una mejora en la calidad de vida de la población local\. Estos modelos han sido probados y rediseñados con base en los resultados y probados nuevamente con el fin de tener las mejores herramientas para el logro de objetivos\. A esta distancia del camino, se puede afirmar que muchos de estos modelos son replicables en otras regiones del país, lo cual puede llevar a un mejorado manejo durable del territorio\. Ello, con el fin de crear corredores biológicos entre fragmentos conservados, como espacios en los cuales la conservación de la biodiversidad será una alternativa para el desarrollo sustentable y el bienestar social\. El camino por recorrer aún es vasto, pero se puede afirmar con toda certeza que los modelos que ha desarrollado el CBMM en apenas dos lustros abren la puerta para replicar esta experiencia con muchas posibilidades de éxito en otros espacios del país y que por ello es necesario ampliar esta experiencia como una auténtica política de índole nacional\. de los productores campesinos Existen seis indicadores básicos en los que se puede vislumbrar el trabajo realizado por el Corredor, algunos de ellos previstos en el PAD y otros alcanzados adicionalmente\. A continuación se enumeran: 101 a) Mejoramiento de la conectividad La conectividad se ha fomentado mediante acciones que promueven la estabilización de la cobertura de ecosistemas remanentes (mecanismos de conservación diversos como ordenamientos, reservas comunitarias, etc\.), promoviendo el manejo sustentable en áreas pobladas y restaurando áreas críticas deterioradas\. En este sentido, se ha puesto mucho énfasis en la planeación participativa\. Ejemplo de ello han sido los trabajos relacionados al ordenamiento territorial en Península de Yucatán: a) Propuesta e implementación de planes piloto de buen manejo apícola, vinculados a una propuesta de ordenamiento apícola y monitoreo de la calidad de miel en las áreas focales del CBMM en el estado de Quintana Roo y sus áreas de influencia; b) Convenio (Con Cinvestav) para la realización del «Programa de Ordenamiento Ecológico del Territorio del Estado de Yucatán\. Etapa 3 de las Fases de Caracterización y Diagnóstico»; c) Ordenamiento ecológico territorial e identificación de proyectos prioritarios de manejo sustentable en las comunidades de X-Hazil y Felipe Carrillo Puerto, Quintana Roo; y d) Creación de bases para el ordenamiento ecológico regional participativo y fortalecimiento de líneas de acción detonante en el área focal de La Montaña, Campeche\. También la formulación de cuatro planes municipales participativos en Chiapas: Coapilla, Solosuchiapa, Escuintla y Siltepec, para la integración de criterios de conservación de la biodiversidad\. El CBMM plantea como uno de los indicadores clave de conectividad y sustentabilidad ambiental el estado de las poblaciones de especies indicadoras específicas\. Para el mantenimiento de la conectividad del paisaje, las especies indicadoras recomendadas son aquellas que muestran una mayor sensibilidad a la fragmentación de su hábitat: vertebrados de gran tamaño corporal, amplios requerimientos de espacio y densidades poblacionales bajas\. Para la biota mesoamericana, las especies que mejor representan este conjunto de características pertenecen al grupo de los mamíferos\. Por ello, se realizaron varios trabajos de monitoreo de este grupo biológico en el área de trabajo del CBMM, sobre todo en el estado de Chiapas, que ponen en evidencia el papel del Corredor en términos de mantenimiento de la biodiversidad por medio de la presencia, aún esporádica, de la mastofauna, así como para asociar y empoderar a la población local en el monitoreo de algunas especies claves de mamíferos como indicadores del bienestar del ecosistema\. Se diseñaron sistemas de monitoreo adoptando una visión sistémica a diferentes escalas en el tiempo y en el espacio, en algunos casos con trampeo fotográfico, y se capacitó a la población local en el sistema de monitoreo sobre las actividades susceptibles de afectar la calidad del medio, en particular de los suelos\. Los resultados del muestreo de mamíferos mayores constituyen una línea base, de manera que la información recabada en muestreos futuros permita detectar cambios en el sistema e identificar acciones pertinentes para mitigarlos o facilitarlos\. Es una evidencia más de que los corredores biológicos favorecen la supervivencia de especies 102 emblemáticas\. De manera paralela, se efectúan una serie de acciones para capacitar a organizaciones y comunidades locales en la observación y monitoreo de aves, sobre todo en espacios en los que se promueve el ecoturismo, que además de representar un ingreso adicional para estos centros, se convierte en una actividad de monitoreo de la conectividad de ecosistemas locales\. b) Impacto en reversión de la tasa de deforestación\. La cobertura forestal es el primer factor asociado a la condición de un hábitat natural\. La deforestación no sólo causa detrimento de la biodiversidad, sino que afecta la calidad de los recursos hídricos, incrementa la erosión de suelos, aumenta los riesgos de inundaciones y actúa en detrimento de los servicios ambientales\. Por ello, uno de los enfoques principales del trabajo del CBMM es precisamente el de evitar la pérdida de la cobertura forestal en las áreas de conectividad, mediante estrategias diversas\. La acción central en este tenor ha sido la promoción de actividades rurales distintas a la agricultura como alternativa de desarrollo económico local, que incluyen principalmente a la apicultura, el ecoturismo y el cultivo de café de sombra, atenuando con ello la presión sobre los recursos forestales y fortaleciendo los incentivos para su conservación\. Esta serie de herramientas, sumadas a la elaboración de la Guía de Campo de Buenas Prácticas Forestales y una serie de criterios y tipologías de productores, han permitido orientar la gestión de los apoyos del CBMM en regiones forestales y evitar que éstos tuvieran resultados negativos\. Esto ha ayudado a garantizar que los apoyos realmente se traduzcan en impactos positivos y contribuyan a la sustentabilidad\. Además ha permitido inducir cambios o robustecer a las propias organizaciones sociales así como a las políticas públicas que afectan al sector forestal para orientarlo hacia la sustentabilidad\. Las evidencias del impacto de estas acciones se han ido manifestando en diversas localidades en las que la preservación de la cobertura forestal se ha convertido en una actividad cotidiana de la mano con el desarrollo de actividades económicas alternativas\. c) Impacto en acciones de adaptación al Cambio Climático Con el generalizado aumento de las temperaturas y las alteraciones en los ciclos de lluvias, aún con reservas naturales, los territorios fragmentados no permitirán a las especies movilizarse hacia lugares con condiciones climáticas más parecidas a las de sus hábitats naturales y muchas de ellas, que se enfrentan ya a otros problemas por la afectación humana de sus hábitats, no podrán adaptarse, provocando la pérdida hacia el final del siglo de numerosas especies\. Tanto plantas como animales contribuyen al 103 funcionamiento de los ecosistemas que proveen al hombre con diversos servicios ambientales, y su pérdida provocará al mismo tiempo un colapso de estos ecosistemas\. Es mediante los corredores biológicos que las especies contarán con esos pasajes para moverse de un lugar a otro y encontrar zonas con condiciones climáticas similares a las de sus hábitats originales\. Hará el espacio territorial mucho más permeable a las migraciones de especies y facilitará su adaptación a las nuevas condiciones inducidas por el cambio climático\. El CBMM participa en el Programa Especial de Cambio Climático (PECC) para ampliar e interconectar los remanentes de vegetación natural, incluyendo aquellos en Áreas Naturales Protegidas (ANP), para mejorar sus posibilidades de adaptación al cambio climático y de desplazamiento de especies y zonas ecológicas\. Las metas específicas acordadas formalmente con Sagarpa en el primer convenio que compromete a la Secretaría encargada del desarrollo rural con la conservación de la biodiversidad y que desarrolla actualmente el CBMM se orientan a destinar 25,000 hectáreas anuales, que actualmente se dedican a la producción primaria, al manejo sustentable, y a reducir el fuego como práctica agropecuaria en al menos el 30 por ciento de la superficie atendida al 2012\. Asimismo participa en el esfuerzo Semarnat-Conafor-INE-Conabio para que el 20% de la superficie reforestada a 2012 (es decir, 80 mil de las 400 mil hectáreas a reforestar), interconecte remanentes de vegetación natural en zonas de prioridad identificadas por las autoridades ambientales\. El trabajo en materia de adaptación al cambio climático es una de las principales aportaciones del CBMM al país, que permitirá hacer frente de una mejor manera a los retos que comienzan ya a vislumbrarse de este fenómeno causado por el hombre\. d) Impacto en reorientación de las políticas públicas Uno de los impactos principales del trabajo del CBMM ha sido sin duda lograr que muchos de los lineamientos y requisitos de los programas públicos de inversión federal en trópico húmedo mexicano incluyan criterios ambientales\. Este ha sido un paso decisivo en un país en el que ciertos proyectos de corte conservacionista se contravenían con los principios de otros programas públicos de índole económica, provocando una dualidad de criterios que terminaban por afectar seriamente a la biodiversidad en los ecosistemas más importantes del sureste\. Adicionalmente, el Corredor ha logrado que otras instituciones que normalmente no invertían o invertían poco en acciones ambientales orienten su gasto hacia proyectos de sustentabilidad ambiental\. El trabajo se ha llevado de la mano con instituciones como Sagarpa, el Instituto Nacional de las Mujeres (Inmujeres), la Comisión para el Desarrollo de los Pueblos Indígenas (CDI), Sedesol, Conafor, etc\. 104 e) Mejoramiento en el nivel de vida de la población local Muchas comunidades han mejorado sus ingresos directos a través de la realización de actividades alternativas a las tradicionales como la apicultura, cultivo de hortalizas orgánicas, artesanías diversas, café de sombra, ecoturismo, etc\., todas ellas con valor agregado al ser producidas en condiciones de sustentabilidad, y que en muchísimos casos cuentan ya con certificación nacional e internacional, lo cual les ha permitido insertar sus productos en mercados internacionales\. Se han realizado trabajos que han permitido a diversas localidades acceder a estufas ahorradoras de leña, capacitación sobre disposición de residuos sólidos, mejoras a la infraestructura y equipo en lugares de trabajo, etc\., que han permitido a la población local mejorar sus condiciones de vivienda y trabajo, y por consiguiente de salud\. Otro aporte esencial ha sido el de la reinserción de localidades en extrema pobreza a la dinámica económica de su municipio, a través de la participación de sus productos de valor agregado en las economías locales, nacionales e internacionales a precios más justos; su capacidad de participar en procesos de planeación municipal; y la posibilidad de tener capacitación regular para organizarse legalmente y producir sustentablemente\. Todo esto nos habla de comunidades que se insertan mejor en las economías locales, con mejores herramientas para tomar decisiones comunitarias y con productos mucho más competitivos, es decir, con mayor bienestar\. f) Fortalecimiento de capacidades de las comunidades locales El mejoramiento de vida de los pobladores de las comunidades en las que trabaja el CBMM va de la mano con el fortalecimiento de las capacidades locales\. Este ha sido uno de los principales esfuerzos realizados por el Corredor desde su creación bajo el principio de que a mejores capacidades, las organizaciones comunitarias podrán insertarse mejor a la lógica del mercado y mejorar de manera consecuente sus productos e ingresos\. El objetivo fundamental es que a los productores les llegue dinero directo para invertir en rubros que no son objeto de crédito o financiamiento en otras instituciones, como para la adquisición de activos productivos en cafeticultura, apicultura, establecimiento de UMA, producción de hortalizas orgánicas en invernadero, reconversión productiva, etc; o financiamiento en proyectos que deben justificar que existe una contraparte, o para que otras instituciones que no financiaban planes de este tipo reorienten sus inversiones hacia proyectos productivos sustentables\. Esta meta se ha alcanzado mediante la realización de innumerables talleres y eventos, acompañamiento técnico así como mediante la provisión directa de recursos para el mejoramiento de infraestructura y equipo en proyectos turísticos y productivos promovidos directamente por las comunidades\. Como resultado, numerosas organizaciones locales se han constituido legalmente y sus productos son reconocidos ya a nivel nacional e internacional\. 105 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders Not Applicable 106 Annex 9\. List of Supporting Documents 1\. Project Appraisal Document (PAD)\. November 2000\. 2\. Operational Manual MMBC\. 2006\. 3\. Grant Agreement\. November 2000\. 4\. Letter of Implementation\. December 2000\. 5\. First Amendment to the Grant Agreement\. November 2001\. 6\. Second Amendment to the Grant Agreement\. September 2004\. 7\. Third Amendment to the Grant Agreement\. November 2005\. 8\. Project Aide-Mémoires\. 1998, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009\.ISR\. 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009\. 9\. MMBC semiannual reports to the World Bank\. 2003, 2004, 2005, 2007, 2008, 2009 (1st half)\. 10\. Project Implementation Review (PIR) 2004, 2005, 2007\. 11\. NST\. Country Assistance Strategy for Mexico\. World Bank\. (CAS\. Country Assistance Strategy 2009) 12\. Final study report on the implementation of Sustainable Rural Development Program MMBC-CONABIO-SAGARPA in the region of Marqués de Comillas, Chiapas\. Ceiba 2009\. 13\. Third Report "Facilitating Development Process for Preparing Regional Meetings Annual Meeting of the State Council MMBC in Chiapas”\. 2009\. 14\. Evaluation of economic and social impact of MMBC (final report 2009) 15\. Program Evaluation for Sustainable Rural Development MMBC-CONABIO- SAGARPA in the region of Marqués de Comillas, Chiapas\.( 2009) 16\. CONABIO\. 2006\. Natural Capital and Social Wellfare\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 17\. CONABIO\. 2009\. Natural Capital and Social Wellfare, vol\. II: Estado de conservación y tendencias de cambio\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 18\. Urquiza-Haas, T\., M\. Kolb, P\. Koleff, A\. Lira-Noriega, and J\. Alarcón\. 2000\. Methodological Approach to Identify Mexico’s Terrestrial Priority Sites for Conservation\. Gap Analysis Bulletin No\. 16:61-71\. 19\. National Development Plan of Mexico (2007-2012)\. 20\. Jaguar Conservancy (2008) Contribution to the Emergency Program for Large Felines in the Area Affected by Huricane Dean\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 21\. Muench, Carlos (2007) Evaluation of Key Species of Large Mastofauna as Indicators of the Health of the Ecosystem in Marques de Comillas, Chiapas\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 22\. Rabeil, Thomas (2009) Implementation of a Monitoring System for Mammals in the Sierra Madre del Sur Corridor\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 23\. Ceballos, Gerardo\. and P\. Ehrlich\. 2002\. Mammal Population Losses and the Extinction Crisis\. Science, vol\. 296: 904-907\. 24\. Chavez Cuauhtémoc, et al\., cited in: Chavez, Cuauhtémoc, Gerardo Ceballos, Rodrigo Medellin A\. y Heliot Zarza (ca 2008) Censo Nacional de Jaguares\. 107  Instituto de Ecología, México\. http://www\.ecologia\.unam\.mx/laboratorios/eycfs/faunos/art/HZ/CL1\.pdf 25\. Chavez, Cuauhtémoc, Gerardo Ceballos, Rodrigo Medellin A\. y Heliot Zarza (ca 2008) National Census of Jaguars\. Instituto de Ecología, México\. http://www\.ecologia\.unam\.mx/laboratorios/eycfs/faunos/art/HZ/CL1\.pdf 26\. Miller and Rabinowitz, (2002), cited in: Chavez, Cuauhtémoc, Gerardo Ceballos, Rodrigo Medellin A\. y Heliot Zarza (ca 2008) National Census of Jaguars\. Instituto de Ecología, México\. http://www\.ecologia\.unam\.mx/laboratorios/eycfs/faunos/art/HZ/CL1\.pdf 27\. Amor Conde et al\. (2006): cited in: Jaguar Conservancy (2008) Contribution to the Emergency Program for Large Felines in the Area Affected by Huricane Dean\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 28\. Unidos para la Conservación (2007) Conservation and Control Models for the Maintenance of Corridors\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 29\. Unidos para la Conservación (2007) Conservation and Control Models for the Maintenance of Corridors Summary\. Comisión Nacional para el Conocimiento y Uso de la Biodiversidad, México\. 108  Annex 10\. Original Description of Project Sites – Corridors and Focal Areas 1\. The MMBC project promoted conservation of natural resources and biodiversity in 5 corridors and 16 focal areas\. The Corridors Box 1: Terminology used Corridor: a mosaic of land patches under various land-uses situated in between protected areas\. Corridors generate global biodiversity benefits through three main mechanisms: (i) by serving as habitats with various degrees of importance for specific types of biodiversity; (ii) by allowing the flow of genes, individuals, and species among protected areas; and (iii) by maintaining ecological processes over large landscapes\. Corridors are mainly identified on the basis of type, quality and quantity of vegetation cover or other ecological criteria\. Corridors are the project’s broad planning tool; however, in recognition of their large territorial extension, and of the variable degree of ecological and biological integrity within them, priority or focal areas have been identified for the purposes of project design and implementation\. State Corridor Protected Area Extension Ecosystems Campeche Sian Ka’an– Calakmul Biosphere 723,185 ha Tropical forest, aquatic ecosystems, Calakmul Reserve secondary vegetation The two focal zones, Xpujil–Zohlaguna (focal zone 1) and Montaña (focal zone 2), are the contact point with the Calakmul Biosphere Reserve, which is part of the forest stand of the Sian Ka’an–Calakmul Corridor\. Primary production predominates in both focal areas and is greatly determined by the area’s relationship with the forest and the use of its biodiversity\. Even though both focal areas are located in the same zone, they represent different realities: focal area 1, with its 31 ejidos and a population of 10,464, is an area characterized by recent immigration (of mestizos resettled from different parts of the country); focal area 2, with its seven ejidos and a population of 2,613, is predominantly an indigenous Maya area\. In both focal areas, the ejido is the central system for land tenure and for natural resource management\. There are two types of ejidos that predominate in the region: (i) forestry ejidos with large extensions of which 12 ejidos (of the 38 total) cover 80% of the forest stand; (ii) twenty-six ejidos with less than 5,000 ha each, which are mostly used for agriculture and livestock activities\. Between the two focal areas, the farmers have formally assigned approximately 215,000 has for common use for forest-based activities; taken together, the ejido extensions (both forest-based and agricultural use) help to maintain a large forest stand since the individual agricultural plots assigned to each farmer continue to an important extent under forest cover\. Although forests cover large areas of the Sian Ka’an-Calakmul Corridor, forest-based activities alone do not allow ejidatarios to earn an income above the minimum wage due to the lack of organization in the production (leading to overuse) and marketing of timber\. In reality, the income provided by beekeeping and honey production is currently the most stable monetary income in both focal areas\. Possibilities exist for timber and non timber forest products, as well as for the sustainable use of fauna, honey, archeological and natural areas ecotourism and other environmental services\. In general, the region produces primary materials that are processed in other parts of the country or abroad\. State and federal institutions, along with NGOs, have invested programs in this region with goals to improve the use of natural resources for local processing and production and to promote reforestation\. However, there has not been sufficient alignment of policies from the various levels of government to ensure long-term success of such initiatives\. 109  State Corridor Protected Area Extension Ecosystems Chiapas Selva Maya – Montes Azules Biosphere 331,200 ha Selva baja caducifolia, mediana subcaducifolia, Zoque Reserve bosque de pino encino, timbales, sabana\. Lacantún Biosphere 61,874 ha Tropical forest Reserve “Selva del Ocote” 48,140 ha Tropical forest Biosphere Reserve “Yaxchilan” Natural 2,621 ha Tropical forest and riparian vegetation Monument “Bonampak” Natural 4,357 ha Tropical forest Monument “Chan Kin” Flora and 12,185 ha Tropical forest Fauna Protected Area “Cascadas 2,580 ha Tropical forest de Agua Azul” Flora and Fauna Protected Area “Metzabok” Flora and 3,337 ha Tropical forest Fauna Protected Area “Na-Ha” Flora and Fauna 3,833 ha Tropical forest Protected Area Sierra Madre “El Triunfo” Biosphere 119,177 ha Cloud forest, tropical and températe forest\. del Sur Reserve “La Sepultura” Biosphere 167,310 ha Cloud forest, tropical forest, dry forest\. Reserve The Chiapas corridors have distinct geographic characteristics: one of them runs the length of the Sierra Madre del Sur with degraded forests and a population that is primarily mestizo\. The other is located in the Selva Maya Zoque with a much more diverse and less degraded swath of highland and lowland forests and farmlands\. This second corridor is also more socially complex: approximately three-quarters of the landowners are either Mayan or Zoque (indigenous groups), and politically the communities are more divided\. It is important to note that in Mexico indigenous communities frequently use a semi-collective, or “social,” land tenure structure (either in the form of “communal lands” or “ejidos”)\. In the Selva Maya Zoque Corridor, there are small rural landholders (having less than 10 hectares), both indigenous and mestizo, who may form associations to create similar semi-collective forms of natural resource management\. In the Sierra Madre del Sur Corridor, large private landholdings also coexist with abovementioned forms of social land tenure\. Population growth in general is approximately 4\.5% annually and in the area of Ixcan it may be as much as double that\. Economically, Chiapas is classified among the four Mexican states suffering extreme poverty\. The rural poor—and virtually the entire population of the corridors—are “milperos,” a few sell corn and beans although much of the population is (nearly) self-sufficient in at least the staple food of corn\. The traditional slash-and- burn production system still prevails in this region\. Forest lands and non-timber forest products (e\.g\., fauna, mushrooms, edible and medicinal plants) are declining due to deforestation that results from various causes, from commercial harvesting to little investment in sustainable forest management practices\. Despite such strong deforestation pressures, rural populations—especially the original indigenous areas—still retain specialized knowledge of local flora and fauna representing an opportunity to develop sustainable use alternatives\. In general, one observes processes of forest degradation in the corridor regions with wood-gathering occupying more woman-hours and hunting sharply declining in importance; increased erosion and the impoverishment of soils with declining production, income, and consumption levels; increasing water pollution and health problems\. Development policies and programs targeting the marginalized poor have tended to change constantly\. For example, the opening of national forest lands to farmers without lands and the promotion of extensive cattle ranching have escalated deforestation in these regions\. Coffee production, a relatively benign product environmentally-speaking, now faces strong fluctuations in price\. Rural migration has increased, with most heading to cities and to the United States\. Even with the above scenarios, the majority of the actors involved in the processes above clearly perceive the environmental degradation problems that are quickly worsening and those steps needed to counter it: (i) a greater importance on sustainable use and production systems; (ii) application of specialized indigenous cultural knowledge; and (iii) strengthening of social organizational capacity\. 110  State Corridor Protected Area Extension Ecosystems Quintana Sian Ka’an– Sian Ka’an Biosphere 528,148 ha Tropical forest, dry forest, mangrove, Roo Calakmul Reserve wetlands, dunes, coastal zone\. “Uaymil” Flora and 89,118 ha Tropical forest, dry forest, mangrove, Fauna Protected Area The Sian Ka’an-Calakmul Corridor is a critical area connecting the northern and southern blocks of the Calakmul Biosphere Reserve as well as the Sian Ka’an Biosphere Reserve\. In this area, there have been strong changes in forest cover\. Currently, there are four settlements with considerable forest cover to form two connectors: one on the west side of the Reserve and another on the east side\. The area between the two connectors has suffered severe deforestation\. Among the causes of deforestation are: (i) chili cultivation, for which farmers cut and burn the highland forests; (ii) indiscriminate use of insecticides, which has affected apiculture; and (iii) excessive extraction of wood from large forested areas, leading to the creation of forest fragments\. Contributing to exacerbation of these trends includes: (i) the existing pattern of colonization of small ejidos; (ii) government programs that favor the production of chili and the use of insecticides; and (iii) the lack of policies that could help guide sustainable soil use by considering ecological principles\. Challenges that lay ahead in order to combat these trends and causes: (i) small forest areas are not an attractive economic alternative; (ii) impoverished forests (from which timber has been excessively extracted) are no longer attractive for conservation; and (iii) the internal organization of the ejido is not adequate to manage the forest effectively while also complying with market requirements and demands\. Among the possible actions that favor sustainability and conservation are the diversification and intensification of production systems in order to reduce pressures on forests\. Such opportunities are found in agroforestry and sustainable agricultural practices\. Large ejidos with important forest resources have applicable forest management experience as well as experience in management of fauna\. There are also archealogical sites with great potential which could contribute to tourism as an additional source of income\. However, the reorientation of government policies is still important, especially regarding: (i) the production of chili, particularly when it comes to the property rights of ejidos; (ii) the adaptation to local circumstances of programs targeting milpa production; and (iii) activities that directly foster environmental protection\. Even with the challenges described above, the natural resources of Quintana Roo—in its forested areas, in its aquatic ecosystems, as well as in its agricultural areas—are still in a state where biological diversity can be conserved and recovered to ensure the survival and continuity of important species\. Nevertheless, future planning and use of natural resources require serious consideration of the impacts of productive activities on biodiversity conservation\. This in turn implies the need to involve all social actors who are in a position to make decisions about the use of natural resources, especially governmental agencies\. The sample of ejidos studied indicates that their land has been demarcated and there are no internal conflicts\. In the traditional Mayan communities, there is a strong tendency to maintain the collective use of land, while the immigrant communities favor division of ejido lands into individual parcels\. The older ejidos have an average of 500 has of land per family, in contrast to ejidos formed in the 1980s which average 40 to 50 has per family\. There are also landless people in immigrant communities, often known as pobladores and repobladores and who usually work as laborers on the farms of the larger landholders\. There are great opportunities for biodiversity conservation and sustainable use of natural resources in the area of the Sian Ka’an-Calakmul Corridor\. 111  State Corridor Protected Area Extension Ecosystems Yucatan Northern La Ría Lagartos 47,840 ha Tropical forest, dune, mangrove, flooded Yucatan Biosphere Reserve lands, coastal zone\. La Ría Celestún 59,130 ha Tropical forest, dune, mangrove, flooded Biosphere Reserve lands, coastal zone\. Dzilam State Reserve 61,707 ha Tropical forest, dune, mangrove, flooded lands, coastal zone\. El Palmar State 50,177 ha Tropical forest, dune, mangrove, flooded Reserve lands, coastal zone\. The northern coast of Yucatan is a socially, economically and ecologically complex region\. It has a population of approximately 60,000 people, who make use of the multiple coastal ecosystems\. The diversity of local users live in the coastal areas permanently, seasonally or otherwise irregularly providing a mix of common and contradictory resource use interests; they utilize resources and ecosystems differently, based on schemes of responsibilities and rights acquired by tradition and formal right\. The Yucatan coast is currently, and will continue to be, an essential region for the state’s economy, mainly for the implementation of future plans and programs such as eco-tourism and traditional tourism\. Currently, the greatest and most important source of income for the majority of these coastal populations comes from fishing in rivers and the use of marine resources, marshes, lagoons, and other reservoirs (e\.g\., shrimp, crustaceans, mollusks and some fish)\. The population of the northern coast of Yucatan is primarily mestizo\. In the coastal ports, new sociocultural dimensions emerge, since part of the population is composed of farmers who immigrated after the 70s and who practice agrarian traditions mixed with a fisheries culture with specific patterns of space appropriation mediated by the technology of the last three decades (e\.g\., outboard motors on ships, synthetic materials for fishing, compasses, telescopes, etc\.)\. One of the principal challenges here is to slow fishing in rivers, to promote offshore fishing and to implement and strengthen legislation for the fishing sector\. Reorganizing the fishing sector and implementing programs for natural protected areas is one of the most difficult challenges for conservation and protection of coastal natural resources and ecosystems\. The Focal Areas Box 2- Terminology used Focal Area: is the area in which actual project activities are targeted, and where progress and impact indicators will be monitored\. The basic building blocks of a focal area are land tenure units (ejidos, communities, private properties); therefore, the boundaries of a focal area results from the boundaries of the land tenure units constituting it\. Transition Area: areas situated inside a corridor, which are adjacent to focal areas, or encompass them\. Even though transition areas will not be the target of specific investments, it is expected that some of the project activities, such as planning at the corridor level or investment for sustainable use at the focal area level, will generate ecological benefits spilling over to transition areas\. The project will furthermore support mainstreaming of biodiversity concerns into rural development programs undertaken in the biological corridors, through improved program design and execution\. By replication and extension to other locations in Mexico and elsewhere, the project can generate benefits well beyond the focal areas targeted by the project\. 112  Corridor Focal Area Extension No\. Communities Year 1-2-3-4-5-6-7 Selva Maya – La Cojolita 51,297 ha 5 --------- Zoque (northern Ixcan 23,010 ha 7 ------- Chiapas) Nahá–Metzobok 27,489 ha 1 ------- Selva Chol 65,574 ha 16 ------- Selva Zoque 48,912 ha 6 --------- Sierra Madre del Pico del Loro 86,529 ha 10 --------- Sur Frailesca 73,966 ha 3 ------- (southern Cintalapa 69,313 ha 2 ------- Chiapas) Sian Ka’an– Carrillo Puerto 461,000 ha 16 --------- Calakmul Área sur de José 134,000 ha 14 --------- (Quintana Roo) Ma\. Morelos Sian Ka’an– Zoh Laguna – 120,000 ha 7 --------- Calakmul Xpujil 180,000 ha 18 --------- (Campeche La Montaña) Norte de Oriente 45000 ha 6 ---------- Yucatán (northern Centro Oriente 36000 ha 3 --------- coast of Yucatan) Progreso 55000 ha 3 --------- Hunucmá 85000 ha 3 ---------- 2\. It was decided to concentrate project efforts on smaller—“focal”—areas within the broad areas of the corridors\. The focal areas were selected based on the opportunities and immediate needs of conservation and sustainable use of biodiversity\. The selection process also took into account aspects of social organization and information available\. For example, in terrestrial corridors, the areas selected have important forest vegetation cover, which presents an opportunity to maintain and restore connectivity between NPAs\. 3\. The various studies conducted during project design highlighted the biodiversity threats and opportunities in each of the focal areas and root causes\. In all of the corridors it was apparent that there are multiple threats to biodiversity\. However, the relative importance of each threat varied from one corridor to another\. The global calculation that was carried out indicated that training in the three levels of government (municipal, state, national), particularly institutional coordination at the regional level, is vital for biodiversity conservation\. 4\. The MMBC covers a total of approximately 6\.8 million hectares of land and 448,798 hectares of sea surface, equaling 25% of Campeche, 37% of Chiapas, 31% of Quintana Roo and 26% of Yucatan and connecting the habitats of 23 protected areas (2\.86 million hectares)\. 113 Annex 11\. Institutions, NGOs, and research centers that comprise the monitoring network of the MMBC 1\. National Commission of Protected Areas 14\. Ministry Environment Chiapas Comisión Nacional de Áreas Protegidas (CONANP) Secretaría de Medio Ambiente de Chiapas 15\. Onca Maya, A\.C\. 2\. Institute of Natural History of the State of Chiapas (Instituto de Historia Natural del Estado Chiapas IHNE)\. 3\.- Tropical Rural Latin America 16\. Conservation of Nature, A\. C\. (Tropical Rural Latinoamérica, A\.C) Conservación de la Naturaleza, A\. C 17\. Ministry of Urban Development and 1\. National Commission for the Knowledge Environment of Yucatan and Use of Biodiversity Secretaría de Desarrollo Urbano y Medio Ambiente de Yucatán Comisión Nacional para el Conocimiento y Uso de la Biodiversidad (CONABIO) 5\. Tropical Research Center of the University 18\. Institute of Ecology of the National Veracruzana, Xalapa University of Mexico (UNAM) Centro de Investigaciones Tropicales (CITRO) Instituto de Ecologia de la Universidad Universidad Veracruzana, Xalapa, Veracruz Autónoma de México (UNAM) 6\. Natura Mexicana, A\.C 19\. Scientific Research Centre of Yucatan, Merida Centro de Investigación Científica de Yucatán\. CICY Mérida 7\. Institute of Social Technology 20\. Pronatura Yucatan, AC Instituto de Tecnología Social (TECSO) 8\. Pronatura Chiapas A\.C 21\. Center for Research in Geography and Geomatics Centro de Investigación en Geografía y Geomática (CentroGEO) 9\. Ecosistemas A\.C 22\. Jaguar Conservancy, A\.C 10\. The Southern Border College 23\. National Institute of Ecology Colegio de la Frontera Sur, Quintana Roo Instituto Nacional de Ecología (INE) (ECOSUR) 11\. Interdisciplinary Center for Biodiversity and Environment, A\.C\. 24\. Yaax Beh, A\.C\. Centro Interdisciplinario de Biodiversidad y Ambiente, A\.C (CEIBA) 12\. Center for Research and Advanced Studies of the 25\. Metropolitan University of Iztapalapa National Polytechnic Institute, Yucatan Universidad Autónoma Metropolitana Iztapalapa Centro de Investigación y Estudios Avanzados del (UAM) Instituto Politécnico Nacional, Yucatán (CINVESTAV) 13\. University of Tabasco 26\. Civil Council for Sustainable Coffee Universidad Autónoma de Juárez, Tabasco Production in Mexico/Banchiapas Consejo Civil para la Cafeticultura Sustentable en México/Banchiapas 114 Figure 1\. Map of five corridors 115

REVIEW

P044789

 ICRR 12884 Report Number : ICRR12884 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 05/09/2008 PROJ ID : P044789 Appraisal Actual Project Name : Private Sector US$M ): Project Costs (US$M): 246\.0 241\.2 Infrastructure Development (PSIDP) Country : Bangladesh Loan/ US$M): Loan /Credit (US$M): 235\.0 230\.2 Sector Board : EMT Cofinancing (US$M ): US$M): 11\.0 11\.0 Sector (s): Power (31%) Oil and gas (30%) Telecommunications (30%) Central government administration (9%) Theme (s): Infrastructure services for private sector development (25% - P) Other urban development (25% - P) Regulation and competition policy (25% - P) Other financial and private sector development (25% - P) L/C Number : C2995 Board Approval Date : 10/28/1997 Partners involved : CIDA, DFID Closing Date : 12/31/2002 03/31/2007 Evaluator : Panel Reviewer : Group Manager : Group : Ramachandra Jammi Peter Nigel Freeman Monika Huppi IEGSG 2\. Project Objectives and Components: a\. Objectives: The overall objective of the Private Sector Infrastructure Development Project (PSIDP) was to support Bangladesh in developing a modern and efficient infrastructure by promoting private sector participation in the investment, operation, ownership and maintenance of infrastructure facilities \. The more detailed objectives were to : (i) proactively develop and market sound infrastructure sub -projects for private investment; (ii) establish speedy competitive and transparent procurement processes for realizing private sector participation in such sub-projects; (iii) provide appropriate mechanisms for reasonable risk -sharing and mobilizing commercial investment in the form of equity and debt financing for infrastructure sub -projects; and (iv) create suitable legal and regulatory structures in the various infrastructure sub -sectors for the sustained and efficient operation of private infrastructure facilities \. Post- PFRAP ) Post -Flood Recovery Assistance program (PFRAP) In March 2005, following severe floods in Bangladesh, IDA provided funding of US$ 200m to the PFRAP by reallocating proceeds from five ongoing credits including the PSIDP (the other four credits were: Post-Literacy and Continuing Education Project (PLCE, Cr\. 3467-BD); Female Secondary School Assistance Project II (FSSAP-II, Cr\. 3614-BD); Municipal Services Project (MSP, Cr\. 3177-BD) and Fourth Fisheries Project (FFP, Cr\. 3276-BD)\. Given that a large portion of PSIDP faced imminent cancellation at that time, 77% (US$154m) of the total reallocation came from PSIDP\. Although the Development Credit Agreements (DCAs) for these five projects were amended to accommodate the revised disbursement categories, PSIDP was not formally restructured\. PFRAP Objective: To support the speedy recovery of the country and of the affected population, particularly the poor and vulnerable, while emphasizing disaster vulnerability reduction over the long -term\. The ICR has provided ratings based only on the original PSIDP objectives \. PFRAP is discussed and rated separately in Annex 10 to the ICR\. This ICR review treats the project as a restructured project (even though it was not formally restructured)\. Therefore, in the following sections, the performance of the original PSIDP and the PFRAP are rated separately\. The final ICR review ratings are weighted on the basis of actual utilization of project funds (approximately 2:3), as per the ICR Review Guidelines for "Rating the Outcome of Projects with Formally Revised Projects" b\.Were the project objectives/key associated outcome targets revised during implementation? Yes If yes, did the Board approve the revised objectives /key associated outcome targets? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): PSIDP 1\. Financing Infrastructure sub -projects with private participation : To provide support for investment sub -projects with private sector participation through a long -term debt facility (SDR159\.6m/US$225m) in the form of a line of credit from the Government of Bangladesh (GOB) to the newly-established Infrastructure Development Company Ltd (IDCOL), a non-bank financial institution, to provide long -term finance to special purpose entities established for the construction and operation of commercial infrastructure projects on the basis of a sub -project pipeline available at appraisal\. This component included technical assistance (TA) of SDR4\.7m/US$7\.0m for investment advisory services to strengthen IDCOL’s capacity in project financing \. (At Appraisal: US$225\.0m; Actual: US$98\.8m) 2\. Capacity-building: To strengthen the capacity of line ministries and parastatals to undertake transaction development (involving the conduct of competitive and transparent procurement processes, marketing of sub-projects and managing the entire process of structuring, documentation, bidding, negotiation and award of concessions) of infrastructure projects for private sector investment \. (At Appraisal: US$10\.0m; Actual: US$6\.7m) PFRAP Livelihood restoration: Financing critically needed eligible imports including food grains, edible oils, fertilizer, industrial plant machinery and raw materials \. (At Appraisal -- Bank/PSIDP: US$10\.0m; Actual -- Bank/PSIDP: US$10\.7m) Infrastructure rehabilitation: (Planned PFRP: US$200m, Actual PFRP: US$154\.0m; Planned PSIDP contribution: US$144\.3m, Actual PSIDP contribution: US$135\.7m)\. This consisted of the following sub -components\. These figures are based on Annex 1 and Annex 12 to the ICR (Borrower's report on PFRAP) (i) Primary Road Network (PFRPPFRP Planned, Actual : US$40m, US$2\.0m; PSIDP Contribution -Planned, Actual : US$32\.0m, US$0\.6m) (ii) Secondary Road Network ( PFRP:US$31\.3m, PFRP US$25\.0m; PSIDP Contribution : US$25\.0m, US$17\.2m); PFRP US$30\.3m, US$26\.0m; PSIDP Contribution : US$11\.9m, US$8\.8m); PFRP: (iii) Municipal Infrastructure (PFRP PFRP:US$49\.4m, (iv) Primary Schools (PFRP PFRP US$40\.0m; PSIDP Contribution : US$26\.0, US$20\.7m); (v) Secondary Schools (PFRPPFRP:US$24\.8m, PFRP US$20\.0m; PSIDP Contribution : US$5\.9, US$4\.0); and PFRP:US$2\.4m, (vi) Fisheries (PFRP PFRP US$2\.0m; PSIDP Contribution : None) A quick disbursing budget support for US$ 45m was made by IDA to GOB to ensure immediate rehabilitation of the affected population, infrastructure rehabilitation, and for economic recovery by financing \. The above figures are based on Annex 10 of the ICR\. The figures presented in Annex 1 and Annex 10 need to be reconciled\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: PSIDP Project Cost, Financing, Borrower Contribution : The project cost for PSIDP as estimated at appraisal was approximately US$ 246m (including co-finance), but only US$105\.5m was used, due to only one major sub -project being financed and the rest being reallocated to PFRAP \. CIDA and DFID provided co-finance of US$7\.5m and US$3\.5m respectively, all of which was utilized for the project \. The borrower's contribution was less than 0\.1% of the project cost at US$0\.35m\. Dates: The project was extended three times, for two years from December 2002 to December 2004, for three months from December 2004 to March 2004 and for three years from March 2004 to March 2007\. The first extension was partly in response to the two -year delay that occurred in establishing the Infrastructure Investment Facilitation Center (IIFC) and to provide time to allow IDCOL to disburse the US$ 80m to the Meghnaghat-1 Power Project (MPL)\. The second extension was based on positive signs of private sector interest and greater government interest and commitment, and progress on several other infrastructure commitments \. The third extension was to also to facilitate potential pipeline projects\. PFRAP The original allocation of US$154\.0m from PSIDP was revised to US$117\.6m, and an additional US$46\.0m was allocated from other credits increasing the total to US$ 163\.6m\. Of this, US$114\.5m or 70% has been disbursed as of March 31, 2007\. The reduced disbursement is due to the cancellation of the primary roads component, and some contracts under the secondary roads and primary schools components \. 3\. Relevance of Objectives & Design: PSIDP Relevance: The project objective and design were highly relevant at appraisal as well as at present (CAS 1998 to CAS 2006-09), for addressing Bangladesh ’s inadequate infrastructure across all sectors – power, gas supply, roads, ports, telecom, water etc\. The project addressed the large gap between needed infrastructure investments and public financing (estimated at over US$0\.75 billion per annum at the time of appraisal ) in a situation where FDI flows were small and domestic capital markets very narrow, and in the context of a poor policy environment and weak legal and regulatory systems\. The project was also consistent with GOB ’s and Bank's policy of promoting private participation in infrastructure for easing public financing requirements and delivering efficient services \. Design: In the above context, the project aimed to enhance government capacity to tackle policy, regulatory and project related issues in the different infrastructure sectors that would tap the financial, technical and managerial resources of the private sector \. It built upon the report on power sector reforms prepared by an inter -ministerial group and related institutional changes that had already been set in motion \. It recognized that the policy environment for private participation was conducive to different extents -- better in power sector, less so in telecom and not conducive in others However, the project consciously chose to depend on other sector loans (incl\. IDA’s Telecom Regulatory support Project and the Asian Development Bank's Power Project ) to work on overarching policy issues\. In respect of actual transactions, the project envisaged lending to projects with majority private sector involvement rather than a wider spectrum of public -private ventures and ruled out some applications like captive industrial power capacity\. This ultimately proved to be unduly constraining \. PFRAP Relevance: The PFRAP was highly relevant to the reconstruction and rehabilitation needs in the aftermath of the devastating floods of 2004, which caused an estimated loss of about US$ 2\.3 billion (or 4% of the GDP), with 36m people (or 26\.5% of the country’s then population) in 47 (out of 64) districts being affected\. It was also relevant to medium and long-term considerations for natural disaster risk management identified in the CASs at appraisal as well as at present\. Design: PFRAP was originally formulated as a three part, unbundled strategy : (1) short-term rehabilitation (2) medium-term reconstruction and recovery and (3) longer-term, multi-hazard risk management needs of the country \. However, no attempt was made to front -load policy conditionality on the project in recognition of the fact that such conditionality would impede the short -term emergency recovery objectives of the program during its rapid preparation and implementation\. The PFRAP worked through existing PMUs in each concerned line ministry and department/executing agency\. 4\. Achievement of Objectives (Efficacy): PSIDP Overall Objective: Develop modern and efficient infrastructure by promoting private sector participation in the investment, operation, ownership and maintenance of infrastructure facilities \. Negligibly achieved \. The overall objective was ambitious, particularly given the inadequate policy and governance environment, and fledgling institutions\. PSIDP did not succeed in developing infrastructure with private participation on a scale that might have produced a transformative impact or demonstrated the attributes of efficient private sector led infrastructure growth\. The main achievement was the financing of a major power plant - the 450 MW combined cycle at MPL and the Haripur project (supported with an IDA guarantee ) which were projects of high quality in terms of timely construction, competitive cost of power and, subsequently, an excellent operational record \. Objective 1: Proactively develop and market sound sub -projects for private investment \. Negligibly achieved \. The TA provided to Government officials through IIFC -- for transparent procurement approaches, regulatory frameworks, and risk sharing mechanisms for private sector infrastructure promotion and operations -- did not yield a significant flow of private project deals \. This is attributed to inertia and lack of initiative in line ministries and lack of clear rules on how to apply the policy, and interference in their decision making by political superiors \. However, the creation of IDCOL and IIFC were positive outputs that can be built upon in the future \. Objective 2: Establish speedy competitive and transparent procurement processes for realizing private sector participation in such sub -projects \. Modestly Achieved \. Competitive procurement and licensing processes were followed for MPL but were not more broadly embedded as rules in a legal regime that would be relatively immune to political interference \. Objective 3: Provide appropriate mechanisms for reasonable risk sharing and mobilizing commercial investment in the form of equity and debt financing for infrastructure sub -projects \. Modestly achieved \. These mechanisms were demonstrated by the MPL, but have yet to be mainstreamed to any significant extent \. Objective 4: Create a suitable legal and regulatory structure in the various infrastructure sub -sectors for the sustained and efficient operation of private infrastructure facilities \. Negligibly Achieved \. IIFC has made some efforts in this direction by preparing policies and regulations (e\.g\. public switched telephone network (PSTN) regulations; Private Sector Infrastructure Guidelines; Remote Area Power Supply Systems Guidelines (RAPSS); Draft Coal Policy in 2007) but it would need a stronger legal and regulatory regime of governance for the sectors in order that private sector infrastructure facilities are developed on a very large scale \. PFRAP Supporting the speedy recovery of the country (first part of the overall PFRAP objective )\. Modestly Achieved \. Results fell far short of even the revised targets, and one important sub -component (primary roads) and parts of other sub-components were cancelled\. In supporting the recovery of the country from flood damage, rehabilitation activities covered infrastructure and livelihoods in almost half of Bangladesh, in 47 districts and 262 upazillas\. At Credit closing on March 31, 2007, and in terms of revised targets, disbursement averaged 70% with 95% of physical works being completed\. The Livelihood Restoration Program (LRP) was delayed by more than an year due to protracted negotiations between the implementing agency -- Palli Karma Sahayak Foundation (PKSF) -- and the Ministry of Finance for channeling funds on a grant basis \. About a third of the planned 400,000 beneficiaries obtained small loans, though with delay\. Only 36\.4% of the disbursed amount had reached the poor as of April 2007, and the rest was expected to be disbursed by December 2007\. However, the maximum ceiling of loan size (Taka 3000) for each borrower was considered insufficient compared to the needs, given the increase in prices of essentials \. The Primary Road network sub-component (US$36\.4m) and related activities in other sub -components were cancelled in February 2006, after misprocurement was declared following a INT investigation \. The ICR does not provide any details about the nature of misprocurement \. Cancellation of these funds put a dent in GOB ’s commitment to the flood program and on overall governance in donor -aided projects\. In each of the sub-components for Secondary Roads, Municipal Infrastructure, Primary Schools, and Secondary Schools, achievements was considerably below even the revised targets as below : Secondary Roads (upazilla roads: 1,700 km (original target), 1,100 km (revised), 888 km (actual); growth center markets (13, 13, 7); bridges/culverts (1,051m, 1,051m, 832m); Municipal Infrastructure (urban roads: 1,350 km (original target), 620 km (actual); bridges and culverts: 1,125 m, 85m; Drainage: 42 km, 7 km) Primary Schools repairs (17,000 (original target), 746 (revised), actual achievements not specified ) Secondary Schools repairs (918 (original target), 746 (revised), actual achievements not specified ) The Secondary Schools sub -component was affected by delay in release of GOB funds \. In respect of Primary Schools, the Bank helped the relevant agencies tackle the demand for uninterrupted cash flow by delaying the recovery of the initial deposit of the Special Accounts up to March 2007\. The Fisheries component included rehabilitation of 31 flood affected fish farms and was completed on time \. Emphasizing disaster vulnerability reduction over the long -term (second part of the overall PFRAP objective ) Negligibly Achieved : There was little or no progress in this respect \. 5\. Efficiency (not applicable to DPLs): PSIDP An economic and financial analysis was carried out for MPL which was the only investment made by IDCOL \. An impressive positive NPV of $1724m and an EIRR of 65% at a 10 percent discount rate is reported based on specific assumptions for consumer willingness -to-pay and an imputed economic value of gas \. Even assuming a conservative rate of Taka8/KWh, the EIRR remains above the benchmark 14% EIRR predicted at the project appraisal stage \.The financial NPV and FIRR are estimated to be US$ 11m and 11 percent respectively using a 10% discount rate, which is relatively modest but still creditable given that this was GOB's initial experience with independent power producers \. Since IEG records ERR and FRR rather than EIRR /FIRR, the above figures are not included in the table below \. PFRAP No NPV or ERR or financial rates of return were calculated for PFRAP \.  ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: PSIDP PSIDP had significant shortcomings in terms of achieving its overall objective of facilitating and financing the development of infrastructure with private participation on a large scale \. Its most significant achievement was to successfully finance MPL for which it coordinated with other donors to develop transparent procurement approaches, and risk sharing mechanisms with the private sector \. However these practices were not mainstreamed to the rest of the power sector or other infrastructure sectors, limiting their overall impact in creating a conducive environment for large-scale private participation in infrastructure \. This was partly because the overall policy, legal and regulatory environment did not keep pace with the progress in expertise in conducting transactions \. In retrospect, the conscious design decision to rely on other projects to work on creating the enabling policy environment, may not have been appropriate \. The project did not receive a reasonable level of government commitment for transparent solicitation and transaction processing \. If such commitment had been forthcoming, the technical competencies that were developed in IIFC and IDCOL as well as the line ministries could have resulted in sound structuring of investment projects \. Rating: Moderately Unsatisfactory PFRAP In terms of the first part of its objective -- supporting the speedy recovery of the country -- results fell far short of even the revised targets, and one important sub -component (primary roads) and parts of other sub-components were cancelled\. There was little or no progress in respect of the second part of the objective -- emphasizing disaster vulnerability reduction over the long -term\. In hindsight, most of the initial targets were not fully based on robust assessment and hence tended to be over-optimistic\. For instance, the design does not seem to have sufficiently taken into account the short span of the dry season during which construction activity can take place in the country \. In addition, national political turmoil, especially in the later part of the last year of implementation, took a certain toll on some components, particularly the secondary road network\. In the light of these problems most of the components were restructured as implementation continued, but ultimately fell short of the revised targets \. Rating: Moderately Unsatisfactory a\. Outcome Rating : Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: PSIDP The successful financing of MPL provides a good benchmark for future projects in terms of a transparent and competitive process, the low price that resulted, and an operational record of high reliability \. However, there appears to be little scope for this to be emulated on a large and diversified scale unless the state of policy, legal, and regulatory environment is enhanced, and government commitment and governance improve \. Bank/IDA projects are attempting to keep up the momentum of reform, particularly in the power sector -- Power Sector Development TA project; Siddhirganj Peaking Power Project; South Zone Power Distribution Project (FY08) and an Energy Sector DPL (FY09)\. However, the risk to the objective of promoting broad -based private sector participation in infrastructure is considered to be significant \. Rating: Significant PFRAP There has been no clear assessment of the quality of rehabilitation works, but the ICR mentions instances where the quality of works may not have not have been of acceptable standards \. For example, weak implementation of the bridges/culverts rehabilitation works, has raised the concern that overall road connectivity with the secondary road network as well as in the municipal infrastructure component will not be achieved \. The rehabilitation needs to continue, especially given the large proportion of targets that remained unmet during PFRAP \. However, no specific transition arrangements are reported in the ICR \. In the long-run, a more stable arrangement for recovery funding, perhaps in the form of a revolving fund, is clearly needed to deal with the reality of recurring natural disasters \. Until institutional coordination improves, and more stable arrangements are made, the risk to achieving both the short-term and long-term objectives of PFRAP remains significant \. Rating: Significant a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: PSIDP PSID P Quality at Entry: QAG rated the project as highly satisfactory for reflecting lessons of experience with similar initiatives in South Asia, EAP and LAC, which led to incorporating synergy between development and financing aspects within the same project; providing for lack of capacity (through IDCOL and IIFC) within the government in facilitating projects with private participation; giving a sense of comfort to private investors through IDA involvement and WB approval of projects \. The project also attempted to focus on developing clean procurement processes and overcoming political interference in sub -project procurement\. However, the failure to embed transparency in the solicitation of infrastructure slowed the momentum of the project \. This also brought into relief the need for sector reform across a broad front, which the Bank had consciously left to other projects \. Rating: Moderately Unsatisfactory Supervision: The project received considerable supervision effort as inferred from the large number and extent of reviews of procurement in several sub -projects proposed for PSIDP support \. The composition of the Bank teams changed as the project life was extended \. The Bank could have been more flexible in terms of the types of projects that could be financed by IDCOL (IDCOL could not provide equity support; it could lend only in foreign currency and only to greenfield projects ), as well as in interpreting its procurement rules to allow local procurement practices to apply \. The Bank did not carry out a mid -term review (MTR) partly because of the perception that the project would be closed early, though it participated in an MTR by DFID /CIDA\. The MTR proposed steps to widen the membership of IIFC ’s Board to included Secretaries of Ministries, which might have had a positive impact, but these steps were proposed too late to have any real influence on the project \. The Bank followed a hands-off approach in mobilizing expertise to help improve the pace of proposals for sub-projects, to which a somewhat hands -off approach was followed\. This appeared to coincide with a period when the Bank (belatedly) gave greater attention to sector policy reform issues \. The Bank tried to be proactive and forceful on the whole in urging successive governments to address implementation and governance issues that were retarding the pace of the project \. However, there was a progressive decrease of ownership on the part of the Bank as discussions over these issues grew to be numerous and protracted \. Rating: Moderately Satisfactory PFRAP QAE: Despite framing the PFRAP as an emergency program, the Bank did not put the program in place and start disbursements until several months after the floods started receding in late September 2004\. This was because of delay in agreeing upon the sources of funding, although the funds were eventually reallocated from several ongoing credits\. In comparison, other international agencies responded quickly, with the Bank doing so only with the Quick Disbursing component of PFRAP \. Rating: Moderately Unsatisfactory Supervision: Implementation issues and solutions were identified appropriately and discussed in a timely fashion with the Borrower\. The Bank’s missions had technical experts in all major project sectors \. The procurement and FM teams provided timely and quality advice \. However, the Bank took longer that required to formally notify the Borrower about the cancellation of the Primary Road Network Component \. The complex nature of the operation which was spread over six executing agencies, put a heavy burden of coordination on the Bank \. Rating: Moderately Satisfactory at -Entry :Moderately Unsatisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Satisfactory c\. Overall Bank Performance :Moderately Unsatisfactory 9\. Assessment of Borrower Performance: PSIDP Borrower: The Borrower displayed strong commitment during project design, and had already taken significant actions leading up to the project including preparing a report on power sector reform, and establishing IDCOL \. However, during implementation, the borrower showed less commitment to the broader policy and regulatory needs, and displayed a lack of transparency in procurement matters, which contributed to a slowdown in the flow of potential sub-projects\. It is noted however, that the level and quality of private sector interest in projects was affected negatively for some years by the financial crises of Asia in 1997 and Russia in 1998\. The failure to establish IIFC (its was delayed by two years ) in a timely fashion and to empower and resource technical units in the line ministries for transaction processes was reflective of the weak government commitment to ensuring competitive transparent procurement of sub -projects\. A positive aspect of the borrower's performance was the competitive conduct of procurement processes in the case of MPL, but this was overshadowed by the subsequent failure to mainstream such processes \. Rating: Moderately Unsatisfactory Implementing Agencies: IDCOL played its role in familiarizing procurement agencies with Bank guidelines through workshops\. However, IDCOL appeared to function more like an arm of GOB rather than a than a commercial entity, which had a negative effect on the Bank's working relationship with IDCOL as well as on the ability of IDCOL to act independently \. An MTR carried out by DFID/CIDA with WB’s participation pointed out that IIFC had no executive authority or decision -making responsibility with respect to transaction or policy changes and concluded that lack of progress in developing transactions was largely attributable to government agencies \. Rating: Moderately Unsatisfactory PFRAP Borrower: The borrower showed commitment for implementation throughout the project period \. However, delays in negotiating with the Ministry of Finance to channel the LRP funds on a grant basis and approval of the Project Proforma (PP) for the Primary and Secondary Schools Component contributed to the avoidable cancellation of some sub-components or portions of sub -components\. Rating: Moderately Unsatisfactory Implementing Agencies: Actual implementation was assigned to existing project management units (PMUs) or project coordination units (PCUs) in six line ministries\. A large part of the program was implemented by the Local Government Engineering Department (LGED) under the Ministry of Local Government, Rural development and Cooperatives\. As the project experienced an inadequate pace and scale of implementation, ERD took over the coordination of the PMUs/PCUs, but this may have come too late to have had a substantial impact \. In addition, mis-procurement under the Primary Road Network sub -component put a dent in GOB’s commitment to the overall program\. Rating: Moderately Unsatisfactory a\. Government Performance :Moderately Unsatisfactory b\. Implementing Agency Performance :Moderately Satisfactory c\. Overall Borrower Performance :Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: PSIDP Design: Keeping in mind that the project was appraised much prior to the recent emphasis on outcomes, the performance indicators proposed in the PAD are a reasonable mix of outputs and intermediate outputs : (i) increase in the country's infrastructure capacity; (ii) increase in the share of private ownership and operation of infrastructure assets; (iii) amount of non-guaranteed debt finance mobilized for infrastructure projects; ( iv) number of infrastructure projects identified and developed for private sector participation; and (v) establishment of processes and frameworks for promoting such participation \. Implementation and Utilization: Since MPL was the only significant sub -project, there was little scope for implementing and utilizing the M&E indicators \. Rating: Negligible PFRAP Design: Owing to the emergency nature of PFRAP, reliance for M&E was placed on the main implementing agency -- Local Government Engineering Department (LGED) under the Ministry of Local Government, Rural Development and Cooperatives -- which used its existing MIS system and quality control laboratories for monitoring outputs rather than and defined outcomes\. Implementation and Utilization: Better use of MIS and monitoring by LGED may have helped prevent the cancellation of contracts \. Six months prior to project closing, the country's Economic Relations Division (ERD) began to regularly coordinate and monitor activities under PFRAP, which may have improved the pace of implementation, but came too late to have a significant impact \. Rating: Negligible a\. M&E Quality Rating : Negligible 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): PSIDP An Environmental Impact Assessment ("EIA"), a Social Impact Assessment ("SIA") and a Resettlement Action Plan ("RAP") were prepared for the MPL, the only significant sub -project under PSIDP\. No major deviations from safeguards and fiduciary policies are mentioned \. PFRAP Safeguards: A rapid environmental and social assessment suggested that the impacts of rehabilitation and reconstruction work would be low, and no significant instances were observed \. Fiduciary Issues: A Chartered Accountancy firm reviewed the large number of contracts under PFRAP (2,599) and estimated that only 0\.25% of them may have deviated from procurement norms \. Credit was cancelled for 14 works contracts (US$36\.4m) under the Primary Roads component \. A suspected case of collusion in bidding for a secondary school was cancelled by IDA \. The Quick Disbursing Support executed by the Bangladesh Bank was not audited by private auditors\. The Bank still needs to review a consolidated audit report on the PFRAP which requires the backing of line ministries in its preparation\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Unsatisfactory Unsatisfactory Risk to Development Significant Significant Outcome : Bank Performance : Moderately Moderately Unsatisfactory Unsatisfactory Borrower Performance : Moderately Moderately Unsatisfactory Unsatisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: PSIDP Prior to encouraging private infrastructure development, starting from a low base, a coherent enabling policy and regulatory environment needs to be in place \. In creating new institutions, due consideration must be given to the interplay with the political economy of old institutional arrangements and incentive structures \. Government commitment at the highest level is essential to ensure the transparent conduct of policy and implementation of transactions for private participation in infrastructure development \. PFRAP Emergency recovery operations should take into consideration local implementation capacity and the fact that such capacity might be hindered in the aftermath of a disaster \. In a situation that is prone to periodic natural disasters, a long -term approach should be taken such as creating a dedicated disaster management fund with a clear mandate, processes (including procurement), staff resources, and appropriate institutional linkages for coordination \. While there may be a need to simplify and speed up procedures during an emergency response, basic procurement procedures and transparency should be maintained \. 14\. Assessment Recommended? Yes No Why? Both the original and "restructured" parts of the project experienced a complex interplay of factors in project design and implementation, including issues of policy, governance, institutional development, and involvement of the private sector\. There are several lessons to be learnt from a more detailed analysis of this experience, that can be very useful to future operations in Bangladesh as well as for other countries in similar situations \. 15\. Comments on Quality of ICR: The portion of the ICR relating to the original project is informative, analytical and objective in its assessment \. The portion (Annex 10) relating to the PFRAP is also informative, but relatively less objective in its analysis \. The amounts planned and actually disbursed under PFRAP need to be reconciled between Annex 1, 10 and 12\. Overall, the ICR is considered satisfactory, but could have beem more concise \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P010390

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20970 IMPLEMENTATION COMPLETION REPORT (23280) ONA CREDIT IN THE AMOUNT OF SDR 88\.9 MILLION TO THE GOVERNMENT OF INDIA FOR MAHARASHTRA FORESTRY PROJECT SEPTEMBER 28, 2000 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective ) Currency Unit = India Rupee (Rs\.) Rs\. 1 = US$ 0\.38 US$ I = Rs\. 26 (1992) = Rs\. 43 (2000) FISCAL YEAR April 1 March 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy ERR Economic Rate of Return FD Forest Department FDCM Forest Development Corporation of Maharashtra Ltd\. FP Forest Production model GIS Geographic Information System GOI Government of India GOM Government of Maharashtra HRD Human Resource Development ICR Implementation Completion Report JFM Joint Forest Management MAI Mean Annual Increment MFD Maharashtra Forest Department FDCM Forest Development Corporation of Maharashtra NGO Non-Governmental Organization MIS Management Information System MTR Mid-Term Review Organization NTFP Non-Timber Forest Product PA Protected Area QAG Quality Assurance Group (World Bank) RDF Rehabilitation of Degraded Forest SAR Staff Appraisal Report SFD Social Forestry Directorate TM Treatment Model VED Village Eco-Development Vice President: Mieko Nishimizu Country Manager/Director: Edwin R Lim Sector Manager/Director: Ridwan Ali Task Team Leader/Task Manager: Irshad A\. Khan  FOR OFFICIAL USE ONLY DRAFT CONFIDENTIAL FOR OFFICIAL USE ONLY CONTENTS Page No\. 1\. Project Data 1 2\. Principal Performance Ratings 1 3\. Assessment of Development Objective and Design, and of Quality at Entry 1 4\. Achievement of Objective and Outputs 4 5\. Major Factors Affecting implementation and Outcome 9 6\. Sustainability 10 7\. Bank and Borrower Performance 11 8\. Lessons Leamed 12 9\. Partner Comments 13 10\. Additional Information 15 Annex 1\. Key Performance Indicators/Log Frame Matrix 16 Annex 2\. Project Costs and Financing 18 Annex 3\. Economic Costs and Benefits 21 Annex 4\. Bank Inputs 22 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 24 Annex 6\. Ratings of Bank and Borrower Performance 25 Annex 7\. List of Supporting Documents 26 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not be otherwise disclosed without World Bank authorization\.   Project ID: P010390 Project Name: MAHARASHTRA FORESTRY Team Leader: Irshad A\. Khan TL Unit: SASRD ICR Type: Core ICR Report Date: September 28, 2000 1\. Project Data Name: MAHARASHTRA FORESTRY L/C/TF Number: 23280 Country,Department: INDIA Region: South Asia Regional Office Sector/subsector: AL - Livestock; AT - Forestry; AY - Other Agriculture; VM - Natural Resources Management KEY DATES Original Revised/Actual PCD: 12/08/89 Effective: 05/18/92 05/18/92 Appraisal: 06/04/91 MTR: 03/31/95 01/25/96 Approval: 01/14/92 Closing: 09/30/98 03/31/2000 Borrower/lImplementing Agency: GOVERNMENT OF INDIA/GOVERNMENT OF MAHARASHTRA STATE Other Partners: STAFF Current At Appraisal Vice President: Mieko Nishimizu Joseph Wood Country Manager: Edwin Lim Heinz Vergin Sector Manager: Ridwan Ali Jan Weetjens Wijnand Team Leader at ICR: Irshad A\. Khan Bernard Van de Poll ICR Primary Author: Ian Hill; Kariyan Mei; Animesh Shukla and Irshad A\. Khan 2\. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: U U Project at Risk at Any Time: Yes QAG rating oj'July 1999 3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: 3\.1\.1\. The major objectives were: a) To slow down environmental degradation;  b) To maintain and improve biodiversity conservation; c) To increase the productivity of forest lands; d) To develop wastelands; e) To raise biomass self-sufficiency; f) To generate rural incomes and improve equity through increased community participation\. In support of these objectives and to increase the effectiveness of project investments, the project also aimed to introduce fundamental institutional, technical and policy changes in the management of the sector\. 3\.1\.2\. The project was innovative in attempting to improve the performance of the forest sector as a whole, rather than focusing on a sub-sector such as social forestry, as in earlier Bank funded projects\. Project objectives framed within this sectoral approach were consistent with the Bank's Countty Assistance Strategy and national and state government priorities\. However, some of the objectives were stated very broadly and the consequent lack of specificity has meant that there has been some difficulty in linking goals to strategies and programs\. Defining the objectives in a well-structured log-frame would have improved clarity\. In addition, the sector-wide approach was translated into eleven sub-components with implementation difficulties compounded by complex institutional arrangements\. 3\.2 Revised Objective\. 3\.2\.1 At the time of the Mid-Term Review (MTR) overall project objectives were maintained but the scope of the project was reduced and the objectives better articulated as follows: a) Increase productivity on forest and wastelands; b) Increase community participation to improve rural incomes and equity, and raise biomass self-sufficiency; c) Conserve biodiversity; d) Improve sector management Slowing environmental degradation remained an implicit overarching objective\. 3\.3 Original Components: 3\.3\.1 The project had two major components, each sub-divided into important sub-components as follows: A\. Land Treatment - Plantation Development providing investment for the treatmnent of about 360,000 ha of degraded public forests and wastelands and 9,000 ha of private lands through: a) production forestry and enrichment plantings; b) rehabilitation of degraded forest; c) wastelands afforestation; and d) pasture development - Village Eco-development (VED) and Tribal Development providing assistance to selected villages to draw up and implement micro-plans for the rehabilitation of degraded village common and surrounding lands through afforestation, fodder development, and soil and moisture conservation, supported by related community works\. In tribal areas the focus was on joint management of degraded forests\. All programs in this sub-component emphasized the participation of local people -2-  and NGOs\. - Biodiversity Conservation and Protected Areas Management providing assistance to develop an integrated strategy to enhance the conservation and management of protected areas in Maharashtra, rationalizing the existing Protected Area (PA) network, updating management plans of existing areas and developing plans for new areas\. B\. Technology and Project Institutional Support Technology Improvements upgrading the quality of planting material through establishment of: a) a seed production unit responsible for collection, treatment and storage of seeds; b) a nursery unit for the development and management of modem nurseries; and c) a pasture research unit for pasture seed collection and pasture establishment\. Project Institutional Support including restructuring of the forest administration\. - Development of specialized support services including extension, research, training, strategic planning, personnel management, resource monitoring, and marketing intelligence capabilities\. 3\.3\.2 The project structure was closely related to the achievement of the project development objectives with individual sub-components contributing to specific project objectives\. The lessons learnt during earlier Bank lending for the forest sector in India were considered in project preparation\. The most important of these were (a) the need to move from a narrow sub-sector approach (focusing on social forestry) to a more comprehensive sector-wide approach including all aspects outlined above and (b) to involve conmmunities more actively and directly in the management of forest resources\. 3\.4 Revised Components: 3\.4\.1 The project was restructured and a number of changes were made to project components at the time of Mid-Tenn Review (January 1996)\. The target for land to be treated under the project was reduced by about 30 percent and wasteland afforestation was canceled, principally because of poor survival rates and a slow pace of implementation prior to MTR\. \. Flexibility was introduced in land treatment models to allow for site specific adaptation, and accommodate local community preferences\. 3\.4\.2 Participatory mechanisms were strengthened and a component was added to introduce Joint Forest Management in 200 villages\. To support this initiative a two-pronged training strategy was developed\. All MFD field staff were to be trained in participatory approaches with senior officers participating in training of local staff\. This was particularly important because it provided an opportunity for officers to translate policy into operational guidance and to clarify any issues that arose\. The second important modification was the introduction of "heterogeneous" training with FD staff and local community members receiving training together\. This approach proved effective in raising issues and identifying solutions for both community members and MFD field staff\. 3\.5 Quality at Entry: 3\.5\.1 Unsatisfactory\. The project design was innovative in attempting to address the forest sector in an integrated manner\. It was also consistent with the Country Assistance Strategy (CAS) objective of increasing efficiency in the public sector\. The main risks to the project were correctly identified, but the design did not take into account the borrower's ability to effectively manage rates of seedling survival and -3 -  achieve the anticipated productivity and financial gains\. 3\.5\.2 Physical targets and productivity assumptions were overly ambitious and critically dependent on sequenced activities (e\.g\. delays in producing improved planting material and slow progress toward gaining community support for plantation protection severely undercut expected productivity gains)\. Given the fact that nearly 75% of the total project cost was directed to achieving physical planting targets, unrealistic productivity projections undermined the financial viability of this component and the project as a whole (see para 4\.3)\. This was a pivotal design error\. 3\.5\.3 The project was also based on unrealistic expectations of the pace of reform\. Dated covenants did not adequately take into consideration the time required to build consensus to introduce significant institutional and technical reforms\. The pace of reform was further delayed by complex institutional arrangements as reforms had to be implemented independently by two separate Ministries and a Corporation\. Physical distance and indirect reporting arrangements also played a role\. For example, the Project Coordination Unit was located at Pune, remote from the Maharashtra Forest Depeartment (MFD) and the Forest Development Corporation of Maharashtra (FDCM), and reported directly to the Secretary, Revenue and Forest Department in Mumbai\. 3\.5\.4 Project design was also flawed by over-dependence on consultant inputs as a precursor to initiating project activities\. This was exacerbated by the initial weak government commitment to implementing the participatory approaches at the field level and to institutional and technical reforms\. A QAG supervision assessment made in July 1999 found project Quality at Entry deficient, but commented that the post MTR design was sound as it reduced the project to a more manageable size and increased the focus on community participation\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective\. 4\.1\.1 Satisfactory\. The project achieved several of its development objectives, particularly those relating to slowing environmental degradation, institutional development, increasing community participation in forest management and biodiversity conservation\. Consequently, the overall project outcome can be assessed as satisfactory\. Although performance in the early years of the project was unsatisfactory, there was a significant improvement in program management and a greater commitment on the part of both the Government and the implementing agencies during the later half of the project period\. The project has contributed to the overall objective of slowing environmental degradation, through the establishment of significant areas of plantations, the rehabilitation of degraded forests and the establishment of vegetative cover on waste and community lands\. Other achievements are discussed below in relation to the four revised development objectives noted in para 3\.2\. Key outcome indicators are summarized in Annex 1\. The major project impacts have been: (1) Adoption of modem technology for nurseries and seed handling resulting in improved planting material for land treatment\. The technology has had and most likely will continue to have a positive impact on forest productivity\. (2) Introduction of participatory forest management involving local communities in rehabilitation and development of degraded community and forest land\. (3) Biodiversity conservation arrangements were consolidated by organizing a separate wildlife - 4 -  wing with the necessary planning skills and infrastructure for protected area management\. (4) Fundamental change in the approach of the Forest Department shifting from command and control to a participatory management of forests involving communities in all aspects from planning and implementation to revenue sharing\. The Human Resources Development activities were designed to effectively facilitate the change process and improve capacity of public forestry and community institutions\. Specific Objectives: 4\.1\.2 Increased Productivity on Forest and Wasteland (DO1)\. Unsatisfactory\. While area-based physical targets for plantation development were achieved following their downward revision at MTR, plantation productivity increases were much lower than expected due to a variety of factors including; rigid treatment models, inappropriate site selection, limited availability of improved planting material, and a limited involvement of communities in protection\. This combination of factors resulted in low survival rates in many areas\. While some of these issues were effectively addressed during implementation (mainly by creating more flexible treatment models and incorporating community preferences in planting material selection) the net impact of this component was disappointing as both survival and productivity remain well below expected levels, and an ex-post analysis (see para 4\.3) shows that the plantation program as a whole yielded an ERR of 6\.9%\. 4\.1\.3 The establishment of pastures was satisfactory, although restricted partly due to delays in the consultancy to develop technical fodder growing packages and the strategy for pasture development\. There were also delays in setting up the Pasture Development Unit and a lack of appropriate specialization within the MFD\. Despite these delays, trial and demonstration plots were ultimately established satisfactorily by the MFD\. 4\.1\.4 The improvement of planting material was satisfactorily achieved, although with some delays because of slow consultant recruitment\. Improved planting material has contributed to increased productivity during the project period but not to the extent envisioned\. Seed and nursery facilities were unable to fully meet the demand for quality seeds for the entire state and at the end of the project period improved nurseries provided only about 25% of the current demand for seedlings\. Nevertheless, capacity for seed collection, handling, storage, and certification was achieved and is likely to be sustainable\. In addition, the improved nursery facilities established during the project have had a significant demonstration impact\. MTR targets in this area were met and exceeded - against a target of 6 modem nurseries, 13 were actually established and against a target for one seed unit two were established\. 4\.1\.5 The development of a research strategy was delayed until 1997 due to delays in consultant recruitrnent\. Following review by the MFD in the light of national priorities developed by Indian Council of Forestry Research ad Education (ICFRE), a prioritized action plan was completed in 1999 which provides a basis for future research that will contribute to increased productivity\. Institutional recommendations were not acceptable to government due to the large incremental staff requirements\. 4\.1\.6 Improved rural incomes and equity through community participation and raise biomass self-sufficiency (D02)\. Satisfactory\. The Joint Forest Management (JFM) program, introduced at MTR, has contributed significantly to the achievement of this objective\. Successful implementation has been based on a long-term strategy supported by a Govermment Order setting out the governing legislation and benefit sharing arrangements\. Clearly defined guidelines for field staff and an important HRD training program provided the necessary institutional support and required skills to change MFD' s approach to - 5-  community participation in forest management\. The program has made significant contributions to rural incomes, in the short-term, through provision of wage employment\. More importantly, in the longer-term, improvements in water supply and fodder availability, are leading to changes in cropping patterns and improved milk production resulting in additional increases in rural income\. Benefit sharing, the transfer of forest assets, the establishment of village funds, and the empowernent of community organizations have all contributed to the development of the rural economy, but to consolidate gains in equity and gender issues additional training for MFD staff and JFM committee members is needed\. One measure of the success of the program is reflected in the growing demand from communities to be included, resulting in a large increase in the number of participating villages\. 4\.1\.7 The Village Eco-Development (VED) program was rated satisfactory by the end of the project period, although the initial approach was not well defined and was largely based on earlier social forestry programs, with implementation mainly undertaken by the Social Forestry Department (SFD)\. One hundred and fifty five villages were ultimately involved in the program, falling short of the MTR target by 10%\. Forty NGOs were also involved in implementation of the VED program\., although only 25 of these contributed satisfactorily to program implementation\. Following mid-term restructuring, a more participatory approach was successfully adopted based on a significant program of training\. This has resulted in many communities participating fully in establishment and protection of forest resources\. Unfortunately in many of the earlier VEDs a culture of dependency on SFD remains to be addressed\. Program benefits in terms of wage employment, development of community funds, water supply, fodder availability and improved crop and livestock production are broadly similar to the JFM program\. But assets created under VED are totally transferred to the village community after three years\. As of March, 2000, assets in 24 villages were completely transferred to VED committees\. 4\.1\.8 Village Eco-Development program was also implemented in areas adjoining Protected Areas as a means of increasing rural incomes to reduce dependency on PA resources\. This program was initiated in only 55 villages\. It has largely failed to achieve its objective\. Until MTR program implementation by the Wildlife Wing was based on SFD guidelines for non-forested areas\. This was found to be inappropriate and a new approach was introduced more closely linked to reducing dependency on the PA resources by providing biogas and training in income generating activities\. The biogas portion of the program was subsequently discontinued by GOM because it was benefiting only a few individuals and not the whole community\. Thus far the income generating initiatives have had little impact\. 4\.1\.9 Improved Biodiversity Conservation\. Satisfactory (D03)\. The strengthening and development of the Wildlife Wing of MFD represents a significant institutional achievement\. A biodiversity conservation strategy for the state and management plans / concept papers developed for 14 PAs form the basis for improved management\. Habitat improvement programs were implemented in 24 PAs out of a total of 27 in the state and a monitoring system has been designed and implemented\. A public awareness program based on 24 information centers has been started and contract research completed\. These assessments of institutional and management achievements must, however, be seen as proxies for improved biodiversity conservation, as real enhancement in biodiversity are only evident from medium to long-term systematic monitoring\. 4\.1\.10 Improved Forest Sector Management (DO4)\. Satisfactory\. Many of the elements of improving sector management have been satisfactorily achieved despite initial delays\. Thus, important policy reforns identified at appraisal have been completed\. A well structured training program has resulted in an important change in the approach of MFD staff to the participatory management of forest resources\. An HRD strategy and action plan have been developed\. The recommendations of the institutional development study have been considered in depth and action taken on a number of key recommendations, including - 6 -  changes in the administrative structure of MFD\. The design of a Management Information System (MIS) is almost complete and necessary hardware is available\. A Geographic Information System (GIS) has been successfully developed and is being introduced in a number of Working Plan Divisions\. Infrastructure improvements financed through the project have facilitated implementation\. Although important management issues related to decentralization, target-oriented budgetary planning, and inter-agency co-ordination remain to be resolved, changes in the management of the sector, linked to important attitudinal changes have taken place during the project period\. The most fundamental of these has been the training and skill acquisition that led to a widespread acceptance of JFM as an effective management tool\. 4\.2 Outputs by components: 4\.2\.1 Output indicators are presented in Annex 1, linked to project components and development objectives\. Appraisal or MTR estimates are compared with actual achievements, or estimates based on MFD monitoring data and implementation experience during the project period\. 4\.2\.2 Plantation Development: Unsatisfactory\. Almost 283,000 ha of forest land was planted or treated during the project period\. This amounts to 120% of MTR targets\. Quantitatively this is an acceptable result however quality and financial concems suggest an unsatisfactory outcome in this component\. Plantation survival rates in some treatment models and on many difficult sites were very low\. Due to (a) lack of site specific planning, (b) site to treatment mismatch, (c) ineffective protection and aftercare, plantation productivity was well below optimum levels\. Mean Annual Increment (MAI) in the production forest models was well below anticipated levels at project closing (see Annex 1, Output Indicators)\. Failure to assess the economic impact of the decline in productivity on the overall financial viability of this component was a major shortcoming of the MTR\. 4\.2\.3 Village Eco-development and Joint Forest Management: Satisfactory\. The VED program has been introduced in 155 villages from an appraisal target of 170\. About 15,941 ha of land has been planted\. Over 600 communities are participating in the JFM program as compared with a target of 200 set at MTR\. Some 26,400 ha of forest land have been treated and a further 182,400 ha are being protected through JFM\. These participatory programs have resulted in improved rural incomes\. The widely recognized success of this component provides important positive reinforcement to the provisional MFD engagement with communities and increases the likelihood of expansion of these pilot activities in the future\. 4\.2\.4 Biodiversity Conservation and Protected Area Management: Satisfactory\. A separate Wildlife Wing was created which has been significantly strengthened with staff and other infrastructure, providing a focus for biodiversity conservation\. A conservation strategy for the state has been developed, leading to the development of an Integrated Protected Area System\. Management plans have been developed and approved for 3 PAs and concept papers developed for a further 13\. The formal notification procedures for 20 of the state's 38 PAs are advanced\. A public awareness strategy has been developed and 24 visitor information centers established\. 4\.2\.5 Technology Improvement: Satisfactory\. Two seed units have been established, 995 ha of seed production areas developed, and about 83 tons of quality seed produced\. Thirteen nurseries using root trainers and other improved nursery practices have been established\. These have a capacity to meet 25% of the current demand for planting material, but on a cumulative basis have met only 7\.8% of the need over the project period\. A Pasture Development Unit has also been established and about 4,400 ha of pasture developed\. 4\.2\.6 Project Implementation Support\. Satisfactory\. There were considerable delays in the recruitment of - 7 -  consultants resulting in slow implementation of many project activities and reforms\. A well-structured Human Resource Development strategy and associated action plan were prepared\. Training in principles and practices of JFM and VED resulted in a significant attitudinal change towards community participation amongst staff at all levels\. The contribution of project supported training to this attitudinal change is potentially one of the most important impacts of the project\. 4\.3 Net Present Value/Economic rate of return: 4\.3\.1 The overall impact of the project has been re-evaluated, and the economic rate of return (ERR) re-estimated using the latest information on prices, costs, forest areas, productivity, and other accrued benefits\. Detailed information on these analyses and assumptions made are given in Appendix C\. Two scenarios have been assumed in the re-estimation of the ERR\. Scenario 1 includes all quantified benefits, except the benefits from carbon sequestration\. Scenario 2 includes, not only the benefits given in Scenario 1, but also the benefits from carbon sequestration\. 4\.3\.2 The ERR of Scenario 1 was estimated at 6\.9%\. The ERR for Scenario 2 is highly dependent on the value placed on sequestered carbon\. The valuation of such carbon is a controversial issue, and values of between US$5 to US $ 25 per ton have been quoted\. To obtain an ERR of 12%, the OCC in India, it must be assurned that the value of carbon is about US$17/ton\. With a more conservative assumption of the value of carbon at US $ 10/ton, the ERR is 10%\. 4\.3\.3 The ERRs for individual plantation models have also been recalculated\. Those for production forestry models range from 3% to 10%\. For rehabilitation of degraded forest land the ERR ranges from negative to 15%, and for wasteland development it is negative\. JFM generates the highest ERR of 16\.5% while that for VED is 9\.9%\. 4\.3\.4 The overall ERR and the ERRs for individual models are significantly lower than those presented in the SAR, due in large part to over-optimistic assumptions at SAR about forest productivity (see also paras 4\.1\.2 and 4\.2\.2)\. The overall ERR was estimated at appraisal as 15\.2%\. If the ERR is recalculated using only the benefits included in the SAR calculations, but with the present revised assumptions about productivity, the overall ERR is 6\.5%\. As indicated above the ERR of the JFM component is significantly higher that the ERR of the project as a whole\. This fact has been recognized and incorporated in the design of most of the ongoing forestry projects in India -greater emphasis on support to JFM activities increases both the financial viability and poverty targeting (with increased returns in early years from harvesting of non-tirnber products with benefits directed to poor, forest-dependent households)\. This is another important lesson learned as a result of this project\. 4\.4 Financial rate of return: 4\.4\.1 Comparative analysis of various financial models indicates that the JFM model generates the highest returns\. The 209,000 ha forest area transferred to about 600 villages under the JFM program would generate a total revenue of about US$ 1\.4 million per year\. Based on 50/50 benefit sharing, the communities would receive US$ 700,000 per year, or about US$ 1,200/village per year\. This revenue constitutes an important financial incentive as well as a source of income to rural communities\. The above estimate does not include forest by-products such as fuelwood and fodder, which are very crucial to rural livelihoods\. During the implementation, the project generated about 78 million person-days of wage employment, thus providing income to rural communities\. Part of this income was deposited in the village fund for further use in village development as well as a source of rural micro-credit\. - 8 -  4\.5 Institutional development impact: 4\.5\.1 Satisfactory\. The project has had a significant impact on the three main implementing agencies by encouraging a change in approach to the management of forest resources, from command and control to one of partnership with communities\. The project-financed consultancy on institutional reform has stimulated a review of existing arrangements and led to changes in the structure of the MFD\. Specialized units have provided an institutional focus for the introduction of improved technology, MIS, GIS, and monitoring and evaluation activities, while training programs have helped to create the necessary management and technical competencies\. The JFM and VED programs have supported the development of community organizations for the protection of forest resources\. Management of associated village funds has built community self-reliance and Forest Protection Committees increasingly provide a focus for other rural development activities\. These community organizations are designed to be representative, but gender and equity concems remain\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: 5\.1\.1 Unrealistic expectations embedded in the design undermined the borrower's ability to effectively meet early targets and covenants\. Institutional and technological changes came more slowly than designers anticipated\. Productivity assumptions were overly ambitious and critically dependent on sequenced activities\. This combination of factors resulted in a much lower ERR than expected\. 5\.2 Factors generally subject to government control: 5\.2\.1 Implementing agencies were not given adequate administrative and financial authority and much decision-making was highly centralized, resulting in delays in procurement of goods and services, and inadequate control of implementation programs\. Difficulties were compounded by frequent changes at the Secretary level and amongst senior staff in MFD and SFD\. A lack of commitment to training in the early part of the project adversely affected the needed changes in staff attitudes, management skills and technical competencies, and the failure to select and approve individuals for overseas training meant that few staff benefited from exposure to ideas and practices outside India\. 5\.3 Factors generally subject to implementing agency control: 5\.3\.1 Project objectives, programs and procedures were not widely disseminated amongst the staff of the implementing agencies prior to project effectiveness, leading to delays in implementation\. There were delays in procurement particularly of equipment and consultancy services\. The Project Coordination Unit acted as an administrative layer rather than a facilitator and sought to centralize many procurement activities\. Delays in initiating appropriate training programs constrained the introduction of new approaches and skills required to involve communities in participatory management of forest resources\. Forest treatment models developed at appraisal were initially treated as inflexible prescriptions tied to budgetary norms so that necessary site specific modifications were not introduced\. Monitoring focused on the achievement of targets, rather than on outcomes and had only a limited impact on program management\. 5\.4 Costs and financing: 5\.4\.1 Total project costs, including the extension period, are estimated at Rs\.4,162 million\. Using year-by-year exchange rates this represents 96% of the SAR estimate in Rupee terms (Rs\.4,3 15 million)\. -9-  In dollar terms, the total cost was 79% of the SAR estimate, primarily due to depreciation of the Rupee vis-a-vis the US dollar (SAR estimate of US$141\.3 million vs actual costs of US$111\.7 million) \. The World Bank financed about US$ 94\.24 million, or 84% of total project costs\. 6\. Sustainability 6\.1 Rationale for sustainability rating\. 6\.1\.1 Likely\. The sustainability of project activities is dependent on the policy environment, human resources and government commitment to continued funding\. Appropriate sectoral policy changes have been introduced and these are unlikely to be reversed\. Specialized technical skills that have been developed will remain as a continuing asset and the significant attitudinal shift towards participatory management of forest resources is also likely to be sustained as is evident from Government commitment to expand the JFM program\. A well-structured HRD strategy and a strong Change Management Committee provide the basis for further reforms\. GOM commitment to implement the HRD strategy is reflected in the State Budget for FY 00-01, in which the provision for HRD activities is about Rs\.4\.0 million\. This is consistent with the requirements of the HRD Action Plan\. 6\.1\.2 Sustainability of other important project activities is also linked to GOM commitment to providing adequate funding for the forest sector as a whole\. The MFD Plan Budget approved by GOM for project and non-project activities during FY 00-01 is about Rs\.400 million (US$ 9 rmillion), of which Rs\.317 million (US$ 7 million) is for continuation of project activities and Rs\.83 million (US$ 2 million) for non-project activities\. A further Rs\. 105 million will be sought to replace external funding\. These budgetary provisions will not pennit the plantation program to continue to expand at the current rate, and maintenance of the plantations and other assets created by MFD under the project are not guaranteed\. Project investments in GIS and MIS have generated systems that are widely accepted and utilized for sector management and their upkeep is deemed likely\. The sustainability of participatory management programs for JFM and VED is dependent on the availability of additional GOM funding, or on obtaining funds from other sources, such as GOI or other state schemes\. The core biodiversity conservation program can be sustained from GOM funds\. It seems likely, therefore, that most MFD activities can and will be sustained\. 6\.1\.3 The sustainability of project activities undertaken by FDCM is more questionable as the Corporation is experiencing severe financial constraints\. It is clear that the current plantation program cannot be sustained and it is unlikely that there will be adequate funds for the maintenance of existing plantations\. The future viability of the seed and nursery activities is contingent upon FDCM's decision to introduce pricing consistent with full cost recovery\. Consequently, the sustainability of project activities undertaken by FDCM is uncertain\. 6\.1\.4 Sustainability can also be considered from an environmental point of view\. The project has resulted in significant environmental benefits (see para\. 4\.6)\. The increasing emphasis on the participation of people in the management of resources increases the likelihood that the enviromnental benefits will be sustained\. 6\.2 Transition arrangement to regular operations\. 6\.2\.1 GOM had expected that the Bank would respond favorably to a request for a follow-on project, that would build on the successes of this project and further integrate project activities into the regular operations of the implementing agencies\. A proposal for such a follow-on project has been submitted and is under consideration by the Bank\. As noted in para\. 6\. 1, GOM budgetary provisions allow for continuation of many project activities, including the implementation of JFM and HRD programs\. Additional funding to - 10 -  expand participatory resource management programs is being sought from GOM and centrally sponsored GOI schemes\. 7\. Bank and Borrower Performance Bank 7\.1 Lending: 7\.1\.1 Unsatisfactory\. Bank staffing and skill mix at appraisal were adequate and project identification was consistent with the Bank and borrower priorities\.Appraisal failed to adequately assess the inmmediate commitment of the borrower to implement vital refonns and also underestimated the capacity of the implementing agencies to achieve ambitious physical targets\. At project negotiations the Bank increased the IDA credit by US$ 20 million to expand the plantation target\. In hindsight it is clear that the credit amount was excessive and the problem was further exacerbated by the depreciation of the rupee vis-a-vis the dollar\. About US$16 million were canceled from the credit following MTR and, even though the project was extended for 18 months, another US$ 13 million was canceled at project closure\. 7\.1\.3 The SAR and project implementation volume did not provide sufficient clarity for the implementing agency with respect to some aspects (JFM) while other aspects were mistakenly interpreted as immutable (treatment models)\. While the JFM approach was included in the project strategy, there was no component or financial allocations to support it\. Finally, as the ICR guidelines call for evaluating projects according to standards prevailing at the time of the ICR and not at the time of appraisal, it is worth noting that there is no evidence whether sufficient attention was paid to environmental and social considerations at appraisal\. 7\.2 Supervision: 7\.2\.1 Satisfactory\. The supervision of the project by the Bank has been regular and included an appropriate skills mix\. MTR was extremely important as a range of issues adversely affecting performance were successfully addressed, although the lack of economic analysis at MTR led to questionable continued support to plantation development\. A greater flexibility was maintained in supervision following MTR, and during the period of project extension\. Overall, Bank supervision staff skill mix and continuity was maintained\. The supervision teams spent adequate time in the field\. There were two missions per year - one minor and one major\. Bank managers remained involved and provided guidance to the staff\. Except for the last two years, the project was managed from headquarters with necessary support and back up from the field office\. No deviation from Bank's policies and procedures including the safeguard policies were found\. In 1999, QAG assessed project supervision as satisfactory\. 7\.3 Overall Bank performance: 7\.3\.1 Satisfactory\. Design deficiencies were overcome by appropriate action at MTR and subsequent supervision\. The project has therefore been able to achieve many of its development objectives, so the Bank's overall performance can be assessed as satisfactory\. Borrower 7\.4 Preparation: 7\.4\.1 Satisfactory\. During preparation the MFD agreed to take bold steps to upgrade their technical capabilities, to revamp institutional arrangements and to initiate a new partnership with communities in the management of forest resources in the state\. At appraisal the borrower provided data and collaborated in the preparation of the project\. However, preparation inputs were channeled through a small number of staff - 1 1 -  and discussions of project concepts and activities were not systematically disseminated neither at headquarters nor to field staff\. This narrow base of understanding and support for project objectives led to weak initial ownership and contributed to a lack of consensus amongst those responsible for implementation at the time of project effectiveness and, hence, to slow start up of project activities\. 7\.5 Government implementation performance: 7\.5\.1 Satisfactory\. Although there were significant delays, the State Government eventually approved irnportant policy reforTns, gave support to the institutional reform program, and was fully supportive of participatory forest management\. 7\.6 Implementing Agency: 7\.6\.1 Satisfactory\. Once the Project Coordination Unit was established plantation activities went ahead rapidly, although models were initially treated as inflexible prescriptions\. Performance was adversely affected by delays in the recruitment of consultants which delayed improvements to seed and nursery facilities\. Initially, the approach adopted in the VED program was unsatisfactory\. Performance is assessed as satisfactory due to improvements made following MTR\. 7\.7 Overall Borrower performance: 7\.7\.1 Satisfactory\. Although performance in the early part of the project was unsatisfactory, the significant improvement made after MTR means that the overall performnance of the borrower can be assessed as satisfactory\. S\. Lessons Learned 8\.1 Policy and Institutional Reform\. Government commitment to reform programs must be clearly established prior to project effectiveness\. A distinction needs to be made between policy and institutional reforms\. The forrner are purely dependent on government decisions that can be made prior to project effectiveness\. Institutional reforms result from a gradual change in attitudes and processes which takes time, so commitment must be evidenced by initiation of the reform process\. The project has clearly shown that effective HRD programs bring about changes in attitude and can provide the driving force for change management, so early commitment to HRD is essential for reform\. 8\.2 Community Participation and JFM\. Participatory forest management programs should, in future, receive a higher priority than government plantations\. Community involvement in the management of forest resources results in improved forest protection and productivity, higher economic returns, and a significant impact on rural poverty and community development\. The benefits from increased availability of forest products, particularly fodder, improved ground water recharge, and resulting indirect increases in agricultural production have been noted\. In addition, the development of the Forest Protection Committee at village level under JFM as an effective conmmunity institution empowers villagers, particularly through the management of village funds by the committee, and provides a focus for many other rural development activities\. This contrasts with the marginal economic benefits of plantations established and managed by government agencies\. However, improved seed and planting materials, coupled with sound silvicultural practices, are as important in participatory programs as in government plantations\. 8\.3 Flexible Project Management\. There is a need for flexibility during project implementation so that forest management practices can be linked to site conditions\. During implementation of this project, forest treatment models developed at appraisal were treated as rigid prescriptions, linked to targets - 12 -  and budgetary norms, adversely affecting performance\. To avoid this, field staff must be given authority to vary expenditures on site specific forest treatment, within an overall budget envelope\. The JFM program allows this flexibility and the choice of land treatment and tree, fruit or fodder species is made by communities\. Good supervision complemented by an effective MTR can assist implementing agency to make the necessary changes\. 8\.4 The Role of Government\. Government has an important role in strategic planning for the forest sector and in the introduction of improved technology\. Project implementation experience points to the need for strategic planning to assess the suitability of forest land for various types of management, and allocate the land to various management zones accordingly\. If plantations are to be established for timber production, they should be located on the best available forest lands\. Elsewhere, it is likely that JFM will be the most effective system of management, supported by the introduction of improved planting material and better silvicultural practices to provide increased returns to the participating villagers at short intervals\. The improved technology produced through the successful planting material program increased the availability of high quality planting stock\. However, project experience shows the need for advance planning to link production and demand for these improved planting materials, whether it be for plantations or participatory programs\. 8\.5 Impact Evaluation\. Monitoring indicators must reflect project outcomes as well as physical outputs\. A monitoring and evaluation unit was strengthened during the project implementation, but there was always a focus on physical establishrnent of plantations\. Consequently, assessment of project outcomes, in particular of project activities involving communities and environmental aspects, was difficult to quantify\. 9\. Partner Comments (a) Borrower/implementing agency: Government of Maharashtra's Remarks on Imnlementation Completion Report (ICR) 9\.1\.1 In the Development Objective 1 (DO 1): Increase productivity on Forest and Wasteland (components: plantations development, technological improvement); the achievement is (has been) rated as unsatisfactory (in ICR)\. 9\.1\.2 In this regard this is to point out that the physical targets of plantation development component have been evaluated using primarily the parameters of achievements of appraisal targets and productivity estimated at SAR and shown as 78% of the original appraisal targets\. In fact reduction of physical target at MTR were basically decided in consultation with the World Bank and hence so far as target achievement viz\. SAR targets are concerned, they were impacted by the decision of reduction of physical targets taken during MTR making the achievement of SAR targets impossible\. Thus the comparison of the achievement of physical targets with SAR targets to rate the achievement of plantation development component is not appropriate\. Again, in view of the fact of projected ERRs at the time of project preparation being relatively high and overestimated (as already agreed to by the ICR mission) the productivity estimated at the end of the project appears quite obviously as low\. 9\.1\.3 In Appendix A, attachment 2, page 1, the MTR physical targets achieved are as under: - 13-  MTR Targets (Ha) Achievement (Ha) FDM, FOCM, SFD ) 2,96,789 2,87,103 96\.73% FDCM ) SFD ) 9\.1\.4 Thus physical targets set for plantation development are satisfactorily achieved, as per MTR targets\. 9\.1\.5 As has been pointed out by the ICR mission also, the slowing down of environmental degradation was implicit over arching objective of the project\. In view of this one cannot ignore the fact that the contribution to the increase in productivity of the area under treatment has been not just because of the planted material but also because of vigorous growth of root stock, improved soil and moisture conservation, and other intangibles like nutrient cycling, carbon sequestration etc\. in the area\. These achievements, it has been specifically mentioned by the ICR mission, resulted from improved technical management within the implementing agencies despite difficult ecological conditions\. Moreover, the technology improvement component of this development objective has been rated as satisfactory in para 4\.3 Point No\. 5 of this ICR report itself 9\.2\. In the Development Obiective 4 (DO4) (Plantation Development) the achievement is (has been) rated as unsatisfactory(in the ICR)\. In this regard it is again pointed out here also there has been a reliance on physical targets at SAR while evaluating the achievements\. Considering in the remarks on para 4\.1\.2 of ICR report as pointed out in para 1 above, it is pointed out that the achievements of this component should also be viewed against the MTR targets since down sizing of the plantation target at MTR simply precluded the possibility of achieving SAR targets\. This single parameter should not be considered as the sole parameter for evaluating this component\. Considering all the above points mentioned with reference to the issue at para 4\.1\.2 also, the achievement of this component may not be rated as unsatisfactory but satisfactory\. 9\.3 Further in annexes the following comments are made: Annexure 1: MIS study position is as shown under: Indicator MTR/Ext\. Estimate Actual/Estimate MIS study complete Complete by 1998 2000: All except 4 modules MIS functional Functional by 1999 2000: One pilot circle for 7 modules Annexure 5: The achievement of gender related objective/output has been rated as unsatisfactory\. In this regard, it is submitted that as against the earlier history of not sensitive environment for gender issues in forestry sector, within the project period itself one finds involvement of women in the decision making institutions within JFM and VED programmes to the extent of 20 to 25% representation\. This position may not be rated as unsatisfactory but satisfactory\. - 14 -  Annexure 6: The Borrower performance in the pre MTR period has been rated as unsatisfactory both regarding performance of the Government as also implementing agency\. Here it is submitted that the Maharashtra Forestry Project was the first of its kind in the country and the switching over from the normal work mode to the project mode was bound to take sometime\. However, the things improved as the project proceeded\. Considering the fact that quality of entry has been rated by the mission as unsatisfactory, the performance of Government and Implementing agencies in the pre MTR period should not be rated as unsatisfactory but quite satisfactory and encouraging\. Appendix C: Para No\. 8: Assumption of incremental benefits of US$ 2 per ha per year is too low\. Considering the annual increment in forest at the rate of about 0\.6 cubic meters, it should at least be above US$ 100\. Para No\. 16: The phrase 'due to' shall be replaced by 'if there is'\. (b) Cofinanciers: Not applicable (c) Other partners (NGOs/private sector): Nil 10\. Additional Information - 15 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome/Impact Indicators Indicator Appraisal Estimate Actual/Estimate I\. Increased productivity of forest land Variable\. Dependent on Plantation MAI increase of 1\.0 to 2\.06 m3/ha production model 2\. Improved rural incomes and equity Not specified Community funds\. through Wage employment community participation Improved water, fodder, fuelwood availability Raised biomass self sufficiency Transfer of assets to community Increased crop and livestock productivity Community institutions developed 3\. Improved biodiversity conservation Not specified Increased biodiversity Improved institutional and management arrangements 4\. Improved forest sector management Not specified Policy and institutional reforms, and acceptance of participatory management approach Output Indicators: Indicator SAR MTR Actual/Estimate Increased productivity offorest land: Production forest established (hectares) 165,000 130,822 148,102 Increase in MAI (cum /ha) models * FPI 3\.56 1\.52 * FP2 1\.98 0\.93 * FP3 3\.94 1\.53 * FP4 (tons/ha) 2\.76 1\.15 * FP5 NA 2\.12 * FP6 NA 2\.18 * RDFI 1\.98 2\.19 RDF2 1\.03 3\.29 2\.03 1\.71 -16 -  Area degraded forest treated (hectares) 145,000 92,694 121,741 Area wasteland afforested (hectares) 37,500 10,590 12,869 Area pasture developed (hectares) 10,000 6,743 4,391 No\. seed units 1 2 Ha\. Seed production areas (hectares) Not Not specified 995 Tons quality seed produced specified Not specified 82\.78 to March 99 No\. improved nurseries established Not 6 13 % use of improved planting material specified Not specified Cumulative 7\.8% to 1999\. 8 Current\. 25% Improving rural incomes, equity and biomass * 'VED (Villages) 150 170 155 * VED/PA (Villages) 60 60 59 \. JFM (Villages) 0 200 602 Increase in rural incomes -\. Not specified Positive Improved water availability _ Not specified Positive Increase in fodder and fuelwood production - Not specified Positive Asset transfer _ Not specified Positive Increase in crop production \. Not specified Positive Improving biodiversity conservation Conservation strategy developed Not specified Completed in 1999 Wildlife Wing strengthened Not specified Posts sanctioned 1993-97 No\. PAs managed by Wildlife Wing 16 38 38 No\. PA management plans completed 10 18 14 draft plan +13 concept papers No\. VED plans implemented 60 60 59 No\. visitor centers established 17 24 24 Improving sector management: Sector reform study and action plan completed Complete by 1997 1998 No\. recommended reforms implemented * Policy Not specified 5 * Administrative Not specified 13 HRD strategy and action plan approved Complete by 1999 2000 HRD Cell established Established by 1997 1999 No\. courses/workshops Not specified 425 No\. persons trained Not specified 20,490 * GIS developed Not specified 1997 * No\. WP Divisions using GIS Not specified 7 * MIS study complete Complete by 1998 2000 - except budget module * MIS functional Functional by 1999 2000 - one pilot circle Infrastructure * No\. of buildings completed 1828 1763 * % goods & equipment procured\. 100 99 -17 -  Annex 2\. Project Costs and Financing Project Costs by Components (in US$ milhon equivalent) Project Component Appraisal Estimate Actual/Latest Estimatel/ Percentage of (US$ million) (US$ million) Appraisal A\. Land Treatment 1\. Plantation Development 87\.70 67\.05 76 2\. Eco and Tribal Development 8\.00 14\.02 175 3\. Biodiversity Conservation 7\.20 7\.70 107 Sub-Total 102\.90 88\.77 86 B\. Technology & Project Implementation Support Technology Improvements 1\. Seed unit 0\.60 0\.89 148 2\. Nursery unit 1\.80 2\.46 137 3\. Pasture Development unit 0\.50 0\.65 130 Sub-Total 2\.90 4\.00 138 Project Implementation Support 1\. Project organization 7\.70 13\.80 179 2\. Restructuring Forest Administration 0\.30 0\.19 63 3\. Specialized support services 3\.00 4\.95 165 Sub-Total 11\.00 18\.94 172 Total Base Cost 116\.80 111\.71 96 Physical Contingencies 6\.30 0\.00 0 Price Contingencies 18\.10 0\.00 0 Total Project Cost 141\.20 111\.71 79 1/ Using year-by-year exchange rates: 25\.00 (91/92); 27\.06 (92/93); 30\.71 (93/94); 31\.64 (94/95) 33\.18 (95/96); 35\.65 (96/97); 37\.55 (97/98); 41\.71 (98/99) and 43\.18 (99/00)\. - 18 -  Project Costs by Procurement Arrangements (in US$ million equivalent) * Expenditure Procurement Method Procurement Method Category App aisal Esfimate Actual/Latest Estimates ICB NCB Other NBF Total ICB NCB Other NBF Total 1\. Plantation 0\.00 00\.0 110\.90 0\.00 110\.90 79\.06 79\.06 Works 2\. Civil 0\.00 4\.60 7\.10 0\.00 11\.70 0\.48 12\.14 12\.62 Works 3\. Goods 2\.00 2\.50 0\.90 0\.00 5\.40 1\.78 5\.80 7\.58 4\. Services 0\.00 0\.00 3\.40 0\.00 3\.40 0\.21 1\.53 1\.74 5\. Misc\. 0\.00 0\.00 10\.70 0\.00 10\.70 10\.71 10\.71 Total 2\.00 7\.10 133\.00 0\.00 142\.10 1\.99 0\.48 109\.24 0\.00 111\.71 Project Financing by Component (in US$ million equivalent) Component Apl Praisal Estimate ActuMl/Latest Estimate Perceg of Apraisal Bank Governme Co-financi Bank Governme Co-financi Bank Governme Co-financi nt er nt er nt er 1\. Land Treatment - Plantation Development 95\.30 10\.60 63\.03 2\.51 66 24 - Eco &tribal 8\.70 0\.90 13\.34 1\.36 153 151 development - Biodiversity conservation 5\.80 2\.70 4\.66 3\.29 80 122 Sub-Total 109\.80 14\.20 81\.03 7\.17 74 50 B\. Technology & Project Implementation Support Technology Improvements I\. Seed unit 0\.40 0\.30 0\.63 0\.29 158 96 2\. Nursery unit 1\.80 0\.40 1\.87 0\.68 104 169 3\. Pasture 0\.50 0\.20 0\.57 0\.11 115 53 development unit Sub-Total 2\.70 0\.90 3\.07 1\.07 114 119 Project Implementation Support 1\. Project 7\.40 2\.10 10\.63 3\.27 144 156 Organization 2\. Restructuring 0\.40 0\.00 0\.15 0\.04 38 Forest Administration 3\. Specialized support 3\.10 0\.40 3\.77 1\.50 122 376 services Sub-Total 10\.90 2\.50 14\.56 4\.80 134 192 Total Base Cost Physical Contingencies X Price Contingencies Total Project Cost 123\.40 17\.60 1 98\.66 13\.04 80 74 - 19 -  * Note: NBF = Not Bank Financed (includes elements provided under parallel co-financing procedures, consultants under trust funds, any reserved procurement and any other miscellaneous items)\. The procurement arrangements for items listed under "Other" and details of the items listed as NBF need to be explained in footnote to the table\. - 20 -  Annex 3: Economic Costs and Benefits Cost Benefit Analysis Present value of Flows Economnc Analysis Financia Analysis Appraisal Latest Estimates Appraisal Latest Estimates ERR% - Whole project 15\.2 10\.0 - FPI model 15\.0 9\.8 - FP4 model 13\.4 10\.0 - RDFI model 18\.6 14\.6 - JFM model -- 16\.5 Area treated (ha) 367,500 330,000 367,500 330,000 MAI (ton/cu\.m/ha): - FP1 model 3\.93 1\.52 3\.93 1\.52 - FP4 model 2\.76 1\.15 2\.76 1\.15 - RDFI model 4\.97 2\.64 4\.97 2\.64 - JFM model -- 3\.46 -- 3\.46 Area under JFM protection (ha) -- 209,000 -- 209,000 Wage employment 80 78 80 78 (person-day/million) Incremental annual income in 1,200 JFM villages (US$/village) - 21 -  Annex 4\. Bank Inputs (a) Missions: Sta orect ycle No\. of Persons and Specialty Performa nce Ratin (e\.g\. 2 Economists, I EMS, etc\.) Implementation Development Month/Year Count _ Specialty Progress Objective Identification/Preparation Jan 90 Appraisal/Negotiation Appraisal June 91 Negotiation Dec 91 Supervision March 1993 5 Foresters(2); Sociologist(l); S S Wildlife(l) Planner(l) October 1993 2 Foresters(2) S S May 1994 6 Foresters(2); Sociologist(l); S S IT(I); Plant tech\.(I), Procurement( 1) December 1994 3 Foresters(2); Sociologist(1) U U June 1995 7 Forester(l); Agriculturist(l); U U Sociologist(I); Procurement( 1); Biodiversity(l); IT(l); Plant tech\.(l) January 1996 9 Foresters(2); Sociologist(l); S S Social forestry(l); IT(I); Costab spec\.(l); Plant tech\.(l); Biodiversity(l); Procurement(l) November 1996 3 Foresters(2); Sociologist(l) S S June 1997 7 Foresters(2); Inst\.& Policy(l); S S Biodiversity(l); Procurement(l); Sociologist(l); Social forester(l) March 1998 5 Foresters(2); Biodiversity(l); S S Social forest\.(l); Plant quality(l) August 1998 3 Forester(l); Forest mgmt(l); S S Team asst\.(l) February 1999 8 Forester(l); NRM(I); S S Biodiversity(l); IT(I); Forest mgmt(l); Forest tech\.(l); Social for\.(l); Procurement(l) October 1999 3 Forester(l); NRM(I); Social S S forest\.(l) ICR April 2000 6 Forestry spec\.(2); Program assist\.(l); FAO-CP team of 3 persons / U = Unsatisfactory; S = Satisfactory; I = no significant problems; 2 = moderate problems\. - 22 -  (b) Staff: i Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ (,000) Identification/Preparation 137\.80 371\.70 Appraisal/Negotiation 68\.10 190\.70 Supervision 207\.14 467\.68 ICR 8\.50 32\.00 Total 421\.54 1062\.08 This includes Bank-financed and trust fund consultants - 23 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating 0 Macro policies O H OSUOM O N * NA O Sector Policies O H * SU O M O N O NA O Physical O H * SU O M O N O NA E Financial O H OSUOM O N O NA I Institutional Development 0 H O SU O M 0 N 0 NA O Environmental * H OSUOM O N O NA Social L Poverty Reduction O H *SUOM O N O NA O Gender O H OSU*M O N O NA 0 Other (Please specify) O H OSUOM O N * NA 0 Private sector development 0 H O SU O M * N 0 NA O Public sector management 0 H 0 SU 0 M 0 N 0 NA 0 Other (Please specify) 0 H O SU O M 0 N 0 NA Community participation - 24 -  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bank performnance Rating O Lending OHS OS *U OHU 0 Supervision OHS Os Ou OHU O Overall OHS OS O U O HU 6\.2 Borrowerperformance Rating O Preparation OHS OS O U O HU O Government implementation performance O HS O S 0 U 0 HU O Implementation agency performance OHS OS O u O HU O Overall OHS OS O U O HU - 25 -  Annex 7\. List of Supporting Documents Appendix A: Aide Memoire of FAO-CP tearn Appendix B: Technology Improvement and Treatment Models Appendix C: Financial and Economic Analysis Appendix D: Borrower's Evaluation - 26 -

REVIEW

P064926

 ICRR 12762 Report Number : ICRR12762 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 09/26/2007 PROJ ID : P064926 Appraisal Actual Project Name : Health Sector US$M ): Project Costs (US$M): 6\.07 6\.62 Management Country : Samoa Loan /Credit (US$M): Loan/ US$M ): 5\.00 5\.55 Sector Board : HE Cofinancing (US$M ): US$M): 0\.00 0\.39 Sector (s): Health (78%) Central government administration (21%) Law and justice (1%) Theme (s): Health system performance (50% - P) Law reform (25% - S) Participation and civic engagement (25% - S) L/C Number : C3421 Board Approval Date : 09/14/2000 Partners involved : Government of Japan Closing Date : 03/31/2006 12/31/2006 Evaluator : Panel Reviewer : Group Manager : Group : Manisha J\. Modi Ridley Nelson Alain A\. Barbu IEGSG 2\. Project Objectives and Components: a\. Objectives: The objective of the Health Sector Management project is to strengthen the capacity of the Department of Health (DoH) to develop and implement appropriate health policies, legislation and regulation, and to improve the functional and technical quality of health facilities, within the health sector reform strategy \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components (or Key Conditions in the case of DPLs, as appropriate): US$ 1\.41 million at appraisal, US$ 1\.61 actual ) A\. Institutional Strengthening (US$1 Strengthening Policy Framework to improve the capacity of the Department of Health to plan and finance health services and effectively allocate resources; through stakeholder and beneficiary consultations, technical assistance, capacity building, studies, and human resource planning \. This sub-component supported review, development, and implementation of policies in four key policy areas for health financing and resource allocation : planning resource needs for the health sector; identifying sources of funding and allocating them efficiently across the health system; improving revenue collection at both the federal and facility levels; and improving the management of public expenditures for overseas care \. In addition, this subcomponent would support development of comprehensive service plans\. Strengthening Health Care Legislation and Regulation by conducting stakeholder consultations and providing technical support to the Department of Health and the Attorney General ’s Office, to draft health legislation \. Support for consultation, communication, evaluation and monitoring of policies and legislation through dissemination workshops, surveys, training in participatory processes for health staff at the local level, advice to and consultations with key stakeholders and the public regarding progress in project components \. B\. Quality Improvement (US$4US$ 4\.24 million at appraisal, US$ 4\.64 actual ) Improving Facilities Planning: This subcomponent was to support the Government of Samoa in preparing a health sector investment masterplan, as well as to develop institutional and human resource capacity within the Department to plan, manage and maintain capital assets \. Improving Quality of Key Infrastructure : This subcomponent financed structural and equipment investments in the Tupua Tamasese Meaole Hospital and rehabilitation and equipment of some rural health centers, according to priorities and standards identified in the masterplan \. The subcomponent also aimed to support the development of capacity in the Department of Health to plan, manage and monitor implementation of capital projects \. Developing a Health Care Waste Management System : This subcomponent financed technical assistance to develop and implement a health care waste management system that would meet international standards, including review of the existing policy and regulation, development of operational and management procedures for waste disposal, and a hospital waste incinerator\. US$ 0\.42 million at appraisal, US$ 0\.37 actual ) This component funded C\. Project Management and Coordination (US$0 administrative expenses of the Project Management Team, including project management consultants, travel, and training\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The project was approved 9/14/2000 and originally scheduled to close 3/31/2006\. The completion date was extended 9 months, to 12/31/2006\. According to the Borrower’s ICR, the late completion was due to construction delays under the Quality Improvement component \. However, the ICR also notes delays in procurement and enacting/implementing key policy reforms\. At appraisal, project costs were estimated at US$ 6\.07 million, to be financed with an IDA credit of US$ 5\.00 million and a Borrower contribution of US$1\.07 million\. The actual project cost was US$ 6\.62 million\. The ICR reports US$5\.30 million in IDA disbursements; however the Government was given a 4-month grace period for disbursements after the official closing date, during which IDA disbursed an additional US$ 0\.25, bringing the total IDA credit to US$ 5\.55 million\. (The difference between the estimated IDA contribution and actual disbursements is due to changes in the exchange rate between IDA special drawing rights (SDRs) and US$)\. During implementation, the Government of Japan made two grants totaling $ 0\.39 million, allowing the Borrower to reduce its contribution commensurately, to US$0\.68 million\. 3\. Relevance of Objectives & Design: Overall project relevance is rated substantial : Relevance of objectives was high Objectives: The project’s objectives were developed to address the current needs of Samoa ’s HNP sector, and guided by the Government’s Statement of Economic Strategy, as well as the Bank ’s Pacific regional and HNP strategies \. Moreover, AAA undertaken jointly by the Bank and Government several years before the project was approved identified key issues which the project explicitly addressed, including redefining the Government ’s role in the sector, strengthening public health programs, and improving efficiency and equity in health finance and public service delivery\. At the time the project was designed, a large and rising share of the Government budget was being spent on health \. Public resource allocation and the existing user fee structure resulted in inefficient over -utilization of hospital services, and there was little incentive for either patients or providers to contain health care costs \. To address these issues, along with human resource and facilities issues arising from shifting disease patterns, the Government needed to change its role in the health sector from service delivery to planning, financing, improving quality, and monitoring and regulation\. The World Bank’s Pacific Regional Strategy recommended building human capital, policies, institutions, and infrastructure, particularly in the social sectors to bring about equitable and sustainable growth \. The Bank’s HNP strategy focused on enhancing the performance of health systems, securing sustainable health care financing, and improving the health outcomes of the poor \. Finally, the Government of Samoa had outlined an economic strategy promoting an increased role of the private sector and strengthening health sector management and planning to achieve sustainable improvements in the health of the population \. Design: Relevance of design was modest The project design was aimed to address country needs, but also had a coherent strategic framework based on both Bank- and Government-defined strategies\. In addition, components were designed to reinforce each other, and activities were well-suited to stated objectives \. For example, technical assistance to draft health legislation and develop a facilities masterplan was coordinated with “action-basedâ€? training intended to develop capacity for stakeholder consultation and routine planning \. National Health Accounts (NHA) were to be established to track health revenues and expenditures, and inform planning and reform \. However, the ICR rightly points out that there seems to be a disconnect between the formal objectives and the outcome indicators\. The first development objective is to strengthen the capacity of the Ministry to implement appropriate policies, but the target indicators focus on longer term outcomes of policy reform \. The second objective is to improve the quality of health services; improving infrastructure quality and facilities planning were appropriate activities to improve the quality of health facilities; however an implicit objective of the project seems to be increasing utilization and efficiency of health facilities as well \. Finally, a sector-wide approach may have been better suited to the wide ranging reform program, especially given the numerous donors involved in the health sector in Samoa, and the leadership of the Government \. 4\. Achievement of Objectives (Efficacy): The project completed almost all activities \. However, the delays in implementing critical outputs such as refurbishing buildings and implementing cost recovery policies resulted in a failure to achieve (and in some cases even assess) most of the target project outcome indicators \. That said, the outcome indicators were not always appropriate to assess whether the project development objectives were fulfilled \. Objective 1: Strengthen the capacity of the Department of Health to develop and implement appropriate health policies, legislation and regulation \. Substantial Outputs Most of the planned project outputs were achieved \. Training activities were carried out \. National Health Accounts (NHA) reports were delivered for each year of the project, and capacity has been developed within MoH to continue to carry them out annually\. Hospital costing studies and other studies on health financing and health issues of vulnerable groups were completed \. Policy options were analyzed and health services plans completed \. The existing legislative framework was thoroughly reviewed and a number of new policies (regarding user fees, overseas treatment, hospital rate setting, rural health financing, public health financing, framework for private health services, and health insurance options ) have been drafted\. However, the few policy changes (on overseas treatment and user fees) that were actually enacted were finalized and implemented very late during project implementation \. Household surveys were carried out in 2000 and 2005, and a Community and Communication Participation Strategy was developed and is being implemented \. Outcomes There were three indicators specified in the PAD to assess the outcome of the first objective \. The baseline percentage of DoH revenues derived from non -government sources was 3\.5%, with a project outcome target of 9\.5%\. Instead, the percentage fell, to 2\.6% during project implementation, partly because the new user fee policy was not implemented until the month before the project closed \. The percentage of health budget allocated to preventive and primary health care was expected to increase from 15% to 16%, and instead fell to 8%\. The percentage of the public sector health budget used for overseas treatment was 15% at the start of the project, with a target of 10%; instead, the percentage increased to 17%\. Again, the policy was not revised until the final months of the project\. However, even if the policy were fully implemented, the ICR estimates that it would only result in a 1% decrease in the percentage of the health budget spent overseas \. Objective 2: Improve the functional and technical quality of health facilities, within the health sector reform strategy : Modest Outputs A health sector investment masterplan for 2006-2010 was developed\. A Facilities and Equipment Maintenance Policy has been endorsed by senior management, and facilities planning has been routinized within DoH \. The Tupua Tamasese Meaole Hospital (TTMH) masterplan and Rural Capital Investment Plan were prepared and those facilities were refurbished accordingly \. A National Health Care Waste Management Policy and Health Care Waste Management Plan were developed and implemented \. The Incinerator Facility at Tafaigata Landfill and Wastewater Treatment Plan were upgraded\. However, apart from the health care waste management plan, there is little information provided in the ICR about what specifically the plans and upgrades entailed \. Outcomes The PAD specified four indicators to assess the outcome of the second objective \. Outpatient visits to health centers were expected to increase, but instead slightly fell between the beginning of 2000 and end of 2005 (possibly because of ongoing rehabilitation of facilities )\. Utilization rates from after the facility improvement were not available because of delays in implementing the civil works component \. Bed-occupancy rate went from 56% to 62% at the end of 2005\. The target was 70% occupancy\. Average length of stay was to decrease from 4\.5 days to 4 days and did drop slightly to 4\.2 days\. Again, however, post-refurbishment rates were not available \. The number of patients receiving inpatient care actually decreased slightly \. No baseline is available to gauge whether a greater proportion of the population was satisfied with the health system in relation to this indicator, as the question was dropped from the first household survey; however, by the end of 2005, 82% were satisfied with the health system \. The hospital and health facility improvements were completed only months before the project closed, and there is no way to assess whether these outputs had any impact on utilization rates \. Again, however, the outcome indicators in the PAD were not necessarily the right ones to assess whether the development objective of improved technical and functional quality was met\. Medical facilities and the disposal of health care waste were substantially improved \. In addition, the ICR noted improvements in hospital infection rates and workflow in operation theaters and the outpatient ward\. 5\. Efficiency (not applicable to DPLs): Efficiency is rated modest \. The ICR did not calculate an ERR\. The internal rate of return calculated at the time of appraisal was based on savings estimated to accrue from as early as year 2 of the project and the returns were estimated to accrue for only 10 years\. In addition, the ICR argues that the project created important benefits which cannot be easily valued, such as improved capacity at the Ministry of Health for policy development and program management; as well as potential future returns such as savings from reforming the user fees system based on the policy review undertaken under the project\. However, many key project outputs were not in place until the end of the project and their economic benefit can not be quantified yet\. In addition, it is unclear whether or when the Government will implement remaining recommended reforms\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re -estimated value at evaluation : re- Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Based on substantial relevance, modest efficacy and modest efficiency ratings, outcome is rated moderately satisfactory\. There were moderate shortcomings in the achievement of objectives and efficacy \. The project delivered most key outputs, but very late, and failed to meet most of the outcome targets set at appraisal, although there is some reasonable expectation that they will be met later \. Efficiency is difficult to assess as many project outputs were delivered so late \. a\. Outcome Rating : Moderately Satisfactory 7\. Rationale for Risk to Development Outcome Rating: There appears to be commitment and momentum in the Government to implement the remaining reforms \. These, combined with the newly-developed capacities within the Ministry, the Bank ’s continuing engagement and the realization of economic benefits from the project should encourage the Government to stay on -track\. It is unclear whether some of the factors which hindered project implementation have been resolved, such as high staff turnover within the Ministry and limited contractors and suppliers in the private sector to complete the civil works\. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: The Bank conducted poverty and social impact analyses and discussions with stakeholders to identify potential risks to the project\. In addition, the team incorporated recommendations from Bank and Government AAA into the project design, as well as suggestions from a Quality Enhancement Review \. Though the team took note of the potential risks of a project having such inter -dependent components, the Bank still overestimated the Government’s capacity and commitment to the objectives \. Finally, the Monitoring and Evaluation framework was ill-matched to the project objectives, and some of the indicators actually seemed to obscure the specific goals of the project rather than clarify them \. The Bank provided needed technical and other assistance to the Borrower \. Supervision missions were regular, but overly optimistic about the progress of project implementation; the project was rated satisfactory just two months before the original closing date, even though no policy decisions had been taken, and less than 20% of the loan had been disbursed \. at -Entry :Moderately Satisfactory a\. Ensuring Quality -at- b\. Quality of Supervision :Moderately Satisfactory c\. Overall Bank Performance :Moderately Satisfactory 9\. Assessment of Borrower Performance: The majority of outputs were delivered, and policy reform is underway \. However, significant delays on the part of the Government, particularly in decision-making related to policy reform, prevented the project from achieving some of its targets\. The Ministry of Health developed capacity to carry out activities crucial for a modern health system, including facilities planning, tracking revenues and expenditures, and management of health care waste \. One important shortcoming was the Ministry ’s failure to address some of the issues raised during the project midterm review, such as revising some indicators \. a\. Government Performance :Unsatisfactory b\. Implementing Agency Performance :Moderately Satisfactory c\. Overall Borrower Performance :Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization: Overall M&E is rated modest Design: M&E design quality is rated modest \. Most indicators were either imprecisely specified, or seemed to misunderstand the causal chain between outputs and outcomes\. For example, setting a target of increased percentage of MoH revenues coming from non -governmental sources goes beyond the goal of increasing the government ’s capacity to implement appropriate health policies, and may not even be an appropriate health policy in the first place \. Some indicators should have been revised, as recommended by the midterm review\. The M&E design might have done better to focus on intermediate outcomes, such as production of the facilities masterplan and specific capital improvements under the quality component \. Implementation: M&E implementation is rated modest Health Accounts reports were prepared more or less on schedule, and tracked data on MoH revenues and expenditures, and health center utilization rates \. Bed occupancy rates proved unfeasible to track, and the change in proportion of the population satisfied with the health system could not be measured because the question was dropped from the baseline household survey \. Utilization: M&E utilization is rated modest \. Because key project activities got underway so late, many indicators either couldn ’t be fully assessed or were not available in time to be useful for decision -making during the project\. However, although not an explicit part of the M&E framework, the data from the NHA and Health Information System were used in the policy reform process \. a\. M&E Quality Rating : Modest 11\. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Both the Bank and Borrower carried out their fiduciary responsibilities diligently; and There was no formal environmental assessment at appraisal, but a health care waste management policy and plan were created under the project \. Additional funding in the form of a grant from Japan was secured to purchase an incinerator\. The TTMH wastewater treatment facility was rehabilitated \. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Moderately Moderately Satisfactory Satisfactory Risk to Development Moderate Moderate Outcome : Bank Performance : Moderately Moderately Satisfactory Satisfactory Borrower Performance : Moderately Moderately Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate \. 13\. Lessons: Clearly stated, specific development objectives logically linked to readily measured outcome indicators with baselines are critical not only for project evaluation but also for effective project implementation; Particular attention should be given to interdependence and timing of project components, and appropriate measures should be taken to ensure that a delay in one component does not derail the entire project \. In this case, substantial delays in completion of some components resulted in sequencing and component linkage problems; and Political and institutional analysis might have improved the prospects for timely policy change and legal  reforms, particularly in a country and sector where the Bank has no experience \. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR was well-written, well-organized, and analytically sound \. However, there are a few shortcomings in the data presented\. First, there is virtually no discussion of what specific capital and equipment improvements and equipment were made in the Quality Improvement component \. Also, there are serious gaps in the reporting of costs and financing, including numerous transposed and even incorrect figures \. The estimated appraisal and actual columns were transposed in the ICR table showing project costs \. Neither the borrower’s estimated nor final contribution was stated clearly and accurately anywhere in the ICR, and the actual amount of the IDA credit was incorrect \. a\.Quality of ICR Rating : Satisfactory

REVIEW

P102284

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) Report Number : ICRR0020613 1\. Project Data Project ID Project Name KH-Second Health Sector Support P102284 Program Country Practice Area(Lead) Additional Financing P145507,P146271,P150472,P1 Cambodia Health, Nutrition & Population 54911 L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-44700,TF-93574 30-Jun-2014 231,570,050\.00 Bank Approval Date Closing Date (Actual) 19-Jun-2008 30-Jun-2016 IBRD/IDA (USD) Grants (USD) Original Commitment 30,000,000\.00 124,370,725\.00 Revised Commitment 30,000,000\.00 124,370,725\.00 Actual 28,168,118\.63 124,370,724\.80 Prepared by Reviewed by ICR Review Coordinator Group Salim J\. Habayeb Judyth L\. Twigg Joy Behrens IEGHC (Unit 2) PHPROJECTDATATBL Project ID Project Name Third Additional Financing for HSSP2 P154911 ( P154911 ) L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) Page 1 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) 12,140,000\.00 Bank Approval Date Closing Date (Actual) 30-Oct-2015 IBRD/IDA (USD) Grants (USD) Original Commitment 0\.00 0\.00 Revised Commitment 0\.00 0\.00 Actual 0\.00 0\.00 PHPROJECTDATATBL Project ID Project Name P150472 Second Health Sector P150472 Support-AF2 ( P150472 ) L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) 12,695,325\.00 Bank Approval Date Closing Date (Actual) 11-Sep-2014 IBRD/IDA (USD) Grants (USD) Original Commitment 0\.00 0\.00 Revised Commitment 0\.00 0\.00 Actual 0\.00 0\.00 PHPROJECTDATATBL Project ID Project Name Second Health Sector Support P146271 Project-AF ( P146271 ) Page 2 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) 13,449,700\.00 Bank Approval Date Closing Date (Actual) 15-Oct-2013 IBRD/IDA (USD) Grants (USD) Original Commitment 0\.00 0\.00 Revised Commitment 0\.00 0\.00 Actual 0\.00 0\.00 2\. Project Objectives and Components a\. Objectives The objectives of the Project were “to support the implementation of Second Health Strategic Plan in order to improve health outcomes through strengthening institutional capacity and mechanisms by which the Recipient and Program Partners can achieve more effective and efficient sector performance” (Financing Agreement, p\. 5)\. The Project Appraisal Document objectives are identical\. b\. Were the project objectives/key associated outcome targets revised during implementation? No PHEVALUNDERTAKENLBL c\. Will a split evaluation be undertaken? No d\. Components Component 1: Strengthening Health Service Delivery (Appraisal US$54\.99 million; Actual US$84\.83 million)\. 1\. Provision of Service Delivery Grants and contracting for health services at the provincial level and below; 2 \. Strengthening health services management supervision and public health functions at provincial and district levels; and Page 3 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) 3\. Investments for the improvement, replacement, and extension of the health service delivery network\. Component 2: Improving Health Financing (Appraisal US$13\.93 million; Actual US$40\.70 million)\. 1\. Health protection for the poor through the consolidation of health equity funds under common management and oversight arrangements, and expansion of health equity fund coverage; and 2 \. Supporting the development of health financing policies and institutional reforms\. Component 3: Strengthening Human Resources (Appraisal US$12\.47 million; Actual US$2\.41 million)\. 1\. Strengthening pre- and in-service training and supporting enrollment where shortfalls existed; 2 \. Strengthening human resource management in the Ministry of Health; and 3 \. Supporting the Merit-Based Performance Incentive scheme for health managers and key technical staff participating in the implementation of the Second Health Strategic Plan at central and provincial levels\. Component 4: Strengthening Health System Stewardship Functions (Appraisal US$28\.59 million; Actual US$24\.88 million)\. 1\. Development of policy packages and strengthening institutional capacity, mainly to meet decentralization demands; 2 \. Private sector regulation and partnerships; and 3 \. Governance and stewardship functions of national programs and centers overseeing the Second Health Strategic Plan\. Note on geographic coverage, resource allocations, and support to the poor\. The project covered the whole country, i\.e\., 90 operational districts in 25 provinces\. An operational district is a managerial sub-unit within the health system (TTL clarifications, 2/6/2017)\. Project resource allocations and investments were based on a Health Coverage Plan, which identified gaps and considered population criteria and geographical access (PAD, p\. 5)\. Local government authorities identified the poor through interviews that assessed household assets and vulnerabilities, and provided them with cards that granted them access to subsidized services at public health facilities\. The project included resources for Health Equity Funds, which provided cash subsidies that paid for out-of-pocket expenses (transportation cost and food allowance) incurred by poor residents, to enable them to better access health services\. The Health Equity Funds reimbursed public health facilities for the cost of exempting the poor from user fees\. e\. Comments on Project Cost, Financing, Borrower Contribution, and Dates The IDA credit was pooled into a Multi-donor Trust Account with other development partners under common management and reporting arrangements\. At appraisal, the indicative resource envelope was US$110 million over five years, including US$30 million in IDA financing, US$50 million from the UK Page 4 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) Department for International Development (DfID), and US$30 million from the Australian Agency for International Development (AusAID)\. Additional grant financing of US$5\.64 million was provided by DfID on 10/1/2013, raising its commitment from US$50 million to US$55\.64 million\. Similarly, AusAID provided a total additional financing of US$27\.72 spread over 2013-2015, raising its commitment from US$30 million to US$57\.72 million\. Additional financing of US$4\.50 million was provided on 6/04/2014 by Korea-KOICA; and US$6\.50 million was provided on 10/30/2015 by Germany-KfW\. The total actual donor financing aggregated at US$152\.54 million, including an actual IDA commitment of US$28\.17 million\. The closing date was extended from 6/30/2014 to 12/31/2015 to allow completion of civil works and delivery of medical equipment\. On 10/30/2015, the closing date was extended from 12/31/2015 to 6/30/2016 to accommodate additional donor financing\. The ICR does not provide information on the Borrower’s contribution in its financing table\. The TTL explained the difficulties in identifying the full total counterpart funding provided through different routes, but stated that the amount of counterpart funding officially channeled through the pooled account was US$60 million (TTL clarifications, 2/6/2017)\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives At appraisal, the government identified improving health outcomes as a priority for the country, as reflected by its health indicators, such as high maternal and infant mortality\. The objectives were consistent with the Country Assistance Strategy 2005-2008, which called for increased investments in sectors critical to attaining the Millennium Development Goals\. They were aligned with the Bank's Healthy Development Strategy for strengthening health systems and focusing on results\. They were also aligned with the country's Second Health Strategic Development Plan (2008-2015)\. At project closing, the objectives remained relevant and consistent with the Third Health Strategic Plan 2016-2020, whose goal is “improved health outcomes of the population, with increased financial risk protection in access to quality health services\." The project objectives are consistent with the country's broader development agenda under the National Strategic Development Plan (2014-2018) which, according to the ICR, provided the foundation for investing in health (ICR, p\. 14)\. Also, The TTL explained the relevance of objectives to the Country Engagement Note FY 2016- 17 for inclusive growth and shared prosperity, and that the Note identifies health, in particular access to the poor and Health Equity Funds, as a key developmental priority (TTL clarifications, 2/6/2017)\. Page 5 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) Rating High b\. Relevance of Design The design adopted a sector-wide management approach, which was a flexible sector-wide approach with a common strategic framework, but where pooled funding was not a pre-requisite for the participation of development partners\. The design focused on strengthening health service delivery and financial protection for the poor to promote their access to services\. The design was consistent with the stated objectives and laid out a results chain where it was plausible that activities, outputs and intermediate outcomes would contribute to improved health outcomes\. The results chain is understood as follows: strengthening health service delivery, promoting financial protection for the poor, and strengthening health system stewardship functions would enhance health sector performance and lead to improved health outcomes for Cambodians\. Rating Substantial 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective Improve health outcomes Rationale Outputs • Construction of 121 health centers, 79 delivery rooms in health centers, 15 maternity wards in hospitals, 12 non-communicable disease clinics, five health posts, one new referral hospital, one pharmacy store, two regional medical training centers, and a National Laboratory for Drug Quality and Control, and strengthening of drug stock management\. • Provision of drugs, commodities for contraception, micro-nutrient supplementation, Vitamin A, and de- worming of school children, medical instruments and equipment, vehicles, office equipment and furniture\. • Service Delivery Grants to Operational Districts and referral hospitals\. • Technical support to Provincial Health Department and Operational Districts\. • Support to incremental operating costs for management, public health, integrated supervision, and capacity strengthening activities based on Annual Operational Plans in the provinces\. • Financing Health Equity Funds-Grants, support to operating and management costs, costs associated Page 6 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) with the identification of the poor, outreach activities and community participation for eligible NGOs operating the grants\. • Technical support for health costing, health financing information, supervision, and integration of M&E functions\. • Support to training institutions, pre-service and in-service training, construction of two new regional training centers, and licensing of professionals\. Over the course of the project, training and re-training involved 166,042 health personnel\. • Support to the National Center for Health Promotion in behavior change communications\. Outcomes Health outcomes that were presented by the ICR showed improved trends between 2008 and 2014, as reported by the Cambodia Demographic and Health Surveys (CDHS)\. The infant mortality rate declined from a baseline of 66 per 1,000 live births in 2005-2008 to 28 per 1,000 in 2014, exceeding the target of 50 per 1,000 live births\. The under-five mortality rate declined from a baseline of 83 per 1,000 live births in 2005-2008 to 35 per 1,000 in 2014, exceeding the target of 65 per 1,000 live births\. The maternal mortality ratio decreased from a baseline of 472 maternal deaths per 100,000 live births in 2005-2008 to 170 in 2014, moderately short of the target of 140 per 100,000 live births\. Childhood stunting decreased from a baseline of 43% in 2005-2008 to 32% in 2014, short of the target of 22%\. The level of improvements in health outcomes varied across provinces\. The ICR (p\.19) showed comparative data between Cambodia and the East Asia and Pacific Region over the period 2008-2014, indicating that the country moved closer to average regional outcomes\. For example, in 2008, the gap was high between Cambodia's infant mortality of 66 per 1,000 and the regional infant mortality of 25\.3 per 1,000; and, in 2014, the gap narrowed between the Cambodia rate of 28 per 1,000 (CDHS) and the regional rate of 21\.2 per 1,000 (WHO)\. While the ICR recognizes that improvements in health are influenced by broader socio-economic determinants beyond the project, such as economic growth and higher incomes (ICR, p\. 17), the report notes the important contribution of the project to improve health outcomes: it states that the increased investments in physical infrastructure, improvements in the quality of health services, and the increase in essential health service utilization by the Cambodian population, including the poorest, are important plausible contributing factors behind these trends (ICR, p\. 18)\. The percentage of deliveries attended by trained personnel increased from a baseline of 58% in 2008 to 85\.2% in 2016, close to the target of 87%, and the percentage of children under one year immunized with DPTHepB3 (Diphtheria, Pertussis, Tetanus, and Hepatitis B) increased from a baseline of 84% in 2008 to 94\.8% in 2016, close to the target of 98 percent\. By May, 2016, 100% of health centers were implementing Integrated Management of Childhood Illness services, surpassing a target of 90 percent\. The infrastructure for health service delivery was strengthened by the construction or upgrading of 699 facilities, including emergency obstetric and neonatal care facilities, exceeding the original target of 300 facilities\. The distribution of secondary midwives improved during the project period, and all health centers had at least one secondary midwife at the end of the project, exceeding the target of 85%\. The project scaled up Health Equity Funds, which assisted the poor by increasing their access to health services, and the percentage of the poor population having access to these funds increased from 57% in 2008 to 100% in 2016\. The project supported the contracting of selected facilities, designated as Special Operating Agencies, for implementing Service Delivery Grants in Page 7 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) exchange for stronger accountability at the provincial and district levels, and by the end of the project, this arrangement was scaled up nationwide\. There were some shortcomings related to strengthening human resources management\. The ICR notes the mixed quality of training and weaknesses in training relevance\. Also, there was modest progress made in professional registration, licensing, and private sector regulation\. Rating Substantial PHREVDELTBL PHREVISEDTBL 5\. Efficiency The PAD's analysis was not specific and provided generic arguments supporting this kind of investment\. The PAD stated that project interventions reflected best practice, and that, in general, the economic value of an additional healthy year of life was in the range of one to three times a person's annual income\. It concluded that the project "can reasonably expect to generate significant health gains" (PAD, p\. 19)\. It also concluded that "external financing is likely to be needed over the long term" (PAD, p\. 20) By contrast, the ICR provided a robust economic analysis, and estimated the Net Present Value of the project in light of the overall achievement in health outcomes\. It quantified the gains in terms of valuation of incremental life expectancy\. The analysis estimated the Net Present Value to lie between US$220 million (using a 7% discount factor) and US$930 million (using a 3% discount factor), showing benefit to cost ratios ranging from 2\.5 to 6\.2\. Some aspects of design also contributed to efficiency, such as the use of a pooled funding mechanism and a Sector Wide Management Approach, which leveraged the resources of development partners, decreased fragmentation, facilitated alignment with the Ministry of Health, and promoted joint monitoring\. However, there were some shortcomings in the efficiency of implementation\. Outreach activities faced budget shortfalls, as they received less than the allocations indicated in the annual plans\. There were delays in the transfer of Service Delivery Grants\. While the project was extended in 2015 to accommodate additional donor financing, it was extended once to complete project activities, from 6/30/2014 to 12/31/2015 to allow the finalization of civil works and delivery of medical equipment\. Efficiency Rating Substantial Page 8 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) a\. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) 0 Appraisal 0 Not Applicable 0 ICR Estimate 0 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome Relevance of objectives is rated High as improving health outcomes was and remains a country priority, and the objectives are consistent with past and future development plans\. Relevance of design is rated Substantial as project design was consistent with the stated objectives and laid out a results chain linking funding, activities, outputs, and intermediate outcomes to improved health outcomes\. Briefly, the results chain is understood as follows: strengthening health service delivery, increasing financial protection and access to health services by the poor, and strengthening stewardship functions of the health sector, would improve sector performance and lead to improved health\. The objective to improve health outcomes was achieved and is rated Substantial\. Efficiency is rated Substantial\. Taken together, these ratings are indicative of minor shortcomings in the project preparation and implementation, and therefore an Outcome rating of Satisfactory\. a\. Outcome Rating Satisfactory 7\. Rationale for Risk to Development Outcome Rating Cambodia’s economy is growing, and the country has recently graduated to lower-middle income status\. The government continues to show strong commitment in pursuing health improvement efforts\. The recently approved follow-on operation aims at improving the quality of care, consolidating gains for vulnerable groups, and protecting against impoverishment from health care costs\. Technical strategies are sound\. Improving health outcomes has broad stakeholder support\. The risk that development outcomes will not be maintained is therefore rated modest, keeping in mind that financing and governance risks remain, including the regulation of public and private providers\. a\. Risk to Development Outcome Rating Modest Page 9 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) 8\. Assessment of Bank Performance a\. Quality-at-Entry The strategic relevance of the operation was high, as it was responsive to sector priorities identified in the Second Health Strategic Plan, and provided continuity to the First Health Sector Support Project\. Preparation built on analytic and sector work undertaken in 2006-2007, notably the Review of the Health Sector Strategy 2003-2007, Public Expenditure Tracking Survey Report, Contracting Review, Midwifery Review, Poverty Assessment, and Equity Review\. The operation built on lessons learned, including the recommendations of the Sector Wide Management Review for improving alignment of resources with government priorities, strengthening primary health care services, strengthening joint planning and monitoring, and the need to integrate accountability functions within line departments\. The project interventions were technically sound\. The preparation and appraisal team ensured that the operation was consistent with the Bank’s fiduciary role\. Environmental aspects, poverty aspects, and risk assessment were well prepared\. Mitigation measures were adequate, including a Good Governance Framework, technical support, monitoring, and physical verification\. M&E arrangements were adequate, and the results framework was aligned with the Second Health Strategic Plan, although it was unnecessarily lengthy\. Quality-at-Entry Rating Satisfactory b\. Quality of supervision Under four task team leaders, supervision was regular, and the missions were conducted jointly with other development partners contributing to the pooled fund\. The Bank fulfilled its convening role and managed the development partners pooled account\. Reports of the joint reviews were structured around project components and development impact\. The reports were of good quality\. Supervision of fiduciary and safeguard policies was appropriate, and Implementation Status Report (ICR) reporting was adequate\. The Bank teams were pro-active in addressing arising issues and in contributing to the mobilization of additional funding\. The Bank team facilitated transition arrangements with the follow-up operation\. Also, the ICR states that a performance assessment was undertaken in 2016 by development partners, who scored Bank performance at five points out of six for its focus on results, maximizing value for money, timely delivery, and good monitoring (ICR, p\. 32)\. Quality of Supervision Rating Satisfactory Overall Bank Performance Rating Satisfactory Page 10 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) 9\. Assessment of Borrower Performance a\. Government Performance The Government showed commitment to improving health outcomes as reflected in its health strategy plans and national development plans, and by pursuing its agenda with a follow-on operation (Health Equity and Quality Improvement Project)\. It was proactive in mobilizing resources to support the project\. The government maintained key functions of the secretariat of the previous operation, including key staff, consultants, finance and procurement units, M&E arrangements, and also created additional positions to support project implementation\. The ICR states that, while there were some delays in the provision of counterpart funding, the government actually increased its funding, notably for the Health Equity Funds and the Service Delivery Grants, where government funding steadily increased from 10% in the first year of the project to 40% in 2014 and in subsequent years (ICR, p\. 32)\. According to the ICR, the establishment of Special Operating Agencies (Section 4) has fostered a new mindset in public service delivery, where citizens are seen as customers, and where results are more important than bureaucratic systems (ICR, p\. 29)\. Given minor shortcomings, the overall performance of the government is rated Satisfactory\. Government Performance Rating Satisfactory b\. Implementing Agency Performance The Ministry of Health was responsible for overall implementation, assisted by a Secretariat for day-to- day coordination of the project\. This Secretariat was developed under the First Health Sector Support Project and was largely staffed by consultants\. The initial plan envisaged project-related functions to be integrated with respective line departments of the Ministry of Health to facilitate a closer shift to a sector- wide approach with full use of country systems\. Such a transition was only partially implemented because of human resources constraints\. Performance in the implementation of M&E was satisfactory\. Joint supervision missions, six-month joint review meetings, joint quarterly management meetings, and joint technical audits were conducted as planned\. Adequate support was provided for the preparation of the subsequent operation, the Health Equity and Quality Improvement Project, which was approved by the Board in May 2016\. There were weaknesses in training relevance and targeting of personnel cadres\. There were some shortcomings in fiduciary aspects in 2012 and 2013, mainly in book-keeping and timeliness (see Section 11)\. There were some procurement delays, including technical specifications, civil works, and consultant recruitment\. Given these moderate shortcomings, the performance of the Implementing Agency is rated Moderately Satisfactory\. Implementing Agency Performance Rating Moderately Satisfactory Overall Borrower Performance Rating Page 11 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) Moderately Satisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The project objectives were specified as improving health outcomes\. The M&E framework was designed to be aligned with the Government’s Health Strategic Plan framework, as there was broad agreement among development partners on adopting common results and a single monitoring framework\. The indicators were measurable, although there were no indicators specified at appraisal to measure the reduction in non-communicable diseases\. Some intermediate results indicators did not have baselines or targets\. Arrangements for data collection and analysis were appropriate and included existing systems such as the Health Management Information System of the Ministry of Health, the Cambodia Socio- Economic Household Surveys of the Ministry of Planning, and participatory assessments\. b\. M&E Implementation M&E implementation was adequately carried out, and the results framework underwent three revisions in 2010, 2014, and 2015 essentially involving intermediate indicators\. The revisions reflected further alignment with the government’s framework\. c\. M&E Utilization M&E findings were used by the Joint Semi-Annual and Annual Performance Reviews, and were shared with main stakeholders and development partners\. The reviews were used to assess progress towards achieving project objectives and to measure outcomes\. They also formed the basis for planning the annual operational plans, which were an integral part of the Ministry of Health processes\. Under the project, such planning contributed to facilitating the decentralization process through the strengthening of provincial plans\. The ICR (p\.14) reports that implementation arrangements of the follow-on project (Health Equity and Quality Improvement project - P157291), which was approved on 5/19/2016, were based on lessons learned from this project, but it does not elaborate further\. M&E Quality Rating Substantial 11\. Other Issues Page 12 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) a\. Safeguards The project triggered four safeguard policies, and the ICR reports that all were complied with\. The safeguard policies were Environmental Assessment (OB/BP 4\.01), Pest Management (OP 4\.09), Involuntary Resettlement (OB/BP 4\.12), and Indigenous People (OB/BP 4\.12)\. The Government prepared an Environmental and Social Management Framework comprising: (a) an updated Environmental Management Plan with details on pesticide mitigation measures related to human and environmental impacts; (b) an updated Framework for Land Acquisition Policy and Procedures describing mechanisms for handling involuntary resettlement; and (c) an Indigenous People’s Planning Framework prepared in consultation with ethnic minorities\. Compliance was rated satisfactory in all ISRs, except for the safeguard on indigenous people, where the government encountered initial delays in conducting the required consultations, but compliance was assessed as satisfactory from 2013 until project closure\. b\. Fiduciary Compliance Financial Management\. Related arrangements were adequate\. A Financial Management Group was responsible for financial management at the central level, and it pursued capacity building efforts both centrally and at the sub-national level\. Overall, financial management and compliance were adequate, although some issues were identified in 2012 and 2013, including late settlement of advances, fixed asset registers not updated, some invoice and payment vouchers not stamped as paid, instances of pre-signed blank checks by Provincial Health Department Directors, delays in the submission of technical audit reports, inaccurate cost projections, and lack of segregation of duties between accountant and cashiers in a number of Provincial Health Departments\. The TTL explained that the issues did not raise major concerns because they were largely related to timeliness and inadequate book-keeping (TTL clarifications, 2/6/2017)\. By 2014, the above issues were resolved, and the audit reports were unqualified until project closure\. Procurement\. Overall, procurement was conducted according to standard procedures, but with occasional delays in the provision of technical specifications, consultant recruitment, and civil works\. There were some delays in executing civil works due to shortage of construction labor\. Initially, procurement was carried out by an International Procurement Agent who adhered to the government’s Standard Operating Procedures for Externally Assisted Projects\. In 2012, the government and the Bank agreed to exit this arrangement upon the expiry of Agent’s contract, and an international procurement consultant was hired to support procurement functions of the Ministry of Health\. c\. Unintended impacts (Positive or Negative) None reported\. Page 13 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Satisfactory Satisfactory --- Risk to Development Modest Modest --- Outcome Bank Performance Satisfactory Satisfactory --- There is no actual disagreement\. The ICR and the ICRR have the same ratings for Government Performance (Satisfactory) and Implementing Agency Performance (Moderately Satisfactory)\. The ICRR notes reasons related to some shortcomings in financial management, procurement, civil works, and training\. According to the harmonized Borrower Performance Satisfactory Moderately Satisfactory guidelines, when Government Performance is rated Satisfactory and Implementing Agency Performance is rated Moderately Satisfactory, the appropriate rating to assign for overall Borrower Performance is Moderately Satisfactory\. If the ICR had correctly applied the guideline, the Borrower Performance rating in the ICR would also have been Moderately Satisfactory\. Quality of ICR Substantial --- Note When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. Page 14 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) 13\. Lessons The project provided a number of lessons (ICR, p\. 34): “The harmonization of development partner management and implementation systems is an important aspect of aid effectiveness that can support government ownership and sector governance\. However, when these harmonization efforts are not accompanied by a reduction in parallel systems, structures and reporting requirements of individual development partners can also increase the partner Government’s transaction costs\." The following lessons are drawn from the ICR and adapted by IEG: The Sector-wide Management Approach, as followed by the Bank and by development partners in Cambodia, can be an effective approach for aid delivery and for using government systems\. The approach was more flexible than a full sector-wide approach because it did not mandate pooled funding or the adoption of the same implementation arrangements\. Experimentation and the effective use of evaluation findings are key ingredients for a successful scale up of health interventions\. The project followed gradual steps in improving financial protection and in scaling up Health Equity Funds nationwide, building on prior experience that started under the First Health Sector Support Project\. 14\. Assessment Recommended? No 15\. Comments on Quality of ICR The ICR is thorough, bringing descriptive as well as analytical inputs into the text\. It is results-oriented and provides adequate analysis and convincing evidence from which conclusions can be drawn\. The report provides rich insights on the sector-wide management approach pursued by the operation\. The document is internally consistent\. The lessons are based on project experience\. Project costs should have included the Borrower's contribution\. Apart from that omission, the ICR adheres to the guidelines\. Page 15 of 16  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review KH-Second Health Sector Support Program (P102284) a\. Quality of ICR Rating Substantial Page 16 of 16

REVIEW

P005161

 ICRR 11859 Report Number : ICRR11859 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 09/22/2004 PROJ ID : P005161 Appraisal Actual Project Name : Basic Education Project Costs 74\.5 69\.4 Improvement Project US$M ) (US$M) Country : Egypt Loan /Credit (US$M) Loan/ US$M ) 55\.5 51\.2 Sector (s): Board: ED - Secondary Cofinancing 0\.7 0\.7 education (40%), Primary US$M ) (US$M) education (40%), Tertiary education (12%), Central government administration (8%) L/C Number : C2476 Board Approval 93 FY ) (FY) Partners involved : UNDP Closing Date 12/31/2002 12/31/2003 Prepared by : Reviewed by : Group Manager : Group : H\. Dean Nielsen Ridley Nelson Alain A\. Barbu OEDSG 2\. Project Objectives and Components a\. Objectives The ICR presents the Staff Appraisal Report version of the objectives, calling them "realistic and clear\." However, since that version contains both objectives and the means of obtaining them, and there is a simplified and clearer version of them in the Loan Agreement, the version in the Loan Agreement is presented here, as follows : 1\. Improve access to basic education through a program of school construction and maintenance; 2\. Improve teaching quality and curricula design; 3\. Enhance the Ministry of Education's capacity in the areas of management, planning, and policy analysis; 4\. Assist in the formulation of options for addressing priority basic education issues \. b\. Components 1\. School construction and maintenance 2\. In-service teacher training; 3\. Institutional development in management, information, and planning in MOE; and 4\. Related policy-oriented studies\. c\. Comments on Project Cost, Financing and Dates IDA Credits of SDR40 million (US$55\.5 million) were committed, which covered about 75% of total Project costs\. About 92% of the credit was disbursed during the Project (98% not counting unallocated funds )\. Given a favorable exchange rate between SDRs and US dollars, there was a surplus at the end of the Project, which, with Bank appproval, was reallocated to expanding a school improvement fund, applying new National Education Standards to teacher training, and expanding the telephone grid for the Ministry's EMIS \. In the end, about $4\.4 million were unutilized and cancelled from the Credit \. Due to sharp increases in construction costs, based on a decision to earthquake-proof new school buildings, the Project had to scale down the number of schools built (from 240 to 146), but then developed new, more economical designs, allowing it to increase the number to 159\. The Project lasted ten years, nine years planned plus one extension year \. 3\. Achievement of Relevant Objectives: It is difficult to assess the achievement of objectives for the Basic Education Improvement Project (BEIP), since the staff appraisal report (SAR) only had performance indicators (targets) for objectives 2 and 3 and these were not tracked in the ICR\. For objective 1, improving access to basic education, some outcome measures were reported \. In about 80% of school districts, where schools were constructed by the Project, basic education enrollment significantly increased (in 81% there were increases for girls; in 78% for boys)\. The extent of the increase, based on national examination center results, was reported for two "catchment areas" -- 7% and 26%, respectively, but not for the others (the number of catchment areas was not specified ), and there were no baseline data \. The ICR also cites a 25 percentage point increase in the overall national gross enrollment ratio from 1991/92 to 2002/03, but appropriately indicates that the Project related enrollment increases accounted for only about 6\.6% of this\. For the Second Objective, improve teaching and curricula design, the Project did specify some performance indicators, but these mostly focused on the design, delivery and quality of the inservice teacher training provided (the means to improved teaching)\. The Project did reach a large number of teachers (over 125,000), largely through distance education, but except for a survey of 9000 students -- 88% of whom believed Project trained teachers performed better than those not trained -- there is no clear evidence that the quality of teaching improved as a result of the Project\. (Best practice would use teacher observations or student exam results to show this )\. On curricula design, this part of the objective was not addressed fully, but the ICR and subsequent explanations from the region indicate that project-supported teacher training conveyed to teachers improvements in basic education curricula resulting from revisions made every two years during the project \. The Third Objective, enhance MOE institutional capacity for policy analysis, management and educational planning, was accompanied by performance indicators, but they were mostly input indicators (amount of training provided), except for those promoted by an improved educational management information system (EMIS); for this there were outcome indicators\. The ICR maintains that management capacity was increased, but no evidence is given except that 1,800 managers received training; for the EMIS, a unified system containing all major educational measures was created and is: a) fully automated at the HQ, governorate, and district levels, b ) updated frequently and available on CDs as well as online, c) used for planning and policy decisions (although not clear by whom and how often ), and d) used as a factor in selecting managers (i\.e\., data on experience, qualifications and performance )\. For the Fourth Objective, assisting in the formation of options for addressing priority basic education issues, again there were no performance indicators (how to know if the Project addressed priority basic education issues? )\. However, the Project had initially planned at least 2 policy-oriented studies, and eight were produced, showing that at least output was high\. The ICR cites as evidence of influence on priority issues the Project's formation of a "comprehensive strategic framework for basic education \." 4\. Significant Outcomes/Impacts: The Project built lasting infrastructure for its computerized management information system which will facilitate data-based decision-making down to the district level throughout Egypt \. In all reporting of student enrollment gains, changes for girls were higher than for boys; national statistics also show a substantial closing of the gender gap, to which the Project estimated the BEIP contributed at least 6\.6% (to be confirmed)\. The Project pioneered the concept of school -based training, and now there are school -based training units in basic education schools throughout the country \. The Project built up national capacity, infrastructure and courseware for teacher training through the cost-effective means of distance education \. The Project helped the General Authority for Education Buildings (GAEB), a semi-autonomous institution, to become more efficient and innovative (it discovered a way to reduce school construction unit costs by 10%)\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): The Project failed to establish a monitoring and evaluation system at the beginning, and thus had few meaningful baselines or targets for judging progress \. Particularly problematic was the lack of outcome indicators, meaning that the Project was good at tracking service delivery but not effectiveness (achieving Project objectives)\. Other "quality at entry" problems concerned the complex and unclear rendering of project development objectives in the SAR; this was improved by simplified versions in the Loan Agreement, but these version left out the "equity" goal of Objective 1 and rendered curriculum revision in Objective 2 ambiguous\. The widespread use of distance education allowed the Government to reach vast numbers of teachers at a reasonable costs, but without data on outcomes it is difficult to know how effective the training was \. Distance education is usually relatively effective for improving teacher knowledge but not their instructional skills; the latter requires practical training and school level follow -up, which do not appear to have been included \. (Information provided subsequently by the region indicate that supervisors received face to face instruction on improving teaching skills, but it is not clear how much of this was passed on to the teachers \.) Despite the fact that the Project was implemented over a nine year period and aspired to improve policy making, the document says relatively little (i\.e\., in a short list at the end of the write -up on "institutional development impact") about specific policy changes that were influenced by the Project \. Despite the emphasis on equity of access to basic education in the SAR, this feature was dropped from the Loan Agreement, making the Project less poverty focused than originally intended \. Although there was some reporting of and positive results on girl's participation, there was little indication as to how the Project affected other disadvantaged groups and the poorest communities \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Moderately Satisfactory [the ICR's 4-point scale does not allow for a "moderately sat\." rating]\. Despite strong  showings in delivering Project inputs (school buildings, training for teachers and managers, and information systems ), there is insufficient evidence to confirm the accomplishment of major objectives, especially with respect to better teaching, and improved management capacity \. Institutional Dev \.: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory The Bank's Quality Assurance Group evaluated Project supervision in year 2000 and found it to be satisfactory; especially commendable were its linkages to policy development in a second project which was jointly supervised with BEIP \. Borrower Perf \.: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. 7\. Lessons of Broad Applicability: The establishment of a monitoring and evaluation system including baseline data and the tracking of outcomes indicators should be a part of any project, especially one that expects to improve quality \. Documenting improvements in teaching quality requires more than teacher satisfaction with training and feedback by children taught by trained teachers -- it requires at least classroom observations and preferably also a record of student learning gains \. Distance education for teacher training can be cost effective for some parts of professional growth, but there is a danger of its being overused for aspects of teacher education (e\.g\., practical skills) for which it is not well suited\. The use of start up grants (like the one from UNDP in this Project) can be an effective to overcome endemic start-up delays in places like Egypt, which require clearance from parliament before a project can become effective\. The use of Government agencies outside the implementing Ministry (MOE) for project monitoring, quality control, and review of financial transactions -- in this case the National Investment Bank -- can be beneficial to a project and help to assure fiduciary responsibility \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: Although basically clearly written and solid, the ICR could have elaborated further on Project design weaknesses in its "quality at entry" section\. For example, it did not remark on the poorly phased Project objectives (substantially paraphrased in the Loan Agreement ), and the absence of a good program monitoring and evaluation design and outcomes indicators for measuring fulfillment of objectives (only mentioned under the Bank performance evaluation )\. The ICR is also overly positive about the quality of outputs indicators for assessing Project components \. Overall, it tends to use delivery of services (training) and physical improvements (better training and management facilities ) as primary measures of Project outcomes \.

REVIEW